1946-07-18

PRIVILEGE


Mr. SPEAKER:: The question of privilege raised yesterday by the hon. member for Peterborough West (Mr. Fraser) is very important as it bears upon one of the main privileges of members of parliament, namely the right to seek information on matters of administration for which the government is responsible to the House of Commons.

The hon. member sent in for the order paper a series of questions inquiring as to the number of motorcycles declared surplus by the army and air departments and asking how many of these vehicles had been disposed of through War Assets Corporation. The officer of the house whose duty it is to see that such questions are in order pointed out to the hon. member that the information sought could be obtained from the special committee on war expenditures and economies which was appointed on March 22 by the following resolution:
That a select committee be appointed to- examine the expenditure defrayed out of moneys provided by parliament for national defence and demobilization, and for other services directly connected with the war, including the disposal of surplus war assets, and to report what, if any, economies consistent with the execution of the policy decided by the government may be effected therein . . .
It seems, therefore, that the committee is the proper authority from which the information should be sought in connection with expenditures for defence, demobilization, and -please note-"for other services directly connected with the war, including the disposal of surplus war assets." The hon. member's questions come within the purview of the committee's powers. It is a well known principle in parliamentary procedure that the house cannot deal with matters referred to committees until those committtees have completed their work and reported to the house. I see in "May's Parliamentary Practice," 14th edition, recently published, the following as a type of question enumerated as being out of order:
Dealing with matters referred to a royal commission or with matters before a parliamentary committee or with matters within the juris-[DOT]diction of the chairman of a select committee or the authorities of the house. No question can be asked regarding proceedings in a committee which have not been placed before the house by a report from the committee.
Moreover the chairman of this committee on war expenditures and economies, the senior member for Halifax (Mr. Isnor) has invited all the members of the house to ask questions dealing with matters referred to the committee. On March 26, as reported in the minutes of the proceedings of that committee, he said that the hon. member for Eglinton (Mr. Fleming) had asked to appear before the committee and follow up a question placed on the order paper; and he added:
You are all familiar as to the answer given by the Minister of Reconstruction (Mr. Howe) yesterday, that Mr. Fleming would have the opportunity of asking the question before this committee. I have given this matter some thought, and I am just offering this to you as a suggestion, not* as a ruling. I am going to

Privilege-Mr. Fraser
suggest to you that you give Mr. Fleming an opportunity at once to place his questions on file here with a view to having them answered, but in the future I ain going to suggest that other members of parliament who are not members of this committee should pass along their questions either to the chairman or to another member whom they may select to place them before the committee. I think that in fairness to the members of this particular committee, Mr. Fleming arid others should follow that suggestion so as to give our own members an equal opportunity to have questions answered which they have in mind and have had in mind for some time. There are some questions that Mr. Probe. Mr. Stewart and Mr. Shaw had before the committee last year that have not as yet been dealt with. I feel in fairness to them that my suggestion should be followed. Is it your pleasure that we hear Mr. Fleming to-day with that understanding as to future members?"
The motion was carried; the hon. member for Eglinton thanked the chairman and submitted a series of questions. This was good parliamentary practice. A matter cannot be before a committee and before the house at the same time; and the proceedings of a committee should not be interfered with by answers to questions and reports laid on the table of the house.
In disallowing for the time being the hon. member's questions, I fully realize that his right to seek information is unimpeachable, but I am merely pointing out to him that he is following the wrong procedure. It is his privilege to file his questions with the chairman of the war expenditures and economies committee. I would therefore ask the hon. member for Peterborough West to try the committee, and if he does not succeed there, he will be free to adopt any course which will be open to him under the rules of the house.


Mr. GRAYDON:: I think perhaps there is another matter to be considered. In view of the importance of the decision which Mr. Speaker has just rendered, may I be permitted to say one word with respect to it, before seeking to appeal to the house with respect to Your Honour's ruling?


James Horace King: I must say to the hon. member for Peel that the hon. member for Peterborough West rose yesterday on a question of privilege. If the hon. member will look at standing order No. 12 he will find that it states this:
12(1) Mr. Speaker shall preserve order and decorum, and shall decide questions of order, subject to an appeal-
And so on. I have made a statement in answer to the hon. member for Peterborough West respecting his question of privilege. It was not a ruling on a point of order. Since no point of order was raised, there is nothing before the house. The hon. member knows very well that when the bon. member for
Peterborough West rose yesterday it was on a question of privilege. Therefore I do not believe any debate is permissible, and moreover, there can be no appeal.


Gordon Graydon: I was seeking to say a word in this connection, with Your Honour's consent, because it is an important matter. I shall try to be constructive in what I . say. I should like very much to be able to say a word about it.


Mr. COLD  WELL@: Mr. Speaker, may I ask a question? Did you make a ruling, or did you make a suggestion to hon. members in the house as to what would be good procedure?


James Horace King: I tried to be very clear. I. said that I was not making a ruling, because no question of order was before the house. The hon. member for Peterborough West rose on a question of privilege, and I told him that I would answer his question to-day. As a consequence of that I made the statement to the house as to what would be good procedure. Now, if the hon. member for Peel wishes to say something I might listen to him, but I give no guarantee that I will let him enter into a debate on the subject.


Gordon Graydon: Mr. Speaker, I wish only to make a constructive suggestion. In our opinion this is a very important matter, one which goes to the very root of the rights of hon. members of the House of Commons, namely that of asking a question at the proper stage. I point out to Your Honour, with great deference, that in applying common sense to the rule affecting questions asked in the house respecting proceedings before a committee I believe Your Honour should not go so far as to rule out any questions asked in the House of Commons just because a committee might have jurisdiction to deal with a wide variety of subjects. There is a vast difference between the proceedings currently before a committee, and the jurisdiction such committee may exercise, which may never reach the points, of questions the hon. member for Peterborough West or other hon. members may ask here.
The other point is this, if I may say so, that if that ruling were adhered to-and I am hopeful that Your Honour, with your usual fairness, will not hold us too closely to it-


Mr. COLDWELL:: He has not ruled.


Gordon Graydon: I think he has, if I may make that reply to the hon. member for Rose-town-Biggar (Mr. Cold well). Such a ruling would mean that I as a member of the House of Commons, but not a member of the committee on veterans affairs, could not ask a question as to the number cf overseas men
Privilege-Mr. Fraser

still to come back to Canada. If this ruling were followed, I could not ask such a question. The same would apply to questions respecting the Department of National Defence. Every question respecting veterans affairs would fall into the same category.
While I do not wish to take up too much time, this is an important matter and I hope that- what I say will be accepted by Your Honour as a constructive suggestion. If this ruling were followed no question could be asked on the whole matter of industrial unrest in Canada until the committee brought in its report. In all fairness to hon. members who are not members of that committee, surely we cannot go so far as to adopt a rule which would debar them from asking such questions.
The other point is that perhaps some day the estimates of all departments will be referred to standing committees. That has been suggested, and it may be that the rules committee will follow the suggestion in its report. But if that is done I would point out to Your Honour that from that day forward you might as well wipe the order paper clear of all questions, because an hon. member would never be permitted, as an ordinary member of the house, to ask a single question if he were not a member of that committee. It seems to me that this interferes with the rights of hon. members who are not serving on committees. If one is a member of a committee he can ask questions; 'but one cannot attend before all committees. If an hon. member has five questions to ask, he cannot be on five different committees at one time.


Some hon. MEMBERS:: Order.


Gordon Graydon: Before sitting down I should like to say one word further.


James Horace King: Order.


Some hon. MEMBERS:: Order.


Gordon Graydon: Well, if the government is going to take the position that you cannot-
Mr. ST. LAURENT: I object to the hon. member's charging the government with having taken a position. The government has not taken a position on this.


Gordon Graydon: The government is- taking a position. The very fact that you are standing up in the house is an indication that you are taking a position.


An hon. MEMBER:: Sit down.


Gordon Graydon: I will not sit down for you or anybody except His Honour.


Some hon. MEMBERS:: Order.


Gordon Graydon: And you are one of the worst offenders, too.


James Horace King: Order. The hon. member will admit, I think, that I have given him plenty of latitude.


Mr. CASSELMAN:: Until he was railroaded.


James Horace King: That statement is unparliamentary. Order.


Mr. IRVINE:: We cannot hear what you are saying, Mr. Speaker.


James Horace King: Order.


William Irvine: Disorder!


James Horace King: Order. The hon. member will admit, I believe, that a ruling by the Speaker is not a matter of giving Mr. Speaker's own interpretation, or his own ruling, to the house. Rather it is a matter of following the practice and.the rules of the House of Commons, as laid down. In my statement I took the trouble to quote May. I do not believe any hon. member will doubt the authority of May on these subjects. In his 14th edition he states:
Dealing with matters referred to a royal commission or with matters before a parliamentary committee or with matters within the jurisdiction of the chairman of a select committee or the authorities of the house. No question can. be asked regarding proceedings-


Gordon Graydon: "Proceedings".


James Horace King: -in a committee which have not been placed before the house by a report from the committee.
So far as this question is concerned, I have read also to the hon. member part of the proceedings of a committee where the chairman of the committee gave permission, not only to hon. members serving on the committee but to every hon. member in the house, to put questions before it.


Mr. HOMUTH:: Mr. Speaker, have you given a ruling?


Mr. FRASER:: Mr. Speaker, I think you have suggested what I should do. May I now ask you if I may place these questions on the order paper?


James Horace King: Order. I have told the hon. gentleman what he should do. I consider the incident closed, and we should carry on with the business of the house.


Gordon Graydon: Are we to be permitted, sir, to appeal from your ruling on this matter?


Gordon Knapman Fraser: Mr. Speaker, the reason I asked-	,


James Horace King: Order.


Some hon. MEMBERS:: Order.


James Horace King: I have been very generous with hon. members. I told them at the begin-

Privilege-Mr. Stephenson
ning that the statement was not debatable and that there could be no appeal. I have given an opportunity to the hon. member for Peel to make a statement, despite the fact that this is not debatable. I think my generosity might be taken into consideration, and I would ask-


Gordon Graydon: Mr. Speaker, I desire to appeal from your ruling.


James Horace King: Presenting reports by
standing and select committees.


Gordon Graydon: We desire to appeal from your ruling, Mr. Speaker.


James Horace King: I have decided that no member can appeal, because it is not a decision, it is a statement. It was not a ruling that I gave, because I had no point of order before me.


Gordon Knapman Fraser: I cannot get satisfaction-


Some hon. MEMBERS:: Order.
Mr. FR.ASER:-from the committee, and that is why I inquired whether I could place them on the order paper.


Some hon. MEMBERS:: Order.


Mr. CHURCH:: We are bound by British parliamentary practice. We shall soon need a police force in here.


Karl Kenneth Homuth: I rise to a question of privilege.


James Horace King: Order. The hon. member knows the rules of the house and understands perfectly well the difficulty the Speaker may have in enforcing them. I hope no hon. member will act in such a way as to oblige the Speaker to use the power that he has to keep order and decorum in the house.


Karl Kenneth Homuth: Mr. Speaker-


Gordon Knapman Fraser: Mr. Speaker-


Some hon. MEMBERS:: Sit down.


Karl Kenneth Homuth: I rise to a point of order.


James Horace King: There can be no point of order because there is nothing before the house.


Thomas Langton Church: I wish to appeal your decision.


Karl Kenneth Homuth: I rise to a question of privilege. On several occasions during this session I have submitted questions to the Clerk with the idea of getting certain answers from War Assets corporation. They have been returned to me with the statement that these matters must come before the committee. These matters have not been brought before the committee, because you have no chance with the present government majority.


James Horace King: Order. I will ask the hon. member to resume his seat.


Thomas Langton Church: Parliamentary government is now at an end here.


Mr. C. E. STEPHENSON (Durham):: Mr. Speaker, I rise to a question of privilege with reference to the accuracy of the answers given to certain questions which I placed upon the order paper. On Thursday, July 11, an order of the House of Commons was tabled in answer to questions which had been standing in my name since May 27, 1946. Two of these questions were as follows:
1.	How many houses are being built on No. 2 highway near Port Hope under the Veterans Land Act?
2.	When will they be completed?
The answers tabled were as follows:
1.	Four.
2.	Houses are completed except for hardwood flooring, which is now being laid, and electrical connection with the hydro-electric power line.
My question of privilege is this: We in this house should be able to rely upon the accuracy of answers tabled in the house; yet a personal inspection of the houses in question made on Sunday, July 14, after the reply was tabled, showed that the houses are by no means complete, having nothing inside them except the studding and sub-floors. The following yet remains to be done:	Wallboard, with the
exception of one house, has not been completed; no plastering, painting, cupboards, doors, plumbing, trim and many other items necessary to make the structures complete. I would like an explanation of these inaccuracies and a proper reply to my question tabled.


James Horace King: Presenting reports by standing and select committees.


Karl Kenneth Homuth: Mr. Speaker, the hon. member has asked a question and he has a right to an answer.


James Horace King: The hon. member will realize that we have not yet arrived at the period for questions.


Karl Kenneth Homuth: Mr. Speaker, this is not a question that is on the order paper.


James Horace King: I would ask the hon. member to resume his seat.
Privilege-Mr. Stephenson



On the orders of the day:


Charles Elwood Stephenson: I would like to ask the responsible minister, or in his absence the Secretary of State if he has any comment to make on the question I raised previously, with regard to the inaccuracy of a return brought down in answer to a question of mine.
Right Hon. C. D. HOWE (Minister of Reconstruction)1: The hon. member for Durham is well aware that the minister responsible for the veterans housing is not in his seat, nor is his parliamentary assistant. I shall be very glad to call the attention of my colleague to the remarks that have been made to-day, and I am sure that he will make a statement at some later date.


Hon. IAN MACKENZIE (Minister of Veterans Affairs):: Mr. Speaker, I wish to speak to a question of privilege. I was detained on other duties at three o'clock when the hon. member for Durham (Mr. Stephenson) raised a question regarding certain replies to questions he had asked in the house. I made an immediate investigation of the situation, because my right hon. friend who sits to my left (Mr. Howe) said he would refer the matter to me.
I find that there was certain justification for the hon. member's complaint. Officials of the department in making reply confused the Bowmanville project with the Port Hope project, and the reply to question 6 in regard to the Port Hope project was incorrect. I
apologize at once to the hon. member and the house for the misinformation inadvertently conveyed by the officials of the department.


[Stage Direction]
First report of standing committee on marine and fisheries-Mr. Reid.

[Stage Direction]
(Questions answered orally are indicated by an asterisk)
['It is a matter of no importance to me, but I gather that if anyone objects to the suggestion offered by the minister, we have no choice but to adjourn. I might be finished in twenty minutes, but that is neither here nor there. Therefore I move the adjournment of the debate.\nOn motion of Mr. Bracken the debate was adjourned.']
James Horace King: Questions.


Karl Kenneth Homuth: In view of the fact that W'hen the hon. member for Durham (Mr. Stephenson) criticized the answers he had received you referred him to the question period, I would ask you, sir, -


James Horace King: I would remind the hon. member that it is the practice in the house for members to ask questions of ministers before the orders of the day are called.


Karl Kenneth Homuth: Mr. Speaker, you-


Some hon. MEMBERS:: Sit down.


Karl Kenneth Homuth: -asked the hon. member-


James Horace King: I would ask the hon. member to resume his seat, and I hope it will be the last time.



Mr. FAIR:: During each of the years 1930 to 1945 inclusive, and up to June 30, 1946, how many persons in each province died as a result of (a) cancer; (b) tuberculosis; (c) infantile paralysis; (d) sleeping sickness; (e) arthritis?


Mr.   MacKJNNON@: (a) Cancer
Can.	P.E.I.	N.S.	NB.	Que.	Ont.	Man.	Sask.	Alta.	B.C.1930	9,273	92	558	370	2,346	3,635	602	480	482	7081931	9,578	86	594	409	2,403	3,726	610	585	441	7241932	10,024	128	628	421	2,483	3,825	670	568	539	7621933	10,653	96	638	451	2,725	4,044	673	593	590	8431934	10,581	95	688	410	2,665	4,034	660	636	572	8211935	11,156	79	617	466	2,848	4,214	786	631	622	8931936	11,694	108	687	459	2,939	4,441	775	710	641	9341937	11,963	137	717	466	3,033	4,547	738	689	598	1,0381938	12.038	138	688	466	3,191	4,472	774	641	681	9871939	12.399	107	730	498	3,206	4,567	850	749	648	1,0441940	13,322	113	762	533	3,591	4,847	808	736	759	1,1731941	13,417	109	792	480	3,521	4,931	863	815	712	1,1941942	13,654	115	745	512	3,672	5,005	871	756	784	1.1941943	14,135	116	780	546	3,793	5,193	890	779	748	1,2901944	14,271	95	769	507	3,831	5.236	888	814	781	1,350January	7,018	49	401	263	1,875	2,581	417	376	380	676
to June, 1945.

Questions
(b) Tuberculosis
Cans.	P.E.I.	N.S.	N.B.	Que.	Ont.	Man.	Sask.	Alta.	B.C.1930	8,075	103	548	392	3,350	1,791	456	407	408	6201931	7,616	68	524	339	3,178	1,728	429	326	382	6421932	7.166	88	519	328	2,983	1,604	397	281	401	5651933	6,939	72	478	352	2,927	1,465	414	297	390	5441934	6,431	93	467	285	2,680	1.337	389	293	318	5691935	6,597	60	488	335	2,813	1,303	432	272	329	5651936	6,763	61	485	357	2,890	1,327	420	279	382	5621937	6,669	65	461	388	2,769	1,315	426	303	340	6021938	6,126	81	415	342	2,616	1,237	349	271	280	5351939	5,977	63	428	286	2,680	1,085	367	233	283	5521940	5,789	56	415	295	2,503	1,011	369	241	321	5781941	6,072	70	429	314	2,685	1,100	328	284	329	5331942	5,980	43	379	330	2,719	1,093	336	251	271	5581943	6,168	42	417	225	2,842	1,101	384	250	294	6131944	5,724	58	357	238	2,624	1.068	348	223	291	517January to June, 1945.	2,882	19	159	145	1.388	522	149	120	130	250
(c) Infantile Paralysis
Can.	P.E.I.	N.S.	NB.	Que.	Ont.	Man.	Sask.	Alta.	B.C.1930	215	1	8	3	44	92	6	21	32	81931	223	1	10	2	150	28	2	11	8	111932	164	4	2	111	24	2	6	14	11933	73	6	3	27	15	5	8	7	21934	84	4	3 [DOT]	18	39	3	10	4	31935	64	2	2	1	14	14	10	5	15	11936	97	1	1	15	23	37	9	4	71937	200	8	5	21	119	12	22	13	1938	83	1	4	16	25	11	7	15	41939	56	1	3	1	14	23	5	1	5	31940	48	1	3	17	14	5	2	4	21941	68	4	19	3	10	20	3	8	11942	64	4	17	8	19	12	1	3	1943	26	1	2	10	8	1	3	i1944	38	1	4	1	21	7	1	1	2January	4	2	1	1	to June 1945.	t	(d) Sleeping	Sickness	Can.	P.E.I.	N.S.	N.B.	Que.	Ont.	Man.	Sask.	Alta.	B.C.1941	40	4	5	12	5	6	5	31942	34	6	16	5	5	l	11943	31	3	4	8	6	2	3	51944	22	3	8	4	5	1	1January	17	. [DOT]	1	4	7	2	3	to June 1945.	Figures not	available	for the	years	1930 to	1940.	
(e) Arthritis
Figures not available, under present international list classification adjustment being made by a special committee of the United States, which includes representation from Great Britain and Canada to cover this deficiency in the list.


H326U-225 REVISED EDITION
[Stage Direction]
Questions

Mr. CASTLEDEN:: 1.	To what firms, corporations or individuals in (a) Ottawa; (b) Montreal; (c) Toronto; (d) Winnipeg, have surplus (1) scrap metal; (2) plumbing fittings and fixtures; (3) electrical equipment; (4) trucks; (5) passenger ears; (6) tractors; (7) machine tools and equipment; (8) aircraft engines; (9) non-ferrous metals; (10) clothing, been sold by War Assets corporation or War Assets Limited in excess of $4,000?
2.	What is the value of the sales made to each of such firms, corporations or individuals as of April 1, 1946?
3.	Which of the above firms, corporations or individuals are classed as "recognized dealers"
by War Assets corporation? '
Mr. SPEAKER; Stand.


Gordon Knapman Fraser: This question has reference
to War Assets corporation, and it appears on the order paper. Why not mine?


James Horace King: Stand.


Gordon Knapman Fraser: May I have an answer?


James Horace King: Stand.


RADIO BROADCASTING-STATIONS CKT AND CKX
Mr. THATCHER:: 1.	Have the licences of radio stations CKY, Winnipeg, and CIvX, Brandon, been cancelled or relinquished?
2.	If so, at what date?
3.	If not, what is the present status of these Stations?


James Horace King: Stand.


Gordon Knapman Fraser: This concerns the Canadian Broadcasting corporation, which is before a committee too, Mr. Speaker.
QUESTION PASSED AS ORDER FOR [DOT] RETURN


PATENT INSTITUTE-REPRESENTATIONS TO . SECRETARY OF STATE
Mr. GRAYDON:: 1.	During the past year has the Secretary of State received a memorial from the council of the Patent Institute of Canada?
2.	If so, upon what date was the said memorial received?
3.	What steps have been taken by the government to institute any or all of the reforms outlined in the said memorial?


CANADIAN INFORMATION SERVICE
[Stage Direction]
Hon. BROOKE CLAXTON (Minister of National Health and Welfare) moved that the house go into committee at the next

sitting to consider the following resolution:
That it is expedient to present a bill to establish a Canadian information service for collecting and distributing abroad information concerning Canada and to coordinate and assist the information service of the government and to provide for payment of salaries of staff and expenses of the service from moneys appropriated by parliament.
He said: His Excellency the Governor General, having been made acquainted with the subject matter of this resolution, recommends it to the consideration of the house.
Thomas Langton Church: The department should be abolished. It is an expensive luxury.


[Stage Direction]
Motion agreed to.

[Stage Direction]
Right Hon. L. S. ST. LAURENT (Minister of Justice): May I be permitted to answer a question submitted yesterday by the hon. member for Vancouver South (Mr. Green). The question was as follows:
I should like to direct a question to the Minister of Trade and Commerce. A Canadian Press dispatch published this morning indicates that a conference may be held this fall to consider the whole question of empire trade preferences. Will the minister make a statement in that regard?
The answer is as follows:	There have
been no arrangements made for a commonwealth conference on empire trade preferences this fall. The conference scheduled for this fall is that to which the Prime Minister made reference in his answer on July 5, which is to be found at page 3205 of Hansard of that day, to the question addressed by the hon. member for Peel (Mr. Graydon), namely, a preparatory committee meeting of the economic and social council in London on October 15, the purpose of which is to explore the general principles of the proposals for the expansion of world trade and employment put forward by the United States.
It is expected that negotiations on tariffs and preferences will be held in 1947 and that these will include commonwealth discussions on preferences.
Karl Kenneth Homuth: May I ask a supplenientary question? In view of the fact that the United States loan to Britain has been approved by congress, with certain considerations attached respecting tariffs-between Britain and other countries, have they any effect at all on the tariff situation between Canada, Britain and the United States?

Ontario Wheat Policy
Mr. ST. LAURENT: The matters of tariff arrangements and preferences are scheduled for discussion at the conference which was originally called by the United States government and which has now been taken under the aegis of the economic and social council of the united nations.

REVISION OP SCHEDULE OF PRICES AND GRADING On the orders of the day:
Mr. MARK C. SENN (Haldimand): Mr. Speaker, I should like to direct a question to the Minister of Finance, under whose department the wartime prices and trade board operates. The daily newspapers of yesterday carried an announcement that a revision of the schedule of beef prices and grading allows an increase in the wholesale ceiling prices on red and blue brand beef, effective July .22. Has any provision been made to allow those with slaughter permits where no official grading is possible to enjoy these increases in price? This is urgent, Mr. Speaker, because the changes go into effect on Monday next.


Right Hon. J. L. ILSLEY (Minister of Finance):: I received no notice of the question and therefore am unable to answer it at the moment. It will be necessary for me first to make some inquiries, but I shall try to see that the answer is given to-morrow.

ONTARIO WINTER WHEAT POLICY, 1946-47 On the orders of the day:


Hon. J. A. MacKINNON (Minister of Trade and Commerce):: Mr. Speaker, I wish to make a brief statement on the Ontario winter wheat policy.
During the crop year 1945-46, Ontario winter wheat was sold at a ceiling price of $1,26. per bushel for No. 1 Canada eastern winter wheat, basis delivered at Montreal. There was an appropriate flour ceiling. Producers were also given the proceeds of an Ontario wheat equalization fund, arising from collection of an equalization fee on the exports of Ontario winter wheat flour. To place a floor under these prices, the Canadian wheat board was empowered to buy No. 1 Canada eastern winter wheat at $1.25 per bushel, basis delivered at Montreal. No purchases by the board were necessary, because commercial interests bought the wheat at the ceiling price.
It had originally been intended to raise the ceiling on Ontario wheat to $1.35 per bushel for the crop year beginning July 1, 1946, and to permit a corresponding increase in the 63260-225i
domestic price of winter wheat flour and the products thereof, but in view of recent developments in price control policy this step is not being taken. Instead producers will receive at time of delivery an additional nine cents per bushel which will be paid by the Canadian wheat board on behalf of the government.
In addition, the wheat board will pay to producers at time of delivery an amount of five cents per bushel in lieu of any payment from the equalization fund that will be operated as before with the government absorbing any profit or loss therein. By this payment at time of delivery, the difficulties and expense of making a subsequent small payment will be avoided. It is felt that this system will be more satisfactory to the producers.
The net effect will therefore be that producers of Ontario wheat will receive, in addition to the price paid by the purchaser under the existing price ceiling, an amount of 14 cents, nine cents of which represents the equivalent of an increased price and five cents of which represents a fixed and final payment out of the Ontario wheat flour equalization fund. The Canadian wheat board will continue to maintain a floor at $1.25.
I should perhaps add, for the sake of clarity, that no adjustment is being made in the price ceiling on Ontario wheat or products made therefrom.


Karl Kenneth Homuth: The minister in his statement referred, I think, to a ruling of the wartime prices and trade board. What was that ruling? Perhaps the minister would clarify that part of his statement.


James Lorimer Ilsley: There was no reference in my colleague's statement to a ruling by the wartime prices and trade board. There was a reference to recent developments in price control policy, and the reference there was to the statement I made recently that having already made a number of changes and taken a number of articles out from beneath price ceilings, and having also made an adjustment of the Canadian dollar in terms of the United States dollar, we intended now to hold the line and did not feel that we could do it if we permitted an increase in the ceiling on Ontario flour, but that rather we would adopt the subsidy method to bring about the same result.


Mr. WRIGHT:: In view of the increased domestic price just announced by the minister for Ontario winter wheat, has he given consideration to increasing the price for western wheat used for milling in Canada?


James Angus MacKinnon: That and other matters relating to the production of wheat in Canada are at present under discussion.
35(52
Immigration


CIVIC HOLIDAY
[Stage Direction]
On the orders of the day:
Thomas Langton Church: In view of the new order in council respecting holidays, may I ask the Secretary of State what is the present status of civic holiday, the first Monday in August? Is it to be just a provincial holiday?


Hon. PAUL MARTIN (Secretary of State):: That is a civic holiday.


IMMIGRATION
[Stage Direction]
On the orders of the day:
Mr. STANLEY KNOWLES (Winnipeg North Centre):: I should like to ask a question of the Minister of Mines and Resources. Has an office of the Canadian wives bureau been opened at The Hague? If so, is it not possible for this bureau to assist the fiancees of Canadian servicemen as well as brides who are seeking to come to Canada?


Hon. J. A. GLEN (Minister of Mines and Resources):: There is a Canadian wives bureau stationed at The Hague, under the jurisdiction of the Department of National Defence (Army), which deals with the wives and dependents of servicemen. There are a great number of them still over there, and as I indicated on Tuesday last we are endeavouring to speed up the facilities in order that these dependents may be brought to Canada. I hope that will be in a very short time. It is also true that a number of Canadian servicemen have become engaged1 overseas during the war, but I would point out to the hon. member that it would not be possible, without the creation of hardship and hard feelings, to give the fiancees a preference over the wives and children of servicemen who are still over there. As a matter of fact, just before I came down to the house I replied to a letter of one hon. member who -had asked about the wife and children of one serviceman who wished to get them over here, and! pointing out the difficulties. The department is very anxious indeed to relieve the anxiety of any Canadian citizens who are in the position indicated by the hon. member.


Thomas Langton Church: I hope the minister will give consideration to immigration from Britain, as he promised to do a month ago.


James Horace King: Order.


MEDICAL INSPECTION OF IMMIGRANTS
[Stage Direction]
On the orders of the day:
Mr. L. W. SKEY (Trinity):: I should like to address a question to the Minister of Mines and Resources. By what definite dates do the government expect to set up medical inspection facilities in Europe for immigrants and fiancees, with special reference to Holland and Italy?


James Allison Glen: I cannot give any definite date. I have had an officer in Paris inspecting with regard to accommodation there. I am also informed that there is great difficulty in obtaining it, and I made a statement on the subject in answer to a question which the hon. gentleman asked me before, with regard to t.he facilities, which will be found in Hansard of Tuesday last.


Thomas Langton Church: What arrangements is the minister going to make with regard to immigration from Great Britain?


James Allison Glen: We have no objection to persons coming in who are medically inspected and satisfy the requirements of the regulations and will not be a charge on the country.


LABOUR CONDITIONS
[Stage Direction]
On the orders of the day:
Stanley Howard Knowles: May I direct to the Minister of Labour a question with respect to the dispute between the international typographical union and the Southam newspapers? Is the minister taking any further steps to bring the parties together? What are the prospects for an early settlement of this dispute?


Hon. HUMPHREY MITCHELL (Minister of Labour):: As the hon. member has said-


Mr. SMITH (Calgary West):: I rise to a point of order. It seems to me, Mr. Speaker, that on the ruling made a moment ago, that question cannot be asked or answered, because there is a committee sitting.


Mr. COLD  WELL@: I rise to a point of order. I understand, Mr. Speaker, that you did not make a ruling; you made a statement to the house and requested hon. members to be governed by your advice. Is that understanding correct?


James Horace King: The hon. member is correct. I have said two or three times that I did not give a ruling. I made a statement.

The Budget-Mr. Jaenicke


Stanley Howard Knowles: Will the Minister of Labour answer my question?


Humphrey Mitchell: Certainly I will answer the question.


Karl Kenneth Homuth: I rise to a question of privilege.


James Horace King: Order. I hope the hon. gentleman will help the Speaker to keep decorum and dignity in this house. It is the privilege of a minister to answer an oral question or not to answer it if I permit the question to be put by the hon. member; yet if the minister does not want to answer it he does not have to do so.


Karl Kenneth Homuth: He is out of order if he does so.


Gordon Graydon: If the minister answers this question we are going to ask to have our question answered. You cannot make fish of one and flesh of another.	*[DOT]'


Humphrey Mitchell: 


Gordon Graydon: At your own risk.


Humphrey Mitchell: Let us for once act like grown-up men.


James Horace King: I suggest to the hon. member that he prepare his question for the order paper, and we shall see then if it can be put.


Stanley Howard Knowles: Apparently the minister is ready to answer the question. I suggest he be allowed to go ahead.


James Horace King: I would ask the hon. member to accept my suggestion. I have asked the hon. gentleman to prepare his question for the order paper and submit it to the proper officials, and if it is in order it will be put on the order paper.


Stanley Howard Knowles: We might as well go home.


Gordon Knapman Fraser: You can see how ridiculous the whole thing is now.


THE BUDGET
[Stage Direction]
The house resumed from Wednesday, July 17, consideration of the motion of Right Hon. J. L. Ilsley (Minister of Finance) that Mr. Speaker do now leave the chair for the house to go into committee of ways and means, and the amendment thereto of Mr. Mac-donnell, and the amendment to the amendment of Mr. Maclnnis.
Mr. F. E. JAENICKE (Kindersley):: Mr. Speaker, my colleagues in this group have covered practically all our objections and the
particularly weak points in this budget, as far as we view these points in the light of our platform and in the light of the economic and social principles which we believe will lead to security and the happiness of the vast majority of the Canadian people.
I wish to deal particularly with the budget proposals as they affect the farmer, and particularly the farmer in the west. It seems to me that in most countries, in most civilized countries in any event, the farmer is always the forgotten man, at any rate if we consider the broad principles of economics as contained in the national budget. The only provision in this budget concerning the farmer as such is the resolution that the farmer shall be allowed to average his income over a period of three years. While I am thankful for this concession, it is but a small dose of relief. The constituency which I have the honour to represent is purely an agricultural area. In my business and profession as a lawyer I represent farmers exclusively, and during the long years of practising my profession I have acquired an intimate knowledge of the farmer's business and especially of his financial and economic difficulties.
I may say that there are a large number of farmers in my constituency who are paying income tax, and it is a matter of very vital importance to them, especially during the last two years. During the parliamentary recess last winter I had occasion to talk to my constituents, my farmer constituents, about income tax in general. I heard numerous complaints and suggestions about farmers' income tax, and I have compiled these into six points which I shall place before the house and upon which I shall elaborate. I may say that these points, although I endorse them fully, are not my own but are those of the farmers in my constituency, and I deem it my bounden duty as their representative to place them before this house and before the minister.
Here are the points:
1. The farmer does not mind paying his share of the national tax load by way of income tax, provided that it is fairly, justly and equally imposed.
2.	He thinks that, because of the whims of nature-his is a very hazardous business, giving him a bountiful crop one year and practically nothing another year-his income should be averaged over a period of at least five years.
3.	The form of income tax returns which is required to be completed needs the employment of a bookkeeper and should be simplified.
4.	The actual assessments are delayed too long.
The Budget-Mr. Jaenicke

5.	Additional exemption should be allowed to a farmer who has the help of his wife and of his children, without whose help he could not have the income on which he is taxed.
6.	Some of his old debts should be allowed as deductions.
The first point I mentioned was that the farmer does not object to bear his fair and equitable burden, provided that he is satisfied that everyone else carries his load. The fact is that the farmer is not satisfied that everyone bears his fair share. A farmer who makes his return every year, because he has been requested to do so, has a feeling that some of his neighbours escape the arduous duty of filling in that form and of paying the tax. Of course he does not know, and often his suspicion is unfounded and the neighbour whom he suspects of delinquency may think the same of him. But in our province of Saskatchewan I am sure the tax-paying farmer knows that some persons are not making returns and are not paying their taxes, because they boast that they are not doing so; and some of these persons are the Saskatchewan taxpayers association-not to be confused with the income tax payers association. So far as I can gather, the officers of this association, and especially the secretary, claim that under our constitution as it stands, or as it should stand, according to his contention, the dominion has no authority to collect income tax. I offer no opinion on this question, because, I mention later, the matter is sub judice, and being a lawyer I have the greatest respect for judicial decisions. So far as I am concerned the question has already been decided. It was decided in 1924 by the privy council. The fact remains, however, that many people, especially farmers, because of the feeling that the tax is not fairly and justly borne rather than because of the intricate constitutional question, have joined the association. This has gone on now for almost two years, so far as I can find out, and only within the last month has action been taken against the secretary. He advised me that he had been prosecuted last month and was defending the case on the constitutional ground. Yesterday I saw a clipping in the Saskatoon Star Phoenix reporting that his case came up last Friday and was adjourned again because apparently the attorney general for Canada had not yet acknowledged his notice that the constitutional question was to be raised, although he had received an acknowledgement from the attorney general of the province. This man is defending himself. I do not know whether he is without the means to retain a lawyer, or whether he is unable to get a lawyer to

review the matter and give an opinion. In any event, as I say, this man is defending his own case and his defence should be facilitated by the Department of National Revenue to bring the issue to an early conclusion.
I do not know this gentleman personally, and have never approached him by letter- that is the secretary of the association, Mr. Smith. But he saw the press dispatch in the Saskatoon Star Phoenix dealing with the answer I received from the ministry to a question I placed on the order paper three months ago, pertaining to the refusal of persons to file income tax returns on constitutional grounds. The question and answer will be found at page 421 of Hansard. I did not refer to the Saskatchewan Tax Payers Association in that question, by the way. However, he wrote to me, after seeing that press dispatch in the Saskatoon paper, and he states in part:
Just to keep the record straight, the Department of National Revenue have not to date proceeded against any member of our association. Numerous threats have been received. No action has been taken. We requested that the department produce its source of authority. They seemed reluctant to state.
Before I had time to reply to the letter, I had another from Mr. Smith dated April 8, 1946, in which he stated in part;
As the income tax division here in Saskatoon have been sending out multigraphed forms threatening to sue our members, it was necessary for us to get a form letter multigraphed to answer them. Enclosed is a copy.
The multigraphed letter form, of which the department must have received scores, perhaps hundreds, reads:
The inspector of income tax, Federal Building, Saskatoon, Sask. Attention Mr. W. S. Mackenzie.
Dear Sir:
Re Income Tax
I am a member of the Saskatchewan Tax Payers' Association which was organized last year to bring to the attention of the legislature the advantage and desirability of the province repossesing all rights to the collection of income tax. The dominion-provincial conference adjourned February 7 last without reaching a decision on this question. Prime Minister W. L. Mackenzie King in a letter to us states "that this matter has been referred to the Department of Justice for consideration and attention."	.	.
As the premiers are to meet again this month I am awaiting the results of this conference before making returns to your office.
I am, sir,
Yours truly,
I repeat, I offer no opinion on the constitutional question involved. I complain, however, that this matter has been allowed to drag along for almost two years, creating doubts in the minds of people, especially the farmers. In view of the publicity which the association

The Budget-Mr. Jaenicke
has received in the Saskatoon paper about it's contention, without action being taken to decide the issue, these doubts were reasonable doubts and I cannot blame any layman for joining the association if it offered some relief in respect of a tax which he feels is not justly and fairly borne by all the people. Likewise in one large area in my constituency the feeling of unfairness is particularly strong. It will surprise some members of the house to learn that there are several farmers in that portion of my constituency who were subject to excess profits tax, and they may still be in that category, although in last year's "budget some relief was granted them by the amendments to the excess profits tax legislation. These cases, I admit, are rare. However, here is an example. One farmer had an income a few years back of a little over $19,000. This is not excessive, because he farms over six sections with a cultivated area of over 4,000 acres. The minister took everything from him except $5,000. That is, on an income of a little over $19,000, he paid more than $14,000. He is one of the finest patriotic gentlemen I have ever had the pleasure of meeting. He did not complain because the tax was high, but he said in discussing his plight with me that he would not object if industry, especially monopolistic industry, bore a like burden, and he pointed to concessions by way of accelerated deductions in depreciation given to the Aluminum Company of Canada and other monopolies which are mostly foreign-owned corporations. He referred me to the capital gains made during the war by large industrial corporations after payment of taxes. No wonder the farmers are bitter about income tax.
I admit that this farmer is a fairly large operator, but being unable to replace worn-out machinery and to make depreciation deductions for machinery because it is too old, he is now faced with the necessity of acquiring new equipment as soon as it is available. But he was not allowed to set up a reserve in order to purchase the new equipment he now needs.
While this feature of the excess profits tax was eased somewhat, the feeling persists, and I believe rightly so, that the farmer, after many years of crop failure and disastrous economic conditions, is not fairly treated as compared with industry.
My second point is that the farmer should be entitled to average his income over a period of five years instead of three, as proposed by the minister. That period of three years may be sufficient to meet the needs of the farmer in the east, where the weather is not as capricious as it is on the prairies. Let me give one concrete example. A farmer in my constituency. who did not think he was liable for
income tax because according to his bank account he was going into the hole, was finally requested to make returns for 1942, 1943 and 1944. It took us a period of several months to get all the vouchers and accounts ready. The matter is now settled and this is the position. In 1942 he operated at a loss of $1,16058. He is a fairly large operator. In 1943, when most of his 1942 crop was marketed and when his 1943 crop was completely hailed out, his net income was $2,591.81, and in 1944 his net income was $1,180.29. He was not taxed. He is a married man. The inspector did allow the 1942 loss to be applied on the 1943 income, which left a small taxable income of $1,431.56 for 1943. As I have already said, the 1944 income was not taxable. The big headache comes in 1945. In that year he marketed almost $11,000 worth of cattle; and he was obliged to do so, not by choice but rather by force of circumstances. In . the fall of 1944, just when he had a bunch of cattle ready to take to market, a bottleneck developed in the packing plants and he was not able to sell his stock until early in 1945. Later that same year he had his regular allotment ready for market, and sold them. Then in the fall he found that because of crop failure in that particular district, resulting from drought, he had insufficient feed to carry all his cattle through the winter, and he was forced to sell a large number which he had intended to keep until 1946. So in one year he had to sell cattle which should have been sold over a period of three years. If you keep in mind his returns for the previous three years, it seems to me only just and reasonable that a farmer in this position should be allowed to average his income over a period of five years rather than three.
I venture to say that similar cases and similar circumstances can be duplicated a hundredfold. I can give the minister all the particulars and references in this case if he desires them. I dare say he has received numerous requests and resolutions from farmers and farm organizations asking for the five-year average. I sincerely believe the request is reasonable, and I trust the minister may give the matter further consideration and amend his resolution on that point accordingly.
My third point is the simplification of returns. I admit that the blue form on which a farmer computes his income is not complicated, and that with the records of his grain marketing permit book he can pretty well establish his gross income. The deductions, however, are a different matter. Very few farmers keep books; it just is not in them. It is not that they are incapable of doing so, but
The Budget-Mr. Jaenicke

they simply do not have time. Usually the farmer buys practically all his necessary supplies, his main supplies which cost a great deal of money, during his busiest season, when he is seeding, summer fallowing, harvesting, working from sunrise to sunset; when he has to rush to town for the necessary repairs in order to keep his outfit going, and at night he is too tired to make bookkeeping entries of the amounts he expended during the day. Over a period of days and weeks I have spent hours assisting farmers to complete their income tax returns. 1 have asked them to gather up their vouchers, accounts and so on; then, after spending two or three weeks on it and getting the form finally completed, a little later the farmer finds this cheque or that receipt, the particulars of which he forgot to give me at the time. Some suggestions have been made to me in this connection. The farmer says he wants a simplified form, and there is at least one suggestion that I think has some merit. I should like to submit it to the minister in the hope that it might be applied at Jeast to western grain farmers. Instead of itemizing his expenses, as he is now required to do, allow the farmer a flat reduction of a certain amount per cultivated acre, in which amount would be included all the necessary expenses and deductions which must now be itemized. I think with the assistance of organized agriculture and our agricultural colleges

that is, the departments of farm management of our colleges- the officers of the Department of National Revenue could arrive at some fair and equitable figure. It might have to be varied according to the size of the farm and the district or location, and according to the rise and fall of the cost of supplies the farmer has to buy, but I do not think any of these obstacles is insurmountable. I believe this suggestion is worth a trial on an optional basis at least, just as the "average" feature proposed by the minister is to be optional, if I understood his explanation aright.
The fourth point I have enumerated is the complaint that the assessments are too long delayed. I presume that is a general complaint and does not pertain only to farmers. I maintain, however, that it affects the farmer more than anyone else because of this lack of bookkeeping to which I referred a few moments ago. A person has a feeling of confidence when he has made his return and paid his tax, but this feeling is dissipated when three or four years later an assessment notice is received stating that large sums of money are still owing the Minister of Finance. In one case which has come to my notice, after some further assessments were made requiring the payment of several hundred dollars in

addition, considerable correspondence ensued and at one stage the inspector asked this man to submit a statement of assets and liabilities from 1938 to date. Surely that is an impossibility for a farmer who keeps no books, at least as far as the earlier years are concerned.
I would plead with the minister that if necessary a larger staff be employed in order that the assessments can be completed more quickly and the taxpayers may know exactly where they stand.
The fifth point concerns a matter that has been drawn to the minister's attention not only in this debate but in debates on numerous other subjects in this house; for instance, in the debate on the address in reply to the speech from the throne. It refers to exemptions for a farmer's wife, at least in cases where part of the income is derived from dairying and poultry, and also where the children of the farmer are helping, without remuneration, in the accumulation of the income that is taxed. I endorse whole-heartedly and fully the very able argument presented a few days ago by the hon. member for Selkirk (Mr. Bryce) in connection with this point. I think it is only fair, especially in view of the fact that agriculture is not yet receiving the share of our national income to which it is entitled.
The last point I enumerated concerned itself with the farmer's debts. In the first place I contend that he should be entitled to deduct in any year capital payments in respect of a mortgage or purchase agreement covering the half section of land on which he makes his home. I think it is pretty well agreed in western Canada that the smallest farm unit on which a farmer can make a decent living for himself and his family is 320 acres. I say that with the proviso that there should be parity prices, which the fafmer does not have to-day. In some districts in the west even a half section would not be enough land.
Secondly, in view of the difficulties the farmers experienced prior to 1938, I think they should be entitled to deduct the old [DOT]debts which they pay off. I believe it should be the policy of any government to assist farmers to get out of debt entirely. I know of no better class of consumers than the farmers, and a debt free agricultural class- and I mean just that, a debt free class- would be reflected in our whole economy by an increased home consumption of our industrial production, which has been emphasized by previous speakers in this debate. Let us do everything in our power to make agriculture debt free, though our present system of taxation is going a long way to prevent such a desirable end being achieved.

The Budget-Mr. Jaenicke
No doubt the minister and some hon. members will contend that my suggestions constitute a plea for special privileges for the farmers as a class. I do not admit the truth of this, but even if that argument should have some validity I think the suggestions made would work to the advantage of our whole economy; and I repeat that I know of no better way of distributing purchasing power than through the farmers. Furthermore I maintain that agriculture has been, is now and for some time to come will be the basic industry in our economy, and a prosperous agriculture will ensure prosperity for the whole of Canada. Then we must consider the uncertainties and hazards which agriculture has to face. There is the weather. In later years aviation has concerned itself a great deal about the weather, but the farmer has been battling and matching wits with the weather man ever since the dawn of history. There is hail, wind, frost and drought which are capable of destroying a whole year's hard labour. In the west we fight grasshoppers, gophers, sawflies, cutworms, rust, diseases of animals and diseases of plants. Nature seems to be full of these tricks, for no sooner have we built up a defence against these pests than some new ones come along. Then there is always uncertainty of the market and the future in general.
I think the farmer in his highly hazardous and speculative industry needs these considerations in relation to income tax liability. In addition he should have further protection of parity prices. I contend that these are not special privileges, but simply compensation for the extraordinary hazards of the farmer's highly important industry.
We had considerable discussion about parity prices at the last session, with everyone having a different idea as to what parity prices really meant. I confess the question has become confused. My rough idea on parity prices is that the farmer should receive his fair share of the national income. If the farming population of Canada comprises thirty per cent of the total population, agriculture should receive thirty per cent of the national income, or as near as possible to that percentage. I shall be frank to admit that this formula could only be a basis for computing parity prices for agriculture, but upon that basis I think the amount can be ascertained.
Of course the cost of production and the farmers' cost of living will have to be taken into consideration. In this connection I should like to mention tables contained in the Economic Annalist, which is a pamphlet received by all hon. members. It is sent to us by the
Minister of Agriculture (Mr. Gardiner), and upon it I wish to commend him highly. It is a splendid pamphlet, worthy of the study of every hon. member. In it is a table showing the rise and fall of agricultural prices as against the rise and fall of the cost of living and the cost of the goods and services the farmer has to buy. This table is confusing because the prices the farmer receives are based upon the index number 100 for the year 1926, while the cost of living and services and supplies the farmer has to buy are based upon the index number 100 for the years 1935 to 1938. But even at that, a close study of this table will convince hon. members that because of the rise in the cost of living and in the goods and services the farmer has to buy, his income is slipping, and he is not as well off to-day as he was a year ago. I have some interesting, indeed astounding figures to present, which prompted my making this plea on behalf of agriculture for consideration of their plight as income tax payers, and of their request for parity prices.
The 1945 "Year Book" goes back only as far as 1942 in its quotation of production figures. On the basis of 1942 figures the farmer received roughly eighteen per cent of the value of our national gross production, while the farming population comprised roughly twenty-seven per cent of the total population. Although there has been some increase in the prices of farm products since that time, I think the comparable percentages have not changed very much. The figures based upon national income are substantially the same, or perhaps lower, so far as the farmer's percentage is concerned, because of late he has received no advance in the price of the products he sells while, as I said, his cost of living and costs of production have undoubtedly risen.
One would assume that the per capita production in Canada by provinces would follow a similar trend, and that the provinces which are mainly concerned with agricultural production would all be on the lowest rung of the ladder. Such however is not the case. In fact the table at page 182 of the latest edition of the "Canada Year Book," the one for 1945, provides some startling information. This table shows per capita production in Canada in 1942, by provinces, and is as follows:
Ontario	
$651	18Saskatchewan	
582	56British Columbia	
574	74Alberta	
566	77Yukon	
566	49Quebec	
491	25Manitoba	
407	79Nova Scotia	
297	24New Brunswick	
276	21Prince Edward Island	
237	83
356S
The Budget-Mr. Jaenicke

It will be noted that Ontario stands first and Saskatchewan second. According to these figures of per capita national production one would imagine that Saskatchewan, which stands second on the list, would come pretty high in income tax payments, which give us an idea of national income. Rather the reverse is true. According to statistics supplied me by the dominion bureau of statistics, I have computed the per capita income tax paid by provinces, averaged over the last four years. The latest year for which I can get figures is 1944-45. With these figures we arrive at the
following results:
Yukon	
$202	90Ontario	
168	00British Columbia	
142	00Quebec	
118	00Manitoba ,	
72	80Nova Scotia	
56	10Alberta	
42	20New Brunswick	
45	10Prince Edward Island	
20	70Saskatchewan	
16	60
It will be noted that the Yukon stands at the top, and that poor Saskatchewan comes in last. While we are second in production, we are right at the bottom of the list when it comes to income tax. In this connection I think of the reference made by the hon. member for Muskoka-Ontario (Mr. Macdonnell) when, as reported at page 3221 of Hansard, he said:
I commend this particularly to the hon. friends to my left, many of whom come from Saskatchewan, because that province probably is the most individualist and the most capitalist province in the whole dominion, composed as it is largely of farmers.
In view of these figures I am sure the hon. member for Muskoka-Ontario and I must differ as to just what a capitalist or a capitalist country is. Saskatchewan's production and income is over seventy per cent agricultural. Perhaps the percentage is even greater, because all of us live on the proceeds of agriculture. From the figures I have just placed on record one would conclude that Saskatchewan farmers pay less income tax than farmers in other provinces. Figures supplied by the bureau of statistics, however, prove the opposite.
A few days ago the hon. member for Selkirk (Mr. Bryce) read a newspaper dispatch which contained information similar to that which I now have before me. These figures are based upon the 1942-43 assessment of income tax, by provinces, paid by farmers. The rest of my figures are on the 1942 basis. The following figures, however, give the assessment of farmers for income tax by provinces:

New Brunswick . Prince Ed. Islan
Quebec	
Nova Scotia . .. British Columbia
Manitoba	
Alberta	
Ontario	
Saskatchewan ...
No. of taxpayers including	Total	Totalfarming	Income	Taxcorpora-	Assess-	Assesstions	ment	ment. 11	$ 21,978	$ 4591 12	38,333	1.539. 72	232,325	5,205. 17	78,266	5.690. 240	644,999	43.876. 392	679,600	34.661. 497	1.244.534	63.113. 784	2.152,823	79.8341,544	3,585,810	205,835
Ontario, Quebec, Nova Scotia, New Brunswick and Prince Edward Island farmers paid a total of 892,727 as against Saskatchewan's 1205,835. The case I quoted a little while ago of the farmer who had paid $14,000 in income tax illustrates the fact that one farmer in Saskatchewan paid more income tax than all the farmers of Prince Edward Island, Nova Scotia, New Brunswick and Quebec put together.


Mr. BROOKS:: Can the hon. member tell us what prices were obtained for the products of the Saskatchewan farmer as compared with the prices in the other provinces he has mentioned? I think that is the only way to get a fair-comparison of what income tax should be paid.


Frank Eric Jaenicke: I am not prepared to answer that question at the moment. Some figures were given a short time ago by the Minister of Trade and Commerce (Mr. MacKinnon) showing that the price of Ontario winter wheat was just about the same as the price of wheat in Saskatchewan, with the exception that the Ontario farmer had less freight to pay. The farmers of Saskatchewan paid $205,835 as against $234,377 paid by the farmers of the other eight provinces. Out of a total of 2,025 farmers who were assessed, more than 75 per cent or 1,544 lived in Saskatchewan.
It seems to me that there is something wrong with our agricultural economics or with our treatment of agriculture, and that a bold approach to tackle the problem will be necessary to assure the farmer a just and equitable share of our national income. The suggestions which I have made are one little step in the right direction, if .they are adopted. Outside of a few isolated cases our farmers, especially those in Saskatchewan, need better homes, better sanitation, better comforts, better schools and more of almost everything before they can be said to have the same standard of living as the average urban resident.
It is said that the- farmer is a perpetual grouser, but since before the feudal system he has had a right to grouse. According to the hon. member for Renfrew North (Mr. Warren)

The Budget-Mr. Hamel
the eastern farmer apparently has no complaint. The hon. member said last year in a speech in the house, as reported on page 2560 of Hansard-.
We eastern farmers have no expectation or hope of ever getting rich.
It is not a question of acquiring riches; it is a question of getting out of debt and having a decent standard of living as compared with the rest of the population. He had some disparaging remark to make about his brother farmers in the west and their "whining." The last Economic Annalist, to which I referred a little while ago, contained a table on page 44 which brought back to my mind the speech made last year by the hon. member for Renfrew North It gives the details of the subsidies paid by the Department of Agriculture during the calendar year 1945. When I computed the per capita figures for each province upon the basis of the agricultural population I found that the provinces received the following per capita subsidies during the last year:
Ontario	 $45
British Columbia	 40
Alberta	 27
Quebec	 26
Prince Edward Island	 19
Nova Scotia	 19
Manitoba	 16
New Brunswick	 15
Saskatchewan	-	 15
In this instance I can tell the hon. member for Royal (Mr. Brooks) that Saskatchewan and New Brunswick seem to be on the same level. I am making no complaint about this apparent disparity and inequality in governmental paternalism, but I do wish some hon. members, including the hon. member for Renfrew North, would take these matters into consideration before they make speeches in and out of this house about the western farmer whining for this and whining for that when all he asks is a fair deal. I repeat: Direct your policies toward creating a debt-free agriculture, and a lot of our economic difficulties, especially those of consumption of our industrial output, will disappear.


Mr. IRENEE HAMEL (St. Maurice-Lafleehe):: (Translation): Mr. Speaker, I have a few remarks to make in connection with this debate. The Canadian ratepayer is greatly disappointed with the 1946-47 budget. He had expected that, in view of the considerable increase in the cost of living, especially from 1941 to 1946, the income tax exemption would be made applicable to incomes of 81,200 for single persons and $2,000 for man-ied people, effective from April 1st 1946. This has not been done. The government could have relieved the Canadian people much more than they are doing, by curtailing the expenditures
of some departments. I am amazed at the way the estimates are apportioned between the various departments.
We have a $2,769 million budget; of which $1,500 millions are for demobilization and re-eontruction, while 593 millions are earmarked for the Department of Finance. This amount of 593 millions includes 481 millions for interest on our public debt.
Mr. Speaker, I respectfully submit that reforms are needed in our financial system. The interest paid on the cost of public works, that is if projects carried out by our governments, whether federal, provincial, or municipal or by our school boards, is too high. I am agreeable that capital invested in useful private ventures invoking some risk should bring a reasonable return, but when it comes to the financial requirements of the government, our country's economic system should enable the latter to obtain the funds needed for just about the equivalent of the administrative costs.
Another department where an inquiry is particularly needed is the Department of National Defence. The minister (Mr. Abbott) requires for the administration of his department during 1946-47 a sum of $488,600,000, which sum is, of course, quite apart from the 525 millions requested by the Department of Veterans Affairs.
Expenditures of $488,200,000 for the army and for demobilization in this second peacetime year! To me this seems too much, especially when I scrutinize the various items. Here is the approximate break-down of those expenditures: Salaries, wages, pay and allowances, over 200 millions; transport of personnel and goods, 41 millions; furnishings, food and medical services, 37 million dollars; munitions, weapons, vehicles, 100 million dollars.
Mr. Speaker, I have brought these figures to the attention of the house and the public to show what becomes of our people's money and to prevent that essential social reforms be blamed1 for the heavy burden placed on the weary shoulders of the disappointed taxpayers.
As for cooperative associations, the sound representations which the various interested parties have made to me show how touchy this problem is, since we are asked to referee a struggle between interests that feel they are both opposite and1 legitimate. A basic factor must be our guide in these matters, and that is the general interest. The function of the state, Mr. Speaker, is to endeavour through legislation, to ensure the people they are called upon to administer, the greatest *possible degree of earthly happiness, and1 one of the essential elements of such happiness
The Budget-Mr. Ilamel

is the highest possible standard of living compatible with the economic possibilities of our country.
There are, without question, two ways of doing this: first, to raise the people's income; second, to bring down the cost of living. Now that is just what true cooperatives are striving to do. Through the elimination, as far as possible, of certain powerful middlemen who generally go in for speculation, the producer unquestionably gets better prices. For the consumer, on the other hand, and especially the industrial worker, increased buying power means that he is better able to obtain the necessities of life.
Mr. Speaker, cooperatives have prospered, especially among our people, because of the concern over the exodus of farmers to the cities. In 1937 and 1938, prominent sociologists made a survey of the exodus from the farms. They thus investigated 161 localities of the province of Quebec, and their findings are quite interesting even though alarming. Out of 161 localities they visited, the average family income was less than $600 in 126 municipalities. It was on the strength of those findings that our best sociologists urged the intensive development of our cooperatives.
What a sad and grave mistake it would be, Mr. Speaker, through arbitrary and meddlesome legislation, to interfere with the development of co-operatives which have been such a boon to our farmers and industrial workers. Besides, the various individuals who have submitted to us documents complaining of the cooperatives do not represent the mass of the people.
I have here a list of companies who sent briefs against the cooperatives to the royal commission. It includes 200 insurance companies, food trusts and corporations like the ABC Packers and the British Columbia Packers Limited. I humbly submit that only a few big speculators can suffer from the intensive development of cooperation. For that reason, any legislation which interferes with the expansion of cooperatives is objectionable.
My final remarks to the house bear upon the problem raised by dominion-provincial relations. On that score we are radical autonomists and we believe that any attempt by any federal government to reduce the prerogatives of provincial legislatures is a step towards the eventual disintegration of the federal compact. Our country cannot reasonably hope to become a unitary state. Two fundamental reasons will always prevent this, namely, the diversity of its population, and the vast expanse of its territory.
	#
Since 1760 one has found in this country citizens of different racial origins, different philosophical ideals, different religious convictions, that is a state of things which will last for all time. In order that legislation may adapt itself in so far as possible to the needs of these various groups, it must be passed and implemented by provincial authorities.
Moreover, it is extremely presumptuous to claim that this country may be administered from Ottawa since it is more extensive than Europe which numbers some thirty governments and since the United States require 49.
These two reasons, in evidence at the time of confederation, still apply and will hold good for all time. It is our duty, as was so aptly pointed out by the hon. member for Beauce (Mr. Dionne), to let the provinces look after their own obligations and sources of revenue. We have been given to understand that Ottawa seeks to centralize taxation so that it may meet dominion expenditures. This argument does not convince me since, looking over the budget now before the house, I find that out of $2,769 millions, a little over ten per cent, that is less than $300 millions are spent annually on the payment of family allowances, old age pensions and unemployment insurance benefits.
Mr. Speaker, if we wish our people to develop in a friendly and prosperous spirit within the scheme of confederation, we need fulfil only one duty, that is, carry out decentralization. On that condition only will life be tolerable for the various groups settled in this country.


Mr. D. S. HARKNESS (Calgary East):: Mr. Speaker, I wish to say something about oil, not the kind that is frequently spread in this chamber, but the kind that comes out of a hole in the ground.
The only direct reference to oil that I find in the budget speech is on page 2919 of Hansard, where the Minister of Finance (Mr. llsley) said:
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.
I am afraid that the second word of that paragraph, "minor", is only too strongly indicative of the attitude which this government has taken towards oil development and exploration and oil taxation generally.

The Budget-Mr. Harkness
Canada has been described as an oil-hungry nation. We produce only fifteen per cent of our requirements of crude oil, which is less than one per cent of the world's production, and we possess less than one-tenth of one per cent of the world's proven reserves. At the same time we are great users of oil, coming second only, on a per capita basis, to the United States among all the nations of the world. In spite of these facts the present budget does not contain the provisions which have been recommended by the oil men of the country to encourage the exploration and drilling programmes which are required to maintain our present production and discover new oil fields in the dominion.
In order to make the oil situation clear I should like to give a brief review of production in Alberta which is and has been for many years the chief source of oil in Canada.
In 1945 Alberta accounted for approximately ninety-eight per cent of Canadian production, excluding the northwest territories. In Alberta Turner valley has contributed 97-6 per cent of all the oil produced in the province from the start of the industry up to the end of 1945. In passing I may say that I exclude the figures for the northwest territories, where they produced 351,000 barrels last year and about 1,250,000 the year before, because that production was really a defence matter. The oil produced in the Northwest Territories can only be used locally, but of course it is very valuable there, close to where it is found.


Mr. MacNICOL:: Does the hon. member mean at Norman Wells?


Douglas Scott Harkness: Yes. In Turner valley, gas seepages had been observed for many years before the first oil well was drilled. There are stories of cowboys and cattlemen in the early days who, when their business took them into that part of the countiy, would poke a stick into the steep side of Sheep creek and light a match to the gas which came out and cook their bacon and beans over the resulting gas fire. It may be a matter of interest that only last year I saw a small fire of this nature burning on a hillside a few miles north of the Turner valley townsite. It was these gas seepages which indicated the presence of oil and led to the discovery of the first Turner valley well, Dingman No. 1, which was drilled not far from the site of one of these gas seepages. This well struck oil in a shallow horizon above the limestone, in 1914, and started the first Calgary oil boom, during which, for a short period, every place of business in Calgary, practically, was an oil office, and fly-bynight stock promoters were collecting money
in wastepaper baskets. This wave of get-rich-quick stock selling was rapidly ended by the first world war of 1914-18, and oil development languished for ten years, until the famous Royalite 4 well was brought into production with a tremendous flow of wet gas from the limestone. This started a second oil boom and, what is much more important, a great deal of exploration work and drilling, which resulted in a steadily increasing production. This development work was given tremendous impetus when the Home well, some four miles south of Royalite 4, in 1929 turned out a large producer and thus extended the field away to the south. The next few years were ones of steadily increasing drilling and production, with constantly improved drilling equipment and methods, which enabled deeper holes to be sunk. In 1936 Turner valley royalties well, some four miles south of the Home well, struck crude oil in the limestone, and the final period of development of the Turner valley field, as a crude producer in quantity, started. Three years later, crude oil was found in the far north end of the field, so that now production has been secured in an area over twenty-five miles in length.
During the thirty years during which oil has been produced in Alberta, approximately 81,000,000 barrels have been recovered from Turner valley, and approximately 2,000,000 barrels from the rest of the province. During this period, there have been drilled some 654 miles of well in the Turner valley, and something in the neighbourhood of 484 miles of well in the rest of Alberta. I give those figures in miles, because in that way is more readily realized, I think, the tremendous, amount of drilling that went on, than if they were given in millions of feet. This has involved the drilling of over 1,200 wells, of which 460 were producers, 560 were dry holes, or dusters, and the remainder were dry gas producers.
I should like the house to note particularly that only 460 of these 1,200-odd wells were producers. In other words, the oil business is a very risky one.
I think we may now properly ask, how was all this drilling financed? Who was responsible for it? Why was it done? The answer is very simple. Initial production and most of the extension of Turner valley and the discovery of other fields were due to small companies, financed by small men in the financial sense, who were willing to take great risks with their capital in the hope of making large returns. After Turner valley had been proved as one of the great North American oil fields, large companies came into the field, and are now engaged in an extensive geological and geo-
The Budget-Mr. Harkness

physical survey of the foothills area of Alberta, as well as the plains of that province and of Saskatchewan, and as a matter of fact in other parts of the dominion-the maritimes and Ontario. However, the start and much of the important development of the oil business in Alberta were due to the "wild-catter,"as he is generally called. It may also be proper to look briefly at the returns received by individuals and companies responsible for Alberta oil development. The amount of capital risked has been in excess of $150,000,000 and the returns less than $130,000,000, so that the major part of Canadian oil production has been secured at a loss of over $20,000,000 to the enterprisers responsible for it. Furthermore, as nearly as I can determine from examining the figures, all this loss, and more, is due to government taxation in one form or another.
Just at this point I might mention something about the contention of my hon. friends on the immediate left, the C.C.F. party, who in Alberta have been advocating the taking over of these oil wells, and as a matter of fact the whole business of oil development, by a government. I should like to point out that if that had been done the government of Alberta, the dominion government, or whoever had done it would now be many millions of dollars behind, because, in addition to the taxes they have collected1 which, had they been operating the industry themselves, they would not have secured, they would have had this further loss.


Mr. LOW:: It was just for campaign purposes.


Douglas Scott Harkness: As the hon. member says, it was just campaign literature.
Furthermore, in connection with the development of oil by a government or a government agency, I should like to mention briefly a -little crown company called Wartime Oils, which the dominion government set up to drill wells in Turner valley, at a considerable loss to the dominion in spite of the fact that they were operating in a proven field.
The point I am getting at there, once more, is that the oil business is an exceedingly risky one, and I think we are extremely fortunate that we have men in Canada who will take the risks involved in putting up the capital required to discover what has been discovered. In view of the loss which has been incurred in searching for oil in this country, is it any wonder that the oil men are discouraged and that a full-out drilling programme is not in progress?

To show it is not, may I illustrate from the situation in Turner valley?	When this
session of parliament began there were thirty-two large rotary drilling rigs in the valley which had been used to drill wells there or other exploratory wells in the foothills. All these rigs were capable of sinking wells to the depth of 10,000 feet or more required in that area. Of these thirty-two drilling rigs only four are in operation and drilling; the remainder are sitting idle. Each of these rigs represents an investment of $150,000 to $200,000, or the twenty-eight sitting idle means between four and five million dollars of idle capital, all of which should have been at work twenty-four hours a day drilling wells and attempting to increase Canadian production. In addition, of course, there is a considerable amount of employment which we might have had and is being lost. Everyone of these rigs would be working if the tax structure were such as to encourage the oil men to drill; but as matters stand at present, only the large companies, whose revenues come largely from refining, and selling and distributing the products, and who own a number of wells now in production, can afford to operate. This is so because present tax credits and depletion allowances cannot be used by the smaller producing companies, or by prospective new ones, to anything like the extent or advantage that they are used by the large companies.
To- illustrate what I mean, assuming that the present budget resolutions pass, let us take a company which secures an income of $1 million from producing wells in 1947. It has a depletion allowance of 33% per cent, which leaves a taxable income of roughly $667,000. The thirty per cent corporation tax on this bill will give a tax bill of roughly $190,000. This company during the year drill one deep test well in the foothills area at a cost of $400,000, which is the normal cost, and if this proves to be a dry hole they get no returns. They are allowed fifty per cent of the cost of this well under the deep test drawback regulations, which of course would be $200,000-$10,000 more than their tax bill-and as a result, the company would pay no taxes. Further, of course, it means that the cost of this dry hole to the company was only $210,000.
Let us take a new company which is formed and which drills a similar well costing $400,000, which proves to be a dry hole.- The cost is $400,000. They have no way of getting out of it. Similarly, a small company with an income of $100,000 a year from producing wells would have done the same drilling at a cost of S381.000. From that

The Budget-Mr. Harkness
example we see clearly that the present tax provisions work out to the advantage of the big company but do not he4p the little fellow.
The plain truth of the matter, put as simply as I can state it, is that no encouragement is given to new capital to go into oil drilling enterprise, and the tax provisions are such that small companies with a limited income from production, or none, and with a fair amount of cash, are not in a favourable situation. There are many companies of that kind, which have no producing wells or only a very small income from producing wells, but from their production in the past they have a fair amount of cash. They are not justified, however, in risking that capital in an attempt to get new production at the present time. As a result they sit there and the drilling equipment is idle. They are doing nothing. Of course the ultimate position is that only a fraction of the drilling that could be carried out is going on in Alberta.
I should like now to make some suggestions to the minister as to how the oil business could be stimulated by government action. These suggestions are essentially those of the Alberta Petroleum Association, which includes in its membership practically all the independent oil producers of Alberta as well as the large companies. When we refer to the independents in Alberta we mean the small companies apart from Imperial, Standard, Shell and so on.
The first of these suggestions is the matter of deep test legislation. A tax deduction of fifty per cent is allowed for expenditures made in drilling deep test oil wells. This deduction is allowed only for wells in the foothills area which involve drilling to a depth ranging from 6,500 to 12,000 feet or more. These are the depths necessary. The oil men would like to see this interpretation of the tax provision changed to include the deepening of abandoned exploratory wells. The question I should like to ask the minister is whether the statement he made does or does not mean that. I am not clear on the point and I should like to have him answer that.
In any event, a considerable number of these abandoned wells did not reach the oil producing limestone, for one reason or another, and their inclusion in the tax deduction provisions would result in some of them being completed, any one of which might,
if successful, give us another Turner valley. The oil men are anxious that the fifty per cent tax. deduction be extended to wells drilled in the plains area, most of which do not go deeper than 3,500 feet and, for the most part, less.
The adoption of this suggestion by the government would do much to encourage drilling in the Alberta and Saskatchewan plains area. Why such wells do not enjoy this tax benefit I cannot understand, because an oil well at 2,000 feet is as valuable as one at 9,000 feet. I suggest that the government should do everything possible to get a large drilling programme under way on the plains where production has already been undertaken.
In 1945, in the plains fields of Alberta there were produced 630,000 barrels of oil, which went a considerable way toward offsetting the decline of nearly 900,000 barrels in Turner valley in 1945 as compared with 1944. At this point I would point out that Turner valley has passed the peak of production. That occured in 1942, and since that year it has been steadily and rather rapidly declining as an oil producer. It is for this reason particularly that it is so essential to open up new fields.
At the same time I wish to make it clear that the valley will produce a large volume of oil for many years to come under a favourable tax structure, and many more wells could be drilled there which would prolong the life of the field. As a producer, Turner valley compares favourably with the major United States fields, and as a result of its performance Canada since 1939 has taken second place in the British empire as an oil producer, and has also taken its place among the oil producing countries of the world.
Let me get back to my suggestions. The first is that the extension of the fifty per cent tax deduction to wells drilled on the plains and to completing abandoned wells will at once materially increase the number of wells drilled.
Secondly, there should be a greater depletion allowance. At the present time operators are allowed a depletion allowance of 33jr per cent. In the United States they are allowed up to fifty per cent and in no case less than a depletion allowance determined by the rate of production to available reserves in relation to the time of investment. This means that a company having no net income in any particular year is entitled to a depletion allowance and may carry it forward or backward to apply against future or past profits.
The Budget-Mr. Harkness

Some of our mines were at one time allowed a depletion allowance of fifty per cent and I understand that they are pressing strongly to have that restored. I would press strongly that the provision be put in for oil drilling whether it applies to mines or not. Mining is surely not as hazardous or as risky as drilling for oil. A mine is usually developed only after a large body of ore has been found, but the only way that oil is found is by the drill and there is always the possibility of a dry hole.
As an example of what the oil men face, even in a proven field, I would read a short paragraph from an issue of the Calgary Herald which I received yesterday or the day before:
Foothills No. 24, recorded a pleasant surprise for oil men when it came in on what was considered the eastern limi t of the north valley field as one of the valley's best, and at latest reports was doing nearly 800 barrels daily under unrestricted flow.
Foothills No. 25 will be drilled immediately a quarter of a mile northeast. Drilling these wells is like walking a plank blindfolded. You never know when you will step over the edge. With the east extension wells you never know when you will have overstepped the fault block. You are dealing with the dark underground mystery of the Turner valley limestone. You are gambling a quarter of a million dollars that it extends one step more. You will have to go over the edge before you can afford to stop drilling.
There have been drilled in Turner valley, since it was proven as a major field, plenty of wells that did not come into production, or that did not realize production which amounted to anything. Then, even when the well is a producer, no one knows how long it will continue, or at what volume. Under the circumstances, I should think the oil drillers ought to be given greater depletion allowances than they have been allowed in the past, and in any event they should get as good a deal as United States operators get in their maximum of fifty per cent.
The third point is that all drilling costs, permit and leasing expense, geological and geophysical costs, etc., be allowed as deductions for tax purposes and, further, that these expenses may be claimed as and when desired, so that large expenditures over two or three years may be deductible when production is secured, and.spread over that production.
The fourth point is that present income tax regulations covering exploration and1 development, which when the present budget is passed will expire on December 31, 1947, should be made part of the permanent tax structure so that operators may be able to make future financial plans under definitely known tax conditions. In the past the existing write-off regulations, depletion allowances, etc., have been subject to renewal, or not, from year to

year. This has made for uncertainty as to what the position might be in future, and has discouraged the small operator particularly.
The fifth point concerns the removal of the subsidies now being paid on crude oil imported into the prairie provinces. The Alberta Petroleum Association contends that to a large extent these subsidies were passed on to the railway companies, and that they have resulted in an artificial depreciation of crude oil prices. They believe that the subsidies should be removed and that Canadian crude oil should be allowed to reach its true economic level. Further, they contend that this will not result in any price increase to the consumer if at the same time the government removes the wartime tax of three cents a gallon on gasoline. In fact, some of the Calgary oil men insist that the price, in Alberta at least, can and would come down if free competitive prices were allowed. To support this, they point to the decrease in the price of gasoline in that province as Turner valley developed and small companies got into the refining business. The great example is the price of gasoline in the Coutts area in the southern part of the province. That price came down materially during the period of Turner valley's growth and development and as small refiners got into operation. About the time the war began the price of gasoline was around twenty cents a gallon. At the present time, owing to various restrictions that have been put on the oil business and the levelling of prices, gasoline now costs thirty-eight or thirty-nine cents a gallon in this area. Of course to a large extent that was due to the fact that one of the large oil companies bought a small refinery which had been established at Coutts and closed it up, and now gasoline has to be shipped into that area. The oil men further maintain-and I think they are right-that under conditions of free competition many small refineries would start up, and as a result the price of gasoline would be brought down.
In that connection they put up the argument, which I think is sound, asking why the government should control the price of gasoline in order to keep it approximately the same throughout the prairie provinces, Alberta, Saskatchewan and Manitoba. They maintain that Alberta should be able to take advantage of its geographical position and the fact that oil is produced there. They say, if that is to continue to be done and Alberta farmers are to be penalized to whatever extent they are penalized, then the government should also take over entire control of the price of wheat, and see that sufficient subsidy is paid so that the same price can be offered for wheat at

The Budget-Mr. Harkness
Didsbury or Olds or Lethbridge that is paid in the Red River valley. There is a considerable differential at present, owing to freight costs, and if that is to be allowed to continue, then gasoline should be treated in the same way.
The government seems determined to keep all information about the subsidies paid very secret, and as a result I am not in a position to say definitely or even to form a good, sound opinion, in regard to the effect on prices of the removal of the subsidy. I have been mentioning the contentions of the oil men; and I think they are right when they say it has been impossible to get from this government information on which a sound judgment could be formed. I placed on the order paper a question which was passed as an order for return on April 17. The information I was given amounted to exactly nothing.
I need not bother reading all the questions I asked; they were in connection with the source of supply of oil imported into the prairie provinces, the amounts from each source, the delivery point, the subsidy paid, the cost per barrel and so on. The reply came back from the Department of Mines and Resources: "No information"; from the Department of Reconstruction and Supply: "No information"; from the Department of Trade and Commerce: " No information." From the Department of Transport comes this information:
The board of transport commissioners advise no information can be given with respect to part 7 of this question because the shipping and destination points are not given.
Of course that is the information that was asked for. Finally, we come to the wartime prices and trade board, and here is what they say:
Subsidy is payable by Commodity Prices Stabilization Corporation Limited where necessary on imports of crude oil from the United States to the prairie provinces in an amount sufficient to reduce the laid down cost to refiners to a level equivalent to the laid down cost of crude oil of comparable grade produced in the Turney Valley oilfields.
What actually happened was that the Turner Valley oil field price was set at a very low level. Subsequently it has been raised forty-five cents a barrel, and the price was just kept at that level. The present price is, I think, $2.08 or $2.11 a barrel, which is an increase of forty-five cents over the price some eight or ten months ago. Then they go on:
In accordance with government policy as stated from time to time in the House of Commons by the Minister of Finance, it is not considered to be in the public interest to give
information as to subsidies paid by Commodity Prices Stabilization Corporation Limited to individual concerns.
The rest of it contains no information at all. Mr. ILSLEY: Is the total subsidy given?


Douglas Scott Harkness: Absolutely nothing is given. I have read everything in this return and, as I say, it amounts to nothing. I might iust as well not have it; it did not give me anything. Why the government should be so cagey about this matter; why they should keep it such a secret; why they will not give us the information in regard to really simple questions like this concerning matters about which I think the general public should know, and about which members of parliament especially should know, I do not understand.


James Lorimer Ilsley: I have stated the total in the house.


Douglas Scott Harkness: Well, here is the return and it gives absolutely no information at all, except the information that they will not give information.
Unless we can, and particularly in this house, get information along the lines I have indicated, how can we reasonably make up our minds in this matter? How can we form sound judgments? So far as I can see, the matter is on a par with the sort of thing we find concerning many other questions which have been asked, and about which members have been complaining. I am convinced that much of this information is denied in various governmental departments because of regulations and red tape which have been laid down, and which no one seems to have sufficient initiative to get rid of or to break. I should think that in many instances ministers do not want to deny the information sought. But three or four years ago, during the progress of the war, rules were laid down, and they have remained in force. A clerk who is asked for information will say, "Well, there is rule 464; no. we cannot say anything about that. No information is available." The time is long past due when departments should be cleaned out in this regard, and new regulations put into effect so that members of the House of Commons can get the information to which they are entitled.
In any event, so far as the oil subsidy situation is concerned, I am sure of one thing, and that is that the removal of the subsidy and the removal of the fixed price on Alberta crude would cause it to rise in price, and thus stimulate development in the oil business.
In closing, I earnestly request the minister carefully to review the whole oil situation, and to make those changes in the tax structure which will enable this industry to start
The Budget-Mr. Hlynka

on a full-out exploration and drilling programme. From the narrow viewpoint of increasing the dominion's tax revenues, alone, this would be good business, because the increased production which would result would materially increase the amount which the dominion government could and would collect in taxes. From the broad viewpoint of increasing our wealth, removing us from the position of almost complete dependence upon foreign countries for our oil supplies, and reducing our unfavourable trade balance with the United States, the benefits would be tremendous.


Mr. ANTHONY HLYNKA (VegreviUe):: Mr. Speaker, on this occasion I propose to discuss the income tax as it affects farmers, and also to discuss briefly Canada's marketing policy and bread rationing in the United Kingdom.
In the presentation of the brief made to the federal government last March by the Canadian federation of agriculture it is stated at the outset that the federation recognizes that with the end of hostilities the problem of food supplies must move into first place on the world scene. They state:
In fact, never before has the burden of responsibility rested so heavily upon victorious peoples of solving the problem of feeding humanity. Even if human considerations were not uppermost m our minds, there is the stern fact that^ millions of hungry, undernourished and starving people constitute an almost insurmountable barrier to progress.
Then it goes on to say:
Canadian farmers would gladly respond to this urgent call for maximum food production, but without a more adequate labour supply and an immediate improvement in economic returns, they will find it quite impossible to produce to capacity.
That is the statement which appeared in the brief presented to the government last March by the Canadian federation of agriculture.
In addition to that, we have the statement made in the house on June 17 by the Prime Minister (Mr. Mackenzie King) upon his return from the United Kingdom. The Prime Minister repeats practically the same story which is told in the presentation of the Canadian federation of agriculture. At page 2530 of Hansard he is reported in these words:
May I add that it does seem to me conditions in central Europe are deteriorating rapidly and greatly . . . Unless some means can be found whereby the new world and countries that have supplies of food and clothing, can furnish those supplies to the people of some of the occupied zones and other parts of Europe, there may be conditions of famine, of strife and of turmoil 
which will amount to something in the nature of the spread of a new revolution throughout Europe.
And farther on, he says:
The last word I should like to say at the moment is that, as far as one can judge what will go farther than anything else in helping to meet present world conditions is increased production and more effective distribution.
He concludes his remarks with this statement :
Anything that can be done in the world to-day to furnish the necessities of life to those parts of Europe which are in dire need will not only mean, salvation for them, but may well be in the nature of salvation for the world as a whole.
After the Minister of Finance (Mr. Ilsley) had brought in his budget on June 27, and after I had an opportunity not only of listening to it but of reading it, I must say I was disappointed lo find that it did not reveal any trace of a recognition of the problem of famine faced by the world to-day.
In the presentation of the Canadian federation of agriculture were eight specific requests respecting taxation. Before setting forth these requests, I should like to read one sentence from the brief, wherein it states:
A number of features of the present act have proved unduly burdensome and in some cases quite unjust to our farmers.
In other words, the federation, an organization which more or less coordinates all farm organizations in Canada, and which represents about thirty per cent of our total population, tells the government that the tax structure of Canada is such that it proves unduly burdensome. Therefore the federation makes eight requests. I shall read them, leaving out the less important parts, so as to have on record what agriculture asked for, and what it received in the present budget. The requests of the Canadian federation of agriculture were as follows:
1.	That the income of the farmer, for income tax purposes be assessed on the basis of an average over a period of at least four years. A moving average plan might be adopted which would assist the taxpayer in meeting payments in years of loss or low returns.
2.	That breeding herds be recognized as a capital asset, and that a basic herd plan be adopted to distinguish between capital and income in live stock dispersal sales.
3.	That the exemption for single persons be raised to $1,000, and that for married persons to $2,000.
4.	That more adequate allowance be made foi the labour of farmers' wives, sons and daughters in connection with production on the farm.
5.	That farmers be no longer required to accept responsibility for collecting income tax from their hired help.
6.	That the government provide a board of arbitration- whereby taxpayers may have a simple and inexpensive means of appealing decisions of income tax officials.

The Budget-Mr. Hlynka
7.	That payment of arrears of interest and principal on the home farm, due before 1940, be allowed as deductions for income tax purposes.
8.	That provision be made for final clearance to be given all taxpayers two years after the final returns have been made for any one year.
One would think that the Minister of Finance would have recognized the contribution made by Canadian farmers during the war; would have recognized and realized that Canadian farmers, particularly those in the west, faced ten years of depression just before the war; would have recognized and realized further that farm machinery just about broke down during the war years, that homes must be repaired and built, that fences must be repaired and built, that house furnishings must be provided, that everything needed in a home on a farm must be paid for at the present time. Yet the minister granted only partly one of the requests which the Canadian federation of agriculture placed before him, that is, the spreading of income tax over a period of three years, not the four-year period as was suggested by the federation. We need food at the present time when half the world is starving and when the British government has been forced to ration bread, but we are not encouraging the production of food by bringing in a budget of this sort and entirely ignoring the farmer. That sort of action discourages food production.
I understand that the Canadian federation of agriculture has been in existence for approximately ten years. I submit that it would be advisable for the government seriously to consider making an annual grant to national farm organizations like the Canadian federation of agriculture. I am quite certain that hon. members will agree with me when I say that Canadian farm organizations have played an important role in the economic life of this country, both during the war and during the peace. Representatives of agricultural organizations have been asked to sit in consultation with the various boards and branches of government, such as selective service. These organizations have been asked to make recommendations and appear as witnesses from time to time in connection with matters of great concern to Canada. These organizations do a considerable amount of valuable research and they print and distribute much valuable information. Hon. members often quote from material and statistics compiled by these organizations and their figures are usually regarded as being authoritative. Various briefs and press announcements dealing with the problems of agriculture are prepared by these organizations. In this way the farm organizations not only are rendering a great service to the farming population of this country, but are rendering a great service to the population of Canada as a whole.
An organization such as the Canadian federation of agriculture has done a great service to Canada by having remained non-political. That in itself constitutes a guarantee that this farm organization will serve a useful purpose in prodding the government in connection with matters affecting our economy regardless of which party is in power. In view of that fact I earnestly plead and recommend to the government that an annual grant be made to this most important farm organization to enable it to carry on research and publish material for the use of our Canadian people. It would be a worth-while investment and would enable our agriculturists to be well informed on matters on which they should be well informed. I make this suggestion and request in all earnestness.
Before I deal with marketing, I should like to say a word or tv%, more in connection with taxation as it affects our farmers. I have received a great many resolutions from organizations in my own constituency of Vegreville. I believe that farm organizations should be encouraged to send resolutions to their members and to the government in order that they may become more keenly interested in the various problems of agriculture. They should be urged to continue and intensify the representations they make to the government and to their representatives in the House of Commons. I should like to place on the record a list of the farm groups in my constituency which have sent resolutions to me fequesting an adjustment in the income tax as it affects farmers. I believe that these resolutions were patterned on the one prepared by the Canadian federation of agriculture and presented to the federal government on March 28, 1946. This is the list:
Pine Knoll Farm Forum
The following Alberta farmers' union locals: Mundare, local 711; Victoria, local 386; Smoky Lake; Brody, local 92; Pakan; Toporetz, local 350; Smoky Lake, local 425; Lampburg, local 101; Chipman, local 75; Andrew, local 8; Mundare, local 145; Woodgrove, local 151; Hillock, local 340; Willingdon, local 1; Lamont, local 192; Sandy Lake, local 27; Errol, local 195.
Mr. Fred Stelter, of Lamont, also sent in a resolution on behalf of a large number of farmers in his district.
These resolutions should not have been ignored by the gentlemen who were drafting the budget. Most of these eight requests that were placed before the government could have
The Budget-Mr. Hlynka

been granted if the government was really and truly anxious to expand production in this country.
I now come to marketing. Over the past two years both the Minister of Agriculture. (Mr. Gardiner) and the Minister of Trade and Commerce (Mr. MacKinnon) have been vigoriusly defending the government's policy of selling Canadian wheat in the neighbourhood of sixty-three cents lower than the United States farmers received who sold their wheat to the same customers. The Minister of Agriculture pacified our Canadian farmers by promising them, if they continued selling at that lower price, a steady market for their wheat in the future.
What are the facts? A Canadian Press dispatch, which appeared in the Winnipeg Tribune of July 3, 1946, gives the following as the reason for the failure of the British food mission to reach an agreement with the Canadian government:
High government officials told the Canadian Press the suspension (of the negotiations) had resulted from reluctance of the Canadian government to commit itself to large-scale wheat shipments which might in the event of a poor crop year in the future prevent her from fulfilling contracts with other customers for Canadian grain.
That dispatch gives what is generally regarded as the reason for the failure to reach an agreement with the British government. But on looking over another newspaper report which appeared in the Toronto Evening Telegram of June 25 last, I find this statement:
Mr. Straehey agreed that it would only be proper for the British government to recognize what this country has done during the war i* supplying wheat and to make a new contract, but he emphatically stated that it would not be of an exclusive character with the United Kingdom filling its entire requirements from this country.
That statement presents an entirely different picture from the one which the Canadian government gives in the first dispatch I quoted.


Mr. GARDINER:: That statement did not come from the Canadian government.


Anthony Hlynka: The dispatch says that' high government officials told this to the Canadian Press.


James Garfield Gardiner: That is the usual press way of saying they saw somebody.


Anthony Hlynka: I take it that the second dispatch by J. H. Pisher appearing in the Toronto Evening Telegram gives the real reason. Yet the Minister of Agriculture and the Minister of Trade and Commerce for
fMr. Hlynka.]
years have been asking our Canadian farmers to sell their wheat below the price which United States farmers were getting on the same market in order that we might be able to hold that market for Canadian wheat. Now, according to the statement of Mr. Straehey, that theory has fallen down; it does not hold good any longer. So why should our Canadian farmer continue to sell his wheat below the price which the United States farmer gets if the former is not guaranteed a future market for his wheat? I feel that Canada can afford to sell her wheat to Britain at the price at which she is selling it to-day or even lower, but not at the expense of the Canadian farmer alone. The whole nation should help to bear the burden by means of a subsidy or whatever you wish to call it, and hot footed by the Canadian farmer alone. The policy of this government may have been responsible for failure to reach an agreement.


James Garfield Gardiner: May I ask the hon. gentleman a question? Is he making these statements on the assumption that there is not going to be any contract made with Britain?


Anthony Hlynka: No.


James Garfield Gardiner: Then why is he assuming that there is failure?


Anthony Hlynka: I was just coming to the point which the Minister has in mind. In the Ottawa Journal of July 16, 1946, just the day before yesterday, there appeared this item:
Indications last night were that the Anglo-Canadian wheat agreement would be signed before the end of the crop year, July 31.
It will be for four years, it wras learned, with a fixed price of $1.55 a bushel, basis No. 1 northern, at the head of the lakes for the first two years and no ceiling price for the second two years, but possibly a floor price.
It appears from that report that an agreement will be reached, but that is not the point I was making. My point was that the theory that has been advanced in this house for years by the government, that if the Canadian farmer sells his wheat at a lower price than the United States farmer he will be guaranteed a market for the future, no longer holds; it has fallen down. For that reason I personally believe that the Canadian farmer should demand a price for his wheat comparable with the price which the United States farmer receives, and if the Canadian government wants to sell our wheat below that price, it is up to the whole country to subsidize that price.

The Budget-Mr. Hlynka


James Garfield Gardiner: May I ask one more question? Assuming that the agreement when it is made and signed provides for the selling of all the Canadian wheat which any authority who is competent to judge thinks ought to be sold under such a contract in each year for the period of the agreement, would the hon. member still make the criticism he is now making?


Anthony Hlynka: It depends upon the price.


James Garfield Gardiner: Even if the price were $1.55 for the first two years and no ceiling on the price for the last two years?


Anthony Hlynka: That does not get the minister out of the hole into which he has got himself by promising the Canadian farmer a guaranteed market for his wheat.


James Garfield Gardiner: I have not got myself into a hole. I am simply trying to help my good friend-although we do not always agree politically-out of the hole in which he has got himself.


Anthony Hlynka: I know the Minister of Agriculture is a good friend of mine, but I have many good farmer friends too, and I want to plead their case because I know they are being taken for a ride.
However to leave that for a moment, may I now refer to a press report about bread rationing in Britain. The title is:
Ration bread in Britain on July 21.
If the British government were so certain that an agreement could be reached, and that the British people would be sure to get all the wheat they want from Canada-of course, we may not be able to fill all their requirements-I am not so sure that the British government would have proceeded to ration bread. By the way, I find in the Evening Citizen of to-day an editorial in part as follows:
Housewives Ask the King
When 300,000 United Kingdom housewives petitioned the king last week asking him to abolish the rationing of bread, they exercised a right recognized as long ago as the Magna Charta and constitutionally confirmed by the Bill of Rights of 1689.
It just goes to show that even the housewives of Britain had to petition the king not to ration bread.
I want to quote a passage or two from a press dispatch:
London, June" 27.- (CP)-The government announced to-day that bread rationing in Britain wfill begin July 21.
John Strachey, food minister, told the House of Commons that flour also will be rationed as from that date.
Further down in the article it is stated:
The ration of bread will be nine ounces a day for adults generally, 15 ounces for male manual workers, 11 ounces for expectant mothers and women manual workers, 12 ounces for adolescents from 11 to 18 years, eight ounces for children from 5 to 11 years, four ounces for children from 1 to 5 years, and two ounces for children under one year.
The basic ration is one onuce a day less than had generally been forecast.	[DOT]
Mr. Strachey said the cabinet decided on rationing

first bread rationing in Britain's history . . .
The last statement is this, in reply to Mr. Churchill:
Mr. Strachey: I assure this house and, I hope, the world that the fact that we have faced the necessity of introducing bread rationing is the best proof that we are concealing no stocks of bread or flour or wheat in this country . . .
That places the picture before this house as clearly as I can place it. I maintain, Mr. Speaker, that it is in the interest of Canada to reach an agreement with the United Kingdom on wheat, regardless of the price which Britain can pay; of course she will not take it for nothing. If the United Kingdom buys our wheat the Canadian government should subsidize or make up the difference between the price which the British government will pay and the price which the Canadian farmer should get. Unless we do that, our Canadian farmers will be compelled to continue receiving less than the United States farmer does from the same customer. We all know that the Canadian farmer deserves to get every cent it is possible to get out of the sale of his wheat.
I notice that farmers were urged by the Canadian wheat board to deliver wheat as early as possible. Also the Minister of Trade and commerce (Mr. MacKinnon) rose in this chamber and lauded the attitude of the farmers; according to press clippings, "MacKinnon lauds prairie farmers." The prairie farmers can do pretty well without lauding, but they want a little cash, and I believe we should get on to a basis which would place the farmer in an economic position where he no longer would be forced out of his home by mortgage companies and so forth.
In addition to that, I want to mention the raising of prices on farm machinery. That is in addition to the refusal of this government to grant the farmer these income tax exemptions. I wish also to refer to freight rates. What about the freight rates which western farmers have had to bear for so many years? I believe the time has come when this government should take a bold stand and show that they are really concerned with the future of our agriculture. Then what about the price of gasoline?
The Budget-Mr. Aylesworth

All these things add up to the fact that the farmer is in such a position that sooner or later he will not be able to stand on his own feet, and will have to get into debt again.
I therefore appeal to the Minister of Finance and the Minister of Agriculture tp consider once again during this budget the position of the farmer and see if some amendments cannot be brought in to place our agriculture on a really sound basis.


Mr. W. R. AYLESWORTH (Frontenac-Addington):: Mr. Speaker, in rising to take part in this debate I feel that I must speak on behalf of the forgotten man-the farmer. He has been carrying far more than his rightful share of the burden during the war years and is still being asked to carry on and produce more and more, and he is given very little consideration when it comes to price control.
The Minister of Finance (Mr. Ilsley) has said that the thing which would prevent a depression would be greater production. I would say that this government has done nearly everything that could be done to discourage production.
For instance, the ceiling^ price which was put on meat has"~Been wrong from the very start. I asked this government three years ago to raise the ceiling on beef two cents a pound to the farmer and to leave it as it was to the consumer. If that had been done we would not have had the black market experiences we have had. There was too great a spread in price from what the farmer received for his meat and what the consumer paid. When the ceiling price was set I warned the government that this spread of seven cents i pound was at least two cents a pound too much and that when meat got scarce it would cause a black market because, the retailer having a spread of seven cents, it would bring him a return, on a 500-pound carcass of beef, of $35 profit, which was too high when compared with the price the farmer had to take. For example, a 1000-pound steer would bring the farmer around S100. He had to take care of that animal for at least two and a half years-buy feed and provide other incidentals. Compare this with the retailer, who would cut and sell this carcass over the counter in possibly two hours for 835 profit. If the ceiling had been raised two cents per pound it would have given the retailer a profit of $25 instead of $35, and the retailer would not have had the $10 to pay the wholesaler over and above the ceiling in order to get meat to sell in his store. Also, if this had been done the farmer would have received1 $10 each

more for his cattle and the consumer would have had his meat for the same price as he has been paying. Instead of this, we have had for the past year the greatest black market this country has ever seen. It has become a joke.
This government has set up many boards of control, and the result is that the farmer has to have a permit for nearly everything he wants to do in connection with the operation of his farm. First, he is forced to obtain a permit to kill, even if he wishes to kill his own stock; then, he is, if lucky, given a quota of the number of carcasses a month he is allowed to handle, which in the case of hogs runs from two to ten a month, and yet some permit holders have bragged that they have killed over two hundred' a month. What is the board of control for? Thus the man who tries to live up to the regulations finds himself handicapped as compared with the man who carries on with little or no regard for government regulations, orders or control boards. This situation has caused more dissatisfaction and unrest among farmers than anything else. We are told by the boards that these restrictions have been put on so that we shall use less meat here and be able to send more meat to England. I am going to say that more meat is being used for our domestic market to-day than ever before; much of the meat is being sold at from three to twelve cents a pound above the ceiling, and yet the farmer is asked to sell at the ceiling price.
There is then the question of milk. A few weeks ago the farmers of Ontario asked the government for a raise in the price of milk. What did they get? Here we have something that has far more food value than any other commodity for the price. Compare milk with soft drinks, which have practically no food value. A quart, or forty ounces of milk sells to the public for twelve cents; forty ounces of soft drink sells to the public for twenty-eight cents. I am sure that the government is holding the price of milk far too low, or is allowing the other to sell far too high. I would ask the government to allow the price of milk to be fixed so as to ensure the farmer a fair profit on his investment and a fair return for his labour. In this regard as with respect to the ceiling on meat, it has worked to the disadvantage of the farmer.
Another class of people who need some consideration are the vegetable 'growers. They work long and hard to supply the consumer, but in many instances before they have had an opportunity of disposing of their vegetables, imported vegetables will appear on the market

The Budget-Mr. Aylesworth
and their surplus remains unsold. I would ask the government to give this matter serious consideration and restrict the importation for longer periods each year.
I feel also that the policy of collecting income tax has worked to the disadvantage of the farmer. He makes out his returns and takes or sends them to an income tax office. He is called in and told that his feed bill is wrong, that if he fed that amount he is wasting it>-this from some man who would not know a hog if he saw one, or scarcely knows that his morning bacon is part of a hog, let alone how to feed them. Not many farmers will buy feed to throw it away. In some other cases he has been charged with $125 for each member of his family for food used from the farm. I understand that this has been stopped. I know of some farmers who have been large producers who have gone home from the income tax office where they were called in connection with their return, and have sold most or all of their stock. Why? Simply because they have not enough left to make it worth while. This has adversely affected hog production and it will be felt in the dairy industry also. This is certainly not a time to do anything to cause a decrease in production; it is a time when everyone should be encouraged to produce more than ever before to help save the thousands in Europe from starvation and at the same time help to stave off a depression here in Canada. Production could be increased, for instance, by increasing the price of milk to the farmer. Milk should bring more than it did in the month of May, which was $1.60 per cwt. for 3-3 milk and is below the cost of production. I know some will say that this price is higher than in the past. That is true, but it costs more to produce milk now than it did before the war. Wages are to-day almost double what they were in pre-war days; feed is higher in price; farm machinery has been increased in price; steel has increased in price. In fact, almost everything the farmer has to buy for use on his farm is higher in price. Therefore it is unfair to ask the farmer to produce to-day at present prices. It cannot and, may I say, will not be done.
Labour and the farmer will rally to the request of the government for greater production, if given a fair chance. The farmer did it in the war years and he will do it to-day, if given fair treatment.
If this country wants more butter, the government should raise the price; more cheese, raise the price; more pork and beef, take off the ceiling price and let the market find its level, Take off the ceilings on all farm produce and do away with control boards. I know that all members of this house will
agree that the production of food is the most serious problem facing this country and the world to-day. During the war years the Canadian farmer produced more food than had ever been produced in the history of the country, despite the short-sighted policy of the government, which had him fighting against labour shortages, price controls that were not in line with cost of production and many other controls. All Canada praised his efforts, but he cannot live on praise alone. There must be some action, some planning and some assistance to make the production of food a prosperous undertaking.
I contend that the prosperity of Canada depends upon the prosperity of the farmer. Why? Because the farmer is the greatest market in Canada for all the goods industry can produce. There are more than 700,000 farm homes in Canada, each one in need of the essentials of life and, in addition, in need of so many of the modern conveniences that have become a part of rural life, as well as of life in the cities and towns. We must convince the people of Canada who do not live on farms of this vital fact.
I believe that this budget should have raised the income exemption for married and single people. As presented by the Minister of Finance, it is a disappointment to nearly everyone. It is a fact that we have been carrying on in a piecemeal fashion for the first six months of this year, and no change for the next six months, a promise of some change for 1947-what a budget! The exemptions for married people should have been raised to at least $2,000 and for single persons to $1,000. If this had been done it would have helped the farmer and all others in the lower income brackets. I believe, too, that some allowance should be made for the farmer's wife who helps on the farm, because on many farms the wife takes the place of a hired man and the farmer is therefore entitled to an allowance on his income tax return.
The farmer is also entitled to a fair return on his investment, and once the people of Canada who live in towns and cities are alive to this fact they cannot but fall in line with the policy of putting agriculture in a healthy condition in order to improve their own living. Once a real standard of living is reached for the Canadian farmer, the standard of living as a whole will be on a much higher level. Then the worker will be busy making goods for the farmer; the farmer will be busy producing foodstuffs for the worker, and with people in full employment and earning good wages prosperity will accrue to all.
Suppose someone had said in 1939 that in the next few years Canada would produce
The Budget-Mr. Aylesworth


Mr. PAUL EDMOND GAGNON (Chicoutimi) :: (Translation): Mr. Speaker, before this debate is brought to a close, I wish briefly to acquaint the house with the reaction of my constituents to the budget, speech delivered by the Right Hon. the Minister of Finance (Mr. Usley.) The people expected, and reasonably so, a general tax reduction. After having done more than their share during the difficult years of the war to help the government in bringing to victory the struggle undertaken, our workers were desirous of having enough money left out of their pay cheques to enable them to cope with the ever increasing cost of living. In my opinion, the tax exemptions in the case of married persons should have been brought up to $2,500 and in the case of single persons to. at least $1,000; I believe the government should forthwith consider this matter. The working classes are over-taxed and they certainly deserve a little more consideration from the government.
Insofar as the proposed tax on cooperatives is concerned, I must say that the cooperatives of my district have been organized by farsighted and honest farmers who combine their resources in order to obtain a higher price for their products; other cooperatives have been organized by various groups of small wage earners, who combine their moral and financial resources in order to secure necessities of life at a lower price. We should have more than sympathy for such organizations. In my opinion, they should be tax-free because they are only the representatives of the members to whom the directors must report and, after a strict auditing, refund any overpayments in proportion to each member's patronage.
The agricultural cooperative is, in our
province, the necessary adjunct of the farm

The Budget

Mr. Burton
and serves those classes of society that need protection and help to survive. We cannot compare them with those monopolies and trusts that are cooperatives in name only. I therefore protest against that tax, which will not even bring enough yearly income to pay the interest on the billion dollar gifts made to foreign countries. The tax on soft drinks which, after all, is merely a nuisance tax, is another of the levies that directly affect the people, and which should be abolished as soon as possible. There are so many other sources of revenue to which the treasury could resort that we find it hard to understand the attitude taken by the government on the matter.
In concluding those brief remarks, I wish to say a few words about the flag question. It is my privilege to represent in this house a constituency which numbers among the most populous and the most advanced, from the industrial, ideological, cultural and social standpoints, in the province of Quebec. Important towns, perfectly developed, lie close to unmatched rural centres. The representations made by my electors, as well as the reports, resolutions, letters and telegrams I have received from individuals or public bodies lead me to believe that 98 per cent of the 80,000'people in the Chicoutimi district desire and want an absolutely distinctive flag. That is all to their credit.
No union jack, no fleur-de-lis, no camouflage, no old imperial fabric mended with maple leaves, but a new and distinctive flag, symbolizing a sovereign, free and independent nation. A flag we shall be proud to unfurl, which will appeal to our hearts and minds alike, which will be attuned to every patriotic aspiration of a country that has lived, that has suffered and that endeavours to free itself from all foreign servitude so as to give its own ambitions a broader scope, an ever nobler and loftier ideal.
You wish for national unity, you hope that all sections of our population may live in brotherly understanding and work in unison, under a common allegiance, to ensure our national future, well then, give us first a flag which every race represented in Canada may accept, as an emblem of strength, fame and achievement in keeping with the sentiments and wishes of the various ethnical groups making up our population.
A distinctive flag, essentially Canadian, will be a rallying emblem for all Canadians. A hybrid flag, were it named the Red Ensign, would be a symbol of disunity and misunderstanding. We do not want it.


Mr. J. W. BURTON (Humboldt):: Mr. Speaker, some lion, members may be anxious to have this debate closed, blit I make no 63260-226
apology for taking the time of the house to voice, on behalf of the people I have the honour to represent, their objections to the budget as brought down by the Minister of Finance (Mr. Ilsley) on June 27.
From all reports I have received thus far, this budget is the most unpopular ever presented to the Canadian people. On the night the minister made his speech I venture to say there were tens of thousands of people, from the Atlantic to the Pacific, sitting by their radios waiting to hear what tribute they would have to render unto Caesar; or rather, I should say, to know how much less Caesar would extract from them. But what a disappointment! Seldom if ever did so many people in Canada expect so much from one man and get so little.
Before dealing with certain features of the budget, I should like to make a few observations. There are times when I find myself in the awkward position of having to defend the Minister of Finance from his own friends and party supporters out in the country. In the past I could do this conscientiously, because if-and I emphasize the word "if"-I were a believer in the capitalist system of so-called free enterprise, I would not know where to go to find a better Minister of Finance. Even the Tory members of the Progressive Conservative party seem to realize that. No doubt they have found it difficult not to receive this orthodox budget with open arms. Would they have done better if the hon. member for Muskoka-Ontario (Mr. Macdonnell) had presented the budget? They might have put a different coloured coating on this bitter pill, but underneath it would have still been the same capitalistic formula: To those wffio have, more will be added thereto, and to those who have not, even that shall be taken from them.
In the matter of price control, I doubt if they would have done much better than the present administration except that in all probability they would have made more noise about the defrosting process. The Tories seem to have a knack for doing a lot of blasting. It will be remembered that in the early thirties they had the one and only R. B. Bennett who was going to blast his way into the markets of the world, but his powder got wet. They now want to blow the lid off the price ceilings; but, afteT listening to their financial critic reply to the Minister of Finance, I could not avoid thinking of the noise made by a harmless fuse on a first of July firecracker that failed to go off.
I should like to deal with the budget as it concerns the taxation oif cooperatives. I want in the most emphatic way possible to

35S4
The Budget-Mr. Burton

protest against the-I was going to say retroactive feature but I know the minister has taken exception, on. a number of occasions during this debate, to the use of that phrase. However, I would remind him that back out in the country the members of cooperative organizations, the farmers who have their little cooperative trading associations, look upon it as a retroactive feature regardless of what the minister calls it.
There is the other factor, the minister's attempt to force all cooperatives into paying a return on the invested capital. I ask: Where is their so-called free enterprise when they are forcing those who find good in the cooperative movement to accept their pagan philosophy that the wages of money must receive the first consideration? That is a vital question in so far as those of us who are in the cooperative movement are concerned. We in the cooperative organizations have endeavoured to build on true cooperative principles, but because of the shortcomings or neglect of the governments of the past there has not been placed upon the statute books of this country a real cooperative act that would give a guide to cooperatives as to what they should do in order to satisfy the government as to what a cooperative really is.
In these cooperative organizations we have one thing which, in my opinion, is the hope and salvation of people in democratic countries. By forming into a cooperative, people are given an opportunity to unite their efforts in self-help. While the Minister of Finance may clamp his finger down on only one section of the cooperative movement, we do not know but that his successor in another year will put the thumbscrews on another section. I should like to give a little illustration of this selfhelp idea, which is to be found in one form or another in all our cooperative organizations.
Back in 1919 there was started north of Humboldt a rural telephone line which I had organized previously. This line was constructed in order to provide telephone facilities to the people in that district. The company was incorporated under the provincial statute as a non-profit-making organization. Over 175 farmers are connected together by the system and we have day and night service for 365 days in the year at a cost of $9 a year. Throughout the years the board of directors have received no remuneration except a per diem allowance for the time spent in attending to the company's business. The shareholders who subscribed for shares have received no dividends, but from time to time money is placed in the reserve account.
It has worked out in this way. We could not wait until the end of the year to collect

from our subscribers the money required to pay the operating costs. We estimated what our expenditures would be, and we made a levy that we considered would be ample with which to pay our linemen, our repair bills and so on. Naturally at the end of the year we had a surplus, but we did not pay any interest on the invested capital, nor did we pay any dividends. If the Minister of Finance wishes I can bring him a file to show that last year this company had considerable correspondence with the department in Ottawa. They had difficulty in getting the department to understand that the company was not a profit-making organization. For a time the department refused to allow them to buy war savings certificates, on the contention that they were a profit-making organization. How do I or any of the members of the other telephone companies in Saskatchewan know that the minister or the Minister of National Revenue (Mr. McCann) will not soon tell us, "You must pay interest on your share capital"?
I should like to quote briefly from a letter I received from a farmer in my constituency, and I can assure the house that this letter voices the opinion of the great majority in my constituency and, I am satisfied, also in the greater part of the west. Here is what he said in regard to the taxation of cooperatives :
The people here are sore about the taxing of cooperatives. They look on it as a raid on the treasury of the cooperatives.
Then again:
Every one knows that the farmers started the wheat pools to save on the costs of marketing, which were excessive. All that the farmer wanted was a fair share of the consumer's dollar and not a profit.
I should like to quote from a letter received, not from a person living in my constituency, but from a man who lives just across the line, in the constituency represented by the hon. member for Rosthern (Mr. Tucker). He is a personal friend whom I have known for many years. He addressed his letter to the Minister of Finance and sent me a copy, thinking no doubt that the minister would be so busy that he would not have time to attend to it. The letter reads:
Hon. J. L. Isley,
Minister of Finance,
Ottawa. Ontario.
Dear Sir:
Re taxation of cooperatives
You are a busy man. In my own way, so am I. I have just read in Hansard that part of your budget speech dealing with the position of cooperatives in respect to income tax. If I read correctly and the House of Commons accepts your recommendation, it is your intention to

The Budget-Mr. Burton
take from me certain moneys that belong to me personally by way of taxing the wheat pools who are holding this money in trust to my account.
I take very strong exception to this action on your part and request that you give me good and sufficient reasons on common sense and moral grounds for your actions.
He goes on:
Let me put my position before you:
(1)	In 1924 I, with my neighbours and other farmers in this province, grouped ourselves together in what was known as the Saskatchewan wheat pool. In that year our grain was handled under agreement with private elevator companies. In many eases this agreement was not lived up to in spirit, if in letter, by many of these companies and proved to be unsatisfactory.
(2)	As a result of dissatisfaction, in 1925 we found it necessary to handle our grain through our own elevators known as Saskatchewan Pool Elevator Company. These elevators were to be operated at cost. Any moneys in excess of actual operation costs were, obviously, a part of the price of my grain and belonged to me personally and at no time were the property of the elevator company.
(3)	In pursuance of this policy of operating at cost, pool elevators in 1925 made no charge for handling and storing of grain at the time of delivery, the policy being to deduct actual operating costs from the final payment to be made when all the grain handled had been sold, plus reasonable reserves.
(4)	My recollection is that on some of the lower grades and mixed grades of grain handled, no final payment was available to make such deductions. The result was that members having such grain got it handled for nothing, which obviously was not fair to other members.
(5)	As a result of this experience, the board of directors quite properly saw the necessity of making a charge for handling and for storing the grain at the time of delivery to the elevators.
(6)	For reasons of safety, and because at the beginning of the grain delivery season it is impossible to accurately anticipate operating costs, handling and storage charges were set at a level greater than was necessary to meet the costs. In other words, part of the proper price of my grain was unavoidably taken from me at the time of delivery.
(7)	This policy of charging an amount for handling of grain at the time of delivery has been followed in subsequent years and has proved satisfactory to me and in line with cooperative principles and sound business practice. The fact that any excess charge greater than operating costs belong to me as the grower of the grain and a proper part of the price of such grain has been accepted by the members through their organization and until just recently admitted and gone unchallenged by your and preceding governments.
He goes on:
Now, I am in complete agreement with you when you say that the profits of cooperatives should be taxed the same as private companies and believe that cooperatives themselves are also in agreement.
May I interject there, so long as we have or may have a cooperative act that will give us all a yardstick to go by, so that we shall not 63260-226J
be subject to the whims of certain individuals or officials, changing from year to year. The letter goes on:
My question to you, Mr. Usley, is, by what process of reasoning do you find that the pools are taxable on moneys that obviously do not belong to them as organizations and which they hold in trust for their members? Obviously, and I think you must agree, such moneys are a proper price of the grain and should become taxable only when they get into the members' hands and they are found to be taxable under the provisions of the income tax laws.
I ask of you a plain and straightforward answer to this question. In closing, may I say that it does seem ingratitude on your part and on the part of your government and a lack of appreciation of the very fair and moderate stand the wheat pools have taken all along in the matter of grain prices at a time when the attitude of privately owned elevator companies must be a cause of considerable embarrassment to yourself and your government.
I wish to say a few words about that flood of postcards which some of us members have been receiving. Here are samples of two different kinds that I received. One of them
says:
I respectfully urge:
1.	That the government apply income taxation on exactly the same basis on all forms of commercial enterprise, including cooperatives, crown companies, municipal and governmental undertakings and mutual concerns.
2.	That patronage dividends, and like payments, be disallowed as an expense before arriving at taxable income.
The other card is of a different colour and is worded a little differently. It says:
Dear Sir:
I respectfully urge that the government apply the same principles of income taxation to all forms of retail business, cooperative and otherwise. I further urge that patronage dividends should not be allowed as an item of expense before computing taxable income.
Yours sincerely
Very appropriately this card bears the name of Mortimer Snerd. That is the way I received it in the mail.
There were, according to the 1941 census, 43,292 people in the constituency of Humboldt. Up to date I have received 253 of these cards. That includes men, women and children, and even those bearing bogus names. Everyone of these cards received by me I acknowledged. A large number of my acknowledgements were returned with the postmaster's notation, "Not called for", or "Unknown here". I diould like to read part of a letter I received from one man in reply to my acknowledgment:
Mr. J. W. Burton, M.P.
House of Commons,
Ottawa, Canada Dear Sir:
This acknowledges receipt of your letter to me dated the 14th instant, in which you acknowledge receipt of a postcard purported to have been signed by me. In reply I would advise

The Budget

Mr. Burton
that I have not signed any of these "request" or "urge" cards that are being. distributed through the mails to the taxpayers of the country. If any such card has reached you under my name it has been signed by someone else than myself.
If the paper shortage is as acute as our government would like to have us believe, why all this tommy-rot and cluttering of the mails in sending out all these cards, many of which may have never been seen by the party whose name is attached to them?
While on the subject of these cards, I want to say that I have always welcomed hearing from the people of my constituency, and I shall continue to look forward to hearing from them. But most of the people in the constituency have known Joe Burton long enough to know they do not need to have some smart aleck in Winnipeg or Toronto prepare their message to me for them. I have lived1 in the constituency for over forty years, and for thirty years I have been an active member of a number of cooperative organizations.
But those 253 cards were not the only communications I received on this taxation question. Over fifty wheat pool locals and other local cooperatives in my constituency expect me to protest vigorously on their behalf against the action of the government in this matter, I shall not weary you, Mr. Speaker, or bon. members by reading all their protests. I shall read only this one as an example, and may I remind the house that the total membership of the local cooperatives I have just mentioned in my constituency is many times greater than the number of cards I received, which were prepared evidently by the so-called income taxpayers association. This letter expresses what they are protesting against generally:
We the members of Quill Lake and Valley Plains Local, strongly protest this move by opponents of the cooperatives, and we wish to bring to the attention of our member of parliament the fact that the farmers of Humboldt constituency are definitely in overwhelming majority in favour of exemption from taxation of patronage dividends in the hands of cooperative organizations, and further, we respectfully request your full support of our views when this matter comes before the house.
May I say, when they ask for exemption from taxation of patronage dividends they do not want to have taxes applied to moneys which are being held for them in trust by their respective cooperative organizations.
I have here a notation that the hon. member for Inverness-Richmond (Mr. McGarry), speaking during this debate, said, as reported in Hansard, at page 3540, in reference to Doctor Coady, who is connected with the cooperative movement in the maritimes:
Doctor Coady has been the organizer, the initiator and the developer of the cooperative

movement throughout the maritimes. He is now and has been for many years the director of that movement.
From what I have heard, Doctor Coady is the director of the extension department of the St. Francis Xavier university at Anti-gonish. It is quite true that he has taken an active part in the organization of cooperatives, but as far as I can find out he is not listed as director of the cooperative movement in Nova Scotia. However, to come to what is more pertinent, the hon. member for Inverness-Richmond said:
What does Doctor Coady say of the legislation dealing with cooperative taxation? He has said it over the radio; he has expressed it in the press. This is what he said: "I am well satisfied with this legislation."
I do not know Doctor Coady personally, but I have heard a lot about his good work; and, having heard and read what the hon. member said in that regard, while I do not doubt his honesty of purpose, I do question the exact attitude of Doctor Coady, if that is the way it was expressed. Why would the cooperative union in New Brunswick, which is part of the movement that Doctor Coady helped build up, have already sent in a protest, as I understand they have done, against this new proposal? Why would the cooperative movement in the province of Nova Scotia, in the organization in which Doctor Coady, again, has been a main driving force, be worried about this and be considering sending in a protest against this legislation? The only explanation which I can think of as to the quotation attributed to Doctor Coady is that probably, on the night the minister delivered his budget speech, some newspaper man got Doctor Coady on long distance telephone or telegraphed and told him that the patronage dividends of cooperatives would not be taxable, without giving him all the other little details; and on hearing that, Doctor Coady possibly said that that would be fine; he was well satisfied. But I doubt if Doctor Coady will be satisfied when he has the full information before him.
One more thing while I am dealing with quotations. On July 10, when the hon. member for Lake Centre (Mr. Diefenbaker) was speaking, he said, after an exchange between him and my leader, the hon. member for Rosetown-Biggar (Mr. Coldwell) and several others:
That, of course, is the length to which my hon. friend, the leader of the C.C.F. party, has gone in this discussion. I can say that he may not be a Conservative, but, as the head of one of the greatest cooperatives in the province, he has indicated the support he would give to my hon. friends of the C.C.F. who have en-

The Budget-Mr. Burton
deavoured to make the cooperative movement in Saskatchewan or elsewhere an annex or an adjunct of the party they represent.
As a member of cooperative organizations in Saskatchewan throughout all these years, I emphatically deny that we of Saskatchewan have in any way endeavoured to bring in the cooperative movement as an auxiliary of the C.C.F. party. I will say this much, that many members of the cooperative movement support us; I as an active worker in cooperative movements have from time to time worked with Liberals and Conservatives, and at no time did any of us attempt to bring politics into our cooperative organization meetings or any of our work. About the best example of cooperation which the hon. member for Lake Centre might experience is when, a year ago last June, some Liberals in the constituency of Lake Centre joined with the Conservatives to elect him, and defeat an outstanding cooperator in the province of Saskatchewan.
Mr. Speaker, on behalf of the people I have the honour to represent I express regret that not more consideration was given to those in the lower income brackets when the minister brought down his budget and announced a new schedule that is to go into effect six months from now. I have always contended, and so have .all members of this group, that the first charge on the production of a nation is a decent standard of living for the people who make that production possible. The Minister of Finance and the Minister of National Revenue (Mr. McCann) know, as well as do all other hon. members, that $750 exemption for a single man and $1,500 for a married couple will not give a decent standard of living. When people earn enough to be able to pay the tax over and above having a decent standard of living the majority, it will be found, will be prepared to do so.
I see my time is going on, and there are a few other things I wish to discuss. I just want to say to you, Mr. Speaker, and all hon. members that some day I am going to take a little time out and tell you two things. One is what we in the C.C.F. mean and would do in so far as social ownership of property is concerned ; and the other is, to give you a straightforward, clear-cut example of what a C.C.F. government in Canada, namely in the province of Saskatchewan, is already doing in that respect. But I shall have to leave that until some other time, because I have a matter here with which I think I should deal. I can assure the house that it is not wholly a pleasure in so far as one part of it is concerned.
Speaking on July 16, the hon. member for Charlevoix-Saguenay (Mr. Dorion) took part in this debate. There is one part of his speech with which I can agree. When he was referring and objecting to the taxation of cooperatives he said this, at page 3519 of Hansard:
I submit that the best way to ensure our population against the dangers of supporting subversive doctrines, is to give them the means and opportunity of acquiring a measure of wealth and becoming landowners.
Since it is difficult if not entirely impossible to conceive of all citizens individually acquiring property, we may. as an alternative, encourage them to joint ownership; such is the function of cooperative societies.
Further on, he said:
The budget, however, ignores this principle; that is why, among several other reasons, I cannot approve the financial scheme as it was brought before us.
I am sorry that the hon. member is not in his place at the moment because, while not agreeing with other parts of his address, I should like to congratulate him on that statement, and other hon. members as well who have spoken in the same vein. I assure them that when they speak like that, whether in the French language, in English or in any other language, that is language that we cooperators can understand. I regret, however, that the hon. gentleman considered it necessary to put on the record a dispatch from Regina as it appeared in Le Droit on July 11 regarding the address made by His Excellency P. J. Monaghan, Archbishop of Regina, wherein he is reported to have accused the provincial government of Saskatchewan of appointing communists to high posts in the department of education. The quotation used by the hon. member can be found in his speech at page 3519 of that day's Hansard.
I regret that I did not have an opportunity to learn French when I was young. That is my loss and no one's gain. However, I could understand enough to know that the quotation which the hon. member was using had1 reference to the provincial government of Saskatchewan, and therefore I made it a point to check on the question he raised. May I say to him-and I hope his deskmate will convey to him what I say in this resipect and ask him to look it up in Hansard-that I have had the privilege of knowing His Excellency Archbishop Monaghan for many years, and I am sure that the archbishop will deplore the fact that the hon. member saw fit to bring this matter into the debate.
May I say again with all deference to the hon. member for Charlevoix-Saguenay that he can rest assured that this question can be
The Budget-Mr. Burton


James Lorimer Ilsley: Mr. Speaker, we have had a long and at times interesting debate on the budget. The criticism has been pretty outspoken, and much of it has been severe. As I have listened to hon. members speaking, I have thought sometimes that they have failed to put themselves in the position of a minister of finance or a government trying to finance a country which has come through five or six years of the most terrible war in human history. Most of the speeches have been directed to the urging of measures which would help here and there, but few of the speeches that have come from the opposition parties in this debate have taken into account the necessity of keeping within our means.
This question was raised by the financial critic of the opposition in the opening speech, when he asked: "Do we or do we not believe in deficit budgeting?" Well, Mr. Speaker, L must say I cannot see how a responsible government or a responsible minister of finance could possibly advocate a system of continued deficits in the Dominion of Canada, that is, deficits year after year, year after year. Therefore the government must in some way, particularly at a time when our national income is as great as it has ever been in the history of Canada, try its best to equate revenue with expenditure. That is the reason we cannot be popular and generous in the fiscal measures we put before the country. If I wanted to popularize myself with the opposition parties in this house I could do so. I could recommend high exemptions; I could recommend large reductions in taxation all along the line; I could budget, instead of for a deficit of $300,000,000, for deficit of a billion or a billion and a half, or something like that. And judging by the tone of the opposition speeches we have heard during the past two weeks, my actions would meet with approval.
I cannot bring myself to do that, even though we have to take a hard course. I know my Social Credit friends think there is another way to do it; that is, by the issue of money. Surely, however, at a time like this even the members of the Social Credit party must realize that this country does not need more money in circulation, or more credit; that this is one of the great contributing causes to the inflationary trend which is so obvious at the present time. So we are
brought back to this, whether we like it or not and whether or not it is popular; we are brought back to the necessity of equating revenue and expenditures when we have high employment and a high national income.
The Conservative opposition has attacked our expenditures. The C.C.F. opposition has shown no concern about our expenditures. Indeed I want to say to the C.C.F. opposition that I do not think in any of their speeches they have faced up to the real problem confronting the government of Canada at the present time. In many respects their speeches are highly intelligent. I do not want to be considered condescending or patroninzing in saying that, because I enjoy listening to them; but they never come down to this: How would they finance? That is the question they never answer. With regard to the Progressive Conservative opposition, they meet this problem by saying that we should cut our expenditures.


Ian Alistair Mackenzie: Not in the committees of the house.


James Lorimer Ilsley: Oh, well, no; and not in the house, and not in their preelection platform, and not in the country. When we have tried to pin them down to specific savings of expenditures in this house, the showing has been pathetic. There has been a tiny suggestion here and a tiny suggestion there.


Ian Alistair Mackenzie: Puny stuff.


James Lorimer Ilsley: Puny stuff, as my hon.
friend says. However, that point has been met during the debate by speeches from this side of the house, and I do not propose to go into it again. There has been some criticism of the fact that these cuts do not take effect until January 1 next, and it has been urged that our new income fax cuts should take effect on July 1, 1946. Well, what were the reasons why we proposed to institute these reductions in taxation on January 1, 1947, instead of July 1, 1946? To begin with, we legislated for 1946 in October of 1945. We made a sixteen per cent cut in our income tax and very heavy cuts in our other taxes in the October budget of last year. The cut for 1946 was provided for then. Some references have been made to promises implied, or something of that kind, by myself that any reductions in this budget would apply to the current calendar year; but no such promises have been read or cited or quoted, nor can any promises to that effect be quoted because I know pretty well what I have said. As I say, 1946 was legislated for by the budget of October 12, 1945; but there are other
The Budget-Mr. Ilsley

reasons. One reason is that had we instituted the reductions in income tax effective July 1, 1946, our deficit, instead of being $300,000,000, would have been very much greater than that; and the responsible critics of the budget in this house do not believe, and I agree with them, in deficit financing. Therefore we had to take into account our financial necessities.
It must be remembered that we changed our income tax system here in 1943. From 1917 to 1943 when income tax changes were made they were effective the current year, because the taxes paid in one year were taxes on the income of the preceding year. That is, in 1935, for example, a taxpayer paid taxes on the income of 1934. But that system was changed in 1943, at a very considerable price. We relinquished 50 per cent of our tax, or something of that kind, in order to get the taxpayers of Canada on the pay-as-you-go, pay-as-you-eam plan. So that now when the taxpayers of Canada pay taxes in a certain calendar year, they are paying on the income of that year, and therefore there is not now the traditional reason for making changes in the income tax system apply to the current year. But there is another very good reason against doing it this year. It is, I think, impossible to put a completely new pattern of taxation into force in the middle of the year. What we have done in the budget of this year is a radical thing, so far as income tax is concerned1. We have immensely simplified it, to begin with. We have raised the exemption. We have dropped the normal tax. We have instituted a different method of fitting family allowances into the taxation system, and we have replaced tax credits with deductions from income when providing for dependents.	[DOT]
When you have a deduction at the source system, and when you have forms in the hands of thousands and tens of thousands of employers in the country who are making deductions from their employee's incomes and you come along with a completely new system in the middle of the year, you create immense confusion. As a matter of fact no government should make a change like that without giving several months' notice.
For that reason it was felt entirely impracticable to institute a new system of taxation during the current calendar year, and that it would be better to have the deductions start in January, 1947. I do not say that you cannot make any changes which affect a current year. You can make a percentage cut. For. instance, you can make a five per cent cut on all taxes, or something of that kind. But I do not think any hon. member
[Mr. Ilsley. 1
would have been in favour of another straight percentage cut. I do not think there would be a member in the house who would be in favour of that. A moderate cut is, I think, all right. We did that. But if you keep that up it is unfair to the low income groups. Therefore we could not attempt another percentage cut. There might be simple changes which you could make during the current year, but not the institution of a new system or introduction of a new pattern of income taxation.
Then there is the question of the provincial agreements. I am not here to put any authoritative interpretation upon these agreements, respecting our obligations to reduce taxation. But I think the relevant clause of the provincial agreements is open to this interpretation, that we must start with the taxes in force on December 31, 1946, and reduce the rate then in force for corporations by ten per cent and reduce the rate in force for individuals by a substantial amount.
If we took $155 million out of our present income tax and substantially reduced our corporation tax in the middle of 1946, we would be in a difficult position if a similar cut were necessary under the provincial agreements at the end of the year. I hope it will be fully understood by the house how important it was and how necessary it was that we should not make the alteration in the middle of the year.
Then there have been criticisms of the reductions in taxation to the effect that they were niggardly. Let us look at that. The reduction for 1947 is very substantial, judged by any responsible standard. In total, including the additional $12 million cost of family allowances it amounts to $155 million, or a quarter of our present income tax revenue. That is the personal income tax. I am under the impression that it is not fully realized that this reduction comes on top of the sixteen per cent reduction that is now in effect and that taken together they represent a total reduction in our personal income tax revenue of $270 million a year, which is over thirty-seven per cent of the revenue from this tax. And mind yot, this is within a year and a half after the end of the war. Furthermore, some 550,000 to 600,000 taxpayers will be removed completely from the tax rolls in 1947, and for those remaining taxable the tax will be back to a level lower than the level of 1941. And when you just look at it you can see that certainly a reduction of that order cannot, with aDy justice, be termed niggardly, particularly when it leaves us in a deficit position.

The Budget-Mr. llsley
Then the hon. member for Winnipeg North Centre (Mr. Knowles) made a criticism of the budget and1 placed on Hansard a set of tables.
I am not going to deal with the first three tables which he placed on Hansard. Whether his first table has any validity or not is a matter of political philosophy, more than anything else.


Stanley Howard Knowles: Social philosophy.


James Lorimer Ilsley: Social philosophy, perhaps.
But I disagree so fundamentally with the whole basis of the argument he used that I do not think I need say anything further to indicate that fact. The second and third tables are difficult to understand, and they do not indicate that there have not been substantial tax reductions. They are very much more complicated than that, and I find them entirely unconvincing. I doubt whether anybody else would find them very convincing. Then, I wish to refer to the fourth table particularly, because of the rather striking statement by the hon. member as it is found at page 3373 of Hansard where it says:
I have added the average amount of the national defence tax payable in 1941, namely 3^ per cent, to each of the rates in the different brackets. An interesting thing that develops from this table is that in the brackets from zero up to $3,000 of taxable income, the rates in 1947 are greater in all cases than were the rates in 1941. For example, in 1941, the rate for the first $1,000 was 18J per cent. It is now 22 per cent for the first $250, and 25 per cent for the remainder of the first $1,000. So it goes right on up to $3,000 ; the rate to be applied under the new budget in each case in these lower brackets is greater than it was in 1941. But from $3,000 to $30,000 the rates to be applied in 1947 are in all eases less than those that were applied in the year 1941.
I said, when the tables were placed on Hansard, that I would not raise any objection to them, but that there was no admission as to the correctness of them. If they were incorrect, and if there were time to do so, an answer would be made, but the hon. member said he vouched for their correctness. However, there is an error in table No. 4, not an arithmetical error, but a more basic error The hon. member has applied the national defence tax only to the part of income over and above exemption, instead of applying the national defence tax to the whole income from the first dollar. Therefore his 18% per cent is much too low, and the same applies to his other figures. That, I say, vitiates the table. My officials advise me that that is so. Indeed he says:
I have added the average amount of the national defence tax payable in 1941. namely 3J per cent, to each of the rates in the different brackets.


Stanley Howard Knowles: I will not ask for time to argue my point, but we are trying to get clear as to the basis of this table. Is it not true that the first $1,000 of taxable income over and above the $750 or $1,500 exemption level -I gave as one of the reasons for comparing those two years the fact that the exemption levels are the same-was taxed at the rate of 1SJ per cent in 1941, and was therefore comparable to the first $1,000 of taxable income in 1947, which is to be taxed at a rate of up to 25 per cent?


James Lorimer Ilsley: This is not so, because the hon. gentleman applied the national defence tax only to the amount over and above the exemption. He would have to apply it all the way down in dealing with the tax on that $1,000. I cannot spend any more time on that. It has been gone into carefully by the officials of my department and that is the conclusion to which we have come.
I should like to say something about the taxation of cooperatives. Hon. members, particularly hon. members of the C.C.F., have taken a position that is surprising to me, that what we are proposing constitutes an attack on cooperatives. I want to deny most emphatically that the government wishes in any way to discourage the cooperative movement in the Dominion of Canada, or that the government had any intention by this proposed legislation of discouraging the cooperative movement in the Dominion of Canada.
Let me give a recapitulation of the course of events. In 1930 the Income War Tax Act was amended to include the present section 4(p), which apparently was intended to give exemption from taxation to certain types of cooperatives. Over a period of years most cooperatives were exempted from tax under this provision, but the law officers of the crown now advise-they have been so advising for the last few years-that in fact very few, if any, cooperatives are organized or operate on such a basis as to secure this exemption.
In the light of this highly unsatisfactory and unsettled situation, the government decided to appoint a royal commission to bring in recommendations. The members of this commission were selected with some care. The cooperative union of Canada was asked to name a member and put forward Mr. B. N. Arnason, deputy minister for cooperation in the government of Saskatchewan. The Canadian chamber of commerce suggested Mr. J. J. Vaughan, a retired business man. The government itself nominated Doctor G. A. Elliott, professor of economics, university of Alberta, and Mr. J. M. Nadeau of Montreal, who combined both economic and legal training, and as chairman, Mr. Justice Errol McDougall, of the

The Budget-Mr. Ilsley

court of king's bench, Quebec. I think the house will agree that it would have been difficult to select a more representative or more competent commission. We took great pains in the selection of that commission, because we knew the great importance of the work they were undertaking.
This commission heard evidence from one end of Canada to the other. Hundreds of cooperative organizations appeared before it, as did groups opposed to the cooperatives. They heard economists and lawyers; they visited the United States and they visited the United Kingdom. I venture to suggest that never before in Canada has the question of the cooperatives received such a thorough and complete review. After months of study the commission brought in a report which was unanimous on the important points. This was a remarkable achievement. The government would not have been at all surprised if there had been a minority report or reports, particularly from the members of the commssion who had been appointed at the suggestion of the various interests concerned. However, the main recommendations were unanimous, the only qualification being in the form of reservations.


Mr. KNIGHT:: Was the report unanimous? Was there not a minority report?


James Lorimer Ilsley: No; the recommendations were unanimous. There are reservations, these being by Mr. Arnason, Mr. Nadeau and Mr. Vaughan, which did not affect in any important way the central body of the report. Under these circumstances, the government would be assuming a heavy responsibility if it departed too far from the recommendations of that report. At least that was the view we took and we have followed the report in the main. Of course the government are under no obligation to adopt the report of a royal commission; they may adopt it, they may vary it, or they may reject it. But in view of the fact that this was a good commission and that the main recommendations were unanimous, the government felt that they should go as far as they possibly could in adopting these recommendations, which they did.
The main point at issue always was: Should patronage dividends be taxed or not? As members of this house know, there was an intensive propaganda against the report of the McDougall commission on that question. That was the main question on which this intensive propaganda took place. All these letters, speeches over the radio, postcards and all that kind of thing were on that main and central and important point, as to whether

patronage dividends should be taxed or not. The government has adopted the commission report in that regard. The qualifications are quite small and I shall deal with them.
I can understand people who want to have everything 100 per cent their own way if they can get it, but there must be a little compromise when you have an acute issue of this kind before the people of a country. The commission came to the conclusion that patronage dividends should not be taxed, that they should be regarded as deductions from income. They recognized the fact that there are cooperatives which have no income within the meaning of the Income War Tax Act, that they market the goods of their members on behalf of the members and return everything to the members. In the case of cooperatives which have no income there is no suggestion that there be any tax imposed.
From hearing some of the speeches in the house, one would have thought that we were constructively creating income which was not income otherwise; that where cooperatives are involved we were saying that there must be at least three per cent. The three per cent provision does not apply at all if there is no income of the cooperative; if in fact there is no income, no profits, then there is no taxing at all.


Joseph William Burton: No profit to the organization, but certainly a return to the member.


James Lorimer Ilsley: I am talking only about the tax on a corporate body. The only thing we are talking about here is bodies corporate and I am talking about the corporation tax. The commission said that this rule should apply throughout, that any body corporate, cooperative or otherwise, which paid out on the basis of patronage to its members should be entitled to deduct that from its income for taxation purposes. In that way it has the appearance of fairness.
The fact is, of course, that when you make a recommendation of that kind you are making a recommendation which benefits cooperatives but which really does not benefit to any substantia! degree their competitors, private business. The great range of private business in Canada cannot practically pay out part of their profits on the basis of patronage. For that reason the cooperative reaction to the McDougall commission report was pretty favourable. Representations were made that we should not adopt this or adopt that or that we should not adopt it entirely, but it was far more favourable than the private trade reaction to the McDougall commission report, far more favourable than the reaction of the other camp. Even though hon. gentle-

The Budget-Mr. Ilsley
men opposite call us capitalists or say that we are leading a capitalist raid against the cooperatives and make many other wild accusations against the government, having appointed the commission we have adopted its report in its main recommendation, which is that patronage dividends be deducted for taxation purposes.
There was one qualification. That was the qualification of the three per cent. I think I have made it clear that that does not apply at all unless there is true profit in the organization. If there is true profit in the organization we felt that the organization could only have earned that profit by the employment of capital and that it should not. be permitted to pay it out tax-free if by so doing it reduced its taxable revenue below a reasonable return on. the capital employed. We are not proposing to stop any cooperative from paying it out as patronage dividends, or to compel any cooperative to make a return on capital employed. They can pay it out in patronage dividends if they wish; but they can only pay it out tax-free to the extent that it exceeds three per cent on the capital employed. That was the underlying principle in that regard, and I stated it this way in the budget speech:
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 modifica-' tion 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.
The three per cent may be paid on loans, not necessarily on shares, and if it is paid on loans, then it is a deduction from income for tax purposes if the cooperative has income.


Joseph William Burton: If the minister will allow a question,, he spoke of true profit. Would that be only in the case of dealing with nonmembers?


James Lorimer Ilsley: The commission did not so find, and I cannot so find either. But please do not let us get into a discussion on this now, because there, is a resolution coming before the house on which there can be a full discussion of the three per cent and of certain other qualifications and extensions of the eommissicra's report, such as the three-year exemption for cooperatives, which the. commission did not recommend except as the Minister of National Revenue might direct. I must say that we have tried to be so fair to cooperatives in this matter that I have been a little surprised at the fury of the attack of some members of the C.C.F. on our motives and on our acts in this regard.
One of the recommendations of the royal commission is that to qualify for exemption of patronage dividends all customers must be treated alike. Some exception has been taken to that. Certain members have said that it would be prejudicial to the development of cooperatives. Our feeling is that that danger is very much exaggerated, very much overstated. In fact, we do not feel that there is any substantial danger at all. But I want to say about all this legislation that we must' do something in regard to the taxation treatment of cooperatives. We have had a commission which has been studying the matter for a long, long time, a fair commission, which has attained, a degree of unanimity which is surprising in the circumstances. If this legislation that we are proposing as a result of the recommendations of the royal commission does not work well; if it turns out to be prejudicial to the development of cooperatives, which we do not want it to be, it can be changed. But I would appeal to members of the house not to take a 100 per cent position necessarily on everything, because this is one of the most difficult questions with which any government was ever called upon to deal.	-
With regard to the necessity of patronage dividends being paid on an equal basis to members and non-members, though the government does not consider that the rule requiring equal payment to all customers would retard the development or interfere with the operation of a cooperative, some of the cooperatives seem to have fears of this kind. Therefore the government is prepared to give consideration in committee to whether the rule can be made more flexible without departing materially from the basic recommendations of the commission.


Mr. COLD  WELL@: I think that is the most fundamental thing in the whole business, myself.
The Budget-Mr. Ilsley


James Lorimer Ilsley: My hon. friend says he thinks that is the most fundamental thing. The whole commission agreed on that unanimously without any reservation or qualification whatever, that members and non-members must be treated alike, and that is the way we prepared the legislation and are placing it before the house. But I have made the statement that I have just made here, and we stand by that statement.
With regard to the past, the taxation of the grain trade, let us have that put straight before the house. I do not know whether all members understand it or not. It has been referred to as retroactive taxation. We are not proposing to introduce legislation which will tax anything which was earned or accumulated in 1944 or 1945 or 1942 or 1943 or any other year. We are not proposing any retroactive tax legislation. The position we found ourselves in, and I think I have explained it to the house, was this. Between 1930 and 1940 or thereabouts, the pools were regarded as not subject to income tax. Shortly after 1940, doubts arose as to whether they were making a profit or not within the meaning of the Income War Tax Act. Their method of doing business had changed between 1930 and 1940, and doubts arose as to whether they were taxable or not. The opinion of the Department of Justice was taken as to whether they were taxable or not, and in 1941 the Department of Justice gave an opinion that one or more of these pools was taxable. It did not touch the question of patronage dividends. In February of 1943 the Department of Justice gave an opinion that patronage dividends could not be deducted from income for taxation purposes. The pools were so advised and1 their competitors, the grain trade, were so advised, because the grain trade had previously received an intimation that they could pay patronage dividends. So that during the years 1944 and 1945 the pools operated in the knowledge that it was the opinion of the Department of Justice that they were taxable on the amount of their patronage dividends. They were assessed, and three or four cases were taken to the courts on that. Now, the statement which I made in the budget was an offer of a compromise of the cases that are in the courts. In fact, to do something about these cases in the courts, we have either to abandon them, or to proceed with them, or to settle them, and we have to act responsibly and with a due sense of our responsibility to the other taxpayers of Canada. Anything else would be indefensible. Whether it would be popular or not, I do not know, but it would be indefensible.

Fortunately, the McDougall commission laid down certain principles which they suggested as a basis for treating cases in the past, back assessments. They laid down what they called the principle of good faith, that if corporate bodies had been led to believe that they were not taxable, that they had not been assessed and so on, and they had ordered their affairs on that assumption, that the income tax administration had given them grounds for that belief, the commission did not think it would be fair to go back and tax them. And we absolutely agreed with that.
But with regard to those that were assessed, different considerations arise. So I made the offer which I did in the budget. Now I want to make it clear to hon. members that this is not part of any proposed legislation, it is not covered by any of the resolutions; it is not something which we are voting on; it is not something that we are passing judgment on at all in this house. This matter of our suggested compromise with the pools is something as to which the government must take responsibility. But as we were dealing with cooperatives, and as it was so important, we felt it was a suitable place to make that offer to the pools, because so far as I know it is only the pools and the grain trade that are affected, that come into this at all.
I want to say just this, that while the language used in the budget may convey the impression that it is "take it or leave it", that is, either proceed with the case or do exactly .as we say, I do not think that would be quite a reasonable position for a government to take. I think, and I have so advised the representatives of the pools, that if they consider there is anything unfair or inequitable about our offer and wish to make representations to that effect we will give consideration to their representation in discussing settlement of those cases. Any settlement, of course, must be on a basis that can be defended to the taxpayers and public of the Dominion of Canada. I am concerned in maintaining integrity in our financial and taxation administration, and that we must do, whatever happens.
I think that is all I have to say on the question of cooperatives. It is an endless subject, and of course in my remarks to-night I can only touch the high spots, I can only cover a few things which have been raised in the debate.


Ian Alistair Mackenzie: And you made a very good job of it, too.


James Lorimer Ilsley: I wish now to say something about the dominion-provincial conference. It

The Budget-Mr. Ilsley
is one of the most important matters which ever came before the House of Commons, and I want the house to believe me that it took a great deal of work and a great deal of consideration to frame the offer which I placed in the budget speech. The attitude of the government has been described by one or more hon. members as the attitude of a person wielding a big stick. I deny that. I deny that there is any coercion in this offer at all, and I deny that there is any big stick in it.
I want to elaborate that a little. The only justification for an accusation that there is a big stick here would be a state of affairs like this, that we were virtually driving the provinces into this position, that there were undue differences in the aggregate level of personal income, corporation and succession duty taxation as between adhering provinces and nonadhering provinces. I do not know whether I have made that clear or not; but that would be the essence of coercion, that would be the only justification, I should say, for any claim of coercion, that we had so framed the thing that there were undue differences in the taxation burden, that there had necessarily to be undue differences in the tax burden in the adhering provinces and the nonadhering provinces. That is not so. We almost leaned over backwards to see that it was not so, so that this accusation of coercion could not be made.
In the case of personal income tax, a tax credit up to five per cent of the dominion tax is given to taxpayers in a non-adhering province.
In the case of corporation taxes we insist that adhering provinces levy a corporation tax of five per cent.
As for succession duties, while the dominion's succession duties have been doubled, there is a credit of the succession duty paid to the provinces up to one-half of the new succession duties. It would take a long time to explain just the reasons for those three provisions.


An hon. MEMBER:: Oh, oh.


James Lorimer Ilsley: My hon. friend is applauding that for some reason or another, but the reason for those provisions is to make sure that there would not be undue or important differences in the aggregate level of personal income, corporation and succession duty taxation in the adhering provinces and the nonadhering provinces. That is the reason for these provisions, and the reason we went that far is so that we could answer the charge that we are wielding a big stick or working
any coercion here. I repudiate entirely the charge of coercion or a big stick. It is entirely unjustified.


Mr. CASE:: Was there a promise made to the provinces in 1941?


James Lorimer Ilsley: I do not understand the hon. gentleman's question.
Then there is the criticism that we have not tried to reach unanimous agreement by having another general conference. I do not want to be too vivid in my language, but you cannot spend the whole year holding conferences, hoping that one may succeed; you cannot do that when your tax agreements are running out and when, if they do run out without an agreement of some kind, the most serious consequences follow. We spent nine months with the provinces and we had conference after conference. Our own offer was used as the basis of the discussions, up to the last minute, so to sDeak. Finally, we got one offer, one definite independent offer from one of the provinces, and it was far apart from ours; it was $134 million more than ours, when you put a valuation on the tax fields, and perhaps a great deal more than that, perhaps another $100 million. That was all proved by me in the speech I made in the dominion-provincial conference, and it is found in the records of the proceedings of May 3, 1946. While someone said my figures were wrong or absurd or something like that, they have never been proved to be wrong because they are correct. Now, the premier of the province that made that offer-and I do not know that even that was good enough for the premier of another province, because there was no indication that he would associate himself with it-said this:
The government of Ontario has gone the very limit in making agreement possible, and when I say that it has gone the very limit I mean that it is prepared to make adjustments in detail, but not adjustments in principle or adjustments in regard to the net overriding amount which it receives.
I have a pile of editorials accusing the government of going entirely too far before that, because the total cost of our offers to the provinces when everything was considered was very great. When we found, after nine months of conference, that we simply got to the point where, unless we "upped" our offer by another $134 million to $234 million there was no chance of agreement-and budget time was approaching and the existing agreements were running out-we felt we had to take a different line, and so we put this offer in the budget. We hope the provinces will come in. It is doubtful whether they will all come in, doubtful at any rate whether they will all
.3596
The Budget-Mr. llsley


An hon. MEMBER:: Why borrow?


James Lorimer Ilsley: Why borrow? I suppose the hon. gentleman suggests that we should print it, issue it. Well, whatever we did, whether we issued it or borrowed it, if we kept that up there would be inflation of the currency such as would eventually destroy the value of our money. It is not much fun living in a country when the value of your money is going to pieces. I do not say for a moment that it is going to pieces here; not by any means. I do not want that to be taken from what I say. What I do say is that inflation is a bitter thing, and inflation we would have if we did not maintain some degree of responsibility in our financing. People may -think it is unimportant, but it is never unimportant. It has never been considered unimportant in the past, and it is

The Budget-Division
not regarded as unimportant by the labour government in Great Britain, by the nonlabour government in the United States-


Ian Alistair Mackenzie: Or by the Liberal government of Canada.


James Lorimer Ilsley: -or by the Liberal government of Canada. There is one development in this debate which I was glad to see. I was glad to see members of the Progressive Conservative party, even in their feeble halting and ineffective way, struggling to criticize expenditures.


Gordon Knapman Fraser: We did not have to struggle very hard.


James Lorimer Ilsley: The hon. gentieman's contribution was to produce an empty envelope. I join with them, but I do not for one moment admit the government has not done everything within its power under the circumstances to get expenditures down. We have made tremendous cuts in the expenditures; and unless we can get better suggestions than we got from the opposition in this debate, as to where to go from here, we shall have to think of other means ourselves. I do not mind saying that I wish a lot of this pie-in-the-sky business, such as we find in the Progressive Conservative platform, would be cut out for a while now, and I think it will be, inside and outside this house until we get our budgets balanced, especially in periods when our employment and income are high.
Abbott Adamson Jutras Kidd Baker Beaudoin Belzile Benidickson Bertrand (Laurier) Bertrand (Prescott) Bertrand (Terrebonne) Black (Chateauguay-Huntingdon)
Black (Cumberland) Black (Yukon)
Blair
Blanchette
Boivin
Bonnier
Boucher
Bradette
Bradshaw
Breithaupt
Bridges
Brooks
Brown
Cardiff
Case
Casselman
Charlton
Chevrier
Church
Claxton
Cleaver
Cloutier
Cote (Verdun)
Coyle
Croll
Cruiekshank
Daniel
Dechene
Denis
Dion (Lake St. John-Roberval)
Douglas
++NAYS
Messrs:
Jackman
Jean
Kirk
Lafontaine Lalonde Langlois Lapointe Laurendeau Leger Lennard Lesage Little McCann McCubbin McCulloch (Pictou) Macdonald (Brantford City)
Macdonald (Halifax) Macdonnell (Muskoka-Ontario)
McGarry McGregor Mcllraith Mclvor Mackenzie MacKinnon MacLean McMaster MacNaught MacNicol Marier Martin Mayhew Menary Merritt Mitchell Mullins Mutch Nixon Pearkes Picard Power
Raymond (Wright) Reid
Richard (Gloucester)
The house divided on the amendment to the	Farquhar	Richard (Ottawa East) Robinson (Bruce)amendment	(Mr. Maclnnis) which was nega-	Fleming Fournier (Hull)	tived on the following division:	Fournier (Maison-neu ve-Rosemont)	Robinson (Simcoe East)YEAS	Fraser Fulton	Ross (St. Paul's) St. LaurentMessrs:	Gariepy	SennArchibald	McCuaig	Gauthier (Nipissing)	Sinclair (Ontario)Argue	McCullough (Assini-	Gibson (Comox-	Sinclair (VancouverBentley	boia)	Alberni)	North)Blackmore	Maclnnis	Gibson (Hamilton	SinnottBowerman	McKay	West)	SkeyBryce	Matthews (Kootenay	Gingues	Smith (Calgary West)Burton	East)	Gladstone	StephensonCampbell	Moore	Glen	Stuart (Charlotte)Coldwell	Nicholson	Golding	StirlingFair	Probe	Gour (Russell)	TremblayGillis	Queleh	Gourd (Chapleau)	TustinHamel	Raymond (Beau-	Graydon	ViauHansell	harnois-Laprairie)	Green	W arrenIrvine	Shaw	Hackett	WebbJaenicke	Strum, Mrs.	Harkness	WeirJaques	Thatcher	Harris (Grey-Bruce)	White (Hastings-Johnston	Townley-Smith	Hazen	Peterborough)Knight	Wright	Henderson	WhitmanKnowles	Wylie	Howe	WinklerLow	Zaplitny-37.	Ilsley	Winters-135.
[Mr. Ilsley.)
The Budget-Division

The list of pairs whips.
Clark
Ross (Hamilton East)
Maybank
McLure
Marquis
Maloney
Eudes
Michaud
Gauthier (Portneuf)
Isnor
Healy
Lapalme
McDonald (Parry Sound)
Pinard
furnished by the chief
Desmond
Cockeram
Diefenbaker Dionne (Beauce)
Dorion
Drope
Homuth
Ferguson
Murphy
Hatfield
Charlton
Heon
Daniel
Stokes

is


James Garfield Gardiner: I was paired with the bon. member for Souris (Mr. Ross). Had I voted I would have voted against the amendment to the amendment.


Mr. ROWE:: I was paired with the hon. member for Quebec West and South (Mr. Parent). Had I voted I would have voted against the amendment to the amendment.


Mr. BRACKEN:: I was paired with the Prime Minister (Mr. Mackenzie King). Had I voted I would have voted against the amendment to the amendment.


Mr. HODGSON:: I was paired with the hon. member for York North (Mr. Smith). Had I voted I would have voted against the amendment to the amendment.


Anthony Hlynka: I was paired with the hon. member for Rost'hern (Mr. Tucker). Had I voted I would have voted for the amendment to the amendment.


Mr. KUHL:: I was paired with the hon. member for Kings (Mr. Grant). Had I voted I would have voted for the amendment to the amendment.


Mr. ASHBY:: I was paired with the hon. member for Temiscouata (Mr. Pouliot). Had I voted I would have voted for the amendment to the amendment.


Mr. HERRIDGE:: I was paired with the hon. member for Bonaventure (Mr. Arsenault). Had I voted I would have voted for the amendment to the amendment.


Mr. MATTHEWS (Brandon):: I was paired with the hon. member for Norfolk (Mr. Barrett). Had I voted I would have voted against the amendment to the amendment.


Paul-Edmond Gagnon: (Translation):	Mr. Speaker, I was paired with the hon. member for Levis (Mr. Bourget). Had I voted, I would have voted for the sub-amendment.


John Bracken: Mr. Speaker, the motion before the house is to go into committee of ways and means to consider the measures by which the government is proposing to raise the funds necessary to carry on the government of Canada. The debate on this motion has come to be known as the budget debate. Whatever else may or may not be discussed in the budget, there are three things that always are; the question of expenditures, the question of taxes and the question of the government's attitude toward its increasing debt and caring for that debt. Any other matter may be raised during the budget debate, but to-night I propose to deal only with two points, because most of the other points have been dealt with by speakers on all sides of the house as well as by members of the party for which I speak.
I wish to refer to two of the points referred to to-night by the Minister of Finance (Mr. Ilsley), namely, the question of dominion-provincial relations and the question of the taxation of cooperatives. Before I do that, I might comment upon the closing remarks a moment ago of the Minister of Finance when he said that if we did not show him how to reduce expenditures, they would have to go and do it themselves.


James Lorimer Ilsley: I said we are doing it,


John Bracken: The Minister of Finance says that they are doing it. The Canadian people will have their own opinion about that when they realize that the present budget in a peace-time year provides for the expenditure of $2,700 million, or five and a half times as much as was provided for in any peacetime year before the war. They will have their own opinion when they realize the size of the tax bill which, with the non-tax revenue, is now some $2,400 million, or five times as much as in any other peace-time year. They will give consideration also to the increasing indebtedness which this year is $300 million on current account and $1,000 million on capital account, and they will as well give consideration to the size of the total debt of this country, which now stands at nearly $16,000 million, or more than four times what it was in any peace-time year.
As I said, I propose to deal only with two questions, that of dominion-provincial relations and that of the taxation of cooperatives. In connection with the latter, the Minister of Finance has anticipated one or two of the things I had intented to say. Nevertheless I shall say what I intended to say in the manner I was prepared to say it.

The Budget-Mr. Bracken
The question of dominion-provincial relations was first set out in detail in the British North America Act, 1867. In that act the dominion government was given certain powers and the provinces were given certain powers. The dominion government was given certain responsibilities and the provinces were given certain responsibilities. These powers and responsibilities are set out pretty largely in sections 91 and 92 of the act. Dealing with the powers resting with the dominion, section 91 has this to say:
. . . the exclusive legislative authority of the parliament of Canada extends to all matters coming within the classes of subjects next hereinafter enumerated, that is to say,-
I shall mention just two subsections:
(3)	The raising of money by any mode or system of taxation.
In other words, the dominion government is not limited in the field of taxation.
(4)	The borrowing of money on the public credit.
The powers of the provinces with respect to taxation and the raising of money are set out in section 92 which provides:
In each province the legislature may exclusively make laws in relation to matters coming within the classes of subjects next hereinafter enumerated; that is to say,-
2.	Direct taxation within the province in order to raise a revenue for provincial purposes.
In other words, the provinces are limited to the field of direct taxation and cannot invade the field of indirect taxation. Subsection 3 reads:
3.	The borrowing of money on the sole credit of the province.
So much for the relative powers of the dominion and the provinces with respect to taxation.
How were the responsibilities divided? The exclusive powers and responsibilities of the provinces are largely enumerated in section 92. They cover taxation and borrowing, already mentioned, the management and sale of public lands belonging to the province and of the timber and wood thereon; public and reformatory prisons in and for the province, and so on. In order to shorten my remarks, I shall not take the time to read these in detail, since any hon. member can read them in section 92. To summarize the responsibilities of the provinces covered, among many other things, education and social services and caring for the natural resources of the country. I could go on and give the details, but they are there to be read by anyone and I am sure hon. members are more or less familiar with them.
What were the dominion's responsibilities? In addition to the enumerated powers set out in section 91, they were given the general
power and responsibility to make laws for .peace, order and good government. I can summarize the responsibilities of the dominion as set out in section 91 by saying that they had to do with questions of trade and commerce; banking; peace, order and good government; criminal law and so on. A number of other items are set out in detail.
There was joint or double jurisdiction in connection with agriculture and immigration. Section 93 makes education a provincial responsibility, subject to certain remedial powers reserved to the governor in council of Canada. As I said, section 95 makes agriculture and immigration a joint responsibility of the dominion and the provinces.
Wo are thus living to-day under a federal system, a system under which the powers of the two sections are set out specifically and where the responsibilities of each are also set out. The relationship thus set out in 1867 and the other clauses of the act constitute the constitution of Canada.
In the seventy-nine years since then, several things have been demonstrated with respect to the federal system of carrying on our affairs. One is that the advantages of confederation have been inequitably distributed. Confederation tended to centralize business and industry more or less in the centre of the nation. In addition, the national laws tended to benefit.-I am referring now more particularly to the tariff-the industrial sections. The result was that industry in considerable part left the maritimes and developed in the central part of Canada. Agriculture developed in the western part of Canada. And without much in the way of industry the western provinces and British Columbia became largely exporting provinces-.
Since that time, seventy-nine years ago. the responsibilities of the provinces in confederation have increased. At the beginnng there was no government aid to hospitals, no mothers' allowances, not many social services. Social services as we know them to-day were scarcely known seventy-nine years ago, They have multiplied many times since then. Public opinion has demanded them and conditions have made them possible. The responsibility for them fell largely upon the provinces.
But the only source of revenue of the provinces, direct taxation, was never enlarged, and the small subsidies granted to the provinces in the beginning increased only very slowly. The public services which fell upon the provinces were increasing two hundred, three hundred and four hundred per cent per capita, while the subsidies granted to the provinces in 1867
The Budget-Mr. Bracken

scarcely increased at all, and in the early years there was very little resort even to direct taxation.
As a result of these conditions-and it was emphasized particularly during the period of 1930's-certain sections of Canada could not provide a measure of public service on anything like a reasonable standard without imposing excessively heavy rates of taxation on the people of the provinces affected. Under those conditions there arose a demand upon the dominion government to sit in with the provinces and arrange either to take over more of the responsibilities which fell upon the provinces or to raise additional funds and give them to the provinces on the basis of fiscal need wherever it was needed. These demands, of course, had arisen many times -before 1930 and adjustments had been made for the mari-times, the prairies, for British Columbia, in fact for all the provinces. But the question became a major problem in the depression of the thirties, and accordingly the dominion government was prevailed upon to appoint a royal commission, which later became known as the Rowell-Sirois commission, to inquire into dominion-provincial relations. The order in council appointing that commission, P.C. 1908, had the following four instructions for the commission:
(a)	to examine the constitutional allocation of revenue sources and governmental burdens to the dominion and provincial governments, the past results of such allocation and its suitability to present conditions and the conditions that are likely to prevail in the future;
(b)	to investigate the character and amount of taxes collected from the people of Canada, to consider these in the light of legal and constitutional limitations, and of financial and economic conditions, and to determine whether taxation as at present allocated and imposed is as equitable and as efficient as can be devised;
(c)	to examine public expenditures and public debts in general, in order to determine whether the present division of the burden of government is equitable, and conducive to efficient administration, and to determine the ability of the dominion and provincial governments _ to discharge their governmental responsibilities within the framework of the present allocation of public functions and powers, or on the basis of some form of reallocation thereof;
(d)	to investigate dominion subsidies and grants to provincial governments.
Let me refer to that commission briefly. Hearings commenced in AVinnipeg in 1937 and continued for more than a year. Eighty-five hearings in all were held across Canada. The commission's report was presented in May, 1940, after two and a half years of study. In January, 1941, more than three years after the commission had started its work, the ten governments concerned met in Ottawa to consider the report. I do not need to remind the house that that conference failed to agree fMr. Bracken.]
on what to do about the matter. Let me only say again that the commission took nearly three years to study the question, and the dominion government, so it is reported, spent something exceeding half a million dollars in providing for it. A voluminous report was presented by the commission. If I may say so, it is the best study that has ever been made of dominion-provincial relations since confederation. The report consists of three published volumes and many exhibits. They and the exhibits submitted in connection with the report are, in my judgment, the best statement of Canadian political and economic problems that has ever been published.
As I said, the conference of 1941 failed. It is no use now going into postmortems with respect to it. It is enough to say that three provinces disagreed to proceeding to consider the commission's report at that time, and the dominion government dropped the matter. Well, it was a problem that could not stay dropped. Before I go on to say what followed, let me indicate to the house what that commission recommended. The commission had made a more exhaustive study of dominion-provincial relations and of the political and economical problems of this country than had ever been made before. What were their findings? A brief summary of them will be found on pages 81 to 110 of book II of the commission's report.
Briefly, the dominion was to do four things: (1) Take over all provincial debts; (2) take over the responsibility for unemployment relief for employables; (3) pay a national adjustment grant to certain of the provinces as recommended by an advisory board; and (4) pay an abnormal emergency grant if made necessary by some abnormal conditions. Those were the duties which the commission would have imposed on the dominion government.
As an offset to that, the provinces were to cease to use the following three forms of taxation: personal income tax, taxes on corporations or corporate income, and succession duties.
As I have said, the dominion government called the provinces into conference in January, 1941. That conference blew up. Since then, there have been three different approaches to this problem. The first of these we now speak of as the wartime tax suspension agreement. It was worked out late in 1941 and agreed to by the different provinces in sessions of their legislatures, most of them early in 1942. The wartime tax suspension agreement was for the period of the war and for a time after the war, and terminates in some -provinces this fall and in other provinces next spring.

The Budget-Mr. Bracken
The government was now faced with what to do when the war-time tax suspension agreements end. The government called another conference last August and presented another proposal. That proposal was modified in several minor respects at different times, and finally the conference on the government's proposals failed once more. Then, as the Minister of Finance said to-night, facing conditions as they are, the government decided to bring in still another proposal, which is the proposal now before us in the finance minister's budget. So that, following the failure of the Rowell-Sirois commission recommendations there has been a continued attack upon this question, and as well a progressive programme of mounting costs in the plans advanced.
Let me give the house a little idea of the different approaches made in these different periods. The implementing of the Rowell-Sirois commission recommendations would have cost the government $40 million. Hon. members may find that statement on page 109 of book II of the report. Forty million dollars to implement the Rowell-Sirois report. The war-time tax suspension agreements cost the dominion for the use of the personal and corporation taxes $86 million a year. Forty million dollars, eighty-six million dollars. The government's August proposal last year was estimated to cost the dominion as a rental payable to the provinces a minimum of $138 million, or, for the year 1947, $185 million. That proposal was amended at different times and, as finally presented in January of this year, it was estimated to cost the dominion $180 million as a minimum, and almost $200 million for 1947. Forty million dollars, eighty-six million dollars, one hundred and eighty-five million dollars, nearly two hundred million dollars.
And that is not all; that is only the contribution of the dominion to the provinces. In the proposals of last August there were not only financial and taxation suggestions made, but also a huge programme of social services and another programme of public investment; and it has been estimated by different persons that the total cost of all these would have been, not $40 million or $85 million, or $186 million, or $200 million, but $600 million.
And even that figure did not include the charges which would fall upon the provinces if these agreements were proceeded with, because there would have been other taxes falling upon them	of-some	of these
things have to be an estimate-approximately $200 million. So that proposal meant, when eventually completed-it would not all be completed in a year-additional expenditures for this country, both dominion
and provincial, amounting to $800 million a year. That is what the government's 1945-46 proposal with respect to finances and taxes, and the increased social security programme and that of public investment would have cost the people of Canada.
As I have said, the dominion proposals of last year contain three types of activities, finance and taxation, in which the dominion would take three taxes-income tax, corporation tax, succession duty-and give to the provinces, in their final recommendation for the year 1947, almost $200 million a year- $198 million. But, in addition to this, there is a huge programme of social security and also a programme of public investment aimed to try to prevent or to lessen a possible depression. As I said, the proposal was loaded with a social security and a public investment programme as well as financial and taxation features.
Prior to that, the dominion had put into effect a $240 million per annum family allowance programme. Aside from family allowances, in which the dominion admittedly invaded a field which was probably of provincial jurisdiction, the government's August, 1945, proposals so far as dominion expenditure are concerned would add up like this: rental payment for the three taxes, $198 million; old age pensions, cost to the dominion treasury, $217 million; health grants and health insurance, cost to dominion treasury, $163 million; or a total of $578 million. But from that would be deducted the amount estimated as the dominion contribution to old age pensions at present paid of $45 million, leaving these new proposals estimated to cost $533 million.
But, in addition to that $533 million, there were five items of unknown cost in the outline of the dominion proposals. Those five items were as follows:	planning grants for public
investment projects; timing grants for public investment projects; grants up to fifty per cent of the cost of national resources service, production and development; unemployment assistance equal to 85 per cent of unemployment insurance benefits; and the recognition of provincial priority with respect to taxation of mining and logging operations. The total programme would cost the dominion government on ordinary account between five and six hundred million dollars. The Financial Post, in its issue of August 11, 1945, estimated that the cost would be not less than $600 million.
The latest statement I have looked at with respect to the estimated cost is from the Minister of National Health and Welfare (Mr. Claxton) at page 234 in the Hansard proceedings of the dominion-provincial conference dated May 3 last. The minister in his state-
The Budget-Mr. Bracken

ment brought the total of enumerated dominion payments up to $527 million; and as I have said, he indicated that there were other items to be added to that figure; independent students have estimated that it would approximate $600 million.
What of the expenditures which this programme would impose upon tihe provinces? The premiers would have to finance their share of the dominion's proposed health services amounting to over $100 million.. There would be additional commitments for a programme of greatly increased expenditures for hospitals, nursing centres and large facilities for the training of medical and nursing personnel. The provinces and municipalities would have to pay eighty per cent of the cost of the dominion's public investment project, the dominion-except in the case of limited classes of work-paying only twenty per cent. If the dominion were serious in putting forward these public investment proposals, it is not unreasonable to assume that they would involve an additional expenditure of between $200 million and $300 million on the part of the provinces. This means a total bill that would be imposed on the taxpayers running to between $700 million and $900 million, or let us say, $800 million, depending upon what degree of seriousness can be attached to the dominion's public investment proposals and how rapidly the programme might be proceeded with.
The dominion was asked how its social security proposals of 1945 were to be financed. It was supposed to be exploring with the provinces the possibilities of financing its share of the cost of the social security programme by some special means other than that of the general tax system now in force in Canada. Later, it became evident that the dominion had fairly clear views on the matter, as far as raising money was concerned-much clearer than were their views as to the projects which the governments were invited to underwrite. In the report of August 29, 1945, of the dominion-provincial proceedings-at pages 9 and 10, will be found this statement by the Prime Minister:
It is intended to meet a part of the dominion's share of the cost of 'the broad extension of social security, included in the dominion proposals by means of direct personal contributions.
So that what is contemplated is some other tax in addition to the taxes which we already have. The dominion wants to finance a substantial part of its social security programme by means of an additional three to five per cent tax on all personal incomes without any exception whatever. True, the rate was not definitely arrived at, but ministers-

notably the Minister of National Health and Welfare-were quoting examples of New Zealand and Australia where the rates are 5 and 7-j per cent on income respectively.
The dominion also proposed that the provinces, to meet their share of the cost of this programme, should levy an individual tax or registration fee or, as some call it, a poll tax on every person of the age of sixteen or over. One province computed that such a levy would amount to $12 per head. Everyone knows that health services cost something, whether they are paid for publicly or privately; and while the government is talking about tax reduction through one side of its month, through the other side it talks about huge projects that mean vastly increased expenditures and taxes.
Let us take the example of a married man with three children, sixteen and over. That family, on the basis of $12 per head registration fee, would pay $60. If that man's income were $2,000 and the dominion rate were five per cent, they would pay another $100, or $160 would come out of that family to finance the dominion health programme-and that is in addition to the present taxation.
What the government did in August, 1945, what it has been doing for some months since, is trying to use the taxpayers' money to bribe and bludgeon the provinces into the surrender of their constitutional rights. It was not the objects sought that were bad; but the dominion's means and methods of trying to accomplish them were, I think, reprehensible. By offering large hand-outs without being too specific about where they were coming from, or the additional taxes they would require, and by vague general assertions that the dominion could make taxes less painful than the provinces, they sought to take from the provinces their great sources of taxation. And, as if it were an afterthought, they added, in effect, "You will finance your share of health commitments by individual taxes or registration fees or a poll tax."
At this time, Mr. Speaker, I should like to say that it was my privilege to attend the closing conference in April or May of this year, and as a witness to that conference I wish to pay a tribute to all those who took part. I believe they were good Canadians. The premiers of the provinces, the representatives of the dominion government, all knew that they were facing heavy tasks. They all knew that they were facing serious problems. They all knew what their various problems were in the different sections of Canada and they stated their positions as well as they knew how.

The Budget-Mr. Bracken
Personally I was proud of those men, proud to be associated with them as a Canadian. They did not all agree. Some provinces felt that there were others more well to do. Those who knew they were in need did not have any difficulty in stating that they would like to get all they could. Those premiers who represented provinces which perhaps in the past have not been so much in need are still the premiers of their provinces. All those men, good Canadians as they were, were still the premiers of their provinces. The dominion officials were here trying to act for the whole country. I repeat, I was proud of those men as I listened to their deliberations. Naturally I was disappointed when the conference failed, but I do not propose now to attach blame to anyone. I think the groundwork of the conference might have been better laid. You cannot bring together men with different points of view in a nation like this and ask them to agree on complicated questions of this kind even after nine months. Why, even the Sirois commission took three years to study the questions submitted to them.
I do not propose to go into a postmortem. What this parliament has to do is to look at the situation as it is now and determine what is best for Canada. The conference failed. As the Minister of Finance has said, he was then faced with the preparation of his budget, and the provinces also were faced with the preparation of their budgets. And so on June 27 the Minister of Finance brought down his budget and submitted this new watered-down proposal. In it he is going to negotiate with each province individually, and he is going to offer the same total amount to the provinces of Canada as he did last summer and winter -$198 million, for 1947, on the basis of $15 a head. On the promise of $15 a head the government asks the provinces to give up to the dominion the sole right to the income tax, corporation tax and succession duties for the next five years, not three years as in the August, 1945, proposal; but the government is leaving out of this proposal the other feature it advanced last summer for social security and public investment. This proposal, which will require the dominion government to pay to the provinces $198 million next year, leaves out the other huge expenditures under the large programmes brought forward last fall. There is nothing in it now with respect to that social security programme-increased old age pensions, health insurance, unemployment assistance and so on-and nothing for public investment.
This means the abandonment, at least foi the time being, by the dominion of that social security programme and the public investment programme. A very proper question at this time is, why does the dominion now abandon its social security and public investment programmes? If they were good programmes they should be put into effect. If they were not good programmes the dominion should frankly say so, instead of trying to make scapegoats of the provinces.
In his budget speech the Minister of Finance indicated a loss in revenue through tax reductions amounting to $266,000,000, to be effective next year. The government is now bemoaning the fact that it cannot make effective tax reductions because of the failure to reach agreement with the provinces. In that respect it is trying to ride two horses going in different directions. One of the reasons put forward in support of its proposals was that they would result in reduced taxation. Think of a government coming forward with a programme the burden of which, through the dominion and provincial taxes, would amount to $800,000,000 a year and then saying, "Put this into effect and we will be able to reduce taxation more than if it is not put into effect. '
In the conference proceedings for Monday, April 29, the Prime Minister is quoted as having said:
In respect to the personal income tax, as now levied, the government is prepared to say that once the dominion proposals are accepted, and the risk of having dominion policies nullified by provincial policies having contrary economic effects is thereby avoided, the government intends to make further reductions in the personal income tax.
Think of it; that proposal, involving as I have shown a burden on the Canadian people when it is fully in effect of $800,000,000 extra, and the government then saying, in effect, "If you sign that we will be able to reduce taxes more than if you do not sign."
Continuing, the Prime Minister said:
In the same circumstances the government also intends to reduce the element of double taxation of corporate income with its tendency to discourage risk-taking enterprise.
As a matter of fact, in the contracts entered into in 1942 with the provinces the dominion government was required to reduce the corporation and income taxes; it had no choice if it was to carry out the terms of the agreement. The Prime Minister made that statement in face of the fact that if the government's programme -were put into effect additional expenditures would be imposed upon the tax payers amounting to some $600,000,000 in dominion taxes and $200,000,000 in provincial taxes, or a total of approximately

The Budget-Mr. Bracken
$800,000,000; #that is, if and when the full programme were put into effect.
The government laments that without the programme we can have tax reductions of only $266,000,000. What, I ask, would the tax reductions be with the programme in effect? Is the money coming out of a magic well? If the programme were put fully into effect, instead of a reduction in taxes of $266,000,000 in 1947 we might look for an increase of at least that amount in dominion taxation, together with an increase of a couple of hundred million dollars in provincial taxation in the near future.
According to the conference proceedings for May 3, at pages 222 and 235, the premier of No\ a Scotia made an answer to this attempt to blame the provinces for the likely failure of the dominion to make substantial reductions in taxes. He said:
I should like to point out that there is more tiian one way of balancing a budget. There is more than one way of lowering income tax. Much has been made of that at this conference. I hat statement has been repeated again and again that the income tax is to be lowered then the dominion proposals themselves-that is the effect of the statement at any rate- must be accepted. And the implication-I do not say that this is the implication desired bv the federal minister-which will spread throughout Canada is that if this conference fails and income tax is not reduced, the responsibility will rest on those nine wicked men from the provinces who came here and refused to enter into an agreement.
That statement was made by the Premier of Nova Scotia, a former colleague of many hon. gentlemen opposite, who sat right over there and who is familiar not only with dominion problems but with provincial problems as well.


Ian Alistair Mackenzie: Would my hon. friend permit me to intervene on a matter of procedure?


John Bracken: Certainly.


Ian Alistair Mackenzie: I could not talk to the hon. gentleman personally because he was on his feet, but I consulted the hon. member for Peel (Mr. Graydon), the hon. member for Rosetown-Biggar (Mr. Coldwell) and the hon. member for Peace River (Mr. Low) as to sitting after eleven o'clock, and would like to move:
That the house be not adjourned at eleven o clock p.m. this day, and that the provisions theretodmg order ^ be susPended in relation


Major James William Coldwell: When we agreed to this half an hour ago, I understood that the vote would be taken at eleven o'clock. I heard the leader of the opposition (Mr. Bracken) say he was covering two subjects to-night, dominion-provincial relations and the cooperatives. He

has not yet concluded that part of his address dealing with dominion-provincial relations; therefore I am going to oppose extension of the time beyond eleven o'clock.


Ian Alistair Mackenzie: Very well.


John Bracken: It is a matter of no importance to me, but I gather that if anyone objects to the suggestion offered by the minister, we have no choice but to adjourn. I might be finished in twenty minutes, but that is neither here nor there. Therefore I move the adjournment of the debate.
On motion of Mr. Bracken the debate was adjourned.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Friday, July 19, 1946