1946-07-08

EMERGENCY POWERS


[Stage Direction]
1947 session
Right Hon. L. S. ST. LAURENT (Minister of Justice) moved for leave to introduce bill No. 253, to amend the National Emergency Transitional Powers Act, 1945.
Motion agreed to and bill read the first time.

[Stage Direction]
Mr. RALPH MAYBANK (Winnipeg South Centre) moved the first reading of bill No. 246 (from the senate) respecting the Canadian Indemnity Company.
Motion agreed to and bill read the first time.

[Stage Direction]
Mr. RALPH MAYBANK (Winnipeg South Centre) moved the first reading of bill No. 247 (from the senate) respecting the Canadian Fire Insurance Company.
Motion agreed to and bill read the first time.

[Stage Direction]
Mr. D. A. CROLL (Spadina) moved the first reading of bill No. 248 (from the senate) to incorporate Prescott and Ogdensburg Bridge company.
Motion agreed1 to and bill read the first time.

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

Mr. ROSS (Souris):: 1.	How many acres of land were purchased in Charleswood, Manitoba, for small holdings under the Veterans Land Act?
2.	From whom was this land purchased and what price per acre was paid for the said land?
3.	What distance is this property from Winnipeg city limits?


Mr. MACKENZIE:: 1.	212-13.
2 and 3.	Distance from
Winnipeg city
Vendor	limits
Bleakley, Thos. J	
3-2	milesGraham, W. H	
2	"McQuade, Jos	
4-5	"Harstone Estate	
4Murray Estate	
4Manitoba Farm Loans Association	
4-5	"
It is considered that the public disclosure as to details of prices paid for various lands purchased by the Veterans Land Act would be detrimental to the administration and operation of the act and not in the best interests of the veterans for whom the lands are purchased. This is in accord with statement made to the house on April 17, 1946, page 951 of Hansard, and on subsequent occasions.
Note: The answer does not include properties purchased for individuals on direct application.


CXIRN STARCH AND GLUCOSE-CEILING PRICE
Mr. HATFIELD:: What was the ceiling price on corn starch and glucose made from corn for the years 1942, 43, 44, 45 and 46 to date?
320S
Questions


Mr. MAYHEW:: From December 1, 1941 to May 20, 1946, the ceiling prices on corn starch and on glucose were their basic period prices (i.e. maximum price established in the four-week period September 15 to October 11, 1941). On May 20, 1946, the rate of subsidy on imported corn was reduced and compensating increases of li cents per pound at the manufacturers' level on both starch and glucose were authorized.


CANNED SALMON
Mr. GIBSON (Comox-Albemi):: 1.	How many cases, basis 48/1's of Pacific coast canned salmon, by species were produced in 1945?
2.	How many cases of such salmon were allocated to the United Kingdom during 1945?
3.	What was the price per ease of each species?
4.	How many calories of food value are there in one pound of each species?
5.	How many cases, bv species were retained for sale in Canada during 1945?


Mr. BRIDGES:: Cases 48/1's
Sockeye 			 329,1014
Springs 			 12,760
Steelhead 			 2,011
Blueback			 6,660
Coho 			 212.103
Pinks 			 825,147
Chums 			 348,9954
1,737,578
2.	United Kingdom, 1,326,578; British Territories Overseas, 72,000.
3.	For establishing prices canned salmon has been grouped as follows:
Group I shall be comprised of sockeye.
Group II shall be comprised of bluebacks, coho, redsprings, steelheads, pinksprings and jacksp rings.
Group III shall be comprised of pinks, chums and whitesprings. The following prices apply in Canadian funds per ease net, unlabelled f.o.b. Vancouver, North Vancouver, Victoria, New Westminster, Prince Rupert or Skeena river rail terminal points:
Grade B salmon and grade A tips and tails and minced or flaked salmon
Group I
1-lb. tall cans 48	cans to	the case...	S13	85i-lb. flat cans 96	cans to	the case...	15	15i-lb. flat cans 96	cans to	the case...	9	30
Group II
1-lb. tall cans 48	cans to	the case...	11	20i-lb. flat cans 96	cans to	the case...	12	50i-lb. flat cans 96	cans to	the case...	8	00
Group III
1-lb. tall cans 48	cans to	the case...	6	75i-lb. flat cans 96	cans to	the case...	8	00i-lb. flat cans 96	cans to	the case...	5	25
Grade B tips and tails and minced or flaked salmon
Group I
1-lb. tall cans 48 cans to the case.. $10 10 i-lb. flat cans 96	cans to	the case...	11	35i-lb. flat cans 96	cans to	the ease...	7	40
Group II
1-lb. tall cans 48	cans to	the case...	9	55|-lb. flat cans 96	cans to	the case...	10	80i-lb. flat cans 96	cans to	the case...	7	15
Group III
1-lb. tall cans 48	cans to	the case...	5	85i-lb. flat cans 96	cans to	the case...	7	10i-lb. flat cans 96	cans to	the case...	4	80
4.
Sockeye	 860
Spring	 991
Coho, blueback	 750
Pink	 696
Chum	   524
Steelhead	 792
5.	Canadian consumption:
Group I (Sockeye)	 57,674
Group II (Coho, bluebacks, redsprings, steelheads, pinksprings and jacksprings)	i	 31,262
Group III (Pinks)	 124,975
(Chums and white springs)	 88,588
Reserve	  1,501
Grade A salmon
1-lb. tall cans 48 cans to the case... i-lb. flat cans 96 cans to the case... i-lb. flat cans 96 cans to the case...
1-lb. tall cans 48 cans to the case... i-lb. flat cans 96 cans to the case... i-lb. flat cans 96 cans to the case...
1-lb. tall cans 48 cans to the case... i-lb. flat cans 96 cans to the case... i-lb. flat cans 96 cans to the case... 
Group I $17 65 18 90 11 20 Group II 12 90 14 15 8 82i Group III
7	65
8	90 5 70
304,000
Armed services and merchant marine.. 35,000
339,000


RUSTICO BAY, P.E.I., DREDGING OPERATIONS
Mr. McLURE:: 1.	What steps have been taken to include dredging of Rustico bay, Queen's county, Prince Edward Island, in dredging operations for the season, 1946?
2.	Has a survey been made of Rustico harbour and Rustico bay?

Questions


Mr. FOURNIER (Hull):: 1.	Dredging of Rustico bay not considered practical owing to shifting nature of sand bottom. Previous dredging operations of harbour had little effect.
2.	No recent survey for dredging purposes has been made.


VETERANS LAND ACT-MIDDLESEX COUNTY
Mr. WHITE (Middlesex East):: 1.	How many homes are being constructed under the Veterans Land Act in (a) London township: (b) Westminster township, county of Middlesex?
2.	How many in each township have been completed?
3.	How many in each township have been sold?
4.	In each township, what are the names of the purchasers and what price did they pay for the houses?


Mr. MACKENZIE:: [DOT]
1.	(a) 28; (b) 72.
2.	None.
3.	None.
4.	Answered by No. 3.


EXPORT OP CANNED LOBSTERS
Mr. McLURE:: 1.	Is there a price control on canned lobsters for export?
2.	Is there a quota control on canned lobsters for export?
3.	Is it necessary for shippers of canned lobsters for export to the United States to secure a permit from the Canned Fish Allocation Officer?


Mr. BRIDGES:: 1.	No.
2.	Yes.
3.	Yes.


RADIO BROADCASTING-LABOUR-PROGRESSIVE OR COMMUNIST PARTY
[Stage Direction]
Mr. LaCROIX:
Has the Labour-Progressive or Communist party obtained a fifteen minute period for propaganda over the CBC network?
Mr. McCANN:: As a qualifying national political party, under the CBC white paper on political and controversial broadcasting, the Labour-Progressive party has been granted one period in the current series of national political network broadcasts in agreement with other national political parties.


OPERATION CROSSROADS
Mr. GRAYDON:: 1.	Was an invitation extended to the Canadian government to send an observer to "Operation Crossroads" at the Bikini Atoll?
2.	If so, was such invitation accepted and who represented Canada at the said atomic bomb tests?


Mr. MACKENZIE KING:: 1.	Yes.
2.	Yes. Air Vice Marshal Ernest W. Sted-man and Major General It. M. Luton proceeded as governmental observers in a civilian capacity. In addition Major Hector Stewart of the public relations directorate, Department of National Defence was present as press observer in a civilian capacity.


IMMIGRATION
Mr. THATCHER:: 1.	How many applications for immigration have been made under order in council No. 2071, dated May 28, 1946?
2.	How many of these applications have been approved ?
3.	How many immigrants have actually entered Canada under these regulations?


Mr. GLEN:: 1.	Information not available. Applications for admission of immigrants are filed at the various immigration offices throughout Canada and dealt with through the district offices. No statistical record is kept of applications filed.
2.	Answered by No. 1.
3.	None.


ALLIED MILITARY GOVERNMENT IN GERMANY- CANADIAN CITIZENS
Mr. GRAYDON:: 1.	How many Canadian citizens are there in Germany connected with the work of the allied military government in that country?
2.	What relation does this number bear to the number of citizens of the United Kingdom and citizens of the United States of America, respectively, who are engaged in Germany on work connected with the allied military government ?


Mr. MACKENZIE KING:: 1. Under the terms of the declaration regarding the defeat of Germany, signed in Berlin on the 5th June, 1945, supreme authority with respect to Germany was assumed by the governments of the United Kingdom, the United States of America, and the Union of Soviet Socialist Republics, and the provisional government of the French republic. The Canadian government does not participate in the administration of the allied military government, which is supervised by these four powers. For this reason statistics regarding personnel employed in Germany in the work of the allied control authority are not normally communicated to this government. A number of Canadian citizens have, however, offered their services to, and have been employed by the allied control authority (British element) in Germany. Precise figures as to the number
Questions

of Canadians so employed are being sought through the Canadian military mission to Germany, Berlin.
2. No information.


UNITED NATIONS ORGANIZATION-EMPLOYMENT OF CANADIANS
Mr. GRAYDON:: 1.	What is the procedure required for a Canadian citizen to make application for a position with the united nations organization?
2.	How many Canadian citizens have made application for positions in the said organization?
3.	How many Canadian citizens are presently employed with the said organization?
4.	Of the numbers of Canadian citizens so employed, how many are women and how many are men?


Mr. MACKENZIE KING:: 1.	The procedure at present required for a Canadian citizen to make application for a position with the united nations is to make written application to the secretary-general of the united nations, Hunter College, the Bronx, New York City. The applicant will then be supplied by the united nations secretariat with the requested application forms. It is understood that the secretary-general is making further arrangements to expedite the procedure with regard to the procedure for application for such positions.
2.	As applications by Canadian citizens for positions in the organization are made directly to the united nations secretariat in New York, the government does not possess detailed information regarding Canadian citizens employed therein. Inquiries are being made of the united nations secretariat on this point.
3.	Answered by No. 2.
4.	Answered by No. 2.


EMPLOYMENT OF CANADIANS OVER FORTY YEARS OF AGE
Mr. KNOWLES:: 1.	Has the government received a request from the Senior Citizens' Association of Canada for the appointment of a royal commission to inquire into ways and means of combating discrimination against persons over forty years of age when seeking employment?
2.	Has consideration been given to such request?


Mr. MITCHELL:: 1 and 2. A request from the senior citizens' association of Canada calling attention to the alleged discrimination in employment against persons over the age of 40 years, and requesting that a royal commission be appointed to inquire into the matter was received.
The petition has been given consideration, but it was considered that the recommendafMr. Mackenzie King.]
tion for the appointment of a royal commission at the present time would not have a beneficial effect.
In the national employment service a special section has been set up to deal with the cases of men and women who find it difficult to obtain placement, and it is anticipated that more beneficial results will accrue from the activities of this special section than in any other way. It is felt that persistent day-to-day activities through the special section herein referred to would be effective.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. McLURE:: 1.	Who are the purchasing procurers of fish supplies for UNRRA?
2.	Have maritime fishermen been notified as to the deadline for purchases of such supplies?
3.	If so, what is the deadline date?


T. EATON WAREHOUSES, WEST SASKATOON- STORAGE OF GOVERNMENT PROPERTY
Mr. KNIGHT:: 1.	Is there, or has there been, any dominion
fovernment owned property stored in the T.
I a ton company warehouses in West Saskatoon?
2.	If so, is it surplus war material from (a) the first great war; (b) the second great war?
3,	Is there stored there as the property of the government anything other than war material?
4.	Is there stored .any (a) wearing apparel; (b) boots and shoes; (c) tools; (d) bedding?
5.	If so, what quantities of each classification listed are stored there?
6.	What quantity of other material is stored there?
7.	How many carloads are there in all?
8.	How many square feet of space are occupied by the government owned material?
9.	Does the storage contract provide for protection from vermin and moths?
10.	Is the government paying for storage in respect of this material?
11.	If so (a) how much monthly; (b) to whom?
12.	How long has the government been paying for such storage?
13.	What action is the government taking as to the ultimate disposal of this property?


CONSCIENTIOUS OBJECTORS
Mr. MacINNIS:: 
STEEL INGOTS
Mr. MacINNIS:: 1.	What percentage of steel ingots produced is actually sold by the three basic producers in Canada?
2.	What is the actual price increase per ton permitted on all the various types of steel produced by the three basic producers?
3.	What is the actual cost of production of a ton of irwot steel in each of the three basic producers' plants?
4.	What are the percentages of ingot steel tons used manufacturing the various steel products of each of the three companies?
5.	What is the estimated cash value to the three basic producers of steel accruing from the recent increases in the price allowed by the wartime prices and trade board using 1945 production figures?
6.	Does the price increase of $5 per ton cover pig iron?
7.	If so, what percentage of pig iron produced is sold by each of the three companies and what percentage is used in its own operations by each of the three companies?



LEGAL SERVICES-J. H. POWER, K.C.

[Stage Direction]
Mr. BLACK (Cumberland);
What legal services were performed since 1939 by Mr. J. H. Power, K.C., New Glasgow, Nova Scotia; what accounts were rendered for such services and what payments were made in each instance for (a) Department of Justice; (b) Department of Munitions and Supply; (c) Department of National Defence; (d) wartime prices and trade board?

[Stage Direction]
Mr. BENTLEY;
1.	How many permanent force officers were attached to the services at September 1, 1939?
2.	How many received medical examination at the time they were attached?
3.	How many permanent force officers have been discharged since September 1, 1945?
4.	How many received medical examination on discharge?
5.	How many cases of lowered medical status resulted?
6.	How many of those discharged since September 1, 1945, are receiving disability pensions as well as retirement service pensions?
7.	How many of those discharged since September 1, 1945, and are in receipt of retirement service pensions, have been granted entitlement to disability pensions by tile pension commission?


[Stage Direction]
On the orders of the day:
Mr. J. G. L. LANGLOIS (Gaspe):: With the permission of the house I wish to say a few words on the passing of Major Louis Philippe Gauthier, former Conservative member for Gaspe, and until recently assistant clerk of the Canadian Senate, who died in Ottawa yesterday.
Born at Ste. Anne des Monts, Gaspe, my own native village, on January 17, 1876, Major Gauthier was educated at Rimouski and Levis colleges, and at Laval university, Quebec, where he graduated in medicine. He practised the medical profession at Ste. Anne des Monts, and was elected to this house in 1911, representing Gaspe here until 1917. In 1916 he enlisted in the Canadian army and saw service with the 127th battalion in France and Belgium, until December, 1918. Major Gauthier was appointed assistant clerk of the senate in 1926, which position he retained until last April, when he was compelled to resign due to illness.
Through his varied activities in the medical, political, military and civil administration fields, Major Gauthier always served his country and his native land of Gaspe with unfailing devotion and outstanding ability, and I must add that we in Gaspe held him in very high esteem. On behalf of my constituents and speaking personally as well, I pray Major Gauthier's family to accept the expression of our deepest sympathy. Canada grieves to-day the passing of a great Canadian, and the Gaspe peninsula deeply regrets the loss of one of its greatest sons.



JEWISH REFUGEES


[Stage Direction]
On the orders of the day:
Mr. ALISTAIR STEWART (Winnipeg North):: In view of the increasingly tragic situation of thousands of Jewish refugees in Europe, and the delay of the British government in implementing the recommendations of the Anglo-American committee of inquiry, will the Prime Minister inform the house if the government is prepared to permit some of the refugees to enter Canada at once, pending the adoption of the report?


Right Hon. W. L. MACKENZIE KING (Prime Minister):: My hon. friend sent me notice of his question, and the answer is as follows.
The government and people of Canada are naturally concerned with the fate of these
Taxation Agreements

refugees. To assist in meeting this tragic situation, two amendments were made in the immigration regulations on May 28 which were made known to the house by the Minister of Mines and Resources (Mr. Glen) on May 29. The amendments will permit some increase in the movement of immigrants to Canada without discrimination as to race or creed by adding to the admissible classes the following:
The father or mother, the unmarried son or daughter eighteen years of age or over, the unmarried brother or sister, the orphan nephew or niece under sixteen years of age, of any person legally admitted to and resident in Canada who is in a position to receive and care for such relative.
Since many prospective immigrants coming within the above classes may not be able to obtain a valid passport, as required under present regulations, the acceptance has been authorized of alternative travel documents establishing the identity of the holder.
The action taken is intended as a short term measure to provide some early and partial relief in a number of individual cases. The general problem of refugees, because of its magnitude, can only be resolved by the united nations as a whole. Canada participated fully in the study given to it by the social and economic council at its recent meeting in New York and will join with other members of the council at the meeting which is scheduled for August 30 when a recommendation is expected to be submitted for approval by the general assembly for the establishment of a united nations refugee organization.



TAXATION AGREEMENTS


[Stage Direction]
On the orders of the day:
Mr. P. C. BLACK (Cumberland):: Has the Minister of Finance or the government received proposals or communications from Nova Scotia or from other provinces regarding taxation agreements or the payment of subsidies to such provinces in accordance with the budget? If so, has the dominion government made reply, and will copies of these communications be laid on the table?


Right Hon. J. L. ILSLEY (Minister of Finance):: The government has received telegrams or letters from two provinces accepting in principle the offer made to the provinces in the budget. Others have acknowledged the telegram and letter which I sent to them, stating that consideration will be given the offer. One province has asked for clarification 
on a number of points, and a reply has been sent. Copies of these communications will be placed on the table in due course.



TRANSPORT COMMISSIONERS


[Stage Direction]
Mr. W. CHESTER S. McLURE (Queens): I desire to direct a question to the Prime Minister, or the Minister of Transport, or both. Under what or by whose authority is the board of transport commissioners to hold a meeting in Charlottetown, Prince Edward Island, on July 17 next regarding truck freight rates on the Borden-Tormentine ferry?
William Lyon Mackenzie King: I am. afraid I shall have to leave it to the Minister of Transport to answer that question, or have it stand as a notice.


Mr. McLURE:: Then I would direct the question to the Minister of Transport.


Hon. LIONEL CHEVRIER (Minister of Transport):: As the Prime Minister has
already indicated, the question may be treated as notice. I shall inquire into it and have an answer for my hon. friend. I may tell him immediately, however, that any individual or group of individuals may make application to the board of transport commissioners to have rates revised, as the hon. gentleman was told some time ago in reply to a similar question. However, I shall be glad to ascertain who made this particular application.


Winfield Chester Scott McLure: On a point of order, Mr. Speaker, I wish to protest against this meeting being held.


Some hon. MEMBERS:: Order.


Mr. SPEAKER:: Order. I do not think the hon. member should debate the matter here.



PRAIRIE FARM ASSISTANCE


[Stage Direction]
On the orders of the day:
Mr. D. J. McCUAIG (Maple Creek):: On May 30, under item 30 of his estimates, the Minister of Agriculture stated that it was his intention to introduce a bill this session to amend the Prairie Farm Assistance Act, and to refer it to the agriculture committee. When may we expect this bill to brought down?


Hon. J. G. GARDINER (Minister of Agriculture):: I just returned a few hours ago, and have not had an opportunity of ascertaining the position of this legislation at the moment. So far as I know, however, that is still the intention.

The Budget-Mr. Macdonnell



THE BUDGET


[Stage Direction]
The house resumed from Thursday, June 27, consideration of the motion of Right Hon. J. L. Usley (Minister of Finance) that Mr. Speaker do now leave the chair for the house to go into committee of ways and means.
Mr. J. M. MACDONNELL (Muskoka-On-tario):: Mr. Speaker, when I made the other evening my few preliminary observations, I said that the budget was a monumental work. I realize much more now than I did then the truth of that statement, and I should say at the outset, that I may have to avail myself for only a few moments of the latitude which I believe is given to a speaker on this occasion, namely that of exceeding the usual forty-minute speaking time.
I do not believe that the government will use this budget as its ace of trumps when the next election comes. It becomes more and more clear that there is great disappointment, some of it from very unexpected quarters, and I submit that that is not surprising. It actually takes the eye of faith to see any relief coming to the taxpayers at all. It has been well remarked that this is not a budget for 1946, but for 1947. And, indeed, the individual taxpayer will not find any change in his situation until he begins to make out his tax return early in 1948. In other words his 1947 bill would be the same as it would have been. This disappointment is accentuated by reason of the fact that it was believed-rightly or wrongly-that hints of imminent reductions had been given from rather august quarters.
If the taxpayers had read the budget carefully enough to find in it the minister's statement to this effect, that "lighter taxes are not needed now for the purpose of permitting or encouraging additional private spending in order to maintain employment this year," I think their disappointment would be much increased. Because I believe they would feel that the minister has treated their urgent necessities in a very casual and impersonal way.
If by reason of the minister's action the budget had been balanced, of course that would have been a horse of a different colour. I believe the people would have been prepared to carry their burdens if the budget had been balanced, and they had been able to look forward with the degree of hope that that would have given them. But although the minister has presented to us an estimated deficit of $300 million I believe he must have
had a very difficult job in making himself believe that that was a realistic picture of the situation.
After congratulating himself upon this $300 million which, as he indicated, was somewhere in the ne'ghbourhood of a ten per cent deficit, he used these words:
This year we must finance not only the anticipated deficit of $300 million but also the large programme of loans, advances and investments which, as I have already indicated, may involve in the neighbourhood of one billion dollars.
In this connection I venture to recommend to the minister the remarks of one of his predecessors in office, the Hon. Charles Dunning, who, speaking some ten years ago, criticized what he called the bridge-score method of accounting, so much above the line and so much below the line. And Mr. Dunning added:
If the people of Canada are fully aware of all the facts I am confident that they will support us in the steps necessary to achieve that balance of government resources and expenditures which, in my opinion, cannot safely be postponed much longer.
It seems like reading of a different world to read of a world in which that was immediately expected. I doubt myself if the minister was very happy in entirely ignoring these large additional amounts when he gave us his estimated budget deficit. He comforted himself by speaking of these export credits as-
-from the economic point of view replacing our war expenditures by government investments on which we shall earn a return in future years.
Now, however correct this may be in a narrow technical sense, nevertheless when we take cognizance of the history of loans of that kind in the past, and especially after the last war, it was a surprise to me that the minister was prepared to regard these as active interest-bearing assets. I doubt if anyone in private business would dare to say that. Undoubtedly any private corporation under such circumstances would have had to do one of two things; it would either have set up a reserve, if resources permitted, or would have to proceed to charge itself so much, year by years, towards anticipated possible losses.
I think I am correct in saying that the minister last year informed the house that substantial losses might be incurred from this quarter. Reverting to my illustration, may I say that any corporation which acted in that way would find itself speedily in the hands of the receiver. And this is not the whole stoiy. I shall mention to the house later that it seems to me the minister is prepared to proceed with deficit financing on a big scale.
The Budget-Mr. Macdonnell

May I point out in passing that $200 million of the income which the minister is counting on is to be special receipts, I presume war assets. This reminds us that we shall be getting merely a modicum of the cost which we originally put out.
What does all this add up to? So far as
I can see it means-no incentive to production, no relief from taxation-only more borrowing.
I know the minister felt that some sweetener was necessary for this sour budget, and so we have the minister hitting upon this curious plan of tax relief in the future. I believe this is the first time a Canadian Minister of Finance has dealt in "futures". If the minister is able in 1946 to promise relief for 1947, then why not in 1948 and 1949-like the man who sent out the Christmas card for 1946, 1947, 1948 and 1949.
Those who are skilled in these matters evidently may have suggested to the minister that he could get a double modicum of gratitude-gratitude for this year, and gratitude for next year for this relief. But my suggestion is that if he gets no more credit next year than he did this year he will have to enter it in red ink.
The minister has failed entirely to do anything to stimulate production in the immediate future, and notwithstanding his rather optimistic forecast it seems to me it is doubtful whether he is going to get the production that he wished. The minister in any event is telling us in one breath to produce and in the next breath is expressing his regrets that he cannot do anything to help.
So we have the worst of both worlds. And yet until the government can successfully grapple with the problem of reducing war-time expenditures, tax relief can never come.
Is there any sign that the government is grappling with the problem-this problem? If it cannot, then it is "just too bad"; because if it is not possible to make drastic reductions in our present expenditures-and I am speaking of our ordinary expenditures; not war expenditures, because we all understand that they are automatically falling-but if it is not possible to make drastic reductions in our ordinary expenditures, or, conversely, if the present expenditures have to be regarded as permanent, then I think our present picture is a very gloomy one, except indeed to those who feel that deficits do not matter, and about whom I shall have something to say later.

I should like to point out that if we feel, like the socialist Chancellor of the Exchequer in England and the private-enterprise Secretary of the Treasury in the United States, that budgets must be balanced, then we can get small comfort out of the present situation, which I maintain shows not the first sign of a beginning, let alone what Churchill called "the end of the beginning."
As I said a minute ago, let no one be confused by the sharp drop in total expenditures, because that was due to automatic decreases in war expenditures. What we are entitled to look at is the situation with respect to peacetime expenditures. I want to point out that the expenditures on the non-war departments have gone up some $200,000,000. I should add quickly that a large part of that is due to interest-nearly $100,000,000, I think-and a very substantial part is due to increases in family allowances. Nevertheless there have been other increases.
I suggested to the minister last autumn that a mere pious desire for economy would produce nothing. I ventured to say to him then that if he could not in some way continue to keep down the spending departments it would break his heart and, incidentally, he would not get results. I am beginning to think that my prophecies are coming true. We are entitled to ask for some real evidence of economy, and my complaint is that there is no sign of it. I propose to take as a test case what has happened in connection with the civil service, and I shall direct your attention to some figures there. But before I do that, I want to say this about the civil service itself. I want to make it very clear that anything I say is by no construction whatever to be regarded as criticism of the civil service, particularly the permanent civil service which had to carry on through difficult days and which has seen a lot of temporary people come in who were perhaps given more interesting and remunerative jobs. That permanent service has carried on in an admirable way all through the years.
I want to say a word about economy. We all recognize that economy is a difficult thing to achieve, and I think we all realize also that in government departments it is even more difficult to achieve than in business, and I know something about it in business. What happens is that you develop in each department a kind of little kingdom. No one wants to see his kingdom reduced. What happened

The Budget-Mr. Macdonnell
during the last five years? Large numbers of people came into the civil service as temporaries and extras, but they very quickly became a part of the landscape, so to speak. When the time comes for reducing, it is extremely difficult to reduce. As I said a moment ago, every man has his kingdom and he does not want to see that kingdom reduced. Not only is this true absolutely, but it is truer relatively, if I may say so. No department head wants to feel that his department is the one that should be reduced.
What is the moral of this? I submit that the moral is very clear. We cannot expect this economy to come from inside the civil service. Let us consider a few basic facts. Since 1939 the civil service has risen from something under 70,000 to 150,000. I am informed that both figures include more than permanent civil servants, but I am also informed that these two figures are fairly comparable. What has happened is that the civil service has more than doubled in number. While this was going on I think the public feeling was that they had to be very sympathetic, that they must not be critical because things were being done in a hurry, that people had to come in, probably more than were necessary. However, when the war came to an end I think the people had the feeling that substantial reductions should begin. I think they felt that it was quite fair to ask for a very substantial reduction within a year.
What would be a reasonable figure? I find that hard to answer. I am quite sure that some people who have thought about it would consider that the service having doubled from
70,000	to 150,000 perhaps it would be reasonable that within a year we would get a twenty-five per cent reduction. However, I think that is too high. I myself would think that perhaps there should have been a 16f per cent or even a 10 per cent reduction. If that had happened I would have found it pretty hard to put much heart into any criticism.
What are the actual facts? As I understand it, the actual fact is that there has been virtually nothing done, that there has been a reduction of less than one per cent, in fact only a little more than one-half of one per cent. I am not forgetting that perhaps in the armed services-I believe it is true in the navy-certain work is now being done by a civilian staff which formerly was done by those who were in the services. That is one reason 63260-203
why I think that twenty-five per cent, or even sixteen per cent, is too high. I think when you come down to ten per cent you have reached a reasonable figure. But I find that nothing has been done-or virtually nothing; because a reduction of 900 out of 150,000 is really nothing. I confess I am alarmed. I imagine the Minister of Finance, with his Baptist background, which I think is more or less similar to my Presbyterian background, likes to think of economy. But I can find no sign that he is doing anything about it. Both at the dominion-provincial conference and in this house last year-I think I am correct in this-there was virtually no reference to economy.
Now, if this is a fair summing up, what does it mean? It means that in respect of continuing expenditures of $240,000,000, nearly half of our total budget in 1939, we have not been able to cut out a single dollar. Indeed, the actual cost is higher by something like $800,000. What does that mean? Has the minister lost heart and given up? Is that the reason no mention of economy was made at the dominion-provincial conference or here in this house? I think it is fair to say that the talk was tax, tax; spend, spend; borrow, borrow, but never save, save.
Last December when we debated the matter in this house the minister made a very disarming confession. I cannot quote his exact words but I can give the effect of them. He pictured his lonely struggle in trying to get some economy, a very unequal struggle it appears to have been. I fully sympathize with him, but I suggest to the house that if he fails in this, he is not the one who suffers primarily; it is the people of Canada.
I just want to give a few figures to show what could have been saved. A reduction of ten per cent, which I have mentioned, would have given us-$25,000,000 on the way to tax relief. A reduction of twenty-five per cent would have given us $60,000,000 on the way to tax relief.
I have brought the matter of the civil service estimates to the attention of the house because I felt that it was bound to be brought up. I feel that when in respect of an item of $240,000,000 we have had no result whatever there is cause for alarm. I can see no reason to expect any more effective or rigorous scrutiny elsewhere.
There is only one way this problem has ever been dealt with-I mentioned it in this house

The Budget-Mr. Macdonnell

last autumn-the spending departments must be rationed. That is what they have done in Great Britain. They decided what they had to spend and they spent it, and no more. It may seem the hard way, it may seem difficult, but it will have to be done. I would remind the house of what Sir John Anderson said when speaking on the British budget. He said that one of the great duties of a minister of finance is to keep down the spending departments. It has been done and it can be done. But it cannot be done without a new mentality on the part of the government'. What do I mean by this? I think I can best express what I mean by reading an extract from a speech which the Prime Minister (Mr. Mackenzie King) made many years ago when he was in opposition. We are apt to forget that the Prime Minister was once in what I understand Sir Wilfrid Laurier used to call "the cool shades of opposition". When the Prime Minister was in those cool shades in 1920 he said some things which I imagine were not very comforting to those who listened to them across the way. However, I think they are most applicable to the situation now and with the permission of the Prime Minister, I will read them. The Prime Minister said:
-these honourable gentlemen have the war habit of mind, and so long as they remain in office they will persist in it. What do I mean by "the war habit of mind"? It is the habit of mind which believes that everything should be done by the autocratic will of the ministry, regardless altogether of the wishes of parliament; it is the habit of mind which allows lavish expenditures to be accounted for by chance.
I do not know what the Prime Minister meant by "chance". I do not know whether I can use a slang phrase here and say: "What a chance" is there of our getting it now? The Prime Minister went on;
And I say to hon. gentlemen opposite, and more particularly to the people of Canada, facing as we are the great questions of the day, that so long as this present administration remains in office, so long will that war habit of mind continue to actuate the government in their management of public affairs, especially as regards extravagance in public expenditure.
What evidence have we of that tendency? As I have said I do not propose to speak of the actual period of the war, but to take the postwar period.
As an example I refer to the expenditure for the last current year as given in the Auditor General's report. And in that connection let me develop the thought which my hon. friend from Guysborough (Mr. Sinclair), brought out so clearly last week. He showed that the addition to the public debt during this year of peace was $395,000,000, or more than $1,000,000 a day.

I do not know how good the Prime Minister is at arithmetic, but if he will take his pencil he will find that the addition to the public debt during this last year is not one million dollars a day but between four and five million dollars a day; I think four and three-quarters million dollars a day. It is perfectly true that we do things on a more lavish scale now. Nevertheless there is the situation.
There is one further point I wish to make in connection with this question of organization and administration-I mentioned it the other night, but it is worth mentioning again. I refer to the utter failure of the government, as I see it, to implement what I understood was the promise made by the Minister of Finance last autumn that the tax administration machinery would be overhauled. Apparently nothing is being done to that end and certainly so far as I can learn, it is not because it is not necessary.
Having spoken of the immediate impact of the budget on our minds as taxpayers, I wish now to deal with its broader impact on the whole Canadian economy. I wish to deal with what the minister said about present business conditions, about future business prospects, and about the financial policies which the government proposes to follow in order to maintain employment. One could not listen to the minister without realizing the extent to which public finance has invaded our lives. It has come to live with us. It gets first cut at everything. It is senior partner in our affairs. To put it in another way, the Department of Finance, instead of being purser on the ship of state, has now become the captain and in effect determines the destination and the course the ship is to follow. As Sir John Anderson said, the budget has become a main instrument of financial and economic policy. For that reason I hope the whole budget debate will be taken very seriously. We are certainly considering things that go to the very root of our welfare.
Speaking of our present position the minister had this to say:
We are enjoying a level of employment and prosperity that we have never experienced before in peace time.
He then proceeded to trace the rise in national income, from $5-1 billion in 1938 to $11-75 billion in 1944. While he did not emphasize the point, it came out elsewhere in his speech, that nearly all of that increase in the national income was due to the fact that government expenditures had gone up from a little over $500 million in 1939 to $5 j billion in 1944. One Could not help remembering that in spite of

The Budget-Mr. Macdonnell
the minister's imposing figures, dry goods shelves are still empty, and we still cannot find houses to live in. I suggest that far too much of the minister's speech deals with money, and far too little with things.
The minister went on to explain how this level of national income was being maintained. He pointed out, very fairly, the things we know-the large gratuities of various kinds to the troops through various departments. He pointed to the big backlog of savings accumulated during the war which are now available for civilian expenditure, and thirdly he referred to our export trade. He emphasized very properly the fact that this export trade is being maintained largely if not wholly by loans which we ourselves make. We are making loans not to pay for imports but to pay for exports.
The minister has so little in the budget to take satisfaction from that I hate to question what little he has. Nevertheless I wish he had not left the feeling that things were promising quite so well. As I consider the inevitable
shrinkage which we hope will take place in government expenditure, and the condition of those countries in Europe whose trade means so much to us, I find the minister's picture tinged with a certain unreality. I should have been more pleased if he had spoken more gravely than he did. It is quite true that he made an appeal for production and used serious words, but to me the picture he painted took the urgency out of those words. My feeling is that unless we can prevent production costs from rising and produce more efficiently, export markets may be hard to find and our home market will begin to dwindle, and if that happens, not all the efforts of finance will find us full employment.
With the consent of the house I should like to put on Hansard tables IV and V of the Bank of Canada Statistical Summary for April-May, 1946. An examination of these tables will show already some signs of shrinkage of production, which will do something to alter the minister's bland optimism. The tables follow:



APRIL-MAY, 1948

[Stage Direction]
IV.-BUSINESS ACTIVITY Dominion Bureau of Statistics
Annual Totals (4)
1941		
1942		
1943		
1944		
1945		
12-Months Ending
April, 1946....
Monthly
1945-	Jan...
Feb	
Mar	
April....
1946-	Jan...
Feb	
Mar	
April....
PRODUCTION	Resi- dential Con- struction Con- tracts Awarded	Car Load- ings	Department Store Sales Index of Value Season- ally adjusted 1926-89 = 100	Employ- ment Index (') Unadjusted June 1, mi = 100	Aggre- gate Payrolls Index (3) Unadjusted June 1, mi = 100Gold	Nickel	Steel	News- print (* *)	Central Electric Stations (*)	Thousands fine ounces	Thous- ands short tons	Thous- ands short tons	Thous- ands short tons	Millions kilowatt hours	Millions of dollars	Thous- ands	5,345	141	2,701	3,426	27,724	92	3,200	133.8	99.6	4,841	143	3,121	3,177	32,506	79	3,386	149.7	113.6	128.33,651	144	2,997	2,983	35,719	79	3,467	150.8	120.4	144.92,923	137	3,024	2,992	35,151	131	3,661	165.7	119.8	148.22,651	123	2,881	3,259	31,913	196	3,627	183.8	114.7	142.62.693*	110*	2,786	3,554	31,642	216	3,622	194.8	112.3	139.4233.2	11.9	268.7	264.8	2,797	4.3	280	163-1	118.1	138.1212.4	10.4	250.5	239.7	2,535	6.3	265	181.0	117.2	146.4228.7	11.8	277.5	263.8	2,828	9.3	301	215.5	116.7	148.8223.7	10.8	274.2	245.4	2,766	16.6	293	171.7	115.8	144.1238.5	6.9	244.6	328.4	2,709	4.8	287	182.4	110.2	127.6229.1	6.2	233.9	308.4	2,488	9.3	263	215.6	109.5	135.5248.4	7.8	249.1	334.1	2,748	15.7	302	258.7	109.4	137.3247.5	337.9	2,708	26.9	282	207.5	110.3	138.9
(l) Source: Newsprint Association of Canada. (*) Total output less exports and secondary power. (*) Eight Leading industries. First of month. (4) Average of months in case of Department Store Sales, Employment and Payroll Indexes.
[DOT] 12-Months ending Mar. 1946.
63260-203£
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[Stage Direction]
V-USE OF MAJOR ENERGY SOURCES*: 1926-45
Compiled from publications of the Dominion Bureau of Statistics and Department of Mines and Resources Trillions of B.T.U
-	Water At 1926 Average Coal equiva- lent (2)	Power At yearly Average Coal equiva- lent 0)	Coal ([DOT])	Petroleum Fuels (®)	Natural Gas (7)	Total (*) Sum of Foregoing Fuels	Domestic	Domestic (<)	Imports (6)	Total (3)	Domes- tic	Imports	Total («)	Domes- tic	Domes- tic	Imports	Total1926	£62	262	379	464	844	2	105	107	21	664	569	1,2341927	S17	299	394	501	895	3	121	124	23	719	622	1,3411928	S61	325	409	464	873	4	148	152	24	763	612	1,3751929	405	351	405	500	906	7	176	182	31	793	676	1,4691930	407	338	347	514	861	9	169	178	32	726	683	1,4091931	S79	301	288	357	645	9	160	169	28	627	516	1,1431932	380	293	273	324	597	6	152	158	25	597	476	1,0731933	415	313	280	302	581	7	151	158	25	624	453	1,0771934	500	377	327	356	683	9	161	170	25	737	517	1,2541935	653	414	327	327	654	9	171	179	27	776	498	1,2741936	597	441	356	353	710	9	177	186	30	836	531	1,3671937	646	473	375	390	764	18	188	205	35	900	577	1,4771938	606	438	340	343	683	42	174	216	36	857	517	1,3741939	663	473	370	399	769	47	185	232	38	927	584	1,5111940	700	484	415	468	882	52	210	262	44	995	678	1,6731941	778	534	427	546	972	61	235	296	47	1,069	781	1,8501942	869	583	437	668	1,104	62	223	286	49	1,132	891	2,0231943	945	636	396	754	1,150	60	228	288	48	1,140	982	2,1221944**	943	633	421	764	1,185	61	248	309	48	1,163	1,012	2,1751945**	933	626	402	682	1,084	51	272	323	57	1,135	954	2,090* Excludes firewood. In 1926 firewood appears to have slightly exceeded petroleum as a source of energy. Petroleum, however, increased approximately 200% from 1926 to 1945 whereas firewood appears to have increased about 10%.	(l) Output ofcentral electric stations, generated by water, less exports. Water power is calculated at the coal equivalent, based on the average efficiency of central electric stations in the United States as reported by the Edison Electric Institute. Because of increased efficiency in the utilization of coal, this average decreased from the equivalent of 1.95 lbs. of coal per kilowatt hour in 1926 to the equivalent of 1.31 lbs. in 1945.	(2) Calculated at the constant 1926 rate of 1.95 lbs. of coal per kilowatt hour. (8) Includes
anthracite coal, bituminous coal, sub-bituminous coal, lignite coal and imported coke. The unit heat values employed are: anthracite, 27,200,000 b.t.u. per ton; bituminous, 26,200,000 b.t.u. per ton; sub-bituminous and lignite, 20,000,000 b.t.u. per ton; coke, 26,000,000 b.t.u. per ton. (4) Sum of sales by Canadian coal mines, colliery consumption, coal supplied to employees and coal used in making coke, etc., less tonnage bunkered and exported. (B) Imported for consumption. Deductions have been made to take account of foreign coal re-exported and bunkered. (6) The coal equivalent of the sum of gasoline, fuel and gas oils and kerosene estimated by the Dominion Bureau of Statistics and converted to b.t.u's on the basis of 1 ton of coal equals 26.000,000 b.t.u. (7) Total production. The unit heat values employed are 1,075 b.t.u. per cubic foot. (8) Including water power calculated at the yearly average coal equivalent. ** Preliminary.
Speaking of high income the minister went on to say:
Indeed the pressure of expenditure at the present in many fields is so great that action by the government and others is needed to prevent rapidly increasing prices and the development of inflation.
Again he said that ordinary expenditures and loans:
. . . will brine our total financial requirements on the basis of present commitments and present estimates during the year to roughly three and three-quarter billion dollars.
He pointed out that these financial requirements "do not of themselves suggest a reduction in taxes". Later he added:
Lighter taxes are not needed now for the purpose of permitting or encouraging additional private spending in order to maintain employment this year.
Having said this and emphasized all this, the minister was evidently a bit troubled by the fact that he was not providing any stimulus
tMr. Macdonnell.]
for increased production, and accordingly he changed his tune and referred to his "pleasant duty in a few minutes to announce reductions." He then proceeded to announce reductions-1947 model!
I need hardly spend time in July, 1946, to consider the effects of tax reductions in 1947, particularly as by that time we shall be on the eve of another budget which might affect even the concessions which are now being made.
I come now to say something about deficit financing. Having underlined the argument for restricting purchasing power even to the extent of keeping up taxation partly for that purpose, the minister at a later stage in his speech referred to the expansive side of his policy. In other words, the minister, having told us that he is afraid of too much purchasing power, now proceeds to make it clear that he is prepared to create a lot more. This is surely blowing hot and cold. One of

The Budget-Mr. Macdonnell
his reasons for not reducing taxation is the fear of letting loose spending power, but at the same time he apparently contemplates, if he can reach agreement with the provinces, a whole series of commitments which if he carries them out will, according to the figures given by him to the dominion-provincial conference, involve annual expenditures of several hundred million dollars. This is manifestly impossible without an incredibly high tax burden, presumably even higher than at present, or deficit financing in a big way.
It appears that the minister has not only moved from the old fashioned annual balancing to the doctrine of cyclical balancing of budgets-that is, balancing over a cycle of years, not necessarily every year-but that he is also contemplating the final step of the new financial thought, namely, oub-and-out deficit financing. Particularly in the light of the fact that this is a year of high income, to contemplate large additional deficits, piled on top of our present deficit and the large loans and advances we have in contemplation, is enough to make us think seriously. What it will do is to increase an already overabundant supply of money while adding little or nothing to the supply of goods.
The London Economist, commenting on the English situation, and the various social services and other expenditures contemplated, said:
Each of these, regarded by itself (the country) can perhaps afford, but can it afford them all together? That is the question that this government ... is apparently unwilling to ask or at least unable to answer.
I apply these words to the minister, and 1 ask him, has he tried to make any such calculation, or is that unnecessary according to the theory of deficit financing? Let me make one thing abundantly clear. I am not suggesting that we should starve social services. What I am suggesting is that if we disregard precautions which even the socialist chancellor in England observes, we may all suffer, and social services most of all.
But someone will say, surely the Minister of Finance is as much against inflation as anyone. He has repeatedly said so. Surely we can rely on him not to run these risks. In answer to this I think it can fairly be said that the minister has been forced into a situation where he halts fatally between two courses. Is he to favour inflation or deflation? Has he too much money or too little money? In this condition of mind it is not surprising that we have this astonishing facing-both-ways budget. In one breath he is warning us against inflation, and in the next he is expounding expansive income-creating policies, which will have to be based on borrowed money, and in
the end he takes an action which is really no action, as it does not become effective until 1947.
While talking of deficit financing, let us have a look at the attitude of Britain and the United States, which I have mentioned already. Both the socialist chancellor in London and the private-enterprise secretary in the United States are at one as to the necessity of balancing and hope to do so soon.
Now a word as to the technique of deficit financing. It depends, of course, on the government being able to borrow money practically without limit and on having the resources of the central banking system available to support the bond market. It is essential that bond prices should be kept firm; otherwise a loan might fail.
For several years this policy of deficit financing has been maintained partly by the creation of additional bank credit, deliberately created for that purpose. Recourse to the creation of additional bank credit solves none of our problems. It only postpones and multiplies them. I note that bank deposits are expanding at the rate of about 1 per cent per month in Canada. That is roughly $50 million a month; I believe that in the last two years, from 1944 to 1946, deposits increased, according to the dominion bureau of statistics, by some two billions. No corresponding increase in our wealth production has occurred or is occurring, but the dykes against inflation are being weakened dangerously. The present dangerous situation in the United States is due in no small measure to the fact that they have proceeded with the creation of spending powers on a scale much greater even in proportion than ours. Apparently the belief is that this procedure can be maintained indefinitely. To me this is suspiciously like the mentality of the stock market speculator who believes the market will never fall.
It is part and parcel of this theory of deficit financing that interest rates should be kept low; for if interest rates are tending to rise, or even are expected to rise, the citizen with a capacity to save can be no longer relied on to subscribe as required at the low rates, and therefore the government is compelled to put its entire reliance on the creation of bank credit. There is only one end consequence of this procedure.
The advantage of low interest from the point of view of government interest charges is, of course, obvious, and this same low-interest policy has been pursued in the United States and in England, and of course has naturally affected our situation here. But there are signs, at any rate in the United States, of a change.
The Budget-Mr. Macdonnell
[Stage Direction]
The success of any course may fairly be tested by asking whether it can be permanently successful. The success of the last five years both in deficit financing and in maintaining a low interest rate makes the government authorities feel that they can go on indefinitely following the same course. But really the theory has not been fully tested. So far it has been maintained partly by appeals to patriotism, partly as a good investment, and when necessary by support in the market afforded by the Bank of Canada.
I want to digress for a moment to tell of an incident which is related of a bond dealer in the United States who was going about selling his wares after the war was over. He approached a coloured gentleman who was engaged in some kind of improvised government employment which was taking care of him, and used some well-tried arguments. First of all he used the argument of patriotism; and the coloured gentleman said, "Boss, de war is over; don't talk to me about dat". Then the bond dealer came to his second argument, the excellence of the investment, and to this the coloured gentleman replied, "Boss, dem dat pays me what I gets for what I does will go broke".
The first of these supports, that is to say, patriotism, is no longer to be relied on to anything like the same extent. The continued low interest is going to tend to make government bonds less attractive as an investment and therefore the task of the bank might be heavier. The truth is that deficit financing and its offspring, low interest, is still untried under peacetime conditions. I suggest that they are not supported by the common sense of the man on the street, but are the financial conceptions of people living in a world inhabited not by ordinary men of hopes and fears but by that imaginary creature, the economic man.
The ordinary man on the street cannot be made to believe that interest charges can go on mounting indefinitely. He believes there can only be one end to constantly mounting debt, namely, currency instability. Moreover, while low interest rates may be very convenient for borrowing governments, there is another aspect of this question which we should not overlook. Whatever may be the blessings of low interest in some ways, let us not forget that it has important implications for those who have through life insurance or otherwise acquired security for their old age.
The policy of hammering all interest rates down to aid the government in carrying a mounting debt burden means an increase in the cost of security to the largest and most diversified group of investors in the country. Those who. aged or disabled, have provided

for self-support from past savings find their retirement allowances cut by this policy. It means that people in modest circumstances must either make larger contributions out of current earnings or accept lower pensions at the time of retirement. It is here that cheap money strikes its hardest blow. It is here that cheap money levies a special tax on the frugal and the thrifty. Inflation can become a vicious form of taxation. Cheap money, especially occasioned by vast government spending, can become in this respect a tax also. It hits the thrifty. It hurts those who are trying to help themselves.
To sum up, the whole deficit theory of financing is based on a controlled economy. Let us face the fact that we have had a virtually controlled economy since 1939. It is not unnatural that those who have been in control should believe that they can do in peace what they did in war. I wish to point out that -three of the all important aids which they had in wartime are now gone. First of all they had the insatiable demand for goods. Second they had practically unlimited spending powers. They ran up our debt from three billion to somewhere near seventeen billion. Third, they had control over both producer and consumer. They could tell the producer what to produce, what not to produce. They could tell the workman at what job he was to work. Do not let us deny that with these advantages they accomplished certain things, but the conditions which made their achievement possible no longer exist.
Do I then suggest that government should from now on take an entirely negative attitude? By no means, but what I do say is that to embark or prepare to embark on large further deficit financing when in addition to a deficit on ordinary account of $300 million we are borrowing hundreds of millions for loans abroad, is a highly questionable proceeding.
Bound up with this matter of deficit financing is the question of security, about which it will be convenient at this point to say a few words. I doubt if there ever was a time in the history of the world when there was such an anxious urge for security and such an appalling awareness that we have not got it. There is a widespread feeling that security must come through government. Well, we have had evidence of governments providing security. Governments provided security for several years over large parts of Europe and large parts of Asia. There was security for work; work was not only obtainable; it was inescapable-the work of the slave, the kind of security the Israelites had when they worked for the ancient Egyptians. We can have that kind of security, but it is not the

The Budget-Mr. Macdonnell
kind of security we want or could tolerate. The truth seems to be that to get security we must take risks. I ventured to suggest that to the minister the other day when he was speaking about the foreign exchange control board. Perhaps that was in Shakespeare's mind when he made one of his characters say-I think it was in Macbeth- "You all know security is mortals' chiefest enemy." That may be a somewhat mysterious statement; nevertheless I believe if we examine into our own minds and study history we shall find that if a man or nation concentrates exclusively on the getting of security, that man or that nation will not get security. I believe we can say that security in a free economy depends on having enough people who are ready to take risks. These are the people who get the thing going; these are the people who provide work for others, and the role of the state is not primarily to provide security but to provide opportunity, and to create an economy conducive to freedom and enterprise. No one will say that we have made a perfect job of it, but great things have been done, and what we need to do is not to change the mainspring, though we may need a better regulator.
Security has come through a multitude of individuals prepared to make the most of their opportunities. At this point I should like to interject this question: what brought our ancestors to this country, from the earliest ones who came from the north of France and then from Britain, on down to the ones who came more recently from the continent of Europe? Did they come here looking for security? They came here looking for opportunity. That is what brought all of them here. Almost without exception they came looking for opportunity, and happily we are able to say that on the whole they found it.
This is not the time or the place for me to take time to discuss the merits of free enterprise and socialism, but I should like to quote something from a man whom I believe no one will regard as a reactionary or a narrowminded supporter of free enterprise. I refer to the late Lord Keynes. Before quoting him I want to say that just before the statement I wish to quote he had spoken about the extension in certain ways of the traditional functions of government. I trust that hon. members to my left may listen to what Lord Keynes said, because I believe they have respect for him and because I think it tells the story so well. After speaking of the functions of government Lord Keynes said:
There will still remain a wide field for the exercise of private initiative and responsibility. Within this field the traditional advantages of individualism will still hold good.
Let us stop for a moment to remind ourselves what these advantages are. They are partly advantages of efficiency-the advantages of decentralization and of the play of self-interest. The advantage to efficiency of the decentralization of decision and of individual responsibility is even greater perhaps than the nineteenth century supposed; and the reaction against the appeal to self-interest may have gone too far.
He is a little cagey there. I continue.
But above all, individualism, if it can be purged of its defects and its abuses, is the best safeguard to personal liberty in the sense that, compared with any other system, it greatly widens-
Mr. MacINNIS:: That is a big "if."


James MacKerras Macdonnell: I am ready to admit that. You see, I did not leave out that "if." I continue with the quotation:
-it greatly widens the field for the exercise of personal choice. It is also the best safeguard of the variety of life which emerges precisely from this extended field of personal choice and the loss of which is the greatest of all the losses of the homogeneous or totalitarian state.
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.
Under our system the duty of government is to create conditions to increase the number of those who will provide employment. There must be more enterprises, more people to take risks. For that there must be freedom for profits, too, because that is the way to distinguish between efficiency and inefficiency. That is the way and the only way to get the maximum production in a free country.
I want to say a word about workers on their own. Sometimes I think we forget them. A reference to security impels me, naturally, to speak of them. In the house the other day the Minister of National Health and Welfare (Mr. Claxton) said, as I recall it, that workers on their own numbered about half of the employed people in the dominion. I was surprised when he said that, but at any rate, it is a very large number. Workers on their own number something over 1,100,000. They include 630,000 farmers, 54,000 manufacturers,
99,000	in trade, 49,000 in fishing and logging, and. so on. I should also add over a million people who are taking part in pension schemes, in1 other words, seeking to look after themselves. What is the characteristic of all these people? The characteristic is that they have a sense of responsibility in that they want to look after themselves. My own riding is full of people like that. There are hardly any other people in it. There are large numbers of them in every riding.
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What is happening to these people? Remember that I say they all have one characteristic; they all wish to be independent. The two things which are making it difficult for them are taxes and high prices. These and low interest are making it extremely hard for them and sometimes I think they wonder whether in the process of providing security for other people they are to be pushed into a situation where they will have insecurity forced on them. I ask the minister to consider whether he is jeopardizing these people. Is it even possible that there are those who wish to increase the number who are leaning on the state? If so, I wish to proclaim my view that it is people like these who are the cornerstone of any free economy. As I understand it, democracy as we have it really takes its roots from seventeenth century England, and if there ever was a place where they believed that people should try to look after themselves and have a sense of responsibility, it was seventeenth century Puritan England. Our whole desire should be to try to strengthen these people. Morally and materially they are a priceless asset.
I wish to say a few words about production. If I say nothing else to-day I hope I may say a word which may help to concentrate our minds on this all-important thing. Really the one inescapable test of the minister's budget is this: Does it help to create production? Does it encourage the investor to invest, the producer to produce, the workman to produce his maximum. So far as it does these things it is a success; so far as it does not, it is a failure.
In considering production, let us concentrate our minds on consumable things which alone increase wealth, and refuse to allow ourselves to be led away and made dizzy by astronomical money figures. Many people who talk about money as if it were worth having as a thing in itself are guilty of a great error. There is another fallacy of which people are guilty. They talk about production in an abstract and unrealistic way. You hear people say that everything is all right; we have got more skills developed during the war and all we need to do is to put people to work. I wish it were as simple as that. But we do not produce in a vacuum. The only production we can get is production related to other parts of the economy in terms of skills and materials to be supplied, costs and so on. Of course the great bulk of our production must be in those things where we have special skills to produce. It is essential, unless we are going to reshuffle the whole deck, that we keep employed 630,000 farmers, 54,000 manufacturers, 49,000 fishermen and loggers, and so

on. On this production depends our whole foreign market, because in these things we produce more than we consume, and if production is high in these lines then we are functioning efficiently, but if it goes down in these lines there is no use in comforting ourselves in an abstract way by saying we shall be able to produce. You cannot suddenly turn a farmer into a miner or a papermaker into a fisherman. Furthermore it is not going to be cured by the huge outpouring of government money. However much we may be prepared to recognize the duty of the government to meet unemployment, we must recognize that the task of turning, let us say, skilled papermakers into foresters is difficult, if not impossible. Therefore, I repeat, when we think of production let us not think of it in abstract terms but let us think of keeping our existing skills employed in production, and let us judge the minister accordingly. Government measures to aid employment should be ancillary, to be used in emergency, and should not blur the fact that the main business of government is to create a favourable climate for the production of the products which we are specially organized and skilled to produce.
Judged by these standards I criticize the minister in three ways. First, he fails to give a definite stimulus to production. Second, his policy of deficit financing I believe will create great uneasiness as to the stability of the currency, if it is continued. Third, the timid and hesitating manner of dealing with controls, even though there has been some improvement, is still hampering business. I shall have a word to say on that later.
Beyond these, and more important still, is the state of mind which has been created throughout the community by vast government expenditures and the hope held out of more. This has created a widespread impression that governments can create money at will and provide full employment by their own financial measures. This has the dangerous effect of lessening the individual sense of responsibility far and wide. In addition, the use of subsidies and bonuses in wartime has created a feeling that the government can step in to fill any money deficiency. "Are the wage-earners not getting enough?" "Let the government make up the deficiency." "Can the company not make money?" "Let the government subsidize the company so prices to the consumer can be kept low." "Are the farmers not getting enough?" "Let a subsidy be given there, too." It all looks to me like pulling ourselves up by our bootstraps. It reminds me of a story which, while of a rather trivial nature, I hope will not offend

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anyone in this house. A farmer had an invaluable pig man, but he discovered that he had one failing. He explained that his man was a wonderful fellow, always on hand when the sows were farrowing, always there to see that each little pig had its proper channel to receive nutriment, and all the rest of it. The only fault of this pig man was that he forgot to feed the sow!
Let me add that perhaps much of this was unavoidable in war time, but the trouble is that it is continuing in peace time. It cannot go on forever unless we are prepared to resign ourselves to a controlled economy. So on all hands we have strikes, refusal to do certain jobs, and so on. This is partly due to other causes-suspicion, distrust and the like; but it is also due to the widespread decline of an individual sense of responsibility, and for this I believe the minister cannot escape responsibility.
Let me give one illustration. We have men who were formerly engaged in mining, lumbering, farming and so on, who have been released from the army or from munition work. They have come to like a gregarious life. Sometimes it happens that they do not wish to return to the work for which they are best fitted and which will enable them to contribute most to the national economy. No one should criticize them; nevertheless responsible leaders, their own labour leaders first of all and also the government, should make it clear that we cannot prosper as a nation unless every man has a sense of responsibility to do his best at the thing at which he is most skilled. Let no one think, however, that I am forgetting the responsibility of investor and producer, particularly the latter. He too must have a full sense of responsibility; and incidentally I associate myself fully with the minister's appeal to him, only I wish the minister had done more to help him.
I have emphasized the fact that social security can come only from production. I believe this is true. Nevertheless I often hear people talking in this house as though they believed we could get things just by voting money. How easy life would be if that were so! We could all then live in the never-never iand which W. S. Gilbert describes, when he says:
There lived a king, as I've been told,
In the wonder-working days of old . . . Then he describes life in this kingdom as follows:
He wished all men as rich as he,
And he was rich as rich could be;
So to the top of every tree Promoted everybody.
But speaking seriously, as I have sat here listening to the call for expenditures how often have I said to myself: Can this really be true? Can we have everything we want regardless of expense? Sometimes I feel that anyone who questions it is regarded as antisocial, and my feeling is that if those of us who think there is a limit somewhere prove to be right, then the anti-social people will prove to be those who carelessly and recklessly, in my opinion, have urged people to believe that government spending could be carried on without limit.
I wish to say one other thing, and it is this. In this house I believe we should be prepared to credit each other with sincerity. The other day I was very much surprised to hear no less a person than the hon. member for Rose-town-Biggar (Mr. Coldwell) say:
I know my Progressive Conservative friends dislike the idea of many other things that are being done for the benefit of the ordinary man and woman in Canada.
I resent this sort of thing very much; I think it is beneath the dignity of the hon. member to talk in that vein. If he must talk in that way I suggest that he keep it for his own constituents.
While I am on this matter there is another thing I should like to mention. It is one of the most popular indoor sports in this house, as far as I can make out, to suggest that in the period from 1930 to 1935, when our party was in power, there was a disregard of the needs of social security. Incidentally I might remind hon. gentlemen opposite that we inherited the years from 1930 to 1935 from those across the way; and while the conditions we had then were in the main world wide, nevertheless prudent housekeeping by the Canadian government in the gay twenties would have made the years from 1930 to 1935 very different from what they were. At the present rate of going, we may have a bad legacy again in a year or two. But to come back to the barrage of criticism, particularly from hon. gentlemen to my left, perhaps it would interest them to hear what a distinguished member of their own fraternity had to say of the prime minister of those days. The speaker is none other than Professor F. R. Scott, who I believe is still in good standing in the C.C.F. party. He had this to say:
A glance at the dominion statutes of 1933-35 will reveal how active was the Conservative leader in the promotion of social reform.
I wish to add quickly, in order to save hon. gentlemen to my left the trouble of pointing it out to me, that at the time Mr. Scott was making this statement he was also pointing
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to the fact that the Prime Minister of that day had done certain things to extend government operation.
Now I wish to say a word or two on the subject of controls. At the end of the war I think almost everybody felt (1) that controls had served a useful purpose, (2) that they could not be done away with immediately, (3) that they hoped they would be done away with as soon as possible, and (4) that they wanted a continuing plan known and understood by the public. In respect to the first three points I am sure the government would agree, but in respect of the last I think we are entitled to criticize the government. I think we can say: (1) that there should be a developing plan; (2) that it should be known; (3) that it should operate in successive stages; (4) that some trouble should be taken to sell it to the public, as trouble was taken when price controls were put on in 1941, when a good job was done; and (5) that the plan should be a general one. The present confused situation in the United States has been the occasion of a new statement by the minister on the subject of controls, but the main principles to which I shall refer are not affected by what has happened; actually they are emphasized by it.
At the present time the picture one has is of the attempt to deal with a multitude of individual cases, and I submit that it is doomed to failure before it starts. Wh-at happens? Case A is considered, and it take some time. It cannot be done overnight. It may take weeks to assemble all the facts, or at any rate a considerable time. If everything else remained static while that was being done, it might be all right; but what happens? Everything else is in a state of flux, so I suggest that by the time a decision is reached in a great many cases, it is already obsolete; and I suggest that has been going on in scores and perhaps hundreds of cases and that we are getting an uneven situation in every direction. The triviality of the cases with which the board still deals is almost beyond belief. I have mentioned here previously that it came to my attention that the price of horseshoeing in one of the small towns in my riding has been under control. The hope was expressed by the board that they might be able to lift the ceiling, and I was asked to hold up the matter for a week while that was being considered. Finally there was a civil and courteous statement that it could not be done, that is was part of a pattern. That, to me, is pure doctrinaire intellec-tualism. Therefore my feeling is that if this is going to be done successfully it has to be done to some extent "by and large", and that we cannot proceed by dealing with each
fMr. Macdonnell.]
individual. Also the public must be taken into the confidence of the government as they were with regard to control.
What has the minister to say about it? I quote his words:
We believe it is wise, and practically necessary, gradually to relax and remove the controls which made up our stabilization programme.
That is all very well, but there must be some method indicated, some plan that is intelligible and for which public support may be sought.
This raises the question of publicity. The original price control was sold to the public in a most effective manner. People were made to believe in it. It is now necessary to sell decontrol to the people in the same effective way, and get them to believe in it also.
Next comes the human equation. In order to get decontrol we must have people who believe in decontrol. People who have been working controls have believed in them. But is it likely that they are going to become enthusiastic about decontrol? I think that to ask them to work for decontrol will be like asking a lot of admirals to decide upon reducing the navy.
Let us be realistic about it. We have a group of men who have had unlimited power in their hands, and who have the controlled economy complex. They are industrious and high-minded, and no doubt convinced that their controlling hands are still necessary. It will be hard for these men to believe really in decontrol. Must it not almost inevitably seem to them a risky thing to trust people to look after their own affairs again?
Then, one final point on the matter of control. The key problem of control is to keep increases in prices and increases in wages related to each other, but at the present time we can see only too clearly that this is not being done. What we actually find is something like this: An increase in wages granted by the national war labour board, then an increase in prices granted by the wartime prices and trade board, then a further demand from labour for increased wages to offset the increased price which the producer, on the other hand, regarded as compensating him for the increase in wages already given.
So long as the period of control exists, and until employers and employees can get back to the healthy business of making their own agreements, there is only one solution for this difficulty, namely to bring employers and employees together and let them hammer out their differences of wages and prices before a joint authority which can arrive at an over-all decision.
This is the only way to get production, which is the answer to every problem which-

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ever way we turn. I cannot do better than quote briefly from Mr. F. P. Walsh, a well-known labour leader in New Zealand:
And nothing should be allowed to interrupt the productive system. We cannot afford to have stoppages of production. Machinery exists in . the federation of labour and in the government for the settlement of industrial disputes. This machinery is adequate and is there to be used. The history of disputes shows that it must be used at some stage and therefore the most effective way for our movement to use it is before the stoppage occurs. Every time a stoppage occurs, not only are wages lost but goods are lost which are essential to the attainment of a higher standard of living-our primary objective.
I wish to say just a word about dominion-provincial relations. I said the other evening that in their method of presenting the new proposals to the provinces, the dominion government was using a very big stick. I favour, as my leader favours, and as I hope all hon. members favour, the adjustment of dominion-provincial relations on the basis of fiscal need. I shall confine myself in my further remarks at the present time to method.
What were the provinces entitled to expect when the meeting adjourned on May 3? Very considerable progress had been made. Much of what the dominion wanted had been conceded already, so that there was no reason for precipitate action. The principle which was advocated on behalf of the provinces had had, on a previous occasion, some years before, the approval of the Prime Minister himself. I shall quote him later.
The great principle which the provinces sought to sustain was the classic principle of responsible government-that all governments should by their own taxation measures raise as much as possible of the money they spend.
After emphasizing the importance to the provinces of retaining certain minor taxation fields, Mr. Macdonald, Premier of Nova Scotia, said that if these be lost-and these are his words as they are reported at page 39 of the official report of the proceedings of the Conference-
Provincial autonomy will be gone. Provincial independence will vanish. Provincial dignity will disappear. Provincial governments will become mere annuitants of Ottawa. Provincial public life-and I do not think these words are too strong-will be debased and degraded.
It is with this background of words used by Mr. Macdonald that I now quote the words used by the Prime Minister in 1930, as reported at page 1237 of Hansard for that year. The Prime Minister, if I may say so, on this occasion spoke with unusual absence of qualification. Here are his words:
When on a previous occasion we were discussing this matter of grants from one treasury to another, I said I thought it was an unsound 63260-204}
principle; in fact, I think I used the expression that it was a vicious principle to have one body raise the taxes and another body spend the peoples' money thus raised.
These words of the Prime Minister put the matter very clearly. In all these circumstances-the progress already made, the wishes of the provincial premiers, the known attitude in the matter of the Prime Minister which I have just quoted-the provinces were entitled to expect that the conference would have been reconvened.
This would have been in accordance with the spirit which characterized the making of confederation. Confederation was brought about only by an exercise of tact, wisdom, moderation, mutual understanding, forbearance, patience, and willingness to give and take. Moreover this principle, the principle of seeking progress by discussion and agreement, has been well established already in commonwealth relations. This spirit of seeking agreement by discussion and compromise, which served us so well at confederation and which has characterized all meetings of the commonwealth, the government of Canada has cast aside in its methods of dealing with the provinces.
I am aware that the answer will be made: Well, what about it? The provinces will have to agree, and if they do, is there anything more to be said?
One or two provinces have accepted, and others will no doubt accept. Needs must when the devil drives. But that is not the final answer. The final question is not whether this high-handed action will succeed, but what bearing it has on the vitally important future relations between provinces and dominion. The question is what would be the effect of this use of the power of the purse, of this shot-gun substitute for consultation, compromise and agreement.
This, I fear, is another instance of what the Prime Minister, in the quotation from which I previously read, called, "the war habit of mind", which he defined as "the habit that believes that everything should be done by the autocratic will of the ministry, regardless altogether of the wishes of parliament." These words of the Prime Minister may rise to confront him still as centralized power goes on from one high-handed arbitrary step to another.
The statement made by the Minister of Finance on Friday last will have, as he recognized, a most serious effect on the goldmining industry. Whether or not, as some think, it will close down low-grade mines, is not clear. We must hope it will not. But
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it will be bad enough, bad for shareholders, but far harder on the miners themselves.
It should not be forgotten by any hon. member that in 1943 there were 64,324 employees in the metal mines industries throughout Canada; that they received in wages and salaries $128,483,302, or an average amount of $1,997, or just $3 less than $2,000. If the gold industry is to be maintained in a strong and progressive position, further immediate steps will have to be taken by the government. Some of these steps are indicated in the recommendations of the senate committee on steps to be taken for the mining industry as a whole, comprising the following basic measures:
(1)	Return of fifty per cent depletion allowance for both mines and shareholders;
(2)	Wipe out the excess profits tax on all mining.
With the full gravity of the situation facing them, I urge the government in the first place to adopt these senate recommendations, which they have so far ignored; second, to consider seriously whether further steps can be taken to maintain this industry, which has been of inestimable importance to the economy of this country, particularly since 1929, by reason of the fact that practically the whole mining output has been exported abroad.
I wish to say a word now about trade- and I also wish to say that I am nearly through.
Two things have always been essential in the past to the prosperity of Canada:
1.	That there should be economic relations on a large scale between the United States and the United Kingdom; and
2.	That we should be able to export large amounts of natural products to the United Kingdom and western Europe.
To-day this remains as true as ever, but there remains the fact that there are tremendous influences at play which tend to create an impossible situation in western Europe. We know that a great part of western Europe has been overrun by Russia and is really inaccessible to us. The rest of Germany is in a very unsound position. While in the balance of western Europe there has been some encouraging progress, that is something which could easily be put back.
What about the United Kingdom? It stands with one foot in Europe and. one foot in the western 'hemisphere. It is trying, as it always has done after successful wars, to treat the enemy decently, wisely and constructively, both from motives of humanity and from motives of enlightened self-interest. It is the

bastion for the western hemisphere in time of peace, just as it was in time of war. It is a bastion now against the flood of economic communism, as it was in war against the flood of nazism. If the flood of communism should cover the rest of Europe, it is hard to see. how Great Britain could survive economically.
What would her failure mean to this country and to the United States? Assuming, as one could hardly fail to assume, that if communism should sweep west it would also sweep east, we would then find an America isolated. Does any one suggest that South America alone could afford a sufficient export area to make possible North American prosperity? How earnestly then must we hope for the success of Great Britain, and how ready we should be to play our part?
The first objective obviously was to enable Britain to resume as rapidly as possible normal economic relations, and in particular to aim for a convertible sterling. The Bretton Woods agreement, which was approved in this house last December, was a step to that end, and a second step was the loan approved in this house some weeks ago. A greater step, which we await anxiously day by day to hear the accomplishment of, is the American loan. I cannot believe that shortsighted obscurantism can possibly win the victory in that great country over the forces of reason and enlightenment. How anyone can doubt that the United States, cut off from Europe, would suffer grievous economic injuries, I cannot understand. A new factor in the situation, from Canada's point of view, is that during the war we become a creditor instead of a debtor nation. This means that the import-export situation is basically altered and, in the long run, we must find a way to take more imports.
I should like to digress here for a moment just to put on record one or two facts often forgotten in the history of trade policy. It can, I think, fairly be said that the Liberal party, if the record is studied, has followed remarkably closely Conservative tariff policy. The Laurier government in 1896 adopted the national policy of 1878. The King government in the nineteen-twenties accepted with little variation the tariffs of Borden and Meighen. Since then the same has been true. The much maligned policy of Bennett in the difficult nineteen-thirties has quietly been adopted with no significant changes by the present government in the nineteen-forties. We hear little now of those Liberals who preached unilateral lowering of tariffs. Hon. gentlemen opposite may be surprised at this, but if they will look at the facts I believe they will find I am right.

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This, as I said, is for the record. To-day we face new conditions and cannot rely complacently on old methods. We are providing large sums of money to enable our products to find a market-perhaps something like a billion dollars this year, not to pay for imports but to pay for exports. We are coming to be creditors in world trade relations, and we must adjust our policies accordingly.
I come back to where I began. We need exports as never before. In the world of today there are new and perplexing difficulties in the way of trade. Difficulties of currency are added to the old difficulties of tariff. If we seek security exclusively, pursuing our own prosperity by policies of exclusiveness, we may very well find that we have failed to get security but have only the exclusiveness. What we must try in every way to do is to pursue security through cooperation and exchange policies.
It will be natural that many hon. members at this moment will have in their minds the cjuestion of British preferences which the United States, in signing the British loan agreement (subject to the approval of congress) suggested we should relinquish as part of the greater freedom of trade which it was hoped would result from that and other similar agreements. In my opinion we in Canada should do all in our power to contribute to the increase of trade. Whether it comes or not depends, it is true, to an almost overwhelming degree upon the United States. However, we bring much greater strength to any negotiation than in the past, and can play a greater part than in the past, particularly with the United States. Meanwhile it would be natural for many in Canada to feel that we must not give up a bird in the hand until we have some indication of what is in the bush.
I have tried to emphasize the unreality of this budget. There is unreality in the new deferred form of tax relief which reminds us of the children's game, "This year, next year, sometime, never." There is unreality in facing our deficit; there is unreality in failing to accentuate production but on the contrary getting lost in mazes of dollars. There is unreality in painting our economic position too rosily, and, worst of all, in making no concentrated attack on the citadel of extravagance.
I sometimes wonder if the government which has been borrowing and pouring into our pockets as part of our income some three billion dollars a year is not allowing or even inviting us to commit the error of a man who has an income of $3,000 a year, who borrows $2,000 and then spends the lot, leaving to someone else all the worry about repaying the loan. Much was expected of the budget-it is
almost pathetic to recall how much-but the hopes have largely turned to ashes. Instead of relief and encouragement, the budget has given us disillusionment and disappointment.
It will be hard for the minister's appeal for production to succeed when no new incentives are offered. But it is essential that all of us as good citizens should do everything in our power to bring it about.
However, the great responsibility must remain on the government, and it seems to me that unless they show a greater ability to organize economically, a greater capacity in other ways, the prospect is not what we would desire.
I desire to move, seconded by the hon. member for Calgary West (Mr. Smith):
That all the words after "that" to the end of the motion be omitted and the following substituted therefor:
"This house regrets:
(1)	That the budget does not provide for tax reductions in the calendar year 1946;
(2)	That the budget gives no indication of any serious attempt to eliminate extravagance or effect economies in the cost of government;
(3)	That the policies of the government are discouraging much-needed production."


Angus MacInnis: Mr. Speaker, in taking part in this debate I want my first word to be one of congratulation to the right hon. Minister of Finance (Mr. Ilsley) upon the careful and comprehensive review of the nation's business which he gave in his budget speech. I am glad that in this one respect I find myself in complete agreement with the hon. member for Muskoka-Ontario (Mr. Maedonnell). We both agree in loving the sinner while hating the sin. Perhaps I should say, while hating the sins, because we may find some difficulty in agreeing on the particular sins that we hate.
This is the first peace-time budget since 1939. The budgets in the years 1939 to 1946 had to dio with the economy of the country in the emergency of war. Under such circumstances we could not expect much constructive long-term planning. Consequently our strongest criticism of this first peacetime budget in seven years is not so much for what it does as for what it fails to do. It is a perfectly orthodox old-fashioned budget, ' and may I say that the criticism we just listened to was perfectly orthodox old-fashioned criticism'. If any proof were needed I would point to the hon. member for Muskoka-Ontario quoting something that the Prime Minister (Mr. Mackenzie King) said in 1920.
This budget takes no account of the social and economic changes which took place in this country and in the world during the ten
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years of the depression and the six years of war. It lool^s back to yesterday, and I may say that my hon. friend the member for Muskoka-Ontario also looks back to yesterday, not forward to to-morrow.
Let me remind the house that we were told during the war that never again would we allow the economy of the country to sink back to what it was in the thirties, never again would we condemn ourselves to live in poverty while all round us we had potential and actual abundance. Yet there is nothing in this budget to indicate that the government has any intention of honouring that promise. In the war we achieved full employment and the economic security that goes with that condition. I think it is agreed, at least, among all progressive people, that we could do the same thing in peace. There is nothing surer than that we cannot do it by using the hit-or-miss methods of private enterprise. It cannot be done without careful over-all planning to meet civilian peacetime needs as we met military needs in time of war. Planning the Canadian economy to meet the requirements of the Canadian people-that should be the foremost feature of this our first peacetime budget in seven years.
Let me draw to the attention of hon. members what the lack of planning results in. It is amusing to hear members of the government and members of the opposition talk of the period from 1930 to 1935 and the years before that. The Conservatives say: Oh, yes, but in the years 1930 to 1935 there was a w'orld-wide depression and, as the hon. member for Muskoka-Ontario said, we inherited that from the Liberals. Unfortunately, the Liberals also inherit from the Conservatives, because Liberals and Conservatives have always been the government in this country, one following the other. What they do is merely to put the blame on each other, and the blame is, of course, correctly placed.
Let me quote briefly from page 144 of book I of the report of the royal commission on dominion-provincial relations, sometimes referred to as the Rowell-Sirois commission. It says:
When the bases for progress along the old lines disappeared-
Let my hon. friends on my right listen to this:
*-and the full force of the world depression fell upon our specialized exports, the problems of adjustment were extremely difficult. Canada's political, public finance and economic organizations were not adapted to deal with sharp and prolonged economic reverses. When a specific and coordinated programme was required, there was bewilderment; when positive action was needed there were only temporizing and negative policies; when a realization of the

far-reaching effects of the altered circumstances was demanded, there was but faith in the speedy return to the old conditions of prosperity.
Could anything be truer of this budget than that statement? Could anything be truer as applied to what the hon. member for Muskoka-Ontario has just said? Again I quote from page 172 of the same book:
It is clear from the above brief review that there was no coordinated or carefully planned relief policy in Canada during the depression. It was a policy of expediency which failed either to promote maximum welfare under the circumstances or to safeguard the financial position of the various governments. The dominion, from whom alone leadership could have come, was mainly concerned with steering a day-to-day course between insisting on the constitutional responsibility of the provinces and the necessity of preventing wide-spread starvation.
Surely the policies which failed then are not good enough for 1946.
We regret, Mr. Speaker, this fundamental defect in the budget, the defect that it does not plan. Indeed it holds out no hope whatever that we can have steady and enduring prosperity in a peacetime economy. In this budget the Minister of Finance bases his whole hope for the maintenance of the prosperity that we attained in the war on three main factors; perhaps I should say three main hopes. First, he places his hope on continued high export trade. His second hope is high private investment. His third hope is in the large reserves of savings in the hands of Canadian people which will be used in consumer purchasing. I wish to deal in some detail with these three hopes of his for maintaining prosperity, on which the government, may I point out, bases its whole fiscal policy.
At page 2902 of Hansard the minister said:
Our income from exports is the most important factor determining our prosperity and employment in peace time.
He then goes on to show how during the war our exports rose to enormous proportions and that while our exports of war material have stopped they are being replaced by manufactured goods and raw materials for civilian consumption. He closes the paragraph with this sentence:
This is the main factor in the maintenance of our national production and employment.
With all due deference to the minister, I suggest to him and the government that when in a country like ours we place the whole or chief emphasis upon exports to maintain prosperity we are leaning on a broken reed. The history of the last twenty to thirty years is sufficient proof of that. Has the minister forgotten that during the depression years one-quarter of our population went hungry and

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without sufficient clothing, went without decent shelter, while we had right here in Canada all of the things needed, and they were all going to waste? On the one hand, men deteriorated, while, on the other, the goods they needed also went to waste. Are we to go back to that? There is nothing in the budget to say that we are not, and there is nothing in the criticism that we heard from the official opposition this afternoon to indicate that they too are not prepared to go back to that.
May I pause to say, for fear I might be misunderstood, that this party is not opposed to a policy of encouraging export trade. Indeed we are very much in favour of such a policy, and we have supported every proposal of the government to that end. We believe export trade to be an important factor in our economy, provided that exports are paid for by imports. But that is an altogether different thing from saying that Canada must depend upon export trade as its main prop in producing and supporting a high standard of living. In my opinion there is only one reason why a country must sell goods, and that reason is that it must buy the goods that it cannot or does not produce. The less varied the resources of a country are, the greater is the necessity for export trade, because the exports will pay for what the country must import. Let me cite an example of what I mean: An export market is much more important to Great Britain than to the United States, because the latter country can and does produce more of the needs of its own people. Similarly, export trade is more important to Canada than to the United States, because our resources are less varied than those of the United States.
An export market, then, sufficient to enable us to buy such imports as are necessary to the functioning of our economy and the maintenance of the health and well-being of our people is highly essential, in fact imperative, if we are to have a high standard of living. But once we have attained that amount of exports, it is the home market which is important; it is the making available to the people of Canada of the goods that can be produced in Canada which is important.
The minister referred to the policy of the government of extending credits to the countries of Europe and the value of this policy in expanding our export trade now and in establishing it for the future. I appreciate that part of the government's policy. But even without these considerations we, because of our circumstances, have an obligation to help our more unfortunate neighbours and to make sacrifices if necessary to do so. Consequently we shall support the government to the limit in that regard. But we must remember that we cannot raise the standard of living of our people without higher consumption at home.
The second factor to which the minister looks for maintaining employment and production is private investment for capital purposes. It would be strange indeed, Mr. Speaker, if there were not heavy capital expenditures at this time, in view of the fact that very little was expended on durable goods during the war. The minister and the government should be aware, however, that under our present economic system the production of capital goods and money capital has a pronounced habit of outrunning opportunities for investment. I think it is correct to say that every major depression in the last fifty years and perhaps for longer than that was brought about by the drying up of opportunities for investment. Such situations were incorrectly attributed to overproduction. It is also a patent economic fact that the openings for new capital on a worldwide scale are decreasing-that is, leaving aside the result of war devastation-while the means for creating new capital are constantly increasing. The speed with which we found the capital needed for war production is ample proof of that assertion.
The minister himself is not at all hopeful that the investment of new capital on a large scale will continue very long. Commenting on retardation in the construction industry because of shortages of material and skilled labour he said, as reported in Hansard, at page 2903:
It is to be hoped that this industrial and commercial expenditure that cannot readily be made now will be deferred a year or two, when it will help in sustaining high levels of employment and incomes after other temporary stimulants are less strong.	.
The use of the word "stimulant" here is appropriate, because the whole idea seems to be to keep the economy going by means which can no longer maintain healthy economic conditions, regardless of how, effective they may have been in the past. This sort of shot-in-the-arm method does not and cannot meet the situation to-day. May I say that the minister has every reason to be apprehensive that in a year or two other stimulants will be necessary for even the partial functioning of our economy. I share his misgivings, and for reasons which I am sure he knows.
Early in the war the government appointed an advisory committee on reconstruction. It was commonly known as the James committee because of the name of its chairman. This
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committee reported in 1944 that under full employment conditions the annual savings of the Canadian people would be about $1,500 million. With savings at this level, the report said, full employment could be maintained only if the $1,500 million were actually invested, used to buy capital goods, that is plant, machinery and such capital material. What are the prospects that we can invest so much? I do not think they are very bright. Mr. J. R. Beattie, of the Bank of Canada, writing in the Canadian Journal of Economics and Political Science in August, 1944, stated as follows:
(a)	that even the tremendously rapid industrial expansion during the war had not involved more than one billion dollars of capital expenditure, public and private, in plant, equipment and housing in any one year;
(b)	that though electric power is a heavy capital-using industry, its total pre-war investment in fixed assets was less than $1,500 million;
(c)	that one year's saving at the rate of $1,500 million a year would cover the cost of all the residential housing in Canada built in the twenty years from 1917 to 1937;
(d)	that $1,500 milllion would cover nearly half the total fixed capital investment in Canadian railways;
(e)	that even the building of a new industry comparable to the pre-war automobile industry would absorb less than three weeks' saving at the rate of $1,500 million a year.
These are impressive figures and, coming from a source so close to the Minister of Finance, he has no doubt heard them before.
A later survey of post-war investment plans of private industry is contained in the Canadian Bank of Commerce monthly Commercial Letter for January 1946. The letter surveys all the available material on pre-war investment, takes into consideration expenditure on new equipment which has been postponed because of the war, and makes an estimate of the total prospective investments of private firms and corporations, publicly owned transportation, hydro and telephone systems, and government highways, from 1946 to 1950. The estimate includes everything - lands, furnishings, machinery and all other equipment. This is the finding: city and town homes, $750 million; business building (warehouses, stores, theatres, hotels, garages, office buildings), $250 million; industrial and mining, $1,000 million; public utilities, $350 million; transportation (highways, railway equipment, airports, waterways), $400 million; farm improvement and extension (buildings, machinery, implements, rural electrification), $350 million; making a total of $3,100 million for the five years. This works out to an annual outlay of $620 million, less than half of the James committee's estimated savings under full employment.
There is a still later survey, one, by the way, made public on June 27, the day the

budget was introduced. The Minister of Reconstruction (Mr. Howe) released the result of a joint survey of the investment intentions of private industry for 1946, made by the Department of Reconstruction and the dominion bureau of statistics. The survey includes private industry and public utilities with plans for expenditures on new construction and improvements, new machinery and equipment for 1946 as follows:
Manufacturing		 $400,000,000
Mining	 25,000,000
Woods operations	 10,000,000
Central electric	stations	 75,000,000
Telephones		50,000,000
Transportation (Airports, highways, railway equipment and waterways)	 140,000,000
Total	 $700,000,000
The release pointed out that there is an additional amount of $500 million mainly for residential, institutional and commercial construction. This will make a total of $1,200 million. But this investment, even if it were realized-and the Minister of Reconstruction said it is not likely to be realized-would fall short of the amount mentioned in the James committee's report.
In my opinion, and in the opinion of the party for which I speak to-day, if the present government is to prevent unemployment there will have to be investment on a scale much greater than private enterprise is prepared for. What does the government then propose? How is the gap to be bridged? Nothing is proposed? There is no bridge. Export trade, private enterprise, and the spending power in the hands of the public; that is all that is proposed. The country that can plan so well for war is left in peace time to the blind blundering of private enterprise.
' Here I should like to quote briefly from the Bank of Canada report for 1943, dated February 10, 1944. The governor of the Bank of Canada had this to say:
The magnitude of the adjustments which Canada will face in maintaining high employment after the war can be indicated in simple terms. In 1939 about four million Canadians were gainfully occupied and at least 300,000 who were available for work were not employed.
In other words, they were unemployed. I continue:
By the end of 1943 the gainfully occupied population had risen to approximately 5,100,000, but about 1,900,000 of these were engaged in the armed forces, in supplying the weapons of war, or in producing the food required for special war-time exports. The number available to meet civilian needs had therefore fallen to about 3,200,000, but at the same time the average standard of living had risen materially and was probably higher than it had ever been.

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This increased output of consumption goods by a smaller working force can be accounted for in part by longer hours of work, favourable crop conditions and the abnormally small number now employed in private capital development and maintenance work. Another important factor, however, has been the improvement in production techniques worked out under the stress of war.
What are we to expect after the war? This is what he says:
After the war, some of those who are now employed will voluntarily withdraw from the working force, and the armed services may be maintained at a level considerably above their pre-war strength. It seems likely however that at least 4,700,000 workers will be available for employment in civilian jobs, or at least 1,500,000 more than the number employed in that sector of the economy at the present time. A working force of this size, at present rates of efficiency, will be able to produce a vastly greater volume of civilian goods and services than Canada has ever known before. By the same token, a vastly increased volume of consumption and capital development will be necessary if this output is going to be fully absorbed and high employment maintained. The adjustments required will clearly be of unprecedented magnitude, and bold planning on the part of labour, farm and business organizations, as well as governments, is urgently needed.
I see no sign that there is any bold planning. Industry says, let the government keep out of business, but there is no indication that industry is willing to plan on the magnitude that will meet the needs of the people with this tremendous power in their hands. The government hesitates between letting industry do it and doing something itself, and it does nothing.
In two or three sentences I wish to draw to the attention of hon. members what I consider to be the imperative implications of the situation confronting us. It is this: if the products of industry are not consumed as either capital or consumer goods, unemployment is sure to develop. If private capital cannot or will not make the necessary investments-and they have never been able to do so-then there are only two alternatives for this government: either to permit production to slow to a stop, or else to take effective steps to increase the consumption capacity of the people, and particularly of those in the low income brackets.
We cannot forever continue to make investments at even the present rate. That, however, should not be something to fear or worry about; it should be something to look forward to with pleasure, because it should mean that we can at last have more of the good things of life.
In case my time should run out I wish to move an amendment to the amendment, seconded by the hon. member for Melfort (Mr. Wright):
That all the words in the amendment after "the calendar year 1946," he struck out, and the following substituted therefor:
(1)	by raising sufficiently the exemptions of those in the lower income brackets;
(2)	that the budget fails to provide for the investment of public funds to bridge the gap between anticipated private investment and the total national investment required to assure a high national income and full employment:
(3)	that the budget fails in the new offer to the provinces to provide for social security measures which will achieve a reasonable standard of economic security for all Canadians;
(4)	that the budget fails in its tax proposals to recognize the principle that cooperatives are non-profit-making organizations.
This brings me to the third factor or stimulant or hope mentioned by the minister as an offset to the decline in war expenditures. At page 2903 of Hansard the minister is reported as having said:
The third offset to the decline in our war expenditures has been a substantial increase in the expenditures of consumers. At present a great many consumers have on hand large reserves of savings which they accumulated during the war, and some of which they wish to spend when the goods they want become available.
That there are large reserves of savings in the hands of Canadians is quite true, but there is not nearly as much in the hands of the people who are eager to spend it on consumer goods as we are sometimes led to believe. Savings deposits in the chartered banks are perhaps our best criterion as to what people have to spend, and also as to the people who have it to spend. A return of classifications of loans and deposits in the chartered banks as at October 31, 1945, shows that at that date 5,616,712 depositors had total savings of $2,991 i'Hlion, and to-day the deposits are some $40o million greater. Let me analyse those figures for a moment. It will be remembered that I gave the number of depositors as 5,616,712. Those with $1,000 or less on deposit numbered 4,968,655, so that nearly 5,000,000 of the 5,616,712 had $1,000 or less. They had an aggregate of $862 million, or an average of $173.50 each. So we see that the greater number of the Canadian people have very little to spend. As a matter of fact I could give figures to show that the great mass of the people have no savings at all. I would like to examine the other categories, but I shall mention only the last one. There were 819 deposits in excess of $100,000, totalling $347,798,839, or an average deposit of $424,662. These are the people who have money to spend, but they will not be spending it on consumer goods. They will be spending some of it on luxury goods and some on investments, if they can find a place to invest it. I should be very glad if the house would allow this table, taken from the report, to be included in the record.


Some hon. MEMBERS:: Agreed.


Angus MacInnis: The table is as follows:
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James Horace King: Order. I am sorry to interrupt the hon. member, but he has spoken for forty minutes. He would not be permitted to continue without unanimous consent.


Some hon. MEMBERS:: Go ahead.


Angus MacInnis: On a point of order, I
call attention to the fact that only a few weeks ago in another debate you stated, Mr. Speaker, that an amendment to an amendment of this nature was a new motion of want of confidence. On that occasion Your Honour after making that ruling allowed the Minister of Agriculture (Mr. Gardiner) to speak for more than forty minutes. If the ruling was good then, it is good to-day. I should not be placed in a position where I am allowed to continue only through unanimous consent of the house. I submit I should continue, by right, under Your Honour's ruling.


James Horace King: I call the hon. member's attention to Beauchesne's third edition, page 93, paragraph 220 where it states:
An amendment to the address in reply to the speech from the throne is a motion of "noconfidence"; so is an amendment not accepted by the government on the motion for the Speaker to leave the chair for committee of supply or ways and means. But a sub-amendment (as the amendment to the amendment is usually called), is not a new motion of no confidence; it is intended to strengthen or weaken the amendment to which it must be relevant and upon which it is dependent. It does not entitle a member to speak longer than forty minutes, this privilege having been already exercised by the mover of the amendment.
I suggest that the rule is clear, and unless the hon. member has unanimous consent I shall be obliged to ask him to take his seat.


Mr. BRACKEN:: I express no opinion on the point of order. But if the hon. member is permitted to continue, he may do so without any protest from this section of the house.


Some hon. MEMBERS:: Go ahead.


Angus MacInnis: May I point out that what you read, Mr. Speaker, was in the rules at the time of your other ruling. It was because the other ruling was made that I prepared to speak at this length.
I should like to know where I stand on the matter, not by consent but by my rights as a member.


Some hon. MEMBERS:: Go ahead.


Angus MacInnis: A person with an income of $5,000 has left, after paying his tax, the sum of $3,548, or more than four times the income of the man in the $850 class. Surely this is not equitable treatment. The human needs of the one are the same as those of the other; and the state, when in need of their services, demands the same service from each. Then, again, the second largest number of taxpayers is in the class between $1,000 and $2,000. In this reference I quote from the publication "Taxation Statistics" issued by the Department of National Revenue. The figures for 1941 show that the number of taxpayers in the income class from $1,000 to $2,000 was 386,862. Their total assessed incomes amounted to $554,305,999. Their total tax was $25,042,082. The income left after the tax paid amounted to $519,000,000, or an average income of $1,407 per person.
Persons paying tax on incomes of $50,000 and over numbered 506. Their total taxable income was $47,264,266 and the total tax paid was $26,675,253. This left these 506 individuals with an average income, after tax was paid, of $40,689, or an average income nearly thirty times as great as that of the average person in the $1,000 to $2,000 class.
Surely the thing to do, if we want to improve the standard of living of all our people, and at the same time ward off a depression, would be to allow higher exemptions-say $1,000 for single persons, $2,000 for persons with dependents-and leave the tax on all incomes over $3,000 as it was.
In concluding his budget speech, the minister referred to the cooperation of effort achieved during the war, and said we could achieve the same results in peace if we would but select our objectives and cooperate to reach them with the same spirit and energy that made our war effort possible. I agree with the minister
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entirely. I wish we could select our peacetime objectives and cooperate to attain them as we did during the war. But I am positive that we cannot do so, as long as there is the great difference in the reward of effort that I have just shown. Neither can we get the cooperation of all our people as long as the motive underlying production is personal gain.
I am glad that in what I am now to say I can commend the minister. We wish to commend him for the decision to make agreements with those provinces which are ready to enter into an agreement with the dominion. It is in our opinion the correct thing to do, and I am sure it will receive the approval of the great majority of the Canadian people.
When speaking in the house on June 27 at the close of the minister's speech, the hon. member for Muskoka-Ontario, who finished his speech to-day, accused the government of using the big stick on the provinces. Without wishing to get into the controversy between the two hon. gentlemen in this matter, and without wishing to absolve the federal government from all blame for the failure of the dominion-provincial conference, I just want to say that the big stick was first used by little fellows, at least by fellows who are little as compared with the dominion government. I refer to Premiers Drew andDuplessis who, by their refusal to cooperate with the other provinces and with the dominion, showed a complete disregard for Canadian unity and for the welfare of the Canadian people.
We regret, howrever, that the minister did not see his way clear to include contributions for a social security programme in his proposed agreement with those provinces wishing to enter into such an agreement. The backward provinces will hold back in the matter of social security as they did in the matter of old age pensions, but there is no reason why the people in the more progressive provinces should be penalized because of the backwardness of others.
In regard to another important matter in the budget, the taxation of cooperatives, it is not my intention to do more than merely refer to it. Further criticism or commendation, as the ease may be, I shall leave to other members of our group who know more of cooperatives and their usefulness than I because of active participation in them1. While the proposed legislation is not all bad, some of it is bad. The minister seems to have taken the position that there are no non-profit cooperatives. That is not the case. Cooperatives built on the Rochdale principle are truly non-profit making and, moreover, they are the most democratic form of economic organiza-

tion yet devised. It would be unfortunate if anything that the Canadian parliament did at this time had the effect of retarding their growth or limiting their usefulness.
I want to conclude as I began with a personal reference to the work of the Minister of Finance. In the difficult years which we have come through he has given service to the people of Canada of a character and in a measure which, in my opinion, deserves the approbation of all Canadians. He has given us of his energy and ability without stint. As one who recognizes his ability and believes in his integrity I would urge him to continue his work for the Canadian people in the only way it can be useful to them and satisfying to him, that is, by looking forward to the new w?orld which is in the making and not backward to the old world which, if not dead, is dying.
In that direction alone lies salvation, not only for Canada but for the world. The cooperation which my right hon. friend referred to in the closing words of his budget speech, and which I agree is not only desirable but imperative if we are to meet effectively the challenge of our time, is not attainable in a society based on competition. Such harmony of effort can be found only in a society based on cooperation and equality of opportunity.


James Horace King: I should not like the hon. member to have the impression that if I let him speak for more than forty minutes it was because he was entitled to do so. I did that because I understood there was no objection from the house.
Mr. SOLON E. LOW (Peace River): Mr. Speaker, I thought I detected in the speech of the hon. member for Muskoka-Ontario (Mr. Macdonnell) some anxiety lest those of us in the house who advocate monetary reform have lost sight of things and had emphasized only the need for more money. To reassure my hon. friend, let me say that as he learns more about social credit- principles he will see that for more than twenty years we have emphasized consistently this fact: money without goods is useless. We have also emphasized its necessary accompaniment: goods without money is stupid. I noted that the hon. member for Muskoka-Ontario referred to the budget as a monumental document. I thought I detected in his tone of voice a conviction that he thought it marked the place where the Liberal party had committed suicide. If that is a correct implication, then I share it definitely.
I must say that the actual building of a budget is a gigantic task. Now that it is finished and now that tributes have been paid

The Budget-Mr. Low
to the right hon. Minister of Finance (Mr. Usley), well deserved I am sure, I suggest that the minister should take a year off. It looks to me as though this is the year for his sabbatical leave. During that leave he should subject himself to some refresher courses. It is always recognized that the hard-working professor in the university cannot possibly keep pace with the things that are going on around him, immersed as he is in his studies and experiments and research. He often finds himself in need of a new objective approach to the field in which he is working. In my judgment, the Minister of Finance likewise is much in need of a new objective view of things in Canada. If he should by the merest possible chance take my advice and set out for refresher courses I suggest that he visit the country of Belgium and see what they are doing there to distribute goods.
As the minister possibly knows, for many years Belgium has been the stronghold in Europe of orthodox finance. I am advised on good authority from overseas that within six months of its liberation Belgium had made an astonishing economic recovery. In the light of world conditions she could not be said to be in the doldrums; she was relatively prosperous. The recovery was due in the main to a new financial policy, more particularly to the introduction of debt-free consumer credits. Instead of financing the production of goods for export and instead of having the goods the people need sent to other countries on an "export or die" policy which is so much in vogue throughout the world, the Belgian government is ensuring that the home market is so financed that the people might enjoy the benefits of their own productive capacity.
In order to raise the total purchasing power of the people to equal the total prices of the consumable goods produced and imported, the Belgian government has declared a national dividend to all people who, by their work, directly or indirectly, are contributing to the national wealth. Extra amounts are given for each dependent who is not employed, and also to pensioners. The principle behind the scheme is one of simple justice, which I hold should be recognized by the government of Canada-that wages and ordinary incomes are barely sufficient to enable the people to meet the everyday expenses of living. They are not in the position to replenish their wardrobes, to buy furniture and the household equipment, and new homes which have been destroyed during the war.
The budget was a great disappointment to millions of Canadians. People who, during the long years of the war, worked so willingly and well and who made such great sacrifices as
did the Canadians, expected much more consideration from the government now that the shooting part of the war is over.
I must admit that the budget did provide some relief for taxpayers. I want to congratulate the minister upon providing that farmers and fishermen may average their income for a period of three years for income tax purposes. This, in my judgment, will be hailed with considerable satisfaction by the basic producers of our country in these particular fields.
Corporations also are to benefit considerably under the new schedules. This, too, is to be commended, particularly if it results in an allout effort by productive corporations to speed the production of consumer goods to meet the demands of the Canadian people.
We must also compliment the minister on his expressed determination to revise and simplify the whole income tax act. Undoubtedly such a move will cut materially the cost of tax compliance.
The general opinion of people across Canada seems to be that the increase in exemptions announced by the minister in his budget speech for individual taxpayers is much less than the great majority of Canadians thought they had reason to expect this year. We had all held out the hope that the government would relieve the Canadian people in a substantial measure from the terrific burden of taxation they have been carrying since the early months of the war. Our hopes received a rude jolt, however, when the minister brought in his budget. The people of Canada also received a rude jolt when they found they could expect no relief at all this year; that the benefits announced would not begin until January 1, 1947. One hears bitter criticism on every hand. People say:	"The
increased taxes and enhanced prices have dwindled our real incomes to half or less of what they were before the war. We expected the government to announce enough reduction in our burden to arouse enthusiasm amongst us for hard work to produce the great volume of goods and services needed to prevent inflation in Canada and to help to prevent suffering in war-ravaged countries of the world. We are having a terrible time to keep up with the high cost of living, and after all the effort and sacrifices we made to ensure victory in the war, we thought the government would recognize our contribution by lightening our burden."
The minister says that it is still necessary to raise very large amounts of revenue. If one may judge by the commitments the government has made, that may possibly be true. If the minister is absolutely convinced that he
The Budget-Mr. Low

The largest single item in the present budget is that one covering the interest and servicing of the public debt-$481,207,000 in round figures. This huge sum is nearly equal to the total of all ordinary governmental expenditures for the year 1938-$525 million including debt servicing-and is the main reason for the heavy tax load. Until we enter upon a policy of continuous debt and interest reduction, taxes will never find a permanently lower level. The government should make an immediate start on such a .programme by asking the chartered banks to hand over to the Bank of Canada all government securities purchased by the banks with created credit or by credit expansion. This should be followed as soon as possible by the removal of the flaws in our money system. Tax reduction could follow immediately thereafter, because the interest loan would largely and progressively disappear.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.


Mr. LOW:: When the house rose at six o'clock I was dealing with the question of taxation, and I suggested with emphasis that the government should introduce a policy of tax reduction, but before they could do so they would have to tackle the debt problem realistically, because the largest single item in the budget was for debt interest. I should like to say that I am quite aware of Mr. Towers' argument that interest should be regarded as a transfer between various groups within the country rather than as a burden on the people as a whole. Whether there is anything sound in that argument or not will depend on just where the $16,800 million of bonds and securities representing Canada's funded debt really are. Who holds these securities? I venture the opinion that people generally would be very much surprised to find out just who does own the vast bulk of these securities.
The Minister of Finance (Mr. Usley), in commenting on the third of four powerful influences offsetting the decline in government war spending at the present time, said in his budget address, as reported at page 2903 of Hansard:
At present a great many consumers have on hand large reserves of savings which they accumulated during the war, and some of which they wish to spend when the goods they want become available.
I know that a good many Canadian business men are anticipating a fairly long period of prosperous turnover once consumer goods

again become plentiful. It appears that the government is quite optimistic over the anticipated fairly long-term increase of consumer spending which is expected to offset government spending in keeping up the volume of production and in giving work to people in Canada. The big question is, is this optimism justified? The answer here again also depends largely upon the distribution of ownership of the large reserves of savings deposits in the Canadian chartered banks.
I noted with a great deal of interest the results of a recent experimental study prepared for the federal reserve board in the United States by the national interview survey division of the department of agriculture, and published in the June issue of the federal reserve bulletin. The survey revealed the following facts:	-
1.	At the end of 1945, personal holdings of liquid assets in the United States, composed of currency, bank deposits, and government securities amounted to S130 billion. This was an increase of $90 billion since 1939.
2.	The top ten per cent of the American people held sixty per cent of the $130 billion.
3.	The bottom fifty per cent of the American people hold only three per cent of the liquid assets, or less than $4 billion.
These facts appear to be of great concern to United States businessmen who must measure immediate future prospects for selling consumer goods. The survey indicates that while there is a vast potential reservoir of spending power in our neighbouring country, the actual spending power is tremendously concentrated; and further, that the ability to continue to buy goods at current inflated prices is a luxury which hundreds of thousands of United States families just do not possess, even after five years of war boom.
It is coming to be widely accepted that depressions occur largely as a result of the failure of masses of workers and others throughout the country to get incomes to enable them to consume the goods which they produce. I would point out, too, that if mass production methods are to serve the people in this age they must be matched by mass consumption. We must have a nation of consumers, of good customers. Have we them in Canada? I believe that the government should at once, if they have not already done so, undertake a similar survey in Canada to determine accurately just how the liquid assets of this country are distributed, and this survey should be made available to the people. Industry needs to know just how far it can count upon pent-up war savings to supply it with markets for its goods; and the

The Budget-Mr. Low
government needs to know what measures will have to be taken to prevent the onslaughts of another period of depression.
While the survey is being made, the government should secure accurate information about the distribution of holdings of government securities. The results will be surprising,
I will guarantee that, and the facts adduced from the survey will doubtless show that the payment of the huge interest on our national debt is largely a transfer of payments from the majority group in the bottom eighty-five per cent of Canadians to a much smaller group in the top ten or fifteen per cent. In other words, I feel sure that our bond debt financing methods have not only resulted in a tax load of almost unbearable proportions, but also created a small but powerful creditor class in Canada. Both of these results are to be regretted. But if the people of Canada are ever to have the situation corrected they must forget allegiance to political parties for a time and unite in one great concerted demand that taxes be sharply and progressively lowered, beginning at once, and that ways and means be worked out immediately to establish every Canadian in his own rights as a good customer for the things which Canada can produce.
I turn now to the government's modified tax transfer proposals to the provinces. To me it is most regrettable that the dominion-provincial conference should not have been called again to consider the modified proposals before they were announced to the world in the budget address. The ethical position of the senior government would have been improved vastly had an attempt been made to reach agreement of the modified proposals before the budget was brought down. Since the government did not do this, it cannot escape the charge that it has resorted to force, whether that charge is well founded or not. The minister was careful to point out that "acceptance of the proposals is wholly optional", but a careful examination of the alternatives to acceptance leads me to believe that few provinces can find it possible to refuse the minister's offer.
A cursory appraisal of the value to the provinces of the minister's proposals, and the figures which he gave showing the benefits to be gained by the acceptance of the proposal would lead one to believe that the provinces should be quick to accept. Indeed that is what the government would like. But it must be remembered that conditions have changed materially since the wartime tax transfer agreements were made, and therefore the government's figure showing advantages to the provinces of acceptance of the new offer is out of date. Since the ultimate comparative value-say five years from now-to any province is not immediately ascertainable, the provinces will probably do considerable research and balancing of values before indicating their acceptance or rejection of the offer.
I am in agreement with the minister that the budget problems which will shortly face the nine provinces must be solved, and that too, if we are to build a strong and united Canada. A system of adequate, automatic payments, objectively determined, made in return for the rental of an asset is, in my judgment, superior to a system of hand-outs negotiated bilaterally. In recent years we have seen something of the evils, the weaknesses and the abuses of the latter practice. It seems to me much more sensible to adopt the automatic payment principle contained in the minister's proposal to the provinces, but I submit that we should make positively certain of three things: first, that the objective formula for determining the size of the payment to the provinces makes adequate allowance for proper increases in subsidy as time and developments bring greater needs; second, that payments to the provinces include, over and above the $15 per capita set out in the modified proposal, a sum sufficient to allow the provinces themselves to extend to their citizens the same or greater old age pension benefits as were envisioned in the original offer to the provinces. Just as many taxes are involved in the new deal as in the original, hence this will certainly be possible; third, that every effort be made to reach agreement with the provinces as the result of consultation with them. It does not tend toward unity in Canada to have the provinces feel that something is being surreptitiously imposed upon them. In fairness to the minister, I must say that whoever may have been responsible for the failure of the conference-and certainly I am not trying to assess that responsibility myself- in building this budget he faced a situation that did call for unusual action.
A good many more things in the budget are of such importance that I should like to state my views on them, but the forty-minute rule does not permit me to do so and I am not going to ask for an extension of time. Therefore my colleagues of this group will deal adequately with these things so that there may be no doubt whatever as to just where we stand with regard to every important matter covered by the minister in his address and in the budget papers.
But allow me to say two things by way of concluding this effort. I sincerely recommend to the g rvernment that legislation be enacted
The Budget-Mr. Low

at this session to prevent retroactive taxation of cooperative patronage dividends. I stand for absolute fairness in distributing the load of taxes that are necessary, but I feel that to make the recommendations of the McDougall commission retroactive in any respect would be a tremendous injustice. My colleagues will deal with this matter at greater length as we go along.
The second and last thing is this. People who have been in the habit of laughing at what they so frequently called the social credit "funny money" system, are now having the tables turned. Every time a social crediter listens to a tale of economic woe, hears predictions as to the oncoming depression, has someone complain to him about taxation or debt, or is asked to donate to the old man's home; or if he hears the prevailing reports of starving millions in other parts of the world and at the same time thinks of the wheat the farmers in recent years were paid not to produce, invariably the retort is, "So that is how your funny money system works, is it?" Social crediters face the future confident that when the people awaken to the true facts they will apply social credit principles to the economy of Canada and help bring abundant happiness, freedom and peace to all men.
Mr. GORDON B. ISNOR (Halifax): Mr. Speaker, I do not propose to follow the reasoning of the leader of the Social Credit group (Mr. Low).


Mr. BLACKMORE:: A good thing; you do not because you could not do it.


Mr. ISNOR:: Nor do I, as a rule, interrupt as they so often do. I feel, however, that I should like to compliment the leader of that group on the definite manner in which he stated his position with regard to the dominion-provincial proposals. I think I can go farther and say I feel that I am in accord with the thoughts he expressed. I was sorry and a little disappointed that he did not enlarge on his views with regard to the report of the McDougall commission. That is a question with which the Minister of Finance (Mr. Ilsley) dealt in a sincere manner and placed before the people without any thought of favouritism to any particular group. I trust, as the leader of the Social Credit group said, other members of that party will, later on, more definitely express their views in respect to this proposal.
I do not intend, either, to follow the reasoning of the acting leader of the C.C.F. party, the hon. member for Vancouver East (Mr. Maclnnis), in his presentation this afternoon. His group differ definitely with this party in regard to public ownership and private enter-

prise. While they stand for public ownership in the broadest possible terms, in a socialistic manner, I stand for free enterprise because I believe that if we are to produce and continue the prosperity Canada is enjoying at present, it must be through the enterprise and initiative of the individual.
I am more concerned with what was said by the financial critic of the opposition than with the remarks of any other speaker who might take part in this debate; and I imagine that is also the case with the people of Canada. Since the evening of Thursday, June 27, when the Minister of Finance presented his budget, the people have been looking forward to what would be said by the official opposition. Naturally they expected criticism, but I believe they also thought they would be offered some solution for our difficulties, some recommendations of a constructive nature, which might make the picture brighter than it appears to them at the moment. I was disappointed, and I believe that was the feeling throughout the house this afternoon. In fact, as I watched hon. members opposite. I thought I could discern signs of keen disappointment on their part in the remarks of the financial critic, and I believe the same feeling existed in the galleries of this chamber. I make that statement in all sincerity; and I believe that if hon. members of the opposition were to give an honest opinion they would say that was right.
What did the financial critic say? He dealt with the lack of any benefit to the taxpayers of Canada, and then in his opening remarks went on to make the astounding statement that no one would profit from any deductions until they made up their income tax returns for 1948. Surely he could not have thought of what he was saying when he made that statement. I have every respect for the high position this hon. gentleman holds in financial circles in this country, but perhaps because of the high position he occupies he has lost touch with the common people, the man on the street, the ordinary wage-earner.


Mr. ROSS (Souris):: Don't ever fool yourself.


Gordon Benjamin Isnor: I am expressing that as a possibility, from the expressions and observations of the financial critic of the hon. gentleman's party. Hon. members will recall what he said this afternoon, that no one would benefit during 1947. I say to the house that a very large number of taxpayers at present paying income tax will, immediately, in 1947, be struck off the so-called taxpayer's list. That number runs 550,000 to 600,000.
As I said a minute ago, this will greatly help the low-bracket employee, wage-earner and worker. I am in close touch with the small

The Budget-Mr. Isnor
businessman-not those who move in high financial circles. I know, coming in touch with these smaller businessmen that they appreciate what the government has done in the matter of giving them exemption, and I pass that information on to the hon. member for Muskoka-Ontario (Mr. Macdonnell). When one considers half a million taxpayers I do not think he can pass over that number lightly.
Then, I would refer to the hon. member's statement that no one would profit by these reductions. I would point out again that an additional number of wage-earners who are paid by the week, who receive their weekly pay envelopes, will, immediately in 1947, enjoy benefits because of the smaller deductions from their pay envelopes.
So I say to the hon. member that, while he may have looked at it from a high plane indeed, he did not view it from the point of view of the average man on the street, the average wage-earner, who does appreciate and understand what this budget means to him.
The hon. member referred to a balanced budget, and I shall have something to say about that later on. Then, he mentioned economies, and said that no steps toward economy were being undertaken.


Mr. JACKMAN:: Hear, hear.


Gordon Benjamin Isnor: I hear the former financial critic say "hear, hear."
The hon.'member for Muskoka-Ontario then dealt with the civil service, saying that whereas before the war there were only 70,000 civil servants, there are 150,000 to-day. He forgot to mention the expanded service rendered by the various departments of government. Surly the hon. member knows that service cannot be given without having sufficient staff. In fact, there has been criticism from time to time that the income tax branch is not sufficiently staffed to give the necessary service. If we are to give that service, then we must have the employees. I do not know if the hon. member was advocating doing away with a large number of civil servants, and thus adding to the unemployment situation.
He referred to the security of private enterprise, and with his comments in this respect I am in accord. I said a minute ago that if we are to have increased production it will have to come largely through that source.
There was one interesting fact the hon. member did not touch upon, and his failure to do so surprised me somewhat. I thought he would dwell at some length upon it, because he had expressed himself clearly on more than one occasion in the house that he, and those he represents, were in favour of immediately doing away with all controls.


James Arthur Ross: He never did any such thing at any time.


Mr. STIRLING:: Never, never. That is a Liberal explanation.


Gordon Benjamin Isnor: That is strange, coming as it does from the west. We see the west coming to the defence of Toronto. But I do say the hon. member showed that he defended that principle, and not on one but on several occasions.


Grote Stirling: No.


James Arthur Ross: It is a matter of being truthful about the matter. The hon. member has misinterpreted the hon. member for Muskoka-Ontario three times.


Gordon Benjamin Isnor: We shall permit the record to speak for itself.


Grote Stirling: That is better.


Gordon Benjamin Isnor: Thank you; I agree with that. Since the evening the budget was presented I have read newspaper comments from one end of Canada to the other-Liberal newspapers, Conservative journals, and those expressing independent views. I have listened to comments from men on the street and in streetcars. I have talked to men in hotels, and listened to them in the corridors in the House of Commons. Like the majority of members of the house I have received scores of telegrams, letters and postcards, some of which speak favourably and others unfavourably.
I have received criticism from businessmen who complain about the reaction from a business .point of view and state that business has not received as great a reduction as was expected. I am frank when I make that statement, and say that I have received such complaints. I have received from others communications indicating that they expected higher exemptions for both single and married persons. I have received communications from those who favoured the action taken by the Minister of Finance in reference to cooperatives, and from those who were opposed to any change in respect of cooperative methods.
Yes, I know that members receive all kinds of advice and criticism. I am pleased to say that many useful suggestions are received. Roughly speaking, there came to my hand 600 cards and letters recommending that the government apply income taxation on exactly the same basis on all forms of commercial enterprise including cooperatives, crown companies, municipal and government undertakings and mutual concerns Many others also
The Budget-Mr. Isnor

recommended that patronage dividends and like payments be disallowed as expenses before arriving at taxable income. Still others-a few hundred-urged that the government apply the same principles of income taxation on all forms of retail business, including cooperatives and others.
I have no fault to find with those who signed the cards and sent them to their members. It is their privilege to show that they are interested, and it is through such communications that we learn and keep in touch with the views held by our constituents.
Having said that, may I come directly to the budget, as I see it. As I said, I listened to the Minister of Finance unfold thought after thought and reemphasize that, although hostilities were over and this was essentially a peacetime budget, providing for the financial needs of the first post-war year, which is wholly a year of peace, it also contained certain remaining costs of demobilization, heavy costs for gratuities and other benefits for our veterans

costs which will not recur on a similar scale in subsequent years.
May I ask the hon. member for Muskoka-Ontario whether he is one who would advocate taking those amounts out of the budget, thus lessening the expenditures to be undertaken by the government.


Mr. SMITH (Calgary West):: He is not
here, but the answer is definitely, no.


Gordon Benjamin Isnor: The hon. member answers for him. I could not avoid being impressed by the honest, frank and sincere manner in which the Minister of Finance approached his task. I was proud he was a maritimer; I was equally proud that I, too, am a maritimer. I have been reminded of two other outstanding mari-timers who filled this honoured post of Minister of Finance, and who filled it with honour and with distinction. I recall such men as the late Right Hon. W. S. Fielding, who stood so high in the hearts of the people of Canada and who in 1897 presented a budget of $38 million. I was reminded, too, of the late Hon. E. N. Rhodes, also highly respected and honoured, not only in his native province but throughout the length and breadth of Canada and who, in 1932, estimated his budget revenue at $311,735,000. Then, as I sat and listened I made a mental picture of the outstanding contributions made by the Minister of Finance during the war period. I thought of the wonderful effect and achievement of his wartime measures and controls, and the splendid1 cooperation given to this man by the people of Canada. By that cooperation we in Canada won and maintained the respect and admiration of all other countries.
[Mr. Isnor.l
Surely we as Canadians may justly take pride in the carrying out of our financing and economic policies during the war. If possible, as it would appear to be, we should be ready to bear with a portion of those controls and taxes for a while longer until we are safely on the road to a proper readjustment period.
The federal government fiscal year, as hon. members all know, ends on March 31. While I do not intend to quote figures to any extent, I feel I must mention a few. The total estimated revenue, as shown by the Minister of Finance when he tabled1 the budget, is around $2,955 million, exclusive of refundable taxes.
The total estimated expenditures are about $4,691 million. There is thus left an over-all deficit for the year of $1,736 million. I mention this deficit of $1,736 million because it is interesting to note that this is $822 million lower than the deficit of the previous year. That is another step in the direction of a balanced economy.
The Minister of Finance then went on to deal with our economic life and) stated that to-day we in Canada are more prosperous and farther along the road1 to reemployment and reconversion than he expected we would be when he presented his budget last autumn. Despite many shortages and interruptions, Canada's economy as a whole has turned with remarkable speed from war services and war to peacetime jobs and objectives. We are enjoying a level of employment and prosperity that we have never experienced before in peace time.
When the hon. member for Muskoka-Ontario came to that portion of the Minister of Finance's remarks he paused and observed, as I recall his remarks, that this was because we were still continuing on a wartime basis of employment. I want to take exception to that remark, and I do so along the following line. When the war ended in Europe a little more than a year ago there were three-quarters of a million men and women in our armed forces. To-day there are only about 100,000. In a little more than a year we have released about 650,000 members of the armed forces to enter into civilian production. A large majority of those people have found employment or are taking university or vocational training or have gone into business for themselves assisted by their wartime savings and the benefits provided by the government. During the same period, but even more suddenly, our workers in war industries have been released upon the labour market. The number of these people is approximately the same as the number of service people who have been demobilized. That is to say, we have 1,300,000 persons who have been sud-

The Budget-Mr. Isnor
denly taken from one type of employment or service and placed in another to produce civilian requirements.
Canada's present prosperity and employment are, on the whole, well distributed throughout the country. In 1938, one year prior to the war, our national product, which is our current production of goods and services, amounted to $5 [DOT] 1 billion; but to-day, one year after the war, it is estimated at over 811 billion. It is only fair to say that that figure may drop as the result of interruptions to production. The reason for this continued high level of production, employment and income is that the demands of war have been replaced by other demands which are supported by effective purchasing power.
There are three main factors which determine our prosperity and the degree of employment we shall have in peace time. The first is our income from exports. The question of exports was touched on this afternoon by the hon. member and he also placed it as the first factor in the reconversion and prosperity of our country. I put it in the same position. If we are able to produce and export we shall have a prosperous country with the highest type of living standard. The second factor is the private enterprise expenditures which include both skilled and unskilled labour. The third factor is the spending power, or what might be termed the consumers' expenditures. To me production should be our primary objective, both for its own value to our country and to satisfy the need of goods in other countries and as a safeguard against the dangers of inflation.
As a businessman I have done everything possible to hold prices down and to get volume up. The time has arrived when there is no need to restrict production in order to conserve resources for war. Civilian production must be given the green light so that we may aim at high-volume production for civilian purposes despite shortages, strikes, delays and uncertainties and by these measures overcome the danger of inflation and high prices.
Now, a few more figures from this budget. First, the revenue figure of 82,510 million forecast shows that there will be a decline, or saving, of 8446 million in the 1946-47 estimate as compared with the 1945-46 figure. On the other side, expenditures show an expected outlay of 82,769 million, or a deficit of $259 million compared with 8822 million for last year, or, in other words, a reduction or saving this year of 8563 million.
Before leaving these figures I believe I should point out a few facts which have been overlooked by a great many. Personal income taxes will be reduced by $52 million. This
item includes the great majority of our citizen taxpayers. Excess profit taxes will be reduced $154 million. This will make additional money available for expansion and production, I hope resulting in increasing employment.
I am coming now to the morning after the night before. The morning newspaper published on the day following the bringing down of the budget, which hon. members will recall was brought down on Thursday, June 27, published heavy type and bold headlines which went something like this:	"Disappointed".


Some hon. MEMBERS:: Hear, hear.


Gordon Benjamin Isnor: I hear "hear, hear." "Low income group fail to get expected relief," and "Tax reductions prove disappointing" and "Ilsley's first peacetime budget gets chill reaction". I am putting these headlines before the house to show how non-partisan I am, how honest I am. I feel it necessary to point out a few definite facts with regard to the benefits and savings which do mean something to the Canadian low-income group of taxpayers. The income tax changes effective January 1 next will mean that between 550,000 and 600,000 persons at present paying income tax will be removed entirely from the list of taxpayers. Let hon. gentlemen opposite say "hear, hear" to that.


James Arthur Ross: When will they be removed?


Gordon Benjamin Isnor: Surely this means something to those in the low-income brackets. It removes at one stroke twenty-five per cent of the present taxpayers.


Mr. CASSELMAN:: You mean it will?


James Arthur Ross: If they live long enough.


Gordon Benjamin Isnor: Second, it means that single persons now enjoying an exemption of $660 will be given an added exemption of $90. The married person, whose present exemption is $1,200, will have an added exemption of 8300.


Mr. HARKNESS:: That will be a great satisfaction in the spring of 1948.


Ian Alistair Mackenzie: That will be long before the Tories get into power again.


Gordon Benjamin Isnor: May I give a few illustrations to show the savings that will be effected: Single Person
Income	1946 Tax 1947 Tax Saving
$1,000	
$77	$55	$222.000	
370	313	573.000	
692.	593	094.000	
1,070	896	1745.000	
1,452	1,206	246
The Budget-Mr. Isnor

Married Person (No Children)
$1,000	No Tax
2.000	
$194	$118	$763.000	
491	383	1084.000	
810	663	1475.000	
1,158	973	185
Yet in spite of those reductions hon. members on the other side of the house say that there is no saving in this budget.


Douglas Scott Harkness: It is like one of those delayed action bombs.


James Arthur Ross: You never know when it is going off.


Gordon Benjamin Isnor: It seems very difficult for members of the opposition to restrain themselves and keep quiet, but I notice that the members on this side show respect by keeping silent when an hon. member has the floor.
The hon. member for Muskoka-Ontario referred this afternoon to a balanced budget. During my term of seven years, from 4928 to 1935, as a member of the Nova Scotia legislature, when I sat with the opposition and at another time with the government of the day, I was always keenly interested as a businessman in financial affairs and my interest naturally centred around the budget. I recall that it was my endeavour to emphasize the importance of a balanced budget and the necessity of keeping expenditures in line with revenue. When I was first elected as a member of this house for the constituency of Halifax I continued to follow this course. On the outbreak of the war and during the war our thoughts were more on finding money and using it to win the war and we gave little thought to balancing the budget, But now that the war is over and Canada is embarked on a post-war high employment and reconversion period, I believe it is necessary for all members of the house, particularly businessmen to see how quickly Canada can be brought into a position where she can report a balanced budget.
I was pleased to hear the Minister of Finance, when presenting his budget, say that his 1946-47 budget proposals meant that he was covering nearly 90 per cent of the expenditures and that if we could maintain high employment and income we shall be able to look forward to something like a balanced budget in 1947-48. Like the Minister of Finance I am a great believer in the ability of Canadians to achieve great objectives. This was shown during the war when Canada's achievements won the admiration of all nations. In peace times, with human needs just as urgent, happiness and contentment so essential, and a high standard of living so necessary, cannot we look forward to con-
TMr. Isnor.l
tinued cooperation and unity of purpose in achieving these objectives and devote our energies to reaching them and thus focus the eyes of the world on Canada not alone in war but in peace?
I am going to touch on the subject of controls, which the hon. member for Muskoka-Ontario passed over so lightly this afternoon. I believe the controls which were brought into effect in 1941 are reflected in this budget and have a direct bearing on the financial economy of our country. Modem war requires the full and effective mobilization of a nation's economic resources, and Canada was quick to realize that if this was to be had, steps must be taken not alone to equip and supply the fighting forces but to maintain the civilian population in such a manner as to get the fullest possible cooperation from all Canadian citizens.
Fortunately, so far as financial organization was concerned, though Canada's financial structure was already established and developed before the war, it was felt that with the increased spending power created during the war through accelerated employment and earning, power, it was necessary that certain controls should be set up. When one looks back and realizes the benefit which is accruing from these controls I am sure that each and every member of the house will say that these were of direct benefit to our country, and no argument on their behalf seems necessary. Still there are those who to-day advocate doing away with the controls which have helped to make Canada the envy of perhaps every other nation of the world. Taking .into consideration the vast amounts which would have been spent in Canada and the greatly increased earnings of Canadians, I think the government was most wise in bringing into being the wartime prices and trade board, "to provide safeguards against any undue enhancement in the prices of foods, fuels, and other necessaries of life and to ensure an adequate supply and equitable distribution of .such commodities." Underlying the work of this board has been the belief that if ample supplies were kept available and were controlled,, fair and reasonable prices could be maintained and our financial structure maintained on an even keel.
I do not propose to go into all the various control branches that were set up. We are familiar with the steps taken in the appointment of administrators in the major commodity fields. Some of these administrators have been severely criticized, while others have been praised for their work. I personally believe that, taken on the whole, they have performed a worth-while job.

The Budget-Mr. Pearkes
I referred to this matter of control as early as 1942, complimenting the government, because I felt that it would serve the purpose intended, namely to keep prices down. I should like briefly to put on record my remarks at that time, as reported in Hansard of July 2, 1942, at page 3893:
I should like to refer briefly to the price ceiling brought into effect by the government, the wage-freezing order and the instalment buying _ regulations. These regulations for the ordinary storekeeper doing that kind of business were a godsend, and I believe they were a blessing in disguise also to great numbers of people who were subject to high-pressure salesmanship which had been spreading throughout the country. The credit regulations, whereby purchases made in one month had to be paid for the next month, were also beneficial both for the store and its customers. All these regulations have, I believe, made it possible for the businessman or storekeeper to carry on and meet his obligations under this budget.
I may have something to add in this connection when we are dealing with the resolutions in committee.
I have in mind to suggest two or three changes. One deals with the tax as affecting retailers; one, with the tax on soft drinks, and another, with the excise on jewellery. It is felt by jewellers throughout Canada-and I am not a jeweller-that this is a discriminatory and unfair tax. They have repeatedly made representations on this matter, and I understand they waited on the Minister of Finance and presented their brief. They feel that all retail businesses throughout Canada should be taxed on the same plan, and recommend the elimination of this particular tax. I feel, in fairness to retail jewellers throughout the country, that it is an unfair position in which they are placed. They are placed in the position of being the minister's tax collectors, and the door is opened, I feel, for practices which are not always what they should be. I suggest to the Minister of Finance that he take this matter under consideration with a view of eliminating the tax.
I need not remind hon. members of the effect which price control has had upon our country. To-day, if I remember the figure correctly, it is at the highest point since the outbreak of the recent war, but from 1939 up to the present time it has increased to the extent of only 23-5 per cent. When we think of the increase which has taken place to the south of us, and realize the actions which United States authorities have had to take, we can have some realization of the benefit of this particular control.
I had hoped to touch on the dominion-provincial proposals as submitted by the Minister of Finance, on family allowances and their effect on income payments, and more particularly I hoped to have an opportunity of complimenting the minister on his action in spreading the income tax returns for farmers and fishermen over a three-year period.


Mr. G. R. PEARKES (Nanaimo):: Mr. Speaker, it is my intention to deal with one aspect of this budget, that is production, and to refer to one industry and one industry only. I am, therefore, anxious to bring to the attention of the house and of the minister the condition which exists in respect of the forest industry in British Columbia, and in particular those industries located in the coastal region of that province.
There are in British Columbia 2,446 active primary and secondary forestry industries. The primary wood-using industries include 1,600 logging operations, supplying raw material to over 600 primary manufacturing plants. These active primary manufacturing industries include saw, pulp and paper, plywood, shingle and barrel mills and box factories. The secondary industries include sash and door mills, furniture factories, boat building works, and many other miscellaneous wood industries.
The capital invested in these forest industries may be classified as follows: the logging industry, that is the industry which takes the logs out of the forest, $30,379,000; pulp and paper industry, $58,912,000; the 'lumber industry, that is the conversion of the logs into lumber, $49,939,000; and other wood-using industries, $14,880,000; making a total of $154,112,000. That is exclusive of the standing timber. The value of the standing timber is estimated at between two hundred and two hundred and fifty million dollars. Thus the forest industries have an over-all investment of over $400,000,000.
Direct employment in the forest industries represents a total of 100,000,000 man hours and an average of 37,000 persons over twelve months. Direct wages and salaries of the various industries total $58,677,000. These are figures which I have obtained from the Sloan report, and they were based on the year 1942, which he took as the basic year. Of course since that date wages have increased considerably.
Indirect employment, such as that derived from transportation by truck, rail and water, the distribution of products, the banking, the insurance and all the other services dependent upon the forest interests, greatly increase the total I have mentioned. The total value of the production of the forest industries was estimated in 1944 as $146,611,000. This represents forty per cent of the total income of British Columbia.
The Budget-Mr. Pearkes

The foreign, export of forest products totalled in value $73,105,000. This includes pulp and paper products, logs, poles, piling, pit props, railway ties, lumber and lumber products. These exports were shipped waterborne or by rail to points outside Canada. They do not include exports from British Columbia to other provinces. If such exports, that is to other provinces, were included, the total must be raised by another $27,000,000 in order to include the exports to the prairie provinces and to eastern Canada. That would bring the grand total of all the exports from the forest products to over $100 million. In this distribution of earnings from the conversion of timber assets during the war, direct revenues to the province in 1942-I take that basic year- totalled $4,268,000, but the dominion government also benefited greatly. On the basis of forty per cent of the total income of the province in forest income-that is generally accepted-this would indicate a dominion tax bill of $60 million contributed in the aggregrate by individuals and firms directly and indirectly connected with the forest industries.
Evidence presented before the provincial royal commission under the chairmanship of Chief Justice Sloan showed that over a period of five years the dominion government collected in income taxes and in excess profits tax $1.57 for every dollar of direct forest revenue collected by British Columbia. In other words, during the past five years the dominion has collected from the industry more than one and a half times as much as the province collected; but the dominion government has given very little in return. For the purpose of comparison I have looked up the appropriation by the dominion government for the support of forests, agriculture, mines and geology for the last peace-time fiscal year, 1939-40. The figures quoted will be found in the auditor general's report for that year, and comparable figures for later years will be found in the public accounts. For the year 1939-40 the dominion government appropriated for all forest purposes $360,529; but for agriculture, $28,633,000; for mines and geology, $7,284,000. Some discrepancy in the dominion support is evident in the succeeding years because the appropriations must have been distorted by the war atmosphere; therefore I feel the comparisons would hardly be fair. Just to mention one, the public accounts for the year 194344 give the appropriation for agriculture as $120,794,000, while the forest service appropriation however remained comparatively normal at $298,741. In the current estimates which the house is being asked to approve, over $19 million are allocated to agriculture, of which sum $6,500,000 may be earmarked for
[Mr. Pearkes.1
research purposes. In the Department of Fisheries some $3 million are to be spent chiefly on research, while for forestry and forestry industries only $625,000 are earmarked. I suggest that although the government drains off by far the greater part of the earnings produced from the forests, it has contributed next to nothing for the protection and maintenance of these forests which are the very source of its income.
The report of the royal commission appointed by the province of British Columbia in 1910 makes the following recommendation:
Your commissioners regard the income from royalty on timber as differing essentially from any other form of revenue in the province. Such receipts should be regarded as capital and not as current revenue. We have no hesitation in recommending that the amount so received, large as it may appear, should be expended by the government for the protection, conservation and restoration of our timber resources. With our present knowledge regarding reforestation, to treat these receipts as other than capital would be utterly unsound in principle and might produce disastrous results in the ultimate impairment of the public estate. .
It is regrettable that for thirty-five years this recommendation has been consistently ignored by succeeding governments, provincial and dominion. Millions and millions of dollars have been drained from our forests into the general revenue to help pay for government services wholly unconnected with the protection and development of our forest industries.
This revenue is not a true income, but is the result of the sale of capital resources which can be replaced only in part. If our forest administration were adequately financed to fulfil properly its function of protection, conservation, management and development of our forest resources, then any surplus forest revenues could be absorbed into the general revenue, but such is not the case, and our forest administration for years has not been adequately financed. The British Columbia loggers' association, the Canadian society of forestry engineers, the Wallace report and other reliable sources have repeatedly urged that a much greater proportion of revenues derived from the forest industries be returned to the forests for protection and their perpetuation.
At the present time under dominion government controls the industry is required to sell a high percentage of wood products, logs, lumber, shingles, and plywood in the Canadian market at ceiling prices actually below the present cost of production. A certain percentage, until recently approximately sixty per cent, could be exported. It is not generally realized that this export, for which a much higher price is obtained, compensates

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the low domestic market and has for many years been the means of keeping the forest industry solvent. But the world lumber market is certain to be a highly competitive export field in post-war days. Operating expenses to the industry are ever increasing. Recently, in order to meet the increased cost of living and the demands of organized labour, a twenty per cent increase in wages-that is to say a fifteen cents an hour wage increase- has been authorized, coupled with a reduction in the hours of work per week. Furthermore, a fifteen per cent increase in the amount of wood products to be made available for domestic consumption has also recently been authorized. While this undoubtedly will help relieve the shortages in building material which is so urgently needed to meet the acute housing situation that exists, yet it should be remembered that the ceiling prices set for lumber for domestic consumption are, as I have already said, below the cost of production, and the returns received for the lumber which has been exported have enabled the industry to operate so far without going into the hole. This change in the percentage of wood products for export and domestic purposes adds just another handicap to the successful operation of the industry. I suggest that some compensating relief should be afforded. In the new dominion-provincial proposals which were presented in this house when the budget was brought down, the fact that the logging, lumbering and mining industries were singled out for double taxation indicates that the present government is not fully conversant with the difficulties facing the primary industries of British Columbia.


James Lorimer Ilsley: May I say that is incorrect, they were not singled out for double taxation.


George Randolph Pearkes: That is my interpretation of it; perhaps the minister will have an explanation later.
A few moments ago I said that operating costs were increasing throughout industry. This is partly the result of the high standard of living rightly demanded by those engaged in the industry. In recent years logging operations have become completely mechanized. You never see a team of horses in the British Columbia woods now. The donkey-engine, the high lead operations, the logging truck and the "cat" have completely replaced the team. To an ever-increasing degree the power-saw is replacing hand tools. Work in the woods is still hard, but it is not so physically exhausting as it used to be. No doubt many hon. members have seen pictures of the loggers who take the tops off these high trees, some of them perhaps two hundred feet in 63260-205
height. Employees in the logging industry to-day are skilled tradesmen, and every year a higher percentage of forestry mechanics and craftsmen are required in the industry. To meet these changing conditions, the companies have had to provide better living conditions. No longer are men satisfied to put up with what one might well say were the sordid conditions of the old-fashioned bunk-houses, where men slept in rows of double bunks, tier on tier. In most camps to-day the men have individual quarters, or cubicles for two men. Excellent meals are provided in the restaurants, and in the more modern camps they are served by qualified waitresses. These advantages necessitate additional outlay, but they are essential if the operators desire to retain the best class of employee.
On several occasions I have urged that assistance be given by the federal government to the construction of housing projects in areas adjacent to the mills and logging camps where employment is assured for many years to come, instead of proceeding with projects on the outskirts of cities. No real progress has been made, however, because under any of the existing schemes the operator is required to tie up too much of his available liquid capital. During the war it was the policy of the government to finance entirely the building of houses for workers engaged on jobs of national importance. In the present interregnum between war and a return to normal peace conditions, having also in mind the present acute shortage of houses for workers engaged in industries whose products are so urgently needed for reconstruction purposes, a more flexible system and a more generous lending policy should be devised to meet the present need for houses for these men employed in the forest industries; that is to say, for these men actually employed in the industry which produces the very materials required for home construction throughout the country.
The forests of British Columbia are not merely a local concern. During the war they proved to be of the utmost value to the national economy. They still are, and must continue to be such. I respectfully suggest that in formulating its taxation policies the dominion government has lost sight of this fact. In my view the dominion government should be prepared to facilitate the development and perpetuation of our forests by allowing the operator to charge annually current operations, with all reasonable costs incurred during the year, to the reforestation of logged-off lands under his control or management. As far as our forests are concerned, Canada has been living on capital. In other words, we have been mining the forests of British

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Columbia in exactly the same way that the forests of Nova Scotia and New Brunswick were mined years ago; mining our forests in the same way the wheat fields of the prairies were mined thirty or forty years ago. Wood products are a crop reaped from lands that are not suitable for other agricultural purposes. In order to ensure a continuous yield, agricultural lands must be fertilized. In the same way our forest lands must be protected. If there is to be a sustained yield that protection must be in the form of dollars and cents expended to prevent unnecessary wastage of the young crop by fire, disease and insect pests, and also for purposes of reforestation. I do suggest in all seriousness that under the present policy the dominion government is killing by starvation the goose which lays this golden egg.
The important thing to the citizens of British Columbia is the perpetuation of the forest industries, for the whole provincial economy is based on these industries to such an extent that the population of the province could not be supported without them. The industries recognize the value of the forests from the point of view of water and soil conservation, fishing and hunting, and the tourist trade; but the greatest value to the public lies in the cropping of the forests and the conversion of wood into marketable prod-ducts. Therefore the maintenance of the forest crop at maximum sustained capacity and the development of wood-using industries, hold the key to the future of British Columbia.
The operators have subscribed to a policy of joint action by the provincial government, the industries themselves and the public, of measures to assure continuous crops on all forest lands, and to attain this objective by practical measures which will maintain maximum production and employment during the period of transition to a sustained forest economy. The attainment of this objective means for the industry a further increase in present operating costs; for the crown, increased expenditures out of forest revenues, to build up the forest capital; and for the public, the enjoyment of somewhat less net revenue than previously derived from its forest capital. But this should not be regarded as a solely provincial matter. As I have already pointed out, the dominion government derives more money from the forest industries of British Columbia than does the ' provincial government. The whole national economy of this country would be affected by any serious dislocation of this industry. But this federal government is doing practically nothing to ensure that the production of wood products can be assured in the years to come. It is
[Mr. Pearkes. 1
not unreasonable to say that heretofore the federal government has not assumed its fair share of its responsibilities in this respect.
The first and most important step in a programme such as has been suggested is to keep fire out of the woods. The great economic loss in connection with our forests in the past has been and still is the destruction of young growth by repeated fires. Unless this loss can be stopped, there is grave danger that proper regeneration will be found economically impossible. The final result will be that one day there will be no crop to harvest.
Much criticism has been given by uninformed persons and has been directed against the methods used in the logging operations of to-day. But the evidence of expert foresters indicates that the practice of clear-cutting is more conducive to proper regeneration than any of the methods which are usually referred to as those of selective logging. Danger from erosion has been shown to be practically nonexistent if the fire can be kept out of cutover land. Evidence has shown that the leaving of seed trees is neither efficient nor economical. The practice known as blocklogging to those operators who have sufficient timber and sufficient capital so to log, has much merit. But the only certain way to ensure regeneration of our forests is to keep the fires out of the young growth. If fire can be kept from destroying seeds and young growth the regeneration of land now cut over or to be cut over in the future presents no great problem. In a period of ten years-and I am taking the period 1934 to 1943, because those figures were available-fires have destroyed from 350,000 to 400,000 acres of valuable young forest growth in the coast district of British Columbia. We have an annual average net loss of over 16 million board feet. These fires, contrary to popular opinion, usually occur years after the loggers have actually left that particular area. It is not the loggers who are responsible for the majority of fires which occur.
The chief forester of British Columbia has estimated that the cost of forest protection should be 81,500,000 annually for the whole province. That may presumably be to protect the 126 million acres estimated by him to be worthy of protection. Those 126 million acres which the forester considers worthy of protection include hundreds of thousands of acres of productive forest land on Indian reserves, which are administered directly by this federal government. In round figures, as nearly as I can ascertain, 118 million acres

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are owned by the crown and eight million acres alienated under various forms of title, of which about five million acres are owned in fee simple. Therefore, of the total area of forest lands to be protected the crown owns the sole interest in 94 per cent and an important interest by way of royalties and taxes in the remaining 6 per cent.
To ensure new growth and the sustained yield, the organization of a fire protection service on a sound industrial basis is essential. This can be achieved only through provision of ample financing by adequate contributions from the dominion government, whose interest in the forests is, as I have already said, greater than either that of the province or that of the industry itself. This assistance might also include provision of aerial photography, map production, detection air patrols and the transportation by air of fire-fighters and fire-fighting equipment. Coupled with fire protection must be protection against insects and fungus disease such as the spruce sawfly, the borer, the hemlock looper, and the pine blister rust. These are not as great problems in British Columbia as fire. But in some regions of Canada they are an even greater menace. The westward migration of the insect pests is, however, beginning to be felt in British Columbia. The prevention of this spread which pays no heed to provincial boundaries is primarily a dominion responsibility. Adequate steps must be taken by the dominion to control insect pests and the spread of disease.
During world wars I and II the coast forests supplied 100 per cent of the aeroplane spruce used by the empire air services for the construction of fighter and bomber aircraft. British Columbia is the only source, as far as I know, of that particular type of spruce, which made possible the production of the Mosquito fighter and bomber. In both wars the dominion government took over the production and exploitation of this aerial spruce. But not one nickel was ever put back by the dominion government to safeguard the remaining stand against any future emergency. At the present time certain of these stands are threatened by insect pests and, as far as I know, no federal appropriation has as yet been made to combat this danger. Need for industrial and silvicultural research to discover new methods of marketing economically the refuse which is now being left in the woods is also apparent. In all these respects opportunities are provided to the federal government to assist the industry by larger appropriations. Moneys devoted to these purposes are a sound investment, because they will assure future production and 63260-205J
yield a direct profit in the form of increased revenue. It is beyond the combined means of the province and the industry to provide these requisite services. The dominion government has a strong interest in our forest resources. The products of Canadian forest industries compete in world markets with those of countries which maintain extensive research facilities. I suggest that in order to prevent duplication of effort, to ensure that silvicultural research is organized on a continuing basis, the dominion government should assume the main responsibility in that field. The maintenance by the dominion government of extensive and up-to-date research facilities in the fields of silviculture, wood utilization, forest protection and forest economies is long overdue.
At present the various categories of cutting rights are under several jurisdictions. The forest branch governs them as to forestry and fire protection regulations, royalties and fire protection tax. The workmen's compensation board governs them as to important operating regulations and relatively high payroll assessments which cost several times as much as it would cost to replant the land and protect the crop from fire to saleable age. The provincial taxation authorities, independently of all other bodies, fix the assessments for property tax on crown granted land classified as timber land. The dominion taxation authorities collect personal and corporation income taxes, excess profits taxes and succession duties which at the present time exceed in cost per acre the total of all other government imposts. The provincial government also preserves an interest in the collection of succession duties.
If forest land is to be managed by individuals or companies for perpetual yield there must be some simplification of the present complicated taxation structure and some assurance that a coordinated policy will be developed under one authority in order to encourage private capital to embark on the growing of crops that cannot be reaped before the second or third generation. But, according to the proposal for the new dominion-provincial agreement, suggested in this year's budget, there is still to be an open season on the logging and lumbering industries which must tend to discourage production.
I have endeavoured to show the great value of the forest industry to the country as a whole; the necessity of maintaining a sustained yield for the industry; the interest and responsibility the federal government has in connection with our forest industry, and the action that the federal government must take
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now before circumstances make it impossible to save the forests of British Columbia for future generations of Canadians. This is a most vital and urgent obligation. I trust I have made some progress by way of proving to the government its responsibility for aiding proportionately in the protection of a major source of its own revenue.
The three to four billion foot crop, which can be produced if adequately protected, annually from the ten million and more acres of forests on the British Columbia coast will bring in an income of at least $120 million every year. The protection of assets of such magnitude demands the serious attention of this government.


Mr. NICHOLSON:: Did the hon. member indicate what the cost would be to the federal government of the interesting development he has suggested?


George Randolph Pearkes: I did not say what the total cost to the federal government was, but I did quote the estimates by the chief forester of British Columbia.


Mr. J. O. PROBE (Regina City):: Mr. Speaker, the budget address was presented some ten days ago, and in the meantime we have had an opportunity to study it and to receive from our constituents and other interested persons everywhere their reactions with respect to the forty-page discourse given by the Minister of Finance (Mr. Ilsley). This afternoon we heard a painstaking criticism by the official critic of the opposition, my genial friend, the hon. member for Muskoka-Ontario (Mr. Macdonnell). During the course of the few remarks I intend to make I shall refer to a few points wherein the official critic and I do not see exactly eye to eye.
If we consider the estimates that were tabled with the budget we find that it is expected that this coming year we shall be in receipt of some $2,500 million from various taxes. As against that we are going to have ordinary expenditures of some $2,770 million. The increase of expenditures over last year fall mainly under the following heads. There has been an increase in the debt charges of nearly $100 million, owing to the large borrowings in the various loans last year. Family allowances are going to cost us another $60 million because we are now in the first full year of the operation of the Family Allowances Act. Public works have grown by some $15 million. In this regard I found it interesting, as I perused the estimates, to note that the government has generously allotted an increased expenditure of $4,500 out of that $15 million increase to my own province of Saskatchewan. I hope that our people will send the Minister

of Public Works (Mr. Fournier) an appropriate letter of recognition for that startling increase in expenditures in my province.
On the side of decreases in expenditure I find that the Department of Reconstruction and "Supply, which I think all of us feel is the outstanding department in the reconstruction period following the war in which I believe we still live, has reduced its commitments this year by some $107 million as compared with last year. Its present commitments are largely to clear up obligations which resulted from war contracts. I find that expenditures relating to the purely administrative end of the Department of Reconstruction are below those of the Department of Labour and nearly $5,000,000 below the cost of operating one branch of the Department of Justice, the Royal Canadian Mounted Police. So much for the principal current year expenditures because, after all, figures generally tend to bore us unless we can interpret them in terms of our national economy.
With respect to the important matter of tax relief, I think all of us expected that some measure of relief would be granted this year. We had expected that income taxes and excise taxes would be cut, to ease the growing cost of living, especially for those in the low income groups. Of course we have been disappointed, although the Minister of Finance, in forecasting changes which might come about next year, almost led me to believe that he has a plan somewhere in the back of his mind looking forward toward a cyclical budget covering a period of years instead of a budget running from year to year, as has been our custom. For the year 1946-47 our taxes, except in one instance, and it is rather a significant one, have remained unchanged. That instance which I thipk is significant is based on a resolution in the name of the Minister of Finance in which he proposes to reduce the excise tax on cigars, effective June 28, from $3 to $1 per thousand.


James Lorimer Ilsley: The excise duty is reduced, but the ad valorem is increased and the total increase is $160,000.


John Oliver Probe: Then we shall not get cheap cigars.


Ian Alistair Mackenzie: You have lost your last hope.


John Oliver Probe: I was thinking that we might have a cheap smoke.
The important tax from the point of view of the small income earner, in addition to the present onerous income tax, is the eight per cent sales tax, and that eight per cent sales tax on most purchases still stands. I

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remember that last May. about * the time that election platforms were being cleared for action, there was a report in the press that the sales tax would be removed on builders' supplies so that we might get cheaper homes. That report, as far as the government is concerned, was correct, but in so far as the change brought about cheaper building materials, the result was entirely the opposite. The householder still pays eight per cent on his electric light bill and the kiddies still pay their two cents to the Minister of Finance on their pop. Had it not been for the minister's correction of my impression that the tax on cigars was to be reduced, I was about to dub the budget of this year "the Ilsley stogie budget," but if the tax on cigars has gone up, as the minister says, my description of the budget does not apply and our stogies are really going to be 10-cent cigars.
As the hon. member for Vancouver East (Mr. Maclnnis) reminded us this afternoon, the Minister of Finance in his budget speech said, at page 2905 of Hansard:
Lighter taxes are not needed now for the purpose of permitting or encouraging additional private spending in order to maintain employment this year. In fact, if only immediate economic conditions were involved, one could make a case for temporary higher taxes in order to curb the excess of spending in some directions that is tending to pull prices up.
There the Minister of Finance in his economic wisdom has stated in the most orthodox manner his case for the retention of the present budgetary plan. It is his intention apparently to secure a balance between tax revenues and expenditures in perhaps another year or so. judging by the rate at which the deficit is being reduced from the high figure of last year to its present figure of something in the neighbourhood of 8300.000,000. He proposes to do that without greatly disturbing the present taxation pattern except, as some of my hon. friends in the cooperative movement may say, by starting to break down the recent rapid growth of Co-Ops by the repeal of clause 4(p). If by some miracle Canadian production should remain at its present level of Sll billion and the unempley-ment figure should not rise above its present level of some 210.000, it is likely that the tax relief suggested for the next year will come to pass.
Canada ha? a right to expect expanding national production of all goods which this country is able to produce, the minister said in his budget speech. He went on, at page 2904 of Hansard:
The real answer, the constructive answer, to the inflationary pressures existing at this time is to work and produce the goods that are wanted in greater volume, so that our greater buying
power will result in more goods at reasonable prices, rather than fewer at higher prices. To business men in particular-
I like the way he puts this:
-I would like to address a plea that they do all in their power to hold prices down and get volume up, over this next critical year.
With that statement and wish of the minister I think most of us are in agreement. But the Minister of Finance has taken no budgetary steps to bring about this all-out production. He simply asks businessmen to do the right thing, to keep prices down and bring production up. Under the free enterprise or profits system which the hon. member for Muskoka-Ontario (Mr. Macdonnell) lauds so much and with which the members on the government side of the house are in general agreement, you do not get all-out production nor do you keep prices down unless you increase the profit stimulus. We learned in the crisis of the war that Canada is able to make unlimited quantities of goods. But here we are in the second year of peace and we are still desperately short of housing for our people. Can j'ou get a lumber merchant to build more houses or to cut down the prices of housing materials by a plea to him? I wish I could. I am trying to build a home for myself following the war, and all I can see, as one day follows another, is that the price of everything required for that house is going up. You cannot solve the difficulty by asking a merchant to give you a fair deal under the present system. We are short of materials and short of craftsmen to do our building. Private enterprise is not providing them, the Minister of Finance is not giving us a lead, nor have we any aggressive government action which can provide them through official agencies. As you are aware, we set up a Central Mortgage and Housing Corporation, and it paid over to the federal treasury $14 million, which was the aggregate of the loans, less repayments, made under the National Housing Act since that act was passed in 1935, and represented some 30,000 housing units. To my mind, that does not suggest aggressive action by the federal government to increase the supply of housing in this country.
We are short of essential food, clothing, furniture, refrigerators, motorcars and almost any consumer commodity which one could name. AVe are short of health services and of the doctors and dentists needed to provide them, and we lack security of income. Yet large-scale production and the sales to the small consumer of these commodities still await government action.
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The minister emphasized in his budget speech that our export position must be built up, no matter what happens at home. As he put it, our income from exports is the most important factor determining our prosperity and employment in peace time. I like to project myself back to the farm where I was raised and think of a farmer becoming prosper-our following the advice of the Minister of Finance, by selling all his hay and oats to his neighbour and leaving his own live stock tied up in the stable to starve. If a farmer did that he would have his head examined. Yet, when our responsible ministers say that, and mean it-because we all give the minister credit for his sincerity-it is called good government business. Over a year has passed since V-E day, and our political and business leaders are actually denying Canadians the abundance which they were promised after the war; sending all available products, whether or not they are surplus to home needs, into a post-war chase for foreign markets, and financing those markets for the most part with Canadian credits, while we at home patiently wait and do without. I am quite prepared to grant that exports form part of the requirements for Canadian prosperity and that right now foodstuffs should move quickly to relieve world suffering. But, in general, exports alone will make no nation prosperous; they must be regulated in the light of that nation's home needs and come from the nation's surplus production. The minister's job is to create a surplus in every possible Canadian field of production, and to the extent that his government's plan fails to speed up the production of surpluses, to that extent the budget fails to create the prosperity which the minister wishes Canada to have.
My hon. friends to my right have said in effect that the way to stimulate production is to reduce the excess profits tax and to lift the price ceiling. Such stimulus was not needed in the emergency of war, nor is it needed in the present emergency of peace. The policy of removing profits taxes and lifting consumer prices means, as hon. members all know, that the number of units which consumers with fixed incomes can buy decreases in direct ratio to the numbers of each unit produced for sale. Such a government policy can only lower production and not increase it. With [DOT]fixed wages, as is now preached here, demand for goods must fall as prices rise. Orthodox economists know this only too well. Let prices rise now and unemployment and depression will follow the present consumer prosperity in the same regular cycles which they always have, ever since capitalism began.

No; we will increase our supply of goods, not by relaxing price controls as they are doing across the border and as the Minister of Finance pledged himself to do here, but we must profit by the war-time planning which we did and adjust that planning to peace-time uses. We shall need not to scrap but to adjust those price ceilings and price floors too, so that the net earnings or the take-home pay of the farmer, the manufacturer, the doctor, the miner, the carpenter, the professor, the pensioner, will bear some relation to the take-home pay of those in other occupations. But will we do this? To do this we must reinvigorate the planning boards which we partialy set up during the war. Our money system must be used to finance all production, whether of the factory, the field or the mine. We must think in terms of stockpiling surpluses for a change, instead of destroying them, until they are sold. We must think of sponsoring a national home-building plan.
My hon. friend to the left this afternoon made some reference to Belgium. I was in that country at the time that its government at one swoop took sixty per cent of the currency out of circulation. The general plan was to give each person who had that amount 1,500 francs, or roughly $40, and beyond that, sixty per cent of that individual's currency was taxed out of existence by the state, due, I assume, to the heavy inflation of paper which had taken place during the period of the German occupation. Yet that country has been able to finance a nation-wide home building plan; and my hon. friend was right when he said that that was being done with tax-free money. There, any man who wishes to own a home has the entire cost of that home financed by the state and the payments are amortized over a period of thirty years, without interest. Further, should by any chance the home owner and his family become unemployed, the payments on that home are assumed by the state during the period of unemployment. There is one condition to that, namely, that that man keep a garden. Of course we have a sort of housing plan but, as I say, the terms of the housing act so discouraged the small would-be home owner that we have thirty thousand and some odd loans under the housing act at a time when we need over twenty times that number of homes.
It is time that we controlled exports and imports by properly constituted boards in accord, not with export demand solely, but with Canadian needs and with an eye to foreign needs, shall we say, but let the foreigner have of our goods when we have developed a surplus. Let us direct and provide that our public investment of surplus money shall meet proper

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development needs and social needs of Canada's unlimited productive power. Our money need not be used, as it has been in the past, to pay bonuses to keep goods off the market, to burn or plough down our crops when human stomachs are unfilled anywhere, or to close shops and factories, or to slow down machinery within those factories to keep supplies short and prices up, as our free enterprise system does.
Finance must never again compel whole sections of this country to take relief when others work fifty, sixty, seventy, yes, eight-four hours a week in the case of the merchant seamen, and yet that is the budget path on which we are walking now. Look at our country. You take the train and you travel over vast unimproved near-wilderness in many places, and yet the current budget makes little provision for its development. I remember, when I was a younger man, the Right Hon. R. B. Bennett was asking us on the prairies for votes and his spokesmen told us of a wonderful Trans-Canada highway which would be built when his government came into office. That was in 1930. His government did get into office, and now, sixteen years after that time, with depression, with people idle, with all sorts of materials, with everything except the national will to complete the job, if you want to travel from my city to Ottawa you go via Minneapolis, Chicago and Detroit, or if you prefer another more scenic route you go to No. 2 highway via Duluth and Sault Ste. Marie.


An hon. MEMBER:: You may go by the Canadian Pacific.


John Oliver Probe: No, you will never drive to Saskatchewan from here on that basis. Perhaps that is the intention of our governments, to keep us away from the prairies unless we take the Canadian Pacific.


James Garfield Gardiner: You can drive all the way through now on the Canadian side; cars are doing it every day.


John Oliver Probe: Yes, I presume one could make the trip all right.


James Garfield Gardiner: You can do it quicker than you can through the United States.


John Oliver Probe: Of course, I do not know whether the minister has ever made the trip, but I would venture to say-


James Garfield Gardiner: My friends have, and are making it this week.


John Oliver Probe: I take it that is now the Trans-Canada highway. Well, if it is and if that is the best that can be offered to our citizens at the present time it is still not a highway according to modern standards. In
my own area there are difficulties over water supplies. Water supplies for Moose Jaw and Regina have been mentioned frequently by hon. members on all sides of the house. Irrigation and the use of water from the Saskatchewan river have been discussed, and they are still in the blueprint stage. I presume those blueprints will be untied at about election time. The Hudson bay route is still a trackless waste, traversed by the occasional tramp steamer. At this time I wish to pay a tribute to the Minister of Agriculture who did make a constructive statement in the house a few weeks ago, namely, that trade between the maritimes and the prairies could be developed by the proper utilization of that route, and yet War Assets Corporation has disposed of the means by which our government might have undertaken the three or four years' exploratory work. They sold the Park Steamships to what are likely to be, for the most part, foreign competitors.
The social security measures which have been debated for months at dominion-provincial conferences are again shelved, while various premiers, federal and provincial, wrangle over provincial rights and blame the British North America Act when things do not work out to the interests of our people. The fathers of confederation would turn over in their graves if they could see the disunity which the terms of the British North America Act have created in our country because of the buck-passing tactics when a government does not wish to implement a measure. Hospitalization of our sick, pensions for the old and helpless have to be provided provincially until our premiers get together. Our veterans are fast spending their gratuities and many have no homes, no farms and no jobs. The savings of war workers which were supposed to go into cars which they hoped or longed for, and other luxuries, are now going to meet rising food costs. When a worker gets a wage increase he gets it after strikes and loss of production. Taxes are forecast for the humble cooperatives; yet the excess profits tax will come off the shoulders of the powerful manufacturers. High-priced advertising of soap and other huge corporations, Pullman travel, entertainment and fancy clubs for high salaried executives are still proper deductions for income taxes, while at the same time the worker pays his eight per cent excise tax on necessities and the child still hands his two cents a bottle on coke to the Minister of Finance.
Last year the Minister of Finance estimated that the excise tax levy would bring into the treasury some S455 million. The excess profits
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taxes were estimated to net S426 million, or roughly equivalent amounts of money. Excise taxes, sales taxes and the like for the most part are levied on the purchases of necessities of the people of modest incomes. The excess profits tax is levied on the surplus excess charges of huge corporations. It is forecast that the excess profits tax is to be reduced and cancelled next year. As a matter of fact it is going to take another form, I believe, but there is no hint that there will be a reduction of the eight per cent sales tax on the necessities of the average individual.


Humphrey Mitchell: What about the two per cent tax in Saskatchewan?


John Oliver Probe: Yes, and may I say to the Minister of Labour that poor as that province is compared with many parts of this country, that two per cent tax is coming off many commodities on October 31 of this year, and there is no election in sight. At the same time may I tell the minister that we are increasing the social services in our province, and we are not demanding that these be paid for by the small wage earner to the exclusion of the wealthier corporations.
I should like to leave with the Minister of Finance a constructive suggestion. I realize that he will be restricted in his point of view. I do not want to speak as the hon. member for Muskoka-Ontario spoke, who, as I recall it, revelled in the good old seventeenth century days. He spoke of the days of Puritan England, the days of good free trade and free enterprise. In his mind at least, he painted a glowing picture of seagoing vessels loaded to the gunwales with profit-bearing goods, with perhaps missionaries on top of them, going to the natives in distant lands to bring profit to the entrepreneur. That was his picture. In my mental picture of that period in the history of the old land, however, all I could see was the slave who was brought back, the factory set up in smoky surroundings with hovels on every side, and children working day and night to maintain the position of the industrialist. Yes; capitalism has two sides. To the man who has power and is ruthless, it spells fortune, whatever that is. All the rest of us can see in it is misery.
After all, corporations are simply collections of business men who still get their wages, shall we say, for the jobs they do; and whatever their workers get for the goods they produce simply swells the total of what that business group's enterprise gains from their work. Instead of removing the excess profits tax, would it not be better to say to these

business men, "Let us look at this thing nationally; let us take the amount you now begrudge paying to the government of Canada by way of excess profits tax, and let us put it into specific ventures. Let us start out by using that money as a revolving fund for housing. Let us put half a billion dollars a year for a number of years into the construction of homes for the people of Canada." That is roughly the amount brought in by the excess profits tax last year. Then, when we have enough homes for our people-


James Horace King: Order. I am sorry to interrupt the hon. member, but he has spoken for more than forty minutes.


Some hon. MEMBERS:: Go on.


Some hon. MEMBERS:: No.


John Oliver Probe: When we have built enough homes in this land-


James Horace King: Has the hon. member the unanimous consent of the house?


Some hon. MEMBERS:: Yes.


Some hon. MEMBERS:: No.


Some hon. MEMBERS:: Two minutes.


John Oliver Probe: -we can switch to social services of other kinds. We can go to highway construction; we can go to the reforestation programme mentioned a few moments ago by the hon. member for Nanaimo (Mr. Pearlces). Let us be realistic, not in terms of cash but in terms of human welfare.


Robert Wellington Mayhew: Mr. Speaker, first I should like to refer to a statement made by the hon. member for Nanaimo (Mr. Pearkes), who said the government was proposing double taxation on logging and mining. That statement was contradicted at once by the Minister of Finance (Mr. Ilsley), but I should like to read what was said in the budget speech of June 27, at page 2910 of Hansard:
An agreeing province would undertake to levy a five per cent tax on net corporate income within the province and would also agree on behalf of itself and its municipalities to impose no other corporation tax or tax on corporations except corporations engaged in mining or logging operations.
This means that the provinces are now collecting a stumpage tax from the logging companies and royalties from the mining companies. These two taxes remain as they have always been, but are now allowed as an expense. No change whatever is proposed in the taxation as outlined by the minister

The Budget-Mr. May hew
in his speech. I thought I had better make this correction before the statement by the hon. member became too widely circulated. Further proof of what I say is found at page 2911 of Hansard for the same date.
Before I deal with some other points raised in the budget debate, I should like to clear up a misunderstanding on the part of the hon. member for Temiscouata (Mr. Pouliot). On June 25, during the debate on the interim supply bill, the hon. gentleman discussed what he thought was a mystery arising out of his interpretation of the public accounts, and out of answers given to questions he had placed on the order paper. I am glad to be able to set his mind at rest and assure him that there is no mystery in the accounting methods followed by the Department of Finance. In his statement the hon. member used figures up to February 28, 1946, in one case, and up to March 31, i945, in another, because figures for the whole fiscal year were not then available. I shall bring my figures down to March 31, 1946, using the figures for the last fiscal year which appear in the appendix to the budget speech.
The hon. gentleman begins with the point that in his view the revenue and the increase in debt during the war period, the increase in the debt through borrowing on the one hand and on the other hand the non-war and war expenditures during that period, should balance. That appears to be a simple statement, but it overlooks the fact that the dominion has to make disbursements for the purchase or acquisition of active assets, that is to say in loans, advances and investments, and the money required to purchase or acquire such assets must come out of the funds raised by the government through either taxation or borrowing. Let me try to make the matter clear by referring to the figures. During the period September 1, 1939, to March 31, 1946, the revenues totalled $13,346,500,000. In the same period the increase in the dominion debt was 815,238,600,000. Adding these two figures together, we arrive at a total of S2S,585,100,000, representing the total receipts of the government during the period. Out of these total receipts, the total expenditures for war and non-war purposes were $23,245,200,000. This leaves a balance of $5,339,900,000 to be accounted for. This is the mystery which the hon. member desires to have explained.
The explanation is to be found in the increases in cash and other assets which are found to be in possession of the government to-day, and are recorded in the dominion balance sheet. If the hon. member will turn 63260-206
up pages 45 and 46 of the appendix to the budget he will find the dominion balance sheet, and on the assets side he will find the amount of cash, loans, advances and other investments held by the dominion as of March 31, 1946.
The first and most liquid item is cash, which amounted to S796,6S5,000,000, which is an increase of $714,200,000 from September 1, 1939.
The second item is advances to the foreign exchange control board of 81,550,000,000. This advance arises out of the necessity of providing the board with Canadian dollars in order that it may purchase United States dollars from Canadian exporters and others who obtain these dollars in their day-to-day business transactions.
The nature of these advances may be ascertained by examining the balance sheet of the foreign exchange control board as of December 31, 1945, which is in the report of the board tabled in the house on June 5. At December 31, 1945, the government advances to the board totalled $1,300 million against which the board had foreign exchange, mainly United States dollars and gold, to an amount of $1,410,200,000.
The third is advances to the Canadian National Railways, which increased by $666,-
500,000	during the period in question. These advances relate mainly to the repatriation of Canadian National securities held in Great Britain. The government has replaced the British investor as creditor of the railways. The government receives interest on its advances to the railways at various rates of two to three and one-half per cent.
The loan made to the government of the United Kingdom originally in the amount of $700 million stood at $538,600,000 at March 31, 1946, an asset created during the war period. In addition, at March 31, 1946, the amount of $425 million represented by accumulated liabilities of the United Kingdom under the British commonwealth air training plan was carried as an active asset. Although cancellation of this indebtedness was provided for in the financial agreement with the United Kingdom the relevant article of the agreement and section of the act implementing it have not yet been put into effect, pending action of the United States congress on the Anglo-American financial agreement. If and when approval is given to this agreement the amount of $425 million will be written off active assets and included in expenditures.
Other advances to the United Kingdom and foreign governments under section 3 of the War Appropriation Act and Export Credits

The Budget-Mr. Mayhew

Insurance Act increased by $241,800,000 during the period.
Advance to crown companies increased by $108,500,000. These advances are covered by inventories and other assets of the companies. Another asset account arising since the outbreak of war is that entitled "Minister of Finance special custody account," amounting to $1,025,000,000, which is in the form of foreign exchange and securities and is offset by a contra item in the increase in total debt.
The increases in the foregoing items total 85,269,600,000, and the remainder, $70,300,000, is made up of sundry small increases or decreases in other active assets.
I think the house will admit that this is an impressive list of assets. The government has acquired them by disbursement of funds raised by either taxation or borrowing. But such disbursements are not expenditures in the sense of budgetary expenditures. The latter cover only outgoes for which the government receives no active asset.
I also point out that these assets are conservatively valued in the dominion's balance sheet. Over the last six years a reserve of $150 million has been built up by charges to expenditure to take care of any loss on the ultimate realization of these assets.
The hon. member for Temiscouata also raised the point that he could not obtain in May the figure for the total debt of Canada at March 31, 1946. As the hon. member knows, that date is the close of our fiscal year, but under the Consolidated Revenue and Audit Act expenditures relating to the fiscal year may be made up to April 30. In addition, many adjusting entries between expenditures and asset accounts have to be made after March 31. Accordingly, it is not possible to take off a balance sheet for the fiscal year-end until some months after the close of the year. However for the hon. member's information and for the information of the house I would point out that the Minister of Finance receives detailed statements of revenue, receipts and cash balances daily, and expenditures and asset and liabilities accounts twice monthly. I can assure the hon. member that the minister is at least as well informed on the operation of his department as any businessman on the operation of his company.
The budget speech indicated the deficit for the current fiscal year is now estimated at $300 million, and there is a good prospect that in the following fiscal year our revenues and expenditures will be in balance. The reduction of the deficit to an amount no

larger than $300 million is a remarkable achievement when considered in the light of the very heavy outlays, amounting to over $600 million, which will be made this year by the Department of Veterans Affairs, the expenditures of the defence departments, for which $489,000,000 will be required, and various other expenditures, including price subsidies and the cost of termination of war contracts, which represent a substantial additional amount. These specific outlays we may reasonably expect to decline in the following year, although there may be moderate increases in other expenditures and, of course, a decline in our tax revenues from the reductions announced in the budget. It is apparent, however, from the magnitude of the figures I have given that when a more normal level is reached in the following year the reduction in our outlays will be substantial and give every reason to believe that our budget will be in balance in 1947-48.
This prospect is even more striking when one considers the heavy reductions in tax revenue that have been proposed, coming on top of the reductions already in effect. On personal income tax and corporation taxes alone these reductions for the years 1945, 1946 and 1947 amount in total to $530 million in tax revenue and, in addition, a reduction of $72 millions resulted from the removal of the refundable portion of the excess profits tax, giving a total in excess of $600 million. This figure does not include a further $90 million that resulted from the repeal of the war exchange tax and the exemption of producers' apparatus and equipment under the sales tax.
The itemized list of the reductions under the personal income tax and the corporation and excess profits tax is an impressive one. For the information of hon. members I will give a summary of the tax relief which is given by the changes which have been in effect for 1945, 1946 and 1947. I would prefer not to read the whole table since it is getting late, but I should like to make a couple of observations on it. The hon. member for Muskoka-Ontario said that we were getting no immediate relief. The relief of four per cent which was effective last fall amounted to $30 million. We already have that to our advantage. The immediate effect in 1946, which we are enjoying at the present time, is the sixteen per cent reduction, which amounts to $115 million. The effect of the other, which we shall enjoy immediately after the turn of the year, amounts to twenty-three per cent, including family allowances, or a total of $155 million. Then there is a total of $300 million in relief from cor-

The Budget-Mr. Mayhew
poration taxes, giving a total of over $600 million. Surely that ought to be some inducement. The table follows:
Tax Relief-1945, 1946 and 1947 Personal Income Tax	Revenue Reduction
1945-	4 per	cent	
$30	million1946-	16 per	cent	
115	million1947-	23 per	cent	
143	million
1947-additional family
allowance	-.	12 million
Total Reduction - Personal
Income Tax	 300	million
Corporation Tax Cuts
Tax reduction applying to 1945 corporation income (1945 budget)
Reduction of E.P.T. rate to 60 per cent and increases in minimum standard
profits	 $95	million
Tax reductions appljdng to 1946 corporation Income (1946 budget)
Net revenue loss from removal of 22 per cent flat E.P.T. rate and reduction of excess rate from 20 per cent to 15 per cent less increased revenue by raising 18 per cent corporation rate from 18 per cent to 30
per cent	 $135 million
Total reduction on corporation incomes excluding E.P.T. refundable taxes ..	$230 million
Removal of E.P.T. refundable taxes	 $72 million
Total corporation tax reductions including E.P.T. refundable taxes	 $302 million
Total reduction (excluding
E.P.T. refundable taxes) . .	$530 million
Total reduction (including
E.P.T. refundable taxes) .	$602 million
Many of the salient features of the personal income tax proposals for 1947 do not seem to have been understood, and I should like to explain more fully some of the aspects of the proposals in order to clear up certain misapprehensions. The proposals will relieve completely of tax between 550,000 and 600,000 taxpayers in 1947, which is about one-quarter of the present number. Under the proposals, our exemptions will be increased to a limit higher than the limit in any other English-speaking country in the world. The exemptions of $750 and 81,500 represents a return of three-quarters of the way to the pre-war exemptions. Some have argued that the exemptions should be increased immediately to $1,000 for a single person and $2,000 for a married person. That would be going much farther than any responsible government would contemplate going in the light of our present financial position. The cost of increasing the exemptions to that level
would be almost $300 million and would cut our income tax revenue in half. The revenue loss of $143 million under the budget proposals represents almost one-quarter of our present income tax revenue. I submit that this will be regarded by all responsible persons as being a generous measure of relief. Surely it is sound ordinary common sense to meet our bills now as a nation when we are fairly prosperous rather than to postpone them to the uncertain future.
I think hon. members will be impressed, on closer examination, with the modest amount of tax that will be paid under our new proposals by the lower income people. For example, a single person with $1,000 a year, who some call oppressed, will pay a tax of $55, or about five per cent of his income. That would hardly seem to be an onerous burden. Similarly, a married man with an income of $2,000 will pay a tax of $118, or about six per cent of his income. In both cases the taxes paid will be lower than those imposed in the United States and Great Britain.
The reduction of taxation under the proposals is substantial for the great majority of taxpayers. The over-all revenue reduction is about twenty-three per cent, which comes on top of the sixteen per cent reduction now in effect. The percentage reductions are largely in the lower incomes. Below $1,000 in the case of single persons and below $2,000 in the case of married the percentage reductions average fifty per cent to seventy-five per cent. Over these incomes they average ten per cent to fifteen per cent, with the percentage dropping gradually from about fifteen per cent in the $3,000 to $4,000 class to about ten per cent at $50,000. Above $50,000, the percentage reductions are less than ten per cent. At $100,000 it is around, seven per cent; at $200,000, about three per cent. In general, our income tax in 1947 will be below the 1941 level. We shall have reduced our taxes two years after the end of the war to below the level they had reached two years after the war started.
There appeal's to be a great deal of confusion regarding the place of family allowances under the proposed changes. Perhaps this confusion arises out of the transition from the present system to the new system rather than out of the new system in itself, which is the essence of simplicity. One misconception that is most prevalent is that all parents not now receiving family allowances will be forced to take them in 1947, but that they will be required to repay the whole amount of the allowance to the government. Nothing could be farther from (he truth. Next year
3258
The Budget-Mr. Mayhew

every taxpayer can apply for the allowance and keep the whole amount he receives. Let me repeat that every taxpayer, next year, no matter what the amount of his income, can apply for the family allowance and keep the whole amount he receives. He does not include it with his income in making up his income tax, nor is it subject to a recovery under which part or all must be repaid as under the present system. If he does not apply for the allowance it is his own loss.
In addition to the family allowance payment, however, every taxpayer will be given a deduction from his income of S100 for the same child. For example, if he is a taxpayer with two children of family allowance age he will receive his family allowance payment in full, which at the present average of $72 a child would amount to $144, and, in addition, he will be given exemption from tax on $200 of his income in respect of the same two children.
The allowance under the income tax for a dependent for whom family allowances are not paid, that is for children over sixteen, and for other dependents qualifying under the law such as dependent brothers, sisters, parents, and so on, will be in the form of a deduction of $300 from income in respect of each such dependent. There has been some argument that this $300 deduction should be allowed to a taxpayer with children of family allowance age if he chose to have his children recognized in this manner rather than through the receipt of family allowances. I wish to point out to the house first in regard to this proposal that for the majority of taxpayers the measure proposed in the budget speech carries a greater benefit than a $300 deduction from income. In the lower income groups this excess of benefit is substantial, and is of significant amounts on all incomes up to $7,500. Take, for example, a married man with two children and an income of $5,000. Under the budget proposal this married man would pay a tax of $911, against which would be offset family allowances of on the average $144, making a net liability of $767. If the same married man were to take instead for his two children a deduction from income of $300 apiece, or $600, he would pay a tax of $897, or $130 more than his net liability under the budget proposal.
Another aspect of the income tax changes which has not been fully understood is that affecting husband and wife where each have separate incomes. The nature of the change might be best explained by reviewing the background of the proposal. Prior to 1942 the law was that when husband and wife each had an income in excess of the exemption limits for

a single person each was subject to tax as a single person on their own separate incomes. If the wife's income was under the exemption limit, however, the husband was allowed to retain the married allowance. In order to encourage married women to take employment during the war, the law was amended in 1942 to allow the husband to continue to pay tax as a married man even though his wife's income exceeded the exempt limit, which modified the previous rule that both would be taxable as single persons when the wife's income exceeded the exemption.
The change proposed for 1947 might be best explained as falling into two parts. The first part relates to husband and wife both having incomes in excess of $750. In this case we propose to return to the pre-1942 position; that is, each will be taxed as single persons on their own income. The second part of the change applies where the wife has an income of her own but less than $750. Under the pre-1942 law in this circumstance the husband would have been allowed to retain the married exemption, and in effect he and his wife had a combined income exempt from tax of $1,500 in the hands of the husband and up to $750 in the hands of the wife, making a combined total exemption of $2,250. This compares with an exemption granted two single persons having the same income of $750 apiece, or only $1,500 in total. We propose in large measure to remove the advantage enjoyed by a married couple under this rule by providing that if the wife has an income in excess of $250 then the husband's exemption of $1,500 must be reduced by the amount by which the wife's income exceeds $250. The amount of $250 of the wife's income will be disregarded because of the very large number of cases where the wife has incidental earnings of so small an amount as to be negligible, but the husband's exemption will be reduced by any excess income his wife has over $250.
An illustration will serve to show the effect of this change. Assume the case of a married man with a $5,000 a year income. If his wife has no income he will get the full $1,500 exemption and his tax in 1947 will be $973. If, however, his wife has an income of, say, $600, then his $1,500 exemption will be reduced by the excess of $600 over $250, or $350, leaving an exemption of $1,150 in place of $1,500. His tax with the reduced exemption will then be $1,081, or $108 higher than it would be if his wife did not have the income of $600.
The changes I have discussed apply to the year 1947. It would- appear that in some quarters they are regarded as "postponed"

The Budget-Mr. May hew
changes because they apply to 1947. They are in no sense postponed changes but simply changes for which legislation affecting the coming year is necessary for good and sufficient reasons. I do not recall that the Minister of Finance has ever made any statement which implied directly or indirectly that there would be a further reduction in 1946 over and above the sixteen per cent reduction now in effect. This cut of sixteen per cent is on a level with reductions made in some English-speaking countries for 1946 and is higher than in others. Further, it is now anticipated that without tax reductions in 1946 we shall still have a gap between our revenue and our expenditure of $300 million. While this is encouraging in comparison with the deficits of earlier years, it still represents a substantial gap, and it would be, in my opinion, unwise to make that gap larger and live on borrowed money when our incomes are high and we can better afford to meet our current expenses out of our current income than we may be able to at a later day. Finally, our obligations to make reductions in the personal income tax for the year 1947 under the existing dominion-provincial agreements have been overlooked in assessing the personal income tax changes. These agreements call for reductions applying to the year 1947, and the dominion would certainly have been giving hostages to fortune, even if financial conditions had warranted a reduction in 1946, to make a reduction in that year in the expectation that the provinces would accept this reduction as fulfilling the terms of the agreements.
I wish to deal now with the effect of the proposal regardiflg succession duties made in connection with the offer to the provinces. The impression created by editorials and statements appearing in the press is that the dominion has doubled the rate of succession duties that will apply on estates in 1947. How such a gross misstatement of the facts could have been seriously advanced is beyond my comprehension. The dominion's proposal was simply that the rates of duty under the dominion act would be doubled and that any duty paid to a province would be offset against the dominion duty up to one-half the amount of the increased dominion duty. Since existing provincial duties are now generally as high as or higher than one-half the increased dominion duty, in general there will be no increase in total duty under the change.
A simple illustration will show the truth of this statement. Take the case of an estate of $50,000 left to a widow in the province of Quebec. At the present time the Quebec duty on this estate is $2,000, and
the dominion duty, $1,470, giving a total duty of $3,470. Now assume that the dominion duty is doubled, which would increase the $1,470 to $2,940. Under the proposal the provincial duty will offset half of the new dominion duty, so that the new duty will be $2,000 paid to the province plus $1,470 payable to the dominion-that is, half of $2,940 -or a total of $3,470, the same as the present duty.
Let me take another example. Assume an estate of $2,000,000 left to a widow in Ontario. The present provincial duty is $494,500, and the present dominion duty, $451,440, giving a total of $945,940. The dominion duty doubled would be $902,880, which, reduced by half for the credit for the provincial tax, would leave a net dominion duty of $451,440, which along with the provincial duty would give a total of $945,940, or exactly the same total duty as the estate now pays.
I think these illustrations show clearly enough that, in general, succession duty rates in Canada will not be increased by the dominion's proposal. This will be true in any province where the provincial rates are as high as or higher than the present dominion rates, which is generally true of all provinces with the exception of Manitoba and British Columbia. There may also be individual cases where the dominion taxes a succession which the province does not tax or possibly taxes a succession in a manner different from the provincial practice where the duty under the dominion's proposal might be increased. In these cases, however, the increase would normally be relatively small in amount, and would not affect the general statement that the level of succession duties in Canada has not been raised.
Further proof of this may be shown by the fact that the revenue from provincial succession duties in Canada has averaged around $25,000,000 in recent years compared with revenue of about S21,500,000 from dominion succession duties in the last fiscal year. It is obvious that provincial succession duties are high enough in general to absorb the credit against the dominion duty, and that the dominion duty remaining payable will be the same as under the present rates.
So much for the arithmetic of the proposal. Its purpose, of course, is to provide a way by which any province, whether it enters into an agreement with the dominion or not, can-remain in the succession duties field or withdraw from it as it may choose. If a province remains, the credit against the dominion duty is allowed for provincial taxes. If, on the other hand, a province withdraws its duty, then the new increased dominion duty replaces;
Privilege-Mr. Coldwell

the present combined provincial and dominion duty. It is to be hoped that, for the sake of uniformity and simplicity of taxation, all or most of the agreeing provinces will withdraw their own succession duty measures and thus remove the duplication of administration which now exists in this field.
I had another statement, Mr. Speaker, but it would run over the allotted time. I thank you.
On motion of Mr. Blackmore, the debate was adjourned.
On motion of Mr. Mackenzie the house adjourned at 10.48 p.m.
Tuesday, July 9, 1946