1946-06-27

Hon. HUMPHREY MITCHELL (Minister of Labour):: Mr. Speaker, I desire to lay on the table the third report, which is also the final report, of the royal commission on veterans' qualifications. Included are two supplements of the second report which was tabled last session, on October 19, 1945. The third report and the two supplements are the result of sittings held in the province of Quebec during January and February, 1946.



NATIONAL WAR LABOUR BOARD

[Stage Direction]
3ESIGNATI0N OF MR. JUSTICE M. B. ARCHIBALD AS CHAIRMAN
Humphrey Mitchell: I wish to table copy of order in council P.C. 2583 of June 25, 1946, by which the governor general in council accepts the resignation of Mr. Justice M. B. Archibald as chairman of the national war labour board. After more than two years in that position Mr. Justice Archibald felt it necessary to relinquish it in order to devote his whole time as a member of the Nova Scotia supreme court.
I take this opportunity of paying warm tribute to Mr. Justice Archibald for the conscientious, able and wholly valuable manner in which he has filled a very difficult position. The administration of the wartime wages control order has not been easy, calling for a combination of fairness, good sense and understanding of the vital importance of economic stabilization. In every way Mr. Justice Archibald measured up to the qualifications of the position. I am sorry to see him go, but felt I could not press him to remain after giving so much of his time and energy.
Mr. C. A. L. Murchison, secretary of the national war labour board, has been appointed vice-chairman, and we shall carry on with alternate chairmen, Mr. Justice D. A. McNiven, Regina, and Judge J. C. A. Cameron, Belleville.



QUESTIONS

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

Mr. LOW:: Are military woollen uniforms being manufactured in Canada at the present time for shipment to foreign countries? If so (a) for which countries are they being produced; (b) how many are contracted for each country?


Mr. MAYHEW:: The wartime prices and trade board has investigated and finds that no military woollen uniforms for shipment to foreign countries are being manufactured in Canada.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. REID:: 1.	What have been the total expenditures in each of the fiscal years 1935 to 1945 by the fisheries research board?
2.	What was the number of permanent and non-permanent employees of the fisheries reseai'ch board in the fiscal year 1935, and in in each year up to 1945?
3.	How many scientists have been employed by the said board in each of the years 1935 to 1945?


DISTRICT AND COUNTY COURT JUDGES
Mr. DIEFENBAKER:: 1.	(a) How many judges in the district or county courts who have resigned from the bench are now in receipt of annuities under section 26 of the Judges Act; (b) what are their names and present addresses?
2.	(a) How many judges of the district or county courts now living resigned after thirty years in office; (b) what are their names and addresses ?
Mr. ST. LAURENT: To answer this question requires a long list of names and addresses, of which I have given a copy to the hon. member for Lake Centre. Perhaps the question might be made an order for a return, which I now table.


BONDING OF GOVERNMENT EMPLOYEES
Mr. REID:: 1.	What is the number of government employees bonded or covered by insurance for the faithful performance of their duties?
2.	What is the number in each department?
3.	What is the annual cost of such insurance??
4.	With what firm or firms is such insurance carried?
5.	Has any claim been made by the government during the past ten years for default of any employee covered by such insurance?
6.	If so (a) were any such claims made good by the companies carrying the insurance; (b) what sums were received by the government for default of any employees during the above years?
THE CiyL SERVICE



INQUIRY AS TO EARLY CLOSING FOR SUMMER

[Stage Direction]
On the orders of the day:
Mr. F. E. LENNARD (Wentworth):: I
should like to ask the Secretary of State if the government would not consider extending

Precious Metals Marking
the privilege of the early daily closing to the civil service starting July 2. I would ask further if in his opinion the civil service should be penalized because this house chooses to remain in session all summer.


Mr. SPEAKER:: Order. I think the question should be placed on the order paper.



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Mr. M. J. COLDWELL (Rosetown-Biggar):: I wish to direct a question to the Minister of Labour, of which I sent him notice. In view of the importance of endeavouring to prevent a stoppage of production in the steel industry, has the minister or his department received any definite proposals from the companies in reply to the union proposals, the forty-hour week, or union-management proposals for settling the dispute in the industry? I have tried to summarize the questions.


Humphrey Mitchell: The hon. member was kind
enough to give me notice of these three questions. In reply may I say that the matter of wages and hours of work in the steel industry is now being dealt with by Mr. Justice W. D. Roach, of the Ontario supreme court, as an industrial disputes inquiry commissioner. The points covered by the questions are under consideration, and I am advised by the commissioner that a meeting of all parties concerned is to be held to-morrow. I do not think there will be any undue delay in the report of the commissioner.



PACIFIC COAST COMMUNICATIONS


[Stage Direction]
On the orders of the day:
Right Hon. C. D. HOWE (Minister of Reconstruction and Supply):: Y'esterday the
hon. member for Nanaimo (Mr. Pearkes) asked a question about the disposal of the Pacific communications system. The question of the disposal of the Pacific communications system was discussed at a meeting between officials of War Assets Corporation, together with representatives of the R.C.A.F., the ' British Columbia Telephone company, Canadian National Telegraphs, Canadian Pacific Telegraphs and Dominion Government Telegraphs, and it was agreed that the surplus
communication system should be sold to the proper parties and in the best interests of the public and all concerned.
The ultimate disposition of the Pacific communications system has been adhered to in accordance with the agreed requirements necessary to operate this high grade telephone and telegraph service in the best interests of the public in the areas covered by the system.
As a result of the sale of the Pacific communications system, wire facilities between Hope and Ashcroft, British Columbia, are composed of one circuit between Hope and Lytton and four circuits between Hope and Ashcroft. Complete telephone facilities at Ashcroft are provided by the British Columbia Telephone company, and telegraph services by Canadian National Telegraphs, Canadian Pacific Telegraphs and Dominion Government Telegraphs.



SUMMER WEIGHT UNIFORMS FOR MESSENGERS AND PROTECTIVE STAFF

[Stage Direction]
On the orders of the day:
Mr. G. K. FRASER (Peterborough West):: Mr. Speaker, I believe the question that I wish to ask should be directed to you, Last year the Department of Public W'orks supplied the elevator operators in this building with summer uniforms. Would it not be possible for you as Speaker of the House of Commons to see that summer weight uniforms are supplied to the messengers and guards in this building? The men are now wearing winter weight uniforms.


James Horace King: Order.



PRECIOUS METALS MARKING


[Stage Direction]
Hon. J. A. MacKINNON (Minister of Trade and Commerce) moved the second reading of bill No. 17, respecting the marking of articles containing gold, silver, or platinum.
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-short title.
Gordon Knapman Fraser: In view of the fact that this bill is a redrafting of the act, perhaps it would be well if the minister were to make a brief; statement. Will he tell the committee whether' jewellery manufacturers and dealers had any say in the redrafting?
Precious Metals Marking


Mr. MacKINNON:: Mr. Chairman, the Precious Metals Marking Act was passed, under that title, in 1928. Since then a number of amendments have been made, and it was found advisable to make some further amendments at this time. Instead of asking simply for the amendments it was considered advisable to rewrite the statute; therefore the bill being presented to-day contains the provisions of the original act, with the suggested amendments. The amendments are only of a minor nature, following experience in the working out of the act. The original act was passed for the purpose of giving protection to the public when purchasing articles of carat gold, silver or platinum. It is my understanding that officials in my department have consulted with the trade in respect of the proposed amendments. To speak frankly, the bill is largely routine, and a process of tying in the amendments which have already been passed.


[Stage Direction]
Section agreed to.
Sections 2 to 5 inclusive agreed to.
On section 6-Quality mark.
Mr. ADAMSON:: I understand that by this section the minister is doing away with the English or heretofore commonly known marking by carats, and is ordering a substitution in the nature of a decimal fineness. In other words under this bill one will be able to refer to gold as 'having so many carats or so much fineness. I see nothing in the bill which states that when, for instance, a metal is marked -6S0 of fineness a statement shall be made as to the other metals in the alloy. This point may or may not be important, but I believe the committee would like further information as to why these changes are being made.


James Angus MacKinnon: An officer from the
department will be here in a moment, or two, at which time I shall be in a better position to answer the question. Perhaps the section might stand, so that we could return to it.


Mr. STIRLING:: Speaking to this section, *will the minister explain what is now required on silver articles manufactured in Canada? They are not covered, by the United Kingdom gold mark. What does Canada require to designate the pureness of silver?


James Angus MacKinnon: This is a change in our act to conform with international usage, and with the system that has been in practice in England. I am informed that the silver marking is exactly the same as that used internationally, showing pure silver to the extent of 925/1000t.hs.


Grote Stirling: What mark on a piece of silver would designate that?


James Angus MacKinnon: The mark would be the wrord "sterling," or the words "sterling silver," or the wrord "silver". It is to protect these markings that this legislation has been introduced.


Mr. CASE:: Is this legislation intended to make the markings now used more readily understood? Why is the previous method of marking in carats being departed from?


James Angus MacKinnon: We are not getting
away from the carat marking system. The explanation I have just given shows that the marking designates the actual silver or gold content.


Grote Stirling: Is a mark required on a plated article?


James Angus MacKinnon: That is permissible,
not compulsory.


Agar Rodney Adamson: Under the act as it now reads, nothing under nine carats can be designated as gold.


James Angus MacKinnon: That is correct.


Agar Rodney Adamson: That is now in the bill.


James Angus MacKinnon: I am told that is not new.


[Stage Direction]
Section agreed to.
Section 7 agreed to.
On section 8-Marking silver articles.
Agar Rodney Adamson: I suggest that it might be advisable to provide for a date along with the Canadian national marking of a lion's head surrounded by the letter "C". We are endeavouring to establish a silversmith's industry and have gone quite a wray in that direction. Silver gains in value as it ages. Georgian silver is much more valuable than Victorian silver, and I suggest that it would be advisable particularly on flatware and other silver household articles, to have near the "C" a date mark, which could be changed slightly every five or ten years.


James Angus MacKinnon: I have just discussed the point raised by the hon. member for York West, and I am told that his suggestion is an interesting one and w'as given consideration by the department just prior to the war, and was again considered when these amendments were under consideration. I should like to have the departmental officials go into the matter a little further.

Precious Metals Marking


Grote Stirling: Subsection 3 reads in
part:
-there may be applied to the article a national mark authorized under licence . . .
Is this system to be adopted so that in future will these articles be marked with a lion's head?


James Angus MacKinnon: This has always been optional, as is indicated by the words "may be".


Grote Stirling: Has it ever been used?


James Angus MacKinnon: I am advised it has
been used to a considerable extent.


Mr. JACKMAN:: If I understand subsection 1 correctly, aif article could be described as a silver article, even though it contained a base metal, as long as the silver was -925 pure. Is subsection 1 drawn as carefully as the minister intends it to be? Reference to the definitions of "silver" and "silver article" in the interpretation section would not seem to disabuse my mind of the interpretation I have put upon this subsection.


James Angus MacKinnon: International custom in the manufacture of silver has called for a silver content of 925/1000ths with 75/1000ths copper. That is the only other metal commonly used in the manufacture of silver articles.


Harry Rutherford Jackman: I take it the minister is referring to sterling silver, not to plated silver. It does not seem to me that this section gives the public the protection which I am sure the minister intends them to have. The wording would indicate that an article could be described as a silver article-the definitions in the interpretation section are by no means limited-as long as the silver in the article is [DOT]925 pure. Surely greater protection should be given to the public than appears to be given by this section.


James Angus MacKinnon: I am advised that this is considered as giving the public all the necessary protection. Ever since the sixteenth century 925/1000ths fine has been considered pure silver. In the great majority of cases copper has been the other metal used, but even if some other metal were used, if it were 925/1000ths fine it would still be classified as pure silver.


Mr. HAZEN:: I think the point raised by the hon. member for Rosedale is worthy of consideration by the Minister of Justice. It depends upon the interpretation of section 8 of the bill, which says:
Subject to subsection- two of this section the mark "silver", "sterling" or "sterling silver" or
any abbreviation thereof may be applied to a silver article containing at least nine hundred and twenty-five parts by weight of pure silver in every one thousand parts of the silver in the article.
Then if you turn to the definition clause,
2 (p):
"silver article" means an article wholly or partly or purporting to be wholly or partly composed of silver.
Therefore it would appear that any article with silver in it is a silver article. Section 8 might be interpreted to mean that the silver in that article must represent 925 parts by weight of pure silver in the article. I may be wrong; I have not studied the point at all, but I think the wording of section 8 is worthy of consideration, particularly when you look at section 2(p).
Mr. ST. LAURENT: If the hon. member will look at subsection 2 of section 8 he will find that the only deviation permitted from the 925/1000ths is to the extent of ten parts in one-thousand when solder is used and four parts when solder is not used. The definition in clause 2 reads:
"silver article" means an article wholly or partly or purporting to be wholly or partly composed of silver.
But the only thing that can be marked "silver", "sterling" or "sterling silver" is something of which 925/1000ths is pure silver, with the permissive deviation provided for in subsection 2 of section 8. It may be that an article of which a part is silver would not be wholly of silver. The head of a cane may be of silver. A certain portion of the cane may be of ebony or something else. In order to mark that part which purports to be silver with the words "silver", "sterling" or "sterling silver", that part must contain at least 925/1000ths of pure silver, subject to the slight deviation provided for in subsection 2.


Mr. HACKETT:: Is that the international standard for sterling silver?


James Angus MacKinnon: Yes.


[Stage Direction]
Section agreed to.
On section 9-Articles to which applicable.
Gordon Knapman Fraser: Subsection 2 says:
Except as authorized by sections ten and eleven of this act, a mark other than a mark authorized by this section shall not be applied to a plated article.
But section 10 permits the use of a trade mark, without waiting for official registration, once application has been made.


James Angus MacKinnon: Delay is sometimes unavoidable in authorizing the granting of the
Precious Metals Marking

proper marks, and this is intended to coyer the case where an application has already been made.


Gordon Knapman Fraser: How long a delay is allowed?
Mr. MacIvINNON: It is a departmental delay. It might be very short, or it might run into a few weeks.


Gordon Knapman Fraser: It would not go over a month ?
Mr. MacIvINNON: I could not guarantee that. It all depends on the state of affairs in the particular branch of the department which receives the application.


Gordon Knapman Fraser: What I have in mind is that a number of articles which were not up to standard might be marked and sold before the department caught up with them.


James Angus MacKinnon: There is a close inspection, and we have had very close cooperation from the trade generally. It would be a very rare case in which advantage would be taken of that situation.


Gordon Knapman Fraser: This is a safe clause to have in the bill?


James Angus MacKinnon: Yes.


[Stage Direction]
Section agreed to.
Sections 10 to 15 inclusive agreed to.
On section 16-Time for laying information and complaint.
Douglas King Hazen: This section says:
In the case of any offence punishable under this act the complaint shall be made, or the information shall be laid, within one year from the time when the matter of complaint or information arose.
W'hy is one year allowed? Why all the delay?
Mr. ST. LAURENT: If it was not expressly provided for in the bill the delay would be two years. The criminal code provides that in all cases not provided for by statute the proceedings to recover a penalty must be brought within two years from the time the offence is alleged to have been committed.


Douglas King Hazen: But this section also permits the information to be laid within one year.
Mr. ST. LAURENT: I take it that means that a complaint is made under oath for a warrant and that an information is laid for a summons.


James Angus MacKinnon: I am told that under the criminal code action must be started within
	.
six months. The department wanted a longer period, and asked for this alteration to one year.


Douglas King Hazen: There seems to be a conflict of opinion between the Minister of Justice and the Minister of Trade and Commerce. I think it should be a shorter time. I do not see why the time should be extended, particularly in view of the provisions of the following section.
Mr. ST. LAURENT: I am sorry; I had possibly in mind the provision of our Quebec statutes, which I remember having had to seek to have applied in several instances, where the period is two years if no special time is set. I see in the criminal code, in the case of any offence punishable by way of summary conviction, if no time is specially limited for making any complaint, or laying any information, in the act or law relating to the particular case, the complaint shall be made, or the information laid, within six months from the time when the matter of the complaint or information arose, except in the northwest territories and the Yukon territory.


[Stage Direction]
Section agreed to.
On section 17-Power to enter, inspect and seize.
Douglas King Hazen: Apparently power is given in subsection 1 to enter and seize, and under subsection 2, to hold the articles for ninety days, or almost ninety days, and then proceedings can be instituted. Subsection 2 says:
Any article seized pursuant to subsection one of this section may be retained for a period of ninety days and if before the expiration of such period any proceedings in respect of such article are taken under this act may be further retained until such proceedings are finally concluded.
In other words, they can seize the articles, they can hold them for practically ninety days, and then they can commence proceedings. Why do they not have to commence the proceedings when they seize the articles? Why are they permitted to wait ninety days?


James Angus MacKinnon: This extra time is frequently needed. There are, I am told, only two points in Canada where the proper assay can be made to determine the quality of the goods seized, and it is found that this extra time is necessary. It is for the protection of the department that this extra time is provided.


Douglas King Hazen: I should like to say another word about section 17, subsection 1. From a note on another page I find that before it was amended the section provided that any officer appointed under this act or any regula-

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tion should have power during business hours to enter the premises of any dealer. Now it is proposed to delete those words "during business hours" and substitute the words "at any reasonable time". It would appear that this is being done merely to meet the convenience of some inspector. He may go into some city and want to get out before the man's store is opened, or he may arrive after it is closed and he does not want to stay there. So to meet the convenience of some government inspector this amendment provides that he can enter a man's premises "at any reasonable time". Why should that be permitted? Why is the act as it stands not satisfactory? It must have been satisfactory to everybody except some government inspector; at least that is the way it impresses me. It seems to me that no government inspector should be permitted to enter business premises at any time that he considers reasonable, and that is all this section is going to amount to if it is changed as proposed. I think we should have some explanation. I may be putting a wrong meaning on the amendment; there may be some other reason why this is being done, but I do not think a government inspector should be permitted to enter a man's premises except during business hours, while he is carrying on his business there.


James Angus MacKinnon: This clause is introduced to cover a point which the hon. member has not thought of. Across the country many people keep their merchandise not only in their business premises but also in their homes. This is to allow an inspector to make an investigation and get possession of these articles at any reasonable time,-not merely during business hours, which may be from six to eight-where part of the merchandise may be in the merchant's home.


[Stage Direction]
Section agreed to.
On section 18-Certificate of master or assayer of Royal Canadian Mint.
Agar Rodney Adamson: I think it is reasonable
that a certificate signed by any assayer of the mint shall be evidence of the facts stated therein. It is the standard certificate, the only possible certificate of fineness. The question I want to ask is this. Is there a definite Canadian marking, as there is in silver, with regard to platinum articles? We are probably the greatest producer of platinum; if not, we are very nearly so, and it seems to me that we should have some specific Canadian marking for platinum goods.


James Angus MacKinnon: In Canada there is a definite marking for silver and gold only, but not for platinum.


Agar Rodney Adamson: I suggest to the minister that he consider a definite Canadian marking for platinum, in view of our particularly large production of platinum, iridium, and other metals which are in so much greater demand now than heretofore on account of their great strength.


James Angus MacKinnon: I shall see that that is done.


Gordon Knapman Fraser: There is no decimal point used either in regard to platinum?


James Angus MacKinnon: No.


[Stage Direction]
Section agreed to.
Sections 19 and 20 agreed to.
Schedule agreed to.
Bill reported, read the third time, and passed.
[Stage Direction]
The house in committee of supply, Mr. Macdonald (Brantford City) in the chair.

[Stage Direction]
106. Penitentiaries	branch-administration,
Mr. MATTHEWS (Kootenay East):: When the debate was adjourned last Friday evening I was commenting on the fact that people like myself who take a deep and keen interest in penal reform are often criticized. It has been said on more than one occasion that we are a people who are swayed by emotionalism and by sob stories, and I for one have resented that, because I think I can say rather that we are men and women who are motivated by the dynamic of righteousness. It will be a sorry day for Canada, and a sorrier day for the inmates of our federal penitentiaries, when our hearts fail to be moved by the needs of these unfortunate members of society.
I have seen men working in prison gangs garbed in prison clothing, guarded by men armed with rifles, and I have said to myself, as I suppose many another hon. member of the house has said to himself: "There I go but for the grace of God". For my part, I do not want ever to condone wrongdoing, no matter where it is found. I fully realize that men and women with criminal tendencies need to be taught that crime does not pay and that certainly the way of the transgressor is hard. But when all that has been said, I believe we still need to temper our justice with mercy.
As I read carefully the report of the Archambault commission, I find that it has some scathing things to say about penal administration in the past, and it emphasizes
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the need for a humane and brotherly understanding of these unfortunate people. I am inclined to think that the criticism of the Archambault commission's report made by the Minister of Justice last Friday evening had to do with these particular assertions on maladministration. I notice that the minister very graciously admitted that there is very much that is good in the report itself. Then he went on to say at page 2739:
There are certainly some assertions in it that are exaggerated.
That to my mind is a very serious reflection to pass upon esteemed persons whose judgment and ability have been so highly praised during the course of this debate. Speaking to tire member for Selkirk, the minister qualified his criticism, when he said:
I have not had time to verify all the conditions described in the report.
And later on in the discussion, speaking about Stony Mountain penitentiary, the minister said-page 2740:
I have not been there myself. In fact, I have not been anywhere else since I came to Ottawa four and a half years ago.
I am satisfied in my own mind, Mr. Chairman, that when the minister made that statement he. was not offering it to the house in any way as an excuse, because I do not think he is that type of person at all. But the people across Canada read Hansard, and they are going to read those remarks that the minister made and that other people are making. I know they read them, and I believe that a great many people will say to themselves it is about time the Minister of Justice got around a bit and visited some of these institutions that are under his care.
We who are here in the house from day to day and see the minister sitting in his place know that he has a most difficult task to perform and is giving himself to that task most diligently. It seems to me however that he ought to visit the federal penitentiaries as occasion offers, possibly between sessions of parliament, and acquire for himself first-hand information of the conditions that exist in those institutions, because I am satisfied that many of the conditions that have been complained about still exist, and they form the basis of our modem appeal for penal reform. Not punishment, but reformation, not revenge, but redemption:	that, I believe, should be
the keynote of our penal institutions to-day. And here I would place on the record an item culled from the Vancouver Sun of June 17, entitled "Contrast in Crime":
Education minister G. M. Weir said in Burnaby a few days ago that reestablishment of the Borstal home at New Haven "likely will be considered soon." It would be more

reassuring if he had said that this matter is already receiving the earnest consideration of the provincial government. The record of both provincial and federal governments with respect to the treatment of delinquents and any real farsighted attack on the problem of crime, is disheartening. The public had a right to expect action earlier than this from Attorney-General Wismer, who is known to have the right idea but who seems, since his reappointment to his high post, to have let the matter sleep. The Department of Justice has issued a report which shows that 78-4 per cent of the 1945 penitentiary population were repeaters. This is an increase of 10 per cent in the last decade. What a terrible indictment of the existing penal system and of governmental sloth! Society is not getting the protection that a decent penitentiary system would give. The penitentiaries supply no corrective, they afford no deterrent. They are making criminals instead of curing them. The Sun, long an advocate of the reintroduction of Borstal, has pointed out before the sorry contrast the Canadian record offers when compared with that of Britain. An article in the current issue of Maclean's magazine highlights this contrast. Between the two wars Canada's serious crime rate multiplied three times while Britain's rate dropped one-quarter. In 1942, for example, the forty-one million people of Britain committed 4,000 indictable offences. In Canada, the same year, our twelve million people committed 46,723. What does Borstal purport to do? Maclean's article gives the answer. Regarding the years between 16 and 23 as the most critical in the life of the criminal, its sponsors try to give youths in this group a treatment that will "turn one kind of human being into another kind of human being." All but those who have demonstrated themselves as hopelessly vicious morally or defective mentally go to Borstal for a term of three years-that being the length of time that it takes to do what Borstal aims to do.
The system works. Four out of five Borstal graduates go straight, and Britain is able to get along with 39 prisons and jails for forty-one million people, while Canada maintains 147 corrective institutions of various kinds.
Before I bring these remarks to a close I want to offer a couple of suggestions to the Minister of Justice. First I suggest that he give serious consideration to the possibility of granting an amnesty to those whose conduct shows them to be deserving. By the grace of God we have been granted victory in a world shattering war. As nations and as individuals we have celebrated, and have expressed our joy and thankfulness. In some lands I believe it is customary at such times to mark the occasion by the granting of an amnesty to certain groups of prisoners. While it may not be feasible, and may not even be desirable, to grant a general pardon, surely something can be done, such as the partial remission of sentence, to mark this great victory.
My second suggestion may be more far-reaching, because it would entail a radical departure from our present system of adminis-

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tration. I realize that as a suggestion it may appear to be one born out of due time, but in my own mind I am convinced that it is sound and that time and the evolution of circumstances will bring it into being. To-day an arrested person is brought before a court of justice and tried. If found guilty of a serious crime he is sentenced to a period of imprisonment, and if that period exceeds two years he is confined in one of our federal penitentiaries. My suggestion is that after a man has been arrested, charged, tried and sentenced, the court of justice has done its work. From the moment a prisoner enters the gate of a prison he should no longer be under the law, which has been applied in the past in military form. He should be under the care of social and redemptive agencies, persons specially trained in reform work. It should be made quite clear to the prisoner that part of his punishment is the curtailment of his liberty, but that the period of his incarceration will afford him opportunities to regain
his lost manhood.	.
. -*"**
I realize that I have spoken at some length,
but the subject is one in which I am deeply interested. For long enough we have contented ourselves with talking about penal reform. Now may God give us grace and strength to go ahead and do something about it. In closing I should like to read a clipping from the Christian Science Monitor of a few weeks ago, written in connection with the revolt, at Alcatraz prison:
The revolt at Alcatraz prison caused five deaths and hundreds of war-sized headlines. The only corrective result so far reported is a plan to repair the cell block which gave a desperate convict a chance to get weapons. Will that be the total product of the headlines? Or will the attention focused on Alcatraz prick the public conscience a mite?
What is Alcatraz? Is it simply an "escape-proof" prison set on a rock amid the rip tides of San Francisco bay? Or is it a spectacular symbol of society's failure to deal adequately with crime? It is not a place for reform or rehabilitation; most of the 277 there society has given up. Most of them are "lifers" the public did not wish to execute and dared not give any chance at freedom. At Alcatraz they are safe-[DOT] and comfortably forgotten.
George Bernard Shaw has a new book called "The Crime of Imprisonment," in which he says: "In imprisonment, the public is seeking its own salvation, not that of the lawbreaker." Perhaps this is the best our society can do at present-seek protection for itself from such desperate enemies as it sends to Alcatraz. Prisons arc easier to repair than men. But the method is costly and does not provide any protection from new crops of criminals-it is not even a sure deterrent. If we could not put such men out of sight in the Aleatrazes, would we make more effort to remove the causes of crime?
This, sir, I contend is a question that society as a whole must answer, and that very soon.


Mr. CROLL:: Mr. Chairman, I realize that prison reform is not a new subject, for it has been under review in this country for well over a hundred years. The most recent review was conducted by the Archambault commission in 1938, when the problem was explored and reexamined and many valuable recommendations put forward. In the light of these researches it is interesting to examine the statistics on crime in Canada over the past forty years. From 1900 to 1943 the number of crimes increased from 5,768 to 41,752, an increase of 642 per cent. The increase in population during the same period was 120 per cent, so we see that the increase in the crime rate was more than five times the increase in population. A further breakdown of the statistics is even more revealing. Convictions for all offences in 1905 numbered 62,559; in 1925 they were 177,783, and in 1943 they numbered 517,363. Or to consider the ratio of crimes to population, convictions for all offences were 1,042 per 100,000 of population in 1905, 1,913 per
100.000	of population in 1925, and 4,379 per
100.000	of population in 1943.
As far as juveniles between the ages of sixteen and twenty-one were concerned, the same trend is apparent. To consider only major offences, or what would be equivalent to indictable offences when referring to adults, the convictions of juveniles were 238 per cent per 100,000 of that age group in 1911, 708 in 1937, and 900 in 1943. I presume hon. members may ask, can that be true? Well, those are the figures; they may be found in the Canada Year Book and in the publications of the statistics bureau, and they are true. I think it well that this house should realize these figures are an appalling reflection upon the moral therapy of our prison system, particularly when we consider that a great proportion of the crimes were committed by repeaters. These figures are very interesting. Of the 1,335 males committed to the seven dominion penitentiaries during the year ended March 31, 1945, 1,050, or more than 76 per cent, three out of every four offenders, had been in prison before. Of the 42,000 men sentenced for indictable offences of all types in the same year, more than 13,000 of them, or one out of every three, had been in prison before. The Archambault commission of 1938 reported that there were 188 prisoners then in confinement who had been convicted an average of nineteen times each, and had cost the taxpayers of this country an average of 825,453.24, without taking into consideration the loss occasioned by the crimes which they committed.
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Mr. FLEMING:: They cost that much each?


David Arnold Croll: Yes, each. No hon. member will deny that these figures represent a staggering defeat of crime prevention. I think we ought to ask ourselves: Why have we failed to keep crime under control? In my opinion -and I think it is the opinion of the Archambault commission-no cause is more influential than the prison system itself. Because, as the hon. member for Kootenay East has said, while Canada's rate of serious crime was increasing threefold between the first and second great wars, under another system the British rate has dwindled by four. In twenty years, in conjunction with the Borstal system for young offenders, Great Britain reduced the population of her prisons from 186,000 to 46,000. More significantly, in the year 1942 there were 47,000 indictable crimes committed in Great Britain, which has a population of 41 million; and in the same year in Canada, with a population of 12 million, there were 46,723 indictable offences.
Chief Justice J. C. McRuer, who was a member of the Archambault commission, said in a public address in May, 1942:
Why we should have 46,723 persons convicted of serious crimes in Canada in one year, while in Great Britain with nearly four times the population the annual convictions were approximately 47,000 is a matter for careful consideration and profound examination.
Well, the explanation it seems is quite clear. There are two methods of handling lawbreakers. One decreases violation of the law, and the other seems to increase violation of the law. An examination of the Canadian penal system, as reported by the 1938 Archambault commission, discloses deep-rooted and yet remediable defects. These defects are:
1.	Staffs are inadequately trained, sometimes unsuitable for their duties, and generally underpaid.
2.	Any individual attempt to ameliorate conditions is frustrated by a multitude of detailed regulations.
3.	The prisoner is cut off from the rest of the world by walls and by regulations which deny him newspapers and restrict his correspondence and visiting privileges.
4.	He is treated as one of a disgraceful class of persons to be denied any humanizing contacts.
5.	He is allowed only one half hour of daily exercise in the open air, consisting mainly of walking in a ring with no conversation allowed.
6.	His work is unproductive and insufficient.
7.	Generally, trades are not taught.

8.	A great proportion of the prisoner's time is spent in idleness.
As for youthful offenders, the commission reported that-
Contrary to the general public belief they have not the least opportunity to learn a trade- -to fit them for employment on discharge.
It also appears that-
Education has been largely neglected in all Canadian penitentiaries, and no real interest has. been taken in this important feature of reformative treatment.
Further:
The school rooms are all poorly equipped . . . accommodation is meagre and unsuitable . . . there is no vocational education worthy of the name . . . there is little use of the library as. an agency of education . . .
And all this in a penitentiary in which-
-a large proportion of the population is. illiterate.
In spite of the obvious opportunities for agricultural work the commission found that-
-the farms are not exploited or cultivated to the extent of their possibilities . . . are inefficiently operated and there is no one connected with the penitentiaries branch who has the required experience to direct the operation of farms which total over 1,000 acres.
Something has already been said about the Borstal system. I looked through Hansard and I did not see there a clear statement of what the Borstal system consists of, so I now quote from a report respecting the Borstal system by Barman of London, in 1934:
Borstal is not a boys' prison. To collect all prisoners under t-wenty-one and confine them in a corner of a large gaol and call the result a Borstal institution is a sham and a pretence, a piece of administrative complacency defrauding a credulous public. A Borstal institution is a training school for adolescent offenders, based on educational principles, pursuing educational methods. To be sent there is a punishment, for the training involves a very considerable loss of liberty, but to stay there is to be given a chance to learn the right way of life and to develop the good there is in each.
The English Borstal system which deals with young offenders over the age of sixteen years was instituted by the Prevention of Crime Act, 1908. The act recognized for the first time that youthful adolescents, whatever their crimes may be, were to receive special treatment adapted to their needs. Subsequent legislation increased the age from twenty-one to twenty-three, and extended the possible period of detention from one to three years.
Young offenders between the ages of sixteen and twenty-three were divided into three classes (1) those who are not bad enough for Borstal and can be dealt with by probation

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or other non-institutional treatment; (2) those who are too bad for Borstal, and (3) the remainder, mostly repeaters, who are selected for Borstal. As a rule first offenders are not sent there.
The Borstal sentence is ordinarily three years, of which two are spent in the institution, with one year at liberty under supervision. In the eight Borstal institutions, some are locked up at night, and some are locked neither day nor night. The institutions offer a graded system of supervision and restriction according to the character of the inmates. Some exercise no more restraint than there is in an ordinary boarding school-in fact the boarding school principle is extensively used. In each institution the boys are divided into houses, in charge of a housemaster and his assistant. They progress from grade to grade, promotion being governed by good conduct and industry, until they are trusted to work without supervision and then without escort.
Industrial training and. vocational guidance play an important part in the Borstal system. Through hard work, physical training and planned recreation, delinquent boys are thus able to reshape their lives. Much of the credit for their success is due to the unusually high calibre of the Borstal staffs, who are given the widest possible scope in dealing with their charges, and to the Borstal association which supervises and assists boys who have been discharged from one of the institutions. The success of Borstal is shown by the fact that two-thirds of the boys who are discharged do not again appear at any time during their lives in prison; and fewer than twenty per cent are repeaters. Almost all youngsters, with few exceptions, develop sufficient strength of character to take their places in the world as useful citizens. Such is Britain's very wise investment in youth. It seems to me that where we cannot lead, we can at least follow.
The report of the Archambault commission proved conclusively that the present system in Canada is fifty years out of date physically and morally. To remedy it requires more than the handful of amendments which have followed this, indictment. In my opinion the need is for a thorough change of perspective on the part of the government and on the part of the people of Canada. Many of the vices of the present system have grown up because of the complete indifference of the public in general. This mentality is undoubtedly a hangover from the Victorian era, where a prison was the place to which you sent lawbreakers and forgot all about them.
Five of the seven penitentiaries in Canada were built upwards of sixty years ago, and
the way of thinking that conceived these gloomy buildings still governs the treatment of their inmates. But if the physical constitution of our penitentiaries is antiquated, the penal therapy practised in them is equally obsolete. Yet it is useless to change one and [DOT]not the other. It is useless to develop modern methods of treatment if young and reformable offenders are to be given a complete education in crime through, enforced and indiscriminate association with experienced criminals. As it works out in practice, the first offender is a better citizen when he goes in than when he comes out. To remedy this situation, the Archambault commission made some eighty-eight recommendations. I shall not read them all, but I should like to refer to a few.
1.	A centralized prison system under one federal government authority.
2.	A classification system to separate young and salvageable prisoners from repeaters and the mentally deficient.
3.	Stress on education and vocational training.
4.	A new approach to prison discipline.
5.	Facilities for helping released prisoners take their place in civilian life.
6.	Institutions patterned after the Borstal system for young offenders from sixteen to twenty-three years.
7.	Better training and pay for prison officers.
8.	Thorough medical and psychiatric examination.
9.	A merit system for reformables on the model of the English system.
10.	More outdoor games and exercises.
11.	Reorganization of prison industries.
12.	Installation of parole officers.
The committee may or may not agree with the Archambault report, but I think we must all pay our respects to the intelligence and probity of the commission. But what has been done in the eight years since their report was submitted can only be put down as insignificant. In fairness it must be said that in six of those years we were involved in a horrible struggle and not much could be expected, but that is finished. We ought to be ready now to make progress. Some small reforms have been made, and credit must be given. These reforms include permission to the prisoners to have playing cards in their cells so that they can amuse themselves. They are allowed to have puzzles and drawing materials. They are permitted to hear a slightly wider selection of radio programs, and to see one moving picture per month. They bathe more often than they used to. One peniten tiary has installed mechanical dishwashers. The rule of silence
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is now enforced only between the hours of seven and eight in the evening. Only a short time ago a psychiatrist was assigned to the penitentiary at Kingston, but there is still none in the other six penitentiaries.
But the rest remains practically as before. There is still the hole, the strapping bench, the thirty minutes of exercise a day, and the necessity of prisoners spending fifteen hours of each day alone in their cells. Prisoners still earn five cents per day in old and badly equipped shops. Virtually nothing has been done to facilitate the classification of prisoners, to supply vocational training, or to segregate and supply curative treatments' for young offenders. In the words of the 1913 penitentiaries commission:
The old and the young, the bad and the well disposed, the hopeless and the hopeful, all are treated as so much human waste in a common heap.
I would call the attention of the committee to the fact that penal reform is not a matter of amending one or another of the seven hundred odd regulations which have accumulated since the original Penitentiaries Act was passed in 1868. It is a question, first, of recognizing and, second, of applying, well established principles. The cornerstone of modern penology is classification, segregation and after-care, none of which is adequately practised in Canada.
Criminals may be divided into three main classes, as the hon. member for Saskatoon City has said. They are, first, accidental or occasional criminals; second, reformable criminals, and, third, habitual criminals. In Canadian prisons these types are thrown together in hopeless confusion, and when to them are added the criminally insane, for whom no separate provision is made, if they become insane more than three months after they have been committed to prison, the reason for Canada's failure in crime prevention becomes apparent.
Only adequate classification and segregation will avoid this evil, and these are almost physically impossible in the Canadian prison system as at present constituted. Sheer lack of facilities prevents the separation of the young from the old, the reformable first offender from the hardened repeater, the weak from the vicious, and the moron from the wayward intellectual. The only solution, as the Archambault commission realized, is to centralize penal control. I can see some difficulties about that. They recommended that the reformatories and provincial gaols must be brought under the same jurisdiction as the penitentiaries so as to develop a coordinated system of classification and treatment for all except short-term offenders. Instead

of automatically sending a man to the nearest penitentiary following a conviction of two years or more, as is done at the present time, it should be made possible to put him through a screening process that will permit the segregation in various prisons of the habitual offender, the young prisoner, the mentally deficient, the incorrigible, and the insane.
The Archambault commission recommended a six-point, programme of classification designed to remove many of the evils of the present system. This recommendation must be implemented, but its functioning is predicated on centralized control. But a just and humane prison system in itself does not complete the picture. The after-care of discharged prisoners is fully as important. The Archambault commission concluded that the alarming increase in repeaters was chiefly due to two factors:
First, the absence of any serious attempt to effect the reformation of the prisoner while he was incarcerated . . . and
Second, the failure to provide him on release with adequate assistance ... to obtain honest work and support himself and his dependents.
It costs this country $4,000,000 a year to keep 3,000 men in penitentiaries, but when a prisoner is let out, he is on his own. He faces an unfamiliar and hostile world with a railroad ticket, a few dollars earned at five cents a day, and a suit of prison-made clothing which he gets rid of at the first opportunity. Through enforced isolation from the outside world he has lost touch; his unproductive, rigidly controlled life in prison has left him badly handicapped in his efforts at rehabilitation. Sooner or later ninety-five per cent of our penitentiary inmates are released, and the 1938 commission was convinced that with proper after-care the vast majority of them could become useful citizens. Instead, as we have seen, three-fourths of them commit further crimes and are returned to prison.
At the present time there are eight prisoners' welfare associations in Canada. They have done invaluable, if unpublicized, work, for which this committee will, I am sure, commend them whole-heartedly. Yet they are gravely handicapped by lack of adequate financial support-no regular contribution is made by the federal government.

and without coordination it is difficult for them to pursue a uniform programme throughout the country. By contrast the state-controlled and financed rehabilitation of ex-prisoners is one of the most profitable features of the British penal system. There the Central Association for the Aid of Discharged Convicts, whose president is the Home Secretary, is financed by the treasury to coordinate the work of all the

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societies engaged in assisting ex-convicts. When a prisoner is released, one of the organizations takes charge of his maintenance for at least two weeks, helps him to find a job, and even buys tools for him if necessary.
No fewer than four recommendations were made by the Arehambault commission to set up a coordinated system of after-care for rehabilitating released prisoners. They saw that prisoners have to be helped to face the problem of their reentry into society, and that the solution lay partly in coordinating all the prisoners' aid societies under government sponsorship, and partly in enlisting the cooperation of the public to assist discharged prisoners to find employment and resume their place in the world.
In general, what is needed is a complete change of mind and a change of heart in dealing with crime. We must recognize it for what it is-a disease born of social conditions for which the country as a whole must accept greater responsibility. And like a disease, crime can, in most cases, be cured. The offender against the law must be punished for his transgression-that is the basic principle of any system of justice. But more important, he must be prevented by positive treatment from continuing in the way of lawlessness.
So far we have confined ourselves to punishing law-breakers by taking away their liberty for a period of years and then returning them to the world more anti-social than they were to begin with. That this method has been a complete failure is apparent from the statistics of crime to which I have referred, It remains to try another course. We have before us, in Britain, an example of what can be done, given an understanding of the nature of the problem and a real desire to remedy it.
The treatment of crime must be brought out from behind the hundred-year old walls of Kingston penitentiary, Dorchester and Stony Mountain into the light of modern science. The country at large must be taught a sympathetic and intelligent approach to crime and its prevention. Only by facing up squarely to the facts can we hope to provide a remedj'. Until we do, and so long as we attempt to cope with the situation by antiquated methods, we may expect the present trend in lawlessness to continue.
I started out by saying that prison reform was not a new problem in this country. The first commission to inquire into it was appointed in 1S32. It met and made a recommendation, which was tabled. Sixteen years later, in 1848, another commission was appointed. It too met and made a recommendation, which also was tabled. In 1867
another commission was appointed. It met, made a recommendation, and the recommendation was tabled. Forty-six years later, in 1913, another commission was appointed. It met, made a recommendation, and that recommendation was tabled. Seven years later, in 1920, another commission was appointed. It too met, made recommendations, and again the recommendations were tabled. Then in 1938, eighteen years later, another commission was appointed. It too met and made a recommendation, and now we have that recommendation before us, eight years later.
We cannot solve the problem we have been discussing here by ignoring it. We have to face up to it. It is long overdue for our attention. Mr. Chairman, we must do something about this problem, not to-morrow, but to-day. The Arehambault report was a splendid one. All I ask is that the minister and his department apply themselves immediately to it and bring into effect recommendations in that report that will change the system to the benefit of the people of Canada generally.


Mr. McKAY:: Mr. Chairman, I have listened with considerable interest to what has been said by the hon. member for Kootenay East, and by the hon. member for Spadina who has just taken his seat. Both speeches have been most informative. This discussion, while it has gone on for some considerable time, is one of great importance to this country. Last year we discussed penal reform at some considerable length. Some of us were not particularly satisfied with what had been done following the report of the Arehambault royal commission, and we are still not satisfied.
I propose to deal at the outset this afternoon with the matter of crime prevention. It seems obvious that there has been neglect and failure to work out any national technique under the Department of Justice, or for that matter anywhere else, for the prevention of crime among our youth. The field-
Mr. ST. LAURENT: Would the hon. member-


Eric Bowness McKay: Would the minister wait until I am finished?
Mr. ST. LAURENT: I do not like to leave the imputation unanswered that there is failure on the part of the Department of Justice to institute methods for the prevention of crime among youth. That is not within the jurisdiction of the department, or within the jurisdiction of the House of Commons or of the hon. member who is now speaking.


Eric Bowness McKay: I said, and I repeat, that there has been a failure to work out any
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national technique, anywhere for the prevention of crime among youth, and I referred to the Department of Justice and added, or for that matter anywhere else. I cannot see any particular objection to that statement, Mr. Chairman. The field has never been explored, so far as I can find out, and no machinery for dealing with potential offenders and for the liquidation of crime-producing centres has from the national viewpoint ever been conceived, much less standardized and set up for service. The dominion has left it in large part to the provinces, and the provinces have left it to the dominion, with the result that next to nothing has been done.
The child who has been raised in a slum home, under bad housing conditions, and in miserable surroundings, often undernourished in mind as well as in body, has been robbed of his rightful chance, and such conditions will breed delinquency as long as the state sits back and placidly allows such conditions to exist. We hoe out weeds in our gardens and fields, but the elimination of the evil which surrounds our youth has been largely left to a few churches and community-inspired organizations, who cannot hope to cope with this problem.
The house should take cognizance of the situation and proceed to eliminate crime by removing its most obvious source.
The minister is unquestionably aware of the wave of crime that is sweeping this country from coast to coast at the present time. Newspaper reports indicate that the perpetrators of these innumerable offences against the law of the land are in most cases young persons in their early twenties. Too often these young men and women have previously served time in penal institutions. It appears obvious to the most casual observer that, this being the case, our penal institutions have little rehabilitative or redemptive value. As a mode of treatment for offenders against the law, incarceration in our gaols and prisons without a programme of rehabilitation appears most ineffective. Many of Canada's outstanding leaders in education, in the church, in the legal profession, believe that a more sympathetic and above all scientific approach to the problem of youthful delinquency is most urgent. Acts of terrorism throughout the country continue, while the major recommendation of the Archambault royal commission of 1938, the establishment of the Borstal system in Canada, remains unimplemented. The United Kingdom has, by the establishment of this system, most satisfactorily met the problem of juvenile delinquency. The number of young people who are rearrested after completing a term in 
Borstal institutions is very small. It is so successful that more than seventy per cent are never reconvicted. Youth have gained confidence in the administration of justice in the old land through the introduction of the Borstal system. There is a grave need of something of the same sort being established here in Canada. This house should insist that action be taken at the earliest possible moment to establish Borstal institutions in this country. It is recognized by many states, including England, the United States and France, as the most efficient agent of reform which has yet been devised for young offenders against the law.
A commissioner has now been appointed as authorized by section 4(a) of the Penitentiary Act of 1939, as enacted by section 2 of chapter 28 of the statutes of 1945. The house should be deeply concerned with regard to the activities of this commissioner. Most students of penology who have carefully studied the report of the royal commission of 1938 which investigated Canada's penal system are agreed that the report was a most noteworthy document, exhaustive in detail and on the whole generally satisfactory. Why, in the face of the opinions of these experts, are such statements made from the government benches as appear in Hansard, page 2744, and as have occurred during this debate? I quote remarks made by the hon. member for New Westminster:
Mr. Reid: I have one question to ask the minister and a suggestion to make as well. First of all, may I say that I was pleased this evening to hear him remark that many of the suggestions-
Note the word "many".
-and recommendations of the commission which were supported by certain hon. members tonight were exaggerated. I remember the visit of the commissioner to the Pacific coast, and I could use a stronger word than "exaggerated." Before tlie minister implements the recommendations made in the report I would suggest that he had better wait until he has a report from the new commissioner who has been appointed.
An hon. Member:	Appoint another royal
commission.
Mr. Reid:	No; I am not in favour of that.
Judge Archambault should never have been appointed to the job to which he was appointed. He knew little or nothing at all about penitentiaries. Many of the recommendations were ridiculous. I know whereof I speak. I do not care who appointed him; I am saying that as a member of parliament.
Mr. Castleden:	He was not alone in it.
Mr. Reid: He took charge of it. As a matter of fact he was the chairman of the commission and took an active part too.
I submit that to say that many of the suggestions and recommendations were exaggerated, and to add that many of the recommendations were "ridiculous", and more,

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that the chairman, Mr. Justice Archambault, should never have been appointed, in effect amounts to a virtual repudiation of the work of this commission. It is a strange thing indeed that the government should appoint men in whom they had no confidence. If the commissioners were incompetent to conduct a survey of this country's penal system, why were they permitted to spend two years studying prisons in Canada and overseas, at a cost to the Canadian taxpaying public of $108,000? There can be only one answer: the government does not approve the report; it was not to the government's liking, because it spoke frankly and told the truth. The truth occasionally hurts, Mr. Chairman. It is most apparent that it is now the government's intention to ignore these suggestions and recommendations, because a commissioner has been appointed-


An hon. MEMBER:: Another one.


Eric Bowness McKay: -who, as the minister
states, and to use his own words, will "be able to make recommendations which can be implemented." After spending thousands of dollars of the public's money to produce it, the royal commission report of 1938 appears destined for the wastepaper basket to which so many other royal commission reports have been relegated in the past. And a new commissioner has been appointed-a military man, no less-who, the minister states, is to obtain accurate and up-to-date information as to what should be done with regard to our penal institutions. I am not questioning this man's qualifications, but I do hesitate, and I believe Canadians generally will hesitate, to accept one man's word against that of three men who were experts in their own field of endeavour for years and because of the very nature of their professions have been closely associated with the subject of penal institutions and penal reform throughout their long and varied careers. It is not inconceivable, Mr. Chairman, that should the new commissioner not recommend changes to the liking of the government, his report too will be thrown in the discard and w'e shall wait for another half century or more for satisfactory penal reform.
Last session the minister stated, as reported in Hansard of December 12, page 3353, that the recommendations of the Archambault royal commission dealing with the establishment of a Borstal system-to use his own words-"cannot be acted upon until there is some change in our constitution."
Mr. TOWNLEY-SMITH:	Good old
constitution!


Eric Bowness McKay: 
Mr. KIDD:: I should like to bring to the minister's attention another angle of the penitentiaries question, and that is the present position of men who resigned as guards to go overseas. When war broke out in 1939 many of these men, returned soldiers from the last war, immediately enlisted. They joined up in 1939, 1940 and 1941, and particularly would I draw attention to Kingston, Portsmouth,
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and similar penitentiaries. The same applies no doubt to other penitentaries across Canada. Some of these men went overseas, others gave valuable service in the veterans guards. Some have not come back; others are now returning. Naturally when they enlisted their places had to be filled, but I would make a strong appeal to the minister to see to it that those men who are now being taken on the staffs again do not lose their seniority by reason of their service overseas. Some of those who were taken on to fill the places of the men who resigned to go overseas have been confirmed in their positions. Some were temporary. At any rate, on behalf of these particular men of whom I speak, who made such a splendid contribution to the war effort, I ask that every consideration be given their cases when they come up for review by the minister.
Mr. ST. LAURENT: That is a matter that has received very serious consideration. When the war broke out my predecessor gave instructions to the wardens to release all those who could be spared and who wished to enlist in the forces. Then, after the staffs were cut to the smallest possible number that could cope with the job that had to be done, the others were told that it was felt their services were essential to the administration of these penitentiaries at home, and that if they remained with the service they would get first consideration, subject of course to the restoration of the rights of those who had obtained leave to enlist. There were very many who did remain, and who felt that they would have been more comfortable in the uniform of the fighting men. Some of them chose to leave, and they resigned. They were told, "If you do that, we shall have to give consideration to those who stay with us." Now the war is over and some have returned. Wherever it is found possible, without breaking a promise to those to whom promises were made to restore full rights to returned men, sympathetic consideration is being given. There are some cases, some specialized jobs, where you could not take back a man who resigned and left, in spite of the representations made to him that his services were required, without breaking a commitment that was made at the time to the one who took on his work. The hon. member would not like, any more than I would like, to have the department break commitments that were made at that time. That is the only qualification there is. The department is doing its best, because it appreciates that that is what every right-minded person would wish to have done, but it cannot go to the extent of break-
ing commitments that were made when there was this great need of retaining essential men in the service of the penitentiaries.


Mr. COCKERAM:: With reference to those who have been taken back, may I ask whether they are being reinstated in the pension fund having regard to the services they rendered in the army?
Mr. ST, LAURENT:	Those who went on
leave return under the ordinary conditions not only of being kept in the pension fund but of having their position in the superannuation fund improved by the statutory increases they would have obtained had they remained here. As to others who left without leave, some of them withdrew their gratuities. I cannot say how each individual case is being dealt with. The only thing I have said that we could not do is to breach commitments which we made to those who replaced these men. But, provided that we do not have to breach commitments made to others, we will give the returning men just as generous treatment as the regulations will allow.


Alan Cockeram: If a man who resigned his position to serve in the forces is taken back on the strength of the penitentiary staff, I would ask the government to allow him to pay into the superannuation fund for the time he was away, so that we will not lose the benefit of those years of pensionable service.


Thomas Ashmore Kidd: I would reinforce what the hon. member has said in that regard. Different points of view were held in 1939 and 1940 with respect to these men, but the men had the good will of everyone when they left to join the forces. When they went, some of them took their five per cent, and now that they are back, when they are taken on the strength of the penitentiary staff, they should be allowed to pay back into the fund what they have withdrawn so that their pension position will not be impaired.
Mr. ST. LAURENT: The most I can say is that the only restriction I have imposed is that we must not break commitments made to others. Apart from that, these men will get as sympathetic consideration as it is possible to extend to them.


Douglas King Hazen: I have a case which I do not regard as a closed book, although I have not got very far with it, and I hope the minister will not regard it as closed either. I do not ask him to deal with it this afternoon, but it has to do with a warden who got leave to enlist in 1940. He enlisted in the armed services, and after dischaige he wrote to the act-

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ing warden, informing him that he was not coming back, although this letter has not been discovered among the files of the warden. He had served as a warden for about nine years, I think, during which period he had contributed five per cent of his salary toward the superannuation fund. Because of the fact that no word had been received that he was coming [DOT]back, an order in council was passed which deprived him of the amount he had contributed to the pension fund over that period *of years. Under the act I believe there is a provision that a man must contribute for ten years before he can have the amount he has *contributed returned to him in case he leaves the service, though I believe an amendment has been made to that provision. This man *served for some nine years. He got leave to [DOT]enlist, and because when he got out of the armed forces he did not go back, an order in council was passed depriving him of this amount. But he points out to me that if a man who is employed as a warden is dismissed after being employed for several years, he receives back the amount he has contributed to the fund. To me it seems hardly fair or right that a man dismissed from the service should have his contribution to the fund repaid while a man who volunteered to go overseas is deprived of the amount he contributed.
As I say, I do not regard this matter as closed. 1 hope the government will see its way clear to do something about it, and I propose to take it up further with the minister, though I do not ask him to deal with the matter this afternoon.
Mr. ST. LAURENT: I think I know the case to which the hon. member is referring. All I would care to say at this time is that this man was not a warden, and I believe that correction should be made. The warden is the person in charge of the penitentiary, and I do not think the impression should be allowed to go abroad that the person the hon. member has in mind is one of the seven wardens.


Douglas King Hazen: No.
Mr. ST. LAURENT:	He was another,
lower official.


Douglas King Hazen: Perhaps I should have said a guard.
Mr. ST. LAURENT: Yes, in fact I think he was an assistant.


Donald Methuen Fleming: I have a few remarks to offer in connection with this ilem, Mr. Chairman, particularly in the light of some of the
statements made iij the chamber to-day and on June 21 in relation to the matter of penitentiary reform.
We have heard an' extended discussion of the recommendations of the Archambault royal commission. I do not know whether the Minister of Justice intended, when he spoke on this subject on June 21, to leave the impression some of us have drawn from his words. Certainly I hope he did not intend to give the impression which I think is given by his words in this respect. I believe many reading what he said will form the impression that the minister was throwing at least some cold water on hopes that the government really means to give effect to the recommendations of that commission. As a matter of fact there was much more reason for hope in the remarks of the minister when he spoke on this subject last fall, hope that the government really intended to implement the recommendations of the Archambault commission, than one would be warranted in drawing from his remarks of June 21. So before this item is passed, in the light of the study of conditions now being made by the commissioner, General Gibson, I hope the minister will give the house an assurance that there is no thought of delaying action on this report or giving to the recommendations therein contained anything less than meaningful action as soon as conditions permit.
It appears that others on the government side drew a similar impression from the remarks of the minister. That was evident in the address of the hon. member for New Westminster, who took occasion to question the capacity of Chief Justice Archambault to head such a commission. I do not feel called upon to justify the qualifications of Chief Justice Archambault for this work. I think his qualifications and those of his associates are abundantly demonstrated in the contents of the report itself. It is a remarkable document, one of the finest services of its kind to be performed by any royal commission in the history of this country. I for one am satisfied that the conscience of this country, now that the war is over and all excuses for delay are removed, will not permit dilly-dallying with the recommendations made by that commission. Chief Justice Archambault was supported by two eminent colleagues, Mr. R. W. Craig, K.C., former attorney general of the province of Manitoba, and Mr. J. C. McRuer, K.C., now chief justice of the high court division of the supreme court of Ontario. Both these gentlemen are eminent jurists, and it cannot be denied that they have had a broad experience with men who have found their way into these penal institutions. Nor
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can it be denied that they gave intensive and most intelligent study to the problem referred to them. They travelled widely; they studied other systems, and I think the report they wrote is the most comprehensive document of its kind to be produced in the history of this country; and w'e have had not a few documents of a similar nature.
Let it not be said that the need for reform of our penal institutions is any less urgent now than it was in 1938, when that report was written by the royal commission. I am not going into statistics; the committee has had ample statistics this afternoon. But I should like to refer to the press report of an address delivered by one who has had much to do at first hand with conditions in Kingston penitentiary. I refer to Canon W. E. Kidd, who for some time was protestant chaplain at this institution. In addressing a church assembly in Kingston on May 10 of this year he is reported as follows:
. . . members of the Christian church should see that men who are sent to penal institutions get treatment leading to reformation.
He said such treatment was not possible under the present system.
Think of that, in this year of grace 19461
Canon Kidd said he spoke as a chaplain who had seen thirteen years' service at the Kingston penitentiary. He said whatever is done with regard to reformation in penal institutions the Christian church should see that new regulations are satisfactory.
Many articles are being written about prison reform, he said, adding that Kingston penitentiary had a splendid staff, but it was hampered by government regulations. It is the general feeling that lack ot reformation at the prison is not due to the staff, he said.
Canon Kidd suggested that the deputy warden and senior officers of institution should get together occasionally to study improvements in the penitentiary system. "The regulations," said he "are formed in Ottawa, and the local authorities have nothing to say about them."
"Men who are serving time in these institutions are entitled to more than they are getting. There are many things that can be done. I think they should get more pay, so they can have sufficient money when they complete their sentence." he said. He charged that there* was a gulf between the penitentiary branch and.the remission branch at Ottawa, and that many recommendations are not acted upon at the right time.
Canon Kidd also referred to Ontario reformatories, and said that in his opinion a full-time chaplain should be employed and not a part-time minister as at the present time. He said the inmates at the Kingston penitentiary had manufactured a large amount of war supplies during the second great war, and had given 3,000 blood donations.
I believe I need say nothing more on that subject, but I feel called upon to say a word concerning the commissioner who h"3 bee/ appointed by the government. I speak in the light of some of the suggestions from certain

quarters of the house to the effect that General Gibson, because of his military experience, is disqualified from carrying on efficiently and sympathetically the duties which devolve upon him as commissioner.
I speak as one who knows General Gibson personally, as one who has known him for many years. May I say to the Minister of Justice that he made an excellent appointment. That is one reason I rise at this late stage in the debate. General Gibson is a man of a most sympathetic and understanding nature. No one need have any doubts or misgivings on that point. I make that statement directly and emphatically to those lion, members who expressed misgiving because General Gibson had had a long military career. His military career was one which brought him distinction and honour. He served in both wars, and was active in the non-permanent militia between the two wars.


Mr. PROBE:: Is he humanitarian? Does he understand juvenile and adult psychology?


Donald Methuen Fleming: He understands human nature. I do not know whether the hon. member for Regina City and I would understand the same thing from the use of the word "psychology". I say that General Gibson understands human nature, and that is the most important requisite in the position to which he has been appointed. He has had a long and distinguished career at the bar in Toronto, and is a man with a humanitarian and sympathetic outlook. Let there be no misgivings or doubts on that point. I repeat that the minister made a most happy choice in his selection of General Gibson, and I look forward to the time when the commissioner's report will be placed before parliament.
The hon. member for Kootenay East, in his excellent review of this problem on June 21, asked the minister if he would give the house an interim report on progress made to date by General Gibson in the study of the problems assigned to him. I hope the minister will give hon. members the benefit of that report, as it may be received from General Gibson. I believe that the house would receive such a report with interest and profit, and that its presentation might very well not be delayed until the report is complete-unless there is some very good reason why such interim report should not be presented at this time.
The minister has emphasized the fact that the problem of penal reform is not one which concerns the federal government alone, but has pointed out that it concerns as well all the provincial governments. I, for one, am happy to report that in Ontario leadership has already been given in this field with the

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appointment of a minister of reform institutions. This is a new portfolio established in Ontario, and is being filled by Mr. Dunbar, the former provincial secretary. Already extensive reform of the penal institutions of the province is under way. I hope that the energetic action by the Ontario government by way of reform of the penal institutions within that province will be matched by equally energetic action on the part of the federal Department of Justice.
In closing, I feel called upon to comment upon certain remarks made by some hon. members during the course of the debate. From what was said one might draw the inference that the problem of crime in Canada to-day is simply one of reforming penal institutions. That is just not so. The reform of penal institutions is but one phase of that problem. It is an important phase; let there be no doubt about that fact, but it is not the whole problem. We can have an extensive measure of reform of both of our provincial and federal penal institutions, and still fail to come to grips with t'he problem of crime at its source.
A discussion of causes of crimes at their source will probably not find all hon. members in full agreement. Attention has been called this afternoon to what has been described- and I think extravagantly-as a wave of crime in Canada. I for one want to state my opinion to this effect, that the essential cause of a great deal of that serious crime-indeed, the greatest cause of it-is the break-down in the home life of this country. One can talk endlessly about other factors which enter into this problem; but I repeat that the greatest cause of crime in Canada is the breakdown of family life.
Not long ago we had in Toronto a great tragedy arising from the slaying in cold blood of a merchant engaged in business in my riding. His store was entered by four youths of twenty, nineteen, eighteen and seventeen years of age respectively. Two of them entered with drawn guns, one shooting the man to death in cold blood. These youths were tried on a charge of murder, and the jury brought in a verdict of manslaughter.
What was the headline in the Toronto newspapers after that conviction? One of those headlines was based on statements given to the press by the parents of those unfortunate boys. "Unfortunate boys"-yes; but criminals, too. What did those headlines contain? Here is the headline which appears at page 3 of the Toronto Globe and Mail of May 17, "Gangster movies, depression, lack of housing blamed by parents of boys for Tobias slaying".
I would agree that quite probably each of those factors entered into the decisions of these bo3rs to embark upon crime-gangster movies, depression and lack of housing. But the staggering fact, as anyone who reads the article containing the statements of the parents will find, is that not one parent took the slightest responsibility for what had happened. They blame these things outside the home. True, they referred to unemployment as having created unrest in the home, and undoubtedly that is so. I do not wish to be misunderstood on that point. I am an advocate of social reform, and hope I always shall be. But, to my mind, the shocking thing was that not one of those parents took the slightest blame or responsibility upon himself or herself for what had happened. Not one said, "Well, probably we should have done more to bring that boy up in t'he way he should go. Probably if we had spent more time with him, been more careful in our training of him, had seen that religion entered into his training and that he had gone to Sunday school and, church it would have been different." But one finds not one word of that kind in the press conference held with the parents of these boys.
As against that I should like to read to the committee what I believe is sane and com-monsense language as it is found in the statement made to these boys by the hon. Mr. Justice Keiller Mackay, a very distinguished jurist on the Ontario supreme court bench, when he passed sentence on them. I quote from the remarks of Mr. Justice Mackay as they appear in the Globe and Mail of Saturday, May 18:
"After a fair trial on an indictment of murder," said His Lordship, "you have been found guilty of manslaughter. Because of the vigorous defence accorded you and chiefly, to my mind, because of your youth, you have been narrowly saved the awful spectre of the gallows.
"During the last score and a half years,
100,000	Canadians have laid down their lives, and 200,000 more have been broken and bruised in defending the honour and maintaining the defence of this country, whose laws you have defied and whose institutions you have sought to debauch.
"Nor, indeed, can any thinking person blame the newspaper press, the theatre or literature for causing your crime. Nor is it the fault of the times. Never in history have there been so many opportunities for education and for social and other advancement. And in the last few years, there have been agencies looking for young men to employ. Attempting to lay the blame on the press, the theatre or literature is sickly and sloppy sentihientality.
"What is to blame is the criminal instinct and a craze for money and corrupt impulses. These must and will be restrained. I can hear someone say those are harsh words, but let that someone reflect that if his or her or their father, husband, mother, wife or child, was by a group
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of armed robbers ushered into eternity in a twinkling, probably those words might not seem so harsh.
"You, one and all, engaged in a dreadful enterprise. I must and will do my duty as a judge and not permit sentiment to interfere with my judgment. You have been found guilty of a ruthless invasion and a ghastly crime."
I have touched on this subject to emphasize that important and urgent as is the need for reform of our penal system, it is not the whole answer to the problem of crime in this country. The problem of crime in this country cannot be resolved into mere questions of social influences outside the home. Those influences can be combatted if some attempt is made in this country to return to the sound standards of the Christian home.


Major James William Coldwell: I did not intend to rise this afternoon, but in view of the discussion I thought I should like to say a word on this matter in connection with which I have had considerable interest ever since coming to parliament. Some of my colleagues have placed the views of this party before the committee and there is no necessity for me to reiterate what they have said. However, I should like to comment on what the last speaker has said.
It is quite true that the home has not played its part as it should have in the bringing up of families, but let us bear in mind that the destruction of home life in this and many other countries is not due entirely to the individuals who form those homes. It is due to the industrial and economic conditions amid which those homes have to exist at the present time. To my mind, society has a responsibility equal to that of the home. When I go into some of our cities I find that there are no places where boys and girls of adolescent age or young men and women may mingle together and engage in cultural activities. During the war I met many young western boys and girls who came to this city and who complained bitterly about how different it was from the small western communities from which they had come. There they could go to the schoolhouse in the evening and have a dance under decent conditions, whereas there was no place in this city to go except to some night club where the dancing was accompanied by liquor and all the rest of it.
During the war we did nothing to provide the kind of entertainment under the right circumstances that these young people need, and this has had something to do with the loosening of morals we have witnessed during the past few years. I am not disagreeing with my hon. friend, because I think the responsibility on the home is very great. As one who

had something to do with young people for many years before coming to this House of Commons, may I say that I think the school also has some responsibility in this regard. Our educational system should provide more centres of community activity. We keep our schools closed after four o'clock and over the-week-end; they are not used as they should be or as they are in some places.
I agree largely with, what my hon. friend' has said, but there are one or two comments I wanted to make. To-day we are not dealing; with crime so much as with the penitentiaries. I was glad to hear what my hon,. friend said: about the new commissioner of penitentiaries, General Gibson. My hon. friend described him, as being a man possessing broad human sympathies. That is a first requisite for this position. I do not know General Gibson, and I do not know what his qualifications are other-than that he has had a distinguished career in the army, but I must confess that when the announcement was made I was disappointed because I had hoped that this appointment would be filled by someone trained in penology. An understanding of human nature and the possession of broad human sympathies, may counteract any disability that General Gibson may have in regard to training, and I hope that this will prove to be the case.
I do not want to say anything derogatory-about the staffs of our penal institutions, but there is another feature that I had in mind.. These guards are chosen largely because they possess certain physical attributes and have had certain physical training. Probably a good physique is necessary for this work, but there is something more important. A guard in a prison should, be trained in the handling of human beings just as an attendant in a mental hospital or a nurse in, an institution is trained. After all, the cure of criminality is sometimes. akin to the cure of a disease. Quite often a little human understanding and psychology will assist those who are engaged in this kind' of work to help a criminal overcome his. criminal tendencies.
I have had some experience in the handling-of people generally and1 particularly younger-people, and I know that you will quite often find young people who are not amenable to-discipline, wh,o are sometimes inclined to do-, things they ought not to do. I found that punishment was not the best way to handle delinquency. Quite often punishment raises-in the mind of the individual punished a resentment and sometimes that resentment is-carried into the wider field of the community. Instead of there being a personal animosity against the one who inflicts the punishment, quite often that animosity is against the whole-

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community. I never believed in corporal punishment and during my many years in educational institutions I did not use it. I have found that an understanding of psychology is the essential thing in the handling of any individual. I had hoped and I still hope that we shall be able to incorporate into our penitentiary system by and by men and women who will have been trained to handle the people in these institutions.
When I was in Great Britain a year or so ago I had the privilege of speaking to several people there who were interested in prison reform and had been to a large degree instrumental in bringing about reforms in the British penal system. They told me what they were doing in this matter. In recent days young university graduates who have made a study of psychology among other things, instead of volunteering as some of them did years ago to go down to Church House in Limehouse and give their lives to the underprivileged in the distressed slum areas, are devoting their lives to helping the people in the penal institutions. In accepting positions in these institutions they are doing the kind of job for society which in former days was done by ministers of the Gospel and by laymen, members of the priesthood, and others. The value to society of their contributions to the reclaiming of criminals' cannot be overestimated. I hope that more and more in our penal institutions we may find a desire to train the personnel that we need. I do not say that all the personnel needs to be trained, but among them there should be at least a sprinkling of those who have made a study of psychology and personal relationships and can give leadership in the reclaiming of those who have been convicted of criminal offences.
One other thing I was going to say, and this does not affect the Minister of Justice to the same extent as it does the Ontario department. I have been disturbed over what I have heard from juvenile court judges and others of the lack of accommodation for adolescent delinquents. I am told that in this province, during the war particularly, when many of the government buildings were being used by the military, first offenders were often mixed with others who had quite a record of offences. That is something we should guard against. We should see to it that first offenders at least are given an opportunity of rehabilitating themselves and that they are kept segregated from confirmed criminals. Penal institutions for offenders serving short sentences should be so organized that young delinquents are not subjected to influences which tend to confirm them in a life of crime.


Thomas Ashmore Kidd: If I may correct the hon. member, in Ontario hardened offenders serving two years less one day go to Burwash and the others go to Mimico or Guelph.


Mr. GOLD WELL:: During the war my understanding is that that was not possible.


Thomas Ashmore Kidd: I served on a parole board for four years and I saw the men going to Bur-wash. They were the hardened offenders, drug addicts, and so on. The first offenders in nearly every case were segregated from the hardened offenders and sent to Mimico or Guelph.


Thomas Miller Bell: I hope the hon. member is right.


Mr. GILLIS:: He is not right.


Major James William Coldwell: I hope he is right, but some of those trying juvenile cases have told me to the contrary. This, however, is getting out of the minister's department. The plea I am making is that we endeavour to get on the staff of our penal institutions trained men and women who will make that their life work, not only because of the security that is offered to them but because of the opportunity they will have there for service to humanity, after training with the definite idea of going into these institutions and doing the job which I think should be done.


Mr. BLACKMORE:: We have been talking for some time of great things to be done by and by. I wonder if we now might give a little attention to some of the smaller things we might do to-day. I have been sympathetic with the observations made thus far in the debate because I was really shocked not long ago to read a press dispatch from Montreal, dated April 14, 1946, which reads:
Canadians were described as the "most cold-hearted people in the world" in their attitude toward prison reforms, in an address here by Judge Allan J. Fraser, judge of the Ottawa family court.
Judge Fraser said Canadians are indifferent to prison conditions and neglect to give sufficient support to former prisoners trying to start life anew after serving their sentences.
He vigorously condemned the Canadian prison system, especially the large number of inadequately equipped "county jails."
Judge Fraser said a federal commission has been investigating penal institutions for a number- of years but nothing has been done and deplorable conditions continue to exist. "Now I understand that a commission is investigating that commission," the Ottawa judge said.
Having read that, I thought I had been neglecting too much this matter of our penitentiaries, and therefore I have been giving it a little attention. I should like to ask the Minister of Justice several questions on details
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of the internal administration of our penitentiaries. First, I would ask concerning the treatment of convicts in our penitentiaries who are mentally ill. I find on page 15 of the annual report of the superintendent of penitentiaries for the fiscal year ended March 31, 1945, this statement by R. M. Allan, warden of Kingston penitentiary:
The situation governing facilities for the treatment of those suffering from mental diseases still remains a difficult and regrettable problem. This has developed due to the inability of the provincial authorities to accept convicts certified as mentally ill-they having to remain in the prison for extended periods without being able to receive proper and adequate treatment.
I take it that these words by the warden of Kingston penitentiary are probably applicable to a large percentage of the penitentiaries throughout the country. Is the minister in a position to tell us how many convicts in our Canadian penitentiaries have been reported as mentally ill? Has he an estimate of the cost of providing adequate facilities for treating them either by (a) grants-in-aid to certain of the provinces or by (b) erecting federal hospitals for mentally ill convicts? Has the minister any plans of his own for dealing with this problem? Would the minister care to comment on that?
Mr. ST. LAURENT: I would rather hear the list of matters the hon. member wants dealt with, and then deal with them seriatim. He asks how many mental cases there are in the penitentiaries. I would have to get that information. I know there are a certain number, but for most of these cases we have had valuable cooperation from the provincial health authorities. We have given consideration to the establishment of a ward in a penitentiary where treatment might be given to those mental cases, but there are not so many that it would be possible without very great expense per unit to provide all the treatment which it is advisable to have them receive, and up to the present time we have been able to make arrangements with the provincial governments to receive at our expense the persons who are our responsibility and to give them the treatment that is available in their mental institutions. I am informed that forty-five convicts are now receiving care in provincial asylums at our expense. In my experience of the last four and a half years there have been two or three occasions where the provincial authorities have advised us that they were overcrowded and could not at the time take prisoners who we felt should be removed to a mental hospital. I remember that on one occasion we were able to have the convict accommodated in the asylum of another province. At that time the matter of

seeing if we could not provide for ourselves was gone into, and we came to the conclusion that while we would have to have such provision for care of various kinds the cost per unit would be very much more than it proved to be when that overhead could be spread over the patients who were a provincial responsibility as well as over those few who came from our institutions.


John Horne Blackmore: I believe that it would be quite advantageous to the committee if the minister would prepare a little fuller account of this matter and give it to us at a later time. What was going through my mind as the minister spoke was this: We will suppose . there is a convict who is mentally ill; he is consigned to a penitentiary for three years. He serves his term, and he comes out of the penitentiary still mentally ill. That convict is likely to commit another grievous crime, and he must be taken care of by some provincial institution. Well, why not allow him to receive that mental treatment while he is serving his term, being punished perhaps for an aberration which was originally traceable to the existence of his mental disability?
Mr. ST. LAURENT: I have just endeavoured to make clear that that is what is done. As soon as it is ascertained that a prisoner in a penitentiary is in need of mental treatment efforts are made to have him taken into a provincial institution and receive that treatment at the expense of the federal authority. That is what is done. It sometimes happens that there is a little delay, but the hon. member knows that is true not only of convicts, but. also of ordinary mental patients. Most of the mental institutions in this country are or have been during the last few years taxed to almost their capacity of accommodation, and it sometimes happens that there is some little delay; but a constant effort is made, as soon as it is ascertained that a convict requires care or mental hygiene, to have him accepted at a provincial institution at the cost of the federal authority.


John Horne Blackmore: The reason I mentioned the matter to the minister was, of course, as I indicated, that I found it in the report of Mr. R. M. Allan, warden of Kingston penitentiary, the statement I read into Hansard, indicating that in his opinion our treatment of the situation was not adequate.
I will leave the matter at that, I think, though, that this is a matter which should be regarded with considerable seriousness; and evidently, from the minister's remarks, it is so being dealt with.
Mr. ST. LAURENT: We have engaged a psychiatrist who is constantly attending to the population of the penitentiaries- of

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Kingston and Collins Bay; elsewhere we have ordinary medical attendants, and whenever the medical attendant feels that there is occasion for it he is supplied with the assistance of a psychiatric expert.


John Horne Blackmore: I was not desiring to criticize the minister unduly. I realize that he is coping with a very big problem. It is one thing to tell about how these matters ought to be taken care of; it is another thing to get on the inside, looking out, and take care of them. I know that; I have had enough experience as a principal of schools to know something of the nature of this sort of thing.
There are one or two matters for which the minister should be highly commended or as to which his conduct of the penitentiaries should be commended. I noticed some matters of great interest to me pertaining to industry in prisons. It is my opinion that one of the best ways to keep anybody out of mischief, and one of the best ways to restore his poise and his health, physical, mental and spiritual, is to give him good, interesting work which he realizes is profitable. I find that a measure of attention has evidently been given to this matter in the penitentiaries. I find in the report on Kingston, at page 16, this statement, which I think is worthy of note by the members of the committee:
As the policy of the department has curtailed construction generally, our shops have been geared to war work, and we have been fortunate in obtaining a sufficient number of government contracts to keep all convicts busily employed at useful and interesting work. With the end of the European war in sight, I have no doubt, difficulties will arise in retaining this market, however, it may be possible to arrange for the continuance of many of these contracts after the end of hostilities.
I believe the members of the committee will be quite interested in extended comments on the part of the minister with respect to policy concerning industry within the gaol. I wonder if I might ask him two or three questions bearing on this matter. Is the government actually curtailing construction at this time of shortages of goods? When all over we are talking about shortages and about the danger of inflation arising from these shortages, can it be that we are curtailing production in our penitentiaries, as is indicated by this statement? Of what kinds of goods is production being curtailed, and what plans has the government for keeping convicts busily employed at useful and interesting work when their efforts are no longer required in filling war contracts? I realize that this again takes the minister at a disadvantage, but it deals with matters which I find extremely interesting.
Mr. ST. LAURENT: I am glad to be able
to say to the hon. member that the construction which we are curtailing is construction which would require the use of building material. We gave instructions to curtail to the greatest possible extent the acquisition of building material, because we believed that it was more urgently required for other purposes. There has been no curtailing of the production in the manufacturing efforts of those confined in the penitentiaries.
I fully agree with the hon. member that one of the best things to do is to keep the men busy and you cannot keep them busy just tearing up things. You must make them feel that they are doing something that is worth while. On the other hand, we cannot, of course, incur the reproach of having prison labour compete with industries outside. But there is at the present time such a shortage of goods of all kinds that we can keep our population in the penitentiaries fully occupied even if everything they produce were going only to government agencies, and I feel no hesitation whatsoever in supplying government agencies with things produced in the .pentitentiaries.


John Horne Blackmore: I entirely agree with the minister and I believe the time has probably come when we must use a sort of educational propaganda to cause the people to be less resistant to the products of prison labour. The people must come to understand that there is a problem in the prisons that calls for solution. I am still a little disturbed because the writer of this report said he wondered whether the government would be able to find markets after the war, but the minister has reassured me that all the product of the penitentiaries can be used in supplying the needs of government departments, and I wish to express commendation to him for his answer in that respect. I should like very much to see the good and useful work of prisoners extended so that skills can be acquired and the joy of accomplishing things can be learned in prison. I have an idea that one of the causes of crime is the fact that people have never learned the sweetness of service and how good it is to do well a job that is worth doing, to be able to look back after the day's work upon the thing accomplished. If men had done that I do not believe they would have gone into crime.
There are two or three things I should like to point out in connection with the report. I have found certain things particularly interesting with respect to ce>-tam penitentiaries. I believe that those men who are conducting the penitentiaries, living a life of sacrifice and almost of ostracism by

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the community roundabout, feel a sense of frustration because no one ever knows about the good work they do. I think it is in order that the pages of Hansard should record some of what is set out in this report on penitentiaries. I should like to draw attention to some of these things but I do not know whether there is time now. If there is not I can wait until we are discussing the matter again, because it looks as though we shall soon hear from the Black Rod.
Mr. ST. LAURENT: I would ask that the committee rise and report progress and ask leave to sit again.


Grote Stirling: This day?
Mr. ST. LAURENT: This day if there is time after the speech of the Minister of Finance, but I do not anticipate there will be.


James Horace King: Later to-day. As the Speaker has to come back to the house from the senate to read a message I would ask hon. members to be good enough to return in order that we may have a quorum.



THE ROYAL ASSENT

[Stage Direction]
A message was delivered by Bonner Larose, Esquire, acting as assistant to the Gentleman Usher of the Black Rod, as follows:
Mr. Speaker, His Honour, the deputy of His Excellency the Governor General, desires the immediate attendance of this honourable house in the chamber of the honourable the Senate.
Accordingly, the house went up to the Senate.
And having returned.
Mr. SPEAKER informed the house that the deputy of His Excellency the Governor General had been pleased to give in His Majesty's name royal assent to the following bills:
An Act for the relief of Juliana Edmonda Isabella Ferdinanda Becquaert de Beaujeu.
An Act for the relief or Margaret Penelope Brown.
An Act for the relief of Marion Cruickshank Isaac.
An Act for the relief of Malvina Angelina Seguin Gascon.
An Act for the relief of Nora Kathleen Loury Cheverton.
An Act for the relief of Elsie Fisher ' Armitage.
An Act for the relief of Florence Mabel McIntosh Simpson.
An Act for the relief of Francis Gordon Sullivan.
An Act for the relief of Minerva Jane Cory.
An Act for the relief of Esther Irene Lind Booth.

An Act for the relief of Katie Hoffman Pinsky.
An Act for the relief of Dorothy Adams Acer McDougall.
An Act for the relief of Helen Douglas Stewart Rankin.
An Act for the relief of Olive Esther Rose Ewen.
An Act for the relief of Andrew Prem-Das.
An Act for the relief of Marie Evelyn Dormer.
An Act for the relief of Reginald Wesley Titcombe.
An Act for the relief of Hilda Forsey Pearce Johnston.
An Act for the relief of Ann Low Fuller Mitchell.
An Act for the relief of Marguerita St. Catherine McKeigan Guillevin.
An Act for the relief of Bessie Goldrosen Green.
An Act for the relief of Audrey Helen Jackson Maxham.
An Act for the relief of Frank Russell Yeoman.
An Act for the relief of Florence Joy McGibbon Lafleur.
An Act for the relief of Isobel Cameron McLaggan Oswald.
An Act for the relief of John Louis Charlebois.
An Act for the relief of Margaret Ruth Weir Allan.
An Act for the relief of Georgina Hylda SwafReld McKenzie.
An Act for the relief of Dorothy Ellen Cope Kimpton.
An Act for the relief of Yera Harriet May Kinghorn Hodgson.
An Act for the relief of Charles Patrick Kavanagh.
An Act for the relief of Irene Gertrude Carry Staley.
An Act for the relief of Ruby Rosina Burnett Walters.
An Act for the relief of Winnifred Violet Unsworth Thomas.
An Act for the relief of Helen Louisa Willcox Reid.
An Act for the relief of Richard Carter Eaton.
An Act for the relief of Annie Coyle Frances.
An Act for the relief of Beatrice Irene Moore Hawes.
An Act for the relief of Laura Lillian Butler May.
An Act for the relief of Gladys Ethel Standring Weldon.
An Act for the relief of Elizabeth Maude Foy Gage.

The Royal Assent
An Act for the relief of George Burley Beresford.
An Act for the relief of Isabelle Eleonora Cantlie Angus.
An. Act for the relief of Albert Stuart White.
An Act for the relief of Edward Mortin Montgomery.
An Act for the relief of Evelyn Clare Ward Davis Murray.
An Act for the relief of Esther Genevieve Johnson Potter.
An Act for the relief of Wanita Winifred Ellerton Upton.
An Act for the relief of Joseph Victor Emile
Tasse.
An Act for the relief of Roland Taillon.
An Act for the relief of Frederick Albert Johnson.
An Act for the relief of Joseph Francois Georges Landry.
An	Act	for	the	relief	of	Dorothy Ruth
Bennett Macnutt.
An Act for the relief of Anne Levy Marder.
An	Act	for	the	relief	of	David	Ritchie
McEwen.
An	Act	for	the	relief	of	Marie	Jeanne
Antoinette Bastien Cadieux.
An Act for the relief of Gwenyt'h Lorraine Madge Popkin.
An	Act	for	the	relief	of	Louise	Jocelyn
Wolfrey Black Griffin.
An	Act	for	the	relief	of	James	Delmer
Thomas Kirton.
An Act for the relief of Helen Sylvia Stacey Thompson.
An Act for the relief of Kay Florence Smart Gardiner.
An Act for the relief of Zoita Tehanciuc Moldovan.
An Act for the relief of Ambrose Keble Fredi Vernham.
An Act for the relief of Clermont Gendreau.
An Act for the relief of Beatrice Lydia Ogulnik Goldin.
An Act for the relief of Harry Dyce.
An Act for the relief of Alastair Trenholme Levat Fraser.
An Act for the relief of Elsie Rachel Silverson Ward.
An Act for the relief of William Joseph O'Sullivan.
An Act for the relief of Dorothy McLelland Hamilton.
An Act for the relief of Violet Maude Griffiths Iiarraclough.
An Act for the relief of Norman Peter Gray.
An Act for the relief of Andrew Kovacs.
An Act for the relief of Eda Margel Sand.
An Act for the relief of Lucille Eileen Piche Perrier.
An Act for the relief of Bertha Lipshitz Joslove.
An Act for the relief of Ernest Leslie Maddock Jones.
An Act for the relief of Marie Komyati Sznyitar.
An Act for the relief of Irene Renee Levey Ritchie.
An Act for the relief of Alexander Marr Meldrum.
An Act for th.e relief of Ottocar Fiedler.
An Act for the relief of Kathleen Regan Griffiths.
An	Act	for	the	relief	of	Eliza	Ritchie
McDerment.
An Act for the relief of Ruby Eileen Baker Jones.
An Act for the relief of Ralph Samuel Currie.
An	Act	for	the	relief	of	Simone	Tardif
Laverdure.
An Act for the relief of Max Sehacter.
An	Act	for	the	relief	of	Mary	Walker
Tiffney.
An	Act	for	the	relief	of	Margaret June
Purdy MacKinnon.
An Act for the relief of John Rae.
An Act for the relief of Nellie Mugford Brumby.
An Act for the relief of Edith May Hort Search.
An Act for the relief of Alexander Thompson Powell Scott.
An Act for the relief of Frances Eleanor Miller Foster.
An Act for the relief of Mary Kathleen Maloney Rassie.
An Act for the relief of Mildred Florence Rooke Cochrane.
An Act for the relief of Eileene Ruby Aspell Stinson.
An Act for the relief of Edna Bookalam Howick.
An Act for the relief of Berthe Alice Cardinal Reid.
An Act for the relief of Elizabeth Jean Warden Leupold.
An Act for the relief of Thomas Bryson Beakes.
An Act for the relief of Lila Edna Page Kennedy.
An Act for the relief of Ernest Crete.
An Act for the relief of Pauline Hellier Kirsch.
An Act for the relief of Wilfred Fields Benlow.
An Act for the relief of Thomas Allan.
An Act for the relief of Martta Haavisto Aaltonen.
The Royal Assent
[Stage Direction]
An Act for the relief of Rhona Gertrude Paikowsky Munn.
An	Act	for	the	relief	of	Arthur	Joseph
Hubbard.
An Act for the relief of Eleanor Hibbard Howe.
An Act for the relief of George Graver.
An Act for the relief of Malcolm Ernest Bigelow.
An	Act	for	the	relief	of	Mary	Epstein
Harris.
An Act for the relief of Helen Irene Flewel-ling Wilson.
An Act for the relief of Maitabel Horwitz Hollander.
An	Act	for	the	relief	of	Pauline-Gisele
Guennette Villeneuve.
An	Act	for	the	relief	of	Mary	Jaelyn
Robinson Jeffrey.
An Act for the relief of Jessie Hope Forbes Hardie.
An Act for the relief of Robert Venor.
An Act for the relief of Lillian Audrey Atkinson Jackson.
An Act for the relief of Bernard Cook.
An Act for the relief of Estelle R. Warhaft Slobod.
An Act for the relief of Alexander Fitz Ormonde Spooner.
An Act for the relief of Eleanor Williams.
An	Act	for	the	relief	of	Joseph Henri
Veaudry.
An Act for the relief of Amelia Jezik Pascas.
An Act for the relief of Cyril Mackie.
An	Act	for	the	relief	of	Carol	Gordon
Cass Planche.
An Act for the relief of Eveline Richmond Sykes Lacoe.
An Act for the relief of Miriam Vineberg Perel.
An Act for the relief of Paul Krawchuk.
An	Act	for	the	relief	of	Henry	Arthur
Creates.
An Act for the relief of Stephanie Tymehuk McLean.
An	Act	for	the	relief	of	Annie	Spivack
Prosterman.
An Act for the relief of Kenneth Edwin Morrison.
An Act for the relief of Almeda Mabel Hartry Ritchie.
An	Act	for	the	relief	of	Margo	Ismena
Graydon Heubach.
An Act for the relief of Erika Gossen Tenzer.
An Act for the relief of Isabel Greenshields Biggs.
An Act for the relief of Henri Edme Bernard.
An Act for the relief of Nellie Harrison Andersen.

An Act for the relief of Marie Irene Clementine Elizabeth Ash.
An Act for the relief of Alexander Grant.
An Act for the relief of Thomas Beach.
An Act for the relief of Fanny Miller Astrofsky.
An Act for the relief of Grace Ellen Rafter Munro.
An Act to amend the Act incorporating The National Council of Women of Canada.
An iVct to incorporate Evangelical Churches of Pentecost.
An Act to incorporate the Executive Board of the Church of the Nazarene.
An Act respecting Citizenship, Nationality, Naturalization and Status of Aliens.
An Act to amend the Feeding Stuffs Act, 1937.
An Act to amend The Naval Service Act, 1944.
An Act for granting to His Majesty certain sums of money for the public service of the financial year ending the 31st March, 1947.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.


Right Hon. J. L. ILSLEY (Minister of Finance) moved:: That Mr. Speaker do now leave the chair for the house to go into committee of ways and means.
He said: Mr. Speaker, in presenting the last budget to this house on October 12, I emphasized that, although hostilities were over, it must still be regarded as a war budget, providing as it did mainly for war expenditures during the fiscal year 1945-46. The budget which I now have the honour and duty to place before the house is essentially a peacetime budget, providing for the financial needs of the first post-war year which is wholly a year of peace, although these needs include also certain remaining costs of demobilization and heavy costs for gratuities and other benefits to our veterans, costs that will not recur on a similar scale in subsequent years.
In reviewing the background against which this budget is projected, I do not propose to look further back than the period of demobilization and reconversion. A review of our war finance and of our other economic policies and

The Budget-Mr. llsley
activities during the war would remind us of many achievements in which Canadians may justly take pride. I referred to some of them briefly in the budget of last October. We plan to provide the important figures of our war finances in convenient form for reference in the next issue of the public accounts. The data regarding government financial operations during the last fiscal year, that is to say, the year ending March 31, 1946, I have set forth in a white paper which I shall table at the conclusion of my remarks and which will be printed as an appendix to the budget for the convenience of the house and the public.
As this white paper gives voluminous detail in regard to the revenues, expenditures and the other transactions and accounts, it will be necessary for me to refer only to some of the highlights in the record for the past fiscal year. The figures quoted, by the way, will not be the final figures; they are close estimates subject still to certain minor adjustments and to one major alteration in connection with the United Kingdom financial agreement, which I shall explain in a moment. In this connection, I should perhaps mention that the accounting adjustments and offsetting transactions required to complete the settlement of various war accounts have been particularly numerous this year, including for instance many transfers of payments originally made as advances on account or out of working capital funds to the final account to which they should be charged in our books.
Total revenues, including refundable taxes, amounted to S3,028 million, a slight increase from the revenues cf the previous year. Accounting in part for this high total is the sum of $593 million under the heading, "Special receipts and other credits". While this includes some such readily understandable items as the net income of the Canadian National Railways, the earnings of Park Steamships Limited, the proceeds of sales of surplus crown assets, etc., it is made up in considerable part by refunds of previous years' expenditures and other essentially bookkeeping transactions arising out of the war. For instance, amounts previously paid by the Department of Munitions and Supply to contractors as advances or working capital are now being finally charged to the department or agency which received the supplies. Such refunds of previous expenditure must be brought into revenue but at the same time there are some corresponding and offsetting increases in expenditures. Too much significance therefore must not be attached to the over-all total of revenues, and the deficit is, of course, not affected by these offsetting transactions.
More significant is the total of ordinary revenues which amounted to $2,436 million, a decrease of only $84 million from the previous year. Total tax revenues are now estimated to have been $2,275 million, which is about S100 million less than in the preceding year. However, this figure includes only $73 million of refundable taxes as compared with $220 million in the preceding year, so that if we consider net taxable revenues we obtained about $48 million more in 1945-46 than in 1944-45, despite the substantial tax reductions made in the budget of last October. If we look at the yield of individual taxes, we find decreases in the revenue from the personal income tax, the corporation tax and excise taxes, and increases in the yield of the excess profits tax, succession duties, customs import duties and excise duties. Rut I shall not weary the house with the statistical details. The decline in the yield of excise taxes was more than accounted for by the abolition of the war exchange tax; most of the other special excise taxes showed increases, offsetting to a considerable extent the decline in the sales tax, which aruse from the broad exemptions introduced last year for building materials and various types of goods entering into production costs.
Non-tax revenues increased by about $15 million to a total of $160 million. As the house knows, most of this revenue is derived from post office receipts and from the return on investments, both of which sources of revenue have shown a steady increase in recent years.
Ordinary expenditures for the year are estimated at $1,062 million, an increase of $295 million from the preceding year. This substantial increase is largely accounted for by an increase of $97 million in the cost of servicing the public debt and by the introduction of family allowances, which involved a cost of $173 million during the fiscal year.
War and demobilization expenditures for the year are shown at a total of $3,558 million. This total includes the offsetting bookkeeping charges that correspond to refunds included in special receipts arising from the adjustment of earlier expenditures made as advances by the Department of Munitions and Supply and finally charged to the departments and agencies receiving supplies. Expenditures by the army, navy and air force amounted in the year to $1,707 million, as compared with $2,938 million the previous year. These service expenditures included heavy costs of repatriation and demobilization, as well as settlement of arrears of charges incurred in previous years of active warfare. The expenditures of the Department of Muni-
The Budget-Mr. Ilsley

tions and Supply and Reconstruction amounted to $263 million, including the item of $145 million for the costs of termination of war contracts following the end1 of 'hostilities. Expenditures to provide Canada's contributions to UNRRA amounted to $143 million, completing the total of $154 million which we agreed to provide. Mutual aid expenditures, including the settlement of outstanding accounts for deliveries in the previous year and the cost of some supplies and aircraft on hand and surplus at the end of hostilities, amounted to $772 million. Expenditures for supplies for military relief amounted in the year to $34 million, for which bills are being rendered to the governments of the recipient countries by the combined military authorities. War expenditures of the Department of Veterans Affairs (including the costs of gratuities, reestablishment credits, rehabilitation benefits, treatment and pensions) amounted to $328 million, nearly three hundred million more than in the previous year. All war expenditures other than those already mentioned amounted to $311 million, of which various subsidies on agricultural products and subsidies to maintain ceiling prices amounted to about $192 million.
We have not as yet included in the figures of war expenditure the $425 million represented by the cancellation of accumulated liabilities of the United Kingdom under the British commonwealtlj air training plan. Although this was provided for in the financial agreement with the United Kingdom, the relevant article of the agreement and the section of the act implementing it have not yet been put into effect, pending action by the United States Congress on the Anglo-American financial agreement. They will be put into effect, however, immediately after approval is given to that agreement, which is now at an advanced stage of congressional consideration. The result will be to extinguish this item now listed on our balance sheet as an advance to the United Kingdom, and to increase the figure of war expenditures for 1945-46 by a corresponding amount. This is the major change which I expect to see in our final accounts for the year, as compared With the estimates now presented.
Special expenditures increased by about $10 million, largely due to an increase in advances to the prairie farm emergency fund. Capital expenditures, losses of and nonactive advances to government-owned enterprises and other charges remained practically unchanged. For the sixth year in succession an amount of $25 million was added to the reserve for possible losses on ultimate realization of active assets.

The grand total expenditures for the year amounted to $4,691 million, a decrease of $555 million from the preceding year. As total revenue, exclusive of refundable taxes, was $2,955 million, the over-all deficit for the year was $1,736 million, a figure approximately $822 million lower than the deficit of the previous year. This amount is, of course, the extent of the increase in the net debt during the fiscal year.
Our financial .requirements for loans, advances and investments, which amounted to a total of $666 million, are set out in some detail in the white paper. This was more than $200 million larger than in the previous year, due to very large advances to the foreign exchange control board and loans and advances to allied governments.
Total borrowings during the year, excluding the renewal of treasury bills, deposit certificates and short term notes held by the Bank of Canada, amounted to $3,750 million. Of this huge total, the great bulk was obtained from the two highly successful victory loan campaigns. In the eighth victory loan, during the spring of 1945, a total of approximately $1,564 million was obtained, made up of 3,178,275 subscriptions. In the ninth loan, floated in October and November, total subscriptions amounted to $2,025 million and numbered 2,947,636. These two highly successful loans marked the climax of the work of the national war finance committee, to whose able leadership I have frequently paid tribute. Our other borrowing during the year took the form of refundable taxes, an increase of $70 million in treasury bills, the sale of war savings certificates and stamps, and a modest increase in the floating debt. During the year we redeemed for cash securities of a par value of $916 million, including $155 million in U.S. dollar securities. Details of borrowing operations and redemptions are given in the white paper. Our holdings of cash in Canada increased by $536 million during the year, accounting in considerable part for the large total of borrowings. The cash deficiency during the year-that is, the net amount borrowed to finance expenditure, loans and investments, and not to redeem debt or add to balances in Canada-amounted to $2,452 million, as compared with $2,955 million the previous year.
There was one important development in our borrowing operations and policy which should be mentioned. As I announced on February 27, the government reduced the rate of interest on deposit certificates sold to the chartered banks after that date from j of 1 per cent to { of 1 per cent, and has arranged with all the chartered banks that

The Budget-Mr. Ilsley
the holdings by each bank of government securities other than these deposit certificates and treasury bills or notes will be limited in amount to the equivalent of 90 per cent of its Canadian personal savings deposits and will be so selected as to maturity as to yield on average an interest rate which gives them only a moderate profit margin over the cost of interest and other operating expenses on these savings deposits. This constitutes an important development in monetary policy and government finance; it means that monetary expansion through the purchase of government securities by the chartered banks will not result in more than a modest profit margin for the banks on such new assets and liabilities. During the \tar we were able to accomplish this objective, in substance, through the large scale use of deposit certificates and informal arrangements for their distribution to the various banks. This new development will enable us to continue to obtain in peace time the advantages of low cost short term borrowing from the banking system.
As at March 31, 1946, our total unmatured funded debt, including refundable taxes, amounted to $16,807 million as now estimated. The net debt was $13,034 million, which reflects, of course, an increase during the year of the amount of the budgetary deficit. The funded debt carried annual interest charges of $436 million. The average rate of interest was 2-59 per cent, as compared with 2-51 per cent as at March 31, 1945, the slight increase being due to the fact that most of the addition to pur debt during the year took the form of 3 per cent victory bonds.
The white paper which I am tabling to-night and which will amplify the brief summary which I have just given, deals at length only with the government accounts. Next year I hope to be able to present additional information of broader significance, showing how the government accounts and activities have fitted into those of the nation as a whole. Already the house will probably have noted the interesting and significant figures of national income, production and expenditures which have recently been prepared by the dominion bureau of statistics in cooperation with other departments and agencies of the government. By next year I hope we shall have both the basic statistical data and the staff necessary to prepare for presentation at the time of the budget figures showing the way in which the government expenditures, revenues and financing relate to the accounts and economic activities of the nation as a whole, and this should help in understanding
and appraising the effect of the government's expenditures and its budget proposals upon the economic life of the community.
I have so much else that I must speak about in this budget that I propose to comment only very briefly on the economic situation. In any case, immediate economic considerations are of less importance in determining our present proposals than longer term economic policy and the necessities of dominion-provincial relations.
We find Canada to-day more prosperous and further along the road of reemployment and reconversion that we could reasonably have expected last autumn when I presented the previous budget. Despite many shortages and interruptions, our economy as a whole has turned with remarkable speed from war service and work to peacetime jobs and objectives. We are enjoying a level of employment and prosperity that we have never experienced before in peace time. For that, in the hungry and devastated world of to-day, we should be thankful. On the other hand, we do not have the spirit of agreement, of cooperation and mutual confidence that we had hoped for; on matters of public policy we do not seem to have found the peacetime equivalent to the "win-the-war" objective that kept us united and strong during the war and enabled us to reach high levels of national achievement. I need not comment on the international or industrial difficulties and disagreements. In a field much closer to home, and immediately affecting this budget, we find now that our previous hopes for a comprehensive agreement between the Canadian and provincial governments have not been realized. -Lacking an agreement that would have enabled us and the provincial governments to make plans with confideqce and boldness, we must now proceed more cautiously, thankful that the present prosperity makes many of our problems less urgent for a short time.
When the war ended in Europe, slightly more than a year .ago, there were three-quarters of a million men and women in our fighting forces. Now there are only about one hundred thousand; in little more than a year we have released about six hundred and fifty thousand. Of these, the large majority have found employment, or are taking university or vocational training, or have gone into business for themselves, assisted by their wartime savings and the many benefits provided for veterans. In the same period-but even more suddenly-our workers in war industry were released upon the labour market. The number is roughly the same as that of servicemen demobilized. All told then, about
The Budget-Mr. Ilsley

one Canadian in four who work for a living has been released from war activities. Several hundred thousand of them-married women, old people and students-have left the labour market. Some others are unemployed, unable to find work which they can and will undertake-although there are more than one hundred thousand unfilled jobs. The rest- the majority of the servicemen and war workers-are busy at work now in industry, trade, farming or elsewhere. Despite shortages and interruptions, peacetime production and trade have expanded rapidly and absorbed most of those seeking work with remarkably little difficulty. The number of unemployed is only about 200,000 at last report, and with the best season for employment still ahead. This compares with about 75,000 unemployed and seeking work immediately after the end of the war in Europe. This 200,000 is only about 4 per cent of our total labour force, at a time when changes in occupation are going on rapidly, and when it is difficult for men to move to the jobs that are now available.
The rapid and successful demobilization and reemployment of man-power has been accompanied and, to some extent made possible, by the rapid technical reconversion of industry. War equipment was removed and replaced by equipment for civilian production in a great many plants with relatively little delay or difficulty. When the change-over has involved or been accompanied by modernization or extension of civilian production facilities, there has been greater difficulty and delay, due to shortages and competing demands in the United States and abroad.
In 1944 the total market value of all our current production and services-what the statisticians call our "gross national product"- reached a wartime peak of about $11$ billion, compared with a value, at lower prices, in 1938 of about $5-1 billion. Thus, the effect of the war, including the effect of price increases, was to more than double our gross national production. We do not know, of course, what the final figure will be for the current year, but so far it has been running at about $11 billion-although that level may be pushed down as a result of interruptions to production.
Our present prosperity and employment are also on the whole well distributed throughout the country. There are some areas which have suffered from crop failure or from the disappearance of unusual wartime industrial or other activity, and which are experiencing temporary difficulties or a period of readjustment to more normal conditions, but there are surprisingly few of them.

The reason for the continuing high levels of production, employment and incomes, is that the demands of w'ar, represented by war expenditures which have fallen from a huge total a year ago to a small fraction of that to-day, have been replaced by other demands which, though less insistent and insatiable, are nevertheless large and urgent and backed by effective purchasing power.
Our income from exports is the most important factor determining our prosperity and employment in peacetime. During the war our exports reached fantastic levels, largely financed by war expenditures directly as through mutual aid, or indirectly, through what our forces spent abroad. These war exports included many of our staple products -foods, metals and other raw materials- but consisted largely of war products, guns, planes, ships, vehicles, ammunition, radar sets and other manufactured war equipment. Now, of course, the exports of these war supplies have almost entirely disappeared. But the exports of food and raw materials continue at high levels, and exports of civilian manufactured goods-locomotives, trucks, railway cars, ships, and machinery-are replacing those of war supplies, and helping to maintain our export trade, and therefore export incomes, at levels far above pre-war even though below the wartime peak. This is the main factor in the maintenance of our national production and employment.
While the need of overseas countries for our exports is enormous and urgent, most of them can only buy from us on credit. It is vitally important for the future development of our trade that these countries, particularly Britain and the countries of western Europe, should be able to buy our foodstuffs, metals, other raw materials and some of our new manufactured products, in order to reestablish their economic life and emerge as great trading nations providing markets for our goods. On our side, it is important to maintain export production and income while war expenditures decline and until normal trade, both domestic and international, is fully reestablished. Therefore the government has undertaken a large programme of export credits, which from the economic point of view is replacing our war expenditures by government investments, on which we shall earn a return in future years.
The second powerful influence maintaining employment and production, despite the decline in war expenditures, is private expenditure of a capital nature, including building and construction, the purchase of new equipment and machinery, and the accumulation of stock in trade. In this general field there has apparently been a substantial increase in expenditure over the levels of last year. There

The Budget-Mr. Ilsley
is a large amount of private capital seeking investment in new building, plant and equipment, but the amount of expenditure of this kind is severely limited now by shortages of materials, parts and manufacturing capacity. In the building and construction field particularly, shortages of building materials, and to a lesser extent the shortage of skilled labour, are seriously restricting the provision of housing that is most urgently needed, as well as other forms of construction, particularly commercial and industrial buildings. It is to be hoped that this industrial and commercial expenditure that cannot readily be made now will be deferred a year or two, when it will help in sustaining high levels of employment and incomes after other temporary stimulants are less strong.
Tire third offset to the decline in our war expenditures has been a substantial increase in the expenditures of consumers. At present a great many consumers have on hand large reserves of savings which they accumulated during the war, and some of which they wish to spend when the goods they want become available. Moreover, the proportion of their incomes which people have spent on consumption during the war has been abnormally low and will increase-both because they will not try so hard to save as under the pressure of war and because the proportion of income taken as taxes has been abnormally high. Now we may expect people to spend more of their incomes-and they are trying to do so. In addition, there has been the effect of the expenditures on family allowances, to which I have already referred. These payments commenced shortly after the end of hostilities in Europe, and immediately offset a part of the rapid reduction which- then took place in our war expenditures. Of even greater importance in its current effects, we have been operating a comprehensive and generous system of gratuities, benefits, reestablishment credits and other assistance for those leaving the armed services. I doubt if the house or the public realizes the large size of the sums involved in this programme. During the fiscal year for which we are now budgeting, these various payments to or on behalf of veterans as already provided for in the estimates, will add up to $620 million, and this figure omits the amounts paid by the services themselves for leave on discharge, deferred pay, clothing allowances and similar benefits. Nearly a quarter of all our expenditures this year will be directly for the benefit of veterans and their families. This year, of course, is the peak period, but these veterans' expenditures have been building up rapidly as war expenditures proper have declined, and have constituted a power-63260-184
ful influence increasing the total of what consumers have been trying to spend.
In fact, of course, consumers' expenditures continue to be limited and determined by the goods and services that are available to meet the demands. The available information indicates a moderate increase in these expenditures during recent months and a more substantial increase in employment in the industries supplying the consumer, particularly in trade and the service industries.
The fourth influence offsetting the decline in our war expenditure has been a modest increase in the non-war expenditures of governments and municipalities-and in this I refer to their expenditures on supplies and services. In the case of the dominion government we have deliberately endeavoured to keep this increase to the minimum required by urgent post-war projects, and in particular we have pruned our public works and other construction programmes drastically in order to avoid demands on building materials and building labour urgently required for housing. I hope that provinces and municipalities will find themselves able to follow a similar policy at this time when the housing situation is so acute. Apart from projects that compete with building, however, them are many increased expenditures by governments and local bodies which it is important to proceed with as soon as possible after the war, and the result has been a gradual increase since last summer in government expenditures that give rise to employment and production.
While I hesitate to venture into the field of forecasting economic developments in a world as chaotic and eventful as the one we are living in at the present time, it appears that these major influences which have maintained a high level of expenditures for Canadian goods and services despite the reduction in war expenditure will persist for the remainder of this fiscal year, and beyond it, unless further difficulties arise to retard production. If these difficulties can be avoided, then I think we may reasonably expect a level of expenditure adequate to maintain a high level of employment and production through the year. Indeed, the pressure of expenditure at the present in many fields is so great that action by the government and others is needed to prevent rapidly increasing prices and the development of inflation.
The pressure on prices is still very strong. The scarcity of goods in relation to spending power is less than during the last few years, because there are more goods and services available for sale, both from larger production and imports and from the decline in the purchases of goods for war purposes. On the

The Budget-Mr. llsley

other hand, purchasers have incomes nearly as high as in wartime, accumulated savings on hand at levels never before approached, and a greater disposition to spend now that the war is over. All this tends to pull prices up. Prices are also getting pushed up from below by increases in costs, increases in the cost of imported materials and parts, increases in fuel costs, increases in wages, and higher overhead costs when output is restricted.
We must resist this pressure towards higher prices and keep the increases within reasonable limits. During the war, as a result of strenuous efforts and the effective cooperation of the Canadian people, we succeeded in keeping prices under control and avoiding inflation. It would be the greatest folly now to dissipate the fruits of our efforts by letting prices get out of hand, by letting inflation set in when the battle is nearly over. Adjustments are necessary now, and many of them have been made. Some increases in prices and wages have been essential, and some others have been tolerable. We believe it is wise, and practically necessary, gradually to relax and remove the controls which made up our stabilization programme. Price ceilings are being raised here and there where conditions permit, and suspended altogether in some cases where no serious harm seems likely to result. Wage and salary control has been made more flexible to permit adjustments that are necessary, or that are justified on grounds of equity. But this relaxation is intended as a deliberate, orderly programme of decontrol and not as an invitation to a mad scramble for higher prices and wages in which we shall all suffer. So far, most Canadians have on the whole shown a sensible restraint in seeking adjustments of prices and wages. Now that we are relaxing our controls, we must look to all important groups and their leaders to act with sense and discretion and a due regard for the results of their actions upon others. I am sure that all members of this house would regard inflation now as a dismal tragedy, coming at the end of what has been an outstanding record of success in dealing with the economic problems of war.
The real answer, the constructive answer, to the inflationary pressures existing at this time is to work and produce the goods that are wanted in greater volume, so that our greater buying power will result in more goods at reasonable prices, rather than fewer at higher prices. To business men in particular I would like to address a plea that they do all in their power to hold prices down and get volume up, over this next critical year. The purchasing power represented by wartime savings will go further and our prosperity will

be more permanent, if prices can be kept down. Canadians, before long, must expect to meet competition in export markets and in their own markets from the exports of other countries. We wish to enter that long period of competition with the advantages of low costs and volume production, so that high employment can be maintained and a high real standard of living.
Production then should be our primary objective both for its own sake in a world that needs goods so badly, and as a safeguard against the present danger of inflation. We should/ aim now at high volume production for civilian purposes despite shortages, strikes, delays and uncertainties, high volume production rather than high prices as a source of income and profits. No longer must civilian production be restricted in order to conserve resources for war. It can now receive first priority.



BUDGET FORECAST 1946-47 AND FINANCIAL PROPOSALS

[Stage Direction]
It is with this view of the current economic situation and the prevailing trends that I have approached the primary purpose of this budget, namely, the formulation of financial proposals to meet the requirements of the current fiscal year 1946-47 and the months immediately following the close of the year.
As the house knows, the main estimates for the current fiscal year, covering both ordinary expenditures and expenditure chargeable to demobilization and reconversion, involve an expected outlay of $2,769 million. We have found from experience, however, that there are likely to be savings in any financial programme of that magnitude, although of course it is impossible t'o say beforehand in respect to what items the savings will actually be made. On the other hand, payments to veterans, chiefly veterans' credits, have been running in recent months at higher levels than were anticipated when the main estimates were prepared. My own forecast is that apart from any substantial increase in this item and assuming no new commitments of a major character, the total savings will be sufficient to allow for any supplementary and further supplementary estimates which it may be necessary later in the year to ask the house to approve.
On the revenue side, it is estimated that under our tax laws as they now stand, total revenues in 1946-47 will approximate S2,510 million as compared with $2,956 million in the last fiscal year. I shall place on Hansard a table showing the details of this estimate in compaiison with the revenues of 1945-46:

The Budget-Mr. Ilsley
	Forecast	Actual
	Fiscal Year	Fiscal Year
	1946-47	1945-46
	(millions)	(millions)
Customs duties 	$ 183	$ 129Excise duties 	195	187Sales tax (net) 	250	212War exchange tax . ..	41Other excise taxes ...	259	244Income tax:	Personal	640	692Corporate 	210	218Excess profits tax . .	340	494Interest and divi-	dends 	30	28Succession duties ....	24	21Miscellaneous	9	9Total tax revenue ....	2,140	2,275Less refundable taxes	73Net tax revenue	2,140	2.202Non tax revenue	170	161Total ordinary revenue	2,310	2,363Special receipts	200*	593Total revenue 	$2,510	$2,956
* Arbitrary estimate.
On these estimates which are believed to be conservative, there will be a decline of $446 million in our revenues this fiscal year compared with last, but most of this expected decrease comes from assigning to special receipts an arbitrary estimate of $200 million as compared with last year's corresponding figure of $593 million which, as I have already explained, is inflated by abnormal bookkeeping transactions. The more significant comparison relates to ordinary revenue, the estimate for which shows a decline of $53 million from last year. This expected decrease is largely attributable to the reductions in personal income and excess profits taxes announced in last year's budget. Substantial declines in the yields of these two taxes are not expected to be fully offset by moderate increases in the returns from customs and excise duties, the sales tax and the special excise taxes.
These revenue estimates of course are based on the assumption of no changes in our present tax structure. They indicate that if no such tax changes are made and if our total expenditures do not exceed the estimate given a few minutes ago, we may expect a budgetary deficit for 1946-47 of roughly $260 million. Measured by standards of the past, that is still a not inconsiderable deficit but it is in pleasing contrast with the deficit of $1,735 million which I have already reported for the last fiscal year.
It is possible that some of the revenue figures given above may prove to be underestimates if economic conditions remain as
63260-184i
prosperous as at present, and in particular, special receipts, swollen by large scale disposals by War Assets Corporation, may be higher than the $200 million figure quoted. On the other hand, as I have already indicated, expenditures in the form of payments to veterans have been running ahead of earlier estimates. I think we can best accept the relatively conservative estimates that I have given above, in the expectation that there may be offsetting increases on both sides of the account, leaving the deficit roughly at the level forecast, subject, of course, to the tax changes which I shall propose.
The financial requirements for which we must provide during the present fiscal year include not only our budgetary expenditures but certain disbursements outside the budget for the acquisition of active assets. For this purpose, during the present year we shall have to raise a substantial amount of cash, as in addition to the normal increases in loans, advances and investments, resulting from ordinary government activities, including the financing of the foreign exchange control board, the export credits programme and the United Kingdom loan will require the disbursement of governmental funds in very large volume. We estimate that during 1946-47 the total of these disbursements which create active assets may be in the neighborhood of a billion dollars. This will bring our total financial requirements on the basis of present commitments and present estimates during the year to roughly 3% billion dollars.
Financial requirements of this magnitude do not of themselves suggest a reduction in taxes. Moreover, as I have already indicated, the current economic situation in respect of the available volume of purchasing power and current spending trends is not such as to provide an economic justification for reducing taxes at the present time. Lighter taxes are not needed now for the purpose of permitting or encouraging additional private spending in order to maintain employment this year. In fact, if only immediate economic conditions were involved, one could make a case for temporary higher taxes in order to curb the excess of spending in some directions that is tending to pull prices up.
There are, however, other important considerations to be borne in mind. In the first place, the action we take now in regard to taxes should provide whatever stimulus is possible to increased production. If we can encourage hard work and efficient production at this critical time, we shall be assisting greatly the effectiveness of our other actions to overcome the inflationary influences left behind by the war.
The Budget-Mr. Ilsley
[Stage Direction]
Secondly, in. shaping our tax policies at present we should be moving toward our normal post-war tax policy, and we should therefore bear in mind the long run problems we shall face once the huge, temporary postwar demands have been satisfied and it becomes necessary for us to maintain and stabilize national expenditure and employment. When that time arrives, we must depend on steady, large scale capital expenditures by private business, and on our ability to sell our products abroad (and at home, too) in competition with other countries, if we are to succeed in maintaining a high level of employment and a high standard of living. To secure these conditions of stable prosperity we must revise our wartime tax system in such a way as to preserve essential fairness in the distribution of the total burden and avoid any serious deterrent to hard work and efficiency.
It will therefore be my pleasant duty in a few minutes to announce reductions in taxes on personal and corporate incomes which are based upon these longer run considerations as well as upon the desire to increase immediately the incentive to produce, even though we recognize that such reductions at this time may possibly increase some of our difficulties during the period of shortages and inflationary pressures.
The effect of the tax reductions which I shall propose to-night will, I believe, depend to an important degree upon what provincial governments do when the wartime tax agreements expire. These agreements were made in order to provide a necessary increase in overall taxation from imposing intolerable inequities and) hardship. Unless new arrangements are made to enable provinces to meet their requirements without a free-for-all scramble to exploit the major tax sources, I am convinced that this country will lose much of the economic advantages which should accrue from the over-all tax reduction which is now envisaged. Before outlining my tax proposals in detail, I must, therefore, refer to the problem of dominion-provincial financial relations.
This problem is far more than one of taxation alone. What is at stake is Canada's ability (a) to have an effective anti-depression policy and to maintain full employment and a high national income after the present abnormal transition period is over; and (b) to achieve a reasonable standard of economic security for all Canadians no matter in what part of the country they may live. It was with these broad objectives in mind that the dominion government put forward its proposals to the dominion-provincial conference which began its sessions on August 6 last.

These proposals outlined a coordinated programme by which the dominion and the provinces could most effectively work together to provide high and expanding employment and national income, a wide measure of economic security and a less burdensome, more efficient tax system. The proposals formed an integrated whole but for purposes of the present outline can be grouped in three categories: those, relating to public investment, those relating to social security and those dealing with tax reform.
Obviously at the present time of many continuing shortages and pressing demands it is not opportune to consider launching a large public investment or public works programme. Nevertheless the wartime depletion of many of our assets and depreciation of many of our public works make it imperative that we now prepare plans for greatly expanded activity in the whole field of public investment when the employment situation and other conditions should make that desirable. In the August proposals emphasis was laid in particular on two aspects of public investment. One was the desirability of regulating the timing of public investment in so far as that was practicable, with a view to levelling out booms and depressions. The second was recognition of the need for increased expenditures on the conservation of our soil and forests, and the economic development of our resources. To these ends the government outlined a substantially expanded programme of resource development and conservation services and construction projects which it was prepared to undertake itself, and also a broad list of services and categories of projects under provincial jurisdiction which it was prepared to assist. There were in addition grants proposed to provincial governments, and through provincial to municipal governments, to assist in meeting the cost of advance planning of projects with a view to building up a reserve shelf of useful works for time of need, and to encourage the best timing in relation to the general employment situation for carrying out these planned works. The programme as a whole was designed to develop and conserve the productive wealth of Canada to assist in stabilizing employment, and to widen opportunities for private investment and employment. The character of investment proposed was one complimentary to private investment rather than competitive with it and was designed to be, when not directly self-liquidating, of real economic and social value to the nation.
The various social security proposals had also broad economic as well as broad social objectives. They were planned not only in relation to the needs of individuals suffering

from the distress of unemployment, illness and old age, but also with a view to stabilizing the income of the lower income groups of the population and consequently that of the community as a whole.
The proposal for unemployment assistance was designed to care for the great bulk of able-bodied workers who might be unemployed through no fault of their own. This extension of dominion responsibility would remove the overcharging menace to the ability of provincial and municipal governments to finance themselves, and in particular the threat and uncertainties facing real property owners, inherent in the present responsibility for relief. In addition, proposals were made for expanded vocational training and other rehabilitation services designed to fit men for their most productive work and to prevent deterioration arising from idleness.
The old age pension proposals, including as they did, an increase in benefits and abolition of the means test for all persons aged 70 and over, and with provision for assistance to provincial schemes for persons from 65 to 69, recognized the claims and needs of our old people with which there seems to be general sympathy. The qualifying age for federal assistance for pensions to the blind was to be lowered to 21.
In the important field of health the proposals provided for substantial dominion assistance to provincial public health and preventive medicine activities, for tuberculosis, mental disease and venereal disease prevention and cure, and for other health services. In addition an offer was made to meet approximately 60 per cent of the cost of provineially administered health insurance schemes within a national framework. The health insurance offer was an optional rather than obligatory part of the proposals and the programme was to be developed progressively by stages and areas. It was believed that it would contribute a great deal to relieve individual suffering and improve the health of the nation, and would ultimately pay substantial dividends in financial as well as human terms.
As in the case of Australia, New Zealand and the United Kingdom, it was proposed that these expanded social services would be financed in part by direct personal contributions. These might be likened to modest insurance premiums paid by each individual in order to make systematic provision against risks or contingencies which might otherwise fall with crippling force upon the family budget, as for instance the cost of medical care does to-day. There were no hard and fast provisions laid down as to the financing of
The Budget-Mr. Ilsley
the province's share of health insurance except that there was to be a registration fee which was not specified.
The'tax proposals which have been the subject of so much controversy were in reality two-fold, and there is some danger that sight may be lost of the second and more important of these aspects. As a necessary preliminary, the government proposed that it should have exclusive occupancy of the personal income, corporation, and succession duty tax fields, compensating the provincial governments by annual rental payments. The August proposals were subsequently modified in respect to the succession duty tax to provide for continued exercise, by any province which so wished, of its succesion duty rights, with compensating credits to individuals paying provincial taxes and compensating adjustments in the annual rental paid to the provincial government. The government then outlined the policies which it proposed to follow if an agreement had been reached giving it a free hand in these fields, including reduction in personal income taxes and elimination of a portion of the existing element of double taxation in the corporate tax. The government attached great importance to the benefits which would be possible through a single administration of these important tax fields, arising from simplification and reform of the tax system on a scientific basis to reduce the total tax burden, from the removal of existing inequities, from greater efficiency of administration and collection, from reduction in the cost of tax compliance by the taxpayer, and from the means it would have available through appropriate changes in policy to help offset fluctuations in the business cycle. Of particular importance was the belief that the right tax policies, varying with the needs of the times, would lead to broadening and expansion of the tax base, that is to say, the size of personal and national incomes, and consequently reduce the real burden of taxation. These taxes which were once relatively trivial in amount have of necessity become far too large to allow conflict, confusion and overlapping of policy to thwart investment, retard industry and depress employment, They are far too important adjuncts of economic policy to be exercised in different and uncoordinated ways if we are to achieve our objectives of high and stable income and employment.
A word should be added on the fiscal position in which the dominion's proposals would have put the provincial governments. In the major expenditure fields of public investment and social services, the government was prepared to assume responsibility for the most sharply
The Budget-Mr. Ilsley
[Stage Direction]
fluctuating items and to assist the provincial governments substantially in expansion of their own services. Municipal budgets would also have been relieved of both substantial current and potential expenditures. The annual rental offered the provinces to vacate, for the proposed three-year term of the agreement, certain direct tax fields was not only generous in relation to any amounts which the provincial governments had hitherto derived from these fields, or could expect to derive in the light of the necessary post-war level of dominon taxes, but could not fall below a guaranteed minimum and would1 rise proportionately with increases in gross national product. The net effect would have been to put all provincial governments in a much stronger and more stable fiscal position than they had ever enjoyed before or than there was any prospect of their achieving in a return to the general free-for-all of pre-war. At the same time it was believed this could be done at a reduced over-all cost to the taxpayers, and would provide positive incentives t.o industry and a greater degree of security for all Canadians in all parts of Canada.
The conference which met last August, decided to accept the dominion's proposals as a basis for discussion and a continuing coordinating committee was appointed consisting of the Prime Minister and the nine provincial premiers. This coordinating committee met in camera from November 26-30, from January 28-February 1, and on April 25 and 26. Most of the discussion at these meetings took place within the framework of the dominion proposals. Modifications were suggested by provinces and a good many substantial revisions were made by the dominion at the January and April meetings, so many indeed that we were charged with "constant and drastic revisions" while at the same time we were also accused of "uncompromising rigidity". It is fair, I think, to add that no alternative to the broad outlines of the dominion's proposals was discussed at the coordinating committee meetings held in camera.
I shall not attempt to analyse the stand taken by each province. The published record of the open meetings which took place from April 29 to May 3 speaks for itself. I am convinced that in the case of at least a majority of provinces an agreement could have been reached along the broad outlines of the dominion's proposals. However, at least two provinces appeared to be definitely opposed to an agreement of the character and scope offered by the dominion. In the case of Quebec, it was never at any time made clear just what changes in the dominion proposals

would be necessary to make them acceptable to that province. Ontario, it is true, did offer a proposal which was an alternative to the dominion proposals, but it was not until the closing hours of the conference that the financial implications of that proposal were revealed. These involved so large a net increase in total cost to the dominion as to put the proposal beyond the possibility of responsible consideration.
Under the Ontario proposal we were asked to forego revenues from which we estimated we would receive $102 million per year and to accept an increase in our obligations amounting to at least $32 million and perhaps to as much as $100 million, as compared with those assumed under the dominion's finally revised proposals. In other words, the Ontario proposal would, according to our estimates, have involved an additional net burden on the dominion treasury of at least $134 million a year, and perhaps $100 million in addition to that. These figures have been disputed, but they cannot be successfully refuted. At that stage the dominion felt it had made as comprehensive an offer, and had undertaken to assume as great a financial burden, as it could possibly justify to the people of Canada. The negotiations had extended over nine months and during that period of time the dominion had repeatedly revised its proposals in an endeavour to meet the several requests made by the provinces. We were still willing to accept suggestions for modification of our proposals provided they did not further increase the burden upon the taxpayers of Canada. In particular, we were willing to rent for a temporary period our rights to use certain fields of excise taxation, in the same way as we were asking the provinces to rent. to us temporarily their rights in certain fields of direct taxation, provided the provinces could agree amongst themselves with respect to the rental consideration. However, none of the suggestions to this end made by ourselves or by some of the provinces, was acceptable to the provinces generally, and when it became clear how wide was the gulf between the dominion and at least one of the provinces, the conference adjourned sine die. There is nothing to be gained by post mortems or recriminations. We must now get on with our tasks as best we can.
The inability to reach a final agreement with the provinces has, however, greatly complicated my task in formulating this budget. The budget obviously cannot be based on the assumption that a general dominion-provincial agreement will still be reached. In my opinion the differences are far too great, not only

The Budget-Mr. Ilsley
between some provinces and the dominion but also between some provinces and other provinces to permit of reconciliation at an early date. I have had therefore to prepare this budget upon the assumption that no new general tax agreement could be made in the near future. Accordingly, in keeping with the terms of section 20 of the wartime tax agreements, I am proposing that the dominion's flat rate of tax on corporate incomes be reduced from 40 per cent to 30 per cent as from January 1,
1947.	I am also proposing, as I shall explain in detail a little later, a substantial further reduction in personal income taxes, effective in 1947, which will enable the provinces which so desire to re-enter the personal income tax field. With these proposed reductions and with the payments to the various provinces of certain holdbacks within thirty days of the termination of the present agreements, we shall have fully carried out all our obligations under those agreements.
Nevertheless, we have all along been acutely conscious that the mere carrying out of the terms of these agreements would not enable us to remain indifferent to the problem of provincial finance and taxation. The agreements will all expire by next spring, three of them this fall, and without a new agreement several provinces are going to be faced with a difficult budget problem, and a chaotic tax situation is likely to arise.
If no new agreements are made, the provinces will again become dependent upon what they can collect from income and corporation taxes. Unfortunately, the income and corporation tax base is very unevenly divided as between provinces. Even before the war those provinces which were less fortunately placed in this respect were driven to uneconomic methods of taxation in attempting to meet their budget requirements. Apart from duplication and overlapping of taxes, provinces were forced to adopt arbitrary and makeshift devices which bore heavily on costs and hampered production. In spite of this, some provinces could not meet their minimum requirements without loans and temporary subsidies from the dominion. Their autonomy and their ability to discharge their constitutional responsibilities were seriously threatened.
If the pre-war situation was unsatisfactory, the post-war position will, in the absence of new agreements, become intolerable. Provincial expenditures have expanded greatly. Overall provincial budgets, brought down for the current year, call for expenditures higher by about $200 million than in 1940. This is an increase of roughly two-thirds. If the provinces again become dependent on income and
corporation taxes, some will be forced to adopt taxation expedients far more drastic than those employed before the war. Financial pressure on the less-favoured provinces will give rise to increasingly arbitrary and discriminatory taxation, will lead to interference with interprovincial trade and to the extension of government ownership and operation of business merely in order to obtain additional provincial revenues which of course would mean loss of revenues to the dominion. Even with all this, it is difficult to see how some provinces could retain their solvency and any degree of financial autonomy. Moreover, the arbitrary and discriminatory provincial taxes would come on top of dominion taxes which, while substantially less than at present, would still be considerably higher than before the war. The dominion cannot stand aside and allow such a situation to develop. It would seriously impair the capacity of private enterprise to provide high and expanding employment. It would weaken and perhaps destroy our federal system.
The government has reached the conclusion that it would be irresponsible in the extreme if it allowed such a situation to develop without a further attempt to prevent it. It has been convinced that it would be shirking its responsibility to the people of Canada if it did not seek to devise some modified proposal which could be accepted by those provinces which wished to accept it and be left aside by those which did not desire it or felt they had no need for it. Such a modified proposal we have devised.
While it is to be regretted that it was not possible to reach agreement with all the provinces at the conference, it would be a mistake to say that the conference itself had not been of the utmost value in making clear to the governments of all the provinces as well as to the dominion government the problems with which each is faced, and the factors of which full account must be taken if immediate pressing situations are to be met and any practicable solution is ultimately to be found. Our modified proposal has been devised in the light of the conference discussions. I wish now briefly to outline its terms. It is, as I have indicated, wholly optional. Any province which wishes to do so will be perfectly free to remain out of the agreement and deal with its own problems in its own way. With those provinces which accept it, an agreement will be signed which will terminate five years after the termination of the present agreement. This is a longer term than the term of three years provided in our original proposals. It is, however, expected that some provinces may wish to sign immediately and others, if they
The Budget-Mr. Ilsley
[Stage Direction]
sign at all, may not sign for one or two or more years. Having this in mind, it seems inappropriate to suggest a term shorter than five years.
The essence of our proposal is that in return for specified unconditional annual payments and other benefits, the agreeing provinces would undertake to restrict during the term of the agreement their use of the three fields of direct progressive taxation as follows:
(a)	The agreeing provinces would agree not to levy any taxes on personal income nor permit their municipalities to do so. There would, of course, be double taxation of personal incomes in those provinces which did not wish to enter into the agreement and proceeded to levy their own taxes on personal incomes, but in order to help reduce the burdens of such duplication the Dominion would be willing to give a tax credit to the individual taxpayer of the amount of the tax he had to pay to the province, up to 5 per cent of the tax payable to the dominion by such taxpayer. Any increase in financial burden on the individual taxpayer would thus be avoided if the provincial tax did not exceed 5 per cent of the dominion tax. The provincial government would, of course, have to remain the sole judge as to the amount and nature of the tax it imposed on its own people, but obviously the inconvenience to the individual taxpayer involved in filling out two sets of income tax returns and calculating tax on two different bases would be decreased if the provincial tax were imposed as a fixed percentage of whatever tax might be payable to the Dominion by the individual taxpayer. In order to be of assistance to that end, the Dominion would be willing to make extra copies of its forms available so that when filling out his dominion tax return the taxpayer could merely make an additional copy and mail it with his cheque to the treasurer of his province.
(b)	An agreeing province would undertake to levy a five per cent tax on net corporate income within the province and would also agree on behalf of itself and its municipalities to impose no other corporation tax or tax on corporations except corporations engaged in mining or logging operations. For this purpose, a corporation tax would have the same meaning as under the existing agreements. The province would also agree to discontinue the special five per cent tax mentioned above at such time as all provinces had made a tax agreement with the dominion. The five per cent levy would be based on taxable income as defined in the dominion income tax law, and allocation

between provinces would be made on the basis of uniform rules worked out between the dominion and the provinces making an agreement. The dominion would collect the five per cent tax for the province and the dominion's annual payments to the province, as specified below, would be reduced by the amount of such collections. Any province not signing the agreement could levy such taxes as it pleased on its corporations, but any such taxes defined as corporation taxes or income taxes under the existing agreements, other than taxes on corporations engaged in mining and logging operations, would not be regarded as a deductible expense for the purpose of calculating taxable income under dominion tax laws.
(c)	For the duration of the agreement also an agreeing province would either undertake not to levy succession duties at all or if it wished to continue to do so, it would agree to accept an appropriate reduction in its annual payments due from the dominion. In the latter case, succession duty amounts payable to the province would be treated by the dominion as a credit against amounts due under the dominion succession duty but the credit would be limited to one half the succession duties payable to the dominion. The dominion's annual payments to an agreeing province so continuing to impose succession duties would be reduced by the aggregate amount of such credits. This proposal, of course, will involve a doubling of the rate of succession duties now in effect under the dominion act but because of the system of tax credits already described, the general burden of the combined dominion and provincial succession duties in those provinces which continue to levy succession duties will be the same as at present.
In return for these undertakings, the agreeing provinces would receive annual payments from the dominion along the lines, of the proposal made by the dominion to the provincial premiers at the conference held two months ago. For the term of the agreement the dominion would undertake to supplement the present statutory subsidies in such a way as to provide that each province signing an agreement with the dominion would receive a guaranteed minimum annual payment, including statutory subsidies, equal to S15 per capita based on the 1941 actual or the 1942 estimated population of the province, whichever is the greater. The actual payments to be made in any year would be equal to the guaranteed minima increased in proportion to increases both in population and in per capita gross national production and

The Budget-Mr. Ilsley
would be based on the average of payments as determined separately for each of the three preceding years. In no case would the dominion's payments to a province be less than 150 per cent of that province's annual receipts under its wartime tax agreement (excluding guarantee of gasoline tax revenue). For no province would they be less than two million dollars. In addition, all provinces would be free to tax profits from mining and logging operations and any such taxes would be treated as a deductible expense for dominion tax purposes. Finally, in the case of companies whose main business is generating for distribution to the public or distributing to the public electrical energy, gas and steam, the dominion would pay to the provinces concerned one-half the dominion's net corporation income tax collections from such companies in respect to such business. This payment to a provincial government would be reduced by an amount equal to any taxes
which the government of that province levied on such companies. If a provincial government or one of its municipalities should take over a tax-paying corporation (other than one of the category just mentioned), the specified annual payments to that province would be reduced by the amount of the tax loss sustained by the dominion. The provisions regarding the allowances for taxes on mining and logging operations and half the tax on certain public utility companies will apply to all provinces, whether or not they sign an agreement.
I have had prepared a table showing the guaranteed minimum payments for all of the provinces and the payments presently estimated for the year 1947, assuming all provinces accepted the agreement, together with the provincial revenues received from comparable sources at the present time. AVith the consent of the House, I shall place this table on Hansard:
Dominion Payments to Provinces Under Proposed Tax Agreements (Millions of Dollars)
Dominion Payments
to Provinces under	_	,	.
Proposed Tax Agreements Present Provincial Receipts From * 1947 as	Provincial
Guaranteed Presently Wartime Tax Statutory Succession Total of Minimum Estimated Agreements Subsidies Duties(l) Foregoing
P.E.I	.... 2-0	2-0	[DOT]7	[DOT]4(2)	[DOT]i	1-2N.S	.... 8-9	10-0	2-9	[DOT]7(2)	[DOT]6	4-2N.B	.... 7-0	7-5	3-7	*7(2)	[DOT]4	4-8Que	
50-9	57-3	20-6	2-9	7-8	31-3Ont	
58-3	64-5	29-0	3-2	12-1	44-3Man	
10-9	11-8	5-7	1-7	[DOT]6	8-0Sask	
13-4	13-7	5-8	2-0	[DOT]4	8-2Alta	
11-9	13-3	5-8	1-8	[DOT]6	8-2B.C	
18-1	18-1	12-0	1-0	1-3	14-3Total 	
181-4	198-2	86-2	14-4	23-9	124-5U) Average 1944 inclusive.	collections in latest	five-year period for	which data	are available,	viz.,
(U Excludes interim subsidies of $275,000 (P.E.I.), $1,300,000 (N.S.) and $900,000 (N.B.) which are included in the previous column under AVartime Tax Agreement receipts and which will become statutory upon expiration of the Wartime Tax Agreements.
Note: The table does not take into account the effect on provincial revenues of the dominion's proposals in regard to taxes on mining and logging operations and the contribution of half of the dominion's receipts from the taxes on certain public utility companies. Nor, of course, does it take into account any reductions in payments due to collections of the special five per cent provincial tax on corporations or the credits allowed to taxpayers where the province continues to collect succession duties. These last two factors merely change the name of part of the payment and not its total amount.
Analysis of the table wall reveal that the nine provinces are now receiving from statutory subsidies, payments by the dominion under the wartime tax agreements, and succession duties, a total of $124-5 million a year. Under the new proposal, if all provinces should accept they would receive as now estimated, a total payment in 1947 of $198-2 million,
and no matter how low the national income might fall at any time during the next five years they would always be sure of the minimum payment of $181.4 million.
If any province did not wish to enter the agreement it would need to raise the amount of revenue shown in the following table by personal and corporation taxation, or some
The Budget-Mr. Ilsley
[Stage Direction]
other form of taxation, to have the same revenue as that estimated for 1947 under the agreement:
P.E.I	 X.S	 N.B	 Que	 Ont		million 	 5-5 	 49-2
Man			 9-5
		 11-3
Alta			 10-9
B.C		
	$157-4
I cite these figures to show the budgetary problems with which the nine provinces will be immediately confronted if no new agreement is made and also to suggest the probable resultant pressure on the tax system of Canada. The budget problems of these provinces must be solved in some way if we are to build a strong and united Canada. Is it not far sounder that they should be solved by a system of automatic payments objectively determined and made in return, so to speak, for the rental of an asset rather than by a system of outright subsidies or handouts? The latter, on the scale indicated, would either encourage irresponsible expenditure in the hope that any additional assistance required would always be forthcoming, or alternatively involve a control by the dominion over provincial administration, which is neither desirable nor practicable.
It has been said that the proposed payments by the dominion to the provinces are not based on the principle of fiscal need. That criticism fails to grasp the true facts of the situation. What is essentially valid in the position taken by the financially weaker provinces is their claim that the great bulk of the wealth and income of the country is concentrated in the two or three large provinces, that most of the head offices of the corporations doing business all over Canada are situated in Ontario and Quebec, and that the larger provinces, therefore, get an unfair share of the tax revenues which are based on the corporate profits and the personal incomes and estates resulting from the business done throughout the country. Now, what the dominion's proposal does is to provide a method whereby the three maritime provinces and the three prairie provinces will be enabled to derive from these sources the same per capita revenue as Ontario and Quebec. By selling certain rights to the Dominion for the term of the agreement, they are put in a position of sharing with the two central provinces equally on a per capita basis the productivity of the three great fields of direct progressive taxation-corporation taxes, taxes

on personal incomes and succession duties. Surely this is going very far to meet the test of fiscal need. If, in spite of such assistance, any one province should still find itself under normal conditions faced with a fiscal problem, that could only be due to a higher relative level of expenditures or a failure to tap other sources of tax revenue to the same extent as other provinces. In such a case, a further fiscal need subsidy would be impossible to justify, although this does not of course mean that occasionally a province or region may not be affected by a calamity which might justify special temporary assistance.
Another merit of the proposal is the greatly increased measure of stability which it would assure for the revenues of an agreeing province. The province would of course benefit from any increase in its population and in per capita gross national product but its revenues from the three tax sources would never fall below the guaranteed minimum, no matter what happened to business conditions. It would be dominion revenues which would have to bear the shock of an economic recession but the dominion government is in a far better position to carry a large deficit for a time than is any provincial government. The high floor which would be set under a substantial part of the revenues of the agreeing provincial governments would enable them to plan their developmental programmes with greater assurance and give them a financial responsibility and freedom of decision in the matters entrusted to them by the constitution not previously known. In this way also would the federal system be strengthened.
In addition to assuring to agreeing provinces a specifically and objectively determined annual revenue, adequate in amount and stable in character, the arrangement which we are offering to make with each province should go a long way toward avoiding the overlapping, discriminatory and uneconomic methods of taxation which will otherwise result when the wartime tax agreements expire. Throughout the agreeing provinces there will be uniformity of over-all income and corporation tax and probably of succession duty rates as well. There will be only one agency collecting such taxes in these provinces and any differentials in the over-all rates as between agreeing and non-agreeing provinces should not be of major proportions.
The proposed arrangements represent, I believe, the closest approach which can be made under present conditions towards an efficient system of income, corporation and succession duty taxation. The way in which, and the rates at which, these taxes are levied have such a bearing on enterprise, on the

The Budget-Mr. Ilsley
incentive to work, and on national income that I would urge every province to give our offer the' most careful consideration. There are, of course, additional and substantial benefits which can only be achieved if and when this interim arrangement can be made with all provinces. Only then will the dominion be in a position to implement its undertaking made at the conference to reduce the element of double taxation on distributed corporate earnings, which has a tendency to discourage risk-taking investment.
Perhaps a more important point is that if and when tax agreements can be made with all provinces and the dominion has exclusive use of the three tax fields in question, it will be able to co-ordinate the management of these taxes with its employment and economic policy as a whole. If I may quote from what I said to the conference on May 1 last, social justice requires that these progressive taxes be used to the fullest extent possible; economic common sense requires that they be limited to rates that will not stop people working hard and taking those risks which are necessary if we are to produce effectively! and make progress. It requires the most careful judgment to balance these conflicting considerations under all the changing economic conditions and political pressures which a modern nation must face. Yet success is vital if we are to maintain employment and economic progress. Success would be made very much more difficult, and perhaps impossible, if it required the joint action of ten governments rather than one. The dominion is prepared and is best able to carry the responsibility of seeing that these progressive taxes are fully used, but not used so much that they do more harm than good. If, however, the provinces are also in this field, there will be a natural tendency for them to take a narrower view, a purely financial view, and to force the total of their taxes and dominion taxes to uneconomic levels. If, for example, experience showed that the corporation income tax, at some time in the future, was so high that it prevented the proper expansion of industry and employment in the nation as a whole, in the judgment of the dominion government, it would be proper to reduce it; but if the provinces were also using that tax, some of them, if not most or all of them, would1 be likely to raise their corporation taxes to take advantage of the reduction made by the dominion. The provinces might feel, quite rightly, that they could not afford to take as long range a view as the dominion, and if they were in need of revenue, they would probably find it difficult to reduce their taxes or
to refrain from increasing their taxes because of the possible effects upon general employment and economic development in the country as a whole. This argument would be especially strong in times when employment and incomes were declining and when vigorous efforts were needed to encourage private expenditure and the expansion of industry. In such times, provinces would naturally be faced with declining revenues in other fields, and would be understandably reluctant to join in a programme of reducing income or profits taxes which however beneficial its long-run effects might be, had the immediate result of reducing substantially the revenues on which provincial expenditure depended.
For the information of the house I may say that I am mailing tonight a letter to the premier of each province, outlining the offer which I have just described and discussed.
It will be desirable if those provincial governments which wish to enter into such an agreement indicate their acceptance at an early date. Arrangements can then be promptly made for getting the agreements into a final form agreeable to all provinces which propose to sign. In some cases special arrangements to take care of special circumstances will have to be made. For instance, it is understood that the western provinces may not wish to sign a new tax agreement until a collateral agreement has been reached in regard to the refunding of their outstanding treasury bill indebtedness to the dominion. In the case of New Brunswick, Nova Scotia and Prince Edward Island, should they desire to accept the present proposal, it might also be necessary to consider an extension for a few months of the present wartime tax agreements which expire on October 31, November 30 and December 31 next respectively, if the necessary authorizing legislation in respect of the annual payments cannot be prepared in time for enactment at the present session of parliament. These and other matters of a similar kind will be the subject of discussion with representatives of the provincial governments concerned. It is my hope, however, that all points of principle can be agreed upon in sufficient time to submit the necessary legislation to parliament at an early date.
The house will have noted that the proposal I have outlined is limited strictly to matters of finance and taxation. That is an inevitable result of the failure thus far to achieve agreement with the provinces. It is obvious that the dominion cannot, for instance, assume responsibility for unemployed employable persons in some provinces but not in others.
The Budget-Mr. Ilsley
[Stage Direction]
Nor can it introduce the over-all plan of social security we had contemplated without at the same time reaching a satisfactory financial agreement with the provinces. Several of the major objectives of the comprehensive dominion proposals which were announced last August must therefore be held in abeyance for the time being. They remain, nevertheless, an essential part of the programme of this government. We continue to be ready to proceed with these or similar measures as and when arrangements can be worked out which will enable us to carry them out satisfactorily. We earnestly hope that those who have it in their power to make agreement possible will not long delay in making it possible to consummate the objectives we have in mind.
Obviously, the interim programme which I have outlined will represent not an ideal solution but only a second best. It is, however, the only solution which at the moment appears to be practicable. Moreover, it is one which is capable of growth. Several provinces will, we hope, be prepared to enter into an agreement at once. Others may do so next year or the year after. In due time we expect that all provinces will see that it is to their advantage to enter into the agreement. However, any province which believes, as I think erroneously, that such an agreement would weaken autonomy or lead to undesirable centralization or would for any other reason be against its best interests will be perfectly free to remain out of the agreement and deal with its own problems in its own way. We, for our part however, believe that unanimous agreement is the effective way to assure full employment, a high standard of living, and a wide measure of social security for the Canadian people.

[Stage Direction]
I wish now to speak in more detail of the tax on personal incomes. As I have already said, we are proposing a substantial reduction in rates under this tax, effective from January 1, 1047. In addition we are proposing a thorough reorganization of the whole structure of this tax. Our personal income tax is now unnecessarily cumbersome, in part because the refundable tax requirement, though obsolete, is still a part of the basic tax law, and in part because it has been necessary as an interim measure to introduce a supplementary rate schedule in order to remove the duplication of benefit between family allowance payments and income tax allowances for the same child. It will also be recalled that our income tax in its present form embodies two separate taxes, namely, the normal tax, which developed

from the national defence tax, and the graduated tax. Each of these taxes has its own set of allowances and credits, which are a blend of deductions from income and credits against tax. Not only is the tax structure itself complex but as the house well knows its drafting leaves much to be desired. We have already begun through an interdepartmental committee a much-needed rewriting of the entire statute but this process will not be brought to completion in time for action at the present session of parliament. However, the amendments which I am about to outline will not only reflect a radical revision and simplification of the present pattern of the income tax but also offer an important instalment in the process of re-writing and clarifying the legislation itself.
The exemption limits under the present tax are $860 for single persons and, in effect, SI,200 for married persons. As a major part of the present revision we are proposing that the exemptions be raised to $750 for single persons and $1,500 for married persons without dependents. This measure, taken in conjunction with the proposal I shall make in a moment regarding allowances for dependents, will remove entirely from the income tax roll between 550,000 and 600,000 taxpayers, or about one-quarter of the present number. The proposed exemptions will be in the form of deductions from income in the manner of the pre-war exemptions, and the $1,500 deduction will replace the combined income deduction of $660 and the tax credit of $150 granted the married man under the present law.
I am aware of suggestions, made by persons who may not be familiar with all the facts, that the exemption limits be raised to $1,000 for single persons and $2,000 for married, or even to $1,200 and $2,400. We have carefully examined these and other suggestions and have come to the conclusion that exemptions of $750 and $1,500 are as high as can be reasonably proposed under present circumstances.
In the first place, we must still raise very large amounts of revenue. Even if no tax reductions were made, our revenues will fall considerably short of our expenditures and far short of our total financial requirements for the current year. Moreover, as I have outlined, there is already a great excess of purchasing power and we must not add unnecessarily to it. In addition to these immediate considerations, we must bear in mind that the government and parliament face a postwar period in which events are likely to .move swiftly and in respect of which we have

The Budget-Mr. Ilsley
accepted a large measure of responsibility for maintaining high employment. Under the circumstances we cannot afford to reduce our revenues too drastically.
Secondly, we are all, I believe, agreed that the income tax is the fairest and best tax on which to rely for the bulk of our revenue. More than any other, it takes ability to pay properly into account. We must, I consider, rely upon it as heavily as we can, subject to the limits imposed by its effects on incentive and efficiency. This applies as well in the lower brackets as in the higher. We cannot secure proper equity and fair treatment if the exemptions from income tax are so high as to exclude most of those receiving incomes. It is just as important to be fair in the distribution of taxation between persons earning $1,500 and $2,400 a year respectively as it is between these persons and those earning $5,000 or S10.000 a year. I have said that we cannot afford to reduce our revenues beyond reasonable figures. In these circumstances, if we raised unreasonably the exemptions for the income tax, or lowered the rates of income tax too drastically, we would only make it necessary to impose other less equitable, even regressive, forms of taxes.
Comparison of our proposed exemptions with those of other countries indicates clearly, I believe, that the figures now proposed are as high as Canada can reasonably go. The suggested exemption of $750 for the single person compares with one of $700 in Australia and New Zealand, of $500 in the United States, and of $490 in Britain. Similarly, the proposed exemption of $1,500 for a married person compares with $1,077 in New Zealand, $1,000 in the United States, $931 in Australia, and $S0O in Britain. In addition, Britain, Australia and New Zealand have substantial social security taxes which apply at much lower levels than the exemptions I have given for income tax alone.
We are, I believe, fortunate in being able to afford after the war income tax exemptions as high as three-quarters of what they were before the war, despite the enormously heavier burdens which the war has thrust upon us. The amount of revenue that can be raised, indeed the amount of income to be taxed, in the higher brackets is disappointingly small. If we are to take a serious view of our financial responsibilities in this house, we cannot, I believe, urge such
extravagant exemptions in our income tax as to lead inevitably to other less fair and open measures of taxation.
As a companion measure to the increase in the basic exemptions for single and married status, it is proposed that the present tax credits of $28 allowed against normal tax and $80 allowed against graduated tax for dependents of the taxpayer be replaced by deductions from income, and that the temporary measure by which family allowance payments are now adjusted to the income tax allowances for a child make way for a solution that will be simple and permanent. It will be recalled that under the present method of adjusting the tax of a parent in respect of whose children family allowances are paid, the parent is allowed to obtain both the family allowance and the income tax credits for the same child, but an amount of the family allowances corresponding roughly to the value of the income tax credits for the child must be repaid to the government. This method of adjustment requires that each taxpayer receiving family allowances must report the amount of such allowances to his employer in order that his tax deductions be adjusted accordingly. This method is cumbersome and complicated for the taxpayer, the employer and the income tax administration.
To overcome these complications, it is now proposed to allow a single, simple deduction from income of $100 for each child eligible to receive family allowances, and to regard all taxpayers having such children as receiving the family allowances for their children. For other dependents not eligible for family allowances, there will be allowed a straight deduction from income of $300. This step will provide a workable and permanent solution and at the same time will preserve the principle approved by this house when the Family Allowances Act was passed, namely, that a taxpayer who received family allowances for his children would not also receive a full allowance for the same children under the Income War Tax Act. The value of a deduction from taxable income of $100, plus the family allowance, will exceed the equivalent of a $300 deduction from income for nearly all taxpayers, particularly in the lower brackets, where the excess is considerable.
I should make it clear that this proposal assumes the universal payment of family allowances to all taxpayers with eligible
The Budget-Mr. Ilsley
[Stage Direction]
children from January 1, 1947. A taxpayer with a child eligible for family allowances will be assumed for purposes of income tax to have received family allowances, and will be given the deduction from income of only $100 in respect of such child. Taxpayers who are not now claiming family allowances for children eligible for them should make application for them to commence in the new year when the proposed measure will take effect.
We are also proposing a complete overhauling and simplification of the rate schedules and a substantial reduction in tax liability. The present normal tax, the graduated tax, the formula for calculating the refundable portion which is no longer collected, and the family allowance recovery tables will be replaced by a single schedule of graduated rates applying on the excess of income over the new exemptions. Under the new schedule the initial rate will be 22 per cent on the first $250 of income in excess of the exemptions, the next rate will be 25 per cent on the following $750 of income, the next 28 per cent on the next $1,000, and the rate will rise gradually until a rate of 85 per cent is reached on income in excess of $250,000. The investment income surtax will be retained at the
rate of 4 per cent, but as a measure of alleviation for the lower income groups the exemption for this tax which is now $1,500, will be raised to $1,800.
In revising a tax structure so complicated as our present one, it has not been possible to assure that all taxpayers will receive the same relative amount of tax relief. We have, however, tried to make the new schedule as fair and equitable as possible. As I have said, something over 550,000 persons now paying income tax will be wholly exempt under the new law. For taxpayers immediately above the new exemptions, the reduction in tax under the new schedule is of the order of 50 per cent to 75 per cent, and this scales down to about 10 per cent to 15 per cent for the majority of taxpayers.
To illustrate in detail the effect of the new exemptions and rates, there have been prepared tables comparing the present and the proposed tax at selected income levels for single persons, married persons without children, and married persons with two children receiving family allowances. I shall now place these tables on Hansard for the information of hon. members and the public at large.
Income	Present and Proposed 1947 Single Person Proposed	Income Tax Married person-	-No children Proposed1946 Tax	1947 Tax	1946 Tax	1947 Tax$	$	$	$	$700 	
11	-	-750 	
25	-	-	-850 	22	-	-1,000 	
77	55	-	-1.250 	118	14	-1,500 	
208	180	84	-2,000 	313	194	1182,500 	
526	453	337	2433,000 	
692	593	491	3834.000 	
1,070	896	810	6635,000 	
1,452	1,206	1,158	9737,500 	
2,495	2,058	2,117	1,79310,000 	
3,622	3,038	3,160	2,72320,000 	
9,264	7,900	8,634	7,48830,000 	
15,453	13,400	14,655	12,98850,000 	
29,319	26,091	28,185	25,64175,000 	
47,953	43,515	46,399	42,991100,000 	
67,483	62,018	65,509	61,491200,000 	
149,776	143,441	146,122	142,841
Note: In calculating the above taxes it has been assumed that all incomes up to $30,000 are entirely earned incomes, and that incomes of more than $30,000 include earned income of that amount and additional investment income to make up the total.
[Mr. Ilsley.l﻿JUNE 27, 1946
The Budget-Mr. Ilsley
Married Person with Two Children of Family Allowance Age
The table below compares the position of a taxpayer with two children of family allowance age under the new tax rates and the new treatment of family allowances proposed for 1947 with his position in 1946. To make this comparison the combined effect of the receipt of family allowances and payment of income tax must be shown in each year. This combined effect is shown in the columns headed "Net Position". Plus figures in this column indicate that the amount of the family allowance exceeds the amount of income tax payable by the amounts shown. The other figures indicate a net liability after offsetting the family allowance against the income tax. Comparison of the "Net Position" figures for 1947 with those for 1946 will give the taxpayer the net improvement in his position in 1947, reflecting either an increase in net benefit or a reduction in net liability. This computation assumes a family allowance payment of $72 for each child, which is the average payment under the family allowance scale.
Position in 1946	Position in 1947
Income	Family	Net	Income	Family	NetIncome	tax(a)	allowance	position	tax	allowance	position$	$	$	$	$	$	$1,300 	... 14	144	+ 130	-	144	+ 1441.500 	. . . 42	144	+ 102	-	144	+ 1441,750 	.. . 80	144	+ 64	11	144	+ 1332,000 	. . . 141	144	+ 3	68	144	+ 762,250 	... 216	144	72	130	144	[DOT] +142,500 	... 276	144	132	193	144	492,750 	... 338	144	194	257	144	1133.000 	... 403	144	259	327	144	1834.060 	... 561	-	561	607	144	4635,000 	... 892	-	892	911	144	7677,500 	.. . 1,809	-	1,809	1,725	144	1,58110,000 	... 2,811	-	2,811	2,647	144	2,50320,000 	.. . 8,285	-	8,285	7,378	144	7,23430,000 	... 14,305	-	14,305	12,878	144	12,73450,000 	... 27,835	-	27,835	25,521	144	25,37775,000 	.. . 46,050	-	46,050	42,851	144	42,707100,000 	... 65,160	-	65,160	61,351	144	61,207200,000 	... 145,772	-	145,772	142,681	144	142,537
(a) Includes the family allowance recovery where the family allowance is shown in the next column. It is assumed that family allowances are not generally now received above the 100 per cent recovery rate. In any case where they are received to obtain the correct amount of present income tax the full amount of the family allowance should be added to the figures shown in the first column for incomes of $4,000 and up. The net position would, however, be unchanged.
Note: In calculating the income tax payable it has been assumed that all incomes up to $30,000 are entirely earned incomes, and that incomes of more than $30,000 include earned income of that amount and additional investment income to make up the total.
The over-all effect of the proposals I have outlined will be to reduce income tax revenue in a full year, assuming the present level of incomes, by approximately $143 millions, or about 23 per cent, and will involve the payment of additional family allowances in the amount of $12 millions per year, making a total cost of $155 million, about one-quarter of our expected revenue from this tax before the proposed reduction. This illustrates the thorough-going character of the revision and the importance of the reductions which we are now making. It will be recalled that the reduction now proposed is to be added to the flat 16 per cent reduction in income tax rates announced in last year's budget. However because the new rates will take effect only as from January 1 next, the loss of
revenue in the current fiscal year will not be large-it is now estimated at about $25 million.
In addition to the over-all revision of the personal income tax structure I have just outlined I am proposing several other amendments in particular previsions of the law. One of these affects the taxation of husband and wife where both have incomes of their own. Prior to 1942 where husband and wife each had incomes in excess of the exemption limits the husband lost the marital allowance and he and his wife were taxed as single persons. As a means of encouraging married women to take employment in wartime the law was amended in 1942 to allow the husband to retain the marital allowance if his wife's income represented earnings received from an employ-
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[Stage Direction]
ment. I am now proposing that effective January 1, 1947, we return to the position as it stood prior to the enactment of this wartime measure, with the result that in 1947 a husband and wife each having incomes in excess of $750 will each be taxed as a single person.
I am also proposing a further change that will place the taxation of husband and wife on a more equitable basis than it has been in the past and bring our law into closer conformity with that of other countries. The effect of the change I am introducing will be that when a taxpayer's wife has income of her own in excess of $250, the marital allowance of $1,500 claimed by the husband will be reduced by the excess of his wife's income over $250. This rule will apply where the wife.'s income is $750 or less. If her income is in excess of that amount, as I stated a moment ago, the husband and wife will be taxable as single persons on their own separate incomes. If the wife's income is less than $750, then the husband may claim the married allowance of $1,500 but he must reduce the $1,500 by the amount by which his wife's income exceeds $250. In effect, the husband will be given the full marital allowance, which is granted in consideration of his wife's dependence on him, only when his wife's income does not exceed $250 a year. When the wife's income exceeds this amount, however, the $1,500 allowance granted the husband is reduced in proportion to the excess of her income over $250. This amendment will apply from January 1, 1947.
There are certain minor amendments which I should like to mention now without, however, giving complete details regarding them. For example, after January 1 of next year members of the armed forces will be treated for tax purposes on the same basis as civilians except those outside the western hemisphere who have not by that time gone into the permanent force. Also, the special provisions relating to the merchant marine will be withdrawn at the end of this year.
During last year's budget debate I said that the government would give sympathetic consideration to the suggestion that farmers and fishermen whose incomes tend to fluctuate widely from year to year should be permitted to pay tax on the basis of their average income over a period of years. We are now prepared to propose a practical method of putting the averaging principle into effect for these particular groups of taxpayers.
The proposal involves giving the farmer or fisherman the benefit of having his income taxed on the basis of a three year moving average. For the year 1946 and subsequent
IMr. Ilsley.)
years, all farmers and fishermen who wish to take advantage of the right to average their incomes for tax purposes over a three-year period will be required to file returns each year whether or not they have taxable incomes. In 1948, all farmers and fishermen who have made returns for 1946 and 1947 will be entitled to average their incomes for the three years 1946, 1947 and 1948 and to pay in respect of 1948, not the tax for that year, but the tax which would have been payable over the three-year period had they earned the average income in each of the three years less the amount of tax actually paid in respect of 1946 and 1947. This means, of course, that in some cases the farmer or fisherman may be entitled to a refund in respect of 1948 of some of the taxes he has paid in respect of 1946 and 1947.
There will be no compulsion on a farmer or fisherman to accept this method of calculating his tax but it will almost certainly be to his advantage to do so. I say this in order to impress upon both farmers and fishermen the importance of making returns each year from now on. When the committee stage is reached, I shall outline the method in more detail.
Another problem affecting farmers to which a great deal of consideration has been given is the treatment of the "basic herd" in the case of a live stock farm or a ranch. The Department of National Revenue has, I believe, been following the practice of allowing adjustments cf income over the preceding five-year period in the case of abnormal dispersal or liquidation sales. The general adoption of the three year forward averaging system which I have just announced should be of great assistance in more normal cases where a live stock herd is being maintained but annual live stock sales may vary from year to year. Several suggestions for carrying the basic herd principle further have been made and in this connection I must acknowledge the help received from various hon. members. Most of these, however, involve maintenance by the farmer of accounting records of greater or less complexity and whether they will prove practicable from the standpoint of both the farmer and the tax administration is a matter which will have to be worked out by the administrative officials in consultation with the Department of Agriculture.
There are certain other amendments which I can only mention. An alternative formula to that now in the law will be provided for determining the tax exempt portion of pensions received from pension trust funds formerly under section 5 (1) (h) of the act, and a change will be made in the method of taxing lump sum payments from superannuation

The Budget-Mr. Ilsley
funds, other payments received on retirement and payments received for loss of office. A method will be adopted for spreading the return from the sale of literary, dramatic, musical or artistic work over the period in which the author was engaged in its composition. There will also be a revision of the present law as it applies to a person resident in Canada for only a part of the taxation year, and finally there will be an amendment providing that where an elected member of a provincial legislature is paid an allowance for expenses incidental to the discharge of his duties the allowance will be deemed not to be taxable income to the extent of not more than one third of the aggregate of his normal sessional indemnity as a member and the expense allowance.

[Stage Direction]
Turning to the taxes on corporations and the profits of business enterprises, the house will recall the general reduction I announced a few minutes ago when referring to the implementation of our obligations under the wartime tax agreements. Under those agreements the dominion's specific obligation is "to reduce its rate of tax on corporation incomes by at least ten per cent of such incomes." To-day the ordinary corporation income tax is 18 per cent and there is also a minimum tax on all corporate incomes of 22 per cent under the Excess Profits Tax Act, making an aggregate flat rate tax of 40 per cent. In addition, the excess profits tax takes 20 per cent of any income in excess of 116% per cent of standard profits. The proposal we are now making is to reduce the flat rate tax from 40 to 30 per cent and to make it all corporate income tax rather than an aggregate of the two types of tax.
I had hoped to be able to announce in this budget the repeal of the Excess Profits Tax Act, in its entirety, effective as of January 1, 1947. As I explained last year, this tax was designed as a war measure and has received overwhelming support as a necesasry instrument of war finance, but it has distinct weaknesses and limitations in, normal times and is not to be accepted as a permanent part of our tax structure. Experience, however, has shown that we are still living in highly abnormal times, the shadow of the war is still upon us, and as I have shown the financial burdens on the dominion budget arising out of the war are still of huge proportions. After careful consideration the government has reached the conclusion that the act should stay on the statute books for another year unless provision is made at the next session of parliament for its earlier repeal. However, we are proposing that it be further amended in such a way as
(1) to make it apply solely to corporations, thus releasing from its provisions all partnerships and sole proprietors; and (2) to reduce the rate of tax applicable to excess profits from 20 per cent to 15 per cent.
These changes in corporate income and excess profits taxes are estimated to result in a reduction in tax revenues of $135 million for the full year 1947. However, as they are to become effective only in respect of profits earned or deemed to have been earned after January 1, 1947, the loss in revenue during the present fiscal year is likely to be small, perhaps of the order of $5 to $10 million.
Certain minor amendments will also be made affecting the corporation income tax and the excess profits tax. One of these relates to the provision introduced in 1944 for permitting half the expenditure on maintenance and repairs in an early post-war period to be charged back to the income of the war period, in order to compensate for maintenance that had to be deferred under war conditions and which had thereby increased artificially the income subject to excess profits tax. For reasons which will be discussed when the resolution is reached in committee, the time has not yet arrived when we can proclaim the period in which this provision can be applied, and we propose to restrict its use to those who have paid tax on profits in excess of standard profits.
Other minor amendments to corporation income and excess profits taxes will provide for the extension for another year of the tax credits now granted in respect of exploration expenses incurred in the petroleum, natural gas and mining industries, with an adjustment in the amount of the credit appropriate to the reduced rate of corporation tax and an extension of a tax credit for expenditures incurred in deepening an existing oil well. The exemption from excess profits tax given certain classes of mines will be continued and exemption will also be granted from one-'half the 30 per cent rate of corporation income tax on the first three years' operations of mines of this class coming into production in the three year period commencing January 1, 1947. The special limitation on the deductibility of charitable donations in computing the taxable income of corporations will be rescinded with respect to fiscal periods ending after June 30, 1947, and certain adjustments will be made in the taxation of investment trusts and non-resident-owned investment corporations.

[Stage Direction]
I come now to the tax treatment of cooperatives. Hon. members will recall that in November, 1944, a commission under the
The Budget-Mr. Ilsley
[Stage Direction]
chairmanship of Mr. Justice Errol McDougali of the court of king's bench, Quebec, was appointed to inquire into this thorny question, and that the commission made-its report a very short time before the presentation of last year's budget. Accordingly, it was decided to defer action until there had been an opportunity for all concerned to give the report thorough study.
I am now in a position to say that in general the government accepts the commission's report as the basis of its proposals with respect to the taxation of trading cooperatives, credit unions and mutual insurance organizations.
The first recommendation of the commission is that we should repeal section 4 (p) of the Income War Tax Act, the section which was inserted in the act in 1930 to authorize an exemption for specified classes of cooperatives under certain conditions. The reasons for this recommendation are summarized in the report as follows:
As a result of the ambiguities of language and the difficulty of administering the section, and because we are of the opinion there is no general class or group of cooperative associations in Canada to-day whose income should be declared not to be liable to taxation, we are of the opinion that the section in its present form cannot survive the attacks made upon it.
The government accepts this recommendation and, accordingly, proposes that section 4 (p) be repealed. Apparently the section has little or no value in any case, for whatever the original intention of parliament may have been, the methods of doing business followed by our ordinary types of cooperatives are not such, in the opinion of the law officers of the crown, as to enable them to secure exemption under this section.
The commission recommended in effect that cooperatives be placed in a position of tax equality with other forms of business enterprise. This principle is sound but it is by no means easy to apply. What is the taxable income of a cooperative? There may be some cooperatives which so conduct their affairs as to have no taxable income within the meaning of the Income War Tax Act. There may be others which so conduct their affairs as to have a very limited income within the meaning of the act. There are, moreover, a variety of payments in proportion to patronage, which for want to a better term I shall call patronage dividends, the status of which is by no means clear. Let me quote a passage from the report of the McDougali commission:
. . . the (cooperative) association is. to some extent, obligated to make return to the members in proportion to patronage. These returns resemble in part an ordinary price rebate or dis-

count. However, their amount is affected by the efficiency of management of the association and a variety of unpredictable circumstances beyond its control. It may be affected also by revenue from the investments of the association in bonds or other securities. It may be influenced as well by the policy the association follows with respect to engaging in business with non-members and granting patronage returns to the latter. On the other hand, if satisfactory returns of this kind are not made, it is probable that the membership and the business of the association will decrease. Functionally, then, the so-called patronage dividends may partake of the nature of a return of profits to the members, or a return of excess charges, or a return of investments, or an expense of the association.
While it will be seen that the commission recognized the complex and ambiguous character of these so-called patronage dividends, it took the general position that such of these payments as are made readily available to the members or customers should be considered income of the members or customers and not of the cooperative association. To avoid discrimination it advised that a similar attitude be taken towards patronage dividends distributed by ordinary companies, partnerships or individual business enterprises.
These simple rules for the tax treatment of patronage dividends would appear to offer the basis of a reasonable solution for an extremely vexatious problem. It will be observed, however, that they involve a departure from one of the cardinal principles of our tax system, for they recognize as a deductible item a distribution which represents in some cases and to some extent at least, as the commission pointed out, a distribution of trading profits. In other words, if all distributions in proportion to patronage are wholly freed from tax, a cooperative association or an ordinary company could reduce the taxes it might otherwise have to pay by distributing its income in one form rather than another, fo*- example, in the form wholly of patronage dividends which wrnuld be non-taxable rather than in the form partly of patronage dividends and partly of dividends on share capital which are taxable. The trading cooperative which recognized an obligation to pay interest or dividends on its capital prior to the distribution of patronage dividends would under such conditions pay a greater proportionate tax on its income than the trading cooperative which did not recognize such an obligation. It will be agreed that a tax law having such a discriminatory effect and which could be used to reduce taxes that would otherwise be payable under our law is to be avoided if at all possible.
One possible alternative would be to dispense with any special legislation with regard to these so-called patronage dividends, relying

The Budget-Mr. Ilsley
on appeals to the courts to establish the status of the payments under the general tax laws. But this might mean prolonged litigation during which cooperatives and other companies would be in a very unhappy position and it is doubtful whether in the end any principles of wide and ready application would. be established by the courts.
After careful consideration, the government has. therefore, come to the conclusion that it should accept the commission's recommendation that patronage dividends and similar payments be treated as a deduction from in-'ome subject to one relatively minor limitation designed to avoid at least some of the discriminatory effects I have mentioned. The limitation is this: that no company or association shall be able to go so far in its distribution of tax-free patronage dividends as to reduce its taxable income below a reasonable return on capital employed in the business. This reasonable return will be defined as three per cent on the capital employed, including borrowed capital, less the interest paid by the company or association on borrowed capital that is allowed as an expense in the computation of the taxpayer's income. The principle underlying this rule is that amounts set aside out of taxable income to be distributed in proportion to patronage by a cooperative or company which does not pay at least three per cent on the capital employed in its business contain earnings which arise from the employment of capital and ought not to escape tax entirely. For many cooperatives which pay patronage dividends this modification of the commission's recommendation will have little or no effect, for they already recognize an obligation to pay interest or dividends equal to at least three per cent on capital or retain undistributed income on which tax will be payable. Share capital with a limited dividend and with limitation of voting to one share per member rather than one vote per share was a characteristic feature of the plan of organization of the Rochdale Equitable Pioneers Society, the real founders of the cooperative movement. Cooperatives of this character will usually be able to claim the full amount of their cash patronage dividends as a deductible allowance. Any cooperative which does not set aside as taxable reserves or pay as interest or dividends a total amount equal to three per cent of capital employed. will find itself subject to tax on a portion of the amount it had set aside out of its income to distribute on the basis of patronage.
It is proposed that this provision relating to the deductibility of patronage dividends shall come into effect for taxation years ending in 1946.
The first step in determining the tax liability of a cooperative or any other company will therefore be to compute its taxable income in the ordinary way. In this computation the cooperative or company will continue to be able to claim, as an expense payments that are found to be enforceable obligations of the cooperatives and not profit-sharing distributions. Having determined its taxable income the cooperative or company will then be able, if the proposed amendment is adopted, to deduct distributions in proportion to patronage paid out of income in that year subject to the limitation I have outlined above.
The government agrees with, the commission that to qualify as a deduction from taxable income, patronage dividends should be paid shortly after the end of the fiscal year and on the same basis to members and customers alike. Some 'cooperatives which finance on the so-called "revolving fund" principle allocate their surplus each year in proportion to patronage, but make the cash distributions in respect of such allocations in a later year. Patronage dividends allocated but not paid in years subsequent to 1941 will be allowed as a deduction to the extent previously indicated in any year from 1946 on during which they are paid.
Following the, commission's recommendation, the proposed amendment will also make it a condition of deductibility for the future that the cooperative or company shall hold forth the prospect to its customers prior to the commencement of its taxation year that distributions will be made on a patronage basis. In the case of a cooperative, it will be sufficient that the statute under which it is organized, its charter, its by-laws or a contract with its customers holds forth this prospect. In the case of any other company, the requirement will be an advertisement in a newspaper circulating in the area in which the company does business.
Finally, the government accepts the commission's recommendation that newly-formed cooperatives which commence business after December 31, 1946, be exempt from tax for a three-year period. This concession is intended to assist only bona fide cooperatives consisting entirely of individuals organized under provincial cooperative law going into business for the first time which do not acquire directly or indirectly the assets or good will of an exist-
[Stage Direction]
The Budget-Mr. Ilsley
ing business, and there will be other suitable safeguarding provisions to assure the true intent of the provision.
I am not sanguine enough to believe that these proposals will meet with complete approval, either in this house or outside. Some will continue to urge complete tax exemption for cooperatives or an even more liberal attitude than has been proposed with respect to patronage dividends. Others will contend that we are going too far in allowing patronage dividends as a deduction from taxable income under any circumstances. As long as it is necessary to retain a tax on corporate profits it will be impossible completely to reconcile these conflicting points of view. In the meantime the best that can be hoped for is a reasonable working arrangement which preserves substantial equity between competing forms of enterprise and safeguards the essential interests of the treasury.
So far I have been dealing with proposed changes in the law to clarify the tax position of cooperatives and patronage dividends for the future. Even if these are adopted, however, cooperatives and ordinary companies which have been paying patronage dividends during the past few years will still be uncertain as to their position under the present law. This is purely an administrative matter, but it is so important to the interests concerned as to call for some statement of government policy.
From 1930, when the section was enacted, until about 1940, section 4 (p) of the Income War Tax Act was interpreted by the tax officials as giving complete exemption to the vast majority of cooperative organizations. During 1940, however, serious doubts were raised as to the correctness of this view and in January, 1941, the Department of Justice was asked for a ruling in the cases of the Manitoba, Saskatchewan and Alberta wheat pools. In the opinion of the department all three wheat pools are taxable under the present law. This opinion was notified to the parties concerned during 1941 and 1942. Immediately thereafter the Department of Justice was asked to consider whether patronage dividends paid by the wheat pools, the United Grain Growers and certain other elevator companies were allowable deductions in the computation of income for tax purposes. In February, 1943, the department gave its opinion that in none of the cases submitted were patronage dividends an allowable deduction.
In view of these opinions the government felt it desirable to bring the wheat pool cases before the courts for final determination, and the Department of Justice advised that the

most practical method of doing so was to issue an assessment which the pools might appeal. This was done. The pools thereupon appealed but when the McDougall commission was appointed further proceedings were stayed.
The commission was not asked to make . recommendations with regard to the obligations of taxpayers under the existing law but it did feel called upon to make a general comment, which I shall quote:
One proposal made to us was that any recommendations for taxing cooperative associations should apply retroactively. Were it not that this point was pressed upon us with some insistence, we would pass it in silence. We do not regard it as any part of our function to make any recommendations which, if enacted into law, would affect the rights or obligations of taxpayers under the existing law. It is the duty of those charged with the responsibility of administering the Act to apply its provisions as they understand them. If doubt or uncertainty arises, the courts are always available both to the taxpayer and to the crown to establish their respective rights and obligations. Having regard, however, to the ambiguities contained in section 4 (p) of the Income War Tax Act and the resulting (though understandable), hesitant administrative practice in applying it, we are of the opinion that _ cooperative associations have so conducted their affairs that great hardship would result should our recommendations be made to apply retroactively. We also feel that many of them would be prejudicially affected if the existing law should be interpreted so as to make them liable for payment of taxes for the period subsequent to the enactment of section 4(p). Believing as they did, and not discouraged in that belief by the administrative attitude, we venture the hope that those cooperative associations which have, in good faith, conducted their affairs in the light of a possible, even plausible, construction of the section in question will be accorded relief from payment of taxes on patronage dividends actually or constructively paid to their members or customers, since the enactment of section 4 (p).
In general, the government agrees with the position taken by the commission and it proposes, therefore, to act on the principle of good faith in assessing cooperatives which are found to be taxable under the existing law. Acting on this principle, provision will be made whereby the income tax administration will not be required to collect tax from any cooperative in respect of any year during which it had reason to believe it was exempt and in respect of w'hich it was led to believe by the income tax administration that it was exempt. While this means that the great majority of cooperatives will be substantially relieved from tax obligation with respect to years subsequent to 1930, the government agrees with the commission that to revive at this late date tax claims in cases such as those mentioned above might cause great hardship to hundreds of small enterprises.

The Budget-Mr. Ilsley
As I have indicated, however, there are some cooperative organizations, notably the wheat pools, which have had reason to believe for some years that they would be subject to tax. The administration will endeavour to apply the same principle of good faith in making assessments in these cases. To be specific, the government is willing to relieve the wheat pools from any liability for tax for fiscal years earlier than those ending in 1942. Furthermore, the government is willing to allow as a deduction from taxable income patronage dividends, refunds of excess charges, and similar amounts actually paid in cash by the wheat pools in fiscal years ending in 1942 and 1943, but not in 1944 and 1945 because well before 1944 these organizations were aware of the legal opinion of the Department of Justice. Patronage dividends distributed or set aside for payment pending settlement of the tax issue by the private elevator companies and the United Grain Growers will be accorded the same treatment as similar payments made by the wheat pools, that is, if the wheat pools accept the foregoing basis of settlement, they will be allowed as a deduction from income for the taxation years up to and including 1943 but not for later years.
Under all the circumstances, the government believes this is a most reasonable compromise and offers it as a basis of settlement. If it is not acceptable to the organizations concerned, the courts must determine the legal position.
Before I leave the subject of cooperatives, I may add that we are accepting the main recommendations of the McDougall commission regarding the taxation of mutual organizations carrying on the business in Canada of fire, casualty and automobile insurance. Such organizations will henceforth be subject to income tax but dividends on or refunds of premiums to policyholders, whether paid in cash or applied against renewal premiums, together with any unabsorbed premiums or premium deposits returned to or payable to policyholders, and any other amount credited to a policyholder or subscriber in such a way that it is exigible by him on giving reasonable notice may be deducted in computing taxable income. To prevent discrimination, joint stock companies carrying on the same line of business will similarly be allowed to deduct dividends paid or refunds of premiums to policyholders in computing taxable income. Credit unions which derive their incomes primarily from loans made to members and federations of credit unions will continue to be exempt from tax. Also the tax free status of
organizations which derive all their premium income from the insurance of churches and schools will be preserved.

[Stage Direction]
There is an important announcement I should like to make with regard to a proposed new feature of our income tax system.
As the house is aware, there has been an increasing demand from taxpayers for a less expensive and more convenient method of appeal from income tax assessments. A special committee set up in another place to examine into the provisions and workings of the Income War Tax Act, has -made a careful study of the present appeal procedure and some recommendations which are extremely useful. Their main suggestion was for the setting up of a board of tax appeals. It is proposed to accept this suggestion with certain modifications.
The proposed board will be appointed by the governor in council and will consist of a chairman and two assistant chairmen, having specified legal qualifications, and not less than three nor more than nine other members. The board will be a court of record and will hear in various parts of Canada appeals from income tax assessments for the year 1946 and succeeding years. Appeals may be taken from decisions of the board of tax appeals to the exchequer court. The rules of procedure before the board will be such that taxpayers will, without great expense to themselves, have a convenient method of obtaining judicial decisions in disputed income tax matters.
The proposed board will decide questions of fact and law in the same manner as any other court. It will not, however, have the power to exercise or review the discretions vested in the Minister of National Revenue by the Income War Tax Act. It is proposed to provide for the review of these discretions in a different way.
There is some complaint about the existing provisions of the law in so far as these discretions are concerned. After careful consideration, the government has concluded that an advisory board, separate altogether from the appeal board to which I have referred, should be set up to advise the Minister of National Revenue upon the exercise of certain of his discretionary powers. The house will recall that under the Excess Profits Tax Act a board of referees was set up to advise the minister with regard to standard profits. The government's proposal is to establish an income tax advisory board, consisting of a chairman and not less than two and not more than six other members, to which a taxpayer may require the Minister of National Revenue to refer for
The Budget-Mr. Ilsley
[Stage Direction]
hearing, consideration and advice, decisions made by the minister in the exercise of specified discretionary powers. I may add that instructions are being given to the interdepartmental drafting committee to explore carefully the possibility of reducing the number of discretions now vested in the minister or at least of providing for their exercise under regulations approved by the governor in council.

[Stage Direction]
The only changes proposed in the Succession Duties Act are the new schedule of rates and the provision for the system of tax credits which I have already described. The new rates will apply in the case of deaths occurring on or after January 1, 1947. It is estimated that the new rates will yield a gross revenue of $48-50 million in a full year, which will, of course, be reduced by the amount of the credits allowed against the dominion duty in any province which wishes to remain in the field.

[Stage Direction]
In the general field* of excise taxes only minor changes will be made. The tax on cigars, for example, will be revised by replacing the present graduated schedule of excise tax rates by a flat ad valorem rate of 25 per cent and reducing the excise duty from $3 per thousand on cigars to $1 per thousand. This revision will place the cigar tax on a more equitable and more efficient basis and will result in a slight increase in revenue. Consequent upon the adoption of the McDougall commission's recommendations in regard to the application of the income tax to mutual fire and casualty insurance companies, the rates of premium tax on the various classes of such companies will be reduced as set out in the resolutions.
[Stage Direction]
Members of the house will recall that in connection with the budget resolutions of last session I referred to the then impending trade discussions of an international character and went on to state that "the present is not the time, by isolated or unilateral action, to change the existing tariff in any particular." Although six months have elapsed, I am to-day in much the same situation as I found myself in last November. The proposed international negotiations on various aspects of commercial policy, including tariffs, are still ahead of us. But the time-table that had* appeared feasible last fall has proved impracticable, having in mind the large number of governments that have indicated a desire to participate in what are bound to be complicated and protracted discussions. In the interval there has been a quite important change in the setting of the
TMr. Ilsley.]
proposed negotiations, in that these are now directly under the segis of the united nations organization, through its economic and social council. The council has appointed a preparatory committee for an international trade conference, on which committee are represented those countries which intend to take part in the negotiations.
In the circumstances I have deemed it inadvisable to introduce at this time anything in the nature of comprehensive or important tariff changes or changes of a type that may soon be the subject of tariff negotiations with other countries from which we may desire and reasonably expect tariff concessions. Subject to this general principle there are proposed a number of minor adjustments in the tariff to which I need not refer in detail. No increases are proposed. Some changes are to facilitate administration, some embody the provisions of outstanding orders in council passed* under the War Measures Act, some reflect small changes in wording of items resulting from technological advances, some affect reductions designed to reduce costs in cases where the item amended would have virtually no importance in trade negotiations and one is related to a reduction being proposed in excise duties.

[Stage Direction]
The proposals which I have now announced will, it is estimated, result in a reduction of our tax revenues by about $254 million in a full year under economic conditions similar to those at present, and an increase in family allowance payments, directly related to the tax changes, of $12 million, making a total cost of $266 million. This does not take into account any further reductions due to income tax and succession duty credits that will be given to taxpayers of provinces remaining in these fields. These and other effects of the offer to provinces cannot, of course, be estimated until we know what provinces plan to accept it.
For the current fiscal year, the tax reductions and the other proposals I have announced will have only a relatively small effect on* our revenues and expenditures because the important tax changes become effective only as of January 1 next, and the new agreements with the provinces will commence, at least in most cases, only at the beginning of the next fiscal year. There will probably be a reduction of personal income tax revenue of about $25 million, an increase of about $3 million in the cost of family allowances, and a decrease in excess profits tax and corporate income tax revenue, taken together, of about $10 million.
The house will recall that on the basis of the present tax structure I forecast a budget deficit for the current year of roughly $260

The Budget

Resolutions
million. As a result of the changes proposed in this budget, the deficit appears likely to be increased to roughly $300 million. This means that we will be covering nearly 90 per cent of our expenditures from revenues, a more rapid approach to the balancing of the budget than I expected to be possible some months ago.
While it is too early to predict the situation in the following fiscal year, that is, 1947-48, we may reasonably look forward to a further substantial decline in our expenditures, particularly for national defence and for veterans' benefits, and as a result of the termination and liquidation of war contracts. There may be some moderate increases in certain other expenditures and perhaps also decreases in certain ] evenues such as special receipts, but if we succeed in maintaining high employment and income we should be able to look forward to something like a balanced budget in that year.
Of course, in that year, as in this one, we shall need to borrow in order to finance loans and investments. But the scale of our borrowing should be smaller than in the current year. This year we must finance not only the anticipated deficit of $300 million but also the large programme of loans, advances and investments which, as I have already indicated, may. involve a sum in the neighbourhood of a billion dollars. While we began the year with a large cash balance, a considerable portion of it was in currencies other than- Canadian and government requirements will necessitate a fairly high cash balance at the end of the year. Apart from refunding or repayment of debt, borrowing requirements for the year may be estimated at roughly a billion dollars. This is a great deal less than the figure for last year but it is nevertheless a substantial part of the total savings which the Canadian people and their institutions will make during the year. We must therefore continue our efforts to encourage savings and their investment in government securities, including the proposed Canada saving bonds which I announced last week.
In conclusion, I would like to stress one thought. We Canadians can achieve great objectives if we can agree among ourselves upon those objectives and devote our energies to reaching them. That is clearly shown by what happened in the war. Now that the war is over, we have an opportunity to select and to achieve objectives just as challenging, just as exciting as those of war, but of a constructive and progressive nature. I believe that the Canadian people, if properly informed, are prepared to agree, by and large, upon great peacetime objectives and to devote to their attainment something of the same spirit and
energy which made our war achievements possible. It is the duty of all of us in government, in business, in labour, in agriculture, to do all that we can now to make possible that agreement upon ends and upon means which will enable Canada in peace to be worthy of the record of Canadians at war.

[Stage Direction]
Resolved, that it is expedient to amend the Income War Tax Act and to provide:
1.	That for the 1947 and subsequent taxation years the present rules for computation of personal income tax be replaced by the following schedule of graduated rates:
On the first $250 of income or any portion thereof, 22 per cent per annum; or $55 upon the income of $250; and 25 per cent upon the amount by which the income exceeds $250 and does not exceed $1,000; or $242.50 upon the income of $1,000; and 28 per cent upon the amount by which the income exceeds $1,000 and does not exceed $2,500; or
$662.50 upon the income of $2,500; and 31 per cent upon the amount by which the income exceeds $2,500 and does not exceed $4,500; or
$1,282.50 upon the income of $4,500; and 34 per cent upon the amount by which .the income exceeds $4,500 and does not exceed $6,500; or
$1,962.50 upon the income of $6,500; and 38 per cent upon the amount by which the income exceeds $6,500 and does not exceed $8,500; or
$2,722.50 upon the income of $8,500; and 42 per cent upon the amount by which the income exceeds $8,500 and does not exceed $10,500; or
$3,562.50 upon the income of $10,500; and 46 per cent upon the amount by which the income exceeds $10,500 and does not exceed $13,000; or
$4,712.50 upon the income of $13,000; and 50 per cent upon the amount by which the income exceeds $13,000 -and does not exceed $18,000; or
$7,212.50 upon the income of $18,000 and 55 per cent upon the amount by which the income exceeds $18,000 and does not exceed $30,000; or
$13,812.50 upon the income of $30,000 and 60 per cent upon the amount by which the income exceeds $30,000 and does not exceed $50,000; or
$25,812.50 upon the income of $50,000 and 65 per cent upon the amount by which the income exceeds $50,000 and does not exceed $70,000; or
$38,812.50 upon the income of $70,000 and 70 per cent upon_ the amount by which the income exceeds $70,000 and does not exceed $100,000; or
$59,812.50 upon the income of $100,000 and 75 per cent upon the amount by which the income exceeds $100,000 and does not exceed $150,000; or
$97,312.50 upon the income of $150,000 and 80 per cent upon the amount by which the income exceeds $150,000 and does not exceed $250,000; or
$177,312.50 upon the income of $250,000 and 85 per cent upon the amount by which the income exceeds $250,000.
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[Stage Direction]
2.	That for the 1947 and subsequent taxation years the following deductions from income be allowed: -
(a)	. $1,500 in the case of married persons and
persons allowed a deduction equivalent to that of a married person and $750 in the case of all other persons;
(b)	$300 in the ease of dependents not eligible for family -allowances, $100 in the case of children eligible for family allowances and amounts not exceeding $300 contributed to -the support of partial dependents.
3.	That for the 1947 and subsequent taxation years the deduction of $1,500 from the income of a married person be reduced
(a)	where the spouse has an income of more than $250 and less than $750 by the amount by which the spouse's income is more than $250, or
(b)	where the spouse has an income of more than $750, to $750
whether or not the wife's income is earned income.
4.	That in respect of income earned after December 31, 1946, the ordinary income tax rate for corporation income be increased from 18 per cent to 30 per cent and from 20 per cent to 32 per cent in a case where a company and its subsidiaries file a consolidated return.
5.	That the exemption of investment income for purposes of the 4 per cent tax on investment income be increased for the 1947 and subsequent taxation years from $1,500 -to $1,800.
6.	That a deduction from tax be allowed in the 1946 and subsequent taxation years to a taxpayer who resides or is ordinarily resident in Canada during only a part of the taxation year of a portion of the tax that would otherwise be payable upon his income during the taxation year that bears the same relation to the whole tax as the period in the taxation year during which he is not resident or ordinarily resident in Canada bears to the whole taxation year.
7.	That there be established, with provision for the expenses thereof, an income tax appeal board' consisting of a chairman and two assistant chairmen having specified legal qualifications and not less than three nor more than nine other members appointed by the governor in Council, as a court of record, to hear, in any part of Canada, appeals from assessments made by the Minister of National Revenue in respect of the 1946 and subsequent taxation years and that an appeal may be taken from a decision of the appeal board to the Exchequer Court of Canada.
8.	That there be established, with provision
for the expenses thereof, an income tax advisory board consisting of a chairman and not less than two nor more than six other members appointed by the governor in council to which a taxpayer may require the Minister of National Revenue to refer for hearing, consideration and advice a decision to which the taxpayer objects made by the Minister in the exercise of specified discretionary powers in respect of an assessment for the 1946 and subsequent taxation years.	.
9.	That for the 1947 and subsequent taxation years, a taxpayer, other than a corporation or joint stock company, may deduct from the tax
[Mr. llsley.l
otherwise payable by him the amount of tax on income paid by him to the government of any province in which he resides not exceeding five per cent of the tax otherwise payable by him.
10.	That for the 1947 and subsequent taxation years, a corporation other than a corporation whose income is primarily obtained from mining or logging operations shall not be allowed to deduct from income any corporation tax as defined in the existing wartime tax agreements paid to the government of a province.
11.	That there be allowed as a deduction from income earned after January 1, 1947, of a corporation whose income is primarily obtained from mining or logging operations taxes paid by it to the government of any province including income tax on income earned after January 1, 1947.
12.	That for the 1947 and subsequent taxation years, the provision exempting the income of certain cooperative companies and associations be repealed and .that for the 1946 and subsequent taxation years provision be made that there may be deducted from a taxpayer's income the aggregate of the payments made.
(a)	in the taxation year or within six months thereafter to his customers of the taxation . year; and
(b)	in the taxation year to his customers of a previous taxation year after the 1941 taxation year and not previously deducted under paragraph (a)
in respect of specified allocations in proportion to patronage for the said years the prospect of which was held forth
(c)	by the statute or by-laws under which the taxpayer carries on business or by his contracts with his customers, or
(d)	by the taxpayer in a specified manner prior to the commencement of the taxation year
except that portion of such payments as would if deducted leave the taxpayer with an income less than an amount determined by deducting from three per cent of the capital employed in the business, including therein borrowed moneys, the interest paid by the taxpayer on borrowed moneys and deductible as an expense in computing his income.
13.	That for the 1946 and subsequent taxation years, paragraph (q) of section four which exempts from taxation the income of credit unions be amended to exempt the income of any credit union or any corporation or association the members of which are credit unions which derives, its revenue primarily from loans made to members residing within the province to which it is restricted for carrying on its business.
14.	That for the 1947 and subsequent taxation years, the provision exempting from tax the income of mutual corporations not having a capital represented by shares be amended to remove therefrom mutual insurance corporations except mutual insurance corporations which derive their premiums wholly from insurance of churches, schools or other religious, educational or charitable institutions.
15.	That for the 1947 and subsequent taxation years, there may be deducted for the purposes of this Act, from the income of insurance companies, other than life insurance companies, whether mutual corporations or joint stock

The Budget-Resolutions
companies, amounts credited to policyholders by way of dividends or refund of premiums or refund of premium deposits and either
(a)	paid to the policyholder,
(b)	credited to the policyholder on account of premiums for renewal of policies or
(c)	credited on terms under which the policyholder is entitled to or may obtain payment thereof within a period not exceeding thirty days after demand for payment by him and if notice of crediting on such terms has been given to the policyholder.
16.	That the income of a corporation or association commencing business after December 31, 1946, incorporated or registered under provincial cooperative legislation and organized and operated as a bona fide cooperative for the purpose of marketing natural products of or acquired from its members, or of purchasing supplies, equipment or household necessities for, or to be sold to, or of performing services for, its members be exempt from taxation during the first three complete taxation years following the commencement of business. '
17.	That a farmer or fisherman be permitted for the 1948 and subsequent taxation years, at his option, to compute his liability to pay tax on the average of his income for the taxation year and the two preceding taxation years.
18.	That for the 1946 and subsequent taxation years, the service pay and allowances, other than travelling allowances or separation allowances in place of travelling allowances, of a member of the permanent Canadian naval, military or air forces paid at the new rates of pay and allowances established f.or the said permanent forces be taxable income of a member irrespective of
(a)	whether he is serving within or outside of Canada; or
(b)	whether he receives the pay and allowances during the first six months after his return to Canada.
19.	That for the 1947 and subsequent taxation rears the pay and allowances of a member of the non-permanent Canadian naval, military or air forces other than the pay and allowances received by a member serving outside of the western hemisphere or within six months of his return thereto be taxable income of the said member and that the provisions for (a) a tax credit in respect of pay and allowances exceeding $1,690 as provided by rule 2 of section 3 of paragraph A of the first schedule; and for (b) taxation of a member serving outside of Canada in the western hemisphere at one-half the effective rate of tax applicable to his total income be repealed.
20.	That the exemption of amounts received by members of the merchant marine as war risk bonuses in respect of service in a war risk zone and of the value of board and lodging received on shipboard, while performing service in respect of which such bonuses are payable be repealed for 1947 and subsequent taxation years.
21.	That, where an elected member of a provincial legislature is, under an act of the provincial legislature, paid an allowance for expenses incidental to the discharge of his duties as a member, the allowance received in the 1946 or a subsequent taxation year be deemed, to the extent of not more than one-third of the aggregate of his normal sessional indemnity as a member and the said allowance, not to be salary or taxable as income.
22.	That where the author or joint author of a literary, dramatic, musical or artistic work on which he was engaged for a period of more than twelve months assigns the copyright therein wholly or partially and has in the 1946 or a subsequent taxation year received within one year of the assignment in consideration therefor an amount, the whole of which would otherwise be included in computing his income during the taxation year a specified part or parts of the consideration may, at his option, be attributed to his income during certain previous taxation years.
23.	That the special rates provided for nonresident-owned investment corporations be reduced for the 1947 and subsequent taxation years from 22J per cent to 15 per cent but that such corporations be taxable on all income received in Canada subject to deductions from the said income in respect of interest and dividends received from other such corporations and foreign taxes paid by the corporation.
24.	That for the 1947 and subsequent taxation years investment corporations whose profits are now exempt from tax under paragraph (f) of section seven of the Excess Profits Tax Act, 1940, be exempt from tax upon income and that such corporations that would be so exempt except that they have outstanding bonds, debentures or other securities evidencing bonded indebtedness pay tax upon income at one-half the rate for corporations.
25.	That for taxation years ending after June
30. 1947, a corporation be permitted to deduct from income amounts paid to charitable organizations not exceeding 5 per cent of the income of the corporation subject to taxation without the limitation presently thereon.	*
26.	That persons entitled to a payment out of an employee's superannuation or pension fund or plan, the investment income of which has been exempt from taxation by reason of an election for such exemption by the trustees or corporation administering the fund or plan, be allowed in the 1946 and subsequent taxation years as an alternative to the present deduction from the pension or superannuation payment, an amount computed on the basis of the amounts paid by the employee together with simple interest on such amounts at 3 per cent per annum.
27.	That the special provisions with regard to
(a)	payments out of a superannuation or pension fund plan upon the death, withdrawal or retirement from employment of an employee or former employee in full satisfaction of all his rights in the fund or plan,
(b)	payments by an employer to an employee upon retirement in recognition of long service, and
(c)	payments by a person to a former employee in respect of loss of office or employment
be replaced by a provision for the taxation of amounts so received after June 27, 1946, at the option of the taxpayer either as income for the year in which he received the amounts or at a rate equal to the percentage which the tax upon the taxpayer's income during his last full year in the employment is of that income.
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The Budget-Resolutions
28.	That for 1946 and subsequent taxation years the provision under which the minister may allow double depreciation in respect of plant or equipment built or acquired as a new investment in a period to be fixed by the governor in council be amended to provide that the allowance be made only in respect of such classes of plant or equipment as may be determined by the governor in council.
29.	That the deduction in respect of income for a taxation year ending between the last day of December, 1942, and the first day of the year of expenditure in respect of one-half of expenditures made
(a)	in connection with maintenance or repairs by a taxpayer carrying on a business, or
(b)	on underground development by a taxpayer operating a mine,
in a period to be fixed by the governor in council, be restricted to an amount
(c)	if the year for deduction is the 1946 taxation year not greater than the taxpayer's excess profit in that year as defined for the purposes of the Excess Profits Tax Act, 1940, or
(d)	if the year for deduction is a taxation year prior to 1946, not greater than the taxpayer's profits in the said year above the point at which the tax calculated for the said year under the first part of the second schedule to the Excess Profits Tax Act, 1940, was equal to the tax calculated for the said year under the second part of the second schedule to the said Act
and that no such deduction be allowed in respect of the income for a taxation year commencing after 1946.
30.	That a corporation or joint stock company shall pay a tax at one-half the ordinary rate of income tax for corporations upon income derived on or after January 1, 1947, from the operation of a mine
(a)	that has come into production during the period commencing January 1, 1944, and ending December 31, 1949, and
(b)	that, in the case of a mine that has come into production before January 1, 1946, is a basic metal or strategic mineral mine and in the case of a mine that has come into production after January 1, 1946, is a metalliferous or industrial mineral mine,
during the first three complete taxation years after the mine comes into production.
31.	That the deductions from tax allowed to a corporation whose principal business is the production, refining or marketing of petroleum or petroleum products in respect of drilling and exploration costs be extended to oil wells spudded in during the year 1947 and the deepening of oil wells which is commenced in 1947 but that in respect of such well the deductions be reduced from 26§ per cent and 40 per cent of the cost to 20 per cent and 30 per cent respectively.
32.	That the deduction from tax allowed to a corporation, association, syndicate or exploration partnership formed for the purpose of exploring and drilling for oil in respect of exploration and drilling expenses be extended
[Mr. Usley.l
to expenditures incurred during the year 1947 but that in respect of expenditures in that year the deductions be reduced from 26§ per cent to 20 per cent thereof.
33.	That the deduction from tax allowed to a corporation, association, syndicate or exploration partnership formed for the purpose of exploring and drilling for natural gas be extended to expenses incurred in the year 1947 but that in respect of such expenditures the deduction be reduced from 30 per cent to 22J per cent.
34.	That the deduction from tax allowed to a corporation, whose chief business is that of mining or exploration of minerals in respect of prospecting, exploration and development expenses incurred in searching for minerals be extended to expenses incurred in the year 1947 but that in respect of the expenses incurred in that year the deduction be reduced from 261 per cent to 20 per cent.
35.	That the deduction from tax allowed to a corporation, association, syndicate or exploration partnership whose principal business is production, refining, or marketing of petroleum or exploration or drilling for petroleum in respect of expenditures made in connection with a deep-test oil well, be extended to expenditures made in connection w-ith deep-test oil wells spudded in during the year 1947.
36.	That no interest shall be payable on unpaid taxes upon incomes of the 1945 or a subsequent taxation year in respect of a period commencing twenty months after the day fixed for filing the return for the taxation year and ending one month after the sending of the notice of assessment.
37.	That the provision for payment of interest by corporations on the amount of taxes unpaid after payment of instalments of estimated tax commencing six months after the end of the taxation year be amended to require payment of interest on the said unpaid amount from the end of the taxation year.

[Stage Direction]
Resolved, that it is expedient to amend the Excess Profits Tax Act, 1940, and to provide:-*
1.	That the provision for taxation of excess profits of every person residing or ordinarly resident in Canada be amended to exclude therefrom in respect of excess profits earned after December 31, 1946, persons other than corporations or joint stock companies and to reduce the rate of tax on excess profits earned after December 31, 1946, from 20 per cent to 15 per cent.
2.	That with respect to profits earned after December 31, 1946, the provision for taxation of profits of every corporation or joint stock company be repealed.
3.	That for the 1947 and subsequent taxation years investment corporations that have outstanding bonds, debentures or other securities evidencing funded indebtedness be exempt from excess profits -tax.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Dominion Succession Duty Act and to provide:
1.	That rates of tax upon or in respect of any succession upon the death of a person after

The Budget-Resolutions
December 31, 1946, shall be twice the rates presently in force and that the tax paid to the government of any province in respect of the same succession be allowed as a deduction from the tax payable under the Dominion Succession Duty Act up to but not exceeding one-half of the tax otherwise payable under the said act.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Special War Revenue Act and to provide:
1.	That the securities transfer tax be extended to apply to rights to receive shares of stock;
2.	That the present graduated excise tax on cigars be changed to an ad valorem tax of 25 per cent;
3.	That any enactments founded on resolutions Nos. 1 and 2 shall be deemed to have come into force on June 28, 1946 and to have applied on all goods imported or taken out of warehouse for consumption on or after that day and to have applied to goods previously imported for which no entry for consumption was made before that day;
4.	That the rate of premium tax payable by mutual insurance companies other than life insurance companies and companies carrying on business under the premium deposit plan be reduced from 3 per cent to 2 per cent, and in the case of exchanges from 4 per cent to 2 per cent in respect of premiums received after December 31, 1946;
5.	That the rate of premium tax payable by insurance companies carrying on business under the premium deposit plan be reduced from 4 per cent to 3 per cent in respect of premiums received after December 31, 1946; and
6.	That a deduction be allowed to insurance companies from the premium taxes payable under the act of the taxes on premiums, paid to the government of any province in respect of premiums received after December 31, 1946.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Excise Act and to provide:
1.	That the excise duty of $3 per thousand on cigars be reduced to $1 per thousand.
2.	That any enactment founded on this resolution shall be deemed to have come into force on the twenty-eighth day of June, one thousand nine hundred and forty-six.

[Stage Direction]
1. Resolved, that Schedule A to the customs tariff be amended by striking thereout tariff items 4, 72e, 143, 168, 197d, 208, 216a, 219e, 272b 326e, 438b, 438c, 438d, 438i, 442, 445j, 462a! 616 (iii), 653, 700a, 703 and 709, the several enumerations of goods respectively and the several rates of duties of customs, if any, set opposite each of the said items, and by inserting the following items, enumerations and rates of duty in said schedule A:
63260-185J

Tariff Item	British Preferential Tariff	Intermediate Tariff	General Tariff	Present Rates	B. P.	Intermediate	GeneralTariff	Tariff	Tariff4	Horses, n.o.p	each	$10.00	$12.50	$25.00	$10.00	$12.50	$25.0072e	Bent grass seed, not to include red-top grass seed	15 p.c.	30 p.c.	30 p.c.	15 p.c.	30 p.c.	30 p.c.90e	10 p.c.	25 p.c.	30 p.c.	15 p.c.	32J p.c.	35 p.c. i143	Cigars, the weight of the bands and ribbons to be	included in the weight ior duty	per pound	$3.50	$3.50	$3.50	$3.90	$3.90	$3.9025 p.c.	25 p.c.	25 p.c.	25 p.c.	25 p.c.	25 p.c.168	Malt flour containing less than fifty per centum in	weight of malt; malt syrup or malt syrup powder, n.o.p.; extracts of malt, fluid or not; grain molas-	ses-all articles in this item upon valuation without British or foreign excise duties, under regulations	25 p.c.	30 p.c. 5 cts.	35 p.c. 10 cts.	25 p.c.	30 p.c. 5 cts.	35 p.c. 10 cts.
168a	Malt syrup, malt syrup powder, or other starch con-						
	version products produced by the action of enzymes on starch, not including any such products used in						
		20 p.c.	25 p.c.	30 p.c.	25 p.c.	30 p.c. and 5 cts. per lb.	35 p.c. and 10 cts. per lb.
							
180e	Engineers' plans, drawings or blue-prints of machines and plant equipment, plant layouts, foundations for machinery and other plant equipment, structural supports and towers and similar outside structures, dams, spillways, and other hydro construction, wiring, piping, platforms, ladders, stairs, etc., not	Free	Free	Free	12| p.c.	22J p.c.	22\ p.c.
192f	Paperboard or fibreboard, single ply, not coated or						
	impregnated, in rolls containing not less than five						
	hundred square feet, when imported by manufacturers of impregnated socklining base, innersoling, welting, or similar materials, for use only in the manufacture of such materials in their own factories	Free	10 p.c.	25 p.c.	15 p.c.	25 p.c.	35 p.c.
197d	Tissue paper, not coated nor impregnated, when						
imported by manufacturers of stencils for duplicating machines for use exclusively in the manufacture of such stencils in their own factories	Free	10 p.c.	25 p.c.	Free	10 p.c.	25 p.c.15 p.c.	22i p.c.	25 p.c.
The Budget-Customs Tariff
199i
219e
272b
272c
326e
326k
434c
Trays of pulp or pulp board imported for use exclusively in the packaging of apples, in their natural	
Boracic acid and borax in packages of not less than twenty-five pounds weight; hydro fluosilicic acid; tannic acid; ammonia, sulphate of; cyanide of potassium; cyanide of sodium and cyanogen bromide; antimony salts, viz.: tartar emetic, chloride and lactate (antimonine); arsenous oxide; precipitate of copper (crude); verdigris or subacetate of copper, dry; sulphur and brimstone, crude or in roll or flour; argols; iodine, crude; bromine; sulphide of arsenic; carbon bisulphide,	
Chloropicrin, ethylene oxide, methyl bromide, methyl formate, cyanides, carbon bisulphide, acrylonitrile, or/mixtures containing any of these, for use in combating destructive insects and pests..	Free
	15 p.c. 10 p.c.
Paraffin wax when imported for use exclusively in the manufacture of candles		
Articles of glass, not plate or sheet, designed to be cut or mounted; articles of glassware, when imported by manufacturers of silverware to be used in receptacles made of or electro-plated with precious metals or to be equipped with tops made of or electro-plated with precious metals, in their own	
High thermal shock resisting glass parts when imported by manufacturers of high thermal shock resisting glassware, for use exclusively in the manufacture or in the repair of such articles, in their own	
Trucks of welded design with tubular frame, cast steel cross members, rubber mountings and rubber inserted wheels, of a class or kind not made in Canada, and body shells of welded sheet steel, for use in the construction of street railway cars, not to include electric motors or magnetic truck brakes; complete parts of the foregoing		Free
7J p.c.
Free
Free
22\ p.c.
12j p.c.
Free
Free
10 p.c.
35 p.c.
35 p.c.	20 p.c.	32} p.c.Free	Free	FreeFree	Free	FreeFree	20 p.c.25 p.c.	15 p.c.	22} p.c.25 p.c.	15 p.c.	22} p.c.22} p.c.	Free	10 p.c.10 p.c.	30 p.c.25 p.c.	Free	25 p.c.35 p.c.	Free	30 p.c.
Free
Free 25 p.c.
25 p.c. 25 p.c.
22} p.c. 32} p.c.
32} p.c.
w
35 p.c.
The Budget-Customs Tariff
(Mr. Ilsley.]
Tariff	British	Intermediate Tariff	General Tariff	Present Rates	Item	Tariff	B, P. Tariff	Intermediate Tariff	General Tariff438b	Bearings, clutch release; bearings, graphite; bearings, steel or bronze backed, with non-ferrous metal lining; bushings, graphited or oil impregnated; ceramic insulator spark plug cores, not further manufactured than burned and glazed, printed or decorated or not, without fittings; compressors, air; commutator copper segments; commutator insulating end rings; tapered discs of hot rolled steel, with or without centre hole, for disc wheels; distributor rotors and cam assemblies; door bumper shoes; electric wiring terminals, sockets, fittings and connectors and parts thereof, not to include battery terminals; gaskets of any material except cork or felt, composite or not; ignition contact points; keys for shafting; auxiliary driving control kits, designed for attachment to motor vehicles to facilitate their operation by physically disabled persons, and parts thereof; lenses of glass for head, tail, dome, signal and cowl or parking lamps, and for light reflectors; lock washers; piston ring castings in the rough, with or without gates and fins removed; rails of lock seam section, corners, locks and catches, unplated ventilators and parts thereof, the foregoing being of metal other than aluminum, for the manufacture of window sashes for bus bodies; steel bolts, or studs, capped with stainless steel; switches for lamps, heaters and defrosters and parts thereof; vacuum control assemblies; vulcanized fibre in sheets, rods, strips and tubing; all of the foregoing when of a class or kind not made in Canada and for use in the manufacture or the repair of the goods enumerated in tariff items 424 and 438a, or for use in the manufacture of parts therefor	Free	Free	30 p.c.	Free	Free	30 p.c.438c	Ammeters; arm rests and wheel housing lining of indurated fibre, pressed to shape; axle housings, one piece welded, machined or not; carburetors and parts thereof; chassis frames and steel shapes for the manufacture thereof; cigar and cigarette lighters, whether in combination with a cigarette holder or not, including base, and parts thereof; control ventilator gear box; cylinder lock barrels, with or'	Free	25 p.c.	40 p.c.
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JVie Budget-Customs Tariff
without sleeves and keys thereof; dash heat indicators and parts thereof; electric gear shift switches and parts thereof; engine speed governor units and parts thereof; fluid couplings, with or without drive plate assemblies, and parts thereof; front axle cross channel king pin support section assembly of steel, in the rough; fuel pumps, vacuum pumps and combinations thereof and parts therefor; gasoline gauges and parts thereof; hinges and parts thereof, finished or not, for bodies; horns and parts thereof; instrument bezel assemblies and parts thereof; instrument board lamps; locks, electric ignition, steering gear, transmission, or combinations of such locks, and parts thereof; mouldings of metal, with nails set in position, lead filled or not; oil filters and parts thereof; oil gauges and parts thereof; pipe lines of tubing, rigid or flexible, covered or not, with or without fittings, and tubing therefor, for oil, fuel, air, or liquid for actuating hydraulic brakes; purifiers for air, and parts thereof; purifiers for oil or gasoline, parts thereof and brackets and fittings therefor; radiator, hood and other grills, assembled or not, and parts thereof, but not polished nor plated, and not to include finish or decorative moulding; radiator ornaments, and hood lift lock ornaments, unplated, and parts, thereof; radiator shutter assemblies, automatic; radiator water gauges; radiator shells and parts thereof, not plated nor metal finished in any degree; shackles, bearing spring, and parts thereof; speedometers and parts thereof; spring covers of metal and closing strips or shapes therefor; stampings, body, cowl, hood, fender and instrument board, of metal in the rough, trimmed or not, but not metal finished in any degree; starter switch assembly and parts thereof; steering wheels, rims and spiders therefor; sun visor blanks of gypsum weatherboard; thermostats and parts thereof; throttle, spark and choke assemblies, including buttons therefor, and parts thereof; tire clamping rings of steel, plated or not; universal joint ball assemblies; voltage control regulators; wind-shield wipers and parts thereof; all of the foregoing when of a class or kind not made in Canada and for use in the manufacture or the repair of the goods enumerated in tariff items 424 and 438a or for use in the manufacture of parts therefor	
Free
20 p.c.
30 p.c.
Free
Free
20 p.c.	30 p.c.
25 p.c.	I 40 p.c.
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The Budget-Customs Tariff

Tariff Item	British Preferential	Intermediate	Present Rates	Tariff	Tariff	Tariff	B. P. Tariff	Intermediate Tariff	General Tariff(1) Provided, that if the above articles are imported for use as original equipment by a manufacturer of automobiles, motor vehicles, electric trackless trolley buses or chassis enumerated in tariff items 438a and 424 whose total factory output during.the year in which importation is sought does not exceed ten thousand complete automobiles, motor vehicles, electric trackless trolley buses or chassis, and provided that not less than forty per centum of the factory cost of production of such automobiles, motor vehicles, electric trackless trolley buses or chassis, not to include duties and taxes, is incurred in the British Empire, the rates of duty under this item shall be	Free	Free	25 p.c.	Free	Free	25 p.c.(2) Provided, that if the above articles are imported for use as original equipment by a manufacturer of automobiles, motor vehicles, electric trackless trolley buses or chassis enumerated in tariff items 438a and 424 whose total factory output during the year in which importation is sought exceeds ten thousand automobiles, motor vehicles, electric trackless trolley buses or chassis, and provided that not less than sixty-five per centum of the factory cost of production of such automobiles, motor vehicles, electric trackless trolley busses or chassis, not to include duties and taxes, is incurred in the British Empire, the rates of duty under this item shall be	Free	Free	25 p.c.	Free	Free	25 p.c.438d	(3) Provided that the Governor in Council may make such regulations, if any, as are deemed necessary for carrying out the provisions of this item. Front and rear axles; brakes; clutches; internal combustion engines; steering gears; magnetos; rims for pneumatic tires larger than thirty inches by five inches; transmission assemblies, hydraulic or fluid couplings and torque convertors; drive shafts; universal joints; steel road wheels; and parts of the foregoing, when of a class or kind not made in Canada, and imported by manufacturers of the goods enumerated in tariff items 424 and 438a for use	
The Budget-Customs Tariff
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only in the manufacture of motor trucks, motor buses and electric trackless trolley buses, or for the manufacture of chassis for the same	 Free
(1)	Provided that if the above articles are imported for use as original equipment for motor trucks, motor buses and electric trackless trolley buses, or for chasses for the same, by a manufacturer of the goods enumerated in tariff items 424 and 438a, and provided also that during the year during which importation is sought, not less than forty per centum of the factory cost of production of such motor vehicles and chassis therefor, not to include duties and taxes, is incurred in the British Empire, the rates of duty under this item shall be. Free
(2)	Provided that the Governor in Council may make such regulations, if any, as are deemed necessary for carrying out the provisions of this item.
17$ p.c.
7$ p.c.
438i
Body bottom cross members and steel shapes for the manufacture thereof; bumpers, front and rear, and parts thereof, including spring steel bumper plates; casket tables or platforms for hearses; destination and route sign assemblies, illuminated or not, and parts thereof; direction signals, illuminated or not; door and step mechanism, hand, vacuum or air operated, and parts thereof; door locks and catches and parts thereof; electric switches, buzzers, bells, push buttons, fuse assemblies and parts thereof; forward drive control conversion assemblies and parts thereof; lamps of all kinds, illuminating and indicating, including sockets, flanges, terminals, glassware, lenses and gaskets therefor, assembled or not, but not to include lamp bulbs; metal stampings, oiled and primed or not, and assemblies thereof; rubber fenders; seat operating mechanisms; ventilators, including motor driven fan type, and grills, and parts thereof; window operating mechanisms; all of the foregoing when imported to be used only in the manufacture of motor truck bodies, motor bus bodies, electric trackless trolley bus bodies, motor ambulances and hearses..
Free
Free
27} p.c.
27} p.c.
20 p.c.
Free
Free
17} p.c. 25 p.c.
Free
7} p.c.
Free
Various
Free
Various
27} p.c. 40 p.c.
27} p.c.
20 p.c. Various
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ta
The Budget-Customs Tariff
[-Mr. Ilsley.]
Tariff Item	-	British Preferential Tariff	Intermediate Tariff442	Articles and materials which enter into the cost of manufacture of the goods enumerated in tariff items 409, 409a, 409b, 409c, 409d, 409e, 409f, 409g, 409h, 409i, 409j, 409k, 4091, 409m, 409n, 409o, and 439c, when imported for use in the manufacture of the goods enumerated in the aforesaid tariff items, or in the manufacture of parts therefor, under regulations prescribed by the Minister	Free	Free445j	Electric dry shaving machines for use in removing human hair, and parts thereof	Free	Free446h	Bathtub stampings of metal	Free	10 p.c.462a	Photographic cameras and equipment, and complete parts of the foregoing, for use by professional photographers and commercial photo-finishers in their own business, as follows:- Cameras for professional purposes, for making negatives 4j inches by 6J inches and larger, and the following accessories for use with such cameras: lenses, shutters, exposure meters, range finders, film and plate holders, lens hoods, lens boards, ground glass carriages, reducing backs, reversible adapter backs, lantern slide attachments, film sheaths, combination paper and plate holders, kits, carrying cases, camera stands, camera tripods, camera tripod tops, vignetters, diffusion disks, diffusion disk holders, colour filters, colour filter holders, polarizing screens, polarizing screen holders and backgrounds. Printers, enlargers, heaters, dryers, mounting presses, print washers, automatic film processors, printing frames and tanks for developing, fixing and washing	Free	Free475e	Matrices of non-advertising news pictures for reproduction in newspapers and periodical publications enjoying second-class mailing privileges	Free	FreeGeneral Tariff	Present Rates	B. P. Tariff	Intermediate Tariff	General TariffFree	Free	Free	VariousVarious	Various	Various10 p.o.	Free	Free	10 p.c.10 p.c.	27| P-c.	35 p.c.25 p.c.	10 p.c.	27J p.c.	35 p.c.Free	Free	Free	Free7! P-c.	25 p.c.	30 p.c.Free	Free	$ ct.	1 ct.per sq. in.	per sq. in.
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TAe Budget[DOT]-Customs Tariff
63260 -1861
569d
Woven fabrics, not exceeding two inches in width, made with unserrated selvages, generally known as single, double or four shot corded ribbon, imported by the manufacturers of men's hats for use exclusively in their own factories in making the bands for, or in binding the edges of, men's hats only	
653
700
(iii) Latex, being crude rubber in liquid form, not compounded beyond the addition of preservatives.
Brushes of all kinds, n.o.p	
(a) Travellers' baggage, scribed by the Minister...
under regulations pre-
(b) Goods valued at not more than one hundred dol lars included in the baggage accompanying residents of Canada returning from abroad after an absence from Canada of not less than forty-eight hours and acquired by them for personal or household use or as souvenirs or gifts, but not bought on commission or as an accommodation for other persons or for sale, under regulations prescribed by the Minister	
Provided that a resident of Canada shall not be entitled to the exemption herein granted within a period of four months from the date of the last exemption allowed, nor shall the exemption be allowed on alcoholic beverages in excess of one quart, or on tobacco in excess of fifty cigars, two hundred cigarettes and two pounds of manufactured tobacco.
Provided further that goods entitled to entry under this Item shall be exempt from all imposts, notwithstanding the provisions of this Act, The Customs Tariff Amendment Act, 1939 or any other Act.
(a)	Goods, including containers or coverings filled or empty, the growth, produce or manufacture of Canada, after having been exported therefrom...
(b)	Goods, including containers or coverings filled
or empty, which have once been entered for consumption in Canada and have been exported therefrom	
All the foregoing under such regulations as the Minister may prescribe.
Free
Free 15 p.c.
Free
Free
Free
Free
Free
Free 30 p.c.
Free
Free
Free
Free
35 p.c.
Free	22\ p.c.	32^ p.c.Free	Free	Free40 p.c.	15 p.c.	30 p.c.Free	Free	FreeFree	Free	FreeFree	Free	FreeFree	Free	Free
Free 40 p.c.
Free
Free
Free
Free
§
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The Budget-Customs Tariff
fMr. Ilsley.i
Tariff	British Preferential Tariff	Intermediate Tariff	General Tariff	Present Rates	Item	B. P. Tariff	Intermediate Tariff	General Tariff786	Provided that the goods are returned within five years from the time of exportation without having been advanced in value or improved in condition by any process of manufacture or other means, or combined with any other article abroad; Provided also that any such goods on which a refund of duty or allowance of drawback has been made shall not be admitted to entry under this item except upon payment of duties equal to the refund or drawback allowed; Provided further that any of such goods manufactured in bond or under excise regulations in Canada and exported shall not be admitted to entry except upon payment of the Customs or Excise duties to which they would have been liable had they not been exported from Canada. Semen of horses, cattle, sheep, goats, asses, swine and dogs, pure bred, for the improvement of stock, under regulations prescribed by the Governor in Council	Free	Free	Free	15 p.c.	25 p.c.	25 p.c.826a	Dies in the rough, not being complete parts of machinery, for use in the manufacture of bolts, nuts, nails, screws, rivets and tacks	Free	10 p.c.	35 p.c.	10 p.c.	27$ p.c.	35 p.c.836	Ultra-violet ray lamps, and complete parts thereof, designated for detecting scheelite ore	Free	Free	Free	15 p.c.	25 p.c.	30 p.c.847	Distillers' solubles obtained from the liquid residue remaining after the alcohol has been removed in the process of distilling grain or molasses mash, whether or not subjected to a fermentation process, when imported without admixture except that necessary for the said fermentation process, for use exclusively'in the manufacture of feeds for livestock, poultry or fur-bearing animals, under such regulations as the Minister may prescribe	Free	Free	Free	Free	Free	Free17$ p.c.	25 p.c.	25 p.c.
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The Budget-Customs Tariff

The Budget-Appendix
2. Resolved, that schedule A to the customs tariff be further amended by deleting from the Customs Tariff Amendment Act, 1939, as amended, the following enumerations of goods and rates of additional duties of customs:
Tea, when the value for duty thereof under the provisions of the Custom Act:
(a) is less than 22£ cents per pound	 5 cents per pound
(b) is 22J cents or more but less than 30 cents per pound	 7£ cents per pound
(c)	is 30 cents or more per pound	
10	cents	per	poundAll goods specified in customs tariff item 25a	
10	cents	per	pound
All goods specified in customs tariff item 26, except coffee, roasted or
ground	
10	cents	per	poundCoffee, green, and coffee, roasted or ground	
10	cents	per	pound
3. Resolved, that any enactment founded upon the foregoing resolutions to amend the customs tariff or schedules thereto shall be deemed to have come into force on the twenty-eighth day of June, one thousand nine hundred and forty-six, and to have applied to all goods mentioned in the foregoing resolutions imported or taken out of warehouse for consumption on and after that date, and to have applied to goods previously imported for which no entry for consumption was made before that date.

[Stage Direction]
A.	Review of Government Accounts, 1945-46.
B.	Tables on Economic Conditions, 1945-46.
A. GOVERNMENT ACCOUNTS, 1945-46 Comparative Summary Statement of Revenues and Expenditures
1. Although the dominion's fiscal year ends March 31, the books of the dominion for each fiscal year remain open for some time thereafter in order to record expenditures made to April 30 as provided by section 32 of the Consolidated Revenue and Audit Act, and to provide for adjustments which affect revenue and expenditure accounts as well as asset and liability accounts. Final figures for the fiscal year 1945-46 are not yet available, and accordingly the statements which follow, in so far as they relate to 1945-46 revenue, expenditure, investment and balance sheet items, must be regarded as preliminary. In particular they do not reflect the cancellation of $425,000,000 of accumulated liabilities of the United Kingdom under the British Commonwealth air training plans, which are provided for in the financial agreement with the United Kingdom. The
relevant article of that agreement and the section of the United Kingdom Financial Agreement Act, 1946, implementing it have not yet come into effect, pending action by the United States Congress on the Anglo-American financial agreement. If and when the Anglo-American financial agreement is approved by congress, immediate action will be taken to implement this provision of the Canadian-United Kingdom agreement. This would result in a cancellation of the item of $425,000,000 listed in the balance sheet given on page 46 of this appendix under the heading of "Loans and Advances." It will also result in an increase of $425,000,000 in war expenditures and total expenditures and a similar increase in the deficit.
2. The following tables show, by main categories and in detail, revenues, expenditures and the increase in net debt for the fiscal year 1945-46 together with comparable figures for the four preceding fiscal years:
The Budget-Appendix

[Stage Direction]
(Thousands of Dollars)
-	1941-42	1942-43	1943-44	1944-45	Estimated 1945-46$	$	$	$	$Tax Revenue- Direct Taxes- Direct Taxes on Incomes- Individual Income Tax, including	National Defence Tax	296,139	534,138	813,435	767,755	691,586Tax on Interest and Dividends	26,643	26,711	25,671	27,053	26,824Taxes on Rents and Royalties	1,626	1,370	1,272	1,546	1,486Corporation Income Tax	185,836	347,970	311,379	276,404	217,834Excess Profits Tax	135,168	454,581	468,718	465,805	494,196Total Direct Taxes on Incomes.	645,412	1,364,770	1,620,475	1,538,563	1,431,926Succession Duties	6,957	13,273	15,020	17,251	21,448Total Direct Taxes	652,369	1,378,043	1,635,495	1,555,814	1,453,374Indirect Taxes-	Customs Import Duties	142,392	118,963	167,882	115,091	128,877Excise Duties-	Spirits, malt, etc	46,776	65,594	65,922	72,133	91,275Cigars, cigarettes and tobacco. ...	65,050	76,372	79,906	83,142	98,228Licences	40	38	37	37	38Less Refunds	-1,775	-3,283	-3,741	-3,390	-2,815Total Excise Duties	110,091	138,72-1	142,124	151,922	186,726Excise Taxes- Taxes on Commodities-	Sales Tax	246,553	250,478	339,256	404,109	326,253War Exchange Tax	100,874	94,553	118,913	98,164	41,198Automobiles, rubber tires and	tubes	16,742	3,062	6,000	6,480	6,701Beverages	6,247	14,119	19,059	19,442	16,657Candy and chewing gum	8,185	12,602	12,874	11,904Cigars, cigarettes and tobacco....	333	26,295	54,688	62,306	70,228Cigarette papers and tubes	3,948	5,056	0,159	6,658	4,645Electric and gas appliances	8,470	5,306	3,302	4,057	1,2723,170 24,898	4,199 24,930	5,217 29,671	4,976 29,836Gasoline	24,752	Matches and lighters	2,766	2,855	2,874	3,117	3,675Phonographs, radios and tubes....	2,361	1,191	491	1,112	646Special excise on importations	861	480	508	545	787Sugar	22,009	14,950	13,048	11,744	9,975Toilet preparations and soaps	3,539	4,542	5,327	6,347	7,107Trunks, bags, luggage, etc	2,187	4,170	4,134	4,711Wines	1,445	2,007	1,710	1,772	2,066Sundry	877	1,938	2,579	2,977	3,811Taxes on Amusements and Services-	Amusements	7,710	10,778	12,019	12,284	13,387Tax on pari-mutuel bets	1,082	1,287	1,683	1,904	2,188Transportation and communication	8,131	16,083	22,379	24,205	26,893Stamps, including payment of taxes on jewellery, chinaware, cabaret	attendance, etc	4,893	12,586	16,734	18,296	21,697Licences, interest and miscellaneous	202	255	331	369	302Less refunds (mainly sales tax)	-10,370	-17,549	-34,342	-194,719	-114,005Total Excise Taxes	453,425	488,712	638,619	543,065	496,910Other Taxes-	Chartered bank note circulation...	786	665	457	350	270Insurance Companies	1,148	10,893	6,481	7,182	7,951Miscellaneous	702	723	753	702	751Total Indirect Taxes	708,544	758,677	956,316	818,312	821,485Total Revenue from Taxes	1,360,913	2,136,720	2,591,811	2,374,126	2,274,859
[Mr. Ilsley.l

The Budget-Appendix
STATEMENT OF REVENUES FOR THE LAST FIVE FISCAL YEARS-Concluded (Thousands of Dollars)
-	1941-42	1942-43	1943-44	1944-45	Estimated 1945-46Non-Tax Revenue- Post Office	
Return on Investments	
Bullion and coinage	
Premium, discount and exchange.... Other	
Total Non-tax Revenue	
Total Ordinary Revenue	
Special Receipts and Credits- Refunds of previous years' Special Expenditure	
Special Receipts-War Appropriation Acts	
War Donations	
Canadian Wheat Board- Reduction in Reserve Account.... Surpluses in certain special accounts Canadian National Railways- Net credit due to increase in Canadian National Railways Securities Trust Stock (contra)	
Previous years' war expenditure on investment in Crown plants trans-	$ 45,994 25,826 4,767 11,855 14,469	$ 48,869 41,242 5,883 395 19,690	$ 01,071 48,281 8,732 2,154 13,045	$ 66,056 60,749 4,586 14,080	$ 68,613 70,915 4,954 16,206102,911	116,079	133,283	145,471	160,6881,463,824	2,252,799	2,725,094	2,519,597	2,435,547102 16,384 459	239 18,651 275 6,660	221 98,918 216 2,971	53 360,061 177 589 2,625 22,400	21 569,150 1611,5761	31,560'	37,838 53,448 26	22,631 1741	Capital and Non-active Accounts- Capital Accounts- * Refunds of previous years' expenditure	
Net insurance proceeds on the	18,521	57,386	193,638	385,905	592,13738 984 33	102	93	728	375Non-active Accounts- National Harbours Board, reduc-	15	19 549	Canadian National (West Indies) Steamships, Limited, reduction	164 1,000 29	Canadian Pacific Railway- repayment of loan made under Unemployment Relief Act, 1932 Write-downs to Consolidated Deficit Account- Seed Grain and Relief Loans.... Total Capital and Non-active Accounts	
Total Special Receipts and Credits.. Grand Total Revenue	
Less estimated amount of Income and Excess Profits Taxes refundable after the war	58	42	36	451,113	[DOT] 159	1,286	1,332	42019,634	57,545	194,924	387,237	592,5571,483,458	2,310,344 70,000	2,920,018 155,000	2,906,834 219,500	3,028,104 72.5C01,483,458	2,240,344	2,765,018	2,687,334	2,955,604
0) Revised to be comparable to the presentation used in Public Accounts of 1943-41 by netting the adjustments affecting the Canadian National Railways Securities Trust Stock.
The Budget-Appendix

[Stage Direction]
(Thousands of Dollars)
-	1941-42	1942-43	1943-44	1944-45	Estimated 1945-46Ordinary Expenditure	$	$	$	$	$Agriculture	8,430	8,492	8,841	9,424	10,318Auditor General's Office	457	441	348	361	379Civil Service Commission	
External Affairs, including Office of Prime	399	427	456	461	480Minister	
Finance-	1,052	1,156	1,596	1,974	4,770Interest on Public Debt	
Cost of Loan Flotations and Annual Amortization of Bond Discounts and	155,018	188,556	242,681	318,995	408,960Commissions	
Premium paid on redemption of called bonds	16,350	13,838	19,285	20,679	22,310Subsidies to Provinces	
Wartime Prices and Trade Board- Dominion Fuel Board Administra-	14,409	14,490	14,449	14,445	14i447tion, coal subsidies and subventions Miscellaneous Grants and Contribu-	4,880	(') -	(>) -	(>) -	(') -tions	531	526	528	531	951Civil Pensions and Superannuation.... Government contribution to Superan-	445	398	356	325	297nuation Fund	
Old Age Pensions, including pensions to	2,347	2,341	2,299	2,341	2,700blind persons	29,612	29,976	30,377	32,187	(*) -Premium, Discount and Exchange	
Compensation to Provinces under Dominion-Provincial Taxation Agreements-	16,348	14,735Income and Corporation Taxes	21,120	85,942	83,678	82,977	94,343Gasoline Tax	
Administrative and Sundry Expendi-	8,273	11,757	10,357	3,709ture	3,807	4,181	4,472	4,724	7,580Fisheries	
Governor General and Lieutenant Gov-	1,679	1,699	1,696	2,159	3,322ernors	226	225	222	223	228Insurance	181	182	-183	185	198Justice	2,657	2,667	2,673	2,696	2,843Penitentiaries	2,786	2,772	2,799	2,936	3,258Labour	762	698	1,147	1,419	1,591Technical Education	
Unemployment Insurance Act, 1940-	41	19	23	25	29Administration	2,344	4,657	5,171	5,115	6,202Government contribution	
Government Annuities-	7,287	11,487	12,344	12,746	12j 514Payments to maintain reserve	
Legislation-	617	498	32	257	294House of Commons	1,408	1,827	1,915	1,612	2,236Library of Parliament	72	76	77	72	73Senate	424	555	562	485	727General	
Chief Electoral Officer, including elec-	47	61	86	95	98tions	
Mines and Resources-	282	1,447	88	179	3,089Administration	178	160	167	161	166Immigration	1,289	1,268	1,262	1,311	1,523Indian Affairs	5,000	4,978	5,177	6,164	(3>
4,479Lands, Parks and Forests	1,959	1,753	1,586	1,832	2'608Surveys and Engineering	1,128	1,129	1,272	1,610	1,322Mines and Geological Survey	1,156	1,140	1,125	1,217	1,303Munitions and Supply	
Dominion Fuel Board Administration	12	12	14	19	(*) -Coal subsidies and subventions	
National Defence-	(') -	4,965	2,165	2,737	(4) -Administration	43	44	36	40	40Sundry Services	223	371	32	29	82
(') See Departments of Munitions and Supply and Reconstruction and Supply.
(2)	See Department of National Health and Welfare.
(3)	Medical care of Indians transferred to Department of National Health and Welfare in 1945-46.
(4)	See Department of Reconstruction and Supply.
[Stage Direction]
The Budget-Appendix
STATEMENT OF EXPENDITURES BY MAJOR CATEGORIES AND BY DEPARTMENTS FOR THE LAST FIVE FISCAL YEARS-Con.
(Thousands of Dollars)
-	1941-42	1942-43	1943-44	1944-45	Estimated 1945-46$	$	S	$	$Ordinary Expenditure-Con.	National Health and Welfare	1,246	1,244	1,617	1,725	6,133Old age pensions, including pensions to	blind persons	(5) -	(6) -	(t) _	(E) _	33,715Family Allowances	172 632National Film Board	(6) -	(6) -	(6) _	(6) -	1,146National Revenue (including Income	Tax)	13,428	15,190	17,721	20,114	22,631National War Services	682	428	547	838	4Post Office	41,502	44,742	48,485	54,629	57,730Privy Council	54	62	80	81	85Public Archives	123	123	124	124	127Public Printing and Stationery	t. .	195	245	235	232	237Public Works	11,937	12,014	12,281	13,169	16,263Reconstruction and Supply	-	-	82	914Dominion Fuel Board Administration,	Coal subsidies and subventions	(') -	(7) -	(7) -	(7) -	2,341National Research Council	(*) -	(*) -	(*) -	887	1,195Royal Canadian Mounted Police	5,985	6,242	6,678	7,183	7,284Secretary of State	823	820	831	864	955Trade and Commerce	(*) 6,200	4,566	4,196	3,497	4,057Canada Grain Act	1,909	1,918	2,089	2,333	2,302Mail Subsidies and Steamship Subven-	tions	616	616	800	869	994Transport-	Administration	388	375	397	402	420Air Service	3,386	3,334	3,593	3,939	4,199Marine Service	4,010	4,257	4,504	4,897	4,844Railways and Canals	3,694	3,340	4,090	4,260	4,374Maritime Freight Rates Act	3,935	4,894	5,058	4,733	4,346Railway Grade Crossing Fund	25	12	17	34	32/eterans Affairs-	Departmental Administration	182	162	176	195	1,141Pensions (War 1914-18 and military)	40,569	39,684	38,998	39,372	40,004War service gratuities and re-establish-	ment credits	-	-	20,228	(*) -Treatment and after-care of returned	soldiers and allowances to dependents	12,667	12,689	14,050	19,845	28,531Soldier Settlement and Veterans Land	Act	564	567	837	1,391	3,163Total ordinary expenditure...	444,778	561,251	630,381	767,376	1,061,845Capital Expenditure	Railways	4	38	692	630	2,313Public Works	3,426	3,238	1,930	2,534	2,290Total Capital Expenditure..	3,430	3,276	2,622	3,164	4,603War and Demobilization Expenditure	National Defence-Army-	Army Services	502,773	1,021,944	1,312,348	1,243,732	853,606Internment Operations	1,370	1,556	1,100	1,580	1,014Inspection Board of the U.K. and	Canada	4,876	10,946	10,522	8,362	6,124U.K. Settlement-War Claims	-	-	-	71,250Sundry	2,150	3,344	4,835	8,080	8,474511,169	1,037,790	1,328,805	1,261,751,	940, 468National Defence-Naval Services	129,S68	210,182	369,556	417,099	241,800(6)	See Department of Finance.(6)	Included under Department of National War Services.(7)	See Department of Munitions and Supply..(8)	Included under Department of Trade and Commerce.
(®) Includes an amount of $2,615,000 for census of population of Canada. (1C) See War and Demobilization.
2S44
The Budget-Appendix
[Stage Direction]
STATEMENT OF EXPENDITURES BY MAJOR CATEGORIES AND BY DEPARTMENTS FOR THE LAST FIVE FISCAL YEARS-Con.
(Thousands of Dollars)
-	1941-42	1942-43	1943-44	1944-45	Estimated 1945-46War and Demobilization Expenditure -Continued National Defence-Air Services-	S	$	$	8	$Overseas War Establishment	13,333	23,666	383,888	759,070	Overseas Operations	-	-	-	-	142,539Home War Establishment	109,820	226,550	312,761	227,942	-Western Hemisphere Operations	-	-	-	93,215Air Training	247,383	366,S97	233,893	272,342	-Training Organization	-	-	-	60,669Repatriation and Demobilization	-	-	-	-	72,153U.K. Settlement-War Claims	-	-	-	-	82,815Restricted Servicing Units	-	-	-	-	39,539General Servicing Units	-	-	-	-	14,896Surplus Equipment Units	
Headquarters and Commands Admin-	-	-	-	-	815istration	-	-	-	-	17,871Sundry	113	122	124	103	96Reconstruction and Supply (formerly Munitions and Supply)-	370,649	617,235	930,666	1,259,457	524,608Administration	4,930	9,457	9,957	8,841	6,900Expansion of Industry	247,761	469,675	672,804	205,039	106,000Acquisition of U.K. Assets	-	200,000	5,000	1,964	Termination of Contracts	-	-	-	-	145,000National Research Council	1,125	2,091	2,640	2,932	2,382Sundry	-	-	-	-	3,133Agriculture- Disposal of agricultural products rend-	253,816	681,223	690,401	218,776	263,415ered surplus by the war	
Subsidy to increase export bacon price to secure adequate supplies for the	2,260	2,901	1,876	1,194	355U.K	
Payment on cheese exports to the	2,281	-	-	-	-U.K	
Freight assistance on western feed	1,784	-	-	-	-grains	
Payment to increase the income of farmers in the spring wheat area of	3,972	10,318	17,754	15,943	17,316Western Canada	
Fertilizer subventions and freight allow-	16,299	2,678	19	2	1anco	
Subsidy on western wheat used ex-	-	1,036	903	350	713clusively as feed for live-stock	-	836	4,500	7,471	7,863Subsidy on milk and milk products.... Premium on hog carcasses suitable for	-	-	29,505	42,330	41,659export to U.K	
To provide for reserve stocks of feed	-	-	3,855	14,091	9,573grains	-	-	1,292	715	1,277Sundry	791	2,211	4,589	5,958	4,221Finance-	27,387	19,980	64,293	88,054	82,978Comptroller of the Treasury	
Payment of premiums on the purchase x>f Dominion of Canada Registered	3,866	6,493	8,404	9,216	9,373Stock	
Wartime Prices and Trade Board-	8,100	126	13	14	12Administration	
Subsidies due to application of Order	1,437	9,278	13,705	12,720	14,761placing a ceiling over all prices	
Advances for payment of drawback claims to millers and other manu-	3,242	67,715	81,519	107,338	97,850facturers of wheat products	
Advances to the Canadian Wheat Board to cover deficits in certain Board	(u) -	20,500	19,700	14,750operations	-	13,058	House Conversion Program	-	-	841	4,053	1,787
(,l) See Department of Trade and Commerce. 

The Budget-Appendix
STATEMENT OF EXPENDITURES BY MAJOR CATEGORIES AND BY DEPARTMENTS FOR THE LAST FIVE FISCAL YEARS-Con.
(Thousands of Dollars)
-	1941-42	1942-43	1943-44	1944-45	Estimated 194.5-46War and Demobilization Expenditure -Continued Finance-Concluded	$	$	$	$	$Old Age Pensions, increased benefits. . Halifax V-E Day disorders and explosion-	3,062	8,788	(!!) _Payment of claims	-	-	-	-	4,611Expenses of investigations	-	-	-	-	260Sundry	80	1,051	417	1,632	955Labour-	16,725	84,668	128,461	176,519	144,359Industrial training	4,569	4,360	3,478	1,617	701Training aircraft mechanics	1,489	2,019	1,378	333	3National Selective Service program... Removal of enemy aliens from pro-	-	4,737	9,346	11,098	11,319tected areas	
Vocational training for discharged members of the Canadian Armed	4,328	2,545	2,137	2,114Forces	3	22	167	602	4,357Sundry	493	1,361	2,724	3,877	4,413Mines and Resources- Prince Rupert-Terrace-Cedarvale	6,554	16,827	19,638	19,664	22,907Highway	10	2,965	5,750	2,499	8Employment of Japanese	71	1,686	894	511	262Sundry	678	1,626	2,761	2,804	3,205National War Services-	7 59	6,277	9,405	5,814	3,475War charities-Auxiliary services	1,175	6,499	10,910	15,933	13,062National Film Board	10	122	1,220	1,341	(!2) _Censorship	22	1,070	1,727	1,856	846Sundry	2,011	954	1,330	6,852	338National Health and Welfare-	3,218	8,645	15,187	25,982	14,246Old Age Pensions, increased benefits. .	-	-	(13) -	(13) _	9,103National Film Board	
Canadian Information Service (formerly Wartime Information	(*) _	('<) -	(*) -	(*) _	1,403Board)	-	1,474	759	1,700	1,229Sundry	(U) _	(15) _	(15) __	1,340	745-	1,474	759	3,040	12,480Public Works	4,497	6,880	6,467	6,500	6,281Royal Canadian Mounted Police	
Trade and Commerce-	3,001	8,870	4,267	3,709	4,776Gift of wheat to Greece	
Canadian Wheat Board- Advances for payment of drawback claims to millers and other manu-	3,835	8,798	0,749	facturers of wheat products	-	3,000	(13) _	(13) _	(«) _Special administration expenses	
Canada's contribution to UNRRA	-	-	963-	-	-	(!6) _	(16) 104,830Sundry	80	529	745	670	80880	7,364	9,543	7,419	106,601Transport	
Acquisition of Airfields and Works	5,228	5,762	9,941	16,077	14,592from United States Government	
Veterans Affairs-	-	-	66,600	18,661	-Treatment-Defence Forces	-	-	-	11,449	26,380Pensions-Defence Forces	
(12)	See National Health and Welfare (13)	See Department of Finance. (14)	See National War Services. (15)	Included in Pensions and Nations	d Health.	11,939	22,213
(16j Additional amounts contributed to UNRRA are included as follows: in 1943-44, $55,500 expended by the Department of External Affairs is listed in this table under ''Other Departments"; in 1944-45, $11,093,000 and in 1945-46, $38,022,000, expended by the Mutual Aid Board, are listed under "The War Appropriation (United Nations Mutual Aid) Acts."
The Budget-Appendix
[Stage Direction]
STATEMENT OF EXPENDITURES BN MAJOR CATEGORIES AND BY DEPARTMENTS FOR THE LAST FIVE FISCAL YEARS-Con.
(Thousands of Dollars)
-	1941-42	1942-43	1943-44	1944-45	Estimated 1945-46S	%	$	$	$War and Demobilization Expenditure -Concluded Veterans Affairs-Concluded Additions, alterations and improvements to departmental hospitals, including land purchases	5,738	7,131Post-discharge re-establishment- rehabilitation benefits	2,468	32,131War service gratuities and re-establishment credits	(17) _	239,592Sundry	-	-	-	1,165	968-	-	-	82,759	828,415Pensions and National Health- Treatment-Defence Forces	
Pension-Defence Forces	
Air Raid Precautions	
Post-discharge re-establishment	
Sundry	
Canadian Mutual Aid Board- Military Relief	2,696 886 619 104 1,308 5,618	4,175 2,760 5,027 296 2,062 14,820	6,456 5,637 1,724 472 3,663 17,952	50,199	34,000Mutual Aid	-	-	-	-	('*) 725,900-	-	-	50,199	759,900Other Departments	1,610	1,757	2,479	8,617	8,1611,339,674	2,724,249	3,674,420	3,615,100	3,474,412The War Appropriation (TJ.K. Financing) Act, 1942	1,000,000	-	_The War Appropriation (United Nations Mutual Aid) Acts	-	-	912,603	803,346	84,042Total War Expenditure	1,339,674	3,724,249	4,587,023	4,418,446	3,558,454Special Expenditure Agricultural and Relief Projects	8,500	5,013	3,751	5,869	4,422Western Drought Area Relief- Prairie Farm Assistance Act, 1939- Administration	423	157	217	188	327Advances to Prairie Farm Emergency Fund	11,848	249	2,578	1,295	12,052Wheat acreage reduction plan- Administration	980	1,342	848	261	163Payments of awards to farmers	29,654	24,527	30,102	1,707	394Provision of reserve to meet deficits resulting from the operations of the Canadian Wheat Board not previously provided for	12,571	186	Total Special Expenditure	63,976	31,288	37,496	7,506	17,358Government Owned Enterprises Losses charged to Consolidated Deficit Account- Prince Edward Island Car Ferry and Terminals	424	591	698	773	688National Harbours Board	33	, -	30	59	86Total Charged to Consolidated Deficit Account	457	591	728	832	774(17)	Included in ordinary expenditure(18)	Excluding amounts for UNB.RA listed above and amounts provided from separate Appropriation Acts listed below.
[Mr. Ilsley.)

The Budget-Appendix
STATEMENT OF EXPENDITURES BY MAJOR CATEGORIES AND BY DEPARTMENTS FOR THE LAST FIVE FISCAL YEARS-Con.
(Thousands of Dollars)
-:	1941-42	1942-43	1943-44	1944-45	Estimated 1945-468	S	$	$	8Government Owned Enterprises- Concluded	Loans and advances non-active-	579	526	560National Harbours Board	758	657	Total non-active advances	758	657	579	526	560Total government-owned enter-	1,358	1,334prises	1,215	1,248	1,307	Other Charges Write-down of assets chargeable to Consolidated Deficit Account- Reduction of soldier and general land settlement loans	271	51	553	325	36Yearly established losses in seed grain and relief accounts-Department of Mines and Resources	58	42	29	36	45Cancellation of Canadian Farm Loan Board Capital Stock	10	7	5	1	1To provide a reserve for possible losses on ultimate realization of Active Assets	25,000	25,000	25,000	25,000	25,000Canadian National Railways Securities Trust Stock- Net changes in Dominion's equity in Canadian National Railways	1,576	31,560	37,838	22,400	22,631Total other charges	26,915	56,660	63,425	47,762	47,713Grand total expenditures	1,879,988	4,377,972	5,322,254	5,245,612	4,691,307

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(Thousands of Dollars)
-	1941-42	1942-43	1943-44	1944-45	Estimated 1945-46$ 1,463,824 1,022 18,612	$ 2,182,799 102 57,443	$ 2,570,094 194,831	$ 2,300,097 700 386,509	$ 2,363,047 375 592,182Capital refunds	
Special receipts and other credits	1,483,458	2,240,344	2,765,018	2,687,334	2,955,604
444,778 3,430 1,339,674 63,976 1,215 26,915	561,251 3,276 3,724,249 31,288 1,248 56,660	630,381 2,622 4,587,023 37,496 1,307 63,425	767,376 3,164 4,418,446 7,506 1,358 47,762	1,061,845 4,603 3,558,454 17,358 1,334 47,713
					
					
Special expenditures						
					
					
	1,879,988	4,377,972	5,322,254	5,245,612	4,691,307
Total deficit or increase of direct net debt					
	396,530	2,137,628	2,557,236	2,558,278	1,735,703
The Budget-Appendix

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3.	The grand total of revenues of the dominion government for the fiscal year ended March 31, 1946, are estimated to amount to $2,955,604,000, representing an increase of $268,270,000 from the previous year. Revenue from tax sources declined by $99,267,000 from 1944-45, reflecting reductions in tax rates made after the end of the war, but increases of $15,217,000 in non-tax revenues and of $205,320,000 in special receipts more than offset this reduction. A table on page 2951 gives a detailed comparison of the actual revenue results with the forecast presented in the budget speech of October 12, 1945.
4.	Tax revenues again reflected the predominance of direct taxes on incomes and profits characteristic of the war years. Of total tax revenue in 1945-46, almost 64 per cent arose from direct taxation as compared with 32 [DOT] 6 per cent in 1938-39, the last pre-war year.
5.	The amount of reserve established in the fiscal year under review for the refundable portion of income and excess profits taxes was $72,500,000, of which $5,000,000 was in respect of personal income tax and $67,500,000 in respect of the excess profits tax. This has been deducted in arriving at the revenue total given above. When added to the reserves previously set aside, this addition brings the gross total liability established at March 31, 1946, to $265,000,000 for refundable personal income tax and $252,000,000 for excess profits tax, or a gross total of $517,000,000. After deducting repayments of refundable taxes made to March 31, 1946, the net liability as at that date amounted to $515,737,000. The distribution of the gross reserves of the two taxes by the taxation years to which they relate is now estimated as follows:
Taxation Year	Refundable Personal Income Tax	Refundable Excess Profits Tax1942	$ 58.000.	000 135,000,000 72.000.	000	$ 31.200.000 67.500.000 72.700.000 70.500.000 10.100.0001943	1944	1945	1946*	Gross Total	265,000,000	252,000,000Less repayments	1,259,382	3,783Net Total	263,740,618	251,996,217
'Corporation fiscal years ending in 1946 prior to March 31st.

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6.	The personal income tax, which yielded $691,586,000, was again the largest single source of tax revenue, although yielding $76,169,000, less than during the previous year. This decrease reflected the 16 per cent reduction in tax effective from October 1, 1945, as provided in the budget of last fall, and in part also the moderate decline in incomes which followed the end of the war. The decline due to these causes was, however, partly offset by the recovery of family allowance payments from taxpayers through deduction at the source which was in effect during nine months of the fiscal year 1945-46.
Mention has been made previously of the reserves now established for the refundable portion of the personal income tax. The additional amount of $5,000,000 set aside in 1945-46 represented an increase in the reserves provided previously against the years 1942,

1943 and 1944, when this tax was in effect and brings the net total liability at March 31, 1946, to the amount of $263,740,618.
7.	Corporation income tax and the excess profits tax are both levied on business profits and may appropriately be discussed together. The yield of the corporation income tax revenue amounted to $217,834,000, and revenue from the excess profits tax to $494,196,000, giving a combined total of $712,030,000, compared with a combined total of $742,209,000 in the previous year. This decline reflected principally a moderately lower level of corporation profits in 1945 and to a minor degree the changes in the excess profits tax introduced in the 1945 budget. The nature of these changes was such that their main effect will be felt in the fiscal year 1946-47.
The amount of refundable excess profits tax reserve has been shown previously in tabular form by the individual taxati m years to which

The Budget-Appendix
the total applies. The liability to pay this tax has been lifted in respect of profits earned after January 1, 1946, but must be paid by any company having a fiscal year ending after that date on the proportionate part of its profits falling in the calendar year 1945. The full final liability for the refundable excess profits tax, therefore, has not- yet been established as companies having a part of their fiscal year falling in the calendar year 1945 will be required during 1946 to pay this tax on a part of their profits proportionate to the portion of their fiscal year which was included in 1945.
8.	Revenues under the headings "Taxes on Dividends and Interest" and "Taxes on Rents and Royalties" are derived from special taxes imposed largely on income going to nonresidents of Canada under authority of section 9b of the Income War Tax Act. In 1945-46 revenue under these two headings amounted in total to 828,310,000, and was derived principally from the 15 per cent tax on interest and dividends paid to non-residents.
9.	Succession duties, which have been levied only since 1941 by the dominion government, have shown a gradual increase from year to year since their inception. The revenue from this source was $21,448,000 in 1945-46, compared with 817,251,000 in 1944-45, $15,020,000 in 1943-44, $13,273,000 in 1942-43 and $6,957,000 in 1941-42.
10.	Gross revenue from customs duties in 1945-46 amounted to S174,076,000 compared with gross revenues of $173,730,000 in the previous year, while net revenue after deducting refunds and drawbacks amounted to $128,877,000 compared with $115,091,000 in 1944-45.
As explained in the appendix to the 1945 budget speech, very substantial amounts of customs and excise revenue have been remitted in recent years in respect of munitions and war supplies exported from Canada to allied governments either as cash sales or under the mutual aid acts. These remissions reached their peak in the fiscal year 1944-45, and their decline to a lower level in 1945-46 accounted almost entirely for the increased net revenue in the latter year. In the fiscal year 1946-47 refunds and drawbacks of customs revenue will return to a normal level with the cessation of the shipment of war supplies abroad.
11.	Excise duties are levied exclusively on alcoholic beverages and tobacco products under the Excise Act. Total revenue in the fiscal year 1945-46 amounted to $186,726,000, an increase of $34,804,000 over the previous year. Of this increase alcoholic beverages, due to an increase in consumption following
the rescinding of the restrictions imposed by the dominion government under the wartime alcoholic beverages control order, contributed $19,142,000, while tobacco products contributed $15,086,000. The extent of the smokers' contribution to the federal treasury is indicated by the over-all revenue from tobacco products (including the yield of the additional taxes imposed under the Special War Revenue Act on tobacco, cigars, cigarettes, cigarette papers and tubes, pipes and smokers' accessories) which amounted in the fiscal year 1945-46 to over $174,000,000, a sum equal to about 40 per cent of the total tax revenue of the government in the last pre-war year, 1938-39.
12.	Under the heading "Excise Taxes" are included the wide variety of taxes on com-modties and services levied under the Special War Revenue Act, of which the sales tax and the taxes on tobacco products were the largest sources of revenue in 1945-46. Gross collections of $610,915,000 were lower by $126,869,000 than during the previous year, due in substantial part to the exemption of building materials from sales tax in May, 1945, and the further exemption from sales tax of machinery and apparatus and the rescinding of the war exchange tax in the budget of October 12, 1945. Refunds of excise taxes declined from $194,719,000 in 1944-45 to $114,005,000 in 1945-46, however, due to reduced remissions on munitions of war exported to our allies, with the result that the net revenue declined by only $46,155,000 as compared with the decline in gross revenue of $126,869,000.
The tax sources which showed the largest reductions in 1945-46 and the amounts by which revenue was reduced in each case are
set forth below:
Sales tax	$ 77,856,000
War exchange	tax	 56,966,000
Beverages	 2,785,000
Electric and	gas	appliances.... 2,785,000
Sugar	  1,769,000
Curtailment of available supplies of sugar accounted for the decline in the sugar tax and the tax on beverages. The tax on electric and gas appliances was repealed in May, 1945, and was, therefore, not. in effect during the greater part of the fiscal year. The reason for the reduction in sales tax and war exchange tax receipts has already been mentioned.
Tax sources from which increased revenue was derived, and the amounts of the increase
in each case were:
Cigars, cigarettes and tobacco.... $7,922,000 Stamps, including taxes on jewellery, chinaware, cabaret attendance, etc	 3,401,000
Transportation and communication 2.688,000
The Budget-Appendix
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13.	Small amounts of tax revenue are derived from the tax on the note circulation of the chartered banks, which decreases from year to year with the decline in such notes as provided by statute; from taxes on the net premium income of insurance companies; from a tax on the export of electric energy from Canada; and from a tax on the export of furs from the Northwest Territories. Revenue from all these taxes amounted to $8,972,000 in 1945-46.
14.	Non-tax revenues for 1945-46 are estimated at $160,688,000, an increase of $15,217,000 over 1944-45. Receipts from the post office amounted to $68,613,000, an increase of approximately $2,557,000. These receipts exceeded the cost of operating the post office by about $10,883,000, if we take no account on the credit side of the value of services rendered free of charge to other departments and on the debit side, of rentals and other costs of premises occupied by the post office. It will be recalled that- postage rates were increased in 1943 to obtain additional revenue. Return on investments realized $70,915,000, an increase over the previous year of about $10,166,000. The larger items making up this total are: interest on
advajnces to Canadian National Railways, $18,400,000; Bank of Canada profits, $22,542,000; interest on loans to foreign exchange control board, $8,155,000; interest on bonds held in securities investment account, $9,555,000; interest on loans to national harbours board, $3,950,000; interest on loans to provinces, $2,762,000; interest on loans to Canadian farm loan board, $746,000; soldier land settlement loans, $588,000; and interest on advances to Canadian National Railways for purchase of railway equipment, $2,155,000.

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15.	The unrevised total of special receipts and credits for the fiscal year 1945-46 is $592,557,000 as compared with $387,237,000 for the previous year. Of this total, $569,150,000 represents receipts developing from war expenditures and consists of refunds of previous years' war ex-1 penditures, $454,549,000; sale of surplus war assets, $44,950,000 and miscellaneous war revenues, $69,651,000.
A breakdown of refunds of previous years' war expenditures by departments, with details of the larger items follows:
Canadian Mutual Aid Board	:
National Defence-Army	
National Defence-Navy	
National Defence-Air-proceeds from sales of equipment, material and supplies furnished and services rendered, $20,101,000; savings on civilian operated air training schools, $2,890,000; refunds on contracts after cost audits and re-negotiation, $4,017,000; refunds on joint operations R.C.A.F. station at Gander, $926,000; sale of surplus and condemned stores, $3,566,000; sundries, $577,000-total	
Reconstruction and Supply-Credit from munitions production allotment fund representing mainly return of working capital advances from pre-financed plants, $310,000,000; refunds on contracts in connection with cost audits, re-negotiation, and voluntary refunds, $12,700,000; amortization of government capital on War Supplies Limited contracts, $55,000,000; amount transferred from suspense upon liquidation of government equity in plant
of Sorel Industries, Ltd., $10,000,000; sundries, $5,353,000-total.
Sundry departments	
3.716.000 13,888,000
6.660.000
32,077,000
393,053.000
5,155,000
Total
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It should be noted that most of these refunds of previous years' war expenditures are made out of current war expenditures of other departments, and that consequently the bulk of these transactions are merely bookkeeping changes and not actual refunds of expenditures. There are offsetting items in the expenditure accounts corresponding to most of the refunds listed above.
In connection with the amount of $44,950,000 realized during the year through the disposal of surplus war assets, it might be mentioned that it does not include residual cash balances or value of inventories in the hands of War Assets Corporation as at March 31, 1946.

The larger amounts making up the total of miscellaneous war revenues, $69,651,000, are from the departments of national defence-army, navy and air services, $3,646,000; reconstruction and supply, $62,100,000; transport, $2,030,000; and sundry, $1,875,000. Included in the total for reconstruction and supply is the sum of $50,000,000 derived from the operation of Park Steamships Limited.
The remaining large item of special receipts and credits is the sum of $22,631,000 which represents the net result of the change in the government's equity in the Canadian National Railways for the calendar year 1945. This arises from the government being the owner of

The Budget-Appendix
the railway company at a time when the latter is using its surplus earnings to reduce its debts. The surplus earnings of the railway company, amounting to §24,756,000, were paid to the government and show up in the accounts as a repayment of active advances (see paragraph 36 on page 2964). This reduction of debt increases the net book value of the government's investment in the railway company by a corresponding amount. It is offset, in part, by a book loss on capital abandonments of $2,125,000. The remainder, $22,631,000, is the net increase in the book valuation of the Canadian National Railways' Securities Trust capital stock. This is carried on the books as an inactive asset, and the increase in it is shown here as a special receipt. It is offset, however, by a contra item of the same amount on the expenditure side, appearing under the heading "Other Charges."
16.	The table which follows gives a summary of the forecast made at the time of the last budget of the probable receipts from the various sources of revenue during the fiscal year 1945-46, and a comparison of these forecasts with receipts for the fiscal year.

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Source of Revenue	Budget Forecast of Revenue	Actual Revenue	Increase (+) or decrease (-) in revenue as compared with budget forecastTax Revenues	(tho 120,000 175,000	usands of dol 128,877 186,726	ars) + 8,877 + 11,726
Excise Taxes:			
	210,000 45,000 250,000	212,248 41,198 243,464	+ 2,248 -	3,802 -	6,536
			
			
Total Excise Taxes	
Income Taxes: Tax on personal incomes	
Corporate Income Tax and Excess Profits Tax	
Interest and Dividends	
Total Income Taxes	
Succession Duties	505,000	496,910	- 8,090680,000 693,000 29,000	691,586 712,030 28,310	+ 11,586 + 19,030 - 6901,402,000	1,431,926	+ 29,92620,000 8,000	21,448 8,972	+ 1,448 + 972Miscellaneous Taxes	Total Tax Revenues	2,230,000 150,000	2,274,859 160,688	+ 44,859 + 10,688
Total				
	2,380,000 100,000	2,435,547 592,557	+ 55,547 + 492,557
Special Receipts and Credits	 Total Revenue				
	2,480,000 65,000	3,028,104 72,500	+ 548,104 - 7,500
Less Refundable Taxes				
Net Total Revenue				
	2,415,000	2,955,604	+ 540,604

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17.	Expenditures are dealt with under the usual classifications of ordinary, capital, war and demobilization, special, government-owned enterprises and other charges. All disbursements under these categories with the exception of active loans and investments charged to war appropriations are included as expenditures in arriving at the over-all deficit or increase in the net debt.

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18.	Ordinaiy expenditures are estimated at $1,061,845,000 compared with $767,376,000 in the previous fiscal year, an increase of $294,469,000. The largest increase was in the payments of family allowances which reached a total of $172,632,000 in 1945-46-the first year in which such payments were made. Other estimated increases over 1944-45 are as follows:
The Budget-Appendix
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Increased interest and public debt
charges	$97,438,000
Increased compensation1 paid to provinces under wartime tax agreements for vacating income and corporation tax fields $1-1,366,000, less reduction of $6,648,000 under guarantee of
gasoline tax revenues	 4,718,000
Increase in chief electoral officer's expenditure due to 1945 general election	 2,910,000
Increase in Post Office expenditures. .	3:101,000
Increase in Public Works expenditures	 3,094,000
Increase in cost of treatment and after-care of returned	soldiers		8,686,000
JAn amendment of the agreement with the province of Alberta as authorized at the last session of parliament resulted in an increased payment to Alberta of $11,394,000.
Other increases as well as decreases effected during the year are revealed in the five-year table.
It might be noted that of the aggregate estimated ordinary expenditures during 1945-46 of $1,061,845,000, the larger contractual and uncontrollable items total $887,143,000 or 83-5 per cent of the total. These items are: interest and other charges on the public debt, subsidies and payments to provinces under the
dominion-provincial taxation agreements, family allowances, premium discount and exchange, unemployment insurance, post office and pensions.

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19.	Estimated capital expenditures totalled $4,603,000 in the fiscal year ended March 31, 1946, compared with $3,164,000 in the previous fiscal year. The main items are costs of dredging the St. Lawrence ship channel, improvements in connection with civil airways and airports and the construction of the new Prince Edward Island car ferry.

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20.	Under the authority of the War Expenditure and Demobilization Acts and the War Appropriation (United Nations Mutual Aid) Acts an estimated amount of $3,570,666,000 was disbursed. Of this amount $12,212,000 was for loans, advances and investments treated as active assets, and the remainder, $3,558,454,000, was classed as war and demobilization expenditures. The following table gives the corresponding figures for each fiscal year from the beginning of the war.
Fiscal Year	Charged to Active Assets	War Expenditures	Total1939-40	$ 9,092,742 26,379,066 42,816,676 65,231,622 91,906,305 35,238,956 12,212,000	$ 118,291,022 752,045,326 1,339,674,152 3,724,248,890 4,587,023,094 4,418,446,315 3,558,454,000	$ 127,383,764 778,424,392 1,382,490,828 3,789,480,512 4,678,929,399 4,453,685,271 3,570,666,0001940-41	1941-42 	1942-43	1943-44	1944-45	1945-46 (estimated)	282,877,367	18,498,182,799	18,781,060,16621.	The following table gives a summary of disbursements from the War Appropriation Acts, War Expenditure Demobilization Appropriation Acts and other acts authorizing expenditure for war. purposes, classified by departments administering the expenditures and segregating disbursements resulting in active assets.

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Department of National Defence-
Army services	$ 940,468,000
Naval services	 241,800,000
Air services	 524,608 000
Department of Reconstruction and
Supply	 263,415,000
Miscellaneous departments-
Agriculture	 82,978,000
Auditor General's office	 267,000
Canadian Mutual Aid Board including mutual aid appropriations	 843,942,000

Civil Service Commission	 641,000
External Affairs, including Prime
Minister's office	 432,000
Finance	 144,359,000
Fisheries	 248,000
Justice	  19,000
Labour	 22,907,000
Mines and Resources	 3,475,000
National Harbours Board	 318,000
National Health and Welfare... 12,480,000
National Revenue	 975,000
National War Services	 14,246,000
Post Office	 185,000
Privy Council	 42,000
Public Works	 6,231,000
Royal Canadian Mounted Police. 4,776,000
Secretary of State	  34,000
Trade and Commerce (including
UNRRA contributions)	 106.601,000
Transport	 14,592,000
Veterans Affairs (including War
Service Grants Act)	 328,415,000
Total estimated war -and demobilization expenditures	 $3,558,454,000

The Budget-Appendix

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Purchase of railway equipment-
1945 orders	$	11,399,000
Construction of dock and rail facilities for Steep Rock Iron
Mines, Limited	 778,000
Loan to village of Dawson Creek for construction of a sewage disposal system	 35,000
Total estimated active loans, advances and investments from the war expenditure and demobilization appropriations,
1945-46	$ 12,212,000
Total "estimated disbursements from the war and demobilization appropriations, 1945-46	$3,570,666,000
22.	The table in the preceding section does not include recoverable outlays made under the provisions of section 3 of the War Appropriation Acts which are classed as active assets rather than expenditure. Under this section, the government of Canada may act as the agent of an allied government for any purpose which will aid directly or indirectly in the prosecution of the war and any obligations or costs incurred temporarily or assumed may be paid out of unappropriated moneys in the consolidated revenue fund. Futhermore, any expenditure required to be made by the government under any contract for war supplies entered into for the purpose of enabling any company wholly owned by the government to fulfil its obligations in respect of orders
received by such company from an allied government may also be paid out of unappropriated moneys.
23.	The principal items of war expenditure for the fiscal year ended March 31, 1946, and the four preceding fiscal years are detailed on pages 2943 to 2946. The expenditures for 194546 include both war and demobilization costs and while there were substantial, reductions in actual war costs, these reductions were offset in a measure by new items of expenditure more closely associated with demobilization. The net reduction last year over 1944-45 amounted to $859,992,000. Some of the larger reductions are accounted for by: National Defence, army $321,2S6,000; National Defence, naval services $175,299,000; National Defence, air services $734,849,000; agriculture, $5,076000; finance, $32,160,000; national war services, $11,736,000. Some of the services showing increases are:	Reconstruction and Supply,
$44,639,000; National Health and Welfare, $9,440,000; Trade and Commerce-Canada's contribution to UNRRA, $131,759,000 (including that under mutual aid) and Veterans Affairs, $295,656,000, including increases of $219,364,000 in war service gratuities and reestablishment credits, and $29,663,000 in post discharge rehabilitation benefits. Not including the amounts paid to UNRRA from the war appropriation (United Nations Mutual Aid) acts, the amount expended for mutual aid was $771,920,000 compared with $792,253,000 in the previous year. Details of war and demobilization, expenditure by departments and services for 1945-46 follow:

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Agriculture-
Agricultural Supplies Board-
Administration	$	24,000
Programmes -to encourage production of essential war supplies	 568,000
Assistance in disposal of agricultural products rendered surplus by ,the war	 355,000
Feeds administrator	 26,494.000
Flax fibre administrator	 20,000
Fertilizers and pesticides administrator	 727,000
Seeds administrator	 105,000
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$	28,293,000
Meat Board	 9,721,000
Dairy Products Board	 16,000
Special Products Board	 197,000
Agricultural Food Board	 44,750,000
Special farm income payments	 1,000
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$	54,685,000
Auditor General's Office-	$
Auditing and checking war appropriation accounts	
Canadian Mutual Aid Board-[DOT]
Military Relief	 34,000,000
Mutual Aid:
Contributions to UNRRA (see also below Trade
and Commerce)	$	38,022,000
General-Ex UNRRA (see details in paragraph 24)	  771,920,000
*

	*809,942.000
82,978,000
267,000
Includes $84,042,000 charged under Mutual Aid Acts.
843,942,000
The Budget-Appendix
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ESTIMATED WAR AND DEMOBILIZATION EXPENDITURES BY DEPARTMENTS AND SERVICES-FISCAL YEAR 1945-46-Con.
Civil Service Commission-
Supply of personnel for war services	 631,000
Payment of minimum rate railway fare re stenographers and
typists	 10,000
External Affairs including Prime Minister's Office-
Departmental Administration and Passport Offices	 96,000
Representation abroad	 56,000
Legation building and residence, Chungking, China	 11,000
San Francisco Conference	$	118,000
Sundries	 91,000
Canadian Representatives at meeting of U.N.O	 60,000
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Finance-
Payment of premium on purchase of Dominion of Canada registered stock	 12,000
Comptroller of Treasury's Office	 9,373^000
Wartime Prices and Trade Board-
Administration	 14,761,000
Canadian Wool Board Ltd	 447,000
Commodity Prices Stabilization Corporation-
Administration and Subsidies	 97,850,000
Payments to millers and manufacturers of wheat products		14,750,000
Dominion-Provincial Conference	 120,000
Conversion of large dwellings into multiple housing units	 1,787,000
Administration of Employees Instalment Purchase Plan, Victory
Loans	 235,000
Royal Commission on Cooperatives	 97,000
Assistance in operation of old Vancouver	Hotel	 20,000
Payment of claims re V-E Day disorders at Halifax and explosion at the Naval Magazine, Dartmouth, NjS	 4,611,000
Investigation Expenses re the above claims	 260,000
Sundries	 36,000
Fisheries-
Subsidies for	the	construction	of	packer-seiner vessels	
34,000Subsidies for	the	construction	of	dragger vessels	
89,000Construction of fishermen's floats, Prince Rupert, B.C	
35,000Construction, etc., of experimental long line vessel	
22,000Expenses re supply of frozen fish for British Ministry of Food..	24.000Bonus to crews of	fisheries vessels	in war zones	
18,000Compensation	for	war damage	to	fishing boats and	gear	
4,000Salt Fish Regulations-Administration	
14,000Canned Fish Regulations-Administration	
8,000
Justice
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War Measures	Act	  2,000
Expenses re enquiry into Halifax disorders	 10,000
Prize Courts	 5,000
Sundries	 2^000
Labour-	<
Industrial training for war work	$	701.000
Training of young men for aircraft manufacturing, etc	 3.000
War emergency training-Administration	 67,000
\ ocational training for discharged members of the Canadian
Armed forces	   4,357,000
National War Labour Board	 435,000
Wartime Labour Relations Board
[Stage Direction]
Administration	 96.000
Western War Labour Board-
Administration	 12,000
Wartime Bureau of technical personnel	 147,000
Personnel Management training	 3,000
National Selective Service Programme-
Labour Supply Administration	$	764,000
Mobilization Division	 815,000
Manpower statistics units	 137,000
Expenses of work done by Unemployment
t Insurance Commission	 9,290,000
National Registration-
Administration	 313,000
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11.319,000
641,000
432,000
144,359,000
248,000
19,000
[Mr. Ilsley.j

The Budget-Appendix
ESTIMATED WAR AND DEMOBILIZATION EXPENDITURES BY DEPARTMENTS AND SERVICES-FISCAL YEAR 1945-46-Con.
Coordination of shiploading and unloading operations at
Halifax	 100,000
Stabilization of longshore labour, Halifax	 362,000
Universities-Accelerating courses and loans to students	 60,000
General labour transference in war industries and agriculture...	613,000
Harvest assistance to provinces	 425,000
Japanese Division	  2,114,000
Deportation of Japanese	   7,000
Japanese Wood Projects-Revolving Fund		 37,000
Organization and operation of day nurseries, etc	 427,000
Army Labour Account-Revolving Fund	 72,000
Compulsory transfer of ex-coal mine workers back to coal
industry	 32,000
Transportation expenses of members of the armed forces for
harvest leave	 122,000
Assistance to provinces in transporting labourers to farms...	305,000
Industrial Production Cooperation Board-Administration		108,000
Industrial Selection and Release Board and Committees-
Administration	 252,000
Vocational Training Coordination Act-Payments to the Provinces under agreements-
Training and retraining former war workers	 2,000
Dominion assistance to vocational schools	 608,000
Educational film programmes	 37,000
Commission of Enquiry re crediting discharged members of the Armed Forces with trades, technical training or experience gained while in the Forces	$	65,000
Sundries	 19,000
[Stage Direction]


Mines and Resources-
Mines and Geology-
Development of tar sands	 287,000
Oil explorations	 130.000
Strategic minerals-exploration and development work	 8,000
Air surveys	 572,000
New Metallurgical Laboratory	 309,000
Investigation of radio active ores	 17,000
Explosives Division-Administration of regulations re explosives	 30,000
Metallic Minerals Division-Services to war departments ....	272,000
Post-war planning	 77,000
Sundries	 5,000
1,707,000
22,907,000
Lands, Parks and Forests-
National Parks Bureau

Alternative service work camps . ..	250,000
Dominion Forest Service
[Stage Direction]
Alternative service work camps	 64,000
Internment and prisoner of war operations	 28,000
Post-war planning	 29,000
Forest Products Laboratories	 50,000
Bureau of Northwest Territories -and Yukon Affairs-
Survey of office -accommodation-White Horse	 2,000
Land Registry
[Stage Direction]
Alaska Highway, legal services, etc	 37,000
460,000
Surveys and Engineering Branch-Administration-Post-war
planning	 1,000
Engineering -and Construction Service-
Prince Rupert-Cedarvale Highway	 8,000
Employment of persons of the Japanese race and Japanese
nationals	"	 262,000
Post-war Service	 135,000
Geodetic Service-
Post-war planning	 158,000
Expenses of Engineers-Alaska	Highway	 12,000
Legal Surveys and Slap Service-
Post-war planning	 61,000
Legal Survey of Alaska Highway	 16,000
Air Navigation maps	 49,000
Dominion Observatory-Ottawa-
Post-war planning	   14,000
The Budget-Appendix
[Stage Direction]
ESTIMATED WAR AND DEMOBILIZATION EXPENDITURES BY DEPARTMENTS AND SERVICES-FISCAL YEAR 1945-46-Con.
Hydrographic Service
[Stage Direction]
Post-war planning	 11,000
War Risk Zone Bonus	 3,000
Dominion Water and Power Bureau-
Post-war planning	 15,000
745,000
Immigration-
Canadian interests abroad	  429,000
Grants to National Advisory Committee for children from
overseas	 30,000
British evacuee children		 49,000
Medical inspection of dependents of members of the Canadian Armed Forces,	etc	 49,000
Sundries	  6,000
563,000
. 
[Stage Direction]

National Defence-Army Services-
Departmental administration	 1,360,000
Dependents' Allowance Board	 707,000
Dependents' Supplementary Grants Fund	 4,911,000
Army	   853,606,000
Army-United Kingdom Settlement War Claims	 71,250,000
Internment Operations	 1,014,000
Inspection Board-United Kingdom and Canada	 6,124.000
Imperial War Graves Commission	 54,000
Chemical Warfare Experimental Station	 1,254,000
Northwest Highway System	 188,000
National Defence-Naval Services-
Navy	 241,134,000
Royal Canadian Sea Cadets	 666,000
National Defence-Air Services-[DOT]
Departmental Administration	 96.000
Western Hemisphere Operations	 93,215,000
Training Organization-Air	 60,669,000
General Servicing Units	 14,896,000
Overseas Operations	 142,539,000
United Kingdom Settlement-War Claims	 82,815,000
Repatriation and Demobilization	 72,153,000
Surplus Equipment Units	 815,000
Restricted Servicing Units	 39,539,000
Headquarters and Commands Administration	 17,871,000
National Barbours Board-
Halifax-Operation of Fire Boat Rouille	$	71.000
Special fire protection	 44,000
Reconstruction of transit shed 21	 185,000
Platform and shelter roof at embarkation area	 16,000
Vancouver-
Dredging False Creek Channel	 2,000
[Stage Direction]


National Health and Welfare-	.
Old age pensions, including pensions to blind persons	 9,103,000
Industrial hygiene including inspection of industrial plants ....	30,000
Laboratory of hygiene	 4,000
Public health engineering	 23,000
Food and drugs	  20,000
Quarantine service	 48,000
Processing of blood for dried serum	[DOT]	 263,000
Maintenance of non-resident seamen	 23,000
Grant to Canadian Nurses Association	 160,000
Chlorination of Water System®-Pacific Coast	 47,000
Dawson Creek, B.C., water supply	 11,000
Treatment Canadian fishermen and seamen	 19,000
Hire of Boat-Halifax Harbour	 13,000
Maintenance of Health Unit, Prince Rupert, B.C	 4,000
Contribution toward Health Services, Halifax	 70,000
Women's Voluntary Services	 10,000

3,475,000>
940,468,000'
241,800,000
524,608,000
318,000

The Budget-Appendix___________
ESTIMATED WAR AND DEMOBILIZATION EXPENDITURES BY DEPARTMENTS AND SERVICES-FISCAL YEAR 1945-46-Con.
National Film Board-
Special War Library	$	57,000
Wartime Information Film Programme ....	1,084,000
Stalls production and distribution	 136,000
Revolving Fund	126'000	l 4Q3 Q0Q
Canadian Information Service (and Wartime Information
Board)	 1,229,000
National Revenue-
Government Office Economies Control	
Canadian Broadcasting Corporation Short Wave Station- Construction and maintenance	
National War Services-
Departmental administration	
War Charities-General	
War Charities-Rental of Burrard Hall, Vancouver	
Auxiliary services	
Salvage Division	
Voluntary War Relief Division	
Canadian firefighters for United Kingdom	
Canadian Prisoners of War next-of-kin Division	
Censorship Division	
Post Office-
*Canadian Postal Corps	
Purchase of tobacco labels for service purchases	
Privy Council-
Statutory Orders and Regulations Division	
Expenses of Special Commission for defence projects in the Northwest	
7,000
968,000
57.000
56.000
8,000
13,062,000
54.000
13.000
142.000
8,000
846.000
182.000
3.000
26,000
16,000
Public Works-
Chief Architect's Branch
[Stage Direction]
Armoury Accommodation for Canadian Officers' Training
Corps Units	[DOT][DOT][DOT][DOT][DOT]*[DOT]*
Repairs, alterations, operation and maintenance of buildings	-	
Rental of premises occupied for war purposes	
Furniture, etc., for war employees ....*	
Post-war construction programme-preparation of plans ... Halifax-	,
Temporary Office Building for Department of Veterans Affairs Quebec-
Temporary Office Building	
Ottawa-	. .
Temporary Annex to Records Building	
London-
Purchase and alterations, Garvey Building	
Norman Wells, N.W.T.-	_
Office and living accommodation for government departments Vancouver-
Construction of temporary office building tor Department oi
Veterans Affairs	
Sundries	
Chief Engineer's Branch-	.
Saint John Harbour (Courtenay Bay), N.B.-Dredging ... North Sydney, N.S.-Reconstruction of wharf and terminal facilities	 [DOT] *	
Post war Construction Programme-Preparation of plans
[Stage Direction]
Waterways, Alta.-
Improvements	
Dredging	[DOT]
Seymour Narrows, B.C.-Removal of Ripple Rocks l*os
1 and 2	
War Risk zone bonus	
55.000
2.263.000
1.621.000
354.000
55.000
105.000
416.000
37.000
76.000
14.000
165,000
3,000
5,164,000
.*	35,000
	46,000 232,000
	3,000 59,000
	301,000 1,000
677,000
12,480,000
975,000
14,246,000
185,000
42,000
The Budget-Appendix

[Stage Direction]
Con.
Telegraph Branch-
To provide for a 24-hour telegraph service on the
Pacific Coast	 56,000
Telephone service-Ottawa	 310,000
366,000
Contingencies		    24,000
[Stage Direction]
Reconstruction and Supply

Reconstruction Division-
Expenses of surveys	and investigation	
127,000Forest Insect Control Board	'	
102,000Canadian Arsenals	Ltd	
1,200,000
Surplus assets of British Commonwealth Air Training Plan
sold by War Assets Corporation to March 31, 1945 ...	1,643,000
Sundries	 61,000
3,133,000
Supply Division
[Stage Direction]
Departmental Administration	 6,900,000
Expansion of war industry	v	 106,000.000
Termination of contracts	 145,000,000
257,900,000
National Research Council-
Special war activities	 2,382,000
Royal Canadian Mounted Police-
Increased activities of the Force due to the war	 4,734,000
Securities control	 42,000
Secretary of State-
Citizenship Branch 	 26,000
Sundries	 8,000
Trade and Commerce-
*Canadian Shipping Board	 96,000
Export Permit Branch	 168,000
Shipping Priorities Committee	 43,000
Steamship Stabilization Fund ....'	 347,000
Canadian Export Board-Administration	 154,000
Canada's contribution to UNRRA	 104,830,000
To reimburse Canadian Wheat Board for expenditure incurred
re allocation of railway cars and deliveries of grain .... 963,000
Transport-
Departmental administration	
Transport Controller's Office	
Director of Merchant Seamen, including administration, manning pools, nautical schools and welfare facilities	
Air Service-
Special radio interception and monitoring services-
Radio service	
Meteorological service	
Civil Aviation-
Operation and maintenance of airports	
Airways and airports traffic control	
Airways and airports-Construction and improvements..
Northeast (Crimson) Staging Route	
Northwest Staging Route	
Mackenzie River Route	
R.C.A.F. airfields transferred to Department of
Transport (maintenance)	
Canadian Government Trans-Atlantic Air Service	
Monoton to Newfoundland Airline	
Saskatoon Airport-reconstruction and enlargement . .. Dorval and North Bay airports-Construction of additional hangar space, etc	
[Mr. IlsleyJ
34,000
229,000
3,542,000
2,111.000
1.959.000
386.000
512.000
213.000
248.000
1.096.000
676.000
151.000
1.955.000 30.000
122.000
105,000
9,564,000
6,231,000
263.415.000 4,776,000
34,000
106.601.000

The Budget-Appendix
ESTIMATED WAR AND DEMOBILIZATION EXPENDITURES BY DEPARTMENTS AND SERVICES-FISCAL YEAR 1945-46-CoK.
Marine Service-
Aids to navigation	 47,000
Marine Service Steamers	 160,000
War risk zone bonus	     96,000
Nautical services	 63,000
Compensation to crews of Canadian vessels for personal effects	25,000
391,000
Railway Service-
Degaussing equipment for Canadian vessels	 236,000
Additional harbour and transportation facilities at Halifax	297,000
Contribution re freight rates on ore from Steep Rock
Iron Mines	 275,000
808,000
Miscellaneous-
Joint United States-Canada	defence-Acquisition	of
Properties	 24,000
[Stage Direction]


Veterans Affairs-
Treatment, Armed Forces	$	26,298,000
Treatment, Royal Canadian Mounted Police	 85,000
Pensions, Armed Forces	 22,213,000
Civil Defence	 106,000
Investigation, Dependents' Allowance Board	 37,000
Post-discharge re-establishment-Rehabilitation	benefits	 32,131,000
War service gratuities and re-establishment credits	 239,592,000
Detention allowances-Canadian seamen	 32,000
War Veterans' Allowance Board-Pensions under the dual service pension order, etc	 155,000
Gratuities-Canadian Firefighters	 162,000
Gratuities-Auxiliary Services	 125,000
Advertising campaign re available housing	 62,000
Contributions for construction of additions to Charlottetown
Hospital and Prince Edward Island Hospital	 15,000
Contribution toward additional accommodation at Kingston
General Hospital	 84,000
Contribution to Port Arthur General towards construction of
a wing	 50,000
Grant to Saskatchewan Anti-Tuberculosis League for extension to Fort Qu'Appelle Sanatorium	 85,000
Provision of additional accommodation in Departmental Hospitals-
Halifax, Camp Hill Hospital	$	280,000
St. Anne de Bellevue, St. Anne's Hospital....	299,000
Sunnybrook Park Veterans' Memorial
Dawson Creek, B.C., purchase of former
Amherstburg, Ont., purchase of land and buildings for establishment of Veterans
[Stage Direction]
6,124,000
14,592,000
The Budget-Appendix
[Stage Direction]
ESTIMATED WAR AND DEMOBILIZATION EXPENDITURES BY DEPARTMENTS AND SERVICES-FISCAL YEAR 1945-46-Con.
Provision of Health and Occupational Centres-
Saint John 	$ Saint Anne de Bellevue 	
Gloucester Township (Ottawa) 	
Toronto 	
London 	
Winnipeg 	
Burnaby 	
Sundries 	78.000 62.000 235.000 165.000 375.000 4,000 88,000	1,007,000 52,000 	$	328.415,000Total Direct War and Demobilization Expenditures, 1945-46	$	3,558,454,000
Mutual Aid
24.	Under the War Appropriation (United Nations Mutual Aid) Acts, and the War Appropriation Acts, 1945, $771,920,000 was expended for mutual aid in the fiscal year ended March 31, 1946, apart from sums expended on behalf of UNRRA which are listed elsewhere.
The following tables give the distribution by countries and by the type of aid provided. The distribution indicated is subject to revision when complete reports are received of finished goods not shipped at September 1, 1945, the date mutual aid shipments ceased. These supplies were later transferred to War Assets Corporation.
Distribution of Mutual Aid Expenditures by
Countries
United Kingdom (including ships
later recovered)	$ 662,586,000
Union of Soviet Socialist Republics 44,069,000
Australia	 15,651.000
China	 6,852,000
France	 7,545,000
New Zealand	 7,382,000
West Indies	 761,000
Greece	 12,000
744,858,000
India-Deduct:	sales tax recovered-charged in previous year ..	1,112,000
743,746,000
Costs not allocated to countries (administration, surplus supplies on hand at end of hostilities, etc.) ..	28,174,000
771,920,000

[Stage Direction]
Munitions and military supplies, including ships-
Aircraft and parts	$	91,124.000
Automotive equipment and mechanical transport	 74,949,000
Tanks and other fighting equipment	 15,591,000
Chemicals and explosives	 4,347,000
Guns and small arms	 55,915,000
Shells and ammunition	 81,918,000
Merchant vessels-construction	 119,580,000
repairs and servicing	 5,892,000
Naval vessels and equipment	 62,916,000
Cloths, clothing and fabrics	 6,580,000
Radio, electrical and telephone equipment	 15,342,000
Lumber and heavy materials _	 3,464,000
Machine tools and heavy equipment	 3,647,000
Small tools, stores and miscellaneous	 2,297,000
Aluminum	 562,000
Other base metals	   1,845,000
Locomotives and railway rolling stock	 5,886,000
Freight	 13,357,000
Foodstuffs and farm products-
Bacon	$ 23,790,000
Canned	pork	 95,000
Offals	 207,000
Casings		 180,000
Beef	 849,000
Other meats	 7,000
Lard	 5,000
Tallow		 60,000
Cheese	 11,489,000
Milk	 1,487,000
Eggs	 6,512,000
Dehydrated vegetables	 451,000
[Mr. Ilsley.l
565,212,000

The Budget-Appendix
DISTRIBUTION OF MUTUAL AID BY TYPE OF AID-Con.
Dried beans	 20,000
Garden seeds	 22,000
Forage crop seeds	 662,000
Seed potatoes	 219,000
Canned salmon	 3,648,000
Canned herring	 55,000
Frozen fish	 1,395,000
Other fish and products	 589,000
meat	 90,896,000
Flour	 21,636,000
Oats	 2,071,000
Oatmeal	 452,000
Rolled oats	 1,056,000
Linseed oil	 18,000
Miscellaneous	 96,000
[Stage Direction]
General supplies-
Asbestos	 353,000
Paper	 3,708,000
Farm machinery	 2,899,000
Boots, clothing and fabrics	 302,000
Fertilizers and chemicals	 519,000
Tires and tire cord fabric	 260,000
Blasting caps	 156,000
Ocean freight	 449,000
Miscellaneous	 1,155,000
[Stage Direction]
 9,801,000
Air Training Services unded B.CA.T.P	 766,000
743,746,000
Surplus aircraft transferred to R.C.A.F	 27,308,000
Declared surplus to War Assets Corporation	 763,000
General costs not allocated to countries	 49,000
Administration	 54,000
[Stage Direction]
 28,174,000
[Stage Direction]
Special Expenditures
25.	Special expenditures are estimated at $17,-
358,000	for the fiscal year ended March 31, 1946, an increase of $9,852,000 over 1944-45. The increase is mainly accounted for by the advance of $12,052,000 to meet the deficit in the Prairie Farm Emergency Fund. The amount required to meet the deficit in the preceding year was only $1,295,000.

[Stage Direction]
26.	The classification of expenditures entitled government owned enterprises comprises the losses of and non-active advances to government owned enterprises which had been established before the war and are operated as separate corporations. As the Canadian National Railways has shown substantial annual surpluses since 1940, expenditure under this heading since the fiscal year 1940-41 has been of minor importance, the total for 194546 being $1,334,000.
63260-187J
Canadian National Railways
27.	The operating revenues of the Canadian National Railways for the calendar year 1945 totalled $433,773,000, a decrease of 1-7 per cent from those of 1944. Operating expenses of the railway amounted to $355,294,000, or 2 per cent less than in 1944.
The net operating revenue of the railway was $78,479,000 and after deducting $10,601,000 for taxes, equipment and joint facility rentals, there remained a net railway operating income of $67,878,000. Other income, less deductions, totalled $3,206,000, resulting in $71,084,000 being available for interest. After payment of $26,-
022,000	in interest on debt held by the public and $20,306,000 in interest to the government in respect of temporary loans for capital and refunding purposes, there was a net cash surplus of $24,756,000. This cash surplus was paid to the government in redemption of temporary loans for refunding, as shown in paragraph 36.
The Budget-Appendix
[Stage Direction]
The operating deficit of the Prince Edward Island car ferry and terminals for 1945 was $688,000 compared with $773,000 in the previous year.
Canadian National Steamships
28.	The Canadian National (West Indies) Steamships, Limited, in the calendar year 1945 had an operating surplus of $1,563,000 and earnings from the vessel replacement fund totalled $217,000. From this total income of $1,780,000 there was paid $521,000 for bond interest and exchange and $143,000 for interest on government advances, leaving an income surplus of $1,116,000. This income surplus was utilized as follows: $632,000 was paid to the government in final discharge of all capital and working capital advances; $217,000 was retained in the vessel replacement fund; and $267,000 was set aside as additional depreciation in view of the decision to dispose of certain of the older vessels in the immediate future.
National Harbours Board
29.	The operating income of the National Harbours board for the calendar year 1945, after payment of interest to the public but before depreciation, reserve for replacements and interest on government advances was
55,596,000	compared with $5,581,000 in the previous year. Interest paid to the government in the fiscal year totalled $3,950,000.
Financial assistance provided by the government to the National Harbours board and charged to expenditure under the category of government owned enterprises totalled $646,000, divided as follows: $86,000 for the operating deficit of Churchill harbour; $558,000 for nonactive advances to meet the deficit of the Jacques Cartier bridge at Montreal; $1,000 for capital expenditures at Halifax harbour; and $1,000 for capital expenditures at Three Rivers harbour. Details of expenditures charged to the war appropriation are given under "War Expenditures."
The elevators at Port Colborne and Prescott operated at a profit during the year and $233,000 was paid to the government.

[Stage Direction]
30.	Total expenditures in this final category are estimated .at $47,713,000 compared with $47,762,000 in 1944-45.

The sum of $25,000,000 has again been added to the debt of Canada and credited to the reserve to meet possible losses on the ultimate realization of active assets, bringing the total amount of the reserve to $150,000,000. The annual write-off of soldier and general land settlement loans and Canadian Farm Loan board capital stock, amounting in all, to but $37,000 for the fiscal year 1945-46, resulted in a similar increase in the dominion's net debt, as the write-off is from active assets. The yearly established loss of $45,000 on seed grain and relief account administered by the Department of Mines and Resources does not increase the net debt as the write-off is from an amount already set aside in the non-active accounts to provide for revaluations and losses.
The dominion's equity in the Canadian National Railways as reflected in the Canadian National Railways securities trust stock increased during the year by the amount of the surplus earnings of the system for 1945 of $24,756,000 less line abandonments of $1,167,000 and retirement of rolling stock of $958,000 resulting in a net increase of $22,631,000. This amount is shown as the final item under other charges and as it is also credited to the consolidated fund on the revenue side of the dominion's books, the net debt of Canada is not affected by these transactions.

[Stage Direction]
31.	The estimated grand total of expenditure for the fiscal year 1945-46 under the various categories enumerated, namely ordinary expenditures, capital expenditures, war expenditures, special expenditures, losses of and non-active advances to government owned enterprises, and other charges, was $4,691,307,-
000.
32.	The following table shows the percentage distribution of estimated revenues and expenditures for a number of important items. Receipts from various taxes and other revenue sources, after deducting the $72,500,000 of income and excess profits taxes estimated as refundable after the war, are shown as percentages both of total revenues and of total expenditures. Similarly, several of the main items of expenditure or groups of such items are shown as percentages both of total expenditures and of total revenues. The purpose of this table is to enable broad conclusions to be drawn as to the relative burdens imposed on the public treasury by the war and the main services or obligations of government.

The Budget-Appendix
Percentage Distribution" of Estimated Revenue and Expenditure, 1945-46
-	Amount in thousands of dollars	Percentage of Total Revenue	Percentage to Total Expenditure$	%	%Ordinary Revenue-	128,877	4-36	2-75186,726 455,712 41,198 932,730	6-32	3-9815-42	9-711-39	0-8831-56	19-88426,696	14-44	9-0921,448 8,972	0-72	0-460-30	0-19
2,202,359 160,688	74-51	46-94
		5-44	3-43
			
	2,363,047	79-95	50-37
			
	592,557	20-05	12-63
			
	2,955,604	100-00	63-00
			
-	Amount in thousands of dollars	Percentage of Total Expenditure	Percentage to Total RevenueOrdinary Expenditure-	$ 408,960 - 28,479 112,499 172,632 33.715 18.716 10,318 11,401 22,631 57,730 16,263	% 8-72	% 13-840-60	0-96Subsidies and payments to provinces under taxation agree-	2-40	3-813-68	5-840-72	114Unemployment Insurance Act, administration and Govern-	0-40	0-63Agriculture	0-22	0-350-24	0-39National Revenue	0-48	0-771-23	1-95Public Works	0-35	0-55T ransport	18,215 72,839	0-39	0-621-55	2-46All other	77,447	1-65	2-621,061,845	22-63	35-93
4,603	0-10	0-16
			
War and Demobilization Expenditure-	940,408 241,800 524,608	20-05	31-82
		5-15	8-18
		11-18	17-75
Reconstruction and Supplv	263,415	5-62	8-91328,415 142,852	7-00	11-113-05	4-83771,920 344,976	16-45	26-12 11-677-35	
3,558,454	75-85	120-39
			
	17,358 1,334 47,713	0-37	0-59
		0-03	0-05
		1-02	1-61
			
	4,691,307	100-00	158-73
			
The Budget-Appendix

[Stage Direction]
33.	As total revenues for the fiscal year ended Match 31, 1946, were $2,955,604,000 and expenditures aggregated $4,691,307,000, the over-all deficit or increase in net debt for the year was $1,735,703,000.

[Stage Direction]
34.	In addition to the expenditures already detailed, the government makes disbursements for the acquisition of investments which are treated as "active" and are deducted from total gross liabilities in arriving at the figure of net debt. The net increase in loans, advances and investments for 1945-46 was $666,055,000 compared with $457,458,000 in 1944-45. Details of these increases together with those for the four previous fiscal years will be found in the table on page 39.

[Stage Direction]
35.	The net increase in this category in the fiscal year ended March 31, 1946, was $43,163,797, and relates to transactions with the Canadian National Railways, and the Canadian National (West Indies) Steamships, Limited.
36.	In the fiscal year the government made net payments to the Canadian National Railways in the amount of $43,613,797 classified as follows:
Advances-*
Under Canadian National Railways Refunding Act, 1944 for retirement of called
or matured issues	$
Under Canadian National Railways Financing and Guarantee Act, 1940-Purchase of Grand Trunk Railway Company of Canada 4 per cent perpetual consolidated
debenture stock	
Under Canadian National Railways Financing and Guarantee Acts, 1941 and 1942
-Purchase of securities from Canadian holders	
Under the War Appropriation (United Kingdom Financing) Act, 1942-Purchase of securities from government of the United Kingdom	
65,500,000
79,645
20,401
231,447
Total advances by way of loan	$ 65.831,493
Equipment purchased by government and leased to railway under hire-purchase agreement:
1945 Agreement	 11,399,341
Total Loans and Equipment Purchased	$ 77,230,834
Repayments-	[DOT]
Application of 1945 net income surplus to advances under Refunding Act, 1938 ..$ 24,756.130 Surplus available from depreciation reserves and debt discount amortization after providing for capital expenditures during 1945-Applied to advances under
the Refunding Act, 1938	 2,545,411
Release of trust funds held re Canadian Northern Ontario Railway 3J per cent
debenture stock-Applied to advances under the Refunding Act, 1938 ... 958,113
Financing and Guarantee Act, 1941-Purchase of securities	 35,213
Total repayment of loans	$ 28,294,867
Repayments of Instalments under Hire-Purchase Agreements:
1936 Agreement	$	517,1731940	Agreement	
991,9681941	Agreement	
1,382,6341943	Agreement	
1,561,6671944	Agreement	
868,728Total Equipment Repayments	$	5,322,170Total Repayments of Loans and Equipment Repayments	$ 33,617,037Net Total Payments on aeount of Loans and for Equipment Purchased	$ 43,613,79737.	During the fiscal year the Canadian National (West Indies) Steamships Limited repaid from its surplus an amount of $450,000 advanced to it in 1937-38 for working capital purposes.

[Stage Direction]
38.	During the fiscal year $700,000,000 was advanced to the foreign exchange control board to enable the board to finance the purchase of gold and foreign exchange.

[Stage Direction]
39.	The net change in advances to the National Harbours board during the year was a reduction of $66,000. Advances of $22,000 were made for capital purposes at the port of Montreal, while a capital refund of $88,000 was received from Vancouver.
40.	The net increase in the fiscal year in advances for soldier and general land settlement aggregated $18,677,000. This increase was occa-

The Budget-A-ppendix
sioned by net advances of $24,012,000 under the Veterans' Land Act, less net repayments by settlers and $36,000 written off and charged to Consolidated Deficit Account.
41.	Net advances to sundry crown companies decreased during the fiscal year by $8,486,000. Repayments of $6,500,000 by the Canadian Wool board and $5,946,000 by various companies operating under the Department of Reconstruction and Supply were partially offset by advances of $2,000,000 to the Export Credits Insurance Corporation for capital surplus and $1,960,000 to the War Assets Corporation.

[Stage Direction]
42.	Net advances under this heading increased by $91,886,000 during the fiscal year. The Canadian dollar obligation of the government of the United Kingdom under the authority of the War Appropriation (United Kingdom Financing) Act, 1942, was reduced by $63,946,000, leaving a balance outstanding at the fiscal year end of $538,564,000. The government of the Union of Soviet Socialist Republics repaid $2,500,000 of the $10,000,000 loan made for the purchase of wheat. Advances made to the government of the United Kingdom under section 3 of the War Appropriation Act for the purchase of food and other essential supplies decreased during the year by $9,841,000.
43.	Advances made to foreign governments and their agencies pursuant to agreements made under the Export Credits Insurance Act totalled $67,412,000, as follows: Belgium, $25,000.000; Czechoslovakia, $3,192,000; Netherlands, $25,150,000; Netherlands Indies, $1,800,000; Norway, $9,495,000. and Union of Soviet Socialist Republics, $2,775,000.
44.	Other large advances made under Section 3 of The War Appropriation Acts and outstanding at the end of the year were a.- follows: Belgium, $2,159,000; France, $88,346,000; Netherlands, $12,442,000; Union of Soviet Socialist Republics, $8,819,000; and the Luiited Kingdom, $32,123,000.
45.	Under the British Commonwealth Air Training Plan No. 1, which terminated on June 30, 1942, there was established during the fiscal year 1943-44 a net liability of the United Kingdom to Canada of $200,000,000. This amount has since been maintained as a book debt owing by the United Kingdom. Under Plan No. 2, in effect from July 1, 1942, to March 31, 1945, the net accumulated amount owing to the government of Canada was shown as $249,504,000 as at March 31, 1945. After eliminating expenditures properly chargeable to other appropriations and making allowance for various adjustments, in accordance with the terms of
the Agreement, some necessarily on an estimated basis, the net liability of the United Kingdom was finally agreed to be $225,000,000.
The Financial Agreement between the government of Canada and the government of the United Kingdom, dated March 6, 1946, provides that the combined total obligations under the two plans, namely, $425,000,000, will be cancelled. The article of the agreement providing for this cancellation, however, and the article in the United Kingdom Financial Agreement Act, 1946, to implement it have not yet come into effect, pending action by the United States Congress on the Anglo-American Financial Agreement. If and when that agreement is approved by Congress, immediate action will be taken to implement this provision of the Canadian-United Kingdom Agreement. This will result in the cancellation of this item in Loans and Advances, and a corresponding increase in War Expenditures for the year 1945-46. Investments-
46. Under the provisions of the Central Mortgage and Housing Corporation Act, $25,000,000 was paid to the corporation for capital purposes. The corporation in turn paid the government $14,721,000, representing outstanding balances of loans made under the Dominion and National Housing Acts (shown under Loans and Advances-Miscellaneous). The corporation also paid $250,000, representing the capital stock of the Central Mortgage Bank.
47.	The government's investment in the Canadian Farm Loan board decreased during the year by $2,401,000. The board purchased out of surplus funds $4,500,000 of its 3i per cent bonds due January 2, 1960, and approximately $1,000 of the board's capital stock was written off to Consolidated Deficit Account. On the other hand, the dominion purchased from the board $2,100,000 of 3 per cent bonds due January 2, 1970. At the end of the fiscal year the government's investment in the Canadian Farm Loan board totalled $21,623,000.
48.	During the fiscal year a further $2,000,000 of the Export Credits Insurance Corporation's capital stock was purchased by the dominion.
49.	Miscellaneous investments decreased by $183,544,000. The main item in this category is the Securities Investment Account, CQn-sisting chiefly of the cost of acquisition of dominion government direct securities, which decreased by $184,382,000 during the year. Other miscellaneous investments increased by $838,000.
50.	The following table gives the details of the annual changes in loans, advances and investments in the fiscal year ended March 31, 1946, and the four previous fiscal years.
The Budget-Appendix

[Stage Direction]
(Thousands of Dollars)
Fiscal Years Ended March 31
1942	1943	1944	1945	Estimated 1946Loans and Advances Railway and Steamship Companies-	251,240 Cr. 800	142,539	Cr. 3,907	83,608	43,613Canadian National Steamships- Canadian Government Merchant Marine Ltd	Canadian National (West Indies) Steamships, Ltd	Cr. 450Canadian Pacific Railway Company Net Total, Railway and Steamship	Cr. 2,085	Cr. 12,814	
248,355	129,725	Cr. 3,907	83,608	43,163
Foreign Exchange Control Board... Sundry Government Agencies- Canadian Broadcasting Corporation.					
	400,000	Cr. 325,000	185,000	265,000	700,000
	Cr. 283 Cr. 980 Cr. 1,791 15,397	Cr. 503 Cr. 267 Cr. 1,692 45,140			
			Cr. 127 Cr. 2,090 03,317 57,007 Cr. 11	8 3,948 Cr. 16,774 Cr. 10,909 38	Cr. 66 18,677 Cr. 8,486
					
					
Sundry Crown Plants, privately man-					
	8	4			Cr. 40
Net Total, Sundry Government					
	12,351	42,682	118,096	Cr. 23,689	10,085
Provincial and Municipal Governments.. United Kingdom and Other Governments- United Kingdom, loan under The War Appropriation (U.K. Financ-					
Cr. 629	Cr. 899	Cr. 437	15,599	Cr. 4,351700,000 917 56,360	Cr. 42,392 9,083 5,403 200,000 13,244 Cr. 11,884 16,766	Cr. 55,098	Cr. 63,946 Cr o sonUnion of Soviet Socialist Republics-	United Kingdom, Australia and New Zealand-Air training accounts	
United Kingdom-British Commonwealth Air Training Plan-Settle-	72,199	81,586	Cr. 249,504 225,000 Cr. 9,841United Kingdom, food advance	6,755 83,042 661	10,613 Cr. 71,158 Cr. 4,215	War Supplies, Ltd	Other (U.K. and Other Govern-	7,405	192,677Net Total, U.K. and Other Govern-	79,604	847,735	190,220	Cr. 38,272	91,886Miscellaneous- Dominion and National IIousingActs Sundry munitions contractors, etc. (Department of Reconstruction and Supply)	2,644 9,260 Cr. 651	239 3,640 Cr. 329	Cr. 532 Cr. 3,964 Cr. 61	Cr. 1,240 7,975 Cr. 74	Cr. 14,72 Cr. 738 Cr. 74Sundry Loans and Advances	
Net Total, Miscellaneous	11,253	3,550	Cr. 4,557	6,661	Cr. 15,533Net Total, All Loans and Advances.	750,934	697,793	484,415	308,907	825,250
[Stage Direction]
The Budget-Appendix
ANNUAL CHANGES IN ACTIVE LOANS AND ADVANCES AND INVESTMENTS FOB THE LAST FIVE FISCAL YEARS-Con.
(Thousands of Dollars)
-	Fiscal Years Ended March 31				
	1942	1943	1944	1945	Estimated 1946
Investments Central Mortgage and Housing Corpora-					25,000 Cr. 2,401 Cr. 250 2,000 Cr. 183,544
Canadian Farm Loan Board		Cr. 985	Cr. 2,507	Cr. 5,005	Cr. 5,001	
Export Credits Insurance Corporation				500 153,052	
Other Investments	
Net Total, Investments	
Net Total of changes in Loans and Advances and Investments	6,530	Cr. 7,645	155,931	5,545	Cr. 10,152	150,926	148,551	Cr. 159,195756,479	687,641	635,341	457,458	666,055

[Stage Direction]
51.	In the fiscal year ended March 31, 1946, the dominion issued securities in the domestic market in an estimated amount of $4,565,703,898. This amount includes the net increase of $70,000,000 in treasury bills outstanding, but does not include the amount of the recurring issues of treasury bills and deposit certificates issued to refund similar securities maturing during the year. In the fiscal year $1,813,748,885 of dominion obligations matured or were called for redemption, leaving $2,751,955,013, less cost of flotations, available for government expenditures. During the year, no issues were sold to the chartered banks except renewals of deposit certificates and treasury bills. Since March 5, 1946 deposit certificates have been issued bearing an interest rate of I of 1 per cent as compared with the former rate of % of 1 per cent.
52.	The following table gives the details of issues sold during the year, classified as to original issue by sales to the Bank of Canada and the general public (excluding the $33,293,471 4 per cent school lands debentures held by the prairie provinces which were renewed for one year).

[Stage Direction]
-	Issue Date	Maturity Date	Interest Rate	Price to Government	Yield at Price to Government	Total Amount Issued	Renewals or Conversions included in Amount Issued	Amount Issued for cash%	$	%	$	$	tTreasury Bills (net increase)	70,000,000	70,000,000Sold to Bank of Canada	One Year Notes	April 15, 1945	April 15, 1946..	i	100 00	1-00	250,000,000	250,000,000	Six Months Notes	April 16, 1945	Sept. 1, 1945..	i	100 00	0-75	102,000,000	102,000,000	Six Months Notes	Sept. 1, 1945	Mar. 1, 1946. .	i	100 00	0-75	256,000,000	256,000,000	Treasury Certificates	Mar. 1, 1946	Sept. 1, 1946..	i	100 00	0-625	256,000,000	256,000,000	Sold to General Public	864,000,000	864,000,000	Eighth Victory Loan	May 1, 1945	Nov. 1, 1949..	If	99 61	1 -SI	Eighth Victory Loan	May 1, 1945	Oct. 1, 1963..	3	99 35	3 [DOT] 05	1,295,819,350Ninth Victory Loan	Nov. 1, 1945	Nov. 1, 1950	12	fi)90 66	fill .89	Ninth Victory Loan	Nov. 1, 1945	Sept. L 1966..	3	(i)99 40	(1)3-04	War Savings Certificates and Stamps (net)	3(*)	ioo oo	(2)3 [DOT] 00	10 07Q 877	3,598,410,427	3,598,410,427Grand Total	3,668,410,427
(') 5,;eii,mina.ry figures, subject to revision. Amount issued includes only the actual amount received to the close of the fiscal year, certifi nt ^ lnves^°r ^ ^cld to maturity, seven and one-half years after issue date, amount issued includes interest accrued during
the year on outstanding
The Budget-Appendix

The Budget-Appendix
53.	During the fiscal year 1945-46, the Eighth and Ninth Victory Loans were sold, both being larger than any previous Canadian loan sold for cash. The Eighth Victory Loan was sold entirely for cash in the amount of $1,563,619,350, the number of subscriptions being 3,178,275. The Ninth Victory Loan was sold entirely for cash in the amount of
$2,024,711,200 (the figures for the Ninth Victory Loan include only the actual amount of cash received at the close of the fiscal year and are not final), the number of subscriptions being 2,947,636.
54.	The following table gives the details of Dominion of Canada bond redemptions during the fiscal year ended March 31, 1946:

[Stage Direction]
Maturity or Call Date	Interest Hate	Where Payable	Amount
	%		$
April 15, 1945		1		250,000,000
	3		102,000,000
July 1 1945	4*	33,293,471July 2, 1945	H	450,000,0003	250,000.000November 15, 1945(0	3*	New York	40,000,000January 15, 1946(1 2)	3	New York	55,000,000January 16, 1946(3)	3	New York	30,000.000January 16, 1946 (4 *)	3	New York	30,000,00045,000,0003	256,000,000May 1, 1955 (6)	31	121,9834	84,338July 1, 1963 (6)	3s	15,381i	260,000,0006,233,7121,813,748,885Less amounts renewed or converted (6)	897,293,471Provided from cash resources	
916,455,414(1)	Maturity date November 15, 1968, called for redemption on November 15, 1945.(2)	Maturity	date	January	15,	1967,	called	for	redemption	on	January	15,	1946.(3)	Maturity	date	January	15,	1953,	called	for	redemption	on	January	16,	1946.(4)	Maturity	date	January	15,	1958	called	for	redemption	on	January	16,	1946.(">) These issues were vested by the Treasury	of the United	Kingdom in	August, 1941. The amounts (at
par of exchange) purchased in the fiscal year 1945-46 were cancelled.
(G) Total from previous table $864,000,000 and School Lands Debenture Stock, viz. $33,293,471.
55.	The fortnightly issue of three months' treasury bills was continued during the year and the amount outstanding was increased by $70,000,000 to $450,000,000. The last issue in the fiscal year was sold at a discount of 0-371 per cent.
56.	The average rate of interest on the dominion's direct funded debt (including treasury bills and deposit certificates) outstanding at March 31, 1946 was 2-59 per cent. This figure compares with 2-51 per cent on the debt outstanding at the close of the
preceding year, the increase being accounted for by the amount of Eighth and Ninth Victory Loan bonds issued which bore a three per cent coupon.

[Stage Direction]
57.	The total cash deficiency of the government for the fiscal year ended March 31, 1946, is estimated at $2,451,600,000 compared with $2,955,000,000 for the previous fiscal year.
63260-188$
The Budget-Appendix
[Stage Direction]
It should be noted that while the budgetary deficit for 1945-46 is estimated at $1,735,703,000, the cash deficiency (that is the excess of cash requirements over receipts other than borrowing) exceeded this amount by $715,897,000. Thus borrowing from the Canadian people supplied the total cash deficiency of $2,451,600,000 although a large portion of the cash thus raised was required, not to finance expenditure but to finance the net increase in assets.
Cash requirements for this latter purpose were much heavier in 1945-46 than in the preceding fiscal year as can be seen from the fact that while the budgetary deficit for 194546 was $822,575,000 less than for 1944-45, the cash requirements decreased by $503,400,000, a much smaller amount.
58.	The following table sets out requirements for and sources of cash as estimated for the fiscal period ended March 31, 1946.
REQUIREMENTS FOR AND SOURCES OF CASK, FISCAL YEAR 1945-46 (!) (Millions of dollars)
Requirements for Cash
Non-War Expenditure-
Interest on the public debt	$	409 [DOT] 0
Payments to provinces under wartime tax agreements	 98-1
Family allowances	 172-6
Other ordinary expenditure	 352-3
Total ordinary cash expenditure	S 1,032-0
Capital expenditure	 4-6
Special expenditure	 17-4
Government owned enterprises	 1-3
Total non-war cash expenditure!1) (*)	$	1,055-3
War Expenditure-
Department of National Defence-
Air Force(4)	 524-6
Army(')	 940-5
Navy	 241-8
Department of Reconstruction and Supply	   263-4
Department of Veterans Affairs	 328 [DOT] 4
Mutual Aid, UNRRAand Military Relief	 948-8
Other Departments	 311-0
Total War Expenditure in Cash	 3,558-5
Outlays that Increased Assets or Decreased Liabilities-
Purchase price of increase in holdings of gold and U.S.
dollars (')	 31-7
Reduction in New York indebtedness (')	 162-6
Purchase price of increase in sterling balances	 28-4
Reduction in London indebtedness	 0-3
Cost of loan flotations, portion to be amortized	 20-7
Advances to F.E.C.B	 700-0
Advances to C.N.R	   43.6
Advances to United Kingdom and other governments (7)...	91-9
Securities investment account	 -184-4
Other outlays	 16-9
Total outlays that increased assets or decreased liabilities	 911-7
Grand total requirements for cash(*)	$	5,525-5*	*	ani non-cash transactions are sometimes difficult to define; for example, interest payments to certain
trust and other accounts are left on deposit with the Receiver General. Those here treated as non-cash are limited to adjust-men® " the valuation of assets and liabilities, and the amortization of loan flotation charges.
' Excluding the amortization of bond discounts and commissions, $14*9 million, and premium, discount and exchange, *14-9 million.
(*) Excluding the write-down of assets $25-1 million and adjustments of the valuation of C.N.R. Securities Trust Stock due to net income surplus less capital losses, $22-6 million.
(4) Includes 182-8 million re U.K. Settlement-War Claims-previously classified as Active Assets.
(*) Includes $71-3 million re U.K. Settlement-War Claims-previously classified as Active Assets.
v") Computed by adding the 10% exchange premium to the change during the year.
(*) Excludes $154-1 million U.K. Settlement-War Claims-transferred to war expenditure. °
[Stage Direction]
The Budget-Appendix
REQUIREMENTS FOR AND SOURCES OF CASH, FISCAL YEAR 1945-46-Con. (Millions of Dollars)
Sources of Cash
Revenue-
Ordinary Revenue-
Customs duties, excise duties and excise taxes	$	812-5Other indirect taxes	
9	0Personal income tax	
691-6Corporate income tax	
217-8Excess profits tax	
494 [DOT] 2Other direct taxes	
49-8Total tax revenue	$	2,274 [DOT] 9Post Office revenue	
68-6Return on investments	
70-9Other ordinary revenue	
21-1
2,363-0
569-4
Gross ordinary revenue	$	2,435 [DOT] 5
Less estimated refundable portion of income and excess
profits tax	 -72-5
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Capital refunds	
Special receipts and credits in cash (*)([DOT])	
Total revenue in cash Other receipts	
[Stage Direction]
Borrowing in Canada-
New Issues of Funded Debt-
Treasury Bills-net increase	$	70-0
General public	 3,598-4
Total new issues	$
Less maturities paid in cash	
Add estimated refundable portion of personal income and excess profits tax-net	
Net increase in funded debt payable in Canada	j
Net increase in floating debt payable in Canada	'.
Cash-
Less increase in cash balances held in domestic currency	
Net cash deficiency	
Grand total sources of cash (9)	
3,668-4
71-4
2,978-6
-536-6
2,932-8
2,451-6
5,525-5
, c(8) ,E*olu.des	r?«fdin* increased value of C.N.R. Securities Trust Stock, adjustment re Crown plants and write-off
of beed urain and Relief Loans.
[DOT] i (? The over-a11 requirements and sources are considerably inflated because the greater proportion of special receipts included as a source of cash consists of credits to certain departments where expenditures initially charged to them and requiring cash at that time, later became charges to other departments. These credits do not constitute new sources of cash nor do the corresponding debits constitute new requirements for cash; but information is not presently available to onset them in this statement.

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59.	It is estimated that the gross unmatured funded debt (including deposit certificates, treasury bills and the estimated refundable portion of personal income tax and excess profits tax) of the dominion outstanding at the close of the fiscal year 1945-46 will amount to $16,807,178,000. Other liabilities consisting chiefly of deposit and trust accounts, insurance, pension and guaranty accounts are estimated at $2,198,478,000. The gross liabilities of the dominion on March 31, 1946, therefore, are estimated at $19,005,656,000. On the other side of the balance sheet there are active assets estimated at a total of
$5,911,591,000 consisting of cash loans and advances and investments less a reserve of $150,000,000 for possible losses on their ultimate realization. If the amount of net active assets is deducted from the amount of gross liabilities, there results a figure of $13,034,065,000 representing the estimated net debt of the dominion as at March 31, 1946. The increase in the net debt for the year is estimated at $1,735,703,000, or the amount of the over-all estimated deficit for the fiscal year 1945-46.
BALANCE sheet
60.	The following is a condensed estimated balance sheet of the dominion, together with details of non-active assets:
The Budget-Appendix
[Stage Direction]
BALANCE SHEET-MARCH 31, 1946 (estimated)
(Thousands of Dollars)
$	22,604
169 59,110 94,700 5,207
[Stage Direction]
$	181,790
35,537
1,689
17,093
1,167,973
140,027
[Stage Direction]
 1,362,322
Insurance, Pension and Guaranty Accounts-
Government Annuities	 287,495
Insurance Fund-Civil Service	 19,014
Insurance Fund-Returned Soldiers	 23,355
Unemployment Insurance Fund (cash portion only)	 8,588
War Damage Insurance Accounts	 12,196
Other Insurance and Guaranty Accounts	 10,065
[Stage Direction]
 360,713
Civil Service Superannuation Account	 85,444
Civil Service Retirement Fund	 10,307
Other Pension Funds	 1,532
[Stage Direction]
 97,283
Liabilities-
Floating Debt-
Matured Funded Debt Outstanding	
Stock and other obligations payable on demand
Interest due and outstanding	
Outstanding cheques and warrants	
Post Office Account	
Deposit and Trust Accounts-
Post Office Savings Bank	
Bank Circulation Redemption Fund.
Indian Trust Funds	
Minister of Finance Special Accounts Miscellaneous	
Deferred Credits	 25,349
Sundry Suspense Accounts	 115,604
Province Debt Accounts	   11,919
Reserves for contingent liabilities, crown companies	 43,498
Funded Debt Unmatured-
Payable in Canada-
Bonds, Deposit Certificates and Treasury Bills	$	16,101,597
Refundable portion of personal income tax and excess profits tax
(estimated)	 515,737
Payable in New York	 178,000
Payable in London	 11,844
[Stage Direction]
 16,807,178
$	19,005,656
Assets-
Cash-
In Current Deposits In Special Deposits.
794,312
2,673
Departmental Working Capital Advances	
Loans and Advances-
To Canadian National Railways	 699,528
To Foreign Exchange Control Board	 1,550,000
To Sundry Government Agencies-
Soldier Settlement of Canada	$	52,732
National Harbours Board	 84,965
Crown Companies	 108,460
Crown Plants Privately Managed	 46,098
[Stage Direction]
	292,255
To Provincial and Municipal Governments-
Unemployment Relief Loans	 156,080
Province of Alberta-Subsidy overpayment	 350
Province of Saskatchewan-Seed Grain Loans
Guarantees, 1938	 11,949
Municipal Improvements Assistance Act	 5,312
796,985
9,260
{Mr. Ilsley.]

____________________________________________________________The Budget-Appendix
BALANCE SHEET-MARCH 31, 1946-Con.
(estimated)
(Thousands of Dollars)
Assets-Concluded
Loans and Advances-
To United Kingdom and Other Governments-
United Kingdom-War Appropriation (United Kingdom Financing) Act	$	538,564
Government of Greece	 6,525
Government of Roumania	 24,329
Government of the U.S.S.R	 7,500
United Kingdom-British Commonwealth Air
Training Plan-Settlement	 425,000
Other (U.K. and Other Governments)	 241,820
[Stage Direction]
$	1,243,738
Miscellaneous	 19,533
[Stage Direction]


Investments-
Bank of Canada Capital Stock	
Central Mortgage and Housing Corporation Capital Stock....
Canadian Farm Loan Board-
Advances and Capital Stock	
Miscellaneous	
Province Debt Accounts	
Deferred Charges-Unamortized Discounts and Commissions on Loans Sundry Suspense Accounts-
Minister of Finance Special Custody Account	 1,025,000
Miscellaneous	 1,830
5,920
25,000
21,623 162,169
Less-Reserve for possible losses on ultimate realization of active assets..
Net Debt, March 31, 1946	
(B) Consolidated Deficit Account-
Balance, Consolidated Deficit Account brought forward from March
31, 1945	$	9,740,575
Excess of expenditure over revenue, less amounts charged under (A)
above, fiscal year ended March 31, 1946	 1,708,329
3,978,957
214,712
2,296
92,551
1,026,830
$	6,121,591 150,000
$	5,971,591 13,034,065
$	19,005,656

[Stage Direction]
(Thousands of Dollars)
Net Debt represented by-
(A) Expenditures for Capital Purposes and Non-Active Assets-
Public Works-
Canals	$
Railways	
Miscellaneous	
Military Property and Stores	
Territorial Accounts	
Canadian Pacific Railway (old)	
Canadian National Railways Securities Trust Stock	
Canadian National Railways Stock	
Loans Non-Active-
Canadian National Steamships	
National Harbours Board-
Chicoutimi	$	3,838
Churchill	 10
Halifax	 12,503
Montreal (Jacques Cartier Bridge)	 6,398
Quebec	 27,766
Saint John	*._____ 17,056
Three Rivers	 3,981
Soldier and General Land Settlement	
Seed Grain and Relief Advances	
Saskatchewan Seed Grain Loans Guarantee Act, 1936	
Seed Grain Loans Guarantee Act, 1937	
Miscellaneous Non-Active Accounts	
240,215
429,327
316,942
12,617
9,896
62,791
381,712
18,000
13,158
71,552
16,526
2,637
7,136
2,458
1,585,161
11,448,904 $	13,034,065
The Budget-Appendix
[Stage Direction]
61. The following table gives the details of the various obligations included in the unmatured funded debt of the dominion outstanding as at March 31, 1946, and the annual interest charges thereon:

[Stage Direction]
Date of Maturity	Rate Per Cent	Where Payable	Amount of Loan	Annual Interest Charges
			$ c.	$ c.
1946, April 15	1	Canada	250,000,000 00	2,500,000 00April 15	If	Canada	100,000,000 00	1,375,000 00May 1	U	Canada	144,253,000 00	2,524,427 50July 1	4	Canada	33,293,470 85	1,331,738 83i	Canada	256,000,000 00	1,600,000 00Nov. 1	U	Canada	197,455,000 00	3,455,462 50Dec. 15	2	Canada	193,286,000 00	3,865,720 001947, May 1	U	Canada	373,259,000 00	6,532,032 502f	London	103,084 94	2,577 1224	New York	30,000,000 00	750,000 00' Feb. 1	3i	Canada	50,000,000 00	1,625,000 002i	Canada	269,879,000 00	6,072,277 50n	Canada	239,713,000 00	4,194,977 50Nov. 1	H	Canada	344,267,000 00	6,024,672 501949, Feb. 1	3i	Canada	50,000,000 00	1,625,000 003i	Canada	33,500,000 00	1,088,750 0011	Canada	267,800,000 00	4,686,500 001950, Feb. 1	31	Canada	50,000,000 00	1,626,000 00Nov. 1	U	Canada	335,690,000 00	5,874,575 001951, Feb. 1	31	Canada	(') 50,250,000 00	1,625,000 003	Canada	(2) 649,969,592 50	19,306,027 50Nov. 15	31	Canada	60,000,000 00	1,950,000 001952, Feb. 1	31	Canada	(3) 50,500,000 00	1,625,000 00Oct. 1	3	Canada	324,945,700 00	9,748,371 00Oct. 15	4	Canada	56,191,000 00	2,247,640 001954, Mar. 1	3	Canada	(') 676,355,489 00	20,089,767 001955, May 1	31	London	4,836,418 74	157,183 613	Canada	40,000,000 00	1,200,000 003	Canada	55,000,000 00	1,650,000 0044	Canada	43,125,700 00	1,940,656 50Nov. 1	3	Canada	(6) 855,607,410 50	25,414,081 503	Canada	1,111,261,650 00	33,337,849 5044	Canada	37,523,200 00	1,688,544 003	Canada	88,200,000 00	2,646,000 001958, Sept. 1	4	London	3,260,844 50	130,433 7844	Canada	276,687,600 00	12,450,942 001959, Jan. 1	3	Canada	1,197,324,750 00	35,919,742 50Nov. 1	44	Canada	289,693,300 00	13,036,198 501960, June 1	3	Canada	1,165,300,350 00	34,959,010 50Oct. 1	4	New York	100,000,000 00	4,000,000 001961, Jan. 15	31	New York	48,000,000 00	1,560,000 001962, Feb. 1	i	3	Canada	1,315,639,200 00	39,469,176 001963, July 1	31	London	3,643,482 41	118,413 18Oct. 1	3	Canada	1,295,819,350 00	38,874,580 501966, June 1	31	Canada	54,703,000 00	1,777,847 50Sept. 1	3	Canada	1,689,021,200 00	50,670,636 00Perpetual	3	Canada	55,000,000 00	1,650,000 001946, April 12 Treasury Bills	[DOT]363	Canada	75,000,000 00	272,250 00April 26 Treasury Bills	[DOT]364	Canada	75,000,000 00	273,000 00May 10 Treasury Bills	[DOT]363	Canada	75,000,000 00	272,250 00May 31 Treasury Bills	[DOT]363	Canada	75,000,000 00	272,250 00June 14 Treasury Bills	[DOT]362	Canada	75,000,000 00	271,500 00June 28 Treasury Bills	[DOT]371	Canada	75,000,000 00	278,250 00April 2 Deposit Certificates	*75	Canada	95,000,000 00	712,500 00April 9 Deposit Certificates	[DOT]75	Canada	95,000,000 00	712,500 00April 16 Deposit Certificates	[DOT]75	Canada	95,000,000 00	712,500 00April 23 Deposit Certificates	[DOT]75	Canada	95,000,000 00	712,500 00Sept. 3 Deposit Certificates	[DOT]625	Canada	75,000,000 00	468,750 00
(') Redeemable at 1001 per cent. (J) Redeemable at 101 per cent. (J) Redeemable at 101 per cent. (J) Redeemable at 101 per cent. <*) Redeemable at 101 per cent. [Mr. Hsleyd
Amount outstanding includes $ 250,000.00 redemption bonus Amount outstanding includes $6,435,342.50 redemption bonus Amount outstanding includes $ 500,000.00 redemption bonus Amount outstanding includes $6,696,589.00 redemption bonus Amount outstanding includes $8,471,360.50 redemption bonus

The Budget

A-ppendix
UNMATURED FUNDED DEBT AND TREASURY BILLS AS AT MARCH 31, 1946, AND ANNUAL INTEREST THEREON-Concluded
Date of Maturity
Rate Where Per	Payable
Cent
Amount
of
Loan
[Stage Direction]
Annual
Interest
Charges
1946,	Sept. 10 Deposit Certificates. Sept. 17 Deposit Certificates. Sept. 24 Deposit Certificates.
1947,	June 15 Non-interest Bearing
Certificates	
1950, June 15 Non-interest Bearing
Certificates	
War Savings Certificates	
War Savings Stamps	
*625
[DOT]625
[DOT]625
Canada
Canada
Canada
Canada
Canada 3 Canada Canada
Refundable portion of personal income tax and excess profits tax (estimated)	
2 ([DOT])
Canada
Payable in Canada... Payable in New York Payable in London__
95.000.	000 00
95.000.	000 00
95.000.	000 00
5,631,472 81
387,017 94 273,760,075 80 5,304,573 50
16,291,440,933 49
593.750	00
593.750	00
593.750	00
8,212,802 27
430,949,114 29
515,736,835 92	([DOT]) 5,274,812 38
16,807,177,769 41	436,223,926 67
16,617,333,938 82	98-87%
178,000,000 00	1-06%
11,843,830 59	0-07%
16,807,177,769 41	100-00%
(*) Interest on refundable portion of personal income tax only.

[Stage Direction]
62.	Bonds and debenture stocks bearing the guarantee of the dominion and outstanding in the hands of the public, totalled $541,000,000 at March 31, 1946, a decrease of $65,665,000 from the amount outstanding at the close of the preceding fiscal year. This decrease is occasioned mainly by the redemption of two Canadian National Railway bond issues one of which in the amount of $50,500,000 was to come due December 15, 1950, but was called for prior payment on December 15, 1945, and the other, in the amount of $15,000,000, came due on January 15, 1946, and was paid off. The funds required to meet these maturities were loaned to the company by the government.
63.	There were also outstanding at the close of the fiscal year, other contingent liabilities authorized by various statutes.
64.	Pursuant to the terms of an order in council dated August 11, 1943, the Commodity Prices Stabilization Corporation, a government-owned corporation, guaranteed certain advances, obtained by any person engaged in the production of logs or lumber, from a chartered bank. The liability of the corporation is limited to twenty-five per cent of the aggregate advances made by each bank. The contingent liability of the corporation at March 31, 1946, was $1,515.
65.	Under the terms of an order in council dated April 17, 1945, the Commodity Prices Stabilization Corporation was authorized to guarantee certain advances and interest thereon obtained by any person from a chartered bank in order to purchase coal, coke or briquettes in the summer of 1945. The liability of the corporation is limited to ten per cent of the aggregate amount of advances made by each bank, but the maximum .amount of guarantee is $500,000. The contingent liability of the corporation at March 31, 1946 was $32,032.
66.	Under the terms of an order in council dated May 4, 1943, the government guaranteed bank overdrafts obtained by certain crown companies and management-fee companies doing business under the Department of Munitions and Supply. Prior to the establishment of this system of financing, funds advanced by the government to the contractors remained idle for considerable periods. The amounts of the various overdrafts are repaid monthly, so no liability is outstanding at the close of the fiscal year in connection with this guarantee. The maximum amount of guarantees authorized at March 31, 1946, was $23,590,000.
67.	Before operations under the Home Improvement Loans Guarantee Act were discontinued (October 30, 1940) 125,720 loans had
The Budget-Appendix
[Stage Direction]
been made by banks and other approved loaning institutions to home owners under the terms of this act and the total amount of such loans was $49,959,055. The dominion's contingent liability arising out of these loans is limited to 15 per cent of the aggregate of such loans made by approved lending institutions, but as the balance of these loans on March 31, 1946, was $98,667, the contingent liability of the government is limited to this amount. Up to March 31, 1946, 1,268 loss claims for an aggregate amount of $462,873 had been paid. In terms of total losses to total volume of loans, this loss ratio is only 0-93 of one per cent.
68.	Under the provisions of the Appropriation Act No. 5, 1942, the home extension plan was started. It provided for loans not exceeding in the aggregate $2,000,000 by banks under regulations similar to those of the Home Improvement Loans Guarantee Act for the purpose of financing the creation of additional self-contained housing units by alterations or additions to a building used solely or partially as a dwelling at the time application is made for the loan. To March 31, 1946, 59 loans for a total amount of $109,238 had been made. The dominion's contingent liability arising out of these loams amounted to 15 per cent of the aggregate of such loans made by the banks or $16,309. There have been no claims for loss made by the banks.
69.	Under the Dominion Housing Act, 1935, the National Housing Act, 1938, and the National Housing Act, 1944, the dominion has accepted and is accepting certain obligations arising out of its contracts with approved lending institutions which, while not expressed in the form of a guarantee, may nevertheless be regarded as contingent or indirect liabilities. On January 1, 1946, the Central Mortgage and Housing Corporation Act, 1945, was proclaimed and since that date the corporation has been acting as the agent of the Minister of Finance in connection with loans under these acts.
The manner in which losses in respect of any loan are to be shared by the dominion and the lending institution was fixed by the contract. The general principle under the Dominion Housing Act and the National Housing Act, 1938, was that the dominion bears two-thirds of the loss, if at the time the loss is sustained the principal amount of the loan repaid, less any other amount due, is equal to or less than the amount advanced by the dominion and one-third of the loss if at the time the loss is sustained the principal amount repaid, less any other amounts due, is more than the amount advanced by the dominion. In the case of small loans (that is, loans not in excess of $4,000 in the

case of single family dwellings or not in excess of $700 per habitable room in the case of multiple family dwellings), the share of the loss to be borne by the dominion is not more than 80 per cent and not less than 50 per cent of the loss. Under the National Housing Act, 4938, a new provision was added to encourage the making of small loans in such small or remote communities and in such districts or other communities as may be designated by the Minister of Finance in any contract. In respect of such loans, the dominion has agreed in contracts with certain lending institutions to pay losses sustained by any such lending institution up to certain amounts determined by the contract which are not less than 7 per cent and do not exceed 25 per cent of the total amount of such loans made in such areas by each such lending institution. Under the National Housing Act, 1944, the dominion bears the first one-quarter of the loss and agrees to pay losses sustained by any lending institution up to fifteen per centum of the total amount of loans made in any area by each such lending institution.
Loans to the number of 27,368 covering 32,612 dwelling units have been approved as at March 31, 1946, under the Dominion Housing Act, 1935, the National Housing Act, 1938, and the National Housing Act, 1944, the total amount of such loans being $113,617,150. Losses recorded and paid to March 31, 1946, amounted to $2,644.78 covering the dominion's proportion of the loss on seven loans. This amount represents total losses to that date under both the Dominion Housing Act, 1935, and Part I of the National Housing Act, 1938. These losses are offset in part by a profit of $497.74 realized by the sale of eleven properties. The net loss to March 31, 1946, is therefore only $2,147.04. There have been no losses under the National Housing Act, 1944.
70.	Under the terms of two orders in council passed under the Export Credits Insurance Act, the dominion government guaranteed the payment to certain contractors for goods sold to V. O. Machinoimport, an agency of the government of the U.S.S.R. The maximum amount authorized was $236,000. Payment having been made for these goods prior to March 31, 1946, there was no liability to the government.
71.	Under the provisions of the Farm Improvement Loans Act, 1944, the government guarantees loans made by chartered banks to farmers for authorized purposes. The amount of the guarantee is limited to 10 per cent of the aggregate principal amount of the guaranteed farm loans made by each bank. At March 31, 1946, 6,156 loans had been made by the chartered banks in the amount of $4,726,153.

The Budget-Appendix
The contingent liability of the government at that date was $472,615.
72.	Order in council dated May 22, 1945, P.C. 3636, passed pursuant to the War Measures Act, authorized the guarantee of bank loans to merchants or business men in Halifax and Yarmouth whose places of business were damaged or looted in the disturbances on May 7 and 8, 1945, in order to enable them to make
essential repairs and replacements of premises and fixtures and to purchase stock-in-trade. Sixteen loans totalling $68,000 were made under this authority, all of which had been repaid by March 31, 1946.
73.	The following is a statement of bonds, debenture stocks and other indebtedness guaranteed by the dominion outstanding on March 31, 1946:

[Stage Direction]
Date of Maturity	Issue	Interest Rate	Amount Outstanding
		%	$
July 1, 1946...	Canadian Northern	6*	2:1,752,000April 1, 1948...	New Westminster Harbour Commissioners	4J	709,000Sept. 1, 1951...	Canadian National	44	48,022,000Feb. 1, 1952....	Canadian National	3	20,000,000Aug. 1, 1952....	Saint John Harbour Commissioners	5	667,953Feb. 15, 1953....	Canadian National	3	25,000,000July 10, 1953...	Canadian Northern	3	1,162,768Feb. 1, 1954....	Canadian National	5	50,000,000Mar. 1, 1955. ...	Canadian National (West Indies) Steamships	Limited	5	9,400,000June 15, 1955	Canadian National	45	48,496,000Feb. 1, 1956....	Canadian National	44	67,368,000July 1, 1957....	Canadian National	44	64,136,000July 20, 1958...	Canadian Northern	34	5,636,508Jan. 15, 1959....	Canadian National	3	35,000,000May 4, I960....	Canadian Northern Alberta	34	551,505May 19, 1961....	Canadian Northern Ontario	34	3,610,074Jan. 1, 1962....	Grand Trunk Pacific	3	26,465,130Jan. 1, 1962...	Grand Trunk Pacific	4	7,999,074Oct. 1, 1969...	Canadian National	5	57,728,500Nov. 1, 1969...	Harbour Commissioners of Montreal	5	19,000,000Feb. 1. 1970....	Canadian National	5	17,338,000Various dates	1946-54	City of Saint John Debentures assumed by Saint	John Harbour Commissioners	Various	590,2295	1,475,4425	861,059it	4	6,012,042it	Northern Railway of Canada Debenture Stock..	4	27,458540,999,742

[Stage Direction]
Principal Amount Outstanding March 31,1946
Bank advances, re province of Manitoba savings office	$	4,968,078
Province of Manitoba treasury bill	 3,500,000
Loans made by approved lending institutions under dominion and national housing
acts	 Indeterminate
Loans made by approved lending institutions under The Home Improvement Loans
Guarantee Act, 1935	 98,667
Loans made by approved lending institutions under the Home Extension Plan		16,309
Deposits maintained by the chartered banks in the Bank of Canada	 518,135,599
Bank advances, re government war contracts-Department of Reconstruction and
Supply	 8,700
Bank overdrafts-government war contracts-Department of Reconstruction and
Supply (closed out monthly)	 [DOT]-
Bank advances, re production of logs or lumber-Commodity Prices Stabilization
Corporation	 1,515
Bank advances, re coal, coke or briquette purchases-Commodity Prices Stabilization
Corporation	 32,032
Guarantee under dominion-provincial taxation agreements of provincial receipts ' from gasoline taxes at amounts received in fiscal years ending nearest December
31,1940	 Indeterminate
Guarantee under dominion-provincial agreements of provincial liquor revenues at
amounts received during the twelve months ended June 30, 1942	 Indeterminate
Guarantees under Part	II. Export Credits Insurance Act	 Indeterminate
Loans made by chartered banks uner the Farm Improvement Loans Act, 1944	 472,615
The Budget-Appendix
[Stage Direction]
(B.) CANADIAN ECONOMIC CONDITIONS

[Stage Direction]
Calendar Years				
	1926	1928	1932	1937	1939	1943	1945
Group I.-Comprehensive Indexes (1935-39=100)							
Phj'sical volume of business	87	103	69	107	107	236	213Volume of manufacturing	89	100	66	109	105	294	249Mining	55	65	59	104	118	242	157Forestry	84	87	57	117	103	123	127Carloadings	131	148	88	106	102	139	145Electric power output	46	61	61	106	108	154	153Employment (a) 	100	112	88	114	114	184	175National income (b)	110	129	69	107	103	222	236Retail sales	(f)	(f)	92	105	105	161	187Group II.-Price Levels and Financial Factors (1926=100)	Wholesale prices	100	96	67	85	75	100	103Farm product prices	100	101	48	87	64	96	105Cost of living (c)	122	121	99	101	102	118	120Common stock prices (c)	92	147	51	117	92	84	100Bank deposits	100	115	100	120	132	199	270Active currency circulation	100	105	81	103	111	353	488Group III.-Gross Value of Production in Major Industries ($ millions)	Agriculture	1,191	1,239	487	731	900	1,524	(d)l, 702Forestrj'	556	586	267	494	466	810	(d) 944Fisheries	73	71	34	51	53	119	(d) 155Mining (including Smelting)	277	313	234	663	663	974	(d) 856Construction	424	571	267	390	373	572	(d) 458Manufacturing... .*.	3,101	3,582	1,980	3,625	3,475	8,733	(d)S, 266Group IV.-Foreign Trade and International Transactions ($ millions)	Exports (gold excluded)	1,277	1,364	498	1,012	936	2,971	3,218Net non-monetary gold exports (e)	30	40	70	145	184	142	96Total exports, including non-monetary gold	1,307	1,404	568	1,157	1,120	3,113	3,314Imports (gold excluded)	1,008	1,222	453	809	751	1,735	1,586Total trade	2,315	2,626	1,021	1,966	1,871	4,848	4,900Export balance	+299	+182	+115	+348	+369	+1,378	+1,728Net tourist receipts	53	79	65	79	68	52	(f)Net interest and dividends going abroad	201	221	262	226	249	202	(f)(a)	1926=100.(b)	Indexes from 1939 are based on a new series and are not strictly comparable with those of earlier years.
(e) 1935-39=100.
(d)	Estimated.
(e)	Adjusted for changes in stocks of earmarked gold. These figures were computed by the Bank of Canada on the basis of official trade returns.
(f)	Not available.


[Stage Direction]
-		Jan.	Feb.	Mar.	April	May	June	July	Aug.	Sept.	Oct.	Nov.'	Deo.
Group 1.-Comprehensive Indexes (a)													
(1935-39 = 100)													
Physical volume of business	.1944	247	242	248	240	242	239	232	233	231	228	228	2331945	229	217	225	232	219	220	214	213	205	195	190	1941946	195	181	191	193	Volume of manufacturing	.1944	304	305	301	291	297	292	288	292	285	286	285	2841945	274	270	271	271	256	253	249	248	244	232	211	2061946	203	198	191	190	Mining	. 1944	250	256	263	248	239	226	225	215	206	209	192	1891945	174	148	174	183	189	175	161	156	150	133	131	1141946	120	98	144	142	Forestry	.1944	114	125	125	115	119	121	113	122	116	129	125	1261945	117	127	138	119	124	125	125	125	124	133	135	1351946	138	151	147	144	Carloadings	.1944	155	158	157	145	157	153	147	143	126	125	141	1431945	152	148	149	149	154	156	151	142	119	129	138	1431946	156	147	150	144	Electric power output	.1944 1945	156 152	154 150	155 154	153 166	165 165	160 164	155 161	153 155	152 146	152 145	149 140	145 1421946	152	153	156	164	Employment (b)	.1944 1945	193 187	190 186	189 186	191 187	185 182	181 175	180 172	179 170	178 166	174 161	176 164	181 1691946	174	174	174	Retail sales (c)	.1944	140	139	163	175	178	178	155	161	179	183	191	23711*45	143	147	194	175	182	196	171	178	187	204	213	2561946	167	167	210	212	Group 11.-Price Level and Financial Factors-	(1926=100)	Wholesale prices	.1944 1945	103 103	103 103	103 103	103 103	103 103	103 103	103 104	102 103	102 103	102 103	102 103	103 1031946	104	105	106	108	Farm product prices	.1944 1945	104 104	104 105	105 105	104 105	102 105	102 106	102 108	101 106	101 104	103 106	103 106	103 1061946	107	107	107	108	
g
The Budget-Appendix


[Stage Direction]
-	Jan.	Feb.	Mar.	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.Cost of living (d)	...1944	119	119	119	119	119	119	119	119	119	119	119	1191945	119	119	119	119	119	120	120	121	120	120	120	1201946	120	120	120	121	Common stock prices (d)	...1944	82	82	82	79	80	84	88	87	85	86	86	871945	89	93	93	94	97	103	101	100	102	104	107	1131946	124	122	119	125	Bank deposits (e)	...1944	215	211	213	222	237	238	239	235	233	243	259	2601945	257	253	251	255	273	281	268	264	264	273	300	2991946	297	293	294	295	Active currency circulation (e)	...1944	391	399	411	419	413	415	427	437	445	458	457	4671945	461	467	477	482	477	479	486	495	504	512	505	5071946	493	495	502	505	Group III.-Other Significant Factors	Exports (f) ($ millions)	...1944	242	227	283	283	368	343	279	257	265	314	313	2671945	230	236	301	312	315	323	283	295	221	228	239	2351946	189	153	178	178	Imports (f) ($ millions)	...1944	126	138	151	137	159	152	148	157	160	160	142	1271945	130	112	132	133	144	146	139	128	122	134	142	1211946	140	117	140	161	Net non-monetary gold exports (g) (1 millions)	...1944	9	8	13	9	9	17	7	10	9	8	10	61945	9	8	10	7	10	5	8	9	7	8	10	61946	9	10	10	7	Construction contracts awarded ($ millions)	...1944	9	16	31	28	32	37	32	24	25	26	19	131945	12	13	20	34	38	59	51	41	42	29	45	261946	27	33	58	76	82	(a)	Indexes seasonally adjusted unless otherwise indicated.(b)	As at first of month. 1926 = 100.(c)	Unadjusted.(d)	1935-39 = 100.(e)	Based on daily average figures; index unadjusted.(f)	AH gold excluded; includes exports of foreign produce.(g)	Adjusted for changes in stocks of earmarked gold. These figures were computed by the Bank of Canada on the basis of official trade returns.
o
§
[Stage Direction]
o
12!
w
The Budget-Appendix

The Budget-Mr. Macdonnell
Mr. J. M. MACDONNELL (Muskoka-Ontario):: Mr. Speaker, in rising to move the adjournment of the debate, I shall begin by making a remark which I am sure will carry the approval of everybody in this house; I shall be brief. I should like to begin by congratulating the Minister of Finance (Mr. Ilsley) on the comprehensive statement he has made. First, we should all congratulate him upon his capacity as a long-distance reader. It is certain that this monumental document, whether for better of for worse, will be remembered for a long time. I do not know whether it is the quality of the minister or whether it is the qualities of the taxpayers; but it is a remarkable thing that, to use a vulgar phrase, when the minister takes our shirt he still manages to retain our good will. It is even worse than that, because he does not enable us to buy another one. As far as I can discover, all the king's horses and all the king's men of the wartime prices and trade board will hardly enable us to do that at the moment.
The minister takes credit, and I am not surprised that he does, because he has an estimated deficit of only $300 million. Three hundred million is a lot less than $1,700 million; there is no doubt about that. However, I think the people who are disappointed that they have not had a greater tax reduction will wish that somehow or another that deficit might have been brought down a little by one method to which I should like to refer for a few minutes, the method of economy.
I	know that economy is a dull word. We only like it for other people; we like it for our wives and our children, but we do not like it for ourselves, and governments do not like it either. Speaking last December in this house, the minister spoke about economy in a way which I think carried the conviction of everyone who heard him. Nevertheless it is a remarkable fact that this document which we have heard read speaks of borrowing, taxing and expenditures, but I did not hear the word "economy" mentioned. It may have been there, and I will not say it is not, but I do say that there was virtually nothing said about economy.
I would remind the minister of what he said last December. To use almost his own words, he said, "I feel when I am trying to keep down expenditures that I have the whole world against me." I sympathized with the minister when he said that. I noticed that when Sir John Anderson was speaking on the British budget the other day he said that one of the great duties, perhaps the greatest duty, of a minister of finance was to keep down the spending departments. Therefore I am going
to say one word about economy because I think the people of this country are going to be disappointed in this tax reduction. They are going to be disappointed in finding out how little of their own money the Minister of Finance will allow them to keep. They are likely going to say to themselves, "If we could only have had a little economy, perhaps we could have had a little of our own money back."
I wish to refer to two things which took place in this house, the first being the reference by the hon, member for St. Paul's (Mr. Ross) to the civil service. He pointed out that in the year after the war, apparently with government activities petering out to some extent, the number of civil servants had gone down from a total of 150,000 by how much? Nine hundred is the figure. I will not say that the minister was not serious about economy- I think he was-but I think if he had tackled the matter of economy in the way it should have been tackled, that is by rationing the spending departments, we would have had a somewhat different situation.
Let me mention a thing that took place in this house the other day when for once we found ourselves in agreement with the hon. gentlemen to our left. We had before us an estimate of $300,000. I know that amounts like $300,000 have become so small that it is difficult for people to think about them. What was the result? We found that, in spite of all the Minister of Finance could do-and I am sure he does all he can-that item of $300,000 wangled its way into the estimates. On inquiry it turned out that last year some $6,000 had been spent. It is only fair to say that this item is for new purposes. Further inquiries showed that in the first two or three months of this year some $5,000 had been spent out of the $300,000 which had been put in. I think it is fair to assume and for the people of Canada to conclude that when $300,000 can find its way into the estimates in that light-hearted fashion, other items of $300,000 might bo treated in the same way.
I want to say a word about tax administration. If I remember aright-and the minister will correct me if I am wrong-last autumn he gave a firm assurance that he was going tc take full cognizance this year, not merely of taxing statutes, which he has dealt with at some length to-night, but with the method of taxation. If I understood this document which he has presented to the house to-night-and I do not pretend to have taken it all in-there is no indication in it, apart from this appeal board, of any comprehensive effort to reorganize the whole method of taxation and collection. When I ventured to say something on
The Budget-Mr. Macdonnell

that last autumn it received general approval even from newspapers supporting the government, and I believe it is something that is deep down in the feelings of the people of this country. I should like to read a short extract on that, from a letter I got to-day:
It is my firm opinion, and I think yon will find it shared by the vast majority of those who are close to the picture, that the administrative machinery is bogged down in a mass of obsolete and unbusinesslike rulings and methods, and that efficiency and equity will be achieved only by a major reorganization of the whole set-up.
As I understood the minister to-night, he did not suggest a complete reorganization of the whole machinery of tax collection, and it is collection that I am talking about. Again, if I am correct, he indicated last autumn that that was to be done, and I beg him to see that it is done as soon as it can be done. Let me give a small illustration that came to my attention to-day. I had a letter from a man in western Ontario. He was acting for a man in the fishing business, who had just got his assessment for 1943, $5,500. He thought it was going to put him out of business. He had not the money to pay it, and he thought he would have to close down his business-that was his assessment for 1943-1943, 1944, 1945, 1946- three years ago. I know the difficulties in war time, but I put this to the minister, that this illustration shows that the thing he undertook to do last autumn is long overdue and I hope that it will be done as quickly as it can be done.
I want to say a word about what the minister had to say about the dominion-provincial conference and the offer that has been made to the provinces. I do not propose to attempt to assess the offer; I cannot take in figures as quickly as that. I am not going to speak of the merits of the offer. I hope the offer is so good that it will be accepted by even-body, because I agree with the minister on the importance of trying to find out how to work together. I think it was the premier of Saskatchewan who, during the dominion-provincial conference, used words that I wish I could remember, but they were to this effect: We have been fighting together against outside foes, and it is a pity that we now have to begin fighting with each other. For that reason I hope that this offer can be accepted.
I should like, however, to say a word about the method that is now being used, because it seems to me here to-night that we have seen the big stick used, and a very, very big stick. I venture to ask the minister and the Prime Minister (Mr. Mackenzie King) whether that is the way to get agreement. I want to direct the attention of the house to one or two things that happened at the conference. The

conference was perhaps a little late in being called together, for reasons which some of us may irreverently think had to do with the welfare of the party across the way rather than with the welfare of Canada. But I pass that over. The conference met last summer, and then met again and again, and progress was made. Then we had that five-day meeting. Then it came to the last day, and it is that I want to speak about.
On that last day and in the very last half hour the premier of Saskatchewan, again in a temperate and reasoned speech, urged that a further attempt be made to get together. The premier of Nova Scotia almost pathetically-I do not think that is too strong a word-urged that there be an adjournment to a fixed date. The premier of Ontario said, as he had said before, that it was not "take it or leave it," The premier of British Columbia, if I remember aright, indicated the hope that there might be a further meeting. Then the Minister of Finance put thumbs down on it. He moved the adjournment of the meeting sine die, or, in other words, indefinitely, and said that the government would decide. I remember reading that at the time, and I did not understand it then as well as I do now. I thought it surprising that he did not say there would be another meeting. He said that the government would decide as to the future procedure.
The Prime Minister was there all that time. Whether we go along with the Prime Minister or whether we do not, whether we have liked all the compromises he has arranged or whether we have not I think any man would say that the Prime Minister has shown great gifts for getting people together. We may not always have liked what he got them together for. But he has had that great gift. What did the Prime Minister do on that last afternoon? I will tell you what he did. I will read the words he used. Since the early part of the afternoon he had sat there as chairman, which was all very right and proper, and then in the last half hour of the day this situation arose. There were nine provincial premiers there and all wanted the conference to succeed. There is evidence of that. Some of them had made great concessions that it should succeed. Others were in urgent need of help. They all wanted it to succeed. Nobody need doubt that. But let me read the Prime Minister's contribution. After the finance minister had moved that the conference adjourn, the Prime Minister said:
Gentlemen, it has been moved that the conference adjourn sine die. All those in favour of the motion will please say "aye."
Some hon. Gentlemen:	Aye.

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The Chairman:: Those opposed please say
"nay."
(No replies)


William Ross Macdonald: I declare the motion carried
unanimously.
I am rather young and innocent in political matters and I could not understand that day why the Prime Minister did that. But it is clear now to anyone who is compos mentis. I did not understand then what the Prime Minister wanted, but anyone who was in that room could not have doubted that the Prime Minister did not want that conference to succeed at that time. That is the only conclusion I could come to.


Some hon. MEMBERS:: Oh, oh.


James MacKerras Macdonnell: I am only saying that is the conclusion I came to, and I believe that is the only conclusion that anyone in that room could come to. And I did not understand it.


Mr. MACKENZIE KING:: May I ask my hon. friend if he was aware that the premier of one province had already left and said that he would not return?


James MacKerras Macdonnell: I was in the room.


An hon. MEMBER:: You did not mention that.


James MacKerras Macdonnell: And I did not mention that I was born either. I was there watching what was going on, and I am giving my impression. I was perplexed; I could not understand it. But I am not perplexed to-night because it has been made perfectly clear. Let me put it in this way. What would have been the natural thing to happen after that conference broke up? I submit that the natural thing would have been a discussion among the parties. I submit that this unilateral way of dealing with the provinces which has been proposed to-night is not the natural way; it is not the way that friends have of dealing with each other. Let me say this. The Prime Minister, if he had tried then to get those men together-


James Lorimer Ilsley: We tried nine months to get them together.


Mr. ROWE:: You postponed it.


James MacKerras Macdonnell: I want now to say something to the Minister of Finance. I have a weakness for the Minister of Finance which I have to struggle against. But I think the minister was not at his best to-night when, after rather scolding the provinces for well over half an hour, he said that there is nothing to be gained by post mortems or recriminations. I thought
that was disappointing. I believe the wrong way has been taken; the big stick has been used. I still hope that this offer may be so good that it may be acceptable. But I felt as I read it and listened to the minister that the provinces were being asked to toe the mark and sign on the dotted line. It seemed to me that it contained a great many stiff stipulations, and that it went quite a long way to justify the suspicions of those who felt that the conference was to some extent a struggle for power and not a struggle for money.


William Earl Rowe: Centralization.


James MacKerras Macdonnell: However that may be, I wish to say in conclusion that in spite of that I hope this may succeed. But those who are presenting it have taken an unnatural course. Not having followed up that conference, as was desired by several of the people who attended it, they have now come here and wielded what I call the big stick. If this does not succeed, it [DOT]seems to me that they have taken a veiy heavy responsibility on their shoulders. I move the adjournment of the debate.


William Lyon Mackenzie King: Before my hon. friend concludes, may I ask him just one question? I was presiding as chairman of the meeting at the time, and I gave the decision- and I conceived it to be correct-that the adjournment sine die was carried unanimously. Was there any exception taken by anyone to that statement? It was made publicly, and all present agreed that I gave the only decision which could be possibly made.


James MacKerras Macdonnell: I did not question the Prime Minister's decision. All I said was that a man of the Prime Minister's gifts might then and there have tried to do what several of the premiers asked to have done, that is, to try to rescue the conference. To me it seemed like a man sinking below the waves and another man refusing to put out his hand to pull him out.
Motion agreed to and debate adjourned. SUPPLY
The house again in committee of suppfy, Mr. Macdonald (Brantford City) in the chair.



DEPARTMENT OF JUSTICE

[Stage Direction]
Penitentiaries branch-
106. Branch administration, $133,499.
John Horne Blackmore: I should like to say a word or two about production in the penitentiaries. I believe it is fitting that the men who are taking care of this work should be remembered for the kind of work they are
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doing. I was surprised to find how much war effort our penitentiaries made. I find in the report of the superintendent of penitentiaries, at page 21, these remarks, relating to St. Vincent de Paul penitentiary:
He has administered in a very satisfactory manner, keeping the machinery in good working condition, having in mind the production end and the training of convicts. The total production for the year amounts to $117,113.76, which is an increase of over $21,000 when compared with the previous year. There is a large increase, ($11,000), in the canvas working department, and over $9,000 in the tailor shop. Customers' work amounts to $84,654.65, and institution, $32,207.76. The blacksmiths', carpenters', shoe shop, shop M (camouflage nets) have been kept very busy with war contracts.
As I was saying before we discontinued our discussion at the dinner recess, the minister ought to have credit given him for the good things which are being done under his administration. I like to give a person credit where credit is due. It is one thing to criticize all the time and find fault. I am not so sure that that method always obtains the best results. I should like to commend the minister for this work which was done in the penitentiaries.
I notice in connection with Dorchester penitentiary, as recorded on page 22, that the following articles were manufactured for the armed services-which matter completely surprised me: twenty map cases, 2,000 paint kettles, 4,858 white cotton sheets, 8,000 soap bags, 46 filing cabinets, 2,000 pairs felt mitts. There were repaired: 813 ammunition boxes, 200 army jackets, 175 pairs army pants, 1,451 pieces R.C.A.F. furniture, 234 bed springs repaired, 4,169 pairs army shoes. Then, articles manufactured, repaired, et cetera, for other government departments, including penitentiaries branch: St. Vincent de Paul penitentiary, 2,691 pairs army pants dyed, 1.0*00 army blouses dyed. Department of Mines and Resources, 75 army blouses dyed, 75 pairs army pants dyed, 51 army greatcoats dyed, 2,331 pairs army shoes repaired. Post Office Department: 15,260 mail bags made, 41,294 mail bags repaired.
I would suggest to hon. members who may be interested in the matter and may wish to pursue this study somewhat further that they might read about the production in the Manitoba penitentiary, on page 27; in the British Columbia penitentiary, on page 29; in the Saskatchewan penitentiary, on page 30; in the Collins Bay penitentiary, on page 33. Then, if the committee will allow me, I will read on page 40 a statement which I think it is well to have on the record, after the war:
The 1,106 convicts employed in manufacturing produced articles valued at $429,650.26. an unprecedented figure. The production of the 1,041

convicts employed in building trades and productive service divisions, including farms, steam plants and bakeries, amounted to approximately $559,865.94.
What I am wondering about is the matter I raised just before the dinner recess. I wonder how the minister will manage to dispose of such production as this, now that there is no longer a war. The minister is engaged in conversation with the hon. member for Muskoka-Ontario. I am sure the latter gentleman is an engaging conversationalist, but-


Frank Exton Lennard: Can the hon. member speak louder? We cannot hear him.


John Horne Blackmore: I could have spoken louder, but, judging from the noise that hon. members were making, it would ultimately have been to blow the roof off this house.


An hon. MEMBER:: We cannot hear you now.


John Horne Blackmore: Can you not hear me?


An hon. MEMBER:: Now, but not a moment ago.


John Horne Blackmore: I can easily make you hear. There is no difficulty about that, but sometimes I am accused of speaking too loudly. The question was this. Here is a remarkable production for the penitentiaries of the country. I do not wish to read again the passage that I quoted, but since hon. members did not hear me it might be a good thing for me to read it once more.


An hon. MEMBER:: Dispense.


John Horne Blackmore: I know that some hon. members are weary after listening to the discussion, but this is a matter which in my judgment should have some attention, and I should like to remind some of those who glibly talk about dispensing that I have not used more of the time of the house than I am entitled to. The matter is worthy of attention. The men in charge of these prisons, who have brought about such production, ought to be given credit in this house, for one thing; and besides that, the question of what we shall do to dispose of such production, now that the war is over, is something that is of interest to all hon. members, or ought to be. I will read the passage again:
The 1,106 convicts employed in manufacturing produced articles valued at $429,650.26. an unprecedented figure. The production of the 1,041 convicts employed in building trades and productive service divisions, including the farms, steel plants and bakeries, amounted to approximately $559,865.94.
To me that is a most commendable achievement in the war effort, but it is a challenge when we ask ourselves what will be done with

Supply-Justice
that production, now that the war is over. The minister, in answering the question before the dinner recess, said that he believed all the production of the penitentiaries could be used by the various departments of government. Does the minister believe that all this amount can be used by the departments of government?
Right Hon. L. S. ST. LAURENT (Minister of Justice): I am convinced that a production of commodities of even greater value than those listed on pages 40 and 41 of the report can be absorbed by the requirements of other departments of government. There may have to be some change in the quantity and kind of things produced, but I do not think we have yet reached the maximum of production that will be possible and practical in the penitentiaries. There may have to be some features of encouragement introduced, but I do not think we have yet reached1 the point where we are getting interested, active work from all those who would be capable of performing such work, and I believe that for themselves it will be a very good thing to bring about that situation. I believe in the value of the feeling that one is doing something worth while as an element of rehabilitation, and as we develop that we can increase the productivity of the shops we have in these penitentiaries. That is only one of the things to which the commissioner of penitentiaries will give attention. We have been employing those who have been giving training in vocational schools to give training to our foremen of shops in the penitentiaries. We have recourse to -the Department of Agriculture to advise us on the development of agricultural possibilities on the penitentiary farms, and I am not concerned about that so much from the point of view of dollars and cents represented by the production, as I am about what the production means in its value to the men themselves when they become interested in doing something that is worth while.
Mr. BLACKM'ORE: And becoming skilled.
Mr. ST. LAURENT: I am interested to see them develop their skill and their confidence in their own ability to produce things that are worth while and thus to be useful members of a productive community. I think that is one feature that has been receiving attention and should receive further attention. I receive a large number of requisitions for machinery and implements to improve these factories. Sometimes I hesitate over the cost and compare it with the amounts provided in the estimates, but I get explanations from the engineer and from the purchasing agent, and every time they have convinced me that they
were going to make it more probable that the particular shop would turn out things well done. In those cases I have felt it was my duty to approve the requisitions. That is only one aspect of the problem we have to deal with.
This problem of handling the seven penitentiaries is a full-time job and no Minister of Justice can do it himself. He cannot devote enough of his time to it to do personally all that has to be done, and when I asked parliament to authorize the selection of one commissioner it was to try to get someone who would go about and investigate and then advise in a practical way regarding the things that would be helpful in creating an atmosphere where men would be interested in developing their skill and proving to themselves as well as to others that they can be useful.
I do not want to take too long in replying to the hon. member's question. I thank all hon. members for the contribution they have made. The commissioner will read with a great deal of interest everything that has been said in this debate on our estimates, and I wish particularly to thank the hon. member for Kootenay East (Mr. Matthews) for the testimonial he offered here to the good work being done in the New Westminster penitentiary. The hon. member for New Westminster (Mr. Reid) had made similar comment, but a testimonial coming from an hon. member on the other side in a confirmatory way does much to assist us. I also extend sincere thanks to the hon. member for Eglin-ton (Mr. Fleming) for what he said about Major General Gibson. I did not know Major General Gibson, but I got from gentlemen in whom I have confidence a description of his qualifications, which the hon. member was kind enough to confirm by what he put on record this afternoon. I was told that Major General Gibson was not only a good administrator but a man with broad human sympathies, one who could select proper assistants; that he was a good judge of human character, and the kind of man who would take a plan and think it right through to the end, visualizing what the doing of certain things would produce in results. I thought that would be the kind of man who would set us on the right path to make such improvements in our penal system as we could make pending the getting of more cooperation or coordination of the efforts being carried on in our institutions and in the provincial institutions. There is no doubt that the principal recommendation of the Archambault commission would be for, if not necessarily a centralized penal system, at least a coordinated penal system for the whole of Canada.
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John Thomas Hackett: Can the government
initiate any plan of production in the penitentiaries? I was under the impression that some years ago a fully equipped binder twine factory was installed at Kingston but that as a matter of policy the government had to stop manufacturing binder twine there, and that some other activities of that sort had to be abandoned because labour felt that the competition of prison labour was unfair and undesirable.
Mr. ST. LAURENT: I do not know particularly about the incident referred to by the hon. member for Stanstead, but I know that labour objected to the production for sale, in competition with its own labour, of that which might be obtained in the penitentiaries by the use of prison labour that was not paid for; and I can quite appreciate that viewpoint. But I would have no hesitation whatever in producing in the penitentiaries as many of the things used by the other agencies of this government as could be properly produced there.


John Thomas Hackett: They used to make boots.
Mr. ST. LAURENT: They make boots.


John Thomas Hackett: For policemen.
Mr. ST. LAURENT: They have repaired vast quantities of discarded army boots for use by the penitentiary population. For a long time they have been making mail bags for the Post Office Department. I do not think there can be any valid objection to the production in this way, for the Canadian government, of things that otherwise would have to be paid for out of taxation. I think it is in the interests of the whole public, including the labour group, to have the expense of government kept as low as possible; and if the sums that have to be expended in these penitentiaries could be, to a certain degree if not wholly, compensated by the value of things produced in the penitentiaries for use in other services of government, I think even the labouring class of our population would be benefited thereby.


John Thomas Hackett: Does the minister think there could be acquired in the penitentiaries any skills which would help a man when he had to return to civil life again?
Mr. ST. LAURENT: Yes. The value of the product is important, but that is not the main feature. The main feature, I think, is to get a man convinced that he is capable of doing useful things and of providing for himself. I have seen, in certain places of detention, people who were just breaking up stones with hammers. You cannot get a man interested 
in doing that. I have seen them picking oakum. You cannot make a man feel that he is doing something useful when his hours are spent in that kind of work.


Mr. MacINNIS:: But was that not considered part of the punishment, the breaking of the stone and the picking of the oakum?
Mr. ST. LAURENT: It was a part of the hard labour, because there was no other hard labour available at which to set these men.


Angus MacInnis: I am not approving it, but that is what I understood it was.
Mr. ST. LAURENT: I think hard labour can be made interesting labour, and can be made educational labour as well; and I believe the job the commissioner has set himself to do is a start in the right direction. There has been complaint that this report was made a long time ago. That is quite true ; and during the war I made no effort toward additional expenditure to implement the report, though we have had a number of the things recommended done. But immediately the war was over, I asked parliament to authorize the appointment of one instead of three commissioners. This gentleman is taking a keen interest in the work he is doing. He has already visited St. Vincent de Paul penitentiary, and the penitentiary at Kingston. At present he is in Halifax attending a meeting of social services which is to be addressed by Mr. Bennett, head of the Washington bureau of prisons; and he is going to take advantage of his trip to the maritimes to spend a few days at Dorchester. Later he will see the others. I have asked him to see not only the penitentiaries, the lay-out and so on, but to see those who are employed from the wardens right down through the whole line, to be able to make an appraisal of the possibilities of the personnel in these penitentiaries. I think there would be useful work to be performed in the penitentiaries even by university graduates, but all the personnel need not be university graduates. Quite a large proportion of those who are on the staffs at the present time may be proper personnel, and we cannot change over all at once. But I think an appraisal of the personnel is quite as important as an appraisal of the bricks and mortar, the yards, farms and shops; and I believe we are taking the right way to get palpable results.


John Horne Blackmore: I wish to ask the minister if he will convey my congratulations to the gentlemen who are in charge of these penitentiaries, because I have some sort of idea what it means to them. I should like

Privilege-Mr. Mackenzie King
to go on with this discussion a little further; but in order that the committee might make some progress, how would it be if we passed the one item, and then continued the discussion on the next item?


Donald Methuen Fleming: I have a question about one matter which will take only a minute. In the details of this item appearing at page 121 of the estimates I notice provision for a chairman of the penitentiary commission at $9,000 and two commissioners at $7,500. Does that carry with it the implication that the minister is contemplating the appointment of the three man commission this year?
Mr. ST. LAURENT: No. That item has been in the estimates and has been voted every year since 1938. The salary that has been fixed for the commissioner is $12,000, and I do not think it will be possible to make any other appointment of additional commissioners in the course of the present fiscal year.


John Thomas Hackett: They may not be necessary.
Mr. ST. LAURENT: I do not think it would be possible to have another commissioner who would be helpful in the course of this fiscal year. These estimates were prepared before the commission was appointed. As the hon. member knows, by order of the treasury board there can be changes. The amount voted cannot be increased, but there can be changes in the allocation of the amount. What is here will be more than sufficient to cover the additional expense which will result from the appointment of the commissioner.


Donald Methuen Fleming: Within what time does the minister think the commissioner will have completed this preliminary survey?
Mr. ST. LAURENT: I do not think he will have completed his survey as long as he remains commissioner. I think this is something which is capable of constant improvement. He will have made a preliminary survey within the next three or four months.


John Thomas Hackett: And advise as to some parts of the commission's report which will become effective?
Mr. ST. LAURENT: Yes.
Item stands.
Progress reported.
On motion of Mr. St. Laurent the house adjourned at 11:05 p.m.
Friday, June 28, 1946.