1949-12-05

Hon. Stuart S. Garson (Minister of Justice):: Mr. Speaker, I desire to table correspondence between the provincial attorneys general and others, and myself as Minister of Justice, relating to Bill No. 10, dealing with crime comics.



GOVERNMENT EMPLOYEES COMPENSATION ACT


Hon. Alphonse Fournier (for the Minister of Transport) moved: the first reading of Bill No. 220 (from the Senate), to amend the Government Employees Compensation Act, 1947.


[Stage Direction]
Motion agreed to.


[Stage Direction]
On the orders of the day:
Mr. Stanley Knowles (Winnipeg North Centre):: Can the Minister of Public Works or the Prime Minister give an answer now as to whether we sit tonight?


Right Hon. L. S. St. Laurent (Prime Minister):: Mr. Speaker, I do not think the answer to this question can be given by the Minister of Public Works or by the Prime Minister. A resolution having to do with sittings on Saturdays was adopted by this house, and to depart from the terms of that resolution would require the unanimous consent of the house, not merely the consent of the Minister of Public Works or of the Prime Minister.
I think hon. members feel that a great deal of public business has been transacted this week, in a manner that did not slight the consideration it was proper to give to that business. I am sure that hon. members are anxious to have due consideration given i.o the remaining public business, and that it be dealt with as expeditiously as may be consistent with their responsibility to see that it receives proper consideration.
I imagine that it will be much easier this afternoon for hon. members to give unanimous consent to adjournment at six o'clock if they feel at that time that the progress made during the week has been continued during the day. I suggest that a request for unanimous consent be made at six o'clock, and I hope that what will have been done in the course of the day will make everybody feel it is appropriate to give that unanimous consent.


Mr. George A. Drew (Leader of the Opposition):: Mr. Speaker, I am not going to press the point, but I suggest it is desirable that hon. members know in advance if the house is not to sit this evening, so that they may make their arrangements accordingly. It should be remembered that members of parliament are human beings, with human associations and contacts. If we are not to sit tonight, a resolution to that effect could be adopted unanimously this morning. If we are to sit, it would be helpful to hon. members to know it now.


Stanley Howard Knowles: Would it not also be fair to the staff that they should know now or not later than three o'clock whether or not we are to sit tonight?


George Alexander Drew: If there is not to be a sitting tonight, the decision, if it is to be helpful to hon. members, should be made known this morning. Otherwise we might just as well sit tonight. The motion might well be put now.


Mr. Maclnnis:: I think we had better take the statement of the Prime Minister at its face value. I suggest to the leader of the opposition that he make his plans to go to a show tonight.



INQUIRY FOR RETURN


[Stage Direction]
On the orders of the day:
Mr. Howard C. Green (Vancouver-Quadra):: I should like to ask the Secretary of State when I may expect a return to an order standing in my name which was passed on November 21, 1949.


Hon. F. G. Bradley (Secretary of Slate):: have made inquiries about the matter, and there is some delay in obtaining the information because of the absence of one of the

Inquiries of the Ministry officials of the department in connection with his duties. We shall have it for the hon. member as soon as possible.



DOUKHOBORS


[Stage Direction]
On the orders of the day:
Stuart Sinclair Garson: Mr. Speaker, I think it is desirable I should make a statement with regard to the latest developments in the matter of the Doukho-bor situation in British Columbia.
Following a further blasting of a section of the Canadian Pacific railway in west Kootenay, British Columbia, Commissioner S. T. Wood, of the Royal Canadian Mounted Police, received a telegram from the Royal Canadian Mounted Police officer in command in British Columbia relaying a request from Commissioner Shirras, British Columbia provincial police, for ten experienced investigators to proceed at once to assist his force in west Kootenay, as he considered the situation serious, and C.P.R. train crews have threatened to discontinue operating trains unless police protection is provided. Furthermore, a request from the provincial government for assistance to this force was to be made officially to me as Minister of Justice within the next day or so.
Commissioner Wood thereupon took the responsibility, in which he has my complete approval, of ordering ten experienced investigators from the prairies and from the Royal Canadian Mounted Police personnel in British Columbia to report without delay to the provincial commissioner at Nelson, B.C. The copy of the instructions of Commissioner Wood to the officer commanding in the Royal Canadian Mounted Police office in Vancouver is as follows:
Officer commanding, R.C.M.P., Vancouver, B.C.- Retel second instant, officers commanding Edmonton. Regina and Winnipeg have been instructed to detail three experienced detachment men respectively to proceed at once to Nelson to operate under the commissioner of the British Columbia police in connection with Doukhobor depredations. They will advise you time of arrival. Please expedite official request from the British Columbia government to our minister for assistance of this force on the understanding that the British Columbia government will pay all expenses. You are to detail one experienced investigator to report to Nelson to British Columbia police.
S. T. Wood
The significance of the stipulation that the British Columbia government should pay all expenses is not so much the amount of the money involved as the continued assertion upon our part of a disclaimer of responsibility. We have neither legal authority nor legal responsibility, and we wish, while

extending the fullest possible co-operation, to have it remain clear that we are assuming no responsibility in a situation in which we have not been involved, even in the matter of extending co-operation, unless it has assumed critical proportions.



OVERSEAS TELECOMMUNICATION ACT


Alphonse Fournier: the second reading of and concurrence in amendments made by the Senate to Bill No. 12, respecting the Overseas Telecommunication Corporation.
He said: Mr. Speaker, the Senate has passed Bill No. 12 with minor amendments which are purely drafting changes designed to improve the form of the bill. There is an amendment to section 3, subsection 6, substituting "board of directors" for "directors". An amendment to section 3, subsection 7, simply deletes "solemnly and sincerely" from the form of oath mentioned therein. An amendment to section 8, subsection 1(a), inserts the words "any or" before "all", in the interests of clarity. An amendment to section 14 rearranges and renumbers the subsections in the interests of conciseness. An amendment to section 18 substitutes the words "the corporation" for the word "it", in the interests of clarity.


[Stage Direction]
Motion agreed to, amendments read the second time and concurred in.


Hon. J. J. McCann (for the Minister of Finance) moved: the second reading of Bill No. 215, to amend the Dominion-Provincial Tax Rental Agreements Act, 1947.


[Stage Direction]
Motion agreed to, bill read the second time, considered in committee, reported, read the third time and passed.


Hon. Colin Gibson (Minister of Mines and Resources) moved: the second reading of Bill No. 219, to amend the Emergency Gold Mining Assistance Act.


Mr. W. Ross Thatcher (Moose Jaw):: Mr. Speaker, I certainly do not set myself up

as an expert on gold, but there are one or two aspects of this bill on which I wish to comment briefly.
In effect the bill proposes to continue the subsidizing by the federal treasury of certain gold mines. When the original act was introduced some months ago it received widespread support in the house. In some cases the support was reluctant, but most members agreed with it. The purpose of the original measure was definitely and clearly set out. I should like to quote from the report of the administration of the Emergency Gold Mining Assistance Act, published by the Department of Mines and Resources. On page 7 I find the following:
It was designed primarily to assist the high-cost or marginal mines to continue in operation . . .
I ask hon. members to note that it was designed to assist high-cost or marginal mines. I remember the Minister of Finance (Mr. Abbott) speaking in the debate along the same lines. At page 2702 of Hansard of April 6, 1948, he said:
It-
The bonus.
-should enable many mines to avoid closing down . . .
That statement was certainly clear, and the objective of the legislation was specifically stated to be the subsidizing of low-grade mines.
I must say that with that objective I agreed in principle. I thought it was sound then, and I think it is sound today, for the government to give such aid to low-grade mines. But while we are looking at these amendments to the act I think we should analyse the effectiveness of the legislation to date. Have only low-grade mines been subsidized? On the surface at least it would appear that others received assistance also.	From April of
last year to August 31 of this year the taxpayers of Canada have subsidized the gold mines to the extent of about $12,500,000. A fair percentage of this money went to marginal mines, and with that no one will quarrel. United States dollars have been earned; men have been employed; communities have been helped. But at the same time, under this legislation several million dollars apparently have gone to mines that are anything but low-grade. Subsidies have been granted to companies that are among the wealthiest in this country. We find that money has been paid to some corporations which had substantial profits in the past year, and which have paid out dividends in some cases amounting to millions of dollars. When this legislation was passed originally I do not think most hon. members had any idea that this would happen; certainly I did not.
Gold Mining
To give one or two illustrations, take McIntyre Porcupine Mines. On March 31 this company had net current assets of more than $21,600,000. In the last fiscal year it earned net profits of $2,425,000 and paid dividends of $2,405,000; yet the federal treasury gave it a subsidy of $386,000. In view of the robust financial position of this company, I ask the minister how he can justify the payment of such a huge subsidy from the federal treasury.
Then take Hollinger Consolidated Gold Mines. Its assets in the last fiscal year were $7,775,000; its net current assets were almost $2,800,000; it had a net profit of $1,110,000 and paid dividends of $1,109,000; yet the government subsidized it to the extent of $886,000. Dome Mines last year earned over $2,114,000, paid dividends of $1,947,000, had total assests of $16,735,000; yet the taxpayers of Canada subsidized it to the extent of $257,000. Teck-Hughes Gold Mines had net current assets of $1,232,000 and total assets of $9,000,000. Last year it paid out in dividends to its shareholders $721,000; yet it received subsidies amounting to $100,000.
I could go on and give numerous other examples. The point I wish to make is that under this legislation a good many needy gold mines have been assisted, but at the same time some extremely wealthy companies have been given subsidies which so far as I can see were not justified by their financial position. A good many companies which by no stretch of the imagination could be said to have needed that assistance were given it.
On September 19 of this year the government devalued the Canadian dollar. In effect that meant the price of gold went up from $35 to $38.50. Surely that was a final reason why the government should have immediately discontinued subsidies to these wealthy corporations. Certainly the companies themselves have been amazed at the generosity of the government, because according to newspaper reports they thought that when the dollar was devalued the assistance would either be decreased or cut out altogether. I believe they treat this subsidy as a sort of windfall, and are genuinely surprised that it has been continued.
My point is that special assistance to marginal gold mines in Canada is one thing, but assistance to wealthy corporations is quite another. I believe it should be discontinued. I find this policy of subsidizing these wealthy companies all the stranger in view of the past attitude of the government toward ordinary subsidies. I have sat in this house for some years now and have heard most of the cabinet ministers, not once but a

Gold Mining
dozen times, say they are opposed to the principle of peacetime subsidies. For instance, as far back as April 21, 1947 the former minister of finance, Mr. Ilsley, said, as reported at page 2252 of Hansard:
I think the general view of the government is that we should withdraw from subsidies as far as possible and as soon as possible . . .
There was the case of the milk subsidy, and we have seen the Prime Minister (Mr. St. Laurent) and others consistently oppose housing subsidies. Time and again the government has opposed subsidies which might have brought down the cost of living. Therefore I find it strange that the bill now before us should propose to subsidize companies which, in my opinion at least, do not seem to need that assistance. I do not see any consistency in this kind of policy. I know some of my Liberal friends would resent it, and perhaps with justification, if I were to say this legislation was discriminatory, or that it was legislation for a privileged group; but if the bill passes in its present form, that is exactly what it will be.
I repeat that so far as this group is concerned we do not oppose subsidies to marginal mines. However, we likewise believe that subsidies to other than marginal mines should be immediately discontinued.


Mr. J. A. Bradeile (Cochrane):: Mr. Speaker, I cannot let the statements just made by the hon. member for Moose Jaw (Mr. Thatcher) pass without saying a few words on this subject. It seems strange to me that the party to which the hon. member belongs should be at times unfair and antagonistic to gold mining. They do not seem to realize what it means to our whole Canadian economy, not only to northern Canada but to every province of the confederation. The gold mining industry of this country does not want any handout. The hon. member apparently has forgotten that the prices of all other metals, precious or otherwise, have gone up since the beginning of the war. He will not deny that the prices of nickel, copper, steel, lead, zinc, aluminum and all other metals have increased greatly, while the price of gold has been fixed by the United States treasury at $35 an ounce and has not been changed for a good many years. Apparently the hon. member has not read the explanatory note to this bill, from which I should like to read a few lines:
The Emergency Gold Mining Assistance Act provides for payments to gold mines to assist them in defraying part of their post-war increase in cost of production during the designated years 1948, 1949 and 1950.
It is true that this legislation has helped the marginal mines, but it was also meant to help gold mining in general. Coming as

I do from northern Ontario, I would not be in favour of subsidizing mines where the cost of production is too high, or in which the ore would not be exploitable or the ores of too low a grade. At the same time the hon. member cannot deny that the cost of producing gold, the same as any other metal, has increased by at least seventy-five per cent. The cost of labour has increased; the cost of material has gone up, but the price of gold has remained static. If today the mines were receiving $10 an ounce more for their gold, there would be no need for a measure of this kind.
I remember when the Canadian dollar was brought to par a few years ago. I received many telephone calls from companies in my district, for instance from the Spruce Falls newsprint mill at Kapuskasing, the Abitibi Pulp and Paper Company, and others, telling me that they were going to be hurt by that action. I said they would not, because the price of newsprint, of sulphite, of pulpwood and so on was flexible and was not fixed, while the price of gold was in an entirely different position.
I want to compliment this administration because they have understood the situation in connection with gold mining. Personally I am against subsidies, because I believe they camouflage both the real cost of living and the cost of production. But you could not call this a subsidy, because this situation has to be dealt with, and in a different manner from any other. The hon. member must realize that as far as gold mines are concerned the price of their product is strictly controlled, while the prices of all other products, such as milk, butter, steel, manufactured goods, or whatever you wish to name, have increased tremendously in the last few years.
Surely an industry that has given so much to the whole of our national life should be able to obtain some consideration from the government without unfair criticism. My hon. friend mentioned the dividends paid by the Hollinger mine. Does he realize that Hollinger is a low-grade mine? It is only because of the efficient management and working of this mine that they are able to pay these dividends. Has the hon. member taken the trouble to analyse what he calls the enormous profit of the Hollinger mine? Does he know the number of people who hold shares in this mine, and the heavy capital investments? Does he know that they are not paid a high rate of interest but a reasonable return on their investment?
The same thing applies to the McIntyre mine, which is only a few yards away from the Hollinger mine. It has higher grade ores

than the average mine, therefore the dividends have been a little higher than those paid by Hollinger. Why take a national forum such as this to attempt to create the impression that this important industry has been exploiting the federal treasury? I do not believe that that is fair. It is not my duty to defend the gold mining industry, because it needs no defenders. As a member who has represented for nearly a quarter of a century this great section of the country called the Porcupine, I know whereof I speak, and I am aware of the great benefits that accrued from this industry to every section of our population.
I remember when the McIntyre mine had to buy c.o.d. their lumber and all other required material. As in any other mining venture, they had to take a chance and invest their money, and believe me, it has not always been a winning gamble. If they are receiving dividends today, I do not see why these sinister motives should be imputed to them. I am speaking about these things feelingly, because I believe all our people should have justice from the central administration. I am astonished to hear a statement of the kind made by a practical member such as the member for Moose Jaw (Mr. Thatcher). A few years ago the same statement was repeated by a member in that group; he said that the gold mining industry was a sheltered industry. The gold mining industry is not sheltered, and does not want government protection; it only wants fair play.
I believe the passing of this bill is only fair play to the gold mining industry which means so much to the whole of our national economy. Its maintenance and future expansion will be important factors in Canada's prosperity.


Mr. Daniel Mclvor (Fort William):: Mr. Speaker, I heartily support the hon. member for Cochrane (Mr. Bradette). He has firsthand information, and knows what he is talking about. During the depression there was no source of employment which could be compared with the gold mines in the north. I thank the hon. member for his statement.


Mr. H. A. Hosking (Wellington South):: Mr. Speaker, as one who spent ten years underground at these northern Ontario gold mines, I should like to ask the hon. member for Moose Jaw (Mr. Thatcher) if he has any idea how long it takes before a mine is in a position to pay dividends. It is impossible for a mine to sink a shaft, drive drifts, put in the raises, or employ any number of men before a period of from three to five years. As this subsidy is given to encourage development, I should like to point out to the member from
Gold Mining
the west that this is commendable legislation. It will provide employment during the next three or four years, when no doubt employment will be scarce. It will have a beneficial effect on our national economy, and I think it would be a shortsighted policy if we were to do anything that would curtail this development and thus lower employment in this country.
We all know that during the depressed years the gold mines were the greatest source of employment. For any party to suggest that we should discontinue legislation which would create jobs in from three to five years is not sensible.


Wilbert Ross Thatcher: I am sure the hon. member did not hear me correctly. I did not suggest anything of the kind. I think this legislation for marginal mines should be kept on the statute book, but I do not believe-


Some hon. Members:: Order.


Mr. Speaker:: The hon. member for Moose Jaw should be allowed to complete his statement.


Wilbert Ross Thatcher: The hon. member suggested that I wanted this legislation discontinued. That is not so. So far as the marginal mines are concerned, this group believes it is excellent legislation. The only thing to which we are objecting is that this aid is given to high-profit mines.


Mr. Maybank:: Without closing the debate, I should like to point out that these amendments are made particularly to take care of clearly marginal cases which had not been dealt with in the first act; We believed it was the intention of the house to take care of those mines, and that is the purpose of these amendments.


Mr. James Sinclair (Coast-Capilano):: I
should like to say a few words on this measure, arising out of the remarks made by the member for Moose Jaw (Mr. Thatcher). I am afraid the misconception has arisen because of the reference to marginal mines rather than to marginal ore. The real intent of the bill is to encourage the production of gold in Canada. No matter how economists may rank the place of gold on the world exchange, there can be no doubt of the great value of high gold production to Canada in our foreign exchange problem.
There are two ways in which we can expand our gold production:	by giving
incentive to the small mines, giving them financial backing which will enable them to do extra exploration work, or-a much quicker way-by giving assistance which will encourage the larger mines to mine marginal ore. I am referring to ore which these mines

Gold Mining
have blocked out underground, but the marketing of which at a profit is doubtful. That is one of the two functions of this gold mining assistance act. While these are called subsidies, they would be much better regarded as incentives towards production. They act as an incentive to the small mines to explore and find new ore bodies, and to the large mines to bring to the surface the marginal ores which they would otherwise by-pass and leave below ground for all time. The large mines would take out the ore on which they could make a profit, and by-pass these large blocks of low-grade ore.
The success of this policy is shown in a report which no doubt the hon. member has seen. A subsidy was paid on the production over two-thirds of the base year. Last year it was paid on ninety per cent of the gold production in Canada-that is, from the primary producers. If there had been no increase in production over the base year, that subsidy would have been paid only on thirty-three per cent of the gold produced in Canada.
The whole of the hard rock mining industry has welcomed this act; and even the base metals mines, although they do not share in the subsidy, have welcomed it. They say that anything which encourages the gold mining industry encourages all hard rock mining, because gold has always been the lure for prospectors.
I can speak with some measure of authority, because a month ago I attended a meeting of the Canadian Institute of Mining and Metallurgy, and there was widespread appreciation of the Emergency Gold Mining Assistance Act and what it had accomplished in its primary purpose of increasing gold production in Canada.


Mr. Clarence Gillis (Cape Breton South):: As I see it, the crux of this question is whether the government has a policy of subsidy for the gold mining industry alone, or whether the sentiments expressed by the parliamentary assistant express government policy as applied to all industries. The hon. member for Moose Jaw (Mr. Thatcher) made it quite clear that he was quite satisfied that the marginal mines or mines under development should be given assistance until production begins. The figures he put on the record, however, clearly indicate that a large percentage of the assistance has gone to corporations that did not need it.
My particular approach to this problem concerns the government policy of no subsidies. I believe the government has made its position in this regard quite clear. In 1945 a production subsidy of approximately
[Mr. Sinclair.)
$8 million per year was provided for the coal mining industry, and that also was an incentive bonus; it was for the purpose of increasing production. But in 1945 the then minister of finance, Mr. Ilsley, made it quiet clear that as far as the government was concerned they were through with that type of subsidy; it was no longer their policy. Early in 1946 when a subsidy of approximately $5 million was necessary to avoid upheaval in the mining industry in Nova Scotia and New Brunswick, and the Minister of Trade and Commerce and the Minister of Finance in this house were answering those of us who were arguing for that amount of subsidy in order to avoid a strike in the industry and enable both producer and operator to get back to a peacetime economy, they said: Oh, no; that is against government policy. The result was that these subsidies were withdrawn at that time and we in Nova Scotia went through a five months' strike in the industry which cost the communities in and around the coal mines millions of dollars, and they have not got over it yet.
I was surprised, therefore, when a few days ago a bill introduced by the Minister of Trade and Commerce was passed which changes the subsidy policy to one of loan with regard to the coal industry. They say: No subsidy, but we will lend you money to develop; you pay that money back at a certain rate of interest. Certain stipulations are also made in that bill to see that the money is spent in such and such a way. If "lend" is the policy of the government with regard to the coal mines, and many of them are submarginal, and if "lend" is their policy in equipping them for increasing their production, why is that not the policy with regard to gold mining? Why should we have one mining industry in Canada receiving mother's allowance and another mining industry-which in my opinion is more essential to the economy of this country- denied that subsidy arrangement and put on a straight loan arrangement?
I am not arguing against that loan arrangement, because when people borrow money under a certain contract they will perhaps use it more carefully and get the greatest amount of good out of it. But you cannot have one policy for the gold mines in northern Ontario and another for the coal mines in eastern and western Canada. If there is any industry that would justify subsidies, it is the coal mining industry. You are not importing from the United States $200 million worth of gold a year, but you are importing that amount of coal each year

from the United States to Canada. If we in this house were alive to our own interests we should be creating incentive bonuses for the purpose of developing our coal industry in order to avoid the terrific drain of United States dollars from this country.
I have all the sympathy in the world for the hon. member (Mr. Hosking) who said he worked underground. But I want to tell him this: I do not think any of this money will benefit the man who works underground in these gold mines in central Canada.


Joseph-Arthur Bradette: Dont be too sure about that.


Clarence Gillis: I have been through that section of the country. It is the only industry in this country that has not a union contract with the members who work underground. Even the rudiments of democracy that are applied in every other basic industry in this country have been refused by the gold mining operators of central Canada. They are not concerned about the men who work underground.


Joseph-Arthur Bradette: On a point of order,
Mr. Speaker, the operators of the mines are concerned about the workers who work in the gold mines in Canada.


Clarence Gillis: The hon. member for Cochrane (Mr. Bradette) speaks with some knowledge of the gold mining industry. I wish he would give a little of it to the house once in a while rather than a straight relief plea for an industry that does not need it.
My objection is this, Mr. Speaker: If this government has a policy of no subsidies for any other industry in the country, it cannot justify the policy of subsidies for the gold mining industry.


James Sinclair: A frozen price.


Clarence Gillis: The wealthy ones.


Mr. John Hunter (Parkdale):: I should like, Mr. Speaker, to answer in part the argument we have just heard from the hon. member for Cape Breton South (Mr. Gillis). It appears to me that he has completely ignored an important point made by the hon. member for Cochrane, namely, that the price of gold has remained static. In the gold mining industry you have a special case in which, for special reasons, the government have determined that the price of the product will remain static; and in a world of increasing costs, they have decided to give assistance to it in order that it can produce the product that it is considered desirable for the country to have. As long as the hon. member for Cape Breton South ignores this point he will never be able to give a clear and fair presentation of the case to this house.
Gold Mining
As to the coal mines and the importation of coal from the United States, surely the hon. member for Cape Breton South is aware of the fact that a large amount of the coal which is imported from the United States is anthracite, whereas the coal produced in his own constituency and thereabouts is bituminous, and in any event we are not in a position to compete with that imported coal.
I make these two points, Mr. Speaker, because I think that the hon. member for Cape Breton South, not deliberately but perhaps inadvertently, did not give a clear and fair presentation of the case to this house.


Mr. J. W. Noseworthy (York South):: Mr. Speaker, while I possibly cannot speak with as much authority on the subject as can the hon. member for Cochrane (Mr. Bradette), I do know something about gold mining. I worked in the gold mines for a considerable number of years. I have had occasion to visit every nook and corner of the gold mines of northern Ontario. I am fairly well acquainted with the management and the representatives of the workers in those mines.
Like the hon. member for Moose Jaw (Mr. Thatcher), I want to make it clear first of all that personally I am not opposed to this bill. We are not opposed to assisting mines whose ore is of such a low grade that without some government assistance it could possibly not be mined at a profit. I think we are as appreciative as is the hon. member for Cochrane of the importance of the gold mining industry to northern Ontario and to the towns and municipalities of that part of the province. I cannot find my heart bleeding over the need of Bollinger, Teck-Hughes, McIntyre and some of these other mines which consistently over the years have been able to pay dividends that total up to about $2 million a year, and often more. I feel that the shareholders of those mines have not done too badly for themselves, either in point of dividends or in point of the increased value of their stock. I can well recall when the stock of some of these mines which is selling at $20 a share today could be bought for less than a dollar. The shareholders who have been fortunate enough to hold the majority of the shares in these mines have not done too badly. I would say that by and large they have done much better than either the men who work underground in the mines or the municipalities in which the mines are situated.
If I were asking for a subsidy for the gold mining country, in addition to that which is paid to mines that actually need it in order to put them on a paying basis, it would not be for Hollinger, McIntyre or Teck-Hughes; it would be for the towns of Timmins and Kirkland Lake and the townships of Tisdale and

Gold Mining
Teck. Over the years these townships and municipalities have contributed the services that the mines themselves would have had to provide if the townships did not provide them. These mines have been able to pay dividends to their shareholders because the taxpayers of the municipalities-


Henry Alfred Hosking: May I ask a question?


Joseph William Noseworthy: The hon. member may make a speech after I am through. The taxpayers of these municipalities have been providing educational facilities, fire protection, water, and all the facilities that go with municipal life, which these mines themselves would have to provide were they situated in unorganized territory. Over the years the government has profited by the fact that the municipalities were providing these services. The government has been taxing these mines without permitting taxes paid to the municipalities to be deducted before their federal taxes were paid. Were these mines situated in unorganized territory they would have been able to deduct every cent of taxes paid for the provision of the services before paying dominion government taxes. I feel, Mr. Speaker, that that is the place where subsidies for the gold mining industry are required, and not for the wealthy mine. Subsidies are required in the municipalities that are providing the services which help to make profits for these mines possible.


Mr. Armand Dumas (Villeneuve):: I want to say a few words on this bill, and I would ask hon. members to look at it in this way. The government did a good stroke of business when they enacted the gold mining assistance act. I shall cite only three examples-Dome Mines Limited, Hollinger Consolidated Gold Mines Limited, and McIntyre Porcupine Mines Limited. In the case of Dome Mines Limited the government paid assistance to the amount of $1.27 per ounce. In the case of Hollinger they paid assistance to the amount of $2.37 an ounce. In the case of McIntyre Porcupine Mines they paid assistance amounting to $1.93 an ounce. The gold which was produced by these different mines was worth $35 an ounce. Therefore for each ounce of gold the government paid these mines respectively $36.27, $37.37 and $36.93. I think the government made a very good deal all through, and by helping the other mines which were producing gold at very high cost they helped also the people in the towns which were developed by these mines.
I feel sorry that the legislation which we are studying today is not going further. It should be extended for three years, to encourage the development of new gold mines;

because we know that by encouraging prospecting for gold mines we also encourage prospecting for base metals, and base metals are certainly very important.


Mr. Victor Quelch (Acadia):: I have always deplored the enormous waste of energy represented by the production of gold. It is a commodity that rarely performs any useful service, because even in the early days there was far more gold than was needed to meet commercial needs. On the other hand, I do realize that so long as there are people and nations who actually desire to accept gold, it is definitely to the advantage of Canada to produce it so that we can export it and get goods and services in return.
While it is argued that gold mines are getting a special privilege in receiving a subsidy, we must not lose sight of the fact that the price of gold today is being held down at a much lower figure than would be the case if it were turned free. That is being done, of course, under the international monetary fund. It certainly would be to the advantage of the sterling area today to have gold turned free. It would make it possible for the sterling area to bring about a far better balance in international payments if the price of gold were allowed to rise to the price that it would reach if it were released from the international monetary fund. I suppose the members of the international monetary fund could accomplish that if they exerted a certain amount of pressure. It is easy to realize why the United States opposes such action; it is because the United States is the main purchaser of gold today. But I do believe that so long as the price of gold is held down under the international monetary fund the gold mines are justified in receiving a subsidy, because gold mining is one of the few industries today that has a ceiling on the price of the commodity it produces. That ceiling was set many years ago. Since that time the price of everything else has gone up. The price of gold has been held down. For this reason I think there is a justification for the subsidy.


Mr. A. L. Smith (Calgary West):: I am going to take only a moment or two because in a row of this kind I think it is often wise to have an outside referee, and that is the position I am going to try to assume.
I think we were all in favour of subsidies to marginal ore rather than marginal mines, as suggested by the hon. member for Coast-Capilano (Mr. Sinclair). If this money is going to the big mines or the small mines for the produclion of marginal ore which

might otherwise be by-passed, the expenditure is completely justified. I am not concerned about the question whether somebody made a million dollars out of a certain mine. I am not concerned about the fact that stock was once $1 and is now $20. We all had the opportunity to buy it. Nobody prevented us from doing that. If it started at $1 and it is now at $20 it was because of the effort put into it by the people who owned it, and I am all in favour of that, irrespective of what the increase might have been. But surely the government that brings in these amendments, and that has been responsible for the operation of these subsidies, knows that they have been going to the development of marginal ore. If that is not so, then the hon. member for Moose Jaw (Mr. Thatcher) is right. But remember, even if they make a million dollars, or whatever the amount is, they make it out of mining gold. Because they are making money no one has the right to ask them to work some property on which they will lose money. To my mind the thing is just as simple as that.
Being an amateur in gold mining I assume that these bonuses have been given to Hollin-ger and the big shots for the production of gold. I assume they have been given for the production of more gold in this country, which we all admit we need, on the same basis as the subsidies which have been going to the smaller mines. If my assumption is correct, then there is no argument among any of us on this particular problem.


Mr. G. M. Murray (Cariboo):: Mr. Speaker, I should like to point out the value of the gold mining industry in relation to agriculture. Pioneers came into the Cariboo country and opened up a number of very profitable mines. In due course some of the mines were depleted, but these people remained to carry on dairying and mixed farming. Today they are shipping from the southern part of that area certified seed potatoes all over the world, and they also have a lively dairy industry. There are prosperous lode and placer mines there today which provide a home market for the farmer.
There is one other way in which the gold mining industry can be assisted. I refer to the building of roads and trails into the mines and a revival of the dominion-provincial arrangements of some years ago by which this was done.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Dion in the chair.
Sections 1 to 3 inclusive agreed to.
Bill reported.
Customs Act
Mr. Mitchell (for Mr. Gibson, Hamilton West) moved: the third reading of the bill.


Stanley Howard Knowles: On division.
Motion agreed to and bill read the third time and passed.



CUSTOMS ACT AMENDMENT


James Joseph McCann: the second reading of Bill No. 200, to amend the Customs Act.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Dion in the chair.
On section 1-Governor in council may order that import duties he disregarded.
Mr. Macdonnell (Greenwood):: Mr. Chairman, this section is in general terms, but as it is short I shall read it:
(5) The governor in council may order that import duties of a country of export shall be disregarded, in whole or in part, in estimating the value for duty of goods of any kind imported into Canada from a country specified in the order.
During the Senate debate on this bill Senator Hugessen said:
I am advised that West Indies rum and Irish whiskey are imported in large bulk quantities by England, that they are aged and bottled in England, and thereafter are exported to Canada.
Senator Hugessen went on to explain that the same was true of other wines and sherries, and he intimated that the bill was intended to deal with that particular situation. At the end of his explanation Senator Hugessen said that the class of commodity sought to be covered by this legislation might vary from time to time. I am advised that the reason for this change is mainly, if not exclusively, that given by Senator Hugessen. I am not suggesting that the legislation can be amended at this late date, but I am wondering if it would not be possible for the minister to indicate that that is what is intended, that the section will be used for that purpose.
It seems to me to be most undesirable to have a section in a statute as wide as this. After all, it will throw considerable uncertainty into business. If in fact it is intended to cover this one case I hope the minister may see fit to give a firm assurance that that is what is intended.


James Joseph McCann: Mr. Chairman, I feel that I can give the assurance that what is indicated by the hon. member for Greenwood is the purpose for which the section is intended. Perhaps I could put on the record the main

Customs Act
purposes of this bill, in order that there may be a clearer understanding when we are discussing other sections.
The purpose of section 1 is to make it possible to disregard, in the determination of value for Canadian customs duty, all or part of the import duties of the country of export. At present the inclusion of these figures in the calculation of the value for duty is said to be not only unfair but also a deterrent to the export and sale to Canada of certain British goods at a time when trade between Britain and Canada is so vital to both countries and when international agreements are being drawn up to remove unreasonable administrative barriers to international trade.
In determining the value for duty of domestic products of Great Britain entering Canada, the Canadian customs, by law, disregards the internal excise taxes of the exporting country; but should the goods exported from Britain not be of domestic origin, Canadian customs have to include in its determination of value for duty the amount of import duties applicable in Great Britain, even though such duties had never been applied to the goods.
The explanation is that a lot of these goods come from other countries to Great Britain, are put in bond and actually do not pay these taxes, which for the most part are luxury taxes. They are then processed and shipped to this country. According to the act we do not regard those taxes that are put on there, but we have to take into account for customs purposes, when the goods come into Canada, not only the price of the goods but the duties that are levied in Great Britain.
There is an obvious anomaly here between the excise taxes and the customs duties which is most striking when the import duties and internal excise tax of the exporting country bear a direct relationship, and equal or nearly equal each other. The ultimate result of the present method of determining value for duty is to cause an increase in the figure on which the Canadian sales tax-I ask hon. members to note this-is applied; for, as is generally known, the sales tax on imported goods is based on the value for duty as established for customs purposes. The application of the tax on this basis obviously increases the price to the customer.
The proposed amendment is merely an extension of the principle in the law by which excise taxes of the exporting country are disregarded in determining value for duty in Canada. Import duties of the exporting country could, under this section, be

treated in a similar manner when such action is deemed advisable by the governor in council. Thus any anomaly or unfairness would be removed and the goods enabled to be entered and marketed at competitive prices.
I think I might also deal at the present time with the principles of the other sections of the bill. Sections 2 and 3 provide for the repeal of certain sections of the act which still contain titles of offices which have been abolished, and for the substitution for these sections of a more uniform and standardized wording in line with modern drafting principles. These proposed amendments carry no substantive changes of law. It is only a tidying up process.
With reference to the fourth section of the bill, it is an amendment which is intended to make an appeal procedure available to the innocent owner of a vehicle or vessel seized and confiscated under the Customs Act, which at the present time disregards entirely the question of ownership in such cases. This provision is similar to section 169(a) of the Excise Tax Act, which was enacted in 1934 in order to enable the innocent owner, mortgagee or lien holder to appeal to the courts to protect his interests or equity in the vehicle seized. I think it will be seen that the present law rather creates an injustice to the innocent owner of a seized automobile which has been used for smuggling purposes. Perhaps some acceptance corporation or other person has a lien against the vehicle. When it is seized it becomes forfeited and is sold, and the person who has a lien, or who has not yet been paid for the vehicle which has been confiscated, suffers the entire loss of his equity in it. The purpose of the amendment is to give that person or corporation an opportunity to appeal to the courts to protect his lien.


James MacKerras Macdonnell: I understand the minister was good enough to say he can give me the assurance I asked for, and I am grateful.


Wilbert Ross Thatcher: Can the minister say whether or not the United States and British governments intend to take similar action in respect to our goods? I understand that when we ship goods to the United States we run into many difficulties of this kind. Have any representations been made to the United States asking for similar legislation?


James Joseph McCann: Not that I know of. The question what they regard as the invoice value for duty purposes is not a matter of concern to us. We do not import as much goods into Canada for reprocessing and resale, and bearing heavy excise taxes, luxury taxes and customs duties, as we attempt to

take care of in this particular instance so far as Great Britain is concerned. In Great Britain, for instance, they import liquors. They also import silk sheets or silk squares from Italy. Of course that is a luxury item, and there are high luxury taxes on it in Great Britain. Then they carry out further processing of the goods by printing, colouring or placing some sort of figures on them, and they are re-exported to Canada.
Another example is a line of cosmetics. If we were to add the taxes and customs duties they impose in order to collect revenue on the basis of the imported value, and take that as the invoice value on which customs duties would be collected in this country, we would be doing something unfair to them. We would not be promoting our general policy, namely, the encouragement of trade between Great Britain and Canada. Our own domestic manufacturers will not be affected in the slightest so far as competition in these articles is concerned.


[Stage Direction]
Section agreed to.
Sections 2 to 4 inclusive agreed to.
Title agreed to.
Bill reported.
Mr. Speaker:: When shall the said bill be read the third time?


Some hon. Members:: Now.


Stanley Howard Knowles: By unanimous consent.


James Joseph McCann: the third reading of the bill.
Motion agreed to and bill read the third time and passed.

The house in committee of supply, Mr. Beaudoin in the chair.
DEPARTMENT OF LABOUR 142. Departmental administration, $735,337.


Arthur Leroy Smith: I desire to speak briefly, and largely about one aspect of the labour question which I think will develop as I proceed.
It is very late in the history of the world to review industrial relations between capital-and I still like that word-and labour. I begin by reaffirming a belief, which I have held for many years, and which I have proved by my actions, in the unionization or organization of labour in industry. I arrive at that conclusion from some knowledge of the question, and it seems to me also from sheer reason.
We all know that the organization of labour into unions has done much to improve
Supply-Labour
their position, in Canada as well as in other countries. There was a time when labour was regarded simply as an intake product in whatever industry labour had to be used. For a long time industry fought the organization of labour. I am happy to say that in Canada that day has long since gone. I think industry has learned that it is better off when labour is so organized. There are still a few who endeavour, as we heard this morning, to stop the organization of labour in various plants. Fortunately they are few in this day and generation. I frankly admit that errors have been made in union policy, but the general good that has come to the community through such organizations far outweighs any mistakes that were made in times gone by.
We may compliment ourselves that in this country today we have practically no strikes, and very little unrest in the ranks of labour. In discussing the estimates that are before us we shall wish to know a number of things which I have no intention of discussing now: but we might remember that the taxpayers of this country are paying a tremendous sum of money in this connection. This year it is $49,629,156, an increase of $806,567 over last year; but perhaps the explanations may wait until we are considering the estimates item by item.
I wish also to pay a sincere compliment to organized labour in Canada on what it has done with respect to communism. Labour has purged itself much better than it could be done by any law passed by this or any other government. The men who led that battle and who received much abuse, some of it physical, in reaching that great objective, are worthy of the highest commendation this house can give them.
I should like also to try to destroy the fiction which is in the minds of many people in this country, as a result of which communism comes to their thoughts whenever labour is mentioned. It is true that labour provides a field in which that vile thing might grow; but let us not think for a moment that labour itself is the chief source of communists. It is not. The chief source of communists, I am sorry to say, is among well-educated people, many of them in our institutions of learning, people who should know much better. I am anxious to go on record definitely as saying that while progress was made in a fruitful field-and we all know the reasons for that, highly uninformed as some of these persons are-the leadership had to come from somewhere else; and it came from well-educated people in this country rather than from labour itself.

Supply-Labour
I am going to say nothing more, Mr. Chairman, except that we shall examine the estimates and be sceptical about an increase of almost a million dollars. Today the administration is not faced with the problems it had to deal with last year or the year before. I am happy to know that all of us in this house played some part in the creation of what might well be called a labour code in Canada. No one in this house can claim the entire credit for that, because, as the minister well knows, and as I credit him with having said, it was threshed out by a large group of people from this house who were aiming to do only one thing, that is, something which might be valuable in settling labour disputes and quieting unrest and disaffection among those of us who work with our hands for our living.
Now I have finished, and shall content myself with an examination of the estimates item by item.


Angus MacInnis: Mr. Chairman, I am very happy to be able to associate myself with almost everything the hon. member for Calgary West has said. As a matter of fact the first thought that came to my mind as the minister and the committee prepared to deal with these estimates was to congratulate the minister and the country on the very few labour disputes we have had during the present year. Compared with the difficult times the minister had in previous years I think he has had a very easy time of it lately. I hope he does not grow too fat and complacent on it, because if he has had an easy time there are others who have not had it quite so easy.
I was glad the hon. member for Calgary West mentioned the steps taken by labour bodies to lessen the influence of communists in their organizations, and I want to point out that this was no easy task to undertake. It meant that people had to be dealt with because of political opinions. It is not so very long ago that I heard responsible leaders in the labour movement say, and quite correctly at that time, that they would not interfere with a man's position in the labour movement because of his political opinions, no matter what those opinions might be. The sad thing about communists, however, is that we cannot deal with them as we would deal with ordinary people, because they do not act as ordinary people do. That is the position with which the labour movement was confronted, and it took a great deal of courage to handle it in the way it was handled.
The principal reason why I rise to speak on these estimates is that I have been receiving communications from various parts of Canada, and particularly from the

province of British Columbia. I am concerned about the unemployment situation this winter in my province, and what is to be done to meet it. I do not want it to be taken that I expect an unemployment situation of huge proportions, or on a scale such as we had during the depression years. I do not think we shall have that this winter, but unemployment worked a great hardship among the people of British Columbia last winter. The situation will be considerably worse this winter. I believe that will be so, not only in British Columbia but right across Canada.
Hon. members will have noted that I put questions on the order paper recently, which were answered on November 24, that is, less than two weeks ago. I asked as to the comparative number of persons receiving unemployment insurance in September and October of 1948 and 1949. While the number is not particularly large, the increase this year over last is, to me, alarming. I shall give the figures to hon. members so that they may have them in mind. In 1948 the number of persons receiving unemployment insurance totalled 44,000 in September, and
55.000	in October-I am giving the round figures. In 1949 the figures were 83,000 in September and 105,000 in October-that is, they had almost doubled.
This is only the beginning of the decline in employment. I have noticed that in other years unemployment reached its peak in February or March, and then began to drop until about August. I asked a similar question about new applications received for unemployment insurance in September and October of 1948 and 1949. We find the same situation. In September, 1948, there were
28.000 new applications; and in October,
38.000.	In September, 1949, there were
51.000,	and in October, 69,000. It seems to me that is a steep increase in the number of those making application for unemployment insurance. These figures do not include unemployed persons who are not covered by unemployment insurance, and a large number of the workers are not covered.
Representations were made to me by the British Columbia command of the Canadian Legion, and by the two central labour bodies in Vancouver. I have noticed that the Canadian Legion is running advertisements in the daily papers in Vancouver to draw attention to the situation. Will the minister say whether any preparations are being made to provide assistance to those unemployed employables who have exhausted their unemployment insurance benefits?
I should like to draw the attention of the committee to the fact that it will be harder

for the municipalities to look after the unemployed who are not receiving unemployment insurance, not only because of their numbers but because, in almost every city, the welfare agencies have found it more difficult to raise funds this year. Then again, we must remember that the unemployment insurance benefits are hardly sufficient-I said hardly sufficient, but I think I can make it much stronger than that. With the present prices, they are not sufficient to maintain a family. Assistance must come from some other source. I should be glad indeed if the minister could give some assurance to the committee that the government is planning for this need.
I believe the committee should be informed that less food is being purchased now than during 1947. The volume of food sales is lower than in 1947. I believe most of the members receive the Financial Times. In the copy which came to my desk yesterday, there is a chart showing the trend of food sales in 1947, 1948, and 1949. The sales in terms of dollars showed a steep increase-from an index figure of 90 to 120 since the beginning of 1947. In physical volume, however, the trend has been the other way. As a matter of fact the graph forms a triangle. Beginning at 90, one leg of the triangle goes up to 120 and the other goes down to almost 80. This indicates, Mr. Chairman, that the standard of living is going down, and that it is exceedingly important that this winter the government should, either by financial assistance or by providing work projects, ease the burden on persons who are unemployed. It should also ease the burden of the municipalities concerned, because they will not be able to handle the situation which will shortly confront them.


Clarence Gillis: Mr. Chairman, does the minister wish to answer the member for Vancouver East now, or does he wish to continue the discussions?


Humphrey Mitchell: It is generally understood that on the first item the members make their speeches. I am assuming that my hon. friend is ready to burst into song, so I shall sit and listen to him.


Clarence Gillis: Yes, it would be a shame if the minister got away too easily. As the hon. member for Vancouver East indicated, he has been getting away very easily this session. However, he has worked hard in the past.


Humphrey Mitchell: This is the result of the
good work.


Clarence Gillis: There are many things that could be said in a general way on the
Supply-Labour
minister's estimates, but I think a good deal of it can be reserved for the items as we come to them.
A great deal of progress has been made in the Department of Labour since I first came into the house, if one just stops and thinks back; and there is no harm in recalling exactly what has taken place in the last ten years. I know that the Department of Labour today is about a hundred per cent more efficient than it was when I came into this house in 1940.


Mr. Low:: See what you have done for it.


Clarence Gillis: It was not necessarily what I did, or what the minister did. He has been fortunate in getting into the department persons who know a great deal about the problem and are anxious to do something about it. The credit goes to no one person, but if any credit is due to an individual I would give it to the deputy minister. The deputy minister is the brains of any department. In addition he must have a flexible minister. Either the Minister of Labour is flexible or the deputy minister is a good diplomat, because he has been responsible for getting a good deal done. We on this side of the house of course have provoked their thoughts, pushed them along and perhaps given them some ideas.
When I came into the house in 1940 we had no Unemployment Insurance Act. Today we have such an act, and I think it is working reasonably well. It needs some jacking up here and there, but we shall reserve discussion on that matter until we come to the item dealing with it. The national employment offices across the country, which have been built up under the machinery in connection with the Unemployment Insurance Act, are a valuable asset if they are used for the purpose for which they were intended. During the war these offices had the right to direct employees and the right to file the requirements of the employers. During the war I think they did an excellent job in directing employees and assisting people to to go from one section of the country to another where there was employment in the particular trades in which they were interested. Since the war these offices have lost that function.
The employment offices have an excellent set-up. They have registered all unemployed who come under the act, and the trades or jobs for which they are fitted; but they no longer have the right to direct employees, and the employer is under no obligation to register his needs. From close contacts with those offices I know that they are working under a handicap in that respect. Many

Supply-Labour
unemployed are not registered because they do not come under the act, and they are wandering around in a circle, whereas if they could go to these offices and get direction, the officers would be performing a much more useful function.
In 1940 we had no national labour code. We now have a code which is national in scope. We have at least established the principle. But that act also, in my opinion, requires some amendment. We have not only suggested amendments but we have moved bills in the house. I think it requires an amendment to provide that the Canada labour board shall be in a position to enforce the act by initiating prosecution when an infraction of the act is committed. I am not going to argue that point again. I maintained it on two occasions in the house by moving a bill. I still hope for that amendment. I am reasonably sure that at some time in the future such a provision will be written into the national code.
I think the act also needs amendment in the matter of the voluntary revocable checkoff. I think that too will come in time. It is the minimum measure of union security that we can hope for in legislation. It would be of great benefit to the trade union movement across the country.
A definition of employees is necessary. There should be a broader definition than is there now; because an employer is in a position to put a fairly wide interpretation on the present definition of an employee who is eligible for membership in a union under the code. He can classify practically anyone in a plant or factory as being ineligible because he is engaged in a confidential capacity. I am not going to argue that point now either. The arguments are on the record. I know that the labour department know what they are. In time I think we may be able to cure the code in that respect.
The most important question that today faces the Department of Labour and the workers of this country generally is the matter of industrial pensions. The main emphasis across the country in every section of labour, be it organized or unorganized, is the necessity of security against the time when they are no longer able to provide for themselves. Last night in the committee on the estimates of the Department of National Health and Welfare, I listened to a discussion on industrial pensions and their relationship to that department. I did not take part in it because I felt that it was out of order. I believe, however, that it is the responsibility of the Department of Labour to lay the basis for some uniform national scheme of industrial pensions.
[Mr. Gillis.I
Right now there are a great many disconnected schemes. Industry after industry is establishing some kind of scheme of its own; but in my opinion there can be no solution to the problem on that basis. As I have previously pointed out in the house, an industry such as the pulp and paper industry in Canada can provide a decent pension, and they have done so. They pay $100 a month after a certain number of years' service; they protect the widow after the husband passes on; they have an excellent scheme. They can handle a scheme of that kind because the industry has the income with which to do it. But there are hundreds of industries in this country, some small and some large, which have not the income, through profits, to set up a decent pension scheme. They are essential industries, but they do not make large profits. The great majority of the workers of this country work in the kind of industry that cannot provide an industrial pension for them.
Another thing that focuses attention on the problem is the policy of industry itself. Since the end of the war they have taken the position that they will not employ anyone over forty years of age. If a man who is forty years of age is out of work today, and has not some specialized training, he will not be taken on by any industry in which the labour is fairly heavy, such as the mining, steel or automobile industries. He will not receive employment. There is growing up in this country a group of thousands and thousands of men who in the past have contributed something to some industry, who get out of work for some reason or another and cannot be employed. The heavy industries have taken the position that when a man is sixty-five years of age he is pensioned off. In most cases where that takes place, particularly in the mining industry, there is no contributory system of pensions. The companies have established some schemes of their own which are non-contributory. It is something they pay themselves as a gratuity. It cannot be called a pension. It is based on twenty-five years' service and on a small percentage of the last ten years of employment when earnings were the lowest. It amounts to about $15 a month up to a maximum of $57 or $60 a month. But in that scheme the over-all average, as applied to steel and coal in Nova Scotia, would run around $30 a month. That is nothing to look forward to. The man is back on relief.
The Canadian Congress of Labour have taken this position. To continue to probe the matter and to find a solution as from industry to industry in Canada means that all you will succeed in doing will be to set up the differentials in pensions that exist in

wage rates across the country at the present time. That is what will happen if a contributory scheme of pensions is established. On the other hand many industries cannot provide any pension at all. My considered opinion is, and has been for a long time, that the only way you can establish a fair retiring allowance for industrial workers in this country and for white-collar workers is to recognize the principle of social security.
I believe the department is now working on this question. I know the minister has one of his officials in Nova Scotia lecturing on industrial pensions. I do not know what the scheme is, but the minister will likely refer to it later. Now that the labour department has begun to gather statistics on the problem, the minister should consider this aspect of it: the only way to answer the question for the workers across this country -I do not mean just those who use a pick and shovel; I mean civil servants and all those who are white-collar workers in industry-is to establish a social security tax. I am not going to say what the amount should be. Everyone in the country should pay a tax, and it should be earmarked as a retiring allowance and set to one side and supplemented out of the consolidated revenue fund. The employer and the employee would contribute to it. The worker would then know that when he had worked for a certain number of years in industry he would be paying a special tax. I can assure the committee that nobody would object to a special tax for that purpose. It would be on a national basis. There would be one administration, and competent people in the annuities branch could work it out, thus eliminating the wasting of millions of dollars by industry in the maintenance of administrative staffs to work out the small and inadequate pensions that exist today.
The one thing that keeps most people in life worried and sends them to an early grave is insecurity. The average worker can pay only enough by way of insurance premiums to guarantee his family that at least there will be sufficient money to bury him when he dies. He is worried all the time on that score. At the convention in Toronto a year ago the Canadian Congress of Labour changed a resolution they had on industrial pensions to read the way I have suggested. They said that from then on the labour organizations should concentrate on a drive to sell the federal government the idea of a national social security tax to provide retiring allowances to workers in every industry and in every profession. I do not say what the contribution should be, but in my opinion that is the only kind of contributory scheme of pensions that will work, and it is the kind 45781-169
Supply-Labour
of thing that most people are thinking about and working for in a piecemeal and disjointed way at this time.
I do not expect the minister to say that this kind of thing will be done. I am speaking about it now so that people may think about it. If we are honestly of the opinion that something should be done in that field, I think that is the only way it can be done. It would answer the question of old age pensions, which we are wrangling about all the time, and the means test. The workers of this country do not want charity. When they retire after producing the wealth of the country they do not want to have to go to some charitable organization and qualify for the means of existence. Because of the means test in old age pensions, they are up against that very thing. Somebody has to come in and ascertain whether, because of the clothes in your cupboard and your living accommodation, you should receive something which is on the basis of charity. If my suggestion were adopted, that would be overcome.
On the other hand, large contributions are made to charitable organizations for the purpose of looking after the aged, the infirm and the afflicted. Nobody wants to accept the kind of charity which is handed out by the Red Cross, the Blue Cross, the White Cross, and all of these other organizations. Nobody wants to end his days by having to accept charity on that basis. In my opinion the only way to eliminate it is to give people a chance, by way of a special tax, to contribute to a national scheme and place the money in the hands of a competent administration that can work the matter out on an actuarial basis and determine exactly what the employee's contribution would be, what industry's should be and how much should come out of the consolidated revenue fund. Make it not just another tax, but a social security tax set to one side for that purpose. It would be pretty much a duplication of the unemployment insurance fund. It might be handled by that department. I do not think it would require additional staff.
At one o'clock the committee took recess.
The committee resumed at three o'clock.


Clarence Gillis: Mr. Chairman, when we took recess for lunch I was making a few general observations. I was elaborating on the question of industrial pensions, which I consider to be one of the objectives of the labour program. I am not going to repeat what I said previously, but I wish to add that I think Canada is in a good position to make a judgment on this particular development.

Supply-Labour
We have the experience of the commonwealth countries to draw from, as well as those of another country which is closer to us and whose economy is pretty much the same as ours, the United States.
But I think what is happening in the United States is proof positive that the establishment of pension plans by industry is not working out. The mine workers were the first union to have a pension of $100 a month established, but the net result has been the creation of one of the greatest obstacles to industrial harmony between employer and employee that has arisen since the establishment of the labour movement. Any industry which cannot pass along to the consumer the additional cost of such a pension plan will not be able to carry it out. When the time comes that they cannot pass it along to the consumer, difficulties arise. The pension plan established by the mine workers worked for one year while it was in the embryo stage, but during the last year there has been a continual disruption of that industry in an effort to maintain the pension of $100 a month.
I think this is a fair indication that we cannot follow along that road with any degree of success and hope to maintain harmonious relations between labour and management. Within the past few months the steel industry in the United States have established a pension plan, and I know they will have great difficulty in trying to maintain it. The automobile workers in Canada are following the pattern set in the United States. In my opinion the only way it can be done in this or any other country is not to pass the cost along to the consumer, but to establish a national security plan which will be supported by contributions by the worker, the employer and to some extent from the consolidated revenue fund. The plan should have the efficient administration we now have in the annuities branch. I know this will not happen tomorrow, I know there will be much difficulty in selling the idea to members of the government, but someone or some group must be looking forward in the field of social legislation and be ready to support it.
I shall not make any further general remarks, but there are many small problems that will be discussed when we reach the appropriate items.


Joseph William Noseworthy: Mr. Chairman, under this general administration item I should like to deal with another branch of the department, the training branch. First of all I should like to compliment the minister and his officers upon the excellent job they have done in vocational training.

There are two schools of thought about education; there are those who believe that education consists chiefly of academic training, and there are those who are interested in vocational training. I was an academic teacher for close to twenty years. I taught in schools where the great majority of the pupils came from industrial homes, and I have learned to appreciate the need and the value of training that our boys and girls are getting in the vocational schools.
According to the report of the department, from the inception of the dominion-provincial training plan in 1937 up to March 31, 1949, there has been an enrolment of 918,740 pupils, close to one million young people who have been benefited by that training during those years. In the last fiscal year the enrolment in these courses was 23,891, with an expenditure of $9,133,300.
I should like to deal briefly with the different types of vocational work that has been carried on. First I want to express my regret that the province of Ontario did not take advantage of the youth training plan over the years. However, last year they availed themselves of the $50,000 that was allotted for youth training which was used to aid students in colleges, universities, nursing training schools, and so forth.
In the field of supervisory training, I note with the same regret that Ontario has indicated that this will be discontinued during the coming year. The report indicates that great assistance has been given in supervisory training, particularly during the past year. Last year three provinces were allotted money, but in no case did a province use the full allotment. Of the $9,000 allotted to Ontario for supervisory training, the province availed itself of only $2,534. Of the $9,000 allotted to the province of Quebec, the province availed itself of $5,867. Of the $3,000 allotted to British Columbia for this type of training, the province availed itself of $1,080.
According to the report this money was used for the training of industrial supervisors and personnel officials; education in job relations and job methods; to aid job safety institutes, and for conferences pertaining to these subjects. There is a great need, particularly in the industrial provinces, for the type of work the act is designed to support, and I feel that this need is as great as it ever has been. Again I regret to see that the province of Ontario has indicated its intention to discontinue that field this year. I notice that the training given to the armed forces, which during the past year absorbed over $3 million, will not necessarily be carried on because that particular phase of the

work is completed. I was hopeful that the minister would be able to secure the $3 million for his department in order that it might be transferred to other fields of education, but I see no indication in the estimates of that being done.
There is another phase of work carried on by the department in which I am interested, the training of unemployed persons. Here again I notice in the report that, while money was available to all the provinces for the vocational training of unemployed persons, there were three provinces in Canada which did not avail themselves of that assistance, Prince Edward Island, Quebec and Ontario. I gather from the report, however, that the training of unemployed personnel was carried on in the province of Quebec to a large extent with assistance from the federal government in the regular vocational schools of the province. Once again I am at a loss to know why, with the number of unemployed increasing in the province of Ontario, the provincial government has not availed itself fully of the assistance for the training of unemployed persons through the regular vocational schools of the province.
Before I deal with the financial assistance given to vocational schools, there is another point in the report to which I wish to refer, the replacement of depreciated equipment within the vocational schools of the country. I find there was a total amount of $259,600 approved by the minister for replacing such equipment in our technical schools, but there were certain strings attached to that. The act gives the minister authority to refund to certain schools 75 per cent of the cost of equipment purchased by them from War Assets Corporation up to the total amount of $259,600 approved by the minister. The report goes on to say that few claims have been sent in by the schools to which funds were made available, and that total payments up to the present time have been $73,423 as against the $259,600 allotted. Of the $73,423, $25,584 was paid during the last fiscal year to one school in Nova Scotia, two in Ontario, three in Saskatchewan and three in British Columbia. I note the reason given why more of these funds were not used is that War Assets Corporation has been able to supply little suitable equipment.
While the minister is speaking on his estimates, I should like him to tell us why it was that War Assets Corporation was able to supply so little equipment to our vocational schools. I cannot believe the reason is that such equipment did not exist. During the war years I had the privilege of visiting a great many of the war industry plants in Ontario.
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I know something about the type of equipment used in our vocational schools, and I am confident there must have been a great deal of war assets equipment that would have been suitable for use. Because War Assets Corporation was able to supply very little I note that the provinces have only been able to avail themselves of $73,423 when the department had an amount allotted of $259,600.
I want to touch briefly on two major fields in which the department is contributing so far as vocational training is concerned. One that I overlooked is apprentice training. From the report it is evident that valuable work has been done in that field. During the fiscal year ending March, 1948, 6,286 apprentices have been assisted under the act, 3,659 of them in the province of Ontario. I also notice that for the year 1949 there has been a considerable drop in the number of apprentices who received assistance under the act. I am quite sure the minister will want to give us some explanation why there is a decreasing number of apprentices taking advantage of the privileges afforded by the legislation.
The department's greatest assistance to vocational education was in the direct contributions made to the provinces for regular vocational training in their schools. An agreement was made with the provinces whereby there was to be an annual outright grant of $10,000 to each province, which was not to be matched. It was an outright gift to each of the provinces to be used by them in vocational education. A grant was made over a ten-year period of $1,910,000 which was to be used in the development of vocational education, and there was a special contribution of $10 million to be allotted among the provinces for capital expenditures on the building and; equipment of vocational schools. There is noquestion but that the assistance given has aided the advancement of vocational education across Canada. I am sure that the minister with his background is probably as-sympathetic to the development of vocational education as any other hon. member in the house.
I would like to call to his attention this report, which indicates that as a result of those direct grants given to the provinces prior to April 1, 1948, in addition to the schools which had been assisted there were 116 schools either completed, in process of completion or approved by the department for assistance under this act, which means that fifty per cent of the cost of constructing and equipping those 116 schools across Canada would come from these funds. In his report the minister told us that in addition.

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to those 116 schools there were 79 new buildings or additions to existing buildings planned by municipalities, which would be built without assistance from the department.
I want to bring to the attention of the committee a resolution which was adopted by the vocational training advisory committee, a special committee set up under the act to advise the minister and the department with respect to its administration. At its meeting on October 4, 1948, that advisory committee called attention to the fact that since this act came into force in 1945 the cost of building and equipping vocational schools had increased greatly, and that the original amount voted for this purpose fell far short of achieving what those who put through this legislation had in mind. As a result of increased construction costs, fewer schools could be built than the government and the department visualized in 1945.
In view of that condition the committee recommended that a further grant of $5 million be made by the dominion for capital expenditure, to be distributed on the same basis as the earlier capital grant; and that annual grants should be increased from $2 million to $4 million. The committee felt this would be effective in carrying out the objectives of the department as set forth in the original act. I have looked through the estimates for this year and find that while the department has been able to reduce its estimates for vocational training by some $3 million because of the fact that it is not required to provide that training for those coming out of the armed forces, there is nothing in the estimates to indicate that this recommendation of the advisory committee has been accepted. The report to which I am referring states that as of March 31, 1949, those recommendations were still under consideration.
As I have already indicated, I am quite sure the minister personally is very sympathetic to this work. I am convinced that if his wishes could prevail in the cabinet the recommendations of this committee would be adopted. So I want to say, not so much to the minister as to the other members of the cabinet who help determine government policy and government budgets, that here is one field where government money can be spent to good advantage to assist the boys and girls of this country. This is one field in which there is no quarrel with the provinces. One feature of these vocational training grants is the way in which this government has been able to co-operate with all the provincial governments in the field of vocational

education. I am assured by provincial educational officers and by officers of the minister's department that there has been nothing but the utmost co-operation in this field.
There are communities where vocational education is badly needed. I think of the community from which I come, the township of York. There we have an industrial population of close to one hundred thousand, with somewhere around four thousand boys and girls attending secondary schools. There we have no vocational school or vocational class of any kind. These thousands of pupils, coming from industrial homes, can get only an academic education leading to matriculation. In that community only about ten per cent of those who enter the secondary schools continue through to grade XIII, and less than two per cent of the pupils proceed to university. That is the sort of community where there is a crying need for vocational education. The township of York is one of the suburbs of Toronto. Most of the large business firms are located in Toronto, and much of the money of that community is spent in that city. Toronto derives taxation from all the large industrial and business centres, which are supported by the suburban communities. The schools of my community derive their support almost entirely from two sources, the assistance given by the provincial government and the taxes on the homes and properties of that area.
It had been planned to build a vocational school there to accommodate a thousand pupils. Today in the township of York there are well over a thousand pupils who would attend a vocational school if one were available. They were unable to get their plans to the department here before the expiration of the period for application. As a result the best that community can do without aid from the federal government will be to construct a school for five or six hundred pupils instead of a thousand, a school without a gymnasium or an auditorium, and without much of the equipment that is absolutely necessary for a vocational school. Were the department or the government to take into consideration the recommendation of this vocational advisory committee, and to include, if not in this year's estimates certainly in next year's, the extra moneys recommended, the community of York township, and many of these other 70 communities across Canada who are undertaking to build vocational schools without any federal assistance, would be able to build better schools in those communities. Those schools would be able to carry on that particular type of work more effectively.

It was my desire to call this matter to the government's attention, and I hope to hear from the minister when he speaks, whether or not his department has taken this recommendation into consideration; and whether or not they are likely to have included in the estimates grants that will make it possible for many of these communities across Canada to get further assistance.


Mr. J. H. Blackmore (Lethbridge):: A discussion on the estimates of the Department of Labour automatically brings to mind the question of standards of living, because the welfare of labour is so vitally concerned with standards of living. I have been interested in the discussion thus far, and I was particularly interested in the contribution made by the member for Vancouver East and the member for Cape Breton South. Perhaps I did not see just as deeply into the general current of the thinking of those gentlemen as I should have, but it seems to me they were advocating policies which were contradictory. I do not raise these matters to criticize the hon. gentlemen, for whom I have a high degree of esteem, but merely to point out the need for some other kind of thinking.
The member for Vancouver East fittingly brought to the attention of the house a chart, which he found in the current issue of the Financial Times. This chart indicated that whereas the expenditure of labour and people generally on the needs of life had increased from 90 to 120 since 1947, yet the actual amount of goods which those people had been able to purchase had dropped from 90 to approximately 80. This is a solemn warning to the members of this house, as representatives of the community of Canada. Something must be done about that. Obviously, if the trend continues, a disaster of one kind or another will result.
Evidently the member for Vancouver East had in mind some measure for reducing the cost of living. I am in hearty accord with him in that objective. This immediately poses the question of how this cost of living is to be reduced. How are you going to bring down the retail prices in Canada? It is well known that if the labouring men strike to raise wages, immediately there will be another spiral of increased costs. If the labouring men do not strike, but continue with the wages they are now receiving, and the prices continue much as they are, then a generation of young Canadians will almost assuredly suffer far more seriously than this house would care to contemplate. Some means of bringing down that cost of living, then, is the thing for which we are looking. I am sure there is no one
Supply-Labour
in Canada more anxious to find a formula that will satisfactorily accomplish that objective than the Minister of Labour.
The member for Cape Breton South cal d for a tax upon everyone for the sake of social security. At one time, he had in mind industrial pensions. The experience of the United States with that sort of thing, which he related, was not a happy one. This was particularly true of the coal industry.
I rather doubt that there is anyone in the house today who, in his heart, would not favour some sort of universal pension for people after about 55, when they can be absorbed no longer in industry. I should like to see a straight vote of the members of parliament, in which they would be entirely free from political consideration, just to ascertain whether there is anyone in the house who would not favour universal pensions such as I have described. I do not believe that, by secret ballot, the nays would be very numerous.
My question is, how are we going to get that universal pension? Where will the money come from? The member for Cape Breton South, a man of sound judgment, wide learning and great ability, as I have said, advocated a universal tax. It must be obvious to the member for Vancouver East and the member for Cape Breton South that if there were a universal tax the following things would happen: If the tax were upon industry, then industry would have to raise prices which would have a result directly opposite to that which the member for Vancouver East desired.


Clarence Gillis: I do not agree with that.


John Horne Blackmore: It will be necessary for the hon. member to establish that point.


Clarence Gillis: They are throwing that much and more away now.


John Horne Blackmore: I do not think a scientific examination of the facts will bear out the member's contention. If the tax were levied upon the workingman, which he apparently envisages, then there would be a reduction in the amount of money those men would have to spend. This would destroy part of our internal capacity to consume, and would tend to destroy the possibilities for employment in industry. Again, this would be the exact opposite of what the member for Cape Breton South and the member for Vancouver East would favour.
If the government made a contribution towards this universal pension, then according to present government thinking the money would have to be raised by taxation, which would in turn raise the cost of living all

Supply-Labour
over the country and decrease consumer purchasing power. It would be a good thing for those hon. gentlemen, the members of their party, and our Liberal and Conservative friends, to give a considerable amount of thought to this question during the next few months.


Angus MacInnis: If those factors would apply to increases in taxation in the way suggested by the hon. member-I do not want him to think I am asking this question with any sinister purpose, but it falls within the argument he was making-would not the same thing apply to the increase in indemnity which the members of parliament voted for themselves in 1945 or 1946?


John Horne Blackmore: Undoubtedly, it would.


Angus MacInnis: That should be a reason for refusing it, then?


John Horne Blackmore: It will apply to every tax which is levied by the dominion government to raise additional revenue to provide additional public services or social services, which everyone in the house advocates. That is the situation confronting us in Canada. Is there not some way of avoiding the whole difficulty?
May I just stop the review here for a minute to point out that the hon. member for Cape Breton South is virtually advocating a dividend for all. I fancy there is no member in the committee who does not recall the amount of jeering that took place and the superior attitude that existed toward the idea of a dividend for all. When fourteen years ago I first came into the house, any suggestion of a dividend for all was met with an almost violent reaction. In fourteen or fifteen years I believe we have come to the point where practically every member of the house favours a dividend. We have therefore made some progress, have we not?
If we can determine now where the money is coming from with which to pay the dividend, then our thinking can go forward another milepost. What the hon. member for Vancouver East really has in mind is what the Social Crediters call the just price, which is brought about by a compensated discount which reduces the price to the consumer. The hon. member for Vancouver East is therefore well along his way toward progressive thinking as Social Crediters look upon it. I rather think that most members on both sides of the house, both Liberals and Conservatives, would favour a reduction in price by a compensated discount, for the Liberals used it with regard to many commodities during the war, and with great success. It is too bad that they did not continue so to control price after the war. They seemed to assume
'Mr. Blackmore.]
that as soon as the war was over all further problems in regard to price had ceased. In reality, those problems had only just begun. No proposal has yet been brought forward for the systematic reduction of prices, notwithstanding the fact that prices are just torturing people from coast to coast in Canada. What the hon. member for Cape Breton South was advocating was a dividend for all or at least a dividend for all those who had found it necessary, for one reason or another, to leave industry.
May I suggest to the members of the committee and to these two good gentlemen and their colleagues in parliament that money can be obtained out of production. I have heard them, in some of their moments of illumination, state that financing would be done out of production; but what they seemed to have in mind was out of taxing production. The thing our generation must realize is that you do not need to tax production in order to get money. If the producers are producing ample goods, let them produce the goods and let the government use the goods as a basis for money. In this way a government can finance projects out of production without injuring the producer or the consumer. Once this committee learns that, and once the government learns that, with all the high ideals that are actuating the government and the opposition today, Canada will be on her way to an era of prosperity and happiness that we have dreamed about in times past but have never dared to hope we would realize.
It will be necessary for me to read one or two short excerpts from men whose opinions might be expected to command the respect of the house. I am reading now an excerpt from an article in the Financial Post of October 5, 1940. The article is entitled "Putting Over the Next War Loan." It is by Professor A. F. W. Plumptre of Toronto university. Here are some words that might be of some value to the members of the C.C.F. and to the other members of the house. He says:
There are some general matters of theory which must be kept in mind in preparing for the next war loan. It must be remembered, primarily and seemingly paradoxically, that the government's object is not to get money but merely to reduce the public's spending.
I am still astonished that no one, except Social Crediters, has seen fit to discuss in the house that remarkable statement. Now may I quote a little bit more. Further on he says:
The government can always "get money" because it may, as an alternative to borrowing or even to taxation, create the required funds. This it can easily do nowadays through the leadership of the central bank and the co-operation of the chartered banks. In this way $200 million were created in this fashion last autumn.

No matter how orthodox the Minister of Labour may be, no matter how highly distasteful it may be to him to consider matters pertaining to-


Humphrey Mitchell: Don't be orthodox; be sensible.


John Horne Blackmore: I am glad the minister said "sensible". I will hold him to that word.


An hon. Member:: Not too strictly.


John Horne Blackmore: No matter how sensible he may be, I think he must have some respect for Professor Plumptre's remarks.


Humphrey Mitchell: I do not care who he is; if he is making the implication my hon. friend is trying to make, I think he is wrong, even if he is a professor.


John Horne Blackmore: In other words, the minister just cannot be sensible about anything with respect to money.


Humphrey Mitchell: Let me just say this to my hon. friend: If it is not hard to get, it is not money.


Some hon. Members:: Oh, oh.


Humphrey Mitchell: I know that my hon. friends say "oh, oh"; but a printing press never in all history raised a potato or grew a blade of wheat.


Stanley Howard Knowles: What about the hair on your head?


Humphrey Mitchell: Yours too.


John Horne Blackmore: You see the situation, Mr. Chairman. The minister cannot possibly see any means of improving the financial and economic conditions of Canada except through taxation. In other words, if we in Canada once get to the point where we have more production than the people in Canada can buy, the minister must throw up his hands in utter helplessness, and go down into a vast depression from which no one has any idea as to how we shall ever emerge.


Solon Earl Low: Then look at his labour problems.


John Horne Blackmore: I wish he could once come to realize that the thing that makes a nation wealthy, the thing that ought to make a nation prosperous, is production; and that when you get to the point where you are producing in a country more food, clothing, shelter and everything than you need, then you have reached the point where everybody should be able to go into a sort of Garden of Eden and have all that he needs.


Solon Earl Low: But you should make money hard to get.


John Horne Blackmore: But here is where the minister's theory will lead him. Just as soon as
Supply-Labour
we get to the point where we have more production than we can consume, then prices begin to fall, production begins to fall off, employment falls off, and people go onto the unemployment lists just as they were in the 1930's. When the income of all the various producing organizations throughout Canada falls you cannot get as much in taxes from them, and the result is of course your revenues fall off. They come down to a mere dribble compared with what they were in the war, and the minister has not a single idea as to what to do about it. It will be hard enough for him to get money, all right; there will not be very much money then.
The minister likes to be sensible. Will he tell us whether the money that he was able to get during the war when revenues were at a high level, were buoyant, as the Minister of Finance would say, was just as good as the money that he could get during the depression? It was a lot harder to get during the depression. I think the minister will agree the money during the war was just as good, if we could have kept prices down, as the money which we got during the depression, which was hard enough to get. I do not think I should say any more along that line.
I just wish to draw to the attention of the committee the fantastic paradoxes that the minister has got himself into by insisting on being a sensible man, and yet maintaining that in a state you cannot create money.


Solon Earl Low: He wanted to have fun.


John Horne Blackmore: I realize he wanted to have some fun but it was a useful bit of fun to me. I think I shall refer to it once in a while. I quoted from Professor Plumptre's remarks to the effect that the Dominion of Canada itself created $200 million in the year 1939, and created it out of nothing.


Solon Earl Low: That was not good money.


Humphrey Mitchell: I do not want to prolong the discussion but I say to my hon. friend that Germany created a billion dollars in 1923 and there were a quarter of a million suicides the year after. I was there; I know what I am talking about.


John Horne Blackmore: The minister reminds me of the Hon. C. A. Dunning, a former minister of finance who was in the house when I first came. You could not begin to talk of these things when Mr. Dunning was here without having him protest. The answer to what I am saying is not to bring in Germany's unfortunate experience, which can be explained easily enough. It is not appropriate that I explain the German inflation. I know about it. I know what caused it, and it was not the kind of thing that the

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minister implies. The simple fact is that Professor Plumptre tells us in definite words that $200 million was created out of nothing in Canada in the year 1939.


Solon Earl Low: And got the war started.


John Horne Blackmore: It was created after the war started. To save your life you could not have created it before the war started. If we had suggested to Mr. Dunning that he could create money he would have thrown up his hands in horror and would have almost fainted, because it would have caused inflation he would have said. When war came on created money did not cause inflation. It could be created for war. Is it not an amazing thing that it cannot be created for peace?
I think it is particularly appropriate to discuss this matter under the estimates of the Department of Labour because it affects the workingman and the production of the country more than any other single matter. As I said the other night, surely when we have our productive capacity right now at the point where we can produce more than we need, and are beginning to worry about where we are going to sell our products, the time has come to begin to think about amending our financial theories.


James MacKerras Macdonnell: Will the hon member permit a question?


John Horne Blackmore: Gladly; more than the hon. member can ask.


James MacKerras Macdonnell: I shall ask only one. The hon. member referred to Mr. Dunning. I wonder whether he has looked up the budget of early 1939, because if he does I think he will find that Mr. Dunning's views on the proper use of credit encouragement were perfectly-what shall I say- constructive. At the same time I think his views were perfectly consistent with the views which he held throughout and with the views later held by his department. I think it is only fair to that very distinguished former member of this house that that should be said.


John Horne Blackmore: Far be it from me to disparage Mr. Dunning, and far be it from me to disparage any good man. Yes, Mr. Dunning had correct ideas about finance and the expansion of credit. The trouble was that that good man did not know how to make them work in peacetime. The hon. member for Greenwood can contradict that if lie wishes. The good man did not know how to make them work in peacetime. Let me put a question to the hon. member for Greenwood. He is a good man and very anxious to get at what is right. Let me ask him this 
important question. Between September 20, 1929, and September 30, 1933, $932 million was withdrawn from circulation in the Canadian economy, $932 million that the people needed to finance their business. From a financial point of view it was the withdrawal of that $932 million that caused in Canada, or accentuated, the depression. Can the hon. member for Greenwood answer the following question? If he can answer it-I know he cannot-I should like him to do it now. If he cannot do it now let him take time to think it over and we shall talk about it next year. The question I ask is this: Will he give us an idea of how the government of Canada between 1930 and 1933 should have proceeded to put back into circulation that $932 million, the withdrawal of which was disastrous to the Canadian economy?


James MacKerras Macdonnell: I certainly landed myself into something when I asked my question, but I do not want to let it go entirely by default. I say this, as I have said before; I think we have all learned something since the early thirties, and I think that if a situation like that appeared again governments would be more constructive than they were then. Do not let anyone think that the ignorance or lack of knowledge was all on one side. We all shared that condition and we are all perfectly right to say that we have learned something since.


Solon Earl Low: Wonderful.


John Horne Blackmore: That is very good. If the hon. member for Greenwood would only just take the house into his confidence and give us an idea of what would be the nature of the constructive measures so that we could learn something of what he would do.


James MacKerras Macdonnell: I am not
making the speech; I am just answering the hon. member's question, and I am perfectly willing to say, as I have said before-there was an instance of it given, as I told the hon. member a few minutes ago. If he will look at the budget speech of 1939 he will find, if I remember correctly, that there was an instance given of it then. A stimulation of credit was brought forward by the finance minister of that day. I think I shall let the hon. member make the rest of his speech and I shall make mine at another time. I apologize for having intervened.


Humphrey Mitchell: If I might rise to a point of order, we have been very tolerant. We have listened to a lecture from my hon. friend about funny money. If we are not careful we shall have a lecture from the next speaker on the birds and the bees. Someone else will get up and talk on something else. An hon. member close to me says that he has some

sheep killers in his riding and he could make a speech on that subject. I think we have been very tolerant, sir.


Solon Earl Low: That is hard labour.


Humphrey Mitchell: That is true. It might do some hon. members good if we had some hard labour. I think we should get along with my estimates.


John Horne Blackmore: Since the minister wants me to discontinue I do not care to carry on. May I suggest that twenty-five hon. members could rise in their places and advocate different forms of taxation increases, and the minister would not object; but the very minute that someone rises and advocates a policy which does not require taxation, immediately the minister wants to cut that discussion off, which once more raises a very serious question as to the genuine good sense of the minister.
I am going to ask the hon. member for Greenwood one question and then I shall thank you, sir, for your indulgence in this matter. I do not think it is out of order because the hon. member for Cape Breton South and the hon. member for Vancouver East were not called out of order because they advocated taxation. I am advocating a way of raising money without additional taxation. I am going to ask the hon. member for Greenwood a question and he can answer me now or he can give the answer when he makes his speech at a later time. Would he have favoured having the R. B. Bennett administration create say $500 million of debt-free money and spend it into circulation in reduced prices or in the payment of subsidies to primary producers? If he would, then indeed he has been learning.


James MacKerras Macdonnell: I can answer that very easily; the answer is no. I agree with the Minister of Labour when he said that the printing press never produced anything that we can eat or wear.


John Horne Blackmore: I am thankful the hon. member for Greenwood raised the question. His answer shows conclusively that he has not learned one single thing, that he would be just as helpless as were those who ruled in R. B. Bennett's time when it came to putting back into circulation money to compensate for the $932 million which were withdrawn from circulation by the banking system between September 30, 1929, and September 30, 1933.


Solon Earl Low: The only difference between the hon. member for Greenwood and the hon. member for Lethbridge is that the hon. member for Greenwood wants the printing presses to turn out bonds.
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John Horne Blackmore: The difference between the hon. member for Greenwood and myself is that he still thinks in terms of scarcity while I have learned something about how to enjoy the abundance that can be produced. I thank you once more for your indulgence. I shall discuss this matter a little later on. Before taking my seat may I say that unless we can solve this problem of distributing the abundance we can produce, unless we can so manage our money that we can have more of it the more things we produce, then we are just getting ready for the greatest depression of all time.


Mr. Gordon B. Isnor (Halifax):: Mr. Chairman, I shall keep in mind the suggestion of the Minister of Labour that the next speaker should not speak of the birds and bees. I do not propose to follow the hon. member for Lethbridge in his Social Credit theories as I have not reached the state of prosperity that apparently has been reached by the hon. member. I am going to endeavour to be practical and deal with just one or two items.
I was pleased to note the broad manner in which the hon. member for Cape Breton South approached this question of social security. The hon. member and I do agree with each other once in a while. However, I am just wondering if labour did not go a little too far in pressing for pensions to begin at sixty-five years of age or earlier and thus bringing about a situation that is affecting labour itself. I throw that suggestion out to the hon. member so that he may think it over. In the next breath I want to say that I am in accord with the general principle as announced by him of social security for all. In this connection I should like to quote from a memorandum presented to the dominion government by the Trades and Labour Congress of Canada on March 24, 1949, as follows:
We desire to call attention to the increasing difficulty being experienced by those over forty years of age in securing employment. The Department of Labour has recognized this unfortunate condition and is doing a creditable job in its campaign for the "over forties." There is, however, a growing evil that must be recognized. A major factor in the resistance of industrial and commercial enterprise to the hiring of persons over forty years of age is the establishment of private pension plans in many industries.
I pause there for a moment to bring that statement forcibly to the attention of the minister. There is an ever-increasing demand for industrial pension schemes, but I submit that these should not be carried to a point where they become a burden on industry and thus defeat the purpose intended. I feel that a contributory scheme as suggested by the hon. member for Cape Breton South is on sounder ground. There should be a
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three-way contribution by the employee, the employer and the government, in much the same way as unemployment insurance is carried on. If that scheme is adopted I feel that we can look forward to the day when all those employed in industry and other types of employment will have that sense of security which they look forward to. The memorandum continues:
The government itself is a contributing factor as it too refuses to bring employees under the scope of the Civil Service Act for similar reasons if they are over thirty-five years of age. However beneficial these limited pension schemes may be, they are acting as a deterrent to the employment of many persons oyer thirty-five years of age and thousands over forty years of age and are a real obstacle to the mobility of our working force.
I am going to ask the minister to pay particular attention to my next thought, which has to do with the type of employee we refer to as temporary or casual, the man who has reached the age of sixty-five years and even though he is not entitled to civil service benefits nevertheless is told by the government or others that his services are no longer required. During the war, order in council 4840 was passed to make it possible to continue that type of person in the employ of the government by extending his period of employment from year to year. I submit that the Minister of Labour should review that order in council and extend its provisions so that this type of person may be kept on until he reaches the age of seventy years.
There is a large number of employees who have given the best years of their lives to the government, but when they reach the age of sixty-five years they are told that their services are no longer required. The government is one of the large employers and I do not think it is fair that it should adopt this means of dispensing with the services of loyal employees, not because they are inefficient but simply because they have reached the age limit of sixty-five years.
There is another class of employee who I feel is discriminated against in respect to unemployment benefits. I refer to the waterfront worker. The port of Halifax is not looked upon as being an all-year-round port or place of employment. Our port is open winter and summer alike while other ports on the St. Lawrence are frozen up for the winter months. It is during the five months of the winter season that we can give employment to a large number. But what happens? As I recall, they must work 180 days out of one year as prescribed by the act. Otherwise they are not able to secure the benefits.
I suggest to the minister the limit of one year should be extended to two or possibly three years in which they can work the 180

days necessary to qualify for the benefits of unemployment insurance. I believe the minister is familiar with my representations in the past, but so far as I know no definite action has been taken up to the present time. I know that the waterfront workers of Halifax and other ports are waiting for a favourable decision from the minister as to this matter. I am hoping that he will consider today a good time to tell one of the members from Halifax that he need no longer worry in this respect, and that he can go back and tell the waterfront workers that the matter will be adjusted so that in the future the 180 days will extend over a period of two or three years.
I want to compliment the minister and his officials on the manner in which they have endeavoured to take care of older employees. Some time ago they issued a news release dealing with this matter in the following words:
In recent years there has developed a considerable tendency for employers to emphasize youth in their selection of new employees. With the steady increase in the life expectancy of the average person, the proportion of our population forty-five years of age or older has reached approximately one-third. While older workers are found to lose or to leave their employment somewhat less frequently than their juniors, once they are out of work they are increasingly difficult to replace in jobs. These older workers possess desirable qualities of maturity, experience and stability. Their permanent retirement from employment would constitute a serious loss to the individuals concerned as well as to the national economy.
That emphasizes what I had in mind in bringing this matter to the attention of the minister. I feel that, while you have taken a step to make the situation known to employers, government branches have not taken advantage of your good advice to continue in employment the type of person to whom I have referred. I am pleased indeed to note that the hon. member for Cape Breton South recognized the fact that these large concerns do not always make the profit which he and his colleagues in the C.C.F. group are so apt to say that they do. He recognized it because he stated that he felt it should not be passed back entirely to the industry.
As I stated a moment ago, I feel that it should be a three-way proposition. Speaking personally for a moment, I know from experience that to get the best results from your employees you must give them a feeling of security. If you can create in their minds a feeling of future security, then you are going to get better results from them. A few years ago I inaugurated a pension scheme on a noncontributory basis which applies to all my employees over twenty-five years of age and up to fifty-five. I feel they would be more interested if they were contributing on a

three-way basis, as I mentioned a moment ago. We also have the Blue Cross health plan which is a great factor in satisfying our help that they are being looked after. To my way of thinking, it is not an expenditure but rather a good investment, and I get a good return for it.
I feel that large firms which have endorsed and entered into pension schemes look at it in the same way. Therefore I am happy to support those who are advocating that we enter into a very much broader scheme of contributory social security measures. I could go on to deal with the system they have in the United States, but I know the minister is quite familiar with it, as he is with the workings of all labour organizations. I stated I proposed to speak only briefly, and I am going to leave these points with the minister in the hope that he will remedy one or two, and particularly the waterfront situation which I had in mind when I rose to address these few remarks to the Chair.


Mr. G. F. Higgins (St. John's East):: Mr. Chairman, I should like to join with the hon. member for Halifax in his endorsation of the hon. member for Cape Breton South advocating industrial pensions. I see the need for such a plan. Frankly, I tried to understand the argument of the hon. member for Lethbridge, which I presume was against the suggestion. It may be that I have not been here long enough, but I did not follow his argument clearly enough to understand what he was talking about. Possibly that may be because I am more accustomed to maritime language, and the language of the hon. member for Cape Breton South and the senior member for Halifax is quite direct on the point. I do not feel any necessity to labour the matter any further.


John Horne Blackmore: If the hon. member will permit me to put the record straight, may I say that I am entirely in favour of pensions. The only difference between me and the hon. member for Cape Breton South is that I favour a different method of financing them. It should not be done by additional taxation.


Gordon Francis Higgins: I do not think it needs any further explanation. We are all agreed on the principle. It is only a question of how to finance it. It seems to me that the principle enunciated by the hon. member for Cape Breton South is a fair and reasonable one, and one that is easily understandable and workable. It is a three-way system involving contribution by the employee, contribution by the government and contribution by the employer. All the money that is being frittered away at the present time in numerous
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pension schemes all over Canada would be much better employed if it were controlled in some manner by the state, as the hon. member for Cape Breton South suggested. No workman wants to have to take an old age pension. It is a form of dole. When a workman finishes his period of labour he has earned the right to be kept. No matter how frugal a workman may be, it is very seldom that he is able to put by sufficient money to be able to keep himself when he is no longer able to work. The ordinary decent workman does not want to have to receive an old age pension, and he should not have to in a country such as Canada which is capable of producing sufficient money through the sale of its produce to ensure that all the people of the country will have the right to live out their lives in happiness, particularly when they come to the time when they are no longer able to produce.
For that reason I feel that the minister would do well to investigate the matter carefully. I know that for many years the hon. member for Cape Breton South has been connected with labour matters in a practical way. He has studied the subject carefully and he speaks with full knowledge. My own connection is comparatively short, and therefore my endorsation would not mean a great deal compared with his. But I point out to you, Mr. Chairman, that this policy has been adopted already by the party of which I have the honour to be a member, so with that endorsation I think we are all in agreement.
I am particularly worried about the situation that is developing in the province of Newfoundland, and that is what I want to direct the minister's attention to this afternoon. Hon. members are aware that we had hoped to substantially reduce the cost of living in our province as a result of confederation with Canada. The official cost of living index as at September 4, 1948, stood at 184-8. The same index as at September 3, 1949, was 173-4, showing a drop of 11 points. But that is not the real position at all; we all know that figures obtained in this manner are not the most reliable. I submit quite honestly from my knowledge of what has happened that if our cost of living has been reduced by five per cent that is as much as it has dropped.
Right now we are faced with growing unemployment all over the island. Recently the premier announced with a great flourish of trumpets that he would soon be making a statement concerning the iron ore of Labrador. Two days later he made that statement, and said work was going to be provided for
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ten thousand men. I am still worried, however, because the Financial Post of December 3 has this to say with respect to that announcement:
New financing for Labrador-Quebec iron ore development from six major steel companies as announced this week by Jules R. Timmins . . . will be followed by an immediate start on the 360-mile railroad . . . Work this winter will be on the tote road-not the actual rail line.
But it won't mean an immediate "10,000 new jobs for Canadians" as heralded this week.
That is very unfortunate; but we are also faced with the problem of secondary industries closing down. Only this week in reading the Newfoundland newspapers I saw that five secondary industries had closed within the last week or two. These include a mattress manufacturing plant, a shoe factory, an underwear factory, a clothing factory and a paper bag company. It is true that they do not employ large numbers of people, as compared with the big factories up here on the mainland, but every person who loses his employment makes the situation that much more serious. At the present time some five thousand workmen are in receipt of a kind of dole. It is supposed to be work, but actually it is a dole. They work a forty-eight hour week for $13.20, the theory being that they are to work for two months and then qualify for unemployment insurance. I do not know how that will work out, and I should like to ascertain whether that will be possible. These men work one day and give the next day's work for nothing; they do not get paid for the second day. I do not believe they will be able to work long enough to qualify for unemployment insurance. Just imagine, in this great country of ours, people getting $13.20 for a whole week's work. The only thing that can happen, the obvious thing, is that the family allowance cheques will be used for purposes not intended by the act. There is no question at all about it; it has to be that way.
Another matter I am afraid I will have to raise in this house is one I mentioned some time ago when I asked the Prime Minister what action was being taken with regard to the increasing unemployment in Newfoundland. At that time the right hon. gentleman replied that federal works were going to be expedited. Well, as far as I am concerned there is no question about the works being expedited, but this unemployment does not exist in only one part of my province; it is all over the country. The major centres such as Corner Brook and Grand Falls would not be as severely affected. I noticed this week that the plant at Grand Falls is going on a five-day shift, while the sulphite mill at

Corner Brook is getting ready to close; but those centres are not so badly affected as the capital city and the settlements around the coast. The public works that are to be undertaken and some of which are actually under way in order to combat unemployment have been allocated by districts, and the district of Burin-Burgeo is to receive $109,735.


Alphonse Fournier: On a point of order, Mr. Chairman, when my estimates are before the committee the hon. gentleman will have ample opportunity to speak about public works. Now we are discussing the labour estimates; and I would not be ready at this time to answer questions because my officials are not here.


Gordon Francis Higgins: I am not going to ask any questions. I have the answers in a return I received the other day.


Alphonse Fournier: But these matters should be brought up on my estimates, when I will have all the answers to any questions which may be asked. I do not think it is in order to discuss my estimates on the labour estimates.


Gordon Francis Higgins: I am discussing unemployment, and surely it is proper to draw attention to what is happening down there and the need for such works in a particular district. Is there any objection?


The Chairman:: The hon. member must discuss the estimates of the Department of Labour.


Alphonse Fournier: There certainly is an objection to a discussion of my estimates at this time.


Gordon Francis Higgins: Then without asking any questions I shall simply point out that of an expenditure of $359,000, only $11,000 has been allocated to the constituency of St. John's East.


Alphonse Fournier: Probably that is
because it has less unemployment.


Gordon Francis Higgins: That is not where there is less unemployment. The two constituencies of St. John's West and East are to get $40,000 between them, and those are the two districts which did not elect Liberal candidates. That is why so little money has been allotted to them; I cannot see any other reason. We do have unemployment there, and I am drawing this to the attention of the Minister of Labour to see if something cannot be done to take care of that unemployment. I am not asking for answers from the Minister of Public Works, but I do advocate most

earnestly that in the distribution of unemployment assistance, which the Prime Minister suggested was being done through expediting public works, at least they should be distributed all over the island.


Alphonse Fournier: On another point of order, Mr. Chairman, public works is not the department which was set up to deal with unemployment. If the hon. member reads the act he will see that our jurisdiction is confined to public buildings belonging to the federal government and to works along the coasts and rivers. There is no suggestion that my department should put up post offices or other buildings in order to relieve unemployment. That is not the purpose of the public works department.


Gordon Francis Higgins: I am not talking about that. I say these public works should have been distributed fairly.


Alphonse Fournier: We can discuss that on my estimates.


Gordon Francis Higgins: I am quite aware of that. I am merely bringing this definitely to the attention of the minister because of our position in Newfoundland. During the depression years the incidence of tuberculosis became very high. If in that province now we are to have unemployment, with people unable to obtain food, the tuberculosis that we have been trying to control as best we might will make great inroads on the population again. Only recently I read in one of the Toronto newspapers that some resident of that city objected to people from Newfoundland coming up to this part of the country without being X-rayed. He said that before confederation they had to be X-rayed, and now they are coming in there without being X-rayed.


Joseph-Alfred Dion: Order. I do not think the hon. member is speaking to the item.


Alphonse Fournier: The hon. member is certainly far away from matters concerning the labour department.


Gordon Francis Higgins: If I am, I shall conclude in a moment. I am only asking the question with a view to ascertaining whether some other assistance can be given to combat this unemployment which is so rampant.


Humphrey Mitchell: I should like to tell my hon. friend that since April, 1949, until today, this department has spent approximately one million dollars in unemployment insurance in the province of Newfoundland. It is running at the rate of $53,000 per week right now, and that is not chicken feed.


Gordon Francis Higgins: I am not saying it is not. I am saying that most of these unemployment
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insurance benefits have now expired, and the people who were receiving them are still out of work. Under the plan for union, the people who were out of work were given six months' unemployment insurance, which is now exhausted, and those people still have not found work. I am not ungrateful for the benefits we have received under confederation; I am not unmindful of that. I would be obliged, however, if the minister could answer my question on unemployment conditions in my province.


Wilbert Ross Thatcher: I only want two minutes of the minister's time. I should like to ask him-


Humphrey Mitchell: I should not do this. Everybody is bursting forth into song, but perhaps that is because it is Saturday afternoon. I thought we would have a discussion on broad principles, such as those discussed by the member for Cape Breton South and the member for Vancouver East, when they talked about communism in trade unions. I thought such speeches might be delivered on the main item, then the questions could be asked on the various items. It is a physical impossibility for me to remember all the points raised by my hon. friends this afternoon. I shall do the best I can to answer them.


Wilbert Ross Thatcher: I thought the minister
wanted to save some time, and that is why I said I would only take two minutes.


Humphrey Mitchell: I know my friend's two minutes.


Wilbert Ross Thatcher: There is one point which concerns the municipality from which I come, and that is relief costs for unemployment. I took this matter up with the minister before, and he has definite views on it. Possibly his views are right but I do not believe so. Back in the depression years, a great many municipalities in Saskatchewan and across Canada went bankrupt because they were keeping so many people on relief. The costs of that relief were almost prohibitive.
Once again we are starting to see unemployment in various sections of the country today. As yet it is not serious, but it may become serious. Various municipal councils are worried about the fact that the federal government is not paying part of the costs of keeping those people today. The minister will say that we have unemployment insurance today, and rightly so. It is a great step forward since the last depression, but only a step. After a few months the unemployment insurance benefits are exhausted, and those people have to draw the dole. At the

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present time, the only source from which that assistance comes is the municipality or the province.
My point is this. Within a month or two, we are having a dominion-provincial conference, and surely that would be the appropriate time to discuss what can be done in sharing the costs of relief between the three levels of government. I feel very strongly, Mr. Chairman, that relief or welfare costs of that sort are not the responsibility of the various municipalities. I warn the minister of something he knows better than I do, and that is that unless the federal government is prepared to pay some part of the relief costs we are going to see hundreds of municipalities in bankruptcy again when the next depression comes. Moose Jaw had 6,000 people on relief out of 20,000 in the thirties and went bankrupt. Swift Current and Prince Albert went bankrupt. I do not want to see that happen again.
I am hoping the minister will offer some solution at the dominion-provincial conference, which would enable the federal government to help pay a part of that cost.


Humphrey Mitchell: I want to say this to my hon. friend right away, that I think I know something about conditions that existed in Saskatchewan during the years he was probably at school. I do not say that disrespectfully. The finances of the province of Saskatchewan have never been better in their history; employment in Saskatchewan is as high as in any province in the Dominion of Canada at the moment. The hon. member talks as though we were standing on the brink of a precipice.


Wilbert Ross Thatcher: No; on a point of order, J am afraid of what may happen if another depression comes.


Humphrey Mitchell: The trouble with people who express such opinions is that they are afraid the sun will not shine tomorrow morning. During the war I had to listen to complaints about the shortage of manpower. This government was criticized because some men had the courage to go and fight, so that freedom, as we understand it, could endure. I went through that. Ever since the end of the war, these people have been predicting such terrible times.
In my department, I have a research staff. The year before last, they predicted fairly accurately what employment conditions in the Dominion of Canada would be. They predicted fairly accurately what would happen last year, and I expect the same will be true of this year. It may be that the third time their judgment will be wrong, owing to some possible international complication; I
[DOT]fMr. Thatcher.]
do not know. I think the best way to ensure bad conditions in the country is to keep on talking about them. I shudder to think what would happen to this country, or to freedom as we understand it, if, during the war years, the people who had the responsibility which some of us bore had taken the negative position which some of my hon. friends take upon occasion. I am hopeful. I am an optimist, like the Minister of Trade and Commerce. I am not looking forward to the conditions which some people predict for this country. I have never taken that view. I take the opposite view, and I think it is a good thing that most of the Canadian people share my view.


Wilbert Ross Thatcher: Perhaps the minister did not understand me. I quite frankly admit that I am surprised that the government has done as well as it has since the war in keeping full employment. I am surprised, and I admit it. But that does not mean that we should not profit from our experience in the last depression. The various city councils are writing to the members to say they are worried about relief costs growing to a greater extent than they can afford. All I am suggesting to the minister is that we should prepare for a depression in case it does come. I hope it does not arrive. These municipal councils are worried. The minister will see a great many municipalities go bankrupt once again unless some federal source of revenue is available to help carry these relief costs.


Humphrey Mitchell: Does my hon. friend know what the relief costs were in Moose Jaw last month?


Wilbert Ross Thatcher: No, I do not.


Humphrey Mitchell: I thought so.


Wilbert Ross Thatcher: My city council wrote asking me to take this matter up with the minister. I am sure he does not resent it, because he knows I am doing what I was asked to do. They are quite concerned because Moose Jaw was one of the cities which did go bankrupt. It is one of the cities which is on the borderline now, and substantial relief costs would put it into bankruptcy again.


Stanley Howard Knowles: It was my intention to make a speech on this item, but I am prepared to forgo it, providing I can protect my right to speak on matters having to do with fan-wage provisions and so on, on item 144 and on some of the other items. That is all I want to say, except for one other point; I had hoped that the minister might answer some of the questions that have been asked. He will probably deal with them as we come to the items if we remind him about them.

I do not, however, see where he might answer the questions asked by the senior member for Halifax with respect to the question having to do with the employment of people over forty, except on this item.


Humphrey Mitchell: I do not intend to speak for long, Mr. Chairman. If you cannot say what you want to say in twenty minutes, I believe you should not get on your feet.


Mr. Harkness:: You have been getting up at the wrong time, then.


Humphrey Mitchell: I believe that also. More people talk themselves out of this place than ever talked themselves into it.


Douglas Scott Harkness: Give us a demonstration.


Humphrey Mitchell: Just look at me. The first question raised by the hon. member for Calgary West, the hon. member for Cape Breton South and the hon. member for Vancouver East was with regard to communism in trade unions. I think that events have vindicated the position taken by all parties in the house on that problem when we framed the Industrial Relations and Disputes Investigation Act, leaving it to the trade unions themselves to discipline these people within their own ranks, having regard to the educational facilities that are provided by adopting a policy of that description. I think it is far better to do that than to pass laws such as those that are in force in some countries, although we were strongly advised to do so. My hon. friends who have lived in the same atmosphere as I have lived practically all my life know quite well that you cannot declare an organization illegal, particularly when you are dealing with communists who have no morality whatsoever, and where they change the name of their organizations every day in the week to suit their purposes. I think it might also be truthfully said that the industrial conditions in this country have vindicated the sound common sense shown by all of us in the framing of that legislation. Everybody did not get his own way. As I have said before, this is the genius of our constitution which is based on the spirit of compromise.
The question of industrial pensions was mentioned, I believe, by the senior member for Halifax and by the hon. member for Cape Breton South. I am speaking now as an individual. I think the position taken by both of my hon. friends is a sound one, in that once you make an agreement with a private employer for a pension scheme, there is no guarantee that that business will be in existence ten years from now. I do not care who it is, there is no guarantee. A representative of one of the largest corporations in North
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America came to see me not long ago, as both sides have been coming to see me for advice or otherwise-and sometimes otherwise.


Stanley Howard Knowles: Which did they get?


Humphrey Mitchell: They got the best advice I could give them; and I might say that it does not cost them anything. You can get a great deal of advice that you pay plenty of money for; you can get advice of the character that you want to hear, and you pay well for it.


Stanley Howard Knowles: "If it is not hard to get, it is not worth anything" is the minister's motto.


Humphrey Mitchell: I agree with my hon. friend that there is no guarantee that the largest corporation in North America will be in existence ten years from now. There may be mistakes on either side that will send these companies into liquidation, and all their schemes will fall to the ground. Do not forget this fact also. No one yet has ever sat down and figured out, on the basis of the purchasing power of the dollar, whether the economy of North America can stand a pension plan of $100 a month. What I mean is this. I have been in trade unions when we set up insurance schemes, with all the best intentions in the world, and found that we reached a stage where the schemes were proved to be actually unsound in the light of experience. That is why I believe in the contributory system under the state itself.
I think that what we all should do is this. All these things must be paid for. I think the recipients should know the cost before they go into any undertaking of that description. In my judgment, there is a limit to taxation of the individual. I am not speaking as some people do. I am speaking of the individual and the producer; that is who pays. In all these schemes of social welfare, it is a matter of distribution of the national wealth. Following the suggestion of the hon. member for Lethbridge, if you get the old printing press out, you can guarantee any amount of pension; all you have to do is to turn the handle. But in so doing you reduce the real value of the pension that was promised when the scheme went into operation.
I cannot quarrel with the approach of the hon. member for York South to the question of education. I can truthfully say that I arrived in Canada on Wednesday evening, got a job on Thursday morning, and have never been out of work for one day since then. As I have said before, I may have been fortunate, but I came with a good trade in my hands. Somebody must do the work in a nation. Everybody cannot go to university. More fools come out of universities than ever came out of technical schools.

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Some hon. Members:: Hear, hear.


Some hon. Members:: Oh, oh.


An hon. Member:: Take that back.


Humphrey Mitchell: No, I will not take it back. The woods are full of what I call economic and financial crackpots, and in my judgment they got the world into more trouble than the working people ever did. One need only go to some of these international conferences and take a look at these international gypsies who roam around all over the world from conference to conference. That is why I am a great believer in technical education. Recently I was in Vancouver when they opened a magnificent technical school there. Strange to say, I opened a technical school in Victoria. I thought I would never live to see the day when a technical school would be opened in the city of Victoria. That just shows the development that has taken place; and in every province in Canada I think it has been quickened by the leadership given by the parliament of Canada in connection with technical education. My mind goes back to the establishment of the first royal commission on technical education. I knew some of the members of that commission which brought about the Vocational Education Act and made possible to a large degree the establishment of technical institutions in Canada.
In passing let me say also, if I may be permitted to do so in a humble way, that I was secretary of the national labour supply council, which worked out the principles underlying the war training that was given. After the fall of France in 1940 in co-operation with the municipalities and provinces, we set in motion a scheme that made possible the education, in a technical sense, of the men and women engaged in war industries and also those in the armed forces. I pay this tribute to the three divisions of government- the municipalities, the provinces and the dominion. I think it is only fair to say that in passing.
Most of the other matters will come up in detail on the estimates.


Joseph William Noseworthy: What about the increased grant?


Humphrey Mitchell: What grant is that?


Joseph William Noseworthy: The grant recommended by the council.


Humphrey Mitchell: Do you mean the resolution you read?


Joseph William Noseworthy: Yes.


Humphrey Mitchell: My hon. friend can rest assured that, as far as I personally am concerned, I will see that it is considered by the government. I will play my part in that regard. I think that is all I shall say at the moment. I have spoken in general terms of the basic principles raised by my hon. friends in this discussion. I do not know whether I have missed anything. If I have, perhaps they will remind me of it when we get into the items.


Gordon Benjamin Isnor: What about the question I asked?


Humphrey Mitchell: The hon. member is speaking of the longshoremen.


Gordon Benjamin Isnor: Yes.


Humphrey Mitchell: The question is being studied at the moment.


Gordon Benjamin Isnor: And favourable consideration is being given to it?


Humphrey Mitchell: Well-


Stanley Howard Knowles: Will the minister answer the other question asked by the senior member for Halifax? He asked whether the Department of Labour was drawing to the attention of other departments of government his recommendations with respect to the employment of people over forty.


Humphrey Mitchell: That is generally understood. I would say that I do not have to draw it to anyone's attention. Everybody knows the problem. I think it can be said that through the unemployment offices great strides have been made in an educational way to assist those older people in obtaining employment, and also the handicapped. We have gone a long way in the last ten years in that regard. May I say also that employers lack judgment when they will not employ a person because he is forty years of age. In most cases the person is married and has all the stability that goes with that. They are trying to raise a family. I hope that the discussion here today will raise the question in an educational way right across the dominion.


Mr.   Maclrmis@: I do not mind the Minister of Labour being vague in answering questions and in being adept at covering them up with aphorisms, maxims, cliches and all that sort of thing.


Mr. Graydon:: Those are big words.


Angus MacInnis: I have been associating with government departments for a long, long time. I know how far you can get in a government department if you have not a university education, in spite of all the fools that come out of the universities.


Gordon Graydon: It is contagious.


Angus MacInnis: You cannot come in contact with people without partaking somewhat of their character, although I hope I shall not get like the Minister of Labour. What I object to the Minister of Labour doing, and what he is not going to get away with, is this. When I draw to his attention the growing unemployment situation in the province from which I come, and which he cannot deny, he says that I am hoping for a bad unemployment situation throughout the country. That is a vile slander which I am not going to take from the Minister of Labour or from anyone else. I am just as good and as reasonable a citizen as the Minister of Labour, if I am not quite so comfortable, and my word and my character go just as far with those who know me as those of the Minister of Labour. I am just as much in favour of order and stability as he is. Perhaps I can see more clearly, because when I go home to my constituency and people call up and ask if they can come to see me to talk about their old age pension, the need for employment assistance or about a dozen and one different things that the poor need, I am so close to them that they can reach me without a telegram that I need not answer if I do not want to.


Humphrey Mitchell: I want to say this to my hon. friend. I think he took too much upon himself. I was casting no reflection on the hon. member for Vancouver East.


Angus MacInnis: A reflection should not be cast on anybody.


Humphrey Mitchell: I am speaking in the singular now, not in the plural.


Stanley Howard Knowles: Is that because of your university education?


Humphrey Mitchell: I have not done so badly without one.


Gordon Francis Higgins: I should like the minister to answer my question. Perhaps I did not frame it very well. Under the present scheme of work in Newfoundland will the workers be eligible for unemployment assistance? If so, how long will they have to work before they can get it?


Humphrey Mitchell: Newfoundland, of course, is under a special arrangement which was made when they came into union. The sum of $3 million was voted this year.


Gordon Francis Higgins: I thought it was $2 million.


Humphrey Mitchell: An additional million appears in the supplementary estimates, making $3 million. With regard to the public works
Supply-Labour
program to which my hon. friend refers, I have not a great deal of knowledge of it except what I have read in the newspapers. The hon. member can rest assured that the people who qualify under the regulations will get the benefit just as though they had made the 180 payments which individuals make in the rest of Canada.


Gordon Francis Higgins: They work one day free, and that is what I was asking about.


Wilbert Ross Thatcher: Perhaps the minister will answer my question. If he has answered it I did not understand him. Will he say whether the government will consider at the present time paying any portion of relief costs? If they will not, will they consider discussing the matter at the dominion-provincial conference? Or is it a closed subject at the moment so far as the government is concerned?


Humphrey Mitchell: My hon. friend is asking me to do something that I cannot do. The chain of correspondence is not between the federal government and the municipalities; it is between the federal government and the provincial government. There is nothing evasive about that. The municipalities are the children of the provincial governments. I could not tell him whether it is to be discussed at the conference. That conference has to do with the respective powers of the dominion and the provinces and the amending of the British North America Act. In that connection I have my own views on some things.


Wilbert Ross Thatcher: So far as the government is concerned it will not consider any portion of relief costs.


Humphrey Mitchell: I have not said that.


Wilbert Ross Thatcher: You are not paying it, then?


Some hon. Members:: Question.


The Deputy Chairman:: Shall the item
carry?


Wilbert Ross Thatcher: I should like an answer.


Humphrey Mitchell: I am not sticking my neck into that noose, and that is understandable.


Wilbert Ross Thatcher: I do not think it is an unreasonable question. Municipalities in Canada have substantial relief costs. They would like to know whether the federal government will pay some share. Will the minister say that the federal government is considering paying a portion of relief costs at the present time? Yes or no?


Some hon. Members:: Carried.


Wilbert Ross Thatcher: No.

Supply-Labour


Louis-René Beaudoin: May I point out to the hon. member that he has asked the question three times.


Wilbert Ross Thatcher: I know, but I have not received an answer.


Louis-René Beaudoin: The minister has answered three times. I do not know when we are going to stop.


Wilbert Ross Thatcher: Will the minister answer?


Alphonse Fournier: The hon. member is not satisfied with his answer.


Louis-René Beaudoin: Sometimes it is
difficult to obtain the answer that one would like to get.


Wilbert Ross Thatcher: Then I take it the minister will not answer.


Humphrey Mitchell: The hon. member can stand there until the resurrection, but I have answered him.


Wilbert Ross Thatcher: What was the answer?


Humphrey Mitchell: The answer is that I am not the government; I am merely a member of the government. I cannot speak for the government.


Wilbert Ross Thatcher: Cannot the minister say yes or no?


Humphrey Mitchell: As you get older you learn, my boy.


Mr. Black (Cumberland):: Has the minister any statement to make with respect to the unemployment situation in Nova Scotia and in New Brunswick as compared with a year ago? The impression I get from the information that comes to me is that there is a general deterioration in employment in Nova Scotia. In some sections the situation is alarming. What reports does the minister get from that part of Canada?


Humphrey Mitchell: As my hon. friend knows, there are spotty unemployment conditions in the maritimes. A special committee has been set up to study the matter. I can go that far with my hon. friend.


Percy Chapman Black: Are any plans under way to provide more employment in those spotty places in that part of Canada? Have any steps been taken to transfer the people who are out of employment in those spotty places in Nova Scotia to other parts of Canada where employment is available?


Humphrey Mitchell: I will answer the last question first. We have endeavoured to do that several times and have not been very successful. Apparently they like to live in Nova Scotia rather than in other parts of Canada, and I can understand that from what I have seen of some parts of the province.


[Stage Direction]
Item agreed to.
143. Annuities Act, $785,871.
Stanley Howard Knowles: The minister will recall that in April, 1948, the government passed an order in council changing the interest rate with respect to annuities which had the effect of increasing the cost to the purchaser. A little later in that session there was a debate on a bill to amend the Annuities Act. That debate was not concluded because in due course the Minister of Trade and Commerce moved the adjournment of the debate and it was not resumed.
During the course of that debate and also another debate with respect to the Annuities Act which we had on a motion to go into supply, the action of the government in raising the cost of annuities was opposed quite forcibly. On June 30, the last day of the session, the minister announced that at the next session a special committee would be set up to deal with the Annuities Act. When the next session came along I asked him if it was intended to carry out that promise. The answer I received was somewhat evasive. However, when I asked the same question at the beginning of this session there was nothing evasive about the answer. The minister's answer was quite clear and direct; he said no. I felt, and so said at the time, that that was breaking a definite promise because the minister had told us in plain language on June 30, 1948, that a special committee would be set up. It looked as though the promise to set up a committee grew out of the discussion on this matter and the dissatisfaction that was felt regarding the increased cost of annuities. I think it was unfair, I think it was a mistake, and it certainly was a broken promise for the government not to go ahead with the setting up of that committee. I am going to ask the minister now if consideration will be given to setting up such a committee at the next session.


Humphrey Mitchell: I do not think the hon. member should be too quick in talking about broken promises. A man may say a thing but in the light of experience it may turn out six months later that he was wrong. I have a recollection of what I said at the last session.


Stanley Howard Knowles: And the session before that.


Humphrey Mitchell: We went through an election and my hon. friend will remember that it was a very hot summer. I do not know whether he suffered from the heat, but I certainly did.


Stanley Howard Knowles: It was pretty warm out our way.


Humphrey Mitchell: I guess it was. My hon. friend will remember the reduction in the interest rate from 4 to 3 per cent. I was informed at that time by my actuaries that unless that reduction was made there would be a deficit of $150 million in the fund in the course of the next ten years. It was pointed out that at that time government bonds were paying 3 per cent and it was felt that you could not differentiate between two classes in the community. It was suggested that the insurance companies had made representations, but if they did those representations were not made to me.
It is a great responsibility to have under your direction trust funds belonging to other people. I quite appreciate that it might be argued that the people of Canada can pay if mistakes have been made, but I do not think that that is the right approach to it. I have always taken the view that these annuities should be on a sound actuarial basis as far as was humanly possible. There are many arguments that can be advanced in connection with the interest rate, but it must be remembered that the cost of administration is paid by the Canadian government. My hon. friend can rest assured that this question along with others is being studied at the moment.
This has been a short and heavy session and, in the very nature of things, first things have had to come first. As the government, we had to take the responsibility of introducing legislation which we thought could be passed during this short session. I hope it will soon be over; otherwise we shall have a Christmas tree on the floor of this House of Commons. I am hoping that we shall all get home for Christmas.


Stanley Howard Knowles: The minister did not answer my question. I asked about the committee; I did not ask him to defend the action taken by the government in the order in council passed in April, 1948. He has tried to defend that action, which I think was indefensible. I am willing to argue the point; I am also willing just to state that I think that action was wrong. But I am asking whether consideration will be given to setting up the committee which was promised on June 30, 1948.


Humphrey Mitchell: I would say yes.


Mr. McLure:: Are these annuities sold by salaried salesmen or commission salesmen? I notice there is an item of $324,000 paid as commissions.


Humphrey Mitchell: They are sold on commission.


Winfield Chester Scott McLure: No salaried men at all?


Humphrey Mitchell: No.
Supply-Labour


George Matheson Murray: Many people throughout the country know very little about this system of annuities and I wonder if the minister would not consider putting on an extensive advertising campaign. Most of the farmers throughout the country know nothing about this system of annuity. I suggest that the billboards, the radio and other advertising media be used.


Humphrey Mitchell: A total of $50,000 is being spent this year for advertising.


George Matheson Murray: I hope some of it will
be spent in the northwestern part of the country.


Douglas Scott Harkness: I endorse what has been said by the hon. member for Cariboo. I think much more could be done to make the people of this country aware of this annuities scheme. How successful has the scheme been during the past year? Has there been any decrease in the annuities sold due to the reduced interest rate? I notice there is a small increase in the appropriation but that would not necessarily indicate that more business is being done.


Humphrey Mitchell: Since the reduction in the interest rate there has been a decrease of around 50 per cent, speaking from memory.


Douglas Scott Harkness: That would seem to be sufficient indication that the reduction in the interest rate was a mistake as far as this scheme to enable people to secure their own old age is concerned. The committee which was asked for should certainly be set up early in the next session so that it could go into this matter and possibly recommend that the interest rate be increased or other measures be taken which would increase the popularity of these annuities. I think all will agree that the more people who take advantage of a scheme such as this and thereby look after their own future needs, their own old age, the less burden there will be upon the taxpayer and the state.


Humphrey Mitchell: I want to say this to my hon. friend, if I may, that at the moment at 3 per cent, with the administrative cost borne by the people of Canada, it is the cheapest form of insurance in the dominion.


Mr. Johnston:: I remember quite well when the interest rate was reduced. I was opposed to it then, and I am opposed to its continuing at a low rate now for the very obvious reason that it is the only form of investment in which the ordinary man has a chance to put his money with the hope of providing for his old age. There is no other form of investment available to the ordinary man. The ordinary man is not in a position to lend moneys on house mortgages. The mortgage

Supply-Labour
companies, loan companies and insurance companies are so organized that they can lend their moneys at 6, 7 and 8 per cent.


An hon. Member:: Where?


Charles Edward Johnston: Almost anywhere.


An hon. Member:: Five per cent.


Charles Edward Johnston: Come on out to the west.


Arthur Leroy Smith: It is 5 per cent in Calgary.


Charles Edward Johnston: The point is that these institutions are so organized that they can do that. At the moment I am not saying whether or not it is the right thing, although I can very easily do so. I think it is decidedly too high, but the point is that the ordinary man is not in a position to do that. Annuity investment was the only thing available to him in order that he might provide for himself in his old age. The very fact that the business in annuities has dropped practically 50 per cent, as the minister has just indicated, shows that the ordinary person has been deprived of that form of security. The very purpose of annuities was to give these people the assurance that they would be taken care of in their old age. Fifty per cent more people are going to be dependent on some form of charity in their old age because the government reduced the interest rate, and thus prevented them from taking out insurance in the form of annuities.
It is true they can purchase dominion government bonds and get 3 per cent, but it is not always easy to get hold of them. Government bonds do not go on paying interest in perpetuity for the safekeeping of the individual. Annuities were the only form of saving for such individuals, and now they have been deprived of that because the interest rate was lowered. I fully support having a special committee at the next session of the house to go into the question of annuities once again in order to see if it is not possible to reinstate the interest rate so that our people will be encouraged to invest in them to take care of themselves in their old age instead of having to rely on charity. I think it would be a fine thing if a committee were set up at the next session of parliament to go into the matter most thoroughly.


Mr. Brooks:: Business has decreased by 50 per cent, and I should like to ask the minister why it is that the number of employees in that branch of his department has increased from twenty-eight to thirty-seven. I notice that where there were five principal clerks before there are now six; where there were two clerks, grade 4, there are now five; where there were four clerks,

grade 3, there are now seven; where there was one clerk, grade 2, there are now six; and where there were two stenographers there are now three. I wonder why there has been such an increase in the personnel of the branch and at the same time a great decrease in the business.


Humphrey Mitchell: The answer to that is quite simple. We are trying to develop a group plan, and the staff was necessary to survey group insurance.


Alfred Johnson Brooks: Less work, more employees.


Humphrey Mitchell: Not necessarily.


[Stage Direction]
Item agreed to.
144. Fair wages, conciliation, industrial relations, industrial disputes investigations, including the administration of legislation relating thereto, and for activities re promotion of co-operation in industry between labour and management, $308,617.
Stanley Howard Knowles: When we were on the administration item I offered to omit my general speech, at the same time protecting my right to raise a couple of matters on this item which are related to it.


Arthur Leroy Smith: Are you going to make a general speech now?


Stanley Howard Knowles: No, it will be quite specific.


Arthur Leroy Smith: I was going to ask you to excuse me if you were.


Stanley Howard Knowles: No, I would much rather have my friend from Calgary West remain here. I assure him I shall deal with a very specific matter, and I think he will support what I say. The other day I referred to the fact that there are times when workers on federal government projects have difficulty in getting the full advantage of provincial labour legislation. I said I had a letter upstairs. The quickest way to deal with the matter is to read the letter.


Humphrey Mitchell: Could you outline it?


Stanley Howard Knowles: It would take longer to outline it than it would to read it. It is addressed to Mr. D. Swailes, M.L.A., at Winnipeg, and was written to him by the Hon. Charles E. Greenlay, minister of labour of the province of Manitoba. It is dated November 2, 1949, and reads:
Dear Sir:
I have your letter of November 1. Provincial legislation cannot bind the Dominion of Canada, hence the Manitoba Vacations with Pay Act cannot be "violated"-
The word "violated" is in quotation marks; that is an interesting use of that word.
-by military authorities in their employment of civilian personnel. It is my impression that some unions have been able to negotiate with the military authorities for voluntary recognition of benefits accruing under provincial legislation. Where the

dominion voluntarily undertakes to meet standards appearing in provincial legislation and regulation, the provincial authorities acquire no status to enforce these standards; therefore correspondence on the subject should be addressed to the dominion department concerned.
Yours very truly,
Charles E. Greenlay,
Minister of Labour
I recognize the constitutional position implied in that letter, but it seems to me that, in view of the fact we have reached the stage where we have fair wage provisions, the federal government should lean over backwards to see to it not only that such provisions are lived up to but that the rights accorded to workers in the provinces are fully enjoyed when they are engaged on federal projects. This has to do with work under the Department of National Defence. Surely it is the job of the Minister of Labour to try to persuade his colleagues, the heads of the other departments, to go the whole way in seeing to it that provincial rights accorded to labour are met when people are working on federal projects.
The particular matter in hand was the implementation of the Manitoba Vacations with Pay Act. Since it has been said today that the minister has not so much to do these days, I urge him to interest himself in the matter, and to try to get provincial rights accepted without question and recognized on all federal projects.


Humphrey Mitchell: I should like to point out to my friend that I have plenty to do. It is a misstatement of fact that I have not much to do.


Stanley Howard Knowles: I merely had in mind the fact that it was said several times to the minister this morning that he was not having as difficult a time as he had a few years ago.


James MacKerras Macdonnell: He said he had been lazy in the last year.


Stanley Howard Knowles: I thought it would be a good idea to keep him on his toes. I turn now to a matter concerning which I have had correspondence with the Minister of Labour. It grew out of my receiving from the president of the Winnipeg and district trades and labour council, Mr. Andrew Murphy, a copy of a letter which he wrote to the Minister of Labour on October 24. It is a long one so I will summarize it. The burden of the letter was that certain government bus contracts had been withdrawn from a union shop in Winnipeg with which contracts had been placed during the war years, and they were being given to a non-union shop in the same city. Mr. Murphy asked the minister to use his good offices to see that dominion government contracts were placed with union shops
Supply-Labour
paying good wages rather than with nonunion shops. I wrote the minister on October 26 endorsing the representations made by Mr. Murphy, and had a reply from the minister dated October 29 in which he said: Dear Mr. Knowles:
In reply to your letter of October 26, I would say that I have heard from Mr. Murphy on the subject matter of your letter and have acknowledged his letter and expressed my thanks for the trouble he has gone to in putting the matter before me.
I wish to also thank you. Of course you will realize that the matter does not come within the purview of my department. Nevertheless, having your views will be helpful.
Yours sincerely,
(Signed) Humphrey Mitchell
As the minister will realize, that letter did not tell me very much. I felt that at least he could have found out which department of government had placed these contracts, and I had dared hope he might go still further and try to persuade whatever department it was to continue to place contracts with the union shops concerned, as they had been placed during the war. So I wrote the minister again on November 2, in reply to his letter of October 29, asking this question:
Could you advise me which department it is that has placed these contracts?
The minister wrote me in reply on November 5:
Dear Mr. Knowles:
This will acknowledge receipt of your letter of the second instant with further reference to representations made by the president of Winnipeg and district trades and labour council concerning a government contract placed with an automobile and truck body plant in Winnipeg.
I am sorry that I am unable to inform you as to the department of government which has placed the contract in question. This department receives information as to the number and aggregate value of contracts for supplies and equipment awarded by the Canadian Commercial Corporation, post office, Royal Canadian Mounted Police, etc., which are subject to the government's fair wages policy in respect of such work. However, these reports do not contain any breakdown showing the exact type of contract or information as to the recipient firm which would enable us to identify individual contracts.
Yours sincerely,
(Signed) Humphrey Mitchell
I must say, Mr. Chairman, that I was disappointed and in fact annoyed that the minister, having had this matter brought to his attention and being the minister who should be interested in taking steps to see that the government's fair wage policy is lived up to, could not find out for me even after three letters, one from the president of the Winnipeg and district trades and labour council and two from me, which department had placed these contracts. It so happens that the letter I just read mentions the very corporation that did place the

Supply-Labour
contracts, as I have since found out. In order to find out, however, I had to go through the routine of putting a question on the order paper and in due course, today as a matter of fact, sessional paper No. 168 was tabled. The Secretary of State had to write to every department of government asking if they knew anything about these questions I had asked; and from this file of correspondence it turns out that the contracts concerned had been let by the Canadian Commercial Corporation.
If I am not mistaken that corporation comes under the Minister of Trade and Commerce. I am going to send this sessional paper across to the minister in order to save time. I asked about the contracts in question for the years 1947, 1948 and 1949, and the information makes it quite clear that in November of 1948 the last small contract was let to the union shop concerned-the one which had given good service during the war, and that beginning in November, 1948, substantial contracts began to be let to the non-union shop in question, which since that time have amounted to a total of $472,866.89.
I do not know what the minister's answer will be. He may tell me that I should not ask him to interfere in what is done by his friend the Minister of Trade and Commerce, but I remind him that he is the Minister of Labour; he is the man who should see to it that the fair wage principles that have been established are lived up to. As a trade unionist surely he should be interested in seeing to it that work of this kind is left with a union shop, as was the case previously. This was not an instance in which the Winnipeg and district trades and labour council asked that contracts be transferred from one shop to another. They were simply asking that the contracts be left where they had been all through the war years. I would appreciate it if the minister would deal with these matters now, for it does seem to me that he has some responsibility in connection with them.


Humphrey Mitchell: My responsibility extends this far. The Canadian Commercial Corporation is the agent which lets contracts for the Department of National Defence; and if my hon. friend will look up the contract in question he will find that it contains a fair-wage clause. I assume this other firm had the lowest tender. Let us be clear about that; there must have been a fair-wage clause in the contract. I do not know what the fair wage would be there, but when requested by other departments my department does set up fair-wage conditions in the area.
That is the answer to the first point. The second point had to do with holidays with

pay in the building trades, if I remember rightly. When the federal government lets a contract the provincial legislation prevails. If the men are employees of the federal government-that is, if they are labourers- they come under the regulations of the federal department and of course are not under the jurisdiction of the provincial government, any more than the employees of a provincial government are under the jurisdiction of this department.


Stanley Howard Knowles: There is a great deal of sweetness and light around here today, but I confess I do not feel that way. The correspondence I have read to the committee indicates that the minister did not know anything about this contract and was not even prepared to find out for me which department had let it. I was put to the trouble of having to place a question on the order paper, and the Secretary of State was put to the trouble of having to go through the routine of preparing the sessional paper that was tabled today. Now the minister rises in his place and says he knows there is a fair wage clause in that contract which was let by the Canadian Commercial Corporation. I remind him that the complaint made to him by the Winnipeg and district trades and labour council, which I supported, had to do with the fact that the shop which formerly had the contract was a union shop, paying not just the fair wages that are required by the provincial legislation as a sort of minimum but paying the trade union wage. From that shop the contract was taken away and given to a shop that may pay the fair wages required by Manitoba legislation, but wages which are less than the trade union wages in this industry. Frankly the minister's answer is not satisfactory.


Humphrey Mitchell: It may not be satisfactory to you, but I am not going to take that from you or anybody else. I believe the fair wage policy of the federal government has put millions of dollars into the pockets of the working people of this country. There was a fair-wage clause in the contract, and those fair wages are worked out by my department. I have an office in Winnipeg. If when my hon. friend wrote to me he had been clearer, he would have obtained the information he sought. May I say to him: We are dealing with thousands of these cases. All you need to do is call up my secretary, myself, or the deputy and give the industrial relations department the information you desire to have. You do not need to get a stenographer from the pool or your secretary to do it for you. There are no sharp practices in it, let us clearly understand that, if that is the impression my hon. friend is trying to create.

The lowest tender got the contract at the fair wages prevailing in the area. At the moment, I do not know the size of the area on which the fair wages are based. I do not know the strength of the organizations on either side, who are concerned in this matter. We set up the fair wages in that particular industry, and that is what must be paid. When those wages are paid, the lowest tender gets the contract. What would my hon. friend say if the contracts were let to other than the lowest tender?


Angus MacInnis: Mr. Chairman, the minister said that there was a fair-wage clause in the contract. I understand that there is a fair wage clause in every federal contract, but that does not mean that fair wages are paid for work done under that contract, unless someone sees to it that they are. Putting a fair-wage clause in the contract is one thing; that is merely a formality. Someone should make certain that the fair wages are paid. The fair wages in the locality-they are not necessarily the union wages-have to be determined. They should be determined, so that those people who are interested in that kind of labour in Winnipeg can get the information quite easily. They should be able to ascertain whether or not that fair wage is being paid on that particular work.
So far as I know, the Minister of Labour has not stated that the fair wage is being paid. He merely said that the fair-wage clause is in the contract, and that the government is going as far as it need go. Perhaps it is the responsibility of the people living in the community to see that the fair wage is paid.


Humphrey Mitchell: I have an organization in Winnipeg in charge of a conciliation officer. There cannot be any secrets about these things. All the people who are interested have to do is to see this officer, Mr. R. H. Hooper, the conciliation officer, and he will tell them. There cannot be any secrets about this sort of thing.


Stanley Howard Knowles: The minister has tried to make out that those of us who are interested in this matter have been vague, and have not stated in the proper way the information we require. I would remind him that the president of the Winnipeg district trades and labour council wrote him a full-page letter setting out the facts on October 24. Then, I wrote him a full-page letter on October 26 endorsing what had been said in Mr. Murphy's letter. Apparently the minister did not get in touch with the people in his department who might have given the information. He did nothing, and now he tells me I did not ask him in the right way.
Supply-Labour
As to his question to me, would I want the government to award the contract to a firm that had not submitted the lowest tender, Mr. Chairman, if the firm offering the lowest tender is a sweatshop, I would rather the government take the higher tender and make sure that good wages are being paid.


Humphrey Mitchell: Don't let that get abroad. I do not think there would be any government in this country that would consciously, irrespective of its political complexion, permit sweatshop conditions to prevail under its fair-wage policy. I mean, that is all very well for the boys back home, but you cannot get away with it here.


Stanley Howard Knowles: It's the boys back home who are complaining.


Humphrey Mitchell: If my hon. friend had been clear, or had said to me in the lobby that this is the information he wanted, he could have gotten it.


Stanley Howard Knowles: It was set out clearly in the letter I wrote.


[Stage Direction]
Item agreed to.
795. International labour conferences-further amount required. $15,000.
George Matheson Murray: Regarding the international labour situation, and the international labour office, I think that this house could very well consider whether the people of Canada are not establishing a standard of living which is probably the highest in the world; wage scales which are of the very highest; an eight-hour day; insurance plans of all kinds; relief projects for farmers and others; family allowances, and about everything that human ingenuity can devise to make security for the people. Yet, we have not got security. It occurs to me that, through this international labour office, we could quite well investigate the labour conditions in some of the countries which are our neighbours.
Coming as I do from the Pacific coast, I might say that we are especially interested in all those countries on the Pacific, such as Japan and China. The other day the Prime Minister of India was a guest in this chamber. Half the population of the world exists in that Pacific area, yet those countries have not an eight-hour day; they have not any minimum wage, nor any workmen's compensation. They have not any mothers' allowances, nor family allowances. Most of the people across the Pacific have the lowest standard of living the world has ever seen. I ask the Minister of Labour whether Canada is not proceeding rapidly to establish such

Supply-Labour
a lavish standard of social security in this country that we are becoming the envy of our Pacific neighbours?
We hear of Russia today, but Russia is merely the name for a great conglomeration of nations representing Asiatic races for the most part. It is for us in Canada to put our house in order, and not to go so far with social security measures that the rest of the world can never catch up with us nor share with us in a spirit of peace and goodwill among men.


Angus MacInnis: I have heard some amazing statements in this house during the time I have been here, but I have never heard anything to equal that made by the last speaker. Does that mean that this country is not to take advantage of its natural resources; the skill of its people and the technical knowledge that we have, to make as high a standard of living as possible for ourselves? Does the member for Cariboo consider that the working people of this country have too high a standard of living now?


An hon. Member:: No.


Angus MacInnis: Well, that is what he said; should we take steps to see that our standard of living is reduced. I do not think we have really begun to make use of the resources of our country to create the standard of living for our people which our resources could make possible. Anyone who takes the time to read the press from day to day, can note that some people in this country have a high standard of living; that is so without a doubt. But he can also note, that there are hundreds of thousands of people in this country who are living below a minimum standard of subsistence. Is the hon. member proposing that we ought to go slow on improving those low standards? As I said before, I have heard some amazing things here, but nothing ever to equal that.


Humphrey Mitchell: The hon. member for Cariboo was of course speaking for himself.


Angus MacInnis: Of course.


Humphrey Mitchell: Last year this government spent $700 million on social services. I can give the committee a breakdown, if they desire it. I have a vivid recollection of conditions when I was an apprentice boy, if hon. members will forgive this reference. We used to start work at six in the morning and work till 5.30 at night, with a half-hour for breakfast and dinner. We received the princely sum of seventy-five cents a week. To those people who want the good old days I say: Let them have them.


An hon. Member:: Including the hon. member for Cariboo.


Humphrey Mitchell: I do not think there is any limit to the possibilities of this nation. I think we compare favourably with most other countries in the world. We are among the best countries in the world having regard to the broad general standard of living that exists in Canada. I hope that we shall continue to progress in that direction. I say that with the utmost sincerity. If anybody wants the standards that obtain in Soviet Russia, let him have them. As I have said before, if low wages and poor social conditions are to be the yardstick of national prosperity, let these people go and live in the Orient and see what it feels like.


Clarence Gillis: The vote of $58,205 is for the
purpose of maintaining in the minister's department a small staff which handles the business of international conferences. I should like to find out who attends these conferences, how the personnel are selected and to whom they x-eport when they return.


Humphrey Mitchell: In the first place, as hon. members know, ever since I have been Minister of Labour I have endeavoured to get the co-operation of the organizations of both the employers and the employees on boards and with regard to everything in my department, in order to get a broad crystallization of their views; but of course, in the very nature of things, you cannot always accept their views. When a labour delegation goes to the ILO we get representation or an adviser from the four major labour organizations in Canada; they are the Catholic syndicates, the Trades and Labour Congress of Canada, the Canadian Congress of Labour and the running trades. Then on the employers' side we get representatives of the Canadian Manufacturers Association, the Canadian Chamber of Commerce, the construction industry and the railway industry. All these persons are nominated by the organizations concerned. I ask them for nominations. I draw the line at some people, however.


James MacKerras Macdonnell: University men.


Humphrey Mitchell: No. I draw the line at those people who do not believe in our way of life. That is the method that is used. What I have endeavoured to do since I have been in the ministry is to have an organization that looks after the international aspect of the affairs of the labour department.


Clarence Gillis: What I should like to ascertain is this. Recently there was a conference in Geneva?


Humphrey Mitchell: Yes.


Clarence Gillis: It was on safety in coal mines. That was the purpose for which the conference was called?


Humphrey Mitchell: Yes.


Clarence Gillis: They laid down a number of rules and regulations on the international scale?


Humphrey Mitchell: Yes.


Clarence Gillis: What I should like to know is where one could get that report. Will it be through the minister's department?


Humphrey Mitchell: If my hon. friend wants that report, I will get it if I have it.


Angus MacInnis: I thought the reports were distributed. I get them.


[Stage Direction]
Item agreed to.
150.	To provide for the effective organization and use of agricultural manpower, including recruiting, transporting and placing workers on farms and related industries and assistance to the provinces pursuant to agreements that may be entered into by the Minister of Labour with the provinces and approved by the governor in council-formerly included in demobilization and reconversion, $360,000.
Douglas Scott Harkness: Can the minister tell us just what agricultural labour is referred to in this item? I notice another item back a little farther, item 156, which apparently is for about $900,000 to provide for people coming into this country from other countries, placing them on farms and so forth. As I read this labour item, I wondered what this particular item was for. What labour does it refer to?


Humphrey Mitchell: I will tell my hon. friend what it is. It is to meet the emergent labour situation in the agricultural economy of the country. My hon. friend probably remembers that, particularly during the war years, we used to send a quarter of a million people from the agricultural structure into base metals and other industries during the winter months and back again into agriculture in the summer. Then there was a movement backwards and forwards across the country from the east to the west to coincide with the harvest season in the respective parts of the country. Then of course you had the berry picking and fruit season in the Niagara peninsula, the Okanagan valley and in other parts of the dominion. The expense is shared jointly between the provincial governments and the federal government.
I do not know whether we shall use it to any great extent this year. I can say this to my hon. friend. I do not know what we would have done without that co-operation between the respective governments in the movement of this kind of labour, particularly during the war years and also since the end of the war. A half million is in connection with the d.p.'s. They are landed at Halifax
Supply-Labour
and we pay their fares to the employers in agriculture, wherever they are going in the dominion.


Douglas Scott Harkness: That is the later item.


Mr. Cardiff:: I should just like to ask the minister if the government intends to carry on the same policy as it has carried on in the past with regard to placing these d.p.'s on farms.


Humphrey Mitchell: Yes.


Lewis Elston Cardiff: I think that policy is absolutely wrong. If you are going to bring d.p.'s out here as farm labour, then we want farmers, not people who merely call themselves agriculturists and stay on farms for just as short a time as they possibly can until they can find themselves a job elsewhere. In one year you cannot make a farmer out of a person of that calibre.
In the first place, they had no intention of farming when they came out here. The only reason they went out on the farm was that they could not get out here in any other way. I think the policy is absolutely wrong and the farmers of this country deserve better treatment than that. The farming population have put up with these men, and many of them are good men; I do not want to be misunderstood. But I would say that a number of the d.p.'s are absolutely no good to the farmers. The farmers are compelled to pay them good wages, and they are not worth their board. If the policy could be changed so that these men would stay on the farm for five years, many of them would never come out at all, because they would not stay that long. As long as you allow them to come out here and to stay on a farm for one year, you are going to get this class of immigrants, who are no good to the farmers, and we have to put up with them.


Humphrey Mitchell: I just want to say this in defence of the d.p.'s. In a big and broad way I think they compare favourably with the people who live in the Dominion of Canada.


Mr. Ferrie:: They are doing a good job.


Humphrey Mitchell: Let me say this also. If some of our people had gone through what these d.p.'s went through in Europe, they would not feel very happy. I have been to many of these camps in Austria and in Germany and have seen the people that came out of them. Our experience has been this. I shudder to think what would have happened to the beet crop last year if it had not been for the d.p.'s. They have fitted into our way of life in the same way as other people have. In every race, colour and creed you get people who do not fit in. My hon. friend may have been unfortunate. Our experience is

Supply-Labour
that there is a demand for them by the farmers, and by people who need domestics, and in other lines of endeavour, right across the dominion. That is the best yardstick that I know of.


Wilbert Ross Thatcher: I must say that I cannot agree with the hon. member for Huron North. Our experience in Saskatchewan has been almost uniformly good with these d.p.'s. Many farmers have asked me this question: . "How can we get some of these men to help us?" If there is one feature of any governmental policy that I can agree with, it has been their bringing in of these farm workers.
I think it was sensible. I think it was wise.
I have only one suggestion to offer the minister, and through him the government. I wish they would extend this program a little further and allow our Canadians of German descent to bring in their relatives from Germany. In the past, Canada's experience has been that the German people usually have made the best possible settlers. They have made good agriculturists. I think we are missing a bet if we do not take advantage of the huge pool of manpower in Germany at the present time. I can see the Chairman getting ready to call me to order. I wish I had ten or fifteen minutes to talk about the matter.


Louis-René Beaudoin: The hon. member is under a misapprehension.


Wilbert Ross Thatcher: Good. I feel rather strongly on this issue. Many people may not agree with me but I do believe that Canada is overlooking a source of future citizens, a source of immigration, by keeping out Germans, particularly those who have relatives in this country. Naturally they will have to be carefully screened. We do not want nazis. But we are in the process of building a nation, and the manpower that we choose today is going to determine, to some extent at least, the kind of nation we shall have in the future.
There are many hon. members in this house who are of German descent. Almost uniformly they have been good citizens. I could name I suppose eight or ten members in the house who are of German descent. I think most hon. members will agree that they have made a pretty good contribution. There are many reasons why we should change our present policy towards Germans.


Humphrey Mitchell: The hon. member should direct his remarks to the Minister of Mines and Resources. He is speaking of immigration; I am speaking of d.p.'s.


Wilbert Ross Thatcher: I must bow to that. I was afraid I would be called out of order. However, I have to go home tonight and I thought I should get it on the record.


Mr.   Baler@: I know that hon. members have their eyes on the clock. It is just about four minutes to six. I can promise the committee that I shall take not more than two or three minutes. I want to go on record and say that over the past few years it has been my privilege to be a member of the dominion-provincial farm labour committee in Saskatchewan. I want to take this opportunity to commend the government and the minister for the assistance that has been given not only during the war but in the post-war period. This work should be continued. I have a lot of figures that I shall not mention. I will not even look at them. We in the west have appreciated the assistance that has been given in bringing harvesters out to help us with our crops. Many men in my constituency and in the district where I live have come down to Ontario to help in the hay harvest. Not only did they help to harvest the hay but they learned of the problems of the farmers of Ontario. That in itself had a great deal to do with bringing the east and the west together. We have sent people of British Columbia to help to pick fruit. Many of the Metis, commonly known as half-breeds, in my constituency have gone into Alberta to help to take up the sugar beets. They have gone across the line and helped to take up the sugar beets there. This particular item is one that should be very carefully guarded and carried out in the future.


[Stage Direction]
Item agreed to.
Unemployment Insurance Act, 1940-
157. Administration, including expenditures incurred in connection with the activities of the national employment service as delegated by the Minister of Labour in accordance with section 88 of the act, $19,645,631.
Stanley Howard Knowles: Mr. Chairman, there are a number of points that one might talk about with respect to unemployment insurance, but I shall deal with only one at this time. I want to say at the outset that the hon. member for Cape Breton South expressed our views when he said that this was essentially good legislation to have on the statute books, and any suggestions that we make for improving it do not detract from that view.
I propose to deal with just one of the changes that could be made. I shall review it briefly because I have done it on a number of occasions. I am sure I need only to outline my contention to remind the Minister of Labour of the various points in the argument. It has to do with the case of a worker who becomes unemployed, qualifies for unemployment insurance benefits, and then while drawing those benefits becomes ill. As the minister knows, in that situation the worker's unemployment insurance benefits are cut off

even though there may still be no employment for him. I think that we have covered the ground in previous discussions of this matter. We have made it clear that although some of us want over-all social security, including health insurance, that is not what we are talking about at this particular time. At this time we are simply asking for a change either in the act or in the regulations, wherever it is necessary, to ensure to the worker who has qualified for benefits and is drawing them that he will continue to draw them even though he takes sick afterwards, particularly when there is no employment for him. In my view that last qualification should not be necessary. I mention it because when a worker has his benefits cut off that often happens to be the situation, namely, that the unemployment insurance office is still unable to supply him with work because he has taken sick, but when his wife goes down to collect the insurance she is told that her husband can no longer draw the benefits. That is the way it happens many times.
Perhaps as a result of this having been raised on the floor of the house a number of times during the past few years and also because it has been discussed in the various unemployment insurance advisory committees across the country, it has been discussed by the top level unemployment insurance advisory committee in Ottawa. My information in that connection grows out of a number of questions I put on the order paper and the answers given to them.
As a result of learning that the unemployment insurance advisory committee did give consideration to it and did refer the question to Mr. A. D. Watson, an actuarial adviser in the department of insurance, I moved a motion for production of papers, calling for the tabling of the report that Mr. Watson had made to the unemployment insurance advisory committee. That report may be found in sessional paper 61D, tabled on Friday, November 18, 1949. I had hoped that it would be a report dealing with this specific and rather restricted question which we have discussed so often on the floor of the house. It turns out, however, that Mr. Watson went considerably afield from that restricted problem and dealt with the whole question of sickness insurance. In my opinion that memorandum is not particularly helpful on the broad question of sickness insurance. In a footnote on page 1 of the memorandum to the committee, which is now sessional paper 61D, Mr. Watson makes his only reference to the particular question in hand, and this is what he says:
The idea of limiting sickness benefit to periods of sickness falling within periods of unemployment is not herein examined, for such a provision would
Supply-Labour
inevitably lead to serious anomalies and dissatisfaction and at the same time would open wide the door to fraud on the fund, mainly through arranging periods of unemployment so as to take in periods of actual or anticipated sickness.
I still feel that in asking the minister to consider this change we have a valid and strong case. I urge him to give this matter serious and favourable consideration. If the unemployment insurance advisory committee is to consider this matter and make recommendations to the minister I ask that they get some other advice because the footnote I have just quoted indicates a complete lack of understanding of the problem. I submit that the committee went to the wrong place when they got that advice. I urge the minister and his committee to get the best possible advice.
I am sure that hon. members who have thought about the kind of circumstance I have described will agree with me that when a worker becomes unemployed and qualifies for unemployment insurance, if he becomes sick while unemployed, his benefits should not be cut off, particularly, as is so often the case, when the unemployment insurance office has no employment for him.


[Stage Direction]
Item agreed to.
Progress reported.

Alphonse Fournier: With unanimous consent, I would move the adjournment of the house until eleven o'clock on Monday. Before announcing the business for Monday I would say that the two resolutions on the order paper in the name of the Minister of Agriculture and the Minister of Fisheries will not be discussed at this session. The first item of business on Monday will be the private bill in the name of the hon. member for Kamloops concerning crime comics. Then there is the motion in the name of the Minister of Mines and Resources which I am told is only a matter of formality; then Bill No. 220, to amend the Government Employees Compensation Act, 1947. This is only a small bill for the determination of compensation for injuries to government employees in Prince Edward Island. Then Bill No. 149, respecting bankruptcy; then Bill No. 216, to encourage the construction and conversion of vessels in Canada; then Bill No. 176, to amend the Income Tax Act and the Income War Tax Act. We expect that there will be a bill to amend the Customs Tariff Act introduced on Monday, but this has only one or two sections. As far as I know that will complete the program of legislation for the session. If we get through
26(34

Supply-Labour
those different items we will move to go into supply, post office if the minister is here or, in his absence, justice.
Motion agreed to and the house adjourned at 6.10 p.m.
[The following items were passed in committee of supply]:



DEPARTMENT OF LABOUR

[Stage Direction]
142.	Departmental administration, $735,337.
143.	Annuities Act, $785,871.
144.	Fair wages, conciliation, industrial relations, industrial disputes investigations, including the administration of legislation relating thereto, and for activities re promotion of co-operation in industry between labour and management, $308,617.
145.	Canada labour relations board-formerly included in demobilization and reconversion as the wartime labour relations board, $17,500.
146.	International labour conferences, $58,205.
147.	Labour Gazette and other publications authorized by Labour Department Act, $103,810.
Vocational Training Co-ordination Act, 1942-
148.	Administration, $44,100.
149.	Expenditures for vocational training under the Vocational Training Co-ordination Act, 1942, and agreements between the dominion and provinces approved by the governor in council, including projects for training of persons to fit them for gainful employment, youth training, apprenticeship training, vocational training at secondary school level, fore-manship and supervisory training and for training of members of His Majesty's forces and other persons to fit them for skilled armed service occupations and to authorize the Minister of Labour to enter into an agreement with any province with the approval of the governor in council for such training, as well as to provide for undischarged commitments of previous years, $3,762,000.
150.	To provide for the effective organization and use of agricultural manpower, including recruiting, transporting and placing workers on farms and related industries and assistance to the provinces pursuant to agreements that may be entered into by the Minister of Labour with the provinces and approved by the governor in council-formerly included in demobilization and reconversion, $360,000.
Demobilization and reconversion-
151.	To provide for expenses relating to placement of labour planning; co-ordination of stevedoring, including authority to continue the regional boards known as "advisory boards labour department" to act in an advisory capacity to the Minister of Labour for the co-ordination of the work of the various divisions of the Department of Labour and the immigration branch of the Department of Mines and Resources, $127,420.
152.	Technical personnel division-administration (formerly bureau of technical personnel and placement of university graduates), $38,640.
153.	Vocational training for discharged members of Canada's armed forces: payments to the provinces for capital expenditure for vocational schools, buildings and equipment; and to provide for dominion contributions towards replacement by a province or municipality of machinery used in war emergency training; including undischarged commitments of previous years, $3,515,000.
Wartime labour relations board-now included in ordinary estimates.
154.	To provide the necessary financial requirements to complete activities for the relocation, maintenance and welfare of persons of the Japanese race in Canada and to carry out the provisions of agreements entered into with the provinces in reference to the foregoing and to continue the appointments of necessary temporary assistance required in administering the project, $220,350.
To provide for the effective organization and use of agricultural manpower, including recruiting, transporting and placing workers on farms and related industries and assistance to the provinces pursuant to agreements that may be entered into by the Minister of Labour with the provinces and approved by the governor in council-now included in ordinary estimates.
155.	To provide for payment to the national film board for educational films for exhibition, $24,000.
156.	To provide for expenses that may be incurred in the arranging for and the movement of workers from outside Canada to work on farms and other essential industry in Canada when Canadian labour is not available to meet the need; including costs connected with the supervision and welfare of persons already immigrated to Canada under former authorized labour movements and administrative expenses connected therewith, $895,675.
B-Unemployment Insurance Act, 1940-
157.	Administration, including expenditures incurred in connection with the activities of the national employment service as delegated by the Minister of Labour in accordance with section 88 of the act, $19,645,631.
158.	Government's contribution to the unemployment insurance fund, $18,750,000.
Demobilization and reconversion-
159.	To provide for the transfer of labour to and from places where employment is available in agriculture and industry and expenses incidental thereto, $225,000.
A-Department-
678.	Fair wages, conciliation, industrial relations, industrial disputes investigations, including the administration of legislation relating thereto, and for activities re promotion of co-operation in industry between labour and management-further amount required, $21,000.
B-Unemployment Insurance Act, 1940-
679.	Administration, including expenditures incurred in connection with the activities of the national employment service as delegated by the Minister of Labour in accordance with section 88 of the act- further amount required, $182,720.
680.	Government's contribution to the unemployment insurance fund-further amount required, $250,000.
681.	To authorize and provide for payment of unemployment assistance to residents of Newfoundland who have been employed in employment that would have been insurable employment within the meaning of the Unemployment Insurance Act, 1940, if it had been employment in Canada, or who have been employed in insurable employment within the meaning of the said act, for at least thirty per cent of the working days within the period of three months preceding their loss of employment or thirty per cent of the working days within the period since the date of union, whichever period is the longer, and who lose their employment within six months prior to the date of union and are still unemployed at that date, or who lose their employment within a two-year period after that date, such assistance to be payable during a period of six months from the

date of union or from the date of unemployment, whichever is the later, on the same scale and under the same conditions as unemployment insurance benefits under the said act and regulations made thereunder, and on rates based on the individual's wage record for the three months preceding his loss of employment; but no person shall receive such assistance and unemployment insurance benefits concurrently; and such assistance shall be deemed to be a benefit or payment within the meaning of section sixty-seven of the said act; the governor in council is authorized to make such regulations as he may deem necessary to administer this vote and give effect to the purposes and terms thereof, $2,000,000.
A-Department
795.	International labour conferences - further amount required, $15,000.
Annuities Act-
796.	To authorize repayment during the current or any future fiscal year out of unappropriated moneys in the consolidated revenue fund of moneys heretofore or hereafter paid to the receiver general of Canada on account of the purchase of annuities under the Government Annuities Act which are not so applied, $1.
B-Unemployment Insurance Act, 1940-
797.	Administration, including expenditures incurred in connection with the activities of the national employment service as delegated by the Minister of Labour in accordance with section 88 of the act-further amount required, $500,000.
Supply-Labour
798.	To authorize and provide for payment of unemployment assistance to residents of Newfoundland who have been employed in employment that would have been insurable employment within the meaning of the Unemployment Insurance Act, 1940, if it had been employment in Canada, or who have been employed in insurable employment within the meaning of the said act, for at least thirty per cent of the working days within the period of three months preceding their loss of employment or thirty per cent of the working days within the period since the date of union, whichever period is the longer, and who lose their employment within six months prior to the date of union and are still unemployed at that date, or who lose their employment within a two-year period after that date, such assistance to be payable during a period of six months from the date of union or from the date of unemployment, whichever is the later, on the same scale and under the same conditions as unemployment insurance benefits under the said act and regulations made thereunder, and on rates based on the individual's wage record for the three months preceding his loss of employment; but no person shall receive such assistance and unemployment insurance benefits concurrently; and such assistance shall be deemed to be a benefit or payment within the meaning of section sixty-seven of the said act; the governor in council is authorized to make such regulations as he may deem necessary to administer this vote and give effect to the purposes and terms thereof- further amount required, $1,000,000.
[Stage Direction]
Monday, December 5, 1949 CANADA FORESTRY ACT

Colin William George Gibson: Mr. Speaker, I rise on a question of privilege. I wish to bring to the attention of the house a Canadian Press dispatch dated the 1st of December, published in the Hamilton Spectator on Friday, December 2, with reference to the Canada Forestry Act. In the report it states:
Resources Minister Gibson, sponsor of the bill, said the federal government, which gained "considerable revenue" from Canada's forest resources, recognized no obligation to take a part in conservation.
I may say, as hon. members all realize, that the whole purpose of the act is to enable the dominion government to assist the provinces in the conservation of our forests.



SYDNEY H. PAWLOWSKI NAMED WORLD OATS KING AT CHICAGO GRAIN AND HAY SHOW

Mr. John Decore (Vegreville):: Mr. Speaker, I rise on a question of privilege. Some two weeks ago I stated in the house that one of my constituents, John T. Eliuk, had obtained the highest award for oats and barley at the royal winter fair in Toronto. The house will be pleased to know that once again a distinction has been conferred upon the constituency of Vegreville. One of its residents, Sydney H. Pawlowski, a twenty-one year old farmer of Spedden, Alberta, was named world oats king at the Chicago grain and hay show a week ago last Saturday. I might mention that in 1940 his brother, Paul Pawlowski, won the oats championship.
I am sure hon. members will be glad to know, since most of my constituents are engaged in farming, that they are doing exceptionally well. Only a few weeks ago Jacob F. Melenka, of Warwick, was awarded the title of master farmer.



HOUSING


Hon. Douglas Abbott (Minister of Finance):: Mr. Speaker, I desire to table further correspondence on rent control, with the premiers
of Manitoba, Saskatchewan and Quebec. If someone will ask that the correspondence be printed in Hansard, and the house so desires, I shall be glad if that is done.


Mr. Speaker:: I am not sure whether the previous correspondence was printed as an appendix to Hansard.


Douglas Charles Abbott: It was.


Mr. Speaker:: Is it the pleasure of the house that this correspondence be printed as an appendix to Hansard.


Some hon. Members:: Agreed.
(For text of correspondence, see appendix, pages 2754-57.)



CUSTOMS TARIFF


Douglas Charles Abbott: for leave to introduce Bill No. 221, to amend the Customs Tariff.
He said: Mr. Speaker, although this bill stands in my name, it is being presented at the suggestion of my colleague the Minister of National Revenue (Mr. McCann). Its principal purpose is to permit secondhand motor vehicles to be admitted into Canada in exceptional cases. Instances of hardship have arisen affecting immigrants and others who enter Canada and are not able to bring their cars into the country. The department is anxious to be given authority to admit such cars in special cases.
Motion agreed to and bill read the first time.



CRIMINAL CODE


[Stage Direction]
The house resumed, from Friday, October 21, consideration in committee of Bill No. 10, to amend the Criminal Code (portrayal of crimes)-Mr. Fulton-Mr. Dion in the chair.
On section 1-Portrayal of crimes by pictures in magazines, etc., tending to induce violence.
Stuart Sinclair Garson: Mr. Chairman, members will recall that when the bill was last before the house I pointed out, in the course of my remarks on the

Criminal Code
motion for second reading, that the amendment moved by the hon. member for Kamloops would merely bring crime comics as paragraph (d) under section 207 of the code, paragraph (a) of which makes the publication and sale of obscene literature an offence; that the prohibition of the publication and sale of obscene literature by this section had not deterred the publication and sale of that sort of literature to any great extent, and therefore that without more determined prosecution the mere adding of crime comics to this section would not likely solve the problem. Then I suggested that in drafting an enforceable amendment, the most valuable suggestions we could secure would be those from the crown prosecutors and law enforcement officers of the provincial governments, whose responsibility it is to enforce the Criminal Code; and it was arranged that we should leave the bill in committee in order that I might secure the views of the provincial attorneys general on this matter.
Perhaps the best way to indicate to the committee the questions I laid before the attorneys general would be to read the relevant portions of a letter I wrote to one of them, in this case the attorney general of Nova Scotia. All the letters were the same; and this one reads:
Re: section 207 of the Criminal Code.
As you know, a bill has been introduced in parliament to amend section 207 of the Criminal Code by adding a paragraph directed against those "crime comics," so-called, which tend to corrupt young persons.
Then I go on and point out the way section 207(a) of the code now reads, and say that the bill would add the following paragraph, indicating the wording of the amendment introduced by the hon. member for Kamloops. Then I say:
The other parts of the section are not material for the purpose of this letter.
Agreeing with the principle of the bill-which was introduced by the hon. member for Kamloops, Mr. E. D. Fulton-but not being satisfied that it would achieve its object in its present form, I suggested upon the second reading of the bill that it be held in committee in order to obtain the suggestions of the attorneys general as to the form of amendment that should be passed in order to make section 207 as enforceable as possible in respect both of obscene books and of "crime comics."
One method I indicated was the deletion of the words "knowingly, without lawful justification or excuse" from the section as amended by the addition of paragraph (d), but I also pointed out that this method would place a heavy burden upon many booksellers and ought not to be adopted until we were satisfied that the section could not be used effectively to remedy the abuses complained of while these words remained; e.g., by proceeding against the publishers who could not as plausibly plead ignorance as the booksellers. My suggestion was made upon the understanding that the bill would be passed in as effective a form as possible before prorogation of the present session, and my motion was agreed to accordingly.

Another method that has since occurred to me is to raise a presumption, rebuttable or otherwise, against the publisher, of knowledge as to the character of the book or magazine, but in the case of the retail vendor to retain the necessity of proving such knowledge affirmatively.
I would therefore be most appreciative if you would give this matter your consideration and, after such consultation as you deem necessary with your prosecuting officers, let me have your advice and views upon the following matters:
(a)	Can section 207, as amended by the bill and without deletion of the words "knowingly, without lawful justification or excuse," be enforced effectively?
(b)	Can section 207 as so amended be enforced effectively if such words are deleted?
(c)	If the answer to (a) is no, can you suggest an amendment that would make the section so enforceable without eliminating the sense of these words?
(d)	Your views generally as to how the section could be best framed from the standpoint of en-forcibility.
Although this letter gives you, I think, the substance of the matter, I am enclosing a number of copies of the bill, No. 10. and of the Hansards containing the speeches. My remarks begin at page 1036 of volume 89, No. 26, Friday, October 21, 1949.
In view of the pressure of time I should be most grateful if you could let me have a reply as early as may be, and not later than November 15 if that is possible.
The attorneys general of the provinces obviously gave this letter careful and in some cases even searching attention, and their replies and suggestions have been extremely valuable. From these replies, which are lengthy and which have been tabled, the following points emerge-this is really a summary of the main points established by the attorneys general in their replies:
1.	Only one province, Ontario, questions that crime comics have a tendency to induce youthful persons to violate the law or to corrupt the morals of such persons.
2.	Quebec and Saskatchewan expressly state that they are in accord that action is necessary. New Brunswick, Prince Edward Island, Alberta, British Columbia, Newfoundland and Manitoba, while not saying it in express words, leave no doubt as to their sympathy, by the manner in which they have replied.
3.	The consensus is that section 207 as amended by the bill could not be enforced while the words "knowingly, without lawful justification or excuse" remain, and that these words should be deleted. At least four provinces, Alberta, British Columbia, Newfoundland and New Brunswick, however, make a distinction in this respect between obscene books on the one hand and crime comics on the other, or between publishers on the one hand and vendors on the other. The ideas put forth in this respect are: (a) That knowledge should not have to be proved against a publisher either in respect of crime

comics or obscene books. A publisher may fairly be presumed to know the nature of his publication, (b) Knowledge should not have to be proved against even the retailer of crime comics. These are not like novels, where an evil interior may be unsuspected within an innocent-looking cover. Crime comics are conspicuous and their general nature well known, and retailers may fairly be expected to handle them at their own risk, (c) Knowledge should have to be proved against a retail book vendor, because it would be unfair to hold him absolutely responsible for all the books upon his shelves.
4.	At least two provinces, British Columbia and Manitoba, which submitted two of the most thoughtful returns coming from the provinces, make the point that it may be practically impossible in any particular case to prove beyond a reasonable doubt that a particular crime comic tends to induce to crime or corrupt morals. They therefore suggest that the words included in the amendment proposed by the hon. member for Kamloops "thereby tending or likely to induce or influence youthful persons to violate the law or to corrupt the morals of such persons" be deleted, and that parliament thereby take the responsibility of saying that crime comics do have that effect, and remove the point from the field of argument.
I also received expressions of opinion from members of the Criminal Code revision group. Mr. Justice Gerald Fauteux, of the Quebec superior court, answered in the negative the first question, whether the law could be enforced with the words "knowingly, without lawful justification or excuse" included.
It was the view of Mr. Justice Fauteux that the deletion of the words "knowingly, without lawful justification or excuse," would in theory facilitate enforcement but would-in his view, of course-be unfair to retailers and others, and thus might lead the courts to compromise on the facts.
Mr. Justice Fauteux, on (c) and (d), submits a draft which omits the words "knowingly, etc.," but makes it a defence, except as regards the production of such matter, to prove that the defendant did not act knowingly or had a lawful justification or excuse; and requires consent of the attorney general to commence prosecution.
Judge Robert Forsyth, the senior judge of the county court of the county of York, questions whether crime comics contribute to juvenile delinquency. While in the justice department he made a survey of a number of juvenile court judges, and never secured any such evidence. This was only a telephone 45781

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survey. He believes phonograph records should be included. The most effective control would be by way of provincial licensing of distributors. He questions whether crime comics are within the words "thereby tending or likely, etc.," in the draft paragraph (d). Nevertheless he considers (d) as satisfactory as possible.
H. J. Wilson, K.C., deputy attorney general of Alberta, expressed a view which was the same as that expressed officially by that province.
Fernand Choquette, K.C., of the Quebec bar, answers (a) "no", and (b) "yes". Under (c) he would make it an offence to act negligently as well as knowingly, and the same with regard to (d).
H. P. Carter, K.C., director of public prosecutions for Newfoundland, answers (a) "no" and (b) "yes", but believes it would place bona fide vendors in a difficult position. He thinks that, without injustice, the words "knowingly, etc." could be dropped with reference to all handling of crime comics.
Now, Mr. Chairman, in the department we have tried to produce an amendment which reconciles all these points of view, so far as we are able to do so. First of all I should like to move the text of the amendment; and then if I may, sir, explain its provisions and endeavour to relate them to the replies we have received from the provinces. I move:
That clause one of the bill be amended by striking out the first three words, "subsection one of," in line one, and by striking out all the words in the clause following the word "is," in line three and substituting therefor the following:
. . . repealed, and the following substituted therefor:
207. (1) Everyone is guilty of an indictable offence and liable to two years' imprisonment-
Perhaps I should interject here that the method we have followed in dealing with this matter is that where we wished to make changes in the substance-the wording of this section has been on the statute book for a number of years-we have tried, in the course of these changes, to redraft the whole section, incorporating the changes in substance and at the same time improving the language all the way through. We are trying to do a workmanlike job on the whole section.
If the amendment which I am now moving carries, section 207 will read in this way:
207. (1) Everyone is guilty of an indictable offence and liable to two years' imprisonment who
(a)	makes, prints, publishes, distributes, circulates or has in possession for any such purpose any obscene written matter, picture, model, or other thing whatsoever, or

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(b)	makes, prints, publishes, distributes, sells or has in possession for any such purpose, any crime comic.
(2)	Everyone is guilty of an indictable offence and liable to two years' imprisonment who knowingly, without lawful justification or excuse
(a)	sells, exposes to public view or has in possession for any such purpose any obscene written matter, picture, model or other thing whatsoever;
(b)	publicly exhibits any disgusting object or any indecent show; or
Now, that is already in section 207; we are Just retaining it.
(c)	offers to sell, advertises, publishes an advertisement of, or has for sale or disposal any means, instructions, medicine, drug or article intended or represented as a means of preventing conception or causing abortion or miscarriage; or advertises or publishes an advertisement of any means, instructions, medicine, drug or article for restoring sexual virility or curing venereal diseases or diseases of the generative organs.
(3)	"Crime comics" means in this section any magazine, periodical or book which exclusively or substantially comprises matter depicting pietorially the commission of crimes, real or fictitious.
(4)	No one shall be convicted of any offence in this section mentioned if he proves that the public good was served by the acts alleged to have been done, and that there was no excess in the acts alleged beyond what the public good required.
(5)	It shall be a question for the judge whether such acts are such as might be for the public good, and whether there is evidence of excess beyond what the public good required; but it shall be a question for the jury whether there is or is not such excess.
(6)	The motives of the accused shall in all cases be irrelevant.
(7)	It shall be no defence to a charge under subsection one that the accused was ignorant of the nature or presence of the matter, picture, model, crime comic or other thing.
I should like, Mr. Chairman, to comment upon these changes. Subsection 1 makes everyone guilty of an indictable offence and liable to two years' imprisonment who publishes any obscene matter, or who publishes any crime comics. In that connection it is not necessary for the crown to prove that he did it knowingly, or that he did it without lawful justification or excuse. Under subsection 7 the accused cannot raise the defence that he was ignorant of the nature of what he published, or of its presence in his possession.
I think I should clear up a point there which might be overlooked. In order to contravene the act, the possession of this obscene matter by the publisher has to be related to his act of publishing, because the section says: "who makes, prints, publishes, distributes, circulates or has in his possession such material for any such purpose." This section could not be relied upon if someone planted an obscene book in someone's office and then prosecuted him. He would not have it there for the purpose of publication, so he would not be guilty.
[Mr. Garson.l
Subsection 2 makes everyone guilty of an indictable offence and liable to two years' imprisonment who knowingly, without lawful justification or excuse, sells obscene matter. This protects the retailer who does make a sale of that sort innocently.
Then the subsection dealing with exhibiting any disgusting object, and the subsection dealing with these advertisements of means, instructions, medicine, drug or other article intended for the prevention of conception, etc., are in the section now. There is no change in substance at all in that regard.
The definition of crime comic has been changed from that suggested by the hon. member for Kamloops, by striking out from his definition the words which make it necessary for the crown to prove that the crime comic upon which the prosecution is based tends to corrupt the morals of youth, and so on. Our advice from the law enforcement officers is that if that is included in the definition of crime comics, it will be an almost insuperable barrier for the crown to surmount, because it will be exceedingly difficult to prove that the specific crime comic upon which the prosecution was based would necessarily tend to corrupt the morals of youth. The advice that we get from those who have the responsibility for enforcing this legislation is that unless this parliament is prepared to make an outright prohibition of crime comics, it is not likely that we shall be able to enforce this section.
Subsection 4, which is to the effect that no one shall be convicted of any offence under this section if he can prove that the public good was served, and so on, is already in the section, and there is no change in substance in that regard. The same is true of subsection 5, and the same is true of subsection 6, that the motives of the accused shall in all cases be irrelevant.
The only other provision new in substance that is being added is subsection 7, which provides that it shall be no defence to a charge under subsection 1 that the accused was ignorant of the nature or presence of the matter, picture, model, crime comic or other thing. The effect is this: not only does the crown not have to prove knowledge or absence of lawful justification or excuse on the part of the accused as part of the crown's case against him in order to establish a prima facie case, but after the crown has put in its prima facie case the accused cannot come into a court and establish a defence of that kind.


Mr. Fulton:: I should like to take the opportunity a little later of saying some words

in connection with the title of the bill, to which, if this amendment carries, there will be a consequential amendment. Under the circumstances, therefore, perhaps I may be excused if I do not make any extended remarks at this particular stage, beyond saying, with regard to the operative part of the amendment itself, that the minister was good enough to show me the amendment a day or two ago and to explain to me the purpose which it is designed to achieve and the thought with which it had been drafted. I want to express my appreciation of the minister's courtesy and co-operation in making the copy available, and to say at this time, if I may put it this way, that the amendment is perfectly acceptable.
I want to make this further comment, however. My main interest and object in introducing Bill No. 10 was to deal with crime comics. To that extent I purposely omitted any reference to the part of the legislation dealing with the question of obscenity, or obscene literature, and so on; because it seems to me that subject is much more difficult to deal with than the question of crime comics. I feel that what has been done in combining the two in the one bill-that is, the general treatment of the question of obscenity and the other sections of the code-is acceptable. It is probably correct to say that obscene literature presents as great a problem as the crime comics, if not greater, and I am happy indeed that the minister and the government should have taken this occasion to deal with the two subjects under the one heading.
I wish to make this comment:	While the
amendment in toto is acceptable, and I am pleased indeed that the minister has taken this opportunity of amending the bill in this way to make it more effective, yet I think he will appreciate my position if I say that naturally enough I can in effect take no measure of responsibility for the part of it which deals with obscenity. I say that merely in the light of the fact that when I introduced the bill my major concern was with the question of crime comics. However, as I have said, the minister has shown me the amendment. I am not enough of an expert in the matter to say whether the amendment is entirely free from objection, but I believe that the part of it dealing with crime comics is even more enforceable now than it was in the form in which I originally presented it to the house.
Since that is so, and in view of the careful consideration and treatment which have been given to the matter by the minister and by the attorneys general whom he consulted, and the fact that these amendments conform to 45781-171J
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their recommendations, I have no hesitation in saying that as an amendment to my bill it is acceptable to me.


Mr. Diefenbaker:: It is difficult to follow this matter without having the bill before us. I endeavoured to make a few notes on the various sections, and there are one or two observations I should like to make.
First I think that the house in general and the country will thank the hon. member for Kamloops for having brought this matter of crime comics to the attention of the house. The acceptance of his suggestion and the resulting creation of public opinion in favour of action at this session of parliament deserve the commendation of hon. members. The minister should be commended on the difficult task he assumed when he endeavoured to find a means by which crime comics and obscene and pornographic-I am not sure of the word, certainly not "literature"-could be prevented from depraving the morals of our young people.
That the subject is a difficult one was obvious in what the minister said. The representation of the attorneys general indicated that they too felt that it was a difficult matter for parliament to become the judge of the morals of literature or of publications, such as these, the distribution of which we are endeavouring to prevent.


Stuart Sinclair Garson: I do not want to interrupt my hon. friend, but I am sure he does not wish to convey the idea that parliament is any more a judge of these matters now than it ever has been.


John George Diefenbaker: No.


Stuart Sinclair Garson: Parliament has always prohibited the publication of obscene matter, and in doing so it leaves to the courts the question whether a given matter is obscene or not. It does not set itself up as a judge.


John George Diefenbaker: I am not in disagreement with that. But in these amendments parliament is in effect actually saying:	We judge
that the possession of these things, crime comics, to begin with-


Stuart Sinclair Garson: Only crime comics.


John George Diefenbaker: Yes-have a depraving influence. It is always difficult for legislation to maintain freedom of speech and at the same time prevent the exercise of licence by those who would destroy morals for monetary benefit.
I support the general principle, but I am concerned about how far we should go in our desire to accomplish the end we have in view, without making the law too strict or too stern and therefore cause juries under such circumstances to do what they have done throughout the years, namely, to acquit.

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As I understand it, the amendments are divided into two sections. First, it is no longer necessary to prove that the publisher knowingly and without lawful justification or excuse published, or had in his possession for the purpose of publishing, lewd, lascivious, obscene matter or crime comics. I can see no objection to that, because it does away with the defence that I believe should not be available to the publisher, namely, that he did not know what he was publishing or what would be published when the document was finally sent out.
The last subsection is one that I find it difficult to support. It says in effect that it shall be no defence that the publisher did not know the nature of or the presence of the matter complained of. Is that not what the last section means? I find it difficult to bring that provision into line with section 1, subsection 1. There the offence is having in his possession for the purpose of printing or publishing. Having "in his possession" implies that the crown must, in doubtful cases, either directly or inferentially, establish that he knew the nature of or the presence of the matter complained of. If you intend to prohibit the publisher from having books, documents and crime comics which are lewd or detrimental to morals, then I submit that in order to close the door you have to remove the words "has in his possession".
May I cite an analogous case? In the early days in Saskatchewan under the temperance act provision was made for an offence which consisted of having intoxicating liquor in a stock of soft drinks. A Chinese resident in that province who had nothing to do with the liquor being in a stock of soft drinks-in fact the crown finally had to admit that the liquor had been planted there-was charged with this offence and convicted. The case went to the court of appeal in Saskatchewan, which said he did not have it in his possession because he did not know of its existence. But that is not the offence. The offence is that he did have in his stock of soft drinks intoxicating liquor.
Here we have, as I see it, an endeavour to get around this difficulty, by saying in section 1 (1) that' the publisher is liable only if he has in his possession; and then you add a paragraph which states that it shall be no defence that he did not know the nature or the presence of the matter. I submit that these two sections, particularly as they apply to the word "presence", cancel out one another. In my view, so far as subsection 7 is concerned, to make it consistent with section 1 (1) it should read that it shall be no defence that he did not know the nature of
the matter, rather than "the presence of the matter". I pass this suggestion on to the minister.
Sometimes, in a desire on the part of a legislature to close all the doors, other doors are opened. The definition of a crime comic is one which exclusively or substantially comprises matter depicting crime, either actual or fictitious. I believe in this instance the door is left open to a continuing stream of crime comics in this country-not crime comic books which exclusively or substantially comprise matter depicting crime, but do so only partly. Would it not be a defence to turn out a ten-page crime comic book containing four pages of crime comics and six pages of the ordinary comics the youngsters enjoy? With four pages only of crime comics there would be an absolute defence under the section as it now stands. I suggest that consideration be given to rewording it. It is not for me to suggest what the rewording should be, because I have not had a chance to prepare a proper amendment. Perhaps the words "a crime comic is one the general purpose of which is either in whole or in part to depict crime either actual or imaginary" might cover it. I am trying to offer some suggestions so that the law may be workable; for I know what crime comics do.
I see that one of the agents of one of the attorneys general has said he is not sure of what the effect would be. Well, I am not inclined to refer to personal matters, but, about a year ago after the session of parliament was over, some parents came to me to speak to me about their son, a boy of nine, brilliant, with a high intelligence quotient. He became a kind of boss and ran his gang. The gang committed a great deal of crime, and he kept up to date through the reading of crime comics. When I had him in my office and talked to him I said: "In the event of your being acquitted, you have a great future ahead of you. I am sure you really got into these difficulties unintentionally, and you will not have any such difficulty again". His answer was: "You were hired by my parents as my mouthpiece". In other words he spoke most contemptuously of any suggestion on my part that what he had done had been a mistake on his part. I believe that attitude is general. Young people of fifteen or sixteen years cannot help being enthusiastic about the possibility that they, too, as a result of misdemeanours and wrongdoings, may achieve the degree of newspaper notoriety-indeed sometimes adoration, as it is set out in some of the crime magazines- which some regard as an element of greatness.
While these amendments are stern, and wipe out some of the things upon which our

heritage and freedom are based, in the administration of criminal law they can be justified only on the ground that obscene and lascivious books, which have no purpose other than that of monetary gain derived from their lewdness and indecency, are available. These books seek not to elevate and encourage ambitions on the part of the young, but rather to lead the minds of the people to a belief that wrong is indeed right. I believe these amendments will permit the enforcement of the law to an extent greater than heretofore has been possible.
Sometimes in respect of matters of this kind we remove the onus of proving knowledge or intent. The feeling in parliament generally, I believe, and certainly the feeling throughout the country, as indicated by the correspondence one receives, is that these things should be prohibited, but there should be assurance that in no case will any publication that is for the public good, or that is necessary or advantageous to science, literature or the arts, be prohibited.
I bring these suggestions to the attention of the minister to the end that this law may be more than merely an attempt to prevent wrongdoing; but that it will place in the hands of the agencies entrusted with enforcement of the law an instrument which will make certain that that which is so detrimental to the welfare of our younger people, and indeed to all who read, as well as to the manufacturers, producers and distributors, may be prohibited. There can be no profit from the sale of material which elevates crime and obscenity to the point where they become the literature of many people.
I commend the hon. member for Kamloops, as well as the organizations throughout the country which have joined together to make possible these amendments, for what they have done. It is an indication of what private members of parliament can do when they bring to the attention of the House of Commons proposals which are supported by public opinion.


Mr. Church:: Mr. Chairman, having sat as police commissioner for many years with the late Colonel Denison, senior magistrate, and senior judges of York county-Judge Winchester, the late Judge Morson and others-I have seen cause and effect in relation to the subject matter of this bill. For a great many years magistrates and judges of the county of York have called the attention of the House of Commons to this matter. The law in this regard is in effect a penal statute. Police commissions, judges and magistrates throughout Ontario have had a great deal of difficulty with it, and so have the judges
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and magistrates of other provinces. For four or five years my sister, now deceased, was the national president of the Imperial Order of Daughters of the Empire. They approached the police commission concerning the cause and effect of this particular statute.
I notice in the bill there is no definition of the following words, "prints, publishes, sells or distributes any magazine," and cause and effect in relation thereto have not been dealt with. As this is a penal statute, you must read into Bill 10 the various sections of the Criminal Code set out in the marginal notes.
We used to have a leading textbook in the law schools entitled "Hardcastle on the Construction of Statute Law". You will have to look at Bill No. 10 and read into it the definitions in the Criminal Code. I think it is admitted that the definitions set out in Snow's "Criminal Code of Canada" are automatically read into the sections of the Criminal Code. I have the fourth edition of "Craies on Statute Law", edited by W. S. Scott, wherein he gives the definition of a penal statute. At page 453 he says:
It is said that penal statutes must be construed strictly-i.e., that "when the legislature imposes a penalty, the words imposing it must be clear and distinct." "Unless penalties are imposed in clear terms they are not enforceable." In Tuck v. Priester, Lord Esher, M.R., said, with reference to section 6 of the Copyright Act, 1862:	"We must be very
careful in construing that section, because it imposes a penalty. If there is a reasonable interpretation which will avoid the penalty in any particular case, we must adopt that construction." "Where various interpretations of a section are admissible it is a strong reason against adopting a particular interpretation"-
That is what is proposed in this bill.
-"if it shall appear that the result would be unreasonable or oppressive." But this rule must be read as applicable, if at all, only to penalties of a quasi-public character-
That is what this is.
-and not to acts creating penalties for infractions of general law which are in the nature of purely civil remedies. The rules laid down in Heydon's case for the construction of obscurely penned statutes are there said to apply to "penal" as well as to other statutes: In Attorney General v. Sillem, Pollock, C.B., said:	"All the penal statutes there
alluded to, and in all the places where that doctrine is to be met with, are statutes which create some disability or forfeiture; none of them are statutes creating a crime, and I think it is altogether a mistake to apply the resolutions in Heydon's case to a criminal statute which creates a new offence. The distinction between a strict construction and a more free one has, no doubt, in modern times almost disappeared, and the question now is, what is the true construction of the statute? I should say that in a criminal statute you must be quite sure that the offence charged is within the letter of the law."
This rule is said to be "founded on the tenderness of the law for the rights of individuals, and on the

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plain principle that the power of punishment is vested in the legislature, and not in the judicial department; for it is the legislature, not the court, which is to define a crime and ordain its punishment." As to enactments creating crimes, the rule was adopted in favorem vitae in respect of treason and capital felonies, and extended to misdemeanours.
I have seen the cause and effect of the subject matter of the bill, and I must compliment the hon. member for Kamloops for having called the attention of the house to this particular feature of it. I know that fathers and mothers come before magistrates and judges in criminal courts meeting weekly and plead for light sentences for their children because the parents say the cause and effect of the subject matter was the main reason why they got into trouble.
In the city of Toronto for many years past there have been publications that are not fit to read. Notwithstanding differences of opinion throughout Canada, I believe the subject matter is one which requires the grave attention of the house before we adjourn. The minister should be sure that the cause and effect of the subject matter of the bill have been dealt with adequately and appropriately in order to help the large number of youths of the city of Toronto and the country generally who have been getting into trouble. Many of them have been carrying arms, and so forth. It has been going on for a long time. It is a serious matter for the country, and I hope that we shall adopt some regulation or rule to check it here and now.


Mr. Applewhaiie:: For the information of hon. members generally, I should like to ask whether it is the intention to reprint the bill with the proposed amendment and distribute it so that we will not have to wait until the statutes are printed in order to have copies for distribution.


Stuart Sinclair Garson: Does my hon. friend mean copies for distribution in connection with this debate, or for public distribution?


Edward Turney Applewhaite: That would depend on whether it is the desire to conclude the debate today, in which case it would not be available. If the debate is to be adjourned, however, it would be a great help if it could be distributed.


Stuart Sinclair Garson: I think the desire certainly was to conclude the debate today. That was why I took the text of this amendment to the hon. member who had introduced the original amendment, to make sure it met with his approval. The hope was that if he did approve, the house would accept it and put it through. As to the printing of the bill

separately for the purpose of law enforcement, and so on, that is a matter which will be taken into consideration.


Edward Turney Applewhaite: I believe all hon. members have had requests from many organizations for information, and if as soon as possible the bill in its final form could be made available for distribution, it would be a great help.


Stuart Sinclair Garson: For that purpose it would be possible for us to get some mimeographed copies which hon. members could incorporate in their letters to their constituents.


Edmund Davie Fulton: Would it be possible or desirable to have the bill as amended printed in full for third reading, so that as finally carried it will include the amendment the minister has moved?


Stuart Sinclair Garson: I think we can have the bill printed in a form which will be of assistance to hon. members, but I should not think it would be necessary to hold up third reading for that purpose. We are in committee now. It is permissible for us to advance the bill another stage and give it third reading. Under the circumstances I think it desirable to do that. In the meantime we can proceed to have it printed in a form in which it can be sent out by hon. members to their constituents who have shown a great deal of interest in this matter.


Mr. White (Haslings-Pelerborough):: In his
amendment the minister is repealing the present section which deals with the publication and distribution of obscene material and introducing an entirely new section 207. If I understood the amendment correctly, in it the minister more or less defines what is a crime comic; but he said there was no definition of obscene literature, that this was a matter for the courts to decide. It is in connection with obscene literature that I wish to make a few remarks.
Within the last three weeks an important decision was given by an Ontario court on a charge laid under section 207, involving the publication and distribution of an obscene novel tending to corrupt morals. While it is too early for the case to be reported in the law reports, there is a fairly full report in the Toronto Globe and Mail and the Toronto Telegram of November 24. If the minister ever had any doubt on the point it will have been removed by the opinions expressed by the various attorneys general, which would indicate that so far as future prosecutions for the publication and distribution of obscene matter are concerned there is no hope of securing a conviction.


Stuart Sinclair Garson: No hope because of what?
Because of this judgment in Brantford?


George Stanley White: No;
because there is no way of legally defining what is obscene literature. In this case the judge is reported to have said, "In my decision I am guided by the laws of this country", which of course is quite correct. Then in his judgment as reported in the newspapers he makes this pertinent observation:
Who am I to say whether this book or any other book is obscene?
The book complained of was one of the twenty-five cent paper novels, distributed by the American News Company, that can be purchased at any bookstore throughout the country. After reading about this case I obtained a copy of the book and read it. It describes no less than eight serious crimes that are recognized by our Criminal Code. Two of them, rape and murder, are punishable by death. Other serious crimes are punishable by long terms in penitentiary, and may also carry the lash. The book sets out other minor crimes, such as the use of narcotics, theft, seduction and crimes of the kind.
I suggest it would be fair to ask any hon. member of this house to read that book and decide whether it is the sort of novel he would be content to have his teen-age son or daughter read; and then consider what possibility there would be of crown counsel in future obtaining a conviction which would prohibit the circulation of this type of literature throughout the country. This book emphasizes the absolute contempt of youth not only for parental control but for all law. All the boys mentioned in the book are of teen age; and one of the most damaging things about it, in my opinion, is the way the twelve-year old boys regarded these older teen-agers as heroes and models. Both boys and girls looked upon them as the ideal type to follow.
In this case the defence relied upon the contention that the author had attempted to portray realism. I looked up the dictionary definition of the word "obscene", and it says: "Offensive to chastity, delicacy or decency; expressing or presenting to the mind or view something that decency, delicacy and purity forbid to be exposed; offensive to morals; indecent; impure; offensive to the senses; foul; disgusting; of evil omen." The definition of an obscene publication is, "an indecent publication which, whether true or false, tends to deprave and corrupt."
With this definition in mind, may I say that here is a book which describes in detail
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a public dance held by this teen-age gang at which a twelve-year old girl was raped; a book which would indicate that the seduction of girls of teen-age is an everyday affair; a book which describes in detail how two boys attending school, who had a quarrel with their teacher, returned to the school to assault and murder the principal; a book which describes in detail the murder of one teen-age boy by another. These are just a few of the things in this book. If, as the defence contended, this was an attempt to portray realism, I think the minister must be convinced that any crown counsel in future will find it impossible to convince a court or jury that a book is obscene.
In this case the case for the prosecution consisted of the evidence of a police officer of the city of Brantford, who laid the charge, and who produced the book and read some passages from it. One passage he read dealt with this club of teen-age boys, and described how they imported a number of prostitutes for the evening. Another passage described the raping of the twelve-year old girl. The other witness for the prosecution was the principal of the vocational school, who described the book as literary sewage. The defence called a well-known literary critic of a large Toronto paper, a well-known columnist of the Globe and Mail, and Mr. Edwin J. Lucas, from New York, who is described as a crime prevention society director. These three witnesses gave evidence that this book had literary value, and that, in their opinion, it was an attempt to portray realism. The book in their opinion was not obscene.
The judge in his decision, as reported in the paper, points out clearly that the responsibility of proving the charge and bringing home a conviction rests with the crown. He says further that it is not enough merely to produce a book and say that it is obscene. The judge says that he has to weigh the opinion of all these witnesses, not in numbers but in content, and he is satisfied that the crown has not proven the charge. The judge goes on to say this:
I have definite convictions on a matter of this character, but I am not going to inject my own views. It is my job to decide whether the crown has proved guilt according to the charge.
The judge further stated that while he would not have such a book in his library, nor would he advise having such a book in the school library, on the evidence presented to him he must render a verdict of not guilty and declare that the book is not an obscene book.

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It is difficult, Mr. Chairman, to understand how this government could appoint a commission to inquire into what we call Canadian culture, and at the same time permit the publication and distribution in wholesale quantities of a series of books of this type. This is only one. I spoke to a distributor of these books, and he said, "Oh, well; this book you are speaking about is nothing; you ought to read so-and-so." We have a commission on culture, and yet one of our courts has decided that under our laws this type of book, which the school principal describes as literary sewage, can be distributed in wholesale quantities throughout the dominion.
I do not need to point out that the question of juvenile delinquency is a matter of concern to every community from one end of this country to the other. Nor do I need to mention that those of us who are lawyers can recall cases that have come to our attention in which a boy or a girl becomes involved with the law, and then in your office you see the tragedy of the parents being at a loss ;o understand how their boy or girl could possibly be mixed up in this matter. Frankly I say to the minister that while his definition of crime comics may stand up, so far as the amendment dealing with obscene literature is concerned I doubt that there will be any improvement in the future. In view of this judgment it is likely there will be even a wider and more wholesale distribution of this type of material.
While the accused may engage the best lawyers in the country, as was done in this case, and contend that it is realism and has literary value, I do not think any member of this house or any parent in Canada would say that this trash is the sort of thing we want our Canadian boys and girls to read.


Mr. Knight:: I have expressed before in this house the opinion that generally speaking I am in favour of the freedom of the individual in regard to his reading. Censorship, even if it were efficiently conducted, is a difficult thing. First of all, there are differences of opinion as to the definition of "obscene". There is little general agreement in regard to this matter. Censorship, even if it is carried on with ability, depends for its effectiveness upon the co-operation and endorsement of the public.
I believe that the public has already indicated its support of this bill. It is a difficult problem to give to the adult individual freedom in the matter of his reading, and at the same time guide our young people and protect them from the literary malnutrition from which they suffer at the moment. My own approach has always been a positive

one. You cannot easily prohibit people. I believe the best way is to substitute something which is good for something which is bad. I mean by that the encouragement of good literature and good libraries. I would draw to the attention of the government the desirability of encouraging the building up of good libraries. I would urge, too, the removal of all restrictions, particularly sales taxes and customs duties, upon good literature coming into this country.
While I am on the subject, I might mention the matter of textbooks. I have a letter from the Minister of National Revenue, in which he says that textbooks "on the curriculum", -whatever that means-are admitted free. I believe that is true, but it is not true of all educational books. Friends of mine who are university professors have complained bitterly that they are not able to get certain books they need-not those which are definitely assigned to the student in relation to subjects on the curriculum, but reference books. Anyone who has any knowledge of teaching knows that wide reading on the part of a man who is trying to teach a subject is more important to him-it may not be to the student-than the textbooks themselves.
I believe that in this day and generation every government has some responsibility in this matter. I know it is a disputed question. I have discussed it with newspaper editors. If you ask the average newspaper editor what his responsibility is in the matter of leadership in the reading of good literature the discouragement of slang, and that sort of thing, he will say it is not his business to run a Sunday school. He is working for a businessman, and his business is to run a newspaper and to sell that newspaper-in other words, to give the public what it wants. I decry that point of view. I do not know whether that is the attitude of the government in this matter-to give the public what it wants-or whether the government feels it has a responsibility of leadership; that it should try to induce the people to move along lines that are in their best interests. It is a question I do not wish to discuss any further here, because if I did so I might get into a lengthy argument.
I know that the assistance the government might give to university professors and teachers, by throwing off certain taxes, would cost money. It would cost the government money to support libraries. But may I refer to another letter I received, this time from the Secretary of State, in reply to a question I asked him the other night with regard to the printing bureau. He tells me that it costs $18,240 to print the divorce evidence which as members we receive

Criminal Code
carefully sealed in a brown envelope, and which, as regularly as we receive it, we throw into our wastepaper baskets. I suggest that there is at least $18,000 which might be earmarked for a better class of reading. There is a difference between government acquiescence and government leadership.
In this matter of the selection of literature there must be somewhere in the department -and I think it should be in the department of customs and excise-men who have some knowledge of these things, whose literary taste-and I draw attention to that expression-is above reproach, and who have some wide knowledge of literature as well as experience in the matter of mere living.
Having stated my objection to censorship generally, I want to say this about these particular crime comics, these things which the hon. member who spoke before me said are realistic, but which are not. There is a difference between a thing which is essentially realistic, as a part of a serious novel, and a thing which is made deliberately pornographic and filthy so that it may become a best seller or appeal to moronic minds.
There are children of ten, twelve, fourteen and fifteen who have not the experience in living to enable them to distinguish the good from the poor in that particular regard. Since this is a matter having to do with youth, I am giving to this bill my hearty support. I should like to congratulate the sponsor upon the courage and initiative he has shown in bringing it to the house. I should also like to congratulate the government upon adopting that bill with the necessary amendments. It has my hearty support, and I believe it will have the hearty support of the country as well.


Mr. Shaw:: Hon. members are aware of the fact that from time to time over the years the hon. member for Macleod has raised his voice in protest against the distribution of crime comics and obscene literature. Were he not unavoidably absent from the house this morning, I am sure his voice would be heard again. He would do as he did earlier in this session; he would compliment the hon. member for Kamloops upon bringing Bill No. 10 before the house. He would also compliment the minister and the government upon the action which they are taking now.
A few weeks ago my leader, the hon. member for Peace River, advanced what he considered to be a positive program to deal with this subject. In supporting the bill as amended, the hon. member for Macleod would naturally be speaking for all of us in this group. We are pleased that this action is being taken, and we will support the measure.


Mr. Fulford:: Last spring, Mr. Chairman, it was my privilege to attend a public speaking contest held in the town of Brockville; it was a contest among the school children of Brockville and district. The debate was won by a twelve-year-old girl whose topic was the harm or value of comic books. Subsequently this little girl won a contest, sponsored by the Ontario trustees and ratepayers association of eastern Ontario, participated in by public schools representing all counties in eastern Ontario, including the city of Ottawa. It was a great privilege for me to listen to this little girl, because a more stinging indictment could not have been made by anybody than was made by Nancy Howard of Brockville. The substance of her short discourse was the fact that all comic books are not harmful, but unfortunately the younger mind was not in a position to tell the difference between what is good and what is bad. She had a number of them pasted on a large board, and with a pointer she indicated those that she considered bad.
Let me tell you, Mr. Chairman, that later I went to the trouble of going to a bookstore and buying some of these publications, and I can testify that she was right; not only was it not fit literature for children, but it was not fit literature for adults. She pointed out then the comic books which depicted biblical stories, historical stories and nature stories, and which were good. I certainly think that if a child of twelve-and I was later assured by her teacher that this work was done entirely on her own initiative, without any help-can point to the danger that exists in the material on the bookstands and in the bookstores of Canada, it is indeed time that we in the House of Commons woke up.
I want to commend the hon. member for Kamloops for his initiative in bringing this bill forward for discussion and consideration. It should have been brought forward years ago. It is one of these things that has just grown. When comic books originally came out, there was no harm in them, but they were not good literature. The harm has crept in until today we must take a decided stand and see that these books are swept from our bookstands and bookstores.
There is little more I need to add, except a comment that may be of some interest. Yesterday I was speaking to the principal of one of Brockville's public schools, who told me that within the last few months the public library has been thrown open to the school children, and that the teachers take their classes there and instruct them in what are good books for the younger generation to read. As a result he says that there has been a marked decrease in the number of crime

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comics in the possession of the children; that the children have now become aware of the dangers that exist, and that they are asking for such books as "Tom Sawyer", "David Copperfield" and the better-known books on which the generation to which we belong were brought up. Unfortunately the parents are generally the last to discover what the child is doing or what he is reading. Until the time comes when there is an act with teeth in it, there will be the danger of these books getting into the wrong hands and influencing the minds of children when they are in their formative period; and in spite of what teachers, parents and others may do, there will be developed in children crime instincts which can do nothing but harm to young Canadians who should be given every opportunity to develop their minds properly rather than along the sadistic lines depicted in these books.


Daniel (Dan) McIvor: Mr. Chairman, I think I was the first to support the hon. member for Kamloops when he brought in his amendment. I spoke then just as vigorously as I knew how, within my experience and intelligence. We are grateful for this amendment, and we are grateful that the minister did not carry it over to the next session. What standard shall we use when we are judging that a thing is right or wrong, whether it is a book or anything else? The standard is that set up by Mr. Speaker when he asks the blessing of the Master Teacher upon our deliberations. If we adopted that standard, many books would be removed from our parliamentary library which emphasize the breaking of the seventh commandment.
I support the minister in this amendment. I am pleased to know that the hon. member for Kamloops has his support. We should join heartily in co-operation to make these amendments a success.


George Alexander Drew: The amendment before us is one which could be of great importance in dealing with an extremely serious situation. The hon. member for Hastings-Peterborough has indicated the difficulty of obtaining convictions under the law as it now stands, and in view of judgments which have been given, he has indicated his concern about the possibility of obtaining a conviction even under the amended section. It seems that it will not be possible to determine how far this new section will be effective until cases have actually been tried. If weaknesses are found, there seems no doubt that hon. members will be ready to support such further amendments as may have the effect of preventing the sale and distribution of this type of literature.
The section as it will now be framed has to do with both the obscene literature which was covered previously, and also what are described as crime comics, defined in the amendment as a magazine, periodical or book which exclusively or substantially comprises matter depicting pictorially the commission of crimes, real or fictitious. I hope that those who are called upon to deal with alleged offences under this amendment will not seek to find ways of avoiding the imposition of penalty, but will direct their minds to the clear pattern that is emerging from influences which produce an extraordinary similarity in crime amongst the members of the younger generation.
It has often been said, and with great truth, that juvenile delinquency is largely parental delinquency, and in the perfect society, which has not yet been reached, undoubtedly parents would be able so to influence their children as to prevent their reading books of this kind, no matter how readily available they might be. But we know as a matter of actual experience that if these books are available they will be read, and if they are read, they have a certain influence. Only two weeks ago a mere boy of sixteen was sentenced in one of our courts to be hanged, and the evidence demonstrated clearly that his mind had been influenced by books of this kind. We have had all too clear evidence of the fact that this type of publication is often dealt with merely on the basis of a fine distinction between what is adult literature and what is extremely harmful poison to the minds of our young people.
We can expect there will be those who sincerely question the withdrawal of the word "knowingly" from the first part of section 207 as amended. There will be a genuine concern about that; but it should be pointed out that this section deals only with those who make, print, publish, distribute or circulate, and it is not too much to ask those who have to do with the sale of these books to exercise some control over what they do sell. With regard to those who place these books or circulars in the hands of retailers, it is not going beyond the general principles of our law to say that since they accept the benefits of that distribution they should accept also the responsibility for it. After all, under the Criminal Code those who handle firearms, poison or explosives; those who start fires, and so forth, are charged with some responsibility for the thing they do, and the same principle should apply here.
The hon. member for Kamloops deserves great credit for the persistence with which, as a private member, he has continued to bring before this house the need for an

amendment of this kind. I am sure that when this legislation passes it will be commonly known as the Fulton bill. I hope it will, because it will be a tribute both to his discernment in choice of a subject for presentation as a private member, and also to his persistence in furthering the legislation. In this instance hon. members will undoubtedly feel that the Minister of Justice and the government, having accepted the suggestions that have been made, having sought the advice of the provincial attorneys general and others, and brought in further amendments to strengthen the section, have co-operated effectively with the private member who introduced the measure. This is an excellent demonstration of the manner in which our system of parliamentary procedure should work.
Amendment (Mr. Garson) agreed to.
Section as amended agreed to.
On the title.


Edmund Davie Fulton: There is a consequential
amendment to the title, arising out of the fact that the amendment moved by the minister has just been adopted.
First let me express to the committee, and through the committee to the house, my appreciation of the support which has been given to this bill. I do not believe it is an exaggeration to say that when the House of Commons passes this bill it will have made a great achievement in the interests of Canada -and it is not the achievement of any one member or of any particular group of members. I express my sincere appreciation of the generosity of those who have spoken in pointing out that I introduced the bill in the first instance, but it represents an achievement of the House of Commons as a whole. All hon. members have united in a spirit of friendship and of urgency to accomplish something of great benefit to our whole country. If it were necessary to do so, I believe one could substantiate this statement by reference to letters that all hon. members have received. I have received many communications from humble men and women, parents who were desperately concerned with the welfare of their children, and conversations I have had with those parents moved me greatly. I know the deep anxiety with which mothers and fathers have viewed this matter, recognizing in it a frightful threat to which their children have been exposed. It was an exposure which was beyond parental control, because these crime comics were available in such large numbers and in so many places. I know that this anxiety of parents has played a large part 45781-172J
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in securing the extraordinary degree of unanimity with which this proposal has been received in the house.
In the past I have not hesitated on occasions to be a severe critic of the government. I take this opportunity to say, with all the sincerity I can muster, how much I appreciate the fact that on this occasion we have been working together for a common purpose. I express unreservedly my appreciation of the manner in which the government, particularly the Minister of Justice, have set themselves the task of accepting and improving upon the bill offered, and facilitating the passage of the legislation. I am profoundly impressed by the great and abiding strength and inherent fineness of our democratic system, in the light of the fact that this proposed legislation has been accepted and the purpose achieved, not, as I say, by any one group or individual using pressure or force in any form of manoeuvring, but quietly and co-operatively in the ordinary course of parliamentary procedure. In that procedure hon. members on both sides of the house, those holding official positions, such as the minister, and the private members, have worked together to produce the desired result. It makes me proud to be a Canadian, and doubly proud of the privilege of being a member of Canada's House of Commons, where this immensely powerful aspect of the democratic process has been demonstrated- and all this in marked contrast to the type of procedure which is not the strength but rather the weakness of countries governed by other methods.
As a private member may I presume finally to speak for all private members in all parts of the house-and I believe I do-by saying that we are immensely cheered, not only by the acceptance of this legislation, but by the fact that even at a time when governmental problems weigh upon the House of Commons and the country, my colleagues and I in the house should have been given an opportunity to contribute something positive to the country we all love so much, and which we are all so anxious to serve and to preserve as the homeland of decency and right; for this is really the purpose of the bill.
I move, seconded by the hon. member for Lake Centre (Mr. Diefenbaker):
That the title of the bill be amended by deleting therefrom the words in the parenthesis, "portrayal of crime."


[Stage Direction]
Amendment agreed to.
Title as amended agreed to.
Bill reported, read the third time and passed.
[Stage Direction]
Questions

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

Mr. Hodgson:: 1.	Are payments under the Family Allowances Act made before proof of eligibility is established?
2.	If so, what was the total amount of such payments made during the years 1948 and 1949 to date?
3.	What amount, if any, of the above payments have been found to be overpayments in accordance with the terms of the act?
4.	On what authority were family allowance payments made prior to proof of eligibility being established?
5.	What action, if any, has been taken to recover overpayments made under the Family Allowances Act?
6.	How much has been recovered to date?


Mr. Martin:: 1.	Payments under the Family Allowances Act are made on the basis of a declaration signed by both parents and stating the birth date of each child. Since this declaration is subject to later verification through provincial vital statistics records, or otherwise, it is not considered necessary to delay payment of family allowances until verification is made. (There are a number of points of eligibility for family allowances, including residence in Canada, attendance at school, maintenance by the parent, age under sixteen, and so forth. However, it is assumed in replying to this question that the inquiry turns on verification of birth dates.)
2.	Payments made during 1948 and 1949 (to October 31) before verification of birth dates, may have been made with respect to accounts originating in 1945, 1946 or 1947, as well as in 1948 and 1949. While all accounts go into pay prior to verification of birth dates, the process of verification began early in 1946 when most provincial records became available and has progressed steadily since. Currently more than 96 per cent of all birth dates claimed have been verified, and more than 99 per cent of all those for which provincial birth record indexes have been supplied to family allowances offices. To determine now what payments were made in 1948 and 1949 in respect to children with birth dates not yet verified in those years would require the detailed analysis of over 1,800,000 family allowances accounts, covering over 4 million children. This would require many months' work.
3.	Of the payments made in 1948 and 1949 on behalf of children whose first payments of family allowances began in those years, total overpayments arising because of birth date errors amount to $163, all of which has been recovered. In addition there remains as of October 31, 1949, a balance of $92,325 due to

overpayments arising from birth date errors made in respect to children who were registered for family allowances before 1948. Of this amount, all except $5,371 is recoverable either by deductions from continuing accounts or by collection from the payee.
4.	The Family Allowances Act does not require that the age of a child must be confirmed from provincial vital statistics records before payments are made. Family allowances payments are made on the basis of a declaration completed and signed by the parents. So far as birth dates are concerned, the birth dates claimed by the parents are subsequently verified by comparison with provincial vital statistics records. Such records are available only after several months following the registration of the child for family allowances. The vast majority of birth dates as claimed by the parents are found to be correct. To require parents to prove the birth date before family allowance payments could begin would mean inconvenience to them in procuring birth certificates and a considerable delay in beginning payments. Moreover the burden placed on provincial vital statistics offices in being called upon to issue so great a volume of birth certificates promptly would exceed their capacity.
5.	Overpayments incurred under the Family Allowances Act are recovered by: (a) complete suspension of the account; (b) deductions from an account; (c) collection from the parent.
6.	In the first years of family allowances payments, records of overpayments were not kept in a manner which permits of determining what amount of overpayments was due to birth date errors, and what amount was due to other reasons. It is not therefore possible, except with detailed examination of every family allowances account in pay at any time since July, 1945, to ascertain what overpayments were set up on account of birth date errors, or what amounts have been recovered against them. However, the balance of overpayments, for all causes, outstanding at March 31, 1948, was $493,291, in respect to 8,982 accounts. This balance on October 31, 1949, was $429,168, in respect to 7,397 accounts made up as follows:-2,495 accounts amounting to $150,374.25 where recovery is automatic by suspension and recovery from future payments, 4,420 accounts amounting to $250,998.36 where recovery is being undertaken by direct collection methods, the accounts having lapsed; 482 accounts amounting to $27,795.56 where every possible attempt thus far to collect the overpayment may have been regarded as uncollectable.

Of the total amount of $429,168, $92,488 is due to overpayments arising from birth date errors made in respect to children registered from 1945 to date. This includes all the children up to sixteen years of age who were registered in 1945, prior to the first payments of family allowances, as well as all children registered from July, 1945, to October 31, 1949, throughout Canada.
It is a matter of great interest to note, as has already been indicated, that of the payments made in 1948 and 1949 on behalf of children whose first payments of family allowances began in those years, total overpayments arising because of birth date errors amount to only $163, all of which has been recovered. This would seem to be, on examination of family allowances administrations in other countries, a record of administrative achievement.


DEPARTMENT OF NATIONAL HEALTH AND WELFARE -EMPLOYEES
Mr. Courlemanche:: 1.	How many persons were in the employ of the Department of National Health and Welfare in 1939?
2.	How many persons are in the employ of the said department at present?


Mr. Martin:: 1.	The Department of National Health and Welfare was established in 1944.
2.	As at October 31, 1949-2,716 (excluding casuals, 137).



FEDERAL GOVERNMENT CONTRACTS


Mr. Knowles:: 1.	Do contracts let by the federal government include any fair wage provisions?
2.	If so, what are the terms of such provisions?
3.	Are there any kinds or classes of contracts exempt from such provisions? If so, what kinds or classes?
4.	To what extent do provincial fair wage laws and other provincial legislation apply to employers carrying out federal government contracts?


Mr. Mitchell:: 1.	Yes. The Fair Wages and Hours of Labour Act, 1935, requires the inclusion of fair wage provisions in every contract made with the government of Canada for construction, remodelling, repair or demolition of any work.
Order in council P.C. 1206 of June 7, 1922 as amended, recently consolidated by order in council P.C. 5547, November 3, 1949, requires that labour conditions shall be observed by the department or departments concerned in connection with all contracts made on behalf of the government of Canada for the construction or remodelling of public buildings of all kinds, railways, canals, roads, bridges, locks, dry docks, elevators,
Questions
harbours, piers, wharves, lighthouses, and other works for the improvement and safety of transportation and navigation; rifle ranges, fortifications, and other works of defence; dams, hydraulic works, slides, piers, booms, and other works for facilitating the transmission of timber, and all other works and properties constructed or remodelled for the government of Canada; also that the like conditions shall, as far as practicable, be observed by the department or departments of Canada, in connection with all agreements made by the government involving the grant of dominion public funds in the form of subsidy, advance, loan, or guarantee for any of the purposes mentioned.
Labour conditions are also observed by the department or departments concerned in connection with all contracts for the manufacture and supply to the government of Canada of fittings for public buildings; harness, saddlery, clothing, and other outfit for the military and naval forces; Royal Canadian Mounted Police; letter carriers, and other government officers and employees; mail bags, letter boxes, and other postal stores.
2.	These are set out in the Fair Wages and Hours of Labour Act, 1935 and order in council P.C. 5547 of November 3, 1949.
3.	Any kind of contract not specified in the answer to part 1.
4.	Except as to the wages and conditions of employment stipulated in the federal fair wages and hours of labour legislation, employers carrying out federal government contracts are not exempted from the operation of applicable provincial legislation.



COMBINES INVESTIGATION ACT


Mr. Coldwell:: What action, if any, has been taken on each of the recommendations contained in the report "Canada and International Cartels", by the commissioner of the Combines Investigation Act in 1945?


Stuart Sinclair Garson: A. The recommendations made in the report "Canada and International Cartels" are set out in pages 66 to 69, and may be summarized as follows:
1. Particular attention should be given by the combines investigation commission to restrictive agreements based on patents.
The following action has been taken in this field: The Combines Investigation Act was amended in 1946 to give powers to the exchequer court to issue remedial orders in cases of use of patents or trade marks unduly to limit production or restrain or injure

Government Employees Compensation Act trade. The combines investigation commission has been giving particular attention in its inquiries to restrictive arrangements based on patents. Recent actions have been taken in the exchequer court, instituted by the Attorney General of Canada, to impeach patents which formed the basis of restrictive agreements. Several of these patents have already been declared invalid.
2.	The establishment of official government records which would show from time to time any significant change in the degree of financial control which corporations outside Canada exercise over individual domestic companies.
Information with respect to this matter is being compiled by the dominion bureau of statistics which, from time to time, publishes the results of its studies in this field. A comprehensive report was published in 1949.
3.	More adequate provision for the initiation of inquiries by the combines investigation commission into restraints of trade and unfair trade practices.
Amendments made to the Combines Investigation Act in 1946 empowered the commissioner to receive and inquire into complaints respecting practices alleged to be offences under the act or under sections 498 and 498A of the Criminal Code. Provision was also made in the 1946 amendments to restore the power of the commissioner to initiate inquiries under section 12 of the act.
4.	The building up of an effective organization under the Combines Investigation Act supported by sufficient appropriations.
The staff of the commission has been built up from an average of eight in 1945 to thirty-two in 1949. Appropriations have increased from $61,000 in the fiscal year 1945-46 to $170,683 in the fiscal year 1948-49. Further increase is made in the estimates for the current year.
5.	Support should be given by the government of Canada to the establishment of an international office to deal with international cartels.
Canada participated in the United Nations conferences on trade and employment which resulted in the Havana charter for an international trade organization. This charter, which has been submitted for ratification to the participating countries, contains provisions for dealing with restrictive business practices by cartels.



* NEWFOUNDLAND


Gordon Francis Higgins: Has Newfoundland made application to be included within the provisions of the Physical Fitness Act?


Mr. Martin:: No formal application has been received, but discussions are taking place with the province of Newfoundland.



QUESTION PASSED AS ORDER FOR RETURN


INCOME TAXES AND SUBSIDIES


Mr. Argue:: 1.	What was the total amount of (a) income taxes; (b) corporation taxes, collected from Saskatchewan individuals or corporations in the fiscal year 1948-49?
2.	What other sums in the form of taxes, levies, or deductions were collected from individuals or corporations in Saskatchewan in 1948-49, and what was the amount of each?
3.	What was the amount of each grant or subsidy paid to the Saskatchewan government in 1948-49?



DOMINION LANDS ACT


[Stage Direction]
16, 1949
Colin William George Gibson: That regulations made by the governor in council under authority of the Dominion Lands Act, chapter 113, R.S. 1927, which were published in the Canada Gazette on the 21st day of May, 1949, and the 23rd day of July, 1949, in accordance with the provisions of section 75 thereof and which were laid on the table on the 16th day of September, 1949, be approved.
He said: Mr. Speaker, the Dominion Lands Act requires that regulations made pursuant to the provisions of the act be tabled in the house, and that they be published in the Canada Gazette. They must also be approved by resolution of both houses of parliament, otherwise they expire at the end of the session. The regulations placed on the table are not new; they are a consolidation of regulations which had previously been approved by parliament.


[Stage Direction]
Motion agreed to.
At one o'clock the house took recess.
The house resumed at three o'clock.


Hon. Lionel Chevrier (Minister of Transport) moved: the second reading of Bill No. 220, to amend the Government Employees Compensation Act, 1947.


[Stage Direction]
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Beaudoin in the chair.

On section 1-Repeal of section 4.
Lionel Chevrier: Mr. Chairman, I think I should make a short statement and explanation as to this bill.
Section 4 of the Government Employees Compensation Act, 1947, provides that where an employee of the federal government is caused personal injury, where death follows an accident, or an industrial disease is suffered by such employee in the province of Prince Edward Island, the rate of compensation shall be that which is in accordance with the law of the province of New Brunswick. On the 23rd day of March, 1949, the Workmen's Compensation Act of the province of Prince Edward Island was enacted, and, I understand, put into effect on the same day. Therefore the province of Prince Edward Island now has its law of compensation in so far as government employees are concerned. This being the case, it is advisable that section 4 of the Government Employees Compensation Act, 1947, be repealed so that section 3 will now came into operation so far as the province of Prince Edward Island is concerned. In other words, it will mean when an accident occurs or death follows or an industrial disease exists involving employees of the government in the province of Prince Edward Island, by virtue of section 3 the law applicable will be that which is in existence at the time in the province of Prince Edward Island.
I am sure the bill will commend itself to the house.


Winfield Chester Scott McLure: This covers compensation for injuries to all government employees in Prince Edward Island, and it will now be the same as the rest of the provinces? Is that right?


Lionel Chevrier: The first part of the hon. member's question should be answered yes, and the second part no. The law applicable in the case of Prince Edward Island will be that which was enacted on the 23rd of March, 1949, but it is somewhat different in that province from what it is in other provinces.


Winfield Chester Scott McLure: It will be entirely up to them.


Lionel Chevrier: That is right.


[Stage Direction]
Section agreed to.
Title agreed to.
Bill reported, read the third time and passed.


Colin William George Gibson: that the house go into committee on Bill No. 149, respecting bankruptcy.
Bankruptcy Act
Motion agreed to and the house went into committee, Mr. Beaudoin in the chair.


Louis-René Beaudoin: May I remind hon. members that the bill has been studied carefully in the standing committee on banking and commerce, and is now reported therefrom with a few amendments. Unless I have unanimous consent I shall have to call each clause separately.


Mr. Fraser:: Will you indicate, sir, the sections on which amendments were made in the committee?


Louis-René Beaudoin: Yes.
Sections 1 to 173 inclusive agreed to.
On section 174-Coming into force.


Mr. Fleming:: It is not my desire to break the spell which has been cast over these sections, but I think it worth saying that the fact the committee has found it possible to pass them with such speed is a tribute to the work done in the banking and commerce committee, which really has been working very hard on this bill, sitting twice a day for the past two weeks.
I should like to ask the Minister of Justice when it is proposed that the act be brought into effect. One of the factors which impelled the banking and commerce committee to work so strenuously on this bill was that representations were received from a number of responsible bodies indicating their keen desire to see the bill adopted and brought into operation as quickly as possible. Could the minister indicate when it is proposed to bring the legislation into effect?


Stuart Sinclair Garson: I do not think I can give any more definite undertaking than simply to repeat the words of those who have urged that it be brought into effect as quickly as possible. Certainly it is our intention to bring this legislation into operation as soon as that can be done.


Mr. Fair:: I should like also to ask the Minister of Justice whether the speed with which this legislation has gone through the house is responsible for the clocks in the chamber going on strike. Apparently they have not been able to keep up with us.


[Stage Direction]
Section agreed to.
Schedule agreed to.
Title agreed to.
Bill reported, read the third time and passed.
[Stage Direction]
Vessel Construction Act


Lionel Chevrier: the second reading of Bill No. 216, to encourage the construction and conversion of vessels in Canada.


George Alexander Drew: Is the minister explaining the bill?


Lionel Chevrier: If I may I should prefer to make the statement in committee of the whole.


[Stage Direction]
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Beaudoin in the chair.
On section 1-Short title.
Lionel Chevrier: The purpose of this bill is to give some measure of tax relief to those persons who build ships in Canada for operation under the Canadian flag.
In its second annual report, which has been recently tabled, the Canadian maritime commission has pointed out that the cost of construction of a ship in Great Britain is approximately twenty-five per cent less than the cost of construction of a similar ship in Canada. This represented comparative costs as of the 31st March of this year, and recent changes in monetary values have probably served to widen this gap materially. In any event it is safe to say that Canadian building costs are the second highest in the world; but owners who build in Canada have not the same benefits in regard to depreciation as those who build in countries which enjoy lower building costs.
The law as it stands at the moment allows a shipowner to write off by way of depreciation six per cent yearly of the cost of a new vessel against his profits. If there are no profits he still must write off three per cent.
It is well known that the shipping industry is a feast or famine business. It experiences fairly well defined cycles of reasonable prosperity and depression. There is not a uniform earning record, and for that reason the shipping industry does not generally represent an attractive investment. Moreover if a shipowner is compelled to take depreciation in loss years, he may lose the opportunity of fully amortizing his investment and therefore be under a disability when the time comes for him to secure fleet replacements.
The bill is designed to make shipping a more attractive investment and thus to encourage building in Canada. In brief, the bill permits a shipowner who builds or converts a vessel in Canada to write off his

investment up to 33J per cent per annum as quickly as earnings permit, and on the other hand he is not compelled to take depreciation in any year when he has experienced a loss.
Under such arrangement of flexible or accelerated depreciation the government does not suffer a tax loss. When the shipowner exhausts his depreciation he must pay taxes on the full amount' of his profits without deduction. In other words he may use his discretion within the limits allowed by the bill to write off his capital investment. Under the particular conditions of the shipping industry I believe it is fair to permit capital write-off to be geared to cycles of fluctuating earnings.
A minor feature of the bill provides authority for establishing a reserve against quadrennial surveys. Under the Canada Shipping Act and under the rules of classification societies, shipowners face a regular and unavoidable expense in relation to special surveys every four years in the interest of the safety of the ship, its crew and cargo. This is another condition which is peculiar to the shipping industry, and therefore the bill envisages the setting up of reserves annually to meet such known and unavoidable liability.
The bill does not represent any new or radical departure in the principles of taxation as they affect shipping in other countries. On the contrary, it tends to bring Canadian legislation affecting shipping into line with that of other countries. The United Kingdom recently increased the first year's depreciation allowance from 20 per cent to 40 per cent. Sweden allows free depreciation, in the sense that the taxpayer may write off on his books any amount in his discretion up to 100 per cent. Denmark allows tax-free depreciation over a two-year period for amounts in excess of pre-war building costs. Many other countries have adopted varying methods in applying the principle.
One thing, however, which I should point out is that the benefits of the bill apply only to vessels built or converted in Canada. In view of the depressed state of the deep-sea shipping industry throughout the world, the demand for new building has fallen off, and I do not suggest that this bill will produce a large volume of building orders for Canadian yards immediately. I am, however, satisfied that it will give considerable encouragement to the building of some vessels, especially those required in the coastal and inland trades, where we are badly in need of new equipment. I believe that building of vessels encouraged by this legislation, together with such vessels as are required for government account, will enable us to

preserve in this country a nucleus of a shipbuilding and ship repairing industry for defence purposes capable of expansion to meet an emergency in time of war.
The object of the bill before the house is to aid in the construction and conversion of ships. The bill may be divided into three main parts: One, depreciation with respect to construction costs of a vessel to be built after a date fixed by proclamation; two, depreciation with respect to conversion costs expended after the date fixed by proclamation on a vessel in existence on that date; three, depreciation with respect to ships sold.
Prior to December, 1948, the maximum depreciation to which the owner of a vessel vas entitled was 6 per cent of the original cost. In 1944 or 1945, the normal rate was 4 per cent of the original cost. However, in order to encourage the sale of Park vessels, the normal rate was increased from 4 per cent to 6 per cent. Furthermore, ships purchased during the reconstruction period were entitled to double the normal rate, that is, 12 per cent.
The present position, therefore, is to allow a maximum allowable depreciation of 6 per cent of the original cost. This is in accordance with the straight line method as opposed to the reducing balance method. This bill will allow the owner of a vessel who constructs or converts his ships in Canadian yards to special depreciation which he may write off at the rate of 33 i per cent in a year. The bill contains certain other clauses which are of a minor nature.
I am sure this bill will commend itself to the house.


Howard Charles Green: This is the first opportunity that the house has had, Mr. Chairman, to discuss the allied questions of shipping and shipbuilding in Canada.


Lionel Chevrier: May I remind the hon. gentleman, without wishing to interrupt him, that this deals with shipbuilding only.


Howard Charles Green: Yes, I believe that is the great weakness in the government's position.


Lionel Chevrier: I am pointing that out because I hope the hon. gentleman is not going to commence a discussion of shipping problems, when this deals with just one angle of the problem.


Howard Charles Green: In the speech from the throne there was a reference to shipbuilding and shipping, in that it said that measures demanding our consideration would include a bill respecting assistance to shipping and shipbuilding in Canada. In the spring session, there was also a reference in the speech from the throne to a bill respecting assistance
Vessel Construction Act for the Canadian shipbuilding industry. Nothing further was heard of that bill to help shipbuilding, and the house prorogued without any legislation having been brought down.
Today we have a measure before us to aid the shipbuilding industry, but it would appear that nothing is to be done to help the shipping industry directly. In any event, this bill is brought before us in the dying days of the session, and it is described as "An act to encourage the construction and conversion of vessels in Canada".
As I understand the bill, and I believe the minister confirmed my understanding in his remarks, its purpose is to provide for accelerated depreciation in respect of ships which are built or converted in Canadian shipyards after a date to be set by proclamation. A ship may be depreciated in full over a period of three years. The bill also contains a provision for setting aside a reserve for what are called quadrennial surveys on all shipping. These provisions will be of some help to the shipbuilding industry, and for that reason I believe the bill should be passed by the house. We should bear in mind, however, the fact that a vessel can be depreciated only once. In other words, if the company that owns the vessel is making a good profit during the three years after the ship is constructed, then of course they would benefit by writing off this depreciation but depreciation can only be taken once, and when the whole value of the ship has been depreciated, this is no further benefit.
As I understand the measure, it helps with the building of any kind of ship; it is not restricted to ocean-going vessels. There is more control over the conversion of ships than there is over construction, because in the case of conversions the Canadian maritime commission have to approve of the conversion plan. I believe the commission are given no such control over the construction of ships.
One other feature of the bill is that there is no provision for a report to parliament, or, in fact, to the minister himself, on the operations under this act. Here we have a bill making a special provision for depreciation with regard to shipbuilding. I suggest to the minister that there should be written into the bill a provision that there shall be a report to parliament annually on the operations under the bill. From its terms, I take it that the bill is to be under the jurisdiction of the Canadian maritime commission. That body is given whatever control there is over the operations carried on under the bill.
That brings me to the story of the Canadian maritime commission. That body being the one which will administer this act, it is

Vessel Construction Act important to consider just what their powers are and what position they have taken. The commission was set up just two years ago after demands had been made for several years from all sections of the house. The United States for a long time has had a maritime commission responsible for advising the government on the marine policy of that country; it has really had control of the shipping and shipbuilding business in that neighbour nation. The Canadian maritime commission was sought in order that it might do for us the same job of work as was being done for the United States by the United States maritime commission. When we received the bill setting up the commission we found that it did not go as far as the United States bill, but the main job of the Canadian maritime commission was defined as being to advise the government and to advise parliament. Hon. members will find the duties set out in section 6 of the Canadian Maritime Commission Act, which is chapter 52 of the statutes of 1947. That section reads as follows:
The commission shall consider and recommend to the minister from time to time such policies and measures as it considers necessary for the operation, maintenance, manning and development of a merchant marine and a shipbuilding and shiprepairing industry commensurate with Canadian maritime needs.
It will thus be seen that great reliance was placed on this commission. In effect, it was supposed to work out and to recommend a shipbuilding and shipping policy for Canada. It was also given power to have advisory committees. Section 9 provides:
With the approval of the minister, the commission may establish and appoint the members of such committee or committees as it deems advisable to confer with and advise the commission with respect to any matter within its jurisdiction.
The commission has actually set up advisory committees, has called in leading people from all parts of the country, and has had their recommendations. It did not begin to function until November, 1947. Although the bill was passed earlier that year, the commissioners were not appointed until November 1,
1947.	Under their act they are required to file a report. Last year they filed a report dealing with the five months of their operation from November 1, 1947 to March 31,
1948.	In view of the fact that they had been operating for such a short time, they were not in a position to report much to parliament. They really were not yet in a position to make recommendations to parliament as to what policy should be adopted. For that reason the next report that they were to make, for the year from March 31, 1948, to March 31, 1949, was of the utmost importance.

Section 13 of the act, which provides for an annual report, reads as follows:
The commission shall as soon as possible after the thirty-first day of March in each year and in any event within three months thereof submit to the minister an annual report in such form as the minister may prescribe of its affairs and operations during the twelve-month period ending on the thirty-first day of March, and the minister shall lay the said report before parliament forthwith if parliament is then in session, or, if parliament is not then in session, within the first fifteen days of the next ensuing session.
Actually the report was dated June 30; that is, it was dated at the last possible day after March 31, but it was not tabled in the House of Commons until November 24, not quite two weeks ago. Here is another instance of a minister and the government failing to comply with the provisions of a statute. In this case that deliberate breach of the terms of a statute is unfair to the house and unfair to the Canadian people.


Lionel Chevrier: I wish my hon. friend would omit the word "deliberate".


Howard Charles Green: The failure to file the report may not have been deliberate. Only the minister and the government know that. But the law called for the tabling of that report within fifteen days after this session commenced. It should have been tabled on the last day of September of this year. The position was that Canada's shipping and shipbuilding industries were steadily declining, that ships were being sold to other flags, that other ships were being laid up and that Canadian sailors were being put on the beach, that is, were losing their jobs. The government had promised action in the spring and had not taken it. It had promised action again in the speech from the throne of this session and yet the minister failed to table that report. It was not just another report. It was not like the report of a department which more or less follows the report of the year before. Here is a report which outlines the whole background of Canadian shipping and shipbuilding, and makes recommendations as to what should be done.
That was the job of the commissioners, and they have actually brought in one of the most comprehensive and worth-while reports that I have ever seen tabled in the House of Commons. Yet the house was not given the opportunity to view the whole picture as set out in the report, and to make up its mind as to what policy should be adopted in regard to shipbuilding and shipping. The men engaged in these two industries across Canada were not given that opportunity, and the Canadian people were not given the opportunity to review this report in order that they might make up their minds what policy should be adopted to meet a very

serious situation. One of the most serious situations in Canada today is the plight of the shipbuilding and shipping industries. This has just been another case of stalling. Measures should have been brought in last spring to deal with the shipbuilding and shipping industries. The remedial measures, if not brought in last spring, should have been brought in earlier in the present session. The delay simply means that the allied industries of shipbuilding and shipping have been allowed to go further and further down.
Let me say a word or two about the report itself. It gives the history of shipbuilding and shipping in Canada, and a very interesting history it is, too. Hon. members will find a very good summary of the report commencing at page 7. It points out that back in the nineteenth century shipbuilding reached a peak in Canada when, in the year 1875-


Louis-René Beaudoin: Order. I hate to interrupt the hon. member but it seems to me he is discussing the report at greater length than may be necessary to put forth his argument for the purpose of discussing this bill. I do not want to place a limitation on what he has to say, but it seems to me that at times he is hardly in order.


Howard Charles Green: Mr. Chairman, in the speech from the throne we were promised measures to aid shipbuilding and shipping. This is the measure which has been brought down to do that job and in order to see whether or not it is ample, whether it meets the situation, I must certainly go into the shipbuilding question, and once I go into the shipbuilding question I must necessarily get involved in shipping because they are allied industries. I shall not be long but there are a few points in connection with this report which I simply must explain to the committee in order to make my speech intelligible.
Dealing with the history of shipbuilding in Canada the report points out that back in the days of the wooden ships, in the year 1875, there were nearly 500 ships built in this country. In the year 1878 Canada had 7,196 vessels of 1,333,015 tons and ranked fourth among the ship-owning nations of the world. That of course was owing to the efforts of Canadians in the maritime provinces who made such a splendid record in the days of the wooden ships. The report goes on to explain how, with the large-scale production of steel for shipbuilding in the United Kingdom, the Canadian shipbuilding industry fell away to practically nothing.
Then came the first world war which brought a great need for merchant vessels, and again the Canadian shipbuilding industry
Vessel Construction Act became of great importance. But after the war it faded away in much the same way as our shipbuilding industry has been fading away since the second world war. The report states that by 1939 there were on the Canadian registry only 38 regular ocean-going ships of one thousand gross tons and over, totalling in all 241,684 gross tons, of which eleven belonged to the Canadian National Steamships and ten were ocean-going tankers owned and operated by Imperial Oil. In other words, during the twenty years following the first great war the shipbuilding and the shipping industries in Canada had fallen away until there was practically nothing left.
At page 18 the report gives the picture after the second war. In 1948 Canada had 172 ocean-going vessels of one thousand tons or over, with a gross tonnage of 1,178,791 tons. I believe that is the largest ocean-going tonnage Canada has ever had. The figures are also given as of March 31 of this year. The number of ships is reduced from 172 to 145, and the gross tonnage is reduced from 1,178,791 to 981,255. I have not the figures for the end of October, but I think there is very little doubt that they will show that there has been quite a large decrease below the figures for the end of March, 1949.
The report also points out some fundamental factors in connection with these industries in Canada. For one thing it sets out that the cost of constructing a Canadian ship is only surpassed by the cost of constructing ships in the United States. In Great Britain the cost is 25 per cent less than the cost of construction in Canada. Our daily operating costs come second, the United States being $972.52 a day, Canada $810.50 and the United Kingdom ranking sixth at $525.46 a day. Italy, which is last, amounts to $421.71 a day. The report also points out that because of the position of our trade balances, because of the trouble the other countries are having in getting Canadian dollars, the situation of the shipbuilding and shipping industries has been made just that much harder.
In connection with the Marshall plan the report explains that under that plan half of the goods shipped to other countries must be carried in United States vessels and that the other half has to be carried in vessels of the countries which are receiving the aid, so that Canada gets absolutely no benefit from the Marshall aid plan, so far as shipping is concerned.
Then the commissioners come to certain conclusions. They do not agree that the Canadian merchant marine should be allowed to disintegrate. On the other hand they say we should not aim to have a large enough marine to carry all the goods we export. On

Vessel Construction Act the basis of national security the report says there should be maintained a Canadian merchant marine of a certain size. It points out that because Great Britain is in such a position geographically that she would probably be heavily bombed in another war, therefore it would not be wise to depend upon her shipyards; and that for defence purposes Canada must maintain a merchant marine.
The recommendation is that it should be on what is called a nucleus basis, the nucleus suggested being that there should be approximately 7,000 men employed in the shipbuilding yards and that the tonnage maintained by Canada should be 750,000 deadweight tons. I believe deadweight tons are not the same as gross tons-and the minister will correct me if I am wrong. My information is that a deadweight ton is approximately three-quarters of a gross ton. This would mean that the gross tonnage would be about three-quarters of 750,000 deadweight tons or 562,500 gross tons. In March of this year, as I pointed out a moment ago, the gross tonnage was 981,255. So that the commission has recommended a very drastic reduction in Canadian tonnage.
Furthermore, in recommending that there be only 7,000 men in Canadian shipyards the commissioners are recommending another very drastic reduction. At the peak period during the war there were 75,000 people engaged in Canada in shipbuilding. In 1947 the average monthly employment was 16,035 and in 1948 it was 14,596. The commissioners expect that by the end of this year that will have dropped to about 9,000 people working in Canadian shipyards, and it is their recommendation that there be a further drop to
7,000.
They also point out that Canada must get a new type of merchant ship. That is referred to at different points throughout the report. For example, at page 21 we find this statement concerning wartime shipping:
The ships were of standard types designed to meet a wartime emergency. Their high fuel consumption, slow speed, and lack of refrigerated space unfitted them to hold their own against fast, modern, more economical cargo-liners which shortly after the war began to appear in British and foreign merchant fleets. It was obvious that, once the world-wide shortage of shipping had been overcome, the ships would not be able to compete with more efficient foreign vessels.
The unfortunate feature about that is that back in 1944 several of us urged the government to begin building faster cargo vessels. However the minister of munitions and supply of that day, the present Minister of Trade and Commerce, took a strong stand against that suggestion. He said that, after all, these slow ships were the kind of ships Canada should have. He pointed out that
IMr. Green.]
most of our cargoes are of bulk commodities such as lumber, newsprint and other products of that type, and that there was no need to have these fast modern cargo vessels. It was his opinion that Canada's fleet should be a fleet of slow ships. As a result of that stand none of these fast cargo vessels were built.
I believe the position today is that Canada has none of these fast vessels, with the exception of perhaps one or two which have been built for the Canadian National Railways. The Minister of Transport will correct me if I am wrong, but I believe it is true to say that practically all our merchant ships today are of slow-going types which cannot compete with the faster vessels built immediately after the war by Britain, Sweden, Norway and other nations. So that we are in a position now of having to start from scratch in 1950, if we are to get rid of most of the ships we do own and build faster ships which can compete.
There is one other recommendation of the commission to which I should like to refer, and that has to do with labour relations. The report points out that there have been very poor labour relations in the shipping industry in recent years, and makes the recommendation that there should be set up a national maritime board. They say:
The system whereby owners and the union make an agreement governing wages and working conditions for one year allows grievances to be built upon on both sides over that period, so that negotiations for the renewal of the annual agreement usually commence in an atmosphere of mutual hostility and distrust. In our opinion many of the difficulties could be overcome by the establishment of a national maritime board, representative of both employers and seamen, similar to the national maritime board in the United Kingdom, which provides in effect for continuous negotiation of wages and working conditions at any time and whereby grievances can be quickly dealt with through the operation of port panels.
The Minister of Labour is here and he will know whether there is any merit in that suggestion. However, I do draw it to the attention of the committee.


Humphrey Mitchell: Was the hon. member asking me a question? If he was, I shall answer him quickly. There is no such thing as an agreement in Britain; it is all done by minutes. There is no written agreement.


Howard Charles Green: Is there a national maritime board?


Humphrey Mitchell: There might be that. I was thinking in terms of an agreement.


Howard Charles Green: The recommendation is that there should be set up in Canada a national maritime board. This side of the picture is

very important, because without good management-labour relations we can never have a first-class industry in Canada.


Humphrey Mitchell: If I might say this about labour relations: when you have in unions politics of the kind indicated by the leaders who met recently in a conference, instead of having straight unions such as we find in the railways, you have some difficulty. You cannot play politics with trade union agreements, you understand.


Howard Charles Green: I realize that.


Lionel Chevrier: 1 realize that this is an extremely important matter to the hon. member; but, after all, surely we will have to stick to the measure before the house. The hon. member has been skating all around the question. I shall be glad to deal with the matter of shipbuilding, but I do not think it is fair at this time to go into a complete analysis of the report of the Canadian maritime commission, a large part of which has nothing to do with the bill.


Howard Charles Green: As I said a moment ago, there is to be no further shipping legislation at this session. This bill is presented to the house as the government's solution of the shipbuilding problem in Canada.


Lionel Chevrier: No, it is not.


Howard Charles Green: There may be some other plans. I hope there are, because I do not believe this measure will come anywhere near solving the problem. That is the reason I am pointing out these other facts. Canada simply must have a further and broader policy than we are given by the bill, to settle these two problems. The bill merely provides for accelerated depreciation. For example, suggestions have been made that the Canadian coastal trade should be restricted to vessels registered in Canada. I suggest that the minister should tell us whether or not the government will adopt a policy of that kind. The United States has such a policy, as have many other countries. Why should Canada not insist that her coastal vessels at least shall be built in Canadian yards?
The minister said the other day that negotiations were going on between Canada and the United Kingdom in an effort to give Canadian vessels some share of the carrying trade to that country. We do not know whether or not these negotiations have been successful. If some such arrangement could be made it would certainly help. Various other ways have been suggested to keep the shipbuilding and shipping industries on their feet. The Canadian maritime commission has
Vessel Construction Act recommended that there should be a merchant navy of 750,000 deadweight tons, and that 7,000 men should be employed in Canadian shipyards, but it does not recommend how that is to be done. The only solution the minister has produced so far is the present bill. We do not believe it will go far enough to enable Canada to attain the objective which has been set by the government's own commission.
We believe the government is drifting on this question, and that its policy is a faltering one. We believe leadership is required, and that if Canada is to maintain even a reduced merchant navy of 750,000 tons and 7,000 men in her shipyards, there must be some further policy introduced by the government. While the bill is good so far as it goes, it simply does not meet the problem. It is just like trying to kill a grizzly bear with a shotgun.


Gordon Benjamin Isnor: Mr. Chairman, you were certainly most generous in the latitude you gave to the hon. member who has just taken his seat. I trust you will accord me the same privilege.


Louis-René Beaudoin: Order. May I say to the hon. member that when I gave that latitude to the hon. member for Vancouver-Quadra, he gave me to understand that he was going to be brief. I understand that this will be the case with my hon. friend.


Gordon Benjamin Isnor: Mr. Chairman, I can assure you that I will follow my usual procedure of endeavouring to be brief. In today's mail I received a letter, the first paragraph of which reads as follows:
John Ruskin once said that "when we fail to praise a man who deserves praise, two sad things happen; we run the chance of driving him from the right road for want of encouragement, and we deprive ourselves of one of the happiest of our privileges, that of rewarding someone who has earned our appreciation."
I thought that the opening paragraph of the letter I received today expressed my thoughts as to what I should like to say to the Minister of Transport for introducing this measure. It may be true, as the hon. member who has just taken his seat stated, that it does not go far enough, but I am satisfied for the time being to accept it as a step in the right direction by way of assistance to our shipbuilding industry. The hon. member for Vancouver-Quadra went into the report of the Canadian maritime commission quite fully. I am going to endeavour to abide by the ruling of the genial chairman and not have him call me to order. I shall only refer briefly to those portions of the report touched on by the hon. member. In doing so, I shall not make my remarks extensive. Instead of reading entire paragraphs, I shall simply refer to them.


James MacKerras Macdonnell: Did I understand the hon. member at one point to be asking whether it would be possible to have what I suppose one might call a retarded depreciation rather than an accelerated depreciation? Was that what he was asking?


Gordon Benjamin Isnor: I did put a question somewhat along that line. I asked whether instead of taking the 33 J per cent in one twelvemonth period a shipowner could take 10 per cent in that period and carry over the remaining 23J per cent to another twelve-month period.


Angus MacInnis: The senior member for Halifax concluded his speech by congratulating the minister on bringing forward this
Vessel Construction Act measure. I am sorry I cannot begin my few words by doing the same. In saying that, I may be misunderstood. It may be understood that I am opposed to this measure, but really I do not know enough about it either to oppose or to support it. I believe very few members in this house can say whether we are justified in subsidizing the shipbuilding industry under present conditions.
I come from a seaport, as does the member for Vancouver-Quadra, where the people are interested in shipbuilding, the sailing of ships, and the work and wealth which a seaport brings to a country. I shall, however, have something more to say on that point. I should like to have the minister reconcile some facts which I believe I can put before him with the proposal to encourage shipbuilding. But, Mr. Chairman, in order to prepare you, in case you are thinking of raising a point of order on me, may I say that we allowed this bill to go into committee without debate. In such circumstances the understanding always is that the debate which would have taken place on second reading can take place in the committee. Since we are discussing a bill to encourage the construction and conversion of vessels in Canada, I believe that everything pertinent to the construction and conversion of vessels in Canada, not only the building of them but the purposes for which they are built and the possibility of finding business for those vessels, is germane to the question under debate.
The government should not put the private members of this house in the position in which they have put them by bringing this measure before us. Unless we approve of the bill, we may be accused of obstructing the building of ships; then, if we do approve of the bill, we may be doing that which is not in the interests of Canada. As has been pointed out, we have the annual report of the Canadian Maritime Commission before us. It was tabled, if I recall correctly, after the estimates of the transport department dealing with the maritime commission had been discussed and carried. Consequently, there was no opportunity of discussing this report. It seems to me it is of sufficient importance that it should be sent either to the standing committee on marine and fisheries, or to a special committee of this house for study and report.
It is really nothing less than an imposition on this house to have a bill of such importance as this presented to it in the dying hours of the session. Let us keep in mind the title of the bill, "An act to encourage the construction and conversion of vessels in Canada". I have two press clippings in my hand, both of which are from the Montreal Gazette. One of

Vessel Construction Act them is dated Halifax, October 11, and bears the heading "Lack of cargoes ties up ten ships at Halifax docks." The article reads as follows:
Ten ships, five owned by Acadia Overseas Freighters Limited, of Halifax, are tied up here for lack of cargoes. The 7,192-ton freighter Seaboard Ranger, owned by the Triton Steamship Company of Montreal, arrived today and became the tenth. Shipping officials said high operating costs, stiff foreign competition and the recent devaluation of the Canadian dollar have contributed to the sharp decline in Canadian shipping.
The other clipping is from the Montreal Gazette of October 14. It is a longer article dealing with much the same matter, so I shall just read one paragraph.
Canadian flag owners complained bitterly about their inability to beat the problem. They say that federal assistance of some kind is required, but they shy from subsidization, as affording only temporary relief. They also admit that the government cannot order importers of Canadian products to use Canadian ships as transporters.
When you put that alongside certain paragraphs in the summary of the second report of the Canadian maritime commission, I believe we should carefully consider whether we are throwing good money after bad in building more ships. Again I say that I may be misunderstood, but let me read two or three of the paragraphs summarizing the report.
On page 8, paragraph 7 reads as follows:
During 1946 and 1947 ocean freight rates remained high, there was a world shortage of shipping and Canadian owners were able to find employment for their vessels. During this period Canadian shipyards were able to maintain a satisfactory level of employment due largely to foreign orders.
8.	During the year 1948 competition from foreign ships became keener, freight rates declined and currency and import controls were imposed by many countries owing to the increasing world shortage of dollars. Profits in the shipping industry fell off. The volume of work in the shipyards, however, was maintained due to a carryover of foreign orders.
9.	At the beginning qf 1948 there were 215 dry-cargo vessels totalling 2,080,066 deadweight tons which had been sold to private Canadian operators for Canadian flag operation. It is found that such tonnage is in excess of Canadian maritime needs.
In another paragraph the commission indicates:
It is estimated that a deep-sea dry-cargo and tanker fleet of about 750,000 deadweight tons would be sufficient for the carriage of essential cargoes in the early stages of an emergency and to act as auxiliaries for the defence services. Such fleet should contain a proportion of modem vessels, faster than those comprising the present-day fleet. The present vessels are uncompetitive with foreign flag vessels in liner trades.
It seems to me that the only argument, or perhaps one of two arguments that could be made for assisting the building of more ships in Canada at this time is, first, for
[Mr. Maclnnis.l
security reasons; we should keep our shipyards in working condition; second, that we might need a number of faster vessels than any we now have.
Here is another point upon which I should like to have some light. It is questions of this kind which should be discussed in a committee of this house and not in the committee of the whole, particularly with the limited time that we have available. During the year 1948 a great many of the government-owned ships built during the war were sold to private companies with the understanding that if the ships were sold the moneys received would go into escrow and would be used for building other ships. We should know how much money is available now in that fund for building ships. The companies buying those ships obtained them at a very reasonable price; they operated them while operation was profitable and then sold them at a good price to foreign companies that are now operating them and under less favourable wage and working conditions than those maintained on Canadian ships. When they were selling those ships to foreign owners, I think the government should have kept in mind the fact that they would eventually be used to compete unfavourably with Canadian-operated ships. All of these questions should be fully discussed, and they must be fully discussed before we can reach an understanding as to whether we are justified in supporting a measure of this kind, excepting only for the two reasons I have already mentioned, namely, security reasons and the building of perhaps some few faster cargo ships.
Then again there is the question of our international trade-what are other countries going to pay us for the goods they buy from us. On several occasions during this session I have heard statements made in this house that Britain could sell more goods here if their goods were cheaper priced. Now Britain is able to provide the service of transportation cheaper than Canada can provide it, and perhaps cheaper than a great many other countries can provide it. But the moment she begins to take advantage of that position, we begin to develop means to prevent her from exchanging those services for the goods she buys from us. It seems to me that we are being most unrealistic if we think that we can sell our goods to other countries and at the same time refuse to take from them the only goods and services which they can give in exchange.
All of these things should have been [DOT] brought out and should be well understood by the members of the house before we are asked to make a decision on a bill of this

kind. I say again that I never oppose a measure here if I can, with good judgment, support it. It does not make any difference whether that measure is brought before the house by the government or by some party in the opposition. As a matter of fact, I think the whole party follows that policy. We always try to support a measure on its merits. It is for that reason that I say that the Minister of Transport has put the members of the opposition in a difficult position or at least those from port cities and representing constituencies such as the one I represent.
I do not think there is anything more I need to say at this stage. I may want some information when we are dealing with the various clauses.


Clarence Gillis: I think the hon. member for Vancouver East has stated the case fairly well. I also am interested in this particular bill because I too come from a part of the country in which there are a great many ports. At this particular time, when everyone is in a rush to get away, I cannot understand either why the Minister of Transport brings in a matter as contentious as this one. The hon. member for Vancouver East suggested the only two reasons why this measure could be supported, namely, for security and to provide faster vessels. While the minister takes the position that we could discuss this matter when the proper item is before the committee, in my opinion we cannot divorce this question from the general question of shipping.
The situation in Canada today certainly does not warrant the building of ships unless we are going to use them. I think perhaps every member of the house is receiving correspondence from reliable people who are engaged in this industry; for example, from the naval association of Canada. Many of the officers and men who served in the navy during the war went over into the merchant marine. Shipping in Canada today is at the point where our ships are being tied up from port to port. I have on my desk a letter and a resolution dated November 29. In that letter and resolution, a copy of which was sent to the government, it was pointed out that at the present time in the city of Halifax fifteen deep-sea ships are tied up because of the lack of cargo. That resolution sets out that the ships that are now engaged in that business are being tied up from port to port because of lack of cargo. The reason they cannot get cargo is that they cannot compete with the ships that were bought by Canadian companies, sold to foreign countries
Vessel Construction Act and are now actually operating from Canadian ports in direct competition with Canadian shipping.
One example that is set out in the correspondence is that of one company which was offered a raw-sugar cargo to Cuba at twenty-five cents a hundred pounds. They could not take it. They said that it cost them twenty-eight cents to load it and unload it without hauling it at all. They therefore had to turn the offer down. A Swedish company takes that cargo and displaces Canadian shipping. When that 50,000 tons of iron ore was to come in to Montreal from Sweden, the Swedish government took the position that it was to be hauled by Swedish bottoms only. According to this correspondence, foreign shipping is replacing coastwise shipping in Canada. On another occasion, at the last session, I had the argument with the minister that foreign ships were doing that. He told me at the time that they were not permitted to do port-to-port trade in Canada, with the exception of British ships.
According to the correspondence from that reliable organization representing that trade, foreign ships, actually flying foreign flags, are doing port-to-port trade along the Canadian coast and displacing our own ships. We had better make up our minds whether we have a shipbuilding policy or not. Other countries are protecting their own bottoms by a proviso, as the Swedish government did with that 50,000 tons of iron ore, that it would have to be carried by Swedish bottoms. If we are to provide a subsidy for shipbuilding we have to make up our minds whether we are going to use the merchant marine, or use the boats, once they are built. Actually what the resolution that I have is asking at the present time is that the government subsidize the present industry so that boats now tied up in harbours may be able to continue to operate. We have to face up to the question as to what we are going to do with regard to competition.
A lot could be said on this question. I appreciate the minister's position in wishing to lay it over, but it is tied up with shipping. I see that the senior hon. member for Halifax is back in his seat. I was pointing out that in correspondence that I have, on the 29th of last month fifteen ocean-going ships were tied up in the port of Halifax owing to lack of cargo.


Gordon Benjamin Isnor: I had already brought that to the attention of the minister.


Clarence Gillis: I did not hear the hon. member mention the number of ships. The hon. member for Vancouver East read some clippings into the record showing that fifteen

Vessel Construction Act ships were actually tied up in the port of Halifax. According to the correspondence they expect more to be tied up. That situation is developing all the time. What I want to find out is: if we are to subsidize shipbuilding in Canada, are we going to use the boats after they are built? If we are, then we have to get down to business and formulate some kind of policy to protect that industry.
I agree with the hon. member for Vancouver East that this whole question requires more study. I believe it is an item that is contentious. It is important that it should lie over and be put in the hands of a competent committee to study the thing and work out some policy with the maritime commission. Very definitely the sections of the report read by the hon. member for Vancouver East suggest that other than introducing a subsidized shipbuilding policy something has to be done with regard to protecting the industry we now have that is lying idle. I believe it should lie over and be given more careful consideration than we are able to give it at the present time.


Thomas Langton Church: Mr. Chairman, I wish to make a few constructive suggestions to the minister in connection with national shipbuilding. We are supposed to be the fifth nation in export trade. I believe that this is a national problem because in the past water-borne traffic has never had the support of this House of Commons that rail transport has. The country has spent hundreds of millions of dollars under private ownership and public ownership of rail transport. I support the national part of this work and believe that it is correct because we are the fifth trading nation of the world.
With regard to the encouragement, construction and conversion of vessels in Canada, we are back to where we were between the two wars. When the Petersen contract was before the house I took part in the debate. That was a contract having to do with ocean, maritime and great lakes rates. In connection with that contract the advantage which this country could get by a national system of construction and conversion of ships was referred to. It will be noted that the powers of the maritime commission have been enlarged. A committee composed of officials of the government are now working out a plan. The minister announced the other day when he referred to the Noronic that a committee composed of government officials was working at the present moment on enlarging the powers of the maritime commission to include the great inland waterways of Canada and the great lakes.

We are the fifth trading nation of the world, and our export trade very largely depends on shipping. Today shipping is a national question. A vessel was first defined as any ship that was not propelled by oars. That is the definition that was in the shipping act not many years ago, and it was re-inserted in the shipping act of 1934. The shipping act of two years ago went through the House of Commons after a very few hours' discussion. It broadened the powers, functions and duties of the Canadian maritime commission, and also dealt with some features of the present system of assistance. The present bill, which is to encourage the construction and conversion of vessels in Canada, is a forward step; it is a step in the right direction.
I just wish to call the committee's attention to one or two facts about it. I was chairman and harbour commissioner for nearly thirty years in the city of Toronto. In that city we have not a dry dock, all the way to Kingston, the nearest one. Boats like the Cayuga and Kingston have to leave Toronto to go into dry dock. I believe these ships were built at the foot of Bathurst street. They were very big ships for that time. Their sister ships the Corona and the Chippawa were also built at the foot of Bathurst street. I was chairman of the harbour commission for some years and commissioner for twenty-seven years. At a cost of $120 million the Canadian government erected the Welland ship channel from Port Weller to Port Colborne on lake Erie. I call the committee's attention to the fact that we have not a dry dock on the whole course of the great lakes. There is not a single dry dock, and the Cayuga and the Kingston have to go to Kingston to go into dry dock. There is no dry dock that I know of along the chain of the lakes. A magnificent ship was launched the other day at Colling-wood, namely, the Coverdale. Mr. Coverdale was a great Canadian, born in Kingston, a former president of the Canada Steamship Lines.
Hon. members will recall that we used to have a type of ship sailing the great lakes which was of the old whaleback construction. They used to sail the great lakes and also go down to the maritimes and along the United States seaboard years ago. These ships are now taken off the lakes altogether. I do not know of any of them at the present time. As I mentioned, we have spent vast sums of money on the canal system, on the St. Lawrence and on other matters. I notice that the minister has changed the definition of conversion in the assistance given to present vessel owners, and exempts it from certain features of the Income Tax Act.

Deduction is permitted for income tax purposes. Then it goes on to deal with deductions in respect of conversion costs. I think it would be a good thing if the minister had a Canadian shipping list. We used to have one a few years ago. On that list were the name of the vessel, the year of construction, the ownership, the type, the year launched and its registration. All those points were listed, within the provisions of the shipping law of this country. In my view it would be a good thing to have that republished.
Then this bill goes on to deal with other matters. It deals with a deduction in respect of conversion costs, where there is a major alteration. Proclamation is to be made by the governor in council so that an allowance of 33'{ per cent of the conversion cost is made. Then are set out certain exemptions regarding income tax, taking the matter out of the income tax law. An allowance is made for special depreciation, or extra depreciation. Then it goes on to speak about vessels concerning which allowances have been made in connection with the matter of disposal. This is to be determined by the Canadian maritime commission.
So that in reality this bill widens the powers of the Canadian maritime commission. I believe those powers should be applied to other parts of the country which are helping pay for the cost of this work. This is a national question. I have said that railway transportation has been treated differently. Hundreds of millions of dollars have been spent on railway transportation, and this has had a direct effect on rates-and I am thinking of the rates on coal from the maritime provinces. When it has to compete with rail transportation, water-borne traffic is assisted to that extent. This should be looked upon as a national question.


James MacKerras Macdonnell: I should like to say a word and to ask a question of the minister. First I should like to follow up the point made by the hon. member for Van-couver-Quadra. The hon. member asked the minister if this bill is the answer to the report of the maritime commission, and I understood the minister to say that it is not. I assume he meant that it is not a complete answer and I was glad to hear him say that, because it does not seem to be complete, or anything like complete.
I should like to read a few sentences from the report of the maritime commission-and I shall not take long, Mr. Chairman-which I believe will make it clear that this bill is no
Vessel Construction Act answer. And it is in that connection I wish to ask my question. Turning first to page 50 of the report we find this:
Freight rates have declined by an average of almost 20 per cent since January, 1948, and Canadian owners are now operating on a very narrow margin if they are not suffering actual losses.
And again at page 53:
If it is considered advisable to maintain the shipping and shipbuilding industries in Canada it is clear that they will require government aid. Neither the manner nor the extent of such aid is properly the subject matter of discussion in this report, but it should be pointed out that no amount of government assistance will effectively aid the shipping industry unless a solution is found in respect of its currency difficulties and unless its labour problems are resolved.
And I quote briefly from the next paragraph to make clear what is referred to by the use of the words "currency difficulties":
Cargoes are frequently offered with freights payable in sterling or other non-dollar currencies, thus excluding Canadian vessels from participation. Foreign importers are induced by their own governments in various ways such as currency restrictions to use their own national shipping. In various trades Canadian vessels are excluded by the operation of regulations providing for the carriage of cargoes by either United States vessels or vessels of recipient countries under the Marshall plan.
I wish to make one comment and ask one question. No one can fail to sympathize with the minister in the difficult problem he faces, and I am not ready with any ready-made solution this afternoon. However, I do wish to ask this: How far is this bill, which provides what we might call accelerated or generous depreciation, to be considered as even the beginning of a solution, if in fact there are no operating profits now? The report of the commission seems to go almost to the point of saying that the industry is unprofitable. I do suggest that if the minister comes along with a bill which is beneficial only if there are profits, then it is really offering a stone where bread is wanted.


Lionel Chevrier: Perhaps I should reply not only to the hon. member for Greenwood but also to some other hon. members who have spoken in this debate. The best way to sum up what has been said is to state that apparently in the opposition parties there are two views, the first of which is that this bill does not go nearly far enough, does not meet the position and does not even begin to face at the problem. That is the attitude of the hon. member for Vancouver-Quadra, although he states that he does support the bill so far as it goes.
Then there is the view held by hon. members of the C.C.F. that this bill should not be approved because, in the words of the hon. member for Vancouver East, he cannot make

Vessel Construction Act up his mind whether he is for it or against it because he has not enough information to come to a conclusion. It is his view that the bill should be sent to a committee so that it might be fully considered, fully understood and fully discussed. In answer to those two points of view let me say, first of all, that this bill deals with one thing, and one thing only, and that is assistance to the shipbuilding industry. It does not pretend or purport to deal with shipping at all. Had it pretended to deal with shipping something would have been said concerning that point. There is nothing in the bill at all, however, which deals with that problem.
Why? I believe that during the consideration of my estimates, and in answer to questions raised by some hon. members, I stated clearly that so far as the shipping industry was concerned the position was a most difficult one-and I gave a number of reasons why it was difficult. At the expense of annoying hon. members I might repeat what I said at that time, that the shipping situation was extremely difficult not only in Canada but throughout the world. Ships were being laid up, and laid up not only in Halifax. I believe someone said there were 23 ships laid up at that point. Let me say there are 1,600 ships laid up in the United States. Why? There are not the cargoes or the freights there were in the immediate post-war period. Freights are declining at a very fast rate. More than that, the announcement made some time in September in regard to devaluation has aggravated the position.
So that this bill, and anything I shall say at the moment, will not be concerned with the shipping industry. I will say, if it is of information to the house, that the position in so far as the shipping industry is concerned is still being considered by the government. Discussions have taken place with officials of the United Kingdom. The chairman of the maritime commission has been in London and has discussed the position, in so far as the shipping is concerned, with the British ministry of transport and other officials. Those discussions have continued in Ottawa. I hope it will be possible for the government to make a complete statement on that aspect of the question before the session ends. I wish I could go further than that, and I am sorry that I cannot. I think that should be enough for the house to understand that the only thing we are concerned with at the moment is assistance to the shipbuilding industry.
It is said by the opposition that the provisions will be of some help. I think they will be of great help to the shipbuilding industry, as I said in my introductory remarks, and will be of help particularly to

coastal and inland shipbuilding, and also to the fishing industry. The hon. member for Greenwood asks how this is going to be of any use if there are no profits; there are profits in respect to inland and coastal vessels.


James MacKerras Macdonnell: Will the
minister permit a question?


Lionel Chevrier: I should like to complete my statement. As I said earlier, the question of assistance to shipping is still under consideration, and I hope it will be possible to make a statement before the session is over.


James MacKerras Macdonnell: I appreciate that the minister has said the bill is designed to assist construction rather that the shipping industry. Nevertheless, I think he will agree that to make the act of any value there actually have to be earnings in the shipping industry in respect of those ships which will have been constructed.


Lionel Chevrier: I should like to continue by dealing with some of the statements made by the hon. member for Vancouver-Quadra. He took exception to the fact that the minister did not file the report of the commission within fifteen days after the commencement of the session of parliament. In the course of his statement he said it was a deliberate omission. There was no deliberateness on the part of the commission or on the part of the minister in not filing the report within the prescribed statutory period. If there is any blame to be assumed in connection with the fact that the report was not filed within the fifteen-day period, the minister must of necessity take that blame. The only reason and the only excuse I can give is that the moment the report was completed the printing bureau was asked to print it so that it could be tabled, and the printers replied that, because of the tremendous amount of work they had, they could not possibly do so within the time required. That is not an extraordinary feature in these days when the printing bureau is laden with all sorts of work. I think I can point to the fact that the national harbours board report has not been tabled within the fifteen-day period for the very same reason. Has any objection been taken to that? Just as soon as the maritime commission report was returned from the printing bureau it was tabled, and there was no deliberateness on the part of myself or anyone else-


Howard Charles Green: Why not table a typed copy?


Lionel Chevrier: -in not tabling it earlier.


Howard Charles Green: Why could a typed copy not have been tabled?


Lionel Chevrier: I suppose a typed copy could have been tabled, but the practice is to ask the printing bureau to print the report, as in the case of all other agencies under the jurisdiction of the Department of Transport that are required to do the same thing. There are a number of other things to which my hon. friend referred. He said that there was no policy on the part of the government in so far as shipbuilding and shipping are concerned. As I said a moment ago, I am not going to deal with shipping. I hope it will be possible to deal with it at a later date. . I want to challenge the statement of the hon. member for Vancouver-Quadra that there is no policy so far as the shipbuilding industry is concerned. There is a very definite policy which has been stated from time to time, and which meets the recommendation of the maritime commission, of a nucleus for shipbuilding.
I think the report clearly states that as a nucleus the shipbuilding industry should have an average of 7,000 men employed each month in the shipbuilding and ship-repairing industry, and second, that $28 million per annum should be spent by way of new construction.
I think I announced not so long ago that within the last two years there had been $51 million committed for government orders alone, in Canadian yards, for building, conversion or repairs. There were employed in those Canadian yards at the end of October,
I believe-I am just quoting from memory- some 8,823 men in both the shipbuilding and ship-repairing industries. Over and above the $51 million to which I have referred, $17,246,000 had been committed for shipbuilding and ship-repairing in a period of two years on account of domestic and foreign orders. For all orders these moneys total roughly $70 million in the last two years. That is going away beyond the recommendation contained in the report of the maritime commission.
Moreover, the maritime commission is charged with the co-ordination of government building for all departments and, as is stated in the report, it is in a position to plan government shipbuilding to be performed and carried out in Canada, in order to preserve a nucleus as recommended by the commission. The hon. member for Vancouver-Quadra made a considerable number of remarks dealing with the shipping industry which I do not propose to review. There is one exceedingly important feature in connection with the whole matter which was discussed by the senior member for Halifax, and I think also by other members. These members suggested that the coastal or inland shipping
Vessel Construction Act trade should be restricted to Canadian vessels only. I believe it was the hon. member for Cape Breton South who made the statement that this trade was being impinged upon by vessels of foreign flags. I do not want to make a statement at this time concerning this matter. I am not in a position to say at this time whether or not the coastal laws of the country should be amended. In fact, if that were so, it would be necessary, as the house knows, to amend the commonwealth shipping agreement. In order to do that it would be necessary to hold discussions with the other commonwealth countries and, as the senior member for Halifax stated, notice of one year would have to be given. In the discussions I mentioned a moment ago, now taking place between the chairman of the maritime commission and the British authorities, this is another matter that has come up; and I think it would be inappropriate for me at this time to make any statement that might prejudice those discussions.
In reply to the hon. member for Cape Breton South, who is not now in his seat, I must say that under the Canada Shipping Act a ship which is not British may not transport goods and passengers from one place in Canada to another place in Canada, either directly or by way of a foreign port. Furthermore, even a foreign-built British ship cannot do that unless it pays a duty of 25 per cent of its value and is thereupon licensed to engage in coastal trade. Subject to that statement, every ship that engages in our coastal trade must be built, registered and owned in some part of the commonwealth. Because of that regulation it becomes almost prohibitive for a foreign-built British ship to operate in the coastal waters of Canada.
Someone asked how this would affect the replacement plan, and suggested that this legislation was in direct opposition to what is being done under that plan. My answer is that what was done under the replacement plan was excellent. The money collected amounted to over $26 million. When we received those funds, which were placed in escrow, we collected upward of $9 million by way of payment of mortgages on the Park vessels which had been sold by war assets and Park steamships to Canadian owners. The balance of these moneys, some $14 million, remains in the escrow fund for building in Canada. So surely no one can attack the replacement plan or replacement fund at least as far as this bill is concerned, because all the money remains here for construction in our own yards. Someone suggested, too, that this might be throwing good money after bad. This is not throwing good money away at all; the government is not losing anything. This simply accelerates the depreciation on

Vessel Construction Act ships and assists the owner to amortize the expenditure in connection with new construction.
I think perhaps that is all I care to say at this juncture. My own feeling, the feeling of the government and I am sure the feeling of the vast majority of hon. members, is that this is an excellent bill. To some hon. members it does not go far enough. If you are dealing with the shipping end, then I am afraid I cannot disagree with that contention. As far as shipbuilding goes, however, I do not see how we could have gone much further than we are going, in allowing the owner of a ship to write off new construction in three years, or to write off conversion costs in three years, as this bill does. So I am sure it will commend itself to hon. members.


Mr. Stuart (Charlotte):: Might I ask the minister if all boats engaged in the fishing industry will come under this regulation, or if there is some restriction as to size.


Lionel Chevrier: The ships covered by this bill are those mentioned in the Canada Shipping Act, which defines a vessel as follows:
"Vessel" includes any ship or boat or any other description of vessel used or designed to be used in navigation.
So the answer to my hon. friend's question would be yes.


George Alexander Drew: There is one feature of the explanation given by the minister that it seems to me might well create some misunderstanding as to the purpose of this bill. Its purpose is to carry out certain of the recommendations of the maritime commission, at least as far as assistance to the shipbuilding industry is concerned. While they do not presume to say how it shall be done, from the remarks of the minister it is obvious that the reason for this is to be found in the report itself, to which he referred with respect to certain details.
It is not possible to separate shipbuilding and shipping in the way the minister suggests. That is made perfectly clear at page 48 of this excellent report, which sums up the situation. According to the report, from a wartime high employment in the shipbuilding industry of 75,000 we have now come down to approximately 11,400, as of March 31 of this year, and the minister has told us this has further fallen to 8,300 as of the end of October. In reviewing the situation with respect to employment the report says at page 48:
For the purpose of this report it may therefore be assumed that in the future 3,500 men can be maintained in the shipyards on repairs and conversions alone. The remaining 3,500 men employed on new construction . . .

That clearly indicates that the discussion now taking place in relation to this bill has to do with a situation in which we may expect 3,500 men to be employed in shipbuilding and 3,500 in repairs and conversions. If we accept that statement, then shipping is very closely related to shipbuilding, because without active shipping we would not have the repairs and conversions; in any event the two are associated. There is no use building ships if those ships are not to be used for shipping, so the whole subject before us relates to the over-all policy of the government based upon the information contained in this report.
Whether this bill will achieve what is hoped, only time can tell. It is difficult for us even to know whether this is the best type of assistance that can be given, without having a more clearly stated declaration of policy by the government in relation to this report. I do think that on this occasion it is important to emphasize what has been the effect of withholding this report. I am not going to engage in any discussion as to why the report was delayed or otherwise, but it was presented to the minister on June 30. Under the act, it should have been tabled by the end of September. The report did not come to the house until November 24, at a time when we are sitting from eleven o'clock in the morning until eleven o'clock at night. Naturally, it was not possible for the members to devote the attention they would have otherwise devoted to this comprehensive review of the situation in regard to shipbuilding today, the history that has preceded that, and what this commission foresees in the future.


Lionel Chevrier: Will my hon. friend permit a question?


George Alexander Drew: Yes, surely.


Lionel Chevrier: Will he tell me, if he can, how the delay in the filing of this report has had one iota of effect upon the bill which is now before the house, and the advantage which shipowners will derive from this bill.


George Alexander Drew: Earlier today we saw an excellent example of what can be done by the proposals put forward by private members, in regard to things that are for the advantage of the people of Canada. If this report had been tabled at the beginning of the session, with the extremely comprehensive survey of the shipbuilding industry and shipping which it covers, it might well be that this industry, which is today in so precarious a position both from a shipbuilding point of view and shipping, might have had the advantage of practical suggestions that would have implemented certain of the findings in this report.


Lionel Chevrier: I do not want to labour the point, but if my hon. friend can point to any harm that has been done to the shipbuilders, because of the late filing of this report, I would appreciate his telling me.


George Alexander Drew: The report makes it quite clear that this industry is in a precarious position. Every day's delay in introducing whatever m .asures of assistance might have helped the industry has been injuring the industry, whether it be shipbuilding or the shipping that is the result of shipbuilding. The fact is that if this report had been tabled, there might have been practical suggestions. Since we hope that the discussions which are introduced in the various debates which take place during the sittings of this house are helpful, it might have been possible to have practical suggestions made at an earlier date.
I am not going to labour the point at all. I do say that the delay in tabling this report has denied to the members of the house an opportunity they would have otherwise had, of considering an extremely valuable report during this session. It is true there will be an opportunity of discussing the details of the report during the next session, but the procedure that has been followed has successfully prevented any adequate discussion of it during this session. It is obvious from the differentiation that is drawn between shipbuilding and shipping, that it is not now possible to discuss, in the detail which this report deserves, the plight of an industry which is of immense concern to every Canadian, from a security point of view, at this particular time.
So far as this bill is concerned, I would say that the observations of the member for Greenwood are very much in point. The advantage or otherwise of the bill will depend upon whether this industry can earn profits. That does not mean that the bill might not be of some help. My reason for raising the question at this time is that the delay in tabling the report denied the members an opportunity of considering it. This might have resulted in suggestions which might have been of benefit to this industry.


Howard Charles Green: During my remarks, I referred to the number and tonnage of Canadian oceangoing vessels of 1,000 tons or over, as appearing on page 18 of the report. Can the minister give us those figures up to October 31, 1949?
Will he also ascertain how many deep-sea cargo vessels, built in Canada for war purposes, are now under Canadian registry? How many merchant seamen are serving on the vessels in operation? A reply I received on October 15 indicated that at that time there were 118 vessels, 18 of which were not in
Vessel Construction Act operation, and approximately 4,100 merchant navy men were still serving. I should like to have those figures brought up to date.


Lionel Chevrier: There is no change in that reply, except that there should be added the 58 vessels which are in the United Kingdom. Those will be returned in 1950.


Howard Charles Green: No more ships have been laid up?


Lionel Chevrier: I do not know what the date of that report was.


Howard Charles Green: October 15.


Lionel Chevrier: I think some ships have been laid up since then. At this time, the total number of ships laid up is 26.
I am afraid, Mr. Chairman, I am not able to give the figures my hon. friend requested earlier. If I gave them now, it would only be a guess. Perhaps I can get that information for him when we are considering the estimates of the Department of Transport.


Howard Charles Green: Will the minister say whether any progress has been made in the construction of faster cargo vessels for Canada? He said that approximately $26 million had been put in escrow when it was received from the sale of slow ships. It would be interesting to know how much of that had been spent for new, faster cargo vessels.


Lionel Chevrier: In so far as deep-sea vessels are concerned, none of that amount has been spent. In so far as coastal and inland vessels are concerned, I do not know the exact amount, but a substantial amount of the escrow fund has been spent for that purpose.


Howard Charles Green: Have we any faster cargo vessels?


Lionel Chevrier: No.


Howard Charles Green: We have been told that the Canadian merchant marine have none at the moment. Is that correct?


Lionel Chevrier: None other than the three diesel vessels, owned by Canadian National Steamships, to which reference was made a moment ago.


[Stage Direction]
Section agreed to.
Louis-René Beaudoin: Now that we are about to consider the other sections of the bill, may I remind hon. members of standing order 58, section 2, which reads as follows:
Speeches in committee of the whole house must be strictly relevant to the item or clause under consideration.
I hope that all hon. members will adhere to this rule.
On section 2-Definitions.


Howard Charles Green: Is this help limited in any way to ocean-going vessels or is it available to any ship?

Vessel Construction Act


Lionel Chevrier: It is available to any type of ship.


Howard Charles Green: Can any help be given to companies owning foreign ships?


Lionel Chevrier: What does my hon. friend mean by "foreign ship"?


Howard Charles Green: Section 2(c) reads as follows: "conversion or major alteration" means a conversion or major alteration made in Canada by a taxpayer in accordance with plans approved in writing by the Canadian Maritime Commission for the purpose of this act;


Lionel Chevrier: Oh, yes, but the ship must be a ship of Canadian registry or a ship of British registry. Section 3, subsection 2, refers to a ship registered in Canada. If it is a ship of Greek, Panamanian, Italian, French or other foreign registry, it is not covered by the section.


[Stage Direction]
Section agreed to.
On section 3-Deduction in respect of capital cost of vessels for purposes of the Income Tax Act.
Gordon Benjamin Isnor: That is a rather important point. I am going to put the same question in a slightly different way. If a purchaser, a Canadian, bought from the United States one, two or three ships, to bring them in here for a certain purpose, and carried on these necessary alterations or reconversion, would that come within the scope of the act?


Lionel Chevrier: Yes, if he had paid duty and registered his ship in Canada.


Angus MacInnis: Will the minister explain how this depreciation works? The point I have in mind is this. Is there a possibility that a person building a ship and getting this depreciation might later dispose of the ship after he had benefited by the depreciation?


Lionel Chevrier: Yes; he can dispose of the ship but he cannot do so without paying income tax on the amount already depreciated. Perhaps I could explain that by way of an example.


Angus MacInnis: Yes.


Lionel Chevrier: Section 3 (1) covers the case of new construction. Assume that the ship costs $1 million and the plans and specifications are approved by the maritime commission. That owner may write off the ship at the rate of 33 J per cent each year. In other words, in the first year he may, if he wishes, write off $333,333. He might write off less, but he may write off an amount not to exceed 33 J per cent or, if my hon. friend looks at paragraph (b) of section 3 (1), the undepreciated capital cost to him of the vessel at

the end of the taxation year. In other words, if he should write off 33 J per cent in the first year and 33:\ per cent in the second year, he has then written off $666,666. If in the third year he decides to write off $200,000, he has then written off $866,666. In the fourth year all he may write off is the remaining $133,133. Is that clear to my hon. friend?


Angus MacInnis: Yes. But suppose that at the end of the third year he decides to sell the ship, how can this depreciation be recovered?


Lionel Chevrier: That is covered by section 4; when we get to it, perhaps I can deal with it.


Mr. Gibson (Coxnox-Alberni):: The senior member for Halifax brought up a point on the general discussion. Is 33J per cent the maximum amount that can be written off? If in the first year the shipowner made only 15 per cent on his investment, that is necessarily all he could write off in that year. In the second year would he be entitled to write off 33 J per cent plus the sixteen some per cent?


Lionel Chevrier: He need not write off anything but he may take from nothing up to 33 k per cent. He cannot, of course, write off more than the total amount of the cost of the ship.


John Lambert Gibson: What he did not write off this year he cannot carry forward and add to the 33J per cent next year. How long is he going to have it? Is he going to have this special depreciation, under this section, until he writes off the total value?


Lionel Chevrier: Yes.


John Lambert Gibson: For instance, if it took seven or eight years to write that off against the profits?


Lionel Chevrier: That is right.


Howard Charles Green: In this section power is taken to fix by proclamation the date from which construction will get the advantage of this provision. Will that date be of necessity a date in the future or is there any intention to set it back before the date of the passing of the act?


Lionel Chevrier: I hope it will be a date in the past; first, because this legislation was announced in the speech from the throne.


Howard Charles Green: In two speeches from the throne.


Lionel Chevrier: Quite. My hon. friend is right. Then again, because of the additional fact, I presume, that shipowners, seeing the announcement of this legislation, proceeded to build and expected to reap the benefit of the depreciation which this bill would give them. If it is construction that dates back

for years, of course that is just out of the question. How far back we will want to go I am not in a position to say at this time; but I would think it should be retroactive to some reasonable, fair and just date.


Howard Charles Green: In the case of the conversion of a ship, the person asking for the benefit must get the approval of the Canadian maritime commission to that conversion. Otherwise he does not get any benefit under this act. But apparently there is no such restriction in the case of new construction. In other words, the Canadian maritime commission has no voice whatever in what new construction is to benefit from the act. Is that correct?


Lionel Chevrier: Yes. That is the case.


Howard Charles Green: Why is there that difference in the way these two separate kinds of work are treated?


Lionel Chevrier: I am informed that the reason for that is that the commission wants to be sure that the amount spent in the conversion costs is reasonable, fair and equitable.


Howard Charles Green: What sort of conversion does the bill contemplate? For example, is it the thought that slow ships could be converted into fast ships? That seems to me to be an expensive process, and I do not think that could be done. Can the minister give us some idea of the type of conversion he has in mind?


Lionel Chevrier: It is conversion of a substantial nature, where the costs would be fairly high. It would envisage the case of the conversion of a 10,000-ton cargo vessel to a fast, modern and up-to-date cargo ship.


Howard Charles Green: Is that feasible?


Lionel Chevrier: Whether or not that is feasible technically, I am not in a position to say. But it would envisage that; if that were possible from an engineering standpoint, it would be covered by this section.


Angus MacInnis: The point was raised by the hon. member for Vancouver-Quadra that there was no approval by the Canadian maritime commission for new vessels. Is that not quite a wide allowance for the ship company, in that they can build whatever sort of ship they wish, whether it is suitable for Canadian trade or not? I imagine that the purpose of this bill is to have vessels built that will be of value to Canada. It rests solely with the shipowner whether or not he is going to build that sort of vessel. But whether or not the vessel is useful to Canada, he can get the depreciation on it.


Lionel Chevrier: I do not think that is an extraordinary provision. After all, if an owner wants to build a new ship, he is not going to spend a tremendous amount of
Vessel Construction Act money on it foolishly. If he decides to spend $1 million, $5 million or $6 million on a tanker or on a fast cargo vessel, he will go into it with his eyes open, I think, and after he has had plans and specifications prepared by competent naval architects. What I say now, however, does not apply to the escrow fund or the replacement fund. Perhaps my hon. friend was not in the house when I replied to some of his remarks in connection with the amounts of money that had been collected under the replacement fund. In so far as that money is concerned- and there is some $26 million-the plans for rebuilding in Canada will of course have to be approved by the Canadian maritime commission. That is already in the contract between the owner and the commission, providing for the payment in escrow.


Howard Charles Green: Would this provision apply to the man who builds a $100,000 pleasure craft?


Lionel Chevrier: No; it would not apply for the reason that he does not earn anything with the craft. It is a pleasure craft. I am informed by the tax expert that he would be entitled to no depreciation.


Howard Charles Green: Is the minister sure of that, because I am doubtful whether there is that restriction. The wording is so wide that it simply refers to a taxpayer, and this taxpayer may have something to do with the shipping business, at least enough to get him under the blanket of the section. The minister may very well find that somebody will decide to build a $100,000 boat or perhaps a $500,000 boat and then come along and claim this accelerated depreciation. It may be that that is not the intention of the bill, but we should know whether or not it can be done.


Lionel Chevrier: Mr. Chairman, I am not a tax expert. This is a bill having to do with income tax, and I have to take the advice of those who know the position. The advice and the information I have is that there is no write-off or depreciation in the case of a pleasure craft any more than there would be on your own home. Furthermore, there is no point in claiming or getting depreciation if there is no profit. That is the whole purpose of the bill.


Gordon Benjamin Isnor: I have one more question. Ten or twelve ships are tied up in the port of Halifax at the present time. In regard to our Park ships there is a special depreciation of 12 per cent. Would these ships be allowed 12 per cent of their total value at the present time and in addition 331 per cent of their conversion expenditure?

Vessel Construction Act


James MacKerras Macdonnell: They would eat it up pretty quickly at that rate; it would soon be a hundred per cent.


Lionel Chevrier: I am informed that the 12 per cfflit to which my hon. friend refers is covered by the ordinary normal law of income tax, and that in so far as the additional conversion costs are concerned they would be covered by this bill.


Gordon Benjamin Isnor: Then the answer to my question would be yes.


Lionel Chevrier: 
[Stage Direction]
Section agreed to.
On section 4-The Income Tax Act not applicable in certain cases.
Howard Charles Green: Is the commission still in control of the replacement fund, or will the company which has money in escrow in the replacement fund be able to take that money out and spend it for constructing a new vessel without being subject to the approval of the commission?


Lionel Chevrier: It must be approved by the commission. In answer to the first part of the question, the commission is still in control of the replacement fund, and to receive the benefits of this bill an owner must spend escrow money on replacement or rebuilding in Canadian yards.


[Stage Direction]
Section agreed to.
Section 5 agreed to.
On section 6-Governor in council may exclude vessels.
Howard Charles Green: What is the purpose of clause 6? Can the minister tell us what types of vessels are being excluded from the operation of the act?


Lionel Chevrier: Well, I have not anything in mind at the moment except to say that in the Canada Shipping Act the definition of vessel is pretty broad and pretty wide. It may be that the governor in council may want to exclude from the operation of this act any class of vessel that might be thought necessary. I do not know of any at the moment or I cannot anticipate any, but it is put in as a precaution.


[Stage Direction]
Section agreed to.
Section 7 agreed to.

On section 8-Coming into force.
Howard Charles Green: In my earlier remarks I mentioned a provision for a report to parliament. Why is there not some section in the bill which provides that there must be a report of the operations under this act?


Lionel Chevrier: For the same reason that it is not done in the reports of ordinary individuals for income tax purposes. I understand that it is not the custom of the income tax division of national revenue to give reports of this kind to parliament. In fact the minister refuses from time to time to bring them down. For that very reason I think it would not be appropriate to do it under this bill.


Howard Charles Green: There never will be any way of finding out who gets the benefits of this act or in what amounts?


Lionel Chevrier: There will be provision for giving hon. members information concerning the total amount of depreciation which has been granted, but not individuals.


[Stage Direction]
Section agreed to.
Title agreed to.
Bill reported.
Mr. Deputy Speaker:: When shall the bill be read a third time?


Some hon. Members:: Now.


Angus MacInnis: By leave of the house.


Lionel Chevrier: the third reading of the biU.
Motion agreed to and bill read the third time and passed.



INCOME TAX


Douglas Charles Abbott: the second reading of Bin No. 176, to amend the Income Tax Act and the Income War Tax Act.
He said: Perhaps I might say just a word in explanation of the seeming length of this bill. The house will recall tliat last year we undertook a major revision of the Income Tax Act, and that it applied for the first time on January 1, 1949. As was inevitable in a major undertaking of that kind, it was found that there were a good many, I wiU not say drafting errors but places in which drafting improvement could be made, which accounts for a very considerable number of the amendments in the bill which is now before the house.

In a good many instances the technique in making these amendments is to repeal the whole subsection and re-enact it, a procedure which also makes for a bit of length. Then of course in addition there are a number of clauses which are necessary because of the entry of Newfoundland into confederation. These two groups, technical drafting amendments, and amendments caused as a result of the entry of Newfoundland, and the amendments made necessary by the budget resolutions of this year, represent the sections of the bill which is now before the house, and account in some measure for what might seem to be a longer bill than one would expect.


Solon Earl Low: Mr. Speaker, I should like to take only a moment or two to say something about the principles involved in the income tax bill before us. I presume I would not be out of order if I were to discuss briefly one or two important points concerning the whole taxation policy as it is involved in the Income Tax Act.
One matter I wish to mention particularly has to do with the taxation of corporations, a principle involved in the bill itself. I shall illustrate what I have to say now, and what I have so often claimed in the house, that government taxation, particularly income taxation, nearly always pyramids in supercosts. This group has consistently brought that matter to the attention of the house, but with to date very little effect.
A short time ago, hon. members will recall, the Bell Telephone Company announced their intention to apply for an increase in rates, or more correctly for the right to boost their rates to subscribers. During November that company sent out in their magazine, Telephone News, some information which is at once revealing and disturbing. The company state in the magazine that they require to increase their income by $23,900,000 to meet their increased operating expenses of $14 million. I emphasize that: They say they require to increase their income by boosting their rates to subscribers to the extent of $23,-
900,000,	merely to be able to meet increased operating costs of $14 million. This is a difference of nearly $10 million they require to meet government taxation. The words they use are these "in order to meet the additional taxes that would result from the increase".
A friend of mine saw the magazine and drew it to my attention. At the same time he wrote to the Bell Telephone Company stating that he had no objection whatever to meeting his legitimate share of whatever increase in rates there might be to help the 45781-173J
Income Tax Act
company meet their increased costs. I suppose he was as anxious as we are to see that companies like the Bell Telephone Company are kept in a good financial condition, and that they are solvent. But my friend and I, and I suppose a good many others, strongly object to having to pay almost as much in addition to the increase in rates necessary to keep the company solvent merely to place in the hands of the government another $10 million in taxation.
To my friend's letter the telephone company replied as follows on November 16:
Your letter of November 10 regarding our proposed rate increase has been referred to me for reply.
You are no doubt aware that taxes must be paid on all revenues received by the company, except such part as is required for operating expenses, reserves for depreciation, and interest on borrowed money. After these expenses have been met and taxes paid, the money left-and this amount only -can be used for the payment of dividends and to build up a surplus to meet future needs.
And this is the part I should like to emphasize:
Therefore, in order to receive an additional $14 million in net income it is necessary for us to obtain an increase in revenues of approximately $24 million.
The paragraph I have just read is the crux of the whole devilish, if I may call it that, situation. I will go further and say that it is Canada's heavy taxation policy, and in many ways our foolish taxation policy, in which we find reasons for a good many of the burdensome increases in costs of the goods and services our people have to buy from day to day.
Where would one find anything quite as asinine as the example I have just cited? Just imagine! In order to be able to extract $14 million from their subscribers so as to meet their increased	costs-and those
increased costs are the result of inflated wages, salaries and costs of materials-the Bell Telephone Company has to grab another $10 million to give to the government.
The example I have just given points up the request a good many of us have made from time to time with respect to the whole income tax policy of this country. We have done so in the house on more than one occasion. I refer to the present need for a change in the Income Tax Act, particularly as it relates to corporations and dividends. The double taxation of corporation earnings has been protested in the house time and again. We now join in that protest, and we do it as strongly as we know how.
The minister should exempt corporate profits from income tax and make those same

Income Tax Act
profits taxable as dividends in the hands of the recipients or the shareholders. That is the only fair way to deal with the situation. The minister will argue that many corporations might beat the game by withholding much of their profits from distribution as dividends. Well, to prevent corporations from doing such a thing the government should provide taxation on undistributed profits and by this method encourage corporations to spend their profits by way of dividends. That, I suggest, would make it necessary for corporations to obtain new capital by the issue of treasury stock, which is, I suggest, the sensible way to finance.
With such a change as I have suggested in the income tax policy the government would relieve the Canadian consumer of a good many of the pyramided and inflated costs, such as we find in the case of the Bell Telephone rates.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Beaudoin in the chair.
At six o'clock the committee took recess.
[Stage Direction]
AFTER RECESS

The committee resumed at eight o'clock.
Section 1 agreed to.
On section 2-Loan to shareholder.
Douglas Charles Abbott: Mr. Chairman, I have an amendment to this section which I shall ask one of my colleagues to move in a moment. It relates to the effective date of the section. The amendment to section 2, which I shall ask my colleague, the Minister of Public Works, to move, is as follows:
That subclause 2 of clause 2 of Bill 176 be deleted and the following substituted therefor:
"(2) The paragraph (c) repealed by subsection one is applicable to
(a)	loans made before the fourteenth day of November, 1949, and
(b)	loans made on or after that day to enable or assist the officer or servant to purchase, pursuant to an agreement entered into before that day, the shares held by a person who died in 1949 prior to that day:
and the paragraph (c) enacted by subsection one is applicable to other loans made on or after that day."


Alphonse Fournier: I so move.


Douglas Charles Abbott: By way of explanation, may I say that I think the 14th of November is the first day that the printed copy of the bill was available to members generally, although it
[Mr. Trtw.l
was given formal first reading on the 10th of November. I think the other changes are selfexplanatory.


James MacKerras Macdonnell: I wonder if we could have a copy of the amendment. In any event I am hoping, if I am successful in persuading the minister to what I hope to persuade him, that we will not need the amendment at all. I hope the minister is in a suggestible mood, and I hope I am in a persuasive mood because I want to point out to the minister that this change is going to defeat entirely the purpose-and I think it is a very worthy one-of the clause as it stands. I think the purpose was twofold. First of all it was to enable one or more partners or virtual partners in an enterprise to buy out the man who is the chief stock owner. Second, it was to enable the chief owner to cash in on his holding, and I am sure the minister will agree that is a most important aspect from the point of view of enabling the succession duty situation to be dealt with when it arises, thereby avoiding unnecessary liquidation of companies.
I understand the difficulty which the department has met, and it is a real one. Nevertheless I want to suggest to the minister that it is not necessary to destroy the effect of what I think is a very beneficial provision in order to meet the difficulty which has arisen. As I understand it, the difficulty is that the department has found, to my great regret, that people are attempting to abuse this by making loans which there is no intention to repay. In that way they hope to get the benefit without playing the game with this section. I urge on the minister very strongly that this was a most beneficial provision, and I think he will agree that as it is now it really makes the situation almost meaningless. All it means now is that the treasury stock of a company can be sold. It does not help the case of the large shareholder who was helped under the original situation. I suggest to the minister that it should be possible in some manner, as to which I am sure his skilled staff can advise, to prevent any abuse of the section.
One suggestion I make is that a time limit might be put on the repayment of such loans, and that terms of repayment should be insisted on. It may be that the minister's technicians can suggest better ways, but I do beg of him not to lightly destroy a provision which I think was a very beneficial one indeed before it has even got started, as I suggest he is doing by this amendment.


Douglas Charles Abbott: As my hon. friend will appreciate, this privilege has only been open since the new act came into force last year. I am

sure he is familiar enough with these matters to realize that if a shareholder is permitted to borrow from the company to buy shares from, shall we say, a majority shareholder, it is a very easy way of enabling the company's surplus to be used to enable a junior partner to finance the purchase of these shares. I do not think that is desirable. We have had long discussions in the house and in committee on the alleged evils of section 126, and suggestions have been made that we should try to spell it out in a way that will prevent that. This is one way of spelling out a method by which it can be abused. I must confess I do not think it is particularly desirable that the assets of a corporation should be loaned to an individual in order to enable that individual to buy shares in the corporation from another shareholder.


James MacKerras Macdonnell: Was that not the very purpose for which the clause was passed? Was that not the purpose, and no other?


Douglas Charles Abbott: The real intention for which the clause was passed was to enable loans to be made for employees and others to buy what is known as employee stock. The Bell Telephone Company and other companies have employee ownership campaigns, and it was considered desirable to enable companies of that kind to make temporary loans to their employees to enable them to purchase stock in the company, but it was never intended that permission should be given to contravene the well-known principle of company law that a company must not lend money to its shareholders, because that is the simplest way in which to dissipate the company's surplus.


James MacKerras Macdonnell: I appreciate that fully, and no one is more anxious to avoid that than I am. Nevertheless, I suggest to the minister that there is a method- and I have put it forward-of preventing this evasion of the act. Surely the minister will agree with the point I made that serious difficulties arise when a man has built up a business and is coming near to the end of his life; if he is not able to dispose of his shares, in all probability his death will wreck the whole business because there may have to be a liquidation, or at any rate it may very seriously impair it. Surely if the abuse can be provided against-then the very thing which I am describing and which frankly I thought was one of the main purposes of the section-the minister will agree the thing is most desirable. Surely the minister would at least be prepared to consider the further suggestion I have made as to whether this abuse cannot be prevented. I agree that the
Income Tax Act
abuse should not be permitted. Furthermore, as the minister himself has pointed out, this section is just getting under way. Why is it necessary to take fright and cancel what seems to me to be the really beneficial effect of the section almost before it has had a chance to operate at all?


Douglas Charles Abbott: That is the reason why the amendment is made at this time. I came to the conclusion it would be subject to such serious abuse that we could not leave it in these general terms. I agree that in the case of private companies very embarrassing situations can be created where the majority shareholder is getting on in years and the junior shareholders are anxious to acquire his interest, but there are other ways in which they can get the necessary capital to do that. They can borrow outside; they can borrow from banks or they can borrow elsewhere. I think it is very questionable whether as a general rule they should use the company's own funds in order to acquire those assets because that in effect amounts to a reduction of capital. There is probably no real security for the loan other than the shares of the company. I will consider the point raised by my hon. friend, but I am not prepared to go further at this time than to support the amendment which my colleague has proposed, and which will remove any possible retroactive effect of the proposed amendment.


James MacKerras Macdonnell: Would the minister not at least do this? Surely it is not asking much to ask the minister to consider with his staff the suggestion which I made. After all, it is my information that the apprehended abuse is that the loans will be made and just allowed to carry on, and not be repaid, and that in this way the intent of the act will be defeated. I am suggesting in good faith a means which prima facie seems to me a cure for that situation. Will the minister not agree to at least let the section stand until he and his colleagues have had a chance to look at that suggestion? That is not asking very much.


Douglas Charles Abbott: I do not think I can let the section stand, Mr. Chairman, because it has been given pretty careful consideration by myself and my advisers already. This is not a hastily introduced amendment, by any means. However, I have listened carefully to the suggestions made by my hon. friend; I hope I shall be introducing another budget not too late in the coming year, probably within the next five or six months, and if it is found that some further improvement in this position can be brought about I shall be very glad to consider it. However, the section as it stands, as it was introduced last

Income Tax Act
year, offers such obvious opportunities for abuse that I am not prepared to let it remain as it is. That is the position. Perhaps it can be modified somewhat, but at the moment I cannot think of any amendment I would be prepared to accept on the spur of the moment.
As a result of the proposed amendment I am removing any retroactive effect. If anybody entered into a bona fide agreement between the time the new Income Tax Act was introduced last year and November 14 of this year, that agreement will be recognized. Between now and the next time we have occasion to consider this measure I shall give careful consideration, with my officials, to the suggestions my hon. friend has made, to see if there can be some further modification of the section to permit legitimate bona fide transactions.


James MacKerras Macdonnell: I do not
want to be persistent, so this will be my last attempt. I do suggest to the minister that if this amendment goes through it is going to be very difficult for him to return in the spring and shift the thing back again. It was my hope that since we still have two or three days left the minister might agree to look at it now, before the door is banged, because it seems to me it will be harder to do later on.


Douglas Charles Abbott: I can only reply that my hon. friend was good enough some days ago to indicate to me that he had some concern about the restrictive effect of this section, and I have been giving it some consideration since that time. I have not been able as yet to arrive at a conclusion that I can recommend by way of amendment, other than the one I have before the committee at the moment.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 3.
Douglas Charles Abbott: Here again I have a minor amendment. This section sought to minimize the adverse effects on stock dividends declared by non-resident corporations. A double test was set out in the section as to the corporations to which it should apply: first, shares which are listed on a recognized stock exchange; second, where more than fifty per cent of the share capital belongs to nonresidents. I am now proposing that the requirement as to listing on a recognized stock exchange be eliminated, and that the ownership of the share capital be the only test. We have found in practice that there were some private companies to which similar considerations should apply, but whose shares

were not listed on a stock exchange. So I would ask my colleague to move the following amendment:
That subclause one of clause three of bill 176 be deleted and the following substituted therefor:
"3 (1) Section nine of The Income Tax Act is amended by adding the following subsection
thereto:
'(10) Notwithstanding subsection (9), subsections (1), (2) and (3) are not applicable where the corporation is a non-resident corporation, more than 50 per cent of the share capital of which (having full voting rights under all circumstances) belongs to non-residents'."


Alphonse Fournier: I move accordingly.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 4-Deductions allowed.
Douglas Charles Abbott: There is a typographical error here, really a printing error, which must be corrected. In paragraph (4) the word "blank" should be "bank." I am afraid I shall have to ask a formal amendment for that. I must apologize to the committee for the numerous amendments; but this is a very technical bill. I purposely had it distributed some little time in advance of bringing it up for consideration in order to get as many suggestions as possible, and that has resulted in the necessity for some amendments which I think are improvements.


Alphonse Fournier: I move that the word "blank" in line 12 of paragraph (4) of section 4 be deleted and the word "bank" substituted therefor.


[Stage Direction]
Amendment agreed to.
John George Diefenbaker: Why is subsection (5) restricted to the expenses of railway telegraphers and station agents? What about the railway employees who have stopovers in the course of their duties?


Douglas Charles Abbott: They are covered already under subsection (7) on page 4 of the bill. This was a group which apparently had been overlooked in the general consideration of railway employees.


John George Diefenbaker: I did not think subsection (7) covered them.


Douglas Charles Abbott: I believe every group of railway employees whose duties require them to travel now are subject to the application of the same principle. That is my information.


Donald Methuen Fleming: I am entirely in sympathy with the intent of subsection (7), but I do take exception to the draftsmanship. I do so with a certain degree of diffidence, but

at different points in this bill we find nouns used as adjectives, in violation of the rules of good English grammar. Here in lines 10 and 11 of subsection (7) we have a very bad example. That subsection reads:
. . . where a taxpayer was an employee of a person whose principal business was passenger, goods, or passenger and goods transport . . .
I believe that is thoroughly objectionable English. I do not know why it could not have been expressed in some such words as these:	"whose principal business was the
transport of passengers, goods, or passengers and goods." I do not propose now to discuss other sections but I could show that a good deal of this sort of bad grammar is contained in this bill. If I may point to one other example to which the same remark applies, over on page 12, line 46, we have the expression "taxation years", with the noun "taxation", used as an adjective. Again on page 35 of the bill, line 35, we have the words "corporation director."


Douglas Charles Abbott: These expressions have been consecrated by long usage in these statutes.


Donald Methuen Fleming: I do not like to see parliament consecrating bad grammar in statutory form. I do not believe you could find a worse example of the violation of well established rules of grammar than in the words I quoted from this very section, "whose principal business was passenger, goods, or passenger and goods transport." Surely it would be much clearer and much more proper, and would be more readable and grammatical to say "whose principal business was the transport of passengers, goods, or passengers and goods."


Douglas Charles Abbott: This was taken from the act
of last year. I know my hon. friend's reputation as a grammarian, and I would not attempt to challenge it for a moment. As the committee knows, these sections are drafted by solicitors in the Department of Justice, highly skilled in the art. At the moment I am not in a position to challenge the accuracy of the point raised by my hon. friend. Since he has not proposed it as a formal amendment, however, perhaps he would allow me to call it to the attention of the officer of the Department of Justice who prepared this section. It may be that the same language occurs elsewhere, and we can correct it the next time the act is before the house for revision. In this section the use of the words "passenger, goods, or passenger and goods transport," I am told is taken from the bill as it was enacted last year. I wish my hon. friend had spotted it at that time.
Income Tax Act


John George Diefenbaker: I am not going to get into this grammatical discussion, but as a matter of fact, I did not understand subsection (7) to refer to railway employees at all. It is clothed in such difficult language that I thought it applied to automobile traffic transporting goods and passengers, and that it did not apply to railway companies.


Douglas Charles Abbott: It applies to bus operators as well.


John George Diefenbaker: I thought it was restricted to bus operators and the like, automobile truckers, and so on. It was because of the obscurity of the language that I raised the point a moment ago. I saw the citation in the margin, "expenses of transport employees". It was for that reason I raised the matter a moment ago. I was not complaining about the grammar because, after all, that was not the point which interested me, but the wording itself. I had read this section carefully, and wondered why railway employees were not included.


Douglas Charles Abbott: No one knows the difficulties of legal draftsmanship better than my hon. friend, the member for Lake Centre. I suppose one of the things that keeps the legal profession in business is the difficulty of accurately expressing in words exactly what is intended. I have enough confidence in the skill and ability of the draftsman in the Department of Justice, who prepared this section, to believe that, while it may not be perfect, it is not obscure. The meaning is quite clear.


Gordon Knapman Fraser: A number of men in business for themselves, as well as commercial travellers, have told me that the income tax inspectors ask	them to produce	receipts formeals costing	as	little as 50 or	75 cents.
They feel they should not be forced to ask a waitress for a receipt for such a small amount.


Douglas Charles Abbott: I shall bring the matter to the attention	of	the Minister	of	National
Revenue.


Gordon Knapman Fraser: I see the Minister of National Revenue smiling, but I understand that has happened.


Douglas Charles Abbott: I shall bring the matter to the attention	of	the Minister	of	National
Revenue.


Donald Methuen Fleming: The Department of National Revenue made a ruling several years ago, with which I had some occasion to become acquainted on behalf of certain brotherhoods of railway employees. It was to the effect that if vouchers were not presented by railway employees, who were on regular runs

Income Tax Act
which kept them away from home overnight, the department would grant them a deduction of a flat $300 a year. If the taxpayer claimed more than that, he had to produce his vouchers. Will that rule be applied in the interpretation of this subsection?


Douglas Charles Abbott: I believe that is really a question of fact. My hon. friend is right in saying that a standard rate for the running trades has, for some time, been considered as a dollar a day. It is open to the taxpayer, of course, to produce vouchers to show the actual expenses incurred, but I believe it was found that that represented approximately the amount which was usually spent. I am told that, for some time, that was accepted as a rule.


Donald Methuen Fleming: It was a useful rule of thumb. May we take it that the same rule will be observed in the administration of this section?


Douglas Charles Abbott: I cannot speak for that, because the administration is the responsibility of another department.
Section as amended agreed to.
Section 5 agreed to.
On section 6-Inadequate considerations.


Donald Methuen Fleming: It is proposed to insert a new subsection (3A) in this section, and I should like to ask the minister whether this new subsection is being introduced to meet any particular situation that has arisen or whether it is a matter of tidying up the draftsmanship of the 1948 act.


Solon Earl Low: When the minister is replying to that question, will he tell us what is meant by dealing at arm's length?


Douglas Charles Abbott: I shall come to that in a moment. This section really rounds out section 17 which, as drafted, covered a sale both ways, but did not cover a lease both ways.
Answering my hon. friend the member for Peace River, "at arm's length", is a phrase which I believe is fairly well understood by lawyers and the courts. It implies that the parties are not either related or connected, and that it is a genuine transaction in which the interests of both parties are adverse.


Solon Earl Low: There is no love between them?


Douglas Charles Abbott: Not necessarily no love between them, but one should not assume there is any love between them. It has to be a genuine business deal.


Donald Methuen Fleming: Have there been any cases under section 126 since it was enacted?


Douglas Charles Abbott: There have been no cases since it was put in the new Income Tax Act.


[Stage Direction]
Section agreed to.

On section 7-Depreciation.
James MacKerras Macdonnell: I should like to ask the minister whether this would be the place for him to make some reference to the new system of depreciation which has been proposed?


Douglas Charles Abbott: Probably this would be as good a place as any. In my budget speech on March 22, I referred to the general principle of the new basis on which depreciation would be allowed. It will be found on page 1799 of Hansard. Perhaps my hon. friend has read it, and I do not know that it is necessary for me to repeat it now, but it might be as well if I were to do that. At that time I said:
In the past allowances have been granted on the basis of wear and tear of assets used in earning the income subject to tax. Under the new regulations which my colleague the Minister of National Revenue is proposing, the governing principle will be the amortization of costs of depreciable assets. Incidentally, an effect of this will be to allow for obsolescence hitherto unrecognized under our act. In the second place the rates of write-off will apply to the written-down value of the asset account rather than to the total asset account. In the technical language of the accountant this means changing from the straight-line method of depreciation to the diminishing balance principle. Of course the rates of depreciation will be appropriately increased having regard to the diminishing base to which they apply. Thirdly, it is proposed to introduce what might loosely be described as a recapture provision. This provision will operate to ensure in effect that the deductions for amortizing the cost of an asset shall not exceed the final proven cost of the asset to the taxpayer. It will call for an adjustment against future write-offs where assets are disposed of after wme use. I might add here that the so-called add-back or adjustment will be limited to the written-down value at the end of 1948 regardless of the price realized on disposal of assets in order that there can be no possible claim that under this provision capital gains are being taxed, or that this recapture provision has any retroactive effect.


Edmund Davie Fulton: Will the minister explain it now?


Douglas Charles Abbott: If my hon. friend wants me to explain it, I shall be delighted to take a long time to do it, but I do not think he really wants me to do so. He knows as well as I do that the matter is an extremely technical one. The Minister of National Revenue and his officials have been engaged for some time in the preparation of the necessary detailed regulations to outline the basis upon which the new system will operate.


John George Diefenbaker: Will the minister give a concrete example?


Douglas Charles Abbott: Yes, I think perhaps I could do that. Take the case of an asset which cost the taxpayer $100,000. Rates of depreciation are established under the regulations to be enacted of, let us say, 15 per cent per annum. The asset as acquired is held by the taxpayer

for five years. It will then have been written down to 25 per cent of its original value or, in other words, $25,000.


Donald Methuen Fleming: That is on straight line depreciation.


Douglas Charles Abbott: That is on straight line depreciation; my hon. friend is quite right. It would start off at 15 per cent, and there would be varying percentages down through the years. The 15 per cent would be applied each year to the depreciated value of the asset and at the end of, let us say, five years it would have a value on the books of whatever you like, say, $25,000 or $30,000. Then it is sold for $50,000 and in virtue of the recapture provision to which I have referred, the $20,000 would have to be taken up into profit and loss and would of course be subject to tax in the year in which it is taken. That is a fairly simple example. I understand that in more complicated cases it could be much more complex than that, but I think it illustrates the principle to which I am referring.


James MacKerras Macdonnell: Regulations are now being made in detail which will govern this exceedingly important and vital thing. At what point does the house get a chance to see them? At what point do we get a chance to study them? Or are we just to take them on the minister's short, though highly interesting statement? I think it is a matter of great concern. As the minister knows, I have been trying to get these regulations for the last couple of weeks. It would be a natural thing for us to want to study them and even to confer with the business community and try to make sure that there was no suggestion that needed to be made. I understand that they are not even in print yet.


Douglas Charles Abbott: That is correct. My hon. friend will appreciate the fact that they cannot be adopted by the governor in council until this particular section 7 is passed setting out some of the matters which must be spelt out in the law before the regulations can be adopted. My hon. friend will recall that until the amendment made to the Income Tax Act last year, the depreciation provisions were not even a matter of regulation. They were a matter of discretion. What will happen is this. After this law has been enacted, regulations prepared by the Department of National Revenue will be brought to the cabinet council, will be adopted, will then be published in the Canada Gazette and will be made available for all who are interested. They will then be subject to the general scrutiny of those who are interested, including the commercial community, lawyers, accountants and others who are considering these questions. So far as consideration by the house is concerned, I 45781-174
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suppose they will not be available for reference and discussion here until the next session. But I point out to my hon. friend that under the act as adopted last year, and under the amendment which is proposed in this bill, and which is required in order to enable the regulations to be passed, it is provided that it will be done by regulation and not by ministerial discretion.


James MacKerras Macdonnell: But we are
in this absurd position now, apparently: the regulations cannot be approved until we approve this act; and we cannot see the regulations before we approve it, so we are approving something, in effect, where we have had nothing but a very sketchy illustration, if the minister will permit me to so describe it; and incidentally he gave us the wrong figures, although that is neither here nor there. But it seems to me that this important thing is being dealt with as if it were something of trifling importance that is just done every day by the officials in their stride.


Douglas Charles Abbott: That is not the case at all. The regulations are being made under section 11 (1) (a) which says:
Notwithstanding any other provision in this division, the following amounts may-
And I leave out some words.
-be deducted in computing the income of a taxpayer for a taxation year:
(a) Such part of the capital cost to the taxpayer of property, or such amount in respect of the capital costs to the taxpayer of property, if any, as is allowed by regulation.
I indicated in my budget speech last March the broad principles on which depreciation will be allowed. I agree with my friend that the rules with respect to depreciation are one of the most important aspects of income tax law because they vitally affect the profit of the taxpayer which is subject to tax. But it has never been considered possible to spell out in a statute the detailed rules with respect to depreciation. It has never been done. Under the old act it was left to the discretion of the minister. Under the new act we provide that it should be done by regulation; that is, that it should be formally enacted in specific terms, tabled in the house, published in the Canada Gazette and available for all who wanted to see it.


James MacKerras Macdonnell: Afterwards.


Douglas Charles Abbott: Afterwards, yes. But you have to have an effective order to make the regulations before you can enact the regulations. I have not seen these regulations yet. I understand that they are prepared and are ready for submission to cabinet council when this amendment is passed. My hon. friend quite properly asked me if I could let him

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have them two or three days ago, and he referred to it today. I told him that I had not seen them myself. I have not seen them yet.


James MacKerras Macdonnell: That does not impress me greatly. I am quite aware that under the clause in the statute these regulations can be made. But I am submitting to the minister, who is usually a reasonable man, that actually, without knowing a great deal more than we now know, we cannot give any intelligent consideration to this section 20 that is now before us. Whether or not it has been the practice, I think it would have been good sense for us to see these regulations. I know they are still tentative; nevertheless, they would have given us an understanding that we do not have at present. As it is now we are asked to approve these regulations really in the dark.


Douglas Charles Abbott: I just point out to my hon. friend that the principles that we are asked to pass on do not depend on the regulations at all. The principles are as I have enunciated them. The detail will be found in the regulations. But my hon. friend or any other member of this house has all the information he needs and is quite competent to pass on the principles.


James MacKerras Macdonnell: I am not
quite through yet. Some of my colleagues are anxious to have a go at the minister and I will give way to them in just a moment. I am quite ready to plead guilty to being just as stupid as the minister likes to accuse me of being, but I do not think we have had any real exposition of this matter. For instance, there is a phrase here that I do not understand. Perhaps the minister does not understand it either.


Douglas Charles Abbott: Quite likely.


James MacKerras Macdonnell: We are told here up to the present, "incidentally, that the effect of this"-that is, of the new system- "will be to allow for obsolescence hitherto unrecognized under our act." There is a short statement which goes to the root of depreciation. That is just stated as a categorical statement. There is no explanation of it here. As I say, I think we are left in a silly position. When we go back to our constituents and to our business friends and they ask us what we know about this important matter, we shall have to say that we just do not know anything, that the minister told us that regulations were going to be made but he had not even seen them himself.


Mr. Wright:: I am not a lawyer and therefore do not understand all the implications of this section, so I should like to present a specific case to the minister and ask him just

what happens in that case. A great many farmers, especially in western Canada, came under the income tax first between 1940 and 1943. We will take the case of a farmer who built, we will say, $10,000 worth of buildings in 1929 and in 1940 he comes under the income tax. He then writes off 5 per cent depreciation on the buildings, and that depreciation has been written off on the $10,000 that he started with. By 1949 his depreciation is all written off. He cannot take any further depreciation, although for five or ten years during the 1930's he was in the drought area or had no crop at all. He was paid P.F.A. Yet his right to take depreciation ceases at the end of twenty years. Is there any provision made for that? It seems unfair that he should not be able to take depreciation for twenty years during a period that he had not an actual income; it seems unfair that he should not be able to take depreciation on years when he had no income at all.


Douglas Charles Abbott: If I understood my hon.
friend's case correctly, the farm that he referred to has been completely written off in the period to which he refers.


Percy Ellis Wright: No.


Douglas Charles Abbott: As with all depreciation, you cannot take it twice.


Percy Ellis Wright: No, it was not written off. He never made income enough to write off any depreciation during maybe a five-year or ten-year period in the thirties. Prices were low or he had no crop. Yet the income tax people insist that by 1949 his right to depreciate those buildings has ceased. That seems unfair.


Douglas Charles Abbott: I am told that is one of the reasons for making the change that is contemplated here. Under the old rules he had to take at least half the allowed depreciation in a particular year, whether he had profits or not. Under the new system he is not required to take any depreciation at all in the particular year unless he sees fit to do so, and obviously he will not do it unless he has profits against which the depreciation can be allotted.


Percy Ellis Wright: That again brings up the difficulties under the act. Most farmers have not kept books. All the department has is their word that during that year they did not have an income. What proof will they have to give to the department that they did not have an income during any particular year in which they could not take depreciation?


Douglas Charles Abbott: Of course if they had profits they took the full depreciation against the profits. Under the old rule they would be

obliged to, or they would be deemed to have taken half of the allotted depreciation whether profits existed or not. That has been operating up to the present time, and the result today would be that either the depreciation has actually been taken against the admitted profits or would have been deemed to have been taken to the extent of half the percentage allowed, applicable in each year in any case.


Edmund Davie Fulton: I have information, and it comes from a chartered accountant of considerable experience, that this is in fact a retrograde step. My information is that in the United Kingdom the practice is in accord with what is called the straight-line method of depreciation; whereas this amendment sets up the reducing balance system. Will the minister comment on that? If that is so, why are we changing to what has been described as an antiquated system?


Douglas Charles Abbott: I can only cite another
opinion. I have been informed by chartered accountants and others in whose judgment I have a good deal of confidence that this is not a retrograde step, but a step in advance and that it actually is better for the majority of taxpayers than the old system. I cannot be otherwise than assertive on that. That is the advice which I have received from my own advisers who are highly experienced in these matters. I can make no claim to being an expert myself. As I said before, this is a very technical subject, one in which the accountants are very much more expert than members of the legal profession. I can only rely on information which I receive that this is an improvement on our old system and essentially fairer to the taxpayer, and that is why we made the change.


Edmund Davie Fulton: May I make two comments on that? The first one is that under this system the taxpayer can never entirely write off the asset, because it is a constantly reducing figure which is diminished each year, the suggestion being a straight 15 per cent of the initial cost. The second is, what is the practice in the United Kingdom?


Douglas Charles Abbott: On the first question my hon. friend is of course a highly skilled mathematician. He is quite right on the diminishing balance principle. You could not completely eliminate the value, but it can be reduced to infinitesimal proportions so that it ceases to have any commercial significance.
As to what the practice in the United Kingdom is, the information we have is that most of the British system is on the basis 45781-174J
Income Tax Act
which we are now adopting, but I am not prepared to assert that with absolute finality. That is the information we have.


Victor Quelch: I should like to get this down to fairly simple figures. Take the case of a farmer who has a tractor worth $5,000. At the end of five years that tractor has been fully written off. That farmer sells the tractor to another farmer for $2,000. Is the purchaser allowed to depreciate that $2,000, or has it been written off so far as he is concerned?


Douglas Charles Abbott: The new purchaser would depreciate it at the cost which is $2,000.


Douglas Scott Harkness: What about the farmer who sold it?


Douglas Charles Abbott: He gets $2,000 back in income because he would have had the tax determined on a depreciated basis which has been proved in fact to be too great.


Mr. Major:: The farmer would receive $2,000 from the sale of his old tractor. He would buy a new tractor for $1,500 on which he would take depreciation, and he would have $500 to spare.


Douglas Charles Abbott: Which shows the great advantage of being a farmer.


John George Diefenbaker: This is one section that will need almost an army to enforce. I am speaking now for the farmers. If it is properly understood it will arouse a degree of antagonism the like of which has never been known before. I come from a province where the farmers pay income tax. When they begin to realize the meaning of this change that my hon. friend passes off with that graciousness for which he is famous, it will take an army of employees to enforce it.


Douglas Charles Abbott: Why does my hon. friend say that?


John George Diefenbaker: I say that simply for the reason that throughout the years in Saskatchewan the farmers have been in the position mentioned already by the hon. member for Melfort and the hon. member for Acadia. They have brought before the committee a situation that is serious. This section makes no allowance for conditions that prevailed throughout the years. Suppose the machinery was purchased in 1932 or 1933 and there was no crop for five or six years and there was no depreciation during those years. If the farmer disposes of his machinery he finds himself in a position where he is subjected to further taxation. There will never be a closing of the farmer's liability for taxes.


Douglas Charles Abbott: If my hon. friend will permit me, this applies only to depreciation from now on. I thought I made that clear in my initial statement. It does not relate to the past.

Income Tax Act


John George Diefenbaker: I appreciate that. But when conditions are bad in any of the years, as they are for instance this year, then the situation is going to be most serious during any year that the farmer has a crop and disposes of any of his machinery that has been depreciated down. I suggest that the minister should give the widest publicity to this section and that the regulations should be published in all the papers. Some say that knowledge is strength. Knowledge of this section in the farming communities will arouse a great deal of ill feeling because it means that when a farmer has a crop after a series of no crops and disposes of any of the assets that have been depreciated down over five or six years, he will find himself paying an abnormal income tax on something that I personally regard as a serious invasion of his rights. I mention farmers particularly in that connection, for I believe that this section as now drafted will be productive of more antagonism than revenue.


Douglas Charles Abbott: I have only one suggestion to make there. Perhaps I should not presume to suggest it but I think one should be careful about making assertions as to what the reaction will be-


John George Diefenbaker: I have already received letters about it.


Douglas Charles Abbott: -until the regulations are fully understood by those who will be affected by them. My hon. friend refers to bad years. Under the proposed new system, if the farmer to whom he alludes sells a piece of equipment at a loss he can continue to take depreciation on it, which he could never do before. He can average his profits over five years back and he can write a loss five years forwards and one year back. A combination of those various privileges I think will be found on application to be much more advantageous than the system which has prevailed up to the present time. Therefore I hope hon. members will not criticize the provisions in unqualified terms, until they are thoroughly informed as to the new regulations and the way they will work out.


John George Diefenbaker: That is one good argument why the tentative regulations should be before the house so that, just as the hon. member for Greenwood has said, we may understand how these new changes are going to be applied. We make a general law in this section. I know one cannot cover a particular case in a general law; he must leave something to the matter of regulation. But those tentative regulations should be before the house so that hon. members may understand what the application will be in so far

as the taxing administration is concerned, in connection with the regulations about to be announced.


Percy Ellis Wright: I agree with the hon. member for Lake Centre that publicity should be given to this change, because I know it is a complete reversal of what has been happening in connection with depreciation on machinery. I know a great many farmers will not know anything about it unless some publicity is given to it; and they will continue to consider as capital gain the $1,000 or $500 for which they may sell a piece of equipment that has been depreciated, rather than place it in their income for taxation purposes, which has been the custom to date.
The minister has not answered my other question. He says the new legislation is not retroactive. Farmers during the thirties were not able to depreciate. There is depreciation taken on his buildings, whether he had an income in those years or not. That seems to be unfair.
The minister stated this new legislation will cover that, but it will not cover the retroactive period. That is the period they are worrying about-the time in the thirties when they were unable to take that depreciation.


Douglas Charles Abbott: I wish I could explain a little more clearly than I have; however, I can only repeat what I said before, that this is probably the most complex and technical part of the income tax law. It is one which I think trained accountants are much better able to understand and explain than lawyers would be.
There will be no retroactive effect, so far as the new section is concerned. Value will be taken as it is today and depreciation will apply from now on. I sincerely believe, from the information I have been given, that they are more fair and more advantageous for the taxpayer than the rules which existed formerly. That is the only assurance I can give the house. I think we have to use the process of trial and error here as we do in so many other cases. These regulations to which I refer are still being worked on and will be put out as early as possible. I am informed by my officials who sit before me that the regulations, even if they were available today, might not help us in discussing the principle of the new rule. But, be that as it may, they are not yet ready.


Percy Ellis Wright: Under the circumstances the minister should advise every farmer to have a chartered accountant make up his income tax next year. Farmers will not be able to

understand these regulations. Hon. members cannot get an explanation they can understand.


Douglas Charles Abbott: I am told however that the new system is simpler than the old one. So, I think it is like so many other cases-we are crossing our bridges before we get to them, and we are worrying about things we need not worry about. I would only ask the indulgence of the house to give this a fair trial. It would have been easy for us to have stuck to the old one. No one was complaining a great deal about it. I do not think one member in the house out of fifty really knew anything about it-and I include myself in the fifty. We are endeavouring to improve it. I apologize for not being able to explain it more clearly than perhaps others could do. However, that is the position.


Donald Methuen Fleming: Mr. Chairman, it is well for us to remember that this house, in legislating, while it has a responsibility with respect to the principle of the bill, also has a responsibility with respect to its form. Unless we can legislate in clear terms we are creating trouble for the taxpayer.
It is not without significance that when the minister sought to give the effect of the section he turned back to a speech he made on the budget last March. There he placed before us a paragraph which was clear and understandable. But when it gets down to a matter of carrying out the effect of the paragraph in the budget speech we find that there are in sections 7 and 8 of the bill, which are the sections dealing with depreciation, some six pages of legislative-


Douglas Charles Abbott: Mostly definitions.


Donald Methuen Fleming: -of legislative provisions.


Douglas Charles Abbott: Mostly definitions.


Donald Methuen Fleming: Well, that does not subtract one iota from the difficulty of construing the sections.
I suppose there may have been times when taxing statutes enacted by parliament were clear and understandable, but it seems to me that time has gone by. If these sections are a fair example of the kind of legislation parliament is to be called upon to pass nowadays, then the days of clear legislation are gone. Looking over this bill, and seeing these sections, and subsections and clauses, and then the exceptions to the provisions, and the exceptions to the exceptions, and the provisos, and the provisos to the provisos, and so on scattered all through this bill, one wonders what on earth the result will be. It reminds me of an expression from an eminent
Income Tax Act
professor of the university of Toronto respecting the profound writings of Dean Roscoe Pound of Harvard law school on jurisprudence, when he said, "He uses English words, but it is not the English language."
One might say of these new provisions that they contain English words, but so far as we can find out they bear no resemblance to understandable English. It is very difficult for any man to follow them.
Then, there are a couple of points in particular I should like to mention. I understand it has been the practice in times past for the Department of National Revenue not to allow depreciation unless that depreciation is actually set up on the books of the taxpayer. That immediately raises the question as to the particular method of depreciation the taxpayer proposes to follow. I am informed that this reducing balance method as a basis of depreciation may become very cumbersome and unsatisfactory from the point of view of the taxpayer. If the taxpayer, to keep himself in the clear so far as the statute is concerned, is to follow this reducing balance method, and if, in trying to keep his books in such shape that he will understand them, he applies the straight line method, which is probably the one to which he has been accustomed, then he will be in great difficulty.
There are taxpayers who are urging upon the minister that the regulations be promulgated in the future so as to permit a choice of bases on the part of the taxpayer, and that he should be allowed to retain, if he so chooses, the straight line method.
There are several other features, and these have been drawn to the minister's attention. I refer particularly to a brief submitted to him by the board of trade of Toronto. These are matters with which it seems to me the minister has not dealt-or certainly has not dealt clearly tonight.
The first objection has to do with the retroactive feature. The minister has said there is no retroactive feature. I submit to him that it would be well if the new provision in respect of depreciation and the regulations yet to be made were made effective on a uniform date. It has been suggested that fiscal periods ending January 1, 1950, and subsequently would be satisfactory, and that the transitional provision could carry forward the former depreciation practice to that date.
The board of trade has made this comment:
It must be obvious that from an administrative point of -view this would be highly desirable. If this is not done, thousands of corporate statements already prepared and filed will be subject to amendment. Furthermore in a great many cases, where assets have been disposed of, a retroactive tax will

Income Tax Act
be imposed. The board believes that this is an improper manner of dealing with the tax-paying public, and strongly urges that this retroactive feature of the proposed law be not enacted.
It seems to me, in commenting upon that point, that that is good sense and clear logic.
The second point has to do with the effect of this provision upon the stranger who at some future date is making a purchase.
Paragraph (2) of section 20 deals with property passing between persons some of whom were not dealing at arm's length. The effect of the paragraph as drafted would seem to work a hardship against a bona fide stranger who is a final purchaser in a series of transactions one of which was not conducted at arm's length. This would obviously be unfair and the wording of the paragraph should be changed to avoid such a situation.
The point arises as to these definitions to which the minister has referred. The particular definition to which I am now about to allude is on page 6 under subsection 3 (c), the definition of "proceeds of disposition". You will observe that the third and fourth clauses of paragraph (c) include:
(iii)	an amount payable under a policy of insurance in respect of loss or destruction of property, and
(iv)	an amount payable under a policy of insurance in respect of damage to property except to the extent that the amount has, within a reasonable time after the damage, been expended on repairing the damage.
The submission of the board of trade on this point is:
Taken together these two items-
That is to say, paragraphs (iii) and (iv) which I have read.
-seem to mean that in case of a total loss by fire the insured company would be taxable on the proceeds of insurance to the extent that the proceeds exceeded the undepreciated capital cost, (but limited to the amount by which original capital cost exceeds undepreciated capital cost). In case of partial loss, no tax would arise if the proceeds of insurance were expended in repairing damage.
This could quite obviously work serious hardship in the case of total loss by fire. In such event part, and possibly a large part, of the insurance moneys would be required for taxes. It is quite possible that some companies would not be able to carry sufficient insurance to cover both the fire loss and the resulting tax, and therefore would not be able to replace the plant facilities.
Then the board proceeds to urge very strongly that the proviso in subparagraph 3 (c) (iv) regarding amounts expended to repair damage should be extended to 3 (c) (iii) to cover amounts expended on replacement. That seems to be a most sensible suggestion. Surely it would not be the wish of parliament that, where insurance is collected on what amounts to a total loss or nearly a total loss, the tax gatherer should step in then and treat the payment made by the insurance company as proceeds of disposition.
It seems to me these points illustrate the definite weaknesses and shortcomings in the
fMr. Fleming.]
legislation now before us. I would suggest that the two related sections, sections 7 and 8 of the bill, should be held over until the minister has had an opportunity to draft amendments that will overcome these very proper objections to the present wording.


Douglas Charles Abbott: I very carefully considered the representations from the Toronto board of trade to which my hon. friend has referred. As to the alleged retroactive question, I announced last March that depreciation for 1949 would be on the new basis. It is true the detailed regulations are not yet available, but I hope they will be within the next week or ten days. However, be that as it may, in the regulations it is proposed to insert a transitional provision that if the taxpayer takes depreciation in the year 1949 calculated on the old basis that dollar amount can be used for the 1949 period. In other words, he is given the option of taking it on that basis or on the new basis, whichever happens to be more advantageous. I think we have carefully guarded against any danger of retroactivity in the application of the new rules. I cannot agree with the submission of the board of trade on the question of insurance. If a man has insured a capital asset and he realizes an amount which is in excess of the written-down value he has in effect disposed of that asset, in an exceptional way it is true, and he has received a certain amount of cash for it. I see no reason why, if the proceeds of the insurance policy are in excess of the written-down book value, he should not be taxable on that excess.


John Lambert Gibson: Would it be all in the same year?


Douglas Charles Abbott: He can of course refuse it and start depreciating on the new basis.


John Lambert Gibson: Does the minister think it is fair that that should all be taken in the one year? After all, if there was appreciation over a period of ten years, why should it all be taken and made taxable in the one year? Getting it down to the simple tractor from Acadia, where the farmer depreciated his tractor in five years, and at the end of that time showed $2,000 profit you would charge him all that amount.


Douglas Charles Abbott: There is one thing which is not appreciated. Under the new system all assets are lumped together as a group. Under the old system each asset had to be valued on the books as a separate item and depreciated separately. Under the new system they are lumped together and all pooled, and your depreciation is against the pool. Therefore if he had two tractors one could be offset against the other. It is really writing back into the pool. Take the case of the ordinary

commercial enterprise where some stock in trade is lost as the result of a fire. Suppose it is not a total loss, but some machinery and equipment is lost, and there is other machinery and equipment and other assets which are depreciated. The collection on the insurance is $25,000 and the written down value is $20,000. Therefore there would be an apparent profit of $5,000 which would be taxable. That is taken into the operations for the year, but depreciation is taken against the pooled assets, and it is offset against that figure.


John Lambert Gibson: How would the minister replace a saw mill if it was insured and then you came along and took your 20 per cent cut out of it? What has happened over the past seven or eight years is that costs have increased, and a saw mill that might have cost $500,000 then would cost $1 million to replace. Nevertheless, in the meantime you have reduced the capital you have there.


Robert Fair: I believe the minister and the government are well aware that the taxation policy and agricultural policy in general have been responsible for the reduction in the production of agricultural products. I think that has been pointed out plainly many times in the house. Just as soon as farmers find out there is one more method by which their money can be filched away from them in the form of taxation, there will be a still greater reduction in the production of the country. I think it is a mistake to have the present system put into effect so far as farmers are concerned.


James MacKerras Macdonnell: I find myself perplexed by the minister's attitude with regard to his refusal to admit that insurance money may be used for replacement as well as repairs. Let me ask, how much destruction must there be? In subparagraph 4 it says:
... in respect of damage to property except to the extent that the amount has, within a reasonable time after the damage, been expended on repairing the damage.
Suppose there is 95 per cent damage. Can he replace it? What if the whole thing is destroyed? Suppose there is 50 per cent damage; he can replace, but if the whole thing is destroyed then he is going to be taxed and he cannot use the money for replacing the building. Is that correct?


Douglas Charles Abbott: There are two separate things. The first paragraph, (iii), relates to loss or destruction, and the second one, (iv), relates to damage. In the case of loss or destruction the insured article is no longer there. It is not a case of repairing it but of replacing it. It is just as though the article has been
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sold; the only thing is it has been sold to the insurance company instead of to a purchaser. So far as the taxpayer is concerned, he has the cash, and if he had sold it he would have to use the cash to replace it if he wanted to. Since it has been burned, or destroyed in some other way, he has the cash from the insurance company. If that amount of cash is greater than the written-down value of the asset, then in effect he has got back more than his capital; he has been claiming a deduction as a capital expense which in fact he has not incurred. Therefore on the recapture principle it should be subject to tax. If the asset is damaged the insurance money, if entirely used to repair the damage, will attract no tax; but if there is an excess over and above what is required for repair then I take it that would be taxable income.


James MacKerras Macdonnell: I understand the recapture principle; in fact that is the only thing I have understood tonight, really. It still seems to me that you are running into an absolutely illogical and even fantastic situation if you say the man whose building is ninety-five per cent ruined can replace or restore the damage, while the man whose building is one hundred per cent ruined cannot do so. Let us be frank about this. Insurance very seldom covers the whole value of a building, as we all know. In the practical outcome of this, say a man has a building worth half a million dollars, and he gets $400,000. According to the statement just made by the minister he can still be taxed on part of it.


Douglas Charles Abbott: No, there would be no tax at all under those conditions. If the written-down value of his buildings is half a million dollars and he collects only $400,000 in insurance, he has had a loss. The new system would help him get the $100,000 back, because he can include that loss of $100,000 in his general pool. He could not have included a capital loss of that kind before; but if you have a running capital account of this kind you can take capital losses into it. That is one of the advantageous features of the new principle.


James MacKerras Macdonnell: The Toronto board of trade stated a simple case, and I thought it was put very sensibly. Let me read it again, to see where the defect may be: The board draws your attention to paragraph (3) subsections (c) (iii) and (c) (iv) which define "proceeds of disposition" to include proceeds of insurance policies. Taken together these two items seem to mean that in case of a total loss by fire the insured company would be taxable on the proceeds of insurance to the extent that the proceeds exceeded the undepreciated capital cost (but limited

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to the amount by which original capital cost exceeds undepreciated capital cost). In case of partial loss, no tax would arise if the proceeds of insurance were expended in repairing the damage.
It seems to me the point is that in the case of partial loss the provision is sensible, but if you have the other case you run into this tax, which could prevent a man from carrying on his business.


Douglas Charles Abbott: My hon. friend cited the case of a ninety-five per cent loss. If the proceeds were used to repair the loss there would be no tax. If on the other hand the proceeds from the insurance were $10,000 and it cost $9,000 to repair the ninety-five per cent loss, the extra $1,000 would be taxable.


Mr. Herridge:: Numbers of people in my constituency own timber, on which in some cases they have paid taxes for from twenty to thirty or forty years, and they have also spent money developing and caring for it. Many of these people sell their timber on a stumpage basis for poles, logs, and so on. Are the receipts from that depreciated capital taxable?


Douglas Charles Abbott: I am told that if the timber is sold on a stumpage basis the proceeds are taxable.


Mr. McCubbin:: As a farmer I am just a little alarmed about this provision. We have become accustomed to the present method of depreciation of farm equipment and farm buildings, and now I want to ask the minister this question. In what way does this section alter the present method of calculating depreciation on farm buildings and equipment?


Douglas Charles Abbott: I would like to give my hon. friend a detailed answer, but I am afraid I cannot do so. I am informed by people who are versed in this rather intricate subject of depreciation that the farmer will be better off under the new system than he was under the old one. I am making that as an assertion. I may be wrong, but I do not think I am, because we did not have to change the old system but did so in order to improve it. I return to what I said a little earlier. I wish I were technically competent to explain the intricacies of this matter, but I am not. However, I am assured by people who have made a study of it that it is an improvement on the old system and that it is better for the taxpayer, which includes the farmer as well as anyone else. That is why we have brought it in. I am afraid I cannot point out just why that should be so, though I shall try to in any specific instances that may be mentioned, but I suggest that people should not get too alarmed about the adverse effects of this provision before they see how it works out.


Douglas Scott Harkness: The more I hear the minister attempt to explain this section the more amazed I become that anyone would contemplate applying this to the farmers of Canada. A moment ago the minister said that in his opinion it would be simpler and easier for people to work out, but in view of what he went on to say I do not see how that can possibly be the case. In the past practically every farmer I have known has had considerable difficulty computing his income tax. Many of them have had to get help from a chartered accountant, or someone of that sort. It seems to me that by putting through this section we will force every farmer to obtain the services of a chartered accountant; and as a result you are going to encounter intense opposition on the part of the farming population to this method of income tax assessment, as far as depreciation is concerned.
Under the old system when a farmer bought a new article, whether it was a tractor, a binder, a combine or anything else, all he had to do was take the cost and move the decimal point over, or in other words divide it by ten. If it was an ordinary piece of farm equipment it was on a ten-year depreciation basis, and the farmer could put down that figure one year after the other. If it was on a twenty-year basis he multiplied by two; if it was on a five-year basis he divided by two, and that was all there was to it. Even that was difficult enough for most people to follow through with many pieces of farm equipment. Now the basis has been changed, as I understand it. If a man buys a piece of equipment for $1,000, we will say, he depreciates it 15 per cent the first year, which brings it down to $850. The next year he has to depreciate it another 15 per cent of that amount. So the farmer is going to have to wrack his brains and spend goodness knows how long trying to figure it out. He will have to take each item separately year after year, and he just will not do it. He does not have time; he will not be bothered with it, and as a result you will not collect your taxes. In other words if you put through this amendment I should say you may get a farmers' strike as far as income tax is concerned. They will not be bothered with it and will not do it. I think you are simply laying yourselves open to all kinds of trouble. It would be much better to leave the old system, under which a man knew how to calculate his depreciation.


Douglas Charles Abbott: As my hon. friend realizes, this is intended to be a relieving section; and it is.


Some hon. Members:: Oh, oh.


Douglas Charles Abbott: It is intended to give the taxpayer further relief. Admittedly there may be a little difficulty getting it started, in arriving at initial values, but I am told when

that has been done it is very much simpler to calculate depreciation than under the old system. I am making that as an assertion, relying upon the advice of people in whose experience I have some confidence. While I know some people are always averse to change and always think the present system is the best in the best possible world, that is not my philosophy. In matters of depreciation as in other matters I think we may be able to bring about an improvement. No farmer is obliged to take depreciation; it is an advantage which enables him to reduce the amount of his tax. Again I appeal for a fair trial for this new basis, which I am assured is better and simpler than the old one.


Gordon Graydon: The thing I think will be in the minds of most hon. members is this: If the minister does not quite understand the implication of this section, I do not know how he expects the farmers to do so. As a matter of fact, I have heard some members of this committee say that the farmer would likely have to have an accountant make out these forms. He has to have an accountant now. I do not suppose there are many farmers, certainly not in my part of the country, who make out their income tax forms themselves. Instead of making these forms more complicated, instead of making the law so obscure that even the minister is not able to understand it, I believe we should be simplifying it.


Douglas Charles Abbott: I did not say that. I said it was a little difficult to explain in generalities.


Gordon Graydon: If a thing is difficult to explain, perhaps the person who is explaining it does not understand it himself.


Douglas Charles Abbott: Or his audience; but that is the fault of the minister, not his audience.


Gordon Graydon: So far as the income tax which is applicable to agriculture is concerned, I have always felt, and I believe it is the thought of most people representing agricultural sections, that the call is constantly for some sort of simplification in the tax structure. The farmer does not want to have to go to his lawyer or accountant, and spend days getting his income tax in shape. The farmer is in an entirely different position from the ordinary individual. You cannot put his business on the same level as the ordinary business of industry and commerce. There is a distinction between the two.
All the minister has to do is to look casually into the distinction between the way a farmer has to conduct his business, and the way the business of industry is conducted. In most instances, there is little in common. When it comes to making out income tax
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returns, however, both of them are put in the same box, and are asked to make out their income tax returns on the same basis. This has been the difficulty facing agriculture during these last few months. There has been a great deal of agitation over the complex nature of the returns the farmer is asked to make out. Upon completion of the return, the farmer is never sure whether he owes the government $10 or $1,000. I believe once the farmer sees this act, he will have great difficulty in coming to the conclusion that he can make out his income tax return.
If we are going to make a move in any direction, I plead with the minister to make a move towards a simpler sort of return for agriculture, having in mind the fact that agriculture is in an entirely different position from industry. Apparently, industry is the section of our population upon which the income tax return standards are based. I wonder what industry would think if the farmers were to have the say as to what kind of income tax return there should be in this country? Industry would raise a howl to the high heavens, but a farmer is expected to fit himself into the sort of strait-jacket that has been prepared for industrial income tax returns. I believe the minister ought to consider that whole question, to ascertain whether we cannot have a simpler form for agriculture, because it is working a great hardship upon farmers generally from one end of Canada to the other.


Donald Methuen Fleming: It was both comforting and challenging to hear the Minister of Finance say a few moments ago that he was technically unable to explain this section, or that he had not the technical knowledge or ability to explain the section. Now, that may be quite comforting to the rest of us who have tried to understand-


Douglas Charles Abbott: Not the section, if my learned friend will allow me, but the detailed way in which this new system operates. The section is largely a section of definitions.


Donald Methuen Fleming: -how it is to be worked out in the legislation now proposed. We are being asked to put into effect provisions which many of the members of this house, if they find themselves in the same position as the minister, will not understand when they are called upon to vote on them.
There is a great deal more than depreciation involved in this provision. If it were simply the changing from one method of depreciation to another, the matter would not offer nearly the complexity or difficulty that it does. It goes beyond that. It is a method of depreciation accompanied by a capital gains tax; in effect, that is what it is.

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If this were a perfectly sound method of depreciation, this new method of the reducing balance instead of the straight-line method hitherto in effect, surely it should commend itself to the department. The department would say, "Very well, as a method of depreciation we are satisfied with the soundness of the reducing balance method and will accept it". The department does not do that. They say that when a sale is made of a depreciated asset later on they are going to step in and take what amounts, in effect, to a capital levy.


Douglas Charles Abbott: Oh, no.


Donald Methuen Fleming: With respect, Mr. Chairman, it means just that. You take a simple transaction. John Jones buys something and sells it. If he is not in the business of buying and selling things of that class, then whatever he has made on that transaction is a capital gain, and is not income. Therefore, it is not subject to income tax.


Douglas Charles Abbott: If he did not claim depreciation, my hon. friend would be quite right.


Donald Methuen Fleming: If the depreciation method that is proposed is sound, why should it not stand simply as a matter of depreciation? In this provision, the department is proposing to follow the asset, and it may go through more than two hands. If at some time in the future you are selling it at a greater value than the reduced value at which you are carrying it on your books, the department is going to treat that excess over the reduced value as income upon which you will be taxed. This will mean that the taxpayer is going to be pushed into a much higher bracket carrying a much higher rate of tax. It seems to me that that, sir, is the effect of this section. It is not simply a depreciation section, but is a section that provides for a method of depreciation and then goes much farther. It provides for the levying of a tax in a way that seems to me to amount to a capital gains tax.
Quite apart from that, sir, there are two points with which the minister has not dealt. In the first place, I raised a point as to the effective date, and the minister has indicated that regulations will make it possible for the taxpayer to make his choice between the two methods of depreciation.


Douglas Charles Abbott: On the amount for a whole year.


Donald Methuen Fleming: For fiscal periods, yes, up until January 1, 1956. Beyond that time there will not be a choice, but during this period there will be a choice. I should like to ask the minister, if he will, to clear up this

point. It is tied up always with the requirement that the department insists that the depreciation must be set up in the books, and in the case of this option, the department will presumably insist on applying the method that the taxpayer has set up on his books.


Douglas Charles Abbott: That will be covered by the regulations, I understand. I understand that the practice in the Department of National Revenue in the past has been that depreciation claimed for tax purposes must be the depreciation which is actually set up on the books. Now, the regulations to be enacted will cover that point, as well as provide some modification in the rule, perhaps. I am informed that has not been settled yet.
I should like to revert for a moment to what my friend has said. I think the fundamental principle here is fairly clear, as to the basis upon which the taxpayer is entitled to recover his capital, because that is the purpose of depreciation and obsolescence allowances. The detailed method as to how it is done is to be made the subject of regulations. The only reason that these sections are complex, and the regulations are rather lengthy, is that, in accordance with what seems to be the general wish of the members of this house and the public, we have eliminated the old ministerial discretion. Under the old system there were no long, elaborate regulations published and available for anybody. You went to the minister. There were certain predetermined rates of depreciation. You went to the minister and he had to rule upon the matter and he did not bother to have that spelled out in a section or to enact regulations. It was a ministerial discretion, exercised no doubt, in all cases, fairly and so on and so forth. But inevitably, in getting away from that we have had to draw rather long and complex regulations.
But the principle of the proposed new system is as simple as a, b, c. The application is quite complicated, it is true, but this recapture provision which has been referred to has been followed in England where the principle of capital gains does not apply. The principle is simply this. If you start off with a cost, you would depreciate that cost on a diminishing balance basis, each year, at the predetermined rate and take your depreciation for your book value at the beginning of the year. Obviously in mathematics you will never write it off completely. You will get down to a fraction of a cent. The recapture provision is simply this. If you sell it for more than the depreciated cost, you have more depreciation deducted from your tax bill than you should have

had, and you should bring the difference back into your tax. It is just as simple as that. The application in different types of assets is admittedly complicated, and in talking in general terms it is difficult to explain particular cases. But there is nothing obscure about the main principle. Even a simple lawyer like myself can understand it.


Donald Methuen Fleming: My point was not cleared up, Mr. Chairman. I am coming back to this point about the method of depreciation set up on the books of the taxpayer in 1949. This is the fifth day of December and when this bill becomes law, either the taxpayer is going to have an opportunity of sitting down then and deciding which of the two methods he chooses to apply for 1949 or the department is going to say: We have looked at your books and we find that this is the method you have been following; therefore because of the rule that the department allows depreciation only where it is set up on the books of the company or the taxpayer, we are going to apply that method. I am wondering how much time the taxpayer is going to have to exercise this option as between the two methods of depreciation for 1949.


Douglas Charles Abbott: As my hon. friend knows, very few taxpayers with complicated accounts are actually in a position to close their accounts and make their final entries until some time after the end of the fiscal period. That is why this three months, or it is six months now, is allowed for filing the income tax return. With the demand for accountants and auditors, it is seldom that you can get your audited statement until some little time after the end of your fiscal year. I am informed that it should be possible to have the new regulations available before the end of the year. I realize that is only three weeks away, nevertheless the Department of National Revenue are hopeful that as soon as this legislation is adopted they will be able to complete the regulations and publish them. While the time may be somewhat short, nevertheless I think there really will be adequate time for those who have to look at one option or the other to see which it would be in their interests to follow.


Donald Methuen Fleming: My point has not been answered.


Louis-René Beaudoin: The hon. member for Acadia.


Victor Quelch: When the minister argues that the new scheme will be fairly simple or that it will be just, I am not going to take exception to that remark. But on the other hand, when he says that the farmer will be better off under this system, then I say that he is
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just talking poppycock, because it will cost the farmer more money. It is bound to cost him more money. Let me explain what I mean. At the present time it is quite common practice for large farmers to sell off their machinery about every fourth or fifth year because they do not want to run the risk of delay at seeding time or harvest time. Seeding time and harvest time are short periods and they do not want to take the chance of a breakdown. So they make it a practice to sell off their machinery about every four or five years and buy new machinery. In the past, when they have sold off their old machinery, they have not had to pay any income tax on the price they received for it. But now the minister says they will have to pay a tax. How can the farmer possibly be better off when he now has to pay a tax which he has not had to pay in the past?


Douglas Charles Abbott: They would not have to pay tax unless they sold the machinery at an amount greater than the depreciated value.


Victor Quelch: That is what I am talking
about.


Douglas Charles Abbott: Are the farmers making a great deal of money selling second-hand machinery?


Victor Quelch: That is not the purpose of selling the machinery. The purpose is to avoid loss of time as a result of using the old machines at harvest time or seeding time. The farmer might easily lose the price of a machine or half the price of a machine. But if the machine has been fully depreciated, he is going to have to pay income tax on the sale price. That has not been the practice in the past. Whether or not it is just is a question I am not going to argue. But the impression now is that he is going to have to pay a tax now that he has never had to pay in the past, and it will not be popular. The minister cannot argue that it is going to be popular.


Douglas Charles Abbott: The farmer must be selling it to another farmer who would buy the same sort of machine.


Victor Quelch: They are going to the dealer for new machines.


Douglas Charles Abbott: I see. I am asking for information. Where does the old machine go?


Victor Quelch: The dealer sells it to another farmer. He reconditions it.


Louis-René Beaudoin: Order. May I ask hon. members to address themselves to the Chair.


Victor Quelch: The dealer reconditions the machine and sells it to another farmer, and the other farmer will be allowed depreciation on that machine. But in the past, the farmer

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who has turned that machine in to the dealer has never had to pay income tax on the amount he received for the machine; but from now on he will have to do so. As I say, that is not going to be popular at all; in fact it is going to be exceedingly unpopular. I assure the minister that he will find that out as soon as the farmers begin to realize that they are going to have to pay that tax.
There is one other point I wish to mention. At the present time any expenditure of over $25 on capital has to be considered a capital investment and cannot be charged as an expenditure; that is if the amount is over $25. We find that farmers sometimes get wells drilled and spend perhaps $600. They do not strike any water. It is a dry hole. But they are not allowed to charge for that expenditure. They have to charge it as a capital investment. How much of an investment have you got when you have a dry hole? Yet they have to depreciate that dry well for ten years. It seems to me that that is nonsensical. Where a farmer goes to the expense of getting a well drilled, spends $600 on that well and gets no water, then he should be allowed to charge that as an expenditure for that year, because he must make a capital expenditure to get another well drilled in order to get water. It seems to me that provision is most unfair.


Douglas Charles Abbott: May I give my hon. friend a specific illustration of how this works with respect to a machine, for instance, because that seems to be the case which is causing some concern. Suppose he sells a particular type of farm machinery for $4,500. Suppose that represents $500 over and above the depreciated value of that machine, so that he would appear to have a profit of $500. Then suppose at the same time he buys a new machine for $5,000. He sets off the $500 against the $5,000 price for his new machine, and the cost of his new machine to start depreciating from is $4,500, so that he pays no tax on what would seem for the moment to be a $500 profit. This is a continuing operation. That is the way in which what I probably not too accurately referred to as the pool system of depreciation works in the case of a farmer or any other taxpayer. There would be no tax payable on the $500 as a profit. That is the point I am making in the illustration I have given. It would be used to write down the value of the new machine which he bought in its place. He does not take it into income.


Percy Ellis Wright: Has the minister or his department consulted any farm organization with respect to this change in depreciation before writing the act? Will they consult with

them before bringing in the regulations with respect to it, because I am sure they could get some valuable suggestions from them?


Douglas Charles Abbott: I cannot answer my hon. friend as to whether organizations were consulted, but I am told that in the administration of these rates in the farming community, the department is in constant contact with the farm organizations, including the federation of agriculture and others.


Gordon Knapman Fraser: Mr. Chairman, back in 1947 the department got out a farmer's income tax guide. Last year there was not one published. I wonder whether-


Douglas Charles Abbott: There was.


Gordon Knapman Fraser: I have not seen one. I see the Minister of National Revenue nodding his head. I wondered whether the department was going to get one out this year and put in it the a.b.c.'s that the Minister of Finance speaks of in this relieving clause. I feel quite sure that many of the farmers will be using the old income tax guide and they are going to be mixed up. There will be difficulties with the income tax inspectors and the farmers will be charged interest on taxes that they have not paid because they will not understand this clause. I think a book should be published as soon as the minister finds out what the regulations are.


James Joseph McCann: The answer is that there was a guide put out last year, and one which will include what the income tax form will be will be put out very shortly.


Gordon Knapman Fraser: Will it have this new clause in it and the minister's a.b.c. explanation? He says it is as simple as that.


James Joseph McCann: All the discussion that has been going on here tonight?


Gordon Knapman Fraser: Does the minister understand it?


James Joseph McCann: It would have to be in two volumes.


Gordon Knapman Fraser: I wonder whether the Minister of National Revenue understands it.


James Joseph McCann: Yes, I do.


Gordon Knapman Fraser: The minister is one man in the committee who understands it.


Douglas Charles Abbott: Speak for yourself.


Herbert Wilfred Herridge: I want to return to this
question of tax on timber entirely liquidated. I want to give the minister one example that illustrates the point. I know of people who have held timber for forty years, owning the land and the timber. They paid taxes for forty years and cared for it. Theoretically

a man could sell that timber off the stump in one year and obtain $20,000 or $25,000, and in doing so he would in reality completely liquidate his capital. After he conserves that timber all throughout these years he is taxed on the total receipts. I ask the minister how he can justify that tax on capital depreciation.


Douglas Charles Abbott: Well, of course, if he sold the land with the timber on it, that would be a sale of capital asset. If he did as my hon. friend suggested, sold it on a stumpage basis in one year he could be taxed on the receipts in one year, on his income less any expense he incurred. Presumably in the thirty or forty years that he has held the land he has deducted his expenses of carrying it as a deduction from income. I would assume that in these circumstances the taxpayer would endeavour to dispose of the land on such a basis over a period of time that it would not attract taxes in a single year. That would be the only common-sense thing for him to do.


Edmund Davie Fulton: It seems to me that one of the greatest objections to the principle of this thing is that the government is setting the rules for depreciation. The department will set them by regulation, and if the department is setting the rules and is saying to the taxpayer, here is the rate of depreciation, here is the percentage by which you may write down your capital depreciation each year, then the department should stick with that, and it should not have the right to change at the end of the year when the taxpayer sells his equipment. They should not have the right to turn around and say, you will pay a tax on the excess of the selling price over the depreciated value, because they set the rate of depreciation. I wonder whether the department will consider giving the taxpayer a refund or allow him to make a further deduction from taxable income if he sells the equipment below-


Douglas Charles Abbott: He is given that under the new system. My hon. friend has put his finger on one of the advantageous features of the new system.


Edmund Davie Fulton: It did not come out in the minister's previous explanation.


Douglas Charles Abbott: I said that. I think I said it twice this evening.


Edmund Davie Fulton: If he sells the equipment at less-


Douglas Charles Abbott: That is correct.


Edmund Davie Fulton: -than the depreciated value-


Douglas Charles Abbott: That is correct.


Edmund Davie Fulton: -he can take that out-
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Douglas Charles Abbott: Correct.


Edmund Davie Fulton: -from his taxable income.


Douglas Charles Abbott: To attempt to make real depreciation obviously rates have to be determined, but they are average rates, and they are attributed rates, and when you see what the real result is, if it turns out to be that the rates of depreciation have been too high and that the capital value has not diminished to that extent, then too much has been taken and there is a tax on the balance. If on the other hand the attributed rates of 15 per cent or 20 per cent, as the case may be, prove to be inadequate then the taxpayer is entitled to claim his loss.


Edmund Davie Fulton: Can the minister say where that is in the section?


Douglas Charles Abbott: Mr. Chairman, it is not in the section. The principle is found in section 11, subsection 1, which says that the taxpayer is entitled to recover his capital in accordance with regulations to be determined by the minister. Under the old act it was discretionary. It was not in the act at all. It was discretionary. Now it is going to be spelled out in regulations. But the principle which underlies depreciation or obsolescence or depletion is that you are entitled to take as an expense an item representing the day by day, the month by month return of your capital through age, wear or use, and the principle is that you should not be taxed on income before you get your capital, at least that you should get your capital back, and that it is not true income so long as a portion of what you are receiving is a return of capital. In essence that is what a depreciation allowance is.


Edmund Davie Fulton: Do I understand now that the minister says that either excess of selling price over depreciation or difference between selling price and depreciated value is on the one hand taxable and on the other hand deductible? Did I understand the minister to say that that principle is contained in section 11 of the act, or did I understand him to say merely that it is a principle which is to be worked out and applied in the regulations?


Douglas Charles Abbott: That is a principle which is inherent in what I referred to as this recapture provision as a basis of depreciation. If you are going to recapture the profit you should give the man the benefit of the loss.


Edmund Davie Fulton: I certainly agree with that. I wish the minister had made it clear to me before. It was not clear to me.


Douglas Charles Abbott: This is the inadequacy of my gift of exposition.

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Mr. Sinnoil:: I know the minister wants to be fair, but he has been a little bit dense about getting this machinery through. Nevertheless he has been fair. He has been trying to block up the holes in taxation. He says if a man bought a machine at $1,000 and depreciated it over a period of five years the machine is gone. Then if he turns around and buys a new one and gets credit of $500 on the old one he starts off with what he got on the other machine.
I come from an agricultural district and I am sure that the minister wants to be fair to all farmers. If a corporation or a man is in business and saves $100,000 he can go to the taxation branch and if he is the manager of that business he can get a fairly good compensation for being the manager of the business. Farmers are managers of their businesses, but I cannot see any section in this act which says that farmers are entitled to any compensation for being managers. There are thousands of farmers in western Canada who should be entitled to management compensation just the same as other people in business. I hope that when the minister looks at this in a fair way he will give them consideration.
The hon. member for Acadia spoke about farmers drilling for water and after having been put to considerable expense found that there was no water there and were not entitled to any consideration. I would ask the minister to give the same consideration to the farmers as he has to those who, under section 52, are exploring and drilling for oil. If he does that it will be quite fair.


Victor Quelch: Would the minister reply to the point I raised about the well? When I asked my question he was busy arguing on the other matter.


Douglas Charles Abbott: Would the hon. member repeat his question. I know it has been up before in the previous debate, so perhaps he would ask it again.


Victor Quelch: Under the ruling of the income tax branch, if a farmer spends more than $25 on capital development he cannot show that as current expenditure. He must show it as capital investment. We will suppose a farmer drills a well at a cost of $600, and does not strike water. It is not an asset; but he is not allowed to show it as a current expenditure, and has to allow depreciation on it over a period of ten years. How can you depreciate something that does not exist? You have not got the well. He will have to drill another well, and when he drills that well it will be carried for ten years. But surely the well he drilled from which he got no water should be allowed as a current expenditure in that year.


Douglas Charles Abbott: I shall have to discuss the matter. It is in the Department of National Revenue, and I do not know what the practice has been there. If a farmer spent $500 looking for water, and did not get the water, he would not have any asset to write off. He has just made an expense, for which he has no return. If he spent $500 and actually got a well, then he would have a capital asset. But that is not one which depreciates. Presumably, so long as nature continues to function, the well will continue as an asset, in perpetuity. He does not have to get back the capital, because his capital is undestructible.


Victor Quelch: No, not in respect of a well. He would be lucky if he had a well which would last more than ten years. At the end of ten years he would probably have to put in a new casing or have to drill a new well. But my argument is that when you do not get water you should be allowed to show it as an expense, and it should be exempt for the full amount.


Douglas Charles Abbott: I shall talk on that with the Minister of National Revenue. I can see some objection to allowing it as a current expense in the year in which it is incurred.


James MacKerras Macdonnell: I just wish to make one or two comments. We have had a very interesting, but not a very profitable hour, until about the last fifteen minutes, at which time I think the minister made a clear statement. We have been asked tonight to approve something sight unseen. The minister also says that he had not had time to review this matter and has asked us to take the view of certain people who, I have no doubt, are reputable people, whom he has referred to as accountants. No one has more respect for accountants than I have; but I do not think they are the only people in the world, and certainly they are not the people who should give judgment in these matters. Whatever qualifications members of the House of Commons may have, they are supposed to have some kind of rough and ready judgment; and they are the people who should take the responsibility in matters of this kind. To do that they should have the evidence before them.
The minister was frank enough to say that he has not even seen the regulations himself.


Douglas Charles Abbott: They are not completed yet.


James MacKerras Macdonnell: If the
minister had even come here and told us he had seen them and that they were all right, it would have been not so unsatisfactory. With that, I would add a final word, that we

were all in the same position, and even the minister did not know what it was all about, except in general terms.
I say when we come to this again there should be an occasion upon which the house through a committee, or whatever may be the best means, should have a chance to look at this very important matter, and should have evidence before it, and should not be asked to take the responsibility which we now take, as I said before, sight unseen.


John George Diefenbaker: I do not know how a regulation can be made to define the indefinable. I would point to one paragraph in subsection 3 which is supposed to clarify "total depreciation allowed to a taxpayer". If this is not a definition as impossible of comprehension as any ever produced in parliament, then I have never seen one impossible of comprehension. The paragraph states:
"Total depreciation allowed to a taxpayer"_
And that is what is being defined.
-before any time for property of a prescribed class means the aggregate of all amounts allowed to the taxpayer in respect of property of that class under regulations made under paragraph (a) of subsection (1) of section 11 in computing income for taxation years before that time;
I do not blame the Minister of Finance for saying he cannot define these things.


Douglas Charles Abbott: There is nothing very complex about that definition.


John George Diefenbaker: It is not complex, do you say?


Douglas Charles Abbott: No.


John George Diefenbaker: Well, just get a farmer to work that out, as to the total depreciation allowed to a taxpayer, under that definition!
I do not know of a collection of definitions that ever equalled this one in incomprehensibility. The minister has said that we must not prejudge. I would ask him this- and for the moment I am speaking as the representative of an agricultural constituency. The farmer up to the present time has had an implement costing $1,000 on which there has been a depreciation for a period of three or four years, with the value of the implement now standing at $500.


James Sinclair: That is the written-down value.


John George Diefenbaker: Down to $500.


Douglas Charles Abbott: That is the written-down value.


John George Diefenbaker: He turns it in on another implement for $600. Is it not a fact that up to the present time he has not been liable for income tax on that $100?
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Douglas Charles Abbott: That is right. And up to the present time, had he had a loss of $300, he could not claim that either.


John George Diefenbaker: We are talking about a gain. I say therefore that there is a very pronounced change made here, and that so far as the farmer is concerned-and I am using him only as an example of all classes -it means that farmers throughout the country will find themselves in a position where they will be taxed on what in effect heretofore has been a capital gain. This affects Saskatchewan particularly, because Saskatchewan is one province in which the farmers pay tremendous income tax.
That is what it amounts to. I am not for one moment dealing with the question of losses. This in effect is the first time parliament has made a provision for the taxation of capital gain, and this may well be the thin edge of the wedge in that direction. That is why it deserves consideration. While the minister says that all we do is to make some minor change, in effect by these provisions we are altering our system of taxation and, as regards the example I have brought to the attention of the committee, we are placing a tax upon what heretofore has been a capital gain.
The minister has said, "Do not prejudge us." I say if the farmers of western Canada had known what he meant when he read the statement upon the introduction of his budget last spring, and which he re-read this evening, there would have been an altogether different reaction toward this matter.
This is a change which cannot but arouse antagonism, for it is a change in the system of taxation, and will mean a larger amount of taxation payable by the people of this country who are affected by this provision.
The expression the minister used is that it is a recapture. It is more than a recapture; it is the first capture of a capital gain in this country. It is for that reason I suggest it be held in abeyance and not brought into effect. It is not just simply a method of altering the system of depreciation. It is in effect a form of additional taxation, and one that merits the consideration of members on all sides of the house. It is a change. It is all very well to say that losses may also be subtracted, but in so far as gains are concerned it is a capital gains tax.


Donald Methuen Fleming: If I may say so, the minister did not completely answer the last question I asked him some time ago about the option he is proposing to extend by regulation to taxpayers in connection with the particular method of depreciation they are to set up for

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fiscal periods ending before January 1, 1950. By the time the statute is adopted and printed, and by the time the regulations are made, printed and circulated, it will be surprising if it is very much before the end of
1949.	Then if it takes people time, as it certainly will, to digest, analyse and try to understand the law and the regulations, the option the minister is offering to them will be meaningless this year unless the minister is prepared to extend beyond January 1,
1950,	the option he proposes to make available to taxpayers as to the method of depreciation for fiscal periods up to January 1, 1950.


Douglas Charles Abbott: I do not know just what my hon. friend wants me to deal with.


Donald Methuen Fleming: It seems to me the minister is going to have to extend the period for applying the option.


Douglas Charles Abbott: If it is necessary that will be done. I do not think there is any question about that. I said a moment ago I felt sure taxpayers would be given ample opportunity to decide which of the two bases it is in their interests to adopt. Every reasonable time will be given to them to do that. I do not think my hon. friend need have any concern that there will be any difficulty on that score.


Arthur Leroy Smith: Don't be so impatient.


Douglas Charles Abbott: I did not think I was impatient. I was just trying to be explanatory.


Arthur Leroy Smith: Your voice was impatient.


Donald Methuen Fleming: I come back to the subject of the capital tax which I mentioned some little while ago. It seems to me that the Department of National Revenue must initially take the responsibility for saying what is a reasonable rate of depreciation, one that they will allow. Having done that, surely it is only reasonable that the department should stay with that rate of depreciation. If the taxpayer later on sells the depreciated article for more than the written-down value on his books, then why on earth should the tax-gatherer step in and lay his hands upon the excess? It comes back to this, that the department is saying that they allowed too much depreciation.
In the first place it seems to me it is the responsibility of the department to set such a rate of depreciation as will be fair. Having set that and enforced it for whatever period of time is in question, surely they should be satisfied to leave it at that. What is involved here is a great deal more than that. The government is not contenting itself with saying: We are going to set up a new method

of depreciation. The Department of National Revenue is not going to content itself with simply setting a rate of depreciation. If they guess low then they are going to follow the asset when sold, and lay their hands on what is a capital gain. The hon. member for Lake Centre is perfectly right in saying this represents the first time parliament has undertaken to tax a capital gain.
When I mentioned this matter earlier this evening I gave a simple illustration. John Jones buys an article and he sells it at a profit. In effect that is a capital gain. He is not taxable on it unless he is in the business of buying and selling articles of that class. The minister says: Oh, well, the difference here is that you are introducing depreciation. Let them introduce their depreciation, but let them stop at depreciation. They set the rate, and if they do not set it at a proper figure, then surely the proper course for them to follow is to set a proper and reasonable rate. Let them revise their rate, and not follow the asset when sold and tax a capital gain. It is a vicious principle, and one that has never been recognized by parliament before. As has been mentioned here, it is going to affect farmers. Actually, it is going to affect every taxpayer in Canada into whose calculation of income depreciation enters in any form, because the moment that he sets up depreciation he has invited a capital gains tax.


Douglas Charles Abbott: I have one observation. I do not want to hold up the committee, but one of the things we have been urged most strongly to make provision for is obsolescence, which has never been allowed before. I know of no way in which one can make provision for obsolescence except by setting maximum annual rates of depreciation which cannot be other than arbitrary, and can only represent an intelligent guess as to what will be the depreciation or obsolescence in that year, and if those expectations are not realized either take the excess back into profit or allow less to be charged. This is not a capital gains tax. It is the system which has been followed under the income tax provisions of the United Kingdom where capital gains have never been taxed, in the same way that they have never been taxed here. One of the things we are trying to accomplish by the changed system is to allow for obsolescence. This is the only way that I can see in which it can be done.


Percy Ellis Wright: I should like to place another example before the minister and ask him what he thinks about it. We will say I invest $5,000 in a house, write off 5 per cent depreciation for ten years, and then sell the house for more than I paid for it. That is a capital gain, and I do not pay any tax on

the amount. On the other hand, if I invest $5,000 in a piece of farm equipment, the price of farm equipment rises over the years, and I then sell that piece of farm equipment, you say it is not a capital gain and that it is taxable. I think the same rule should apply in both cases.


Douglas Charles Abbott: It does apply in both cases if depreciation is taken on the house. As my hon. friend knows, one cannot claim depreciation as an expense on the house in which one lives. If it is a rented house you can claim depreciation at whatever the attributed rates are, 5 per cent or li. per cent. We will say the depreciated value of the house is $6,000, written down from $9,000, and that it is sold for $7,000. In effect it will have been overdepreciated, and there will have been a greater amount claimed as a deduction from income than should have been claimed. The $1,000 will go back in. In most cases it does not apply to private residences; it applies to machinery, equipment, business premises, and that sort of thing.


Douglas Scott Harkness: I wonder if the minister can explain to us what the situation will be as to farm buildings under the new system so far as depreciation is concerned. Let me take a specific example. We will say a farm is purchased for $20,000. The buildings on the farm cost the original owner $10,000 to erect. He has depreciated them until their value, so far as he is concerned with the income tax people, is $500. The man who buys the farm figures the buildings are worth $5,000, and he estimates that of the $20,000 he paid for the farm $15,000 was for the land and $5,000 for the buildings. What is his situation under the new system so far as depreciation on the buildings is concerned? Does he have to put them in at $500, does he put them in at the $5,000 he figures they are worth to him, or does he put them in at replacement cost which at present prices would be $10,000?


Douglas Charles Abbott: I would think the figure he would put them in at would be the portion of the price which he has paid that can be reasonably attributed to the value of the buildings. That would be the fair value of these buildings. My hon. friend gave an example of $20,000 for the land and the buildings. The fair value for the buildings would be $5,000. He would put those in at $5,000 and depreciate on that figure. The rest would be land, of course, which does not depreciate, so he would not claim anything there.


Douglas Scott Harkness: The minister says he thinks that would be the case. Does he know?


Douglas Charles Abbott: The matter of the fair attributable value would be a question of fact. If there were a dispute between the taxpayer
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and the income tax department it would be settled by agreement or by the income tax appeal board and then on to the exchequer court; but the question as to the proportion of the price fairly attributable to the buildings as distinct from the land would be a question of fact.


Douglas Scott Harkness: It has nothing to do with the depreciated value?


Douglas Charles Abbott: No.


Arthur Leroy Smith: The minister is completely wrong with respect to provinces where they have the Torrens system of land holding. In that case the registrar of the particular district in which the lands were situated just would not pay any attention to the principle you are talking about. The provincial tax would be on the value of the buildings at the time they were purchased, so the man in that case would be soaked both ways. Under your scheme he might pay very little but in provincial taxes he would pay a tremendous amount, because the actual or replacement cost of these buildings would be taken at so much and the land at so much. So you are going contrary to the established practice where the Torrens system applies.


Douglas Charles Abbott: I suppose that is a provincial tax on the transfer, the land and building value?


Arthur Leroy Smith: Yes.


Douglas Charles Abbott: My suggestion is that the value the new purchaser would place on the buildings for purposes of depreciation would be the fair portion of the purchase price he paid which would be attributable to those buildings.


Arthur Leroy Smith: I had forgotten the name of it, but now I remember it is called the assurance fund. In all provinces where the Torrens system applies they have something called an assurance fund, which is in direct contradistinction to the principle we are discussing now. So a purchaser would pay in perhaps two ways, under the law in a province where the Torrens system applies and under the system the minister is describing. I am quite sure many difficulties will arise. Knowing the minister, I am sure he will get his share, and the province will be called the blood sucker in the picture. The individual will suffer, whatever name he is called.


Victor Quelch: I want to bring up another case, just to round out the argument. A farmer goes to a sale and buys a second-hand machine for $2,000. The age of the machine does not matter. He uses it for a few days, finds it unsatisfactory and puts it up for sale

Income Tax Act
again. This time he gets $2,500 for it, so he makes a profit of $500. What happens to that $500?


Douglas Charles Abbott: If he has claimed no depreciation on the machine that money would not be taxable at all; it would be straight capital gain.


Louis-René Beaudoin: Shall the section carry?


Some hon. Members:: On division.


[Stage Direction]
Section agreed to.
On section 8-Transitional provisions re depreciation.
Douglas Charles Abbott: I have a short amendment which I shall ask my colleague to move, to add subsection (5) in order to include matters which previously were called depletion. It is purely a technical amendment which was overlooked in the drafting of the section. It reads:
That clause 8 of the bill be amended by adding the following as subclause (5) :
(5) Reference in this section to depreciation shall be deemed to include a reference to allowances in respect of depreciable property of a taxpayer made under paragraph (a) of subsection (1) of section 5 of the Income War Tax Act.
Mr. Fournier) Hull): I move accordingly.


[Stage Direction]
Amendment agreed to.
Louis-René Beaudoin: Shall the section as amended carry?


Arthur Leroy Smith: On division, because I do not know what the amendment meant.
Section as amended agreed to.
Section 9 agreed to.
On section 10-Computation of taxable income.


John George Diefenbaker: As the result of a letter which I received since we started to discuss this matter I should like to ask the minister for a ruling. This is the case of a married man living separate and apart from his wife, as he has been for a number of years. Is a person in that position entitled to the married exemption or the single exemption?


Douglas Charles Abbott: The position, apparently, is this. If he is maintaining a self-contained domestic establishment in which he is supporting someone connected with him by blood relationship, such as children, he would be entitled to the married exemption. If he is simply supporting his wife and paying her maintenance, for instance, he gets the single exemption but can claim as a deduction the alimony he is paying, if that alimony is paid pursuant to an order of a court.
(Mr. Quelch.]


John George Diefenbaker: Let us say he operates a self-contained establishment but that his family have grown up and left. His wife does not receive alimony from him; she lives apart and maintains herself. Is he then allowed the married exemption or only the single exemption?


Douglas Charles Abbott: In that case he is considered a single man for taxation purposes.


Arthur Leroy Smith: Does this clause result from a decision of the Supreme Court of Canada which recently went against the department in its collection of tax with respect to a man and his wife who had some income of her own?


Douglas Charles Abbott: No. This clause simply increases the exemption from the previous $1,500 to $2,000, and so on. The question asked by the hon. member for Lake Centre was in regard to the position of a married man living apart from his wife. The ruling I have explained was introduced in 1943 or 1944, I think, certainly five or six years ago, during the war.


Arthur Leroy Smith: At the risk of being a trifle out of order may I ask if in these amendments you are trying to get away from a decision by the Supreme Court of Canada with respect to a man and his wife who had a separate income?


Douglas Charles Abbott: I am told I can assure my hon. friend that is not the case.


[Stage Direction]
Section agreed to.
On section 11-Medical expenses.
Gordon Knapman Fraser: In line 12 I see the words "a twelve months period ending in the taxation year." That would mean a period ending any time during that taxation year?


Douglas Charles Abbott: That is correct.


Gordon Knapman Fraser: It would not matter as long as it included twelve months?


Douglas Charles Abbott: That is correct.


Gordon Knapman Fraser: And from that point another twelve-month period would commence?


Douglas Charles Abbott: That is correct.


Gordon Knapman Fraser: While I am on my feet I should like to ask for a definition of paragraph (c) where I find the words "was totally blind at any time in the year or was, throughout the whole of the year ..." I should like to know the definition of "totally blind". I ask this question because there are many people who are not what they call totally blind but who still require someone to help them around They have some sight, but very little Whose say-so do you go by?

Are those the people who are registered with the Canadian National Institute for the Blind?


Douglas Charles Abbott: I believe that is the case, but I would have to verify that statement. The deputy minister who is in front of me is not quite sure on that, but he believes it is the one issued by the national institute for the blind. There is some test applied by that institute which is accepted for the purpose of this section.


Gordon Knapman Fraser: Then, the taxpayer would have to have a certificate from the national institute for the blind before claiming exemption? I believe there is another blind association, but the department does not accept a certificate from anything but the national institute; am I correct?


Douglas Charles Abbott: I would not be sure, but the department certainly accepts the certificate from the national institute for the blind.


Gordon Knapman Fraser: That is the only association from which you do accept it?


Douglas Charles Abbott: I would have to verify that, but I think that is probably correct.


Donald Methuen Fleming: I am sure that the house is glad to see the changes that are being made in connection with the definition of allowable medical expenses. I should like to raise again the two subjects that I have raised several times in previous sessions in connection with this matter of allowable medical expenses.
The first concerns eyeglasses. Parliament has made provision for the allowance of the cost of aids to hearing as a deductible medical expense; that provision has existed for several years. We are now allowing aids to those who are crippled, artificial limbs and wheel chairs. I contend there is no distinction in principle between an aid to hearing and an aid to seeing. Nevertheless, as the law is administered today, the department will allow the cost of an aid to hearing, but will not allow the cost of aids to seeing. It seems to me that is an altogether illogical and unfair stand. The matter has been before the minister, and I would urge that before parliament meets again, he give the subject favourable consideration, and submit amendments which will permit those who have to make outlays for aids to seeing to deduct those as medical expenses.
The other point has to do with the purchase of drugs and medicines. Everyone knows quite well the discrimination which exists against city residents in this respect. When a physician prescribes drugs or medicines, fills the prescription himself and includes the cost of the drug or medicine in his account,
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the department admits it as a medical expense. If, as is the custom in urban centres, the physician simply writes a prescription which the taxpayer takes to the pharmacist, who fills the prescription, and charges separately for it, regardless of how much the taxpayer may have to spend on the necessary medicines and drugs, he is not permitted to have one cent deducted as medical expenses. Again that seems to me illogical and thoroughly unfair. It seems to me that situation has been allowed to continue quite long enough. I urge the minister to submit amendments at the earliest opportunity at the next session which will eliminate that unfair feature.


Solon Earl Low: I should like to say a word on subsection 6 of section 11. I am not opposing the section, but a change is being made to provide for those in religious orders, and I should like assurance that it will be applied without any discrimination. I should like assurance that it will be applied carefully enough to ensure that no loopholes are taken advantage of for the purpose of avoiding the tax. In order to secure some information, I should like to ask the minister two questions. What is the definition of the term "religious order"? Perhaps if he will answer that, then I can frame my next question.


Douglas Charles Abbott: I think the definition would be a member of any recognized religious community, if that is a better term, or recognized religious denomination. This section is introduced because of certain special circumstances which have arisen. The committee will recall that the ordinary limitation on making gifts to charity stands at ten per cent of a person's income, but there are certain religious orders who receive no income as such, the members of which have to act as teachers. They are paid because of the fact they are teaching for a public school board. They do not keep these fees themselves, but give them to the order. Provided they are members of these orders or denominations which have, as the term says, taken a vow of perpetual poverty, this section enables them to turn that money over. It applies to a comparatively small group, and there have been some rather hard cases, so it seemed the sensible thing to do.


Solon Earl Low: In order to illustrate to the minister what I have in mind, I would recall to him the religious order known as the Hutterites. I believe that they pay income taxes. I think I am quite safe in saying that they do pay income tax on the total income of that colony or religious community.


Douglas Charles Abbott: I have to inquire because that is not my department, but I am told that

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individuals of that particular group pay Mr. Low: My only concern was to make income taxes on the amount which they are sure that what we were doing would leave paid for the work which they do.	no loopholes.


Solon Earl Low: In addition, sir, I think you will find that the community itself does pay a lump-sum tax on the total of the community income. I administered that regulation for the Alberta government for some years before you took it over, sir, and I understand that you do the same thing. These Hutterite colonies are now within the definition the minister has given of religious communities or orders. It is for that reason they organize themselves as they do. Every member has taken what amounts to a vow of perpetual poverty, because not one of them draws anything more than his board and bed.
What I want to point out is this. Will the Hutterite colonies have to be told by anybody that, if they just change their procedure a little bit, and at the end of the year apportion to each member of the community his share of the year's increase and then say simply, in accordance with your vows of perpetual poverty, you give it back to the community, they can bring themselves within the provisions of this subsection, and apply for exemption from taxation? I just wanted to point that out to the minister.
One other thing: I believe the minister will find that certain Doukhobor colonies across this country are organized on a similar basis. I believe there are other religious communities, and I know of one in particular, in which the members have gone so far as to take a vow of perpetual poverty. They have concentrated not only all their money, but I believe would even give their life for their religious community. Under such circumstances, they might, by a slight change in their procedure, come within the terms of this section and claim exemption from taxation.


Douglas Charles Abbott: I am glad the hon. member has brought this matter to my attention. In preparing the section, I had not thought of it. I think, perhaps, I shall give some consideration to the circumstances he outlines. If there is any difficulty, no doubt we should make the proper amendment in the language of the section, and I think we can do that in the next budget. In drafting this section, it was intended to provide for certain special cases, but perhaps the language of the section could be made either more general or more restrictive, I do not know which. It was not intended to meet the cases the hon. gentleman mentioned. I have some doubts as to whether it would, but if there is any question-


Douglas Charles Abbott: Quite so. I am anxious to accomplish the same result.


Arthur Leroy Smith: I must have a word on this matter, Mr. Chairman. If the minister can do anything in the world to make these Hutterites decent citizens of Canada who will pay their way, I am with him. They are the most useless outfit that was every imported into this country. They are no good to anybody. They grabbed every ranch with some water on it in the province of Alberta. I compliment the province of Alberta and Mr. Manning for spacing them so far apart that they can never get a new colony. I am with you, no matter what you do against these people who never will become citizens of Canada.


[Stage Direction]
Section agreed to.
Sections 12 to 16 inclusive agreed to.
On section 17-Dividend deduction.
Gordon Knapman Fraser: This exemption on common and preferred shares does not lose its identity when it goes into an estate or trust, does it? If those are carried by an estate or trust, it does not lose that identity?


Douglas Charles Abbott: No. There are appropriate
provisions later in this bill, which is another reason why the bill has to be a little bit longer. When it is carried through a personal corporation, an estate or trust, they get the benefit of the tax credit.


[Stage Direction]
Section agreed to.
On section 18-Rate.
Douglas Charles Abbott: I have a technical amendment to make the repeal of section 37 effective. It is a kind of drafting amendment. I will ask one of my colleagues to move it.


Alphonse Fournier: That the words "Section thirty-six of the Income Tax Act, as enacted by this section," and the commas, appearing in the first and second lines of subclause 2 of clause 18 of Bill 176 be deleted and the words "this section" substituted therefor.


[Stage Direction]
Amendment agreed to.
James MacKerras Macdonnell: I am appealing to the minister that, after all the refusals he has given us, he should now let us have a crumb from the table. I want to read to him quite briefly what he said in his budget speech last March. In announcing the section which it is now sought to repeal, he said this, as reported at page 1798 of Hansard:
At present we have a flat rate of 30 per cent on. all corporate profits. I am recommending that this 30

per cent be reduced to 10 per cent on profits up to $10,000 and increased to 33 per cent on profits in excess of $10,000. The house will at once recognize this as tax relief for small businesses and will, I trust, be heartily in accord with the policy.
I think the house was. We in this party-had advocated the very same thing and we were naturally in full accord. The minister continued:
Our country as a whole owes a great deal to the small family type of business. They have to struggle along, grow and develop in competition with large and well-financed corporations whose activities may be nation-wide. My own belief is that small businesses should be encouraged and it seems to me that a useful way to do this is to lower the tax and take less out of the funds they need for growth and expansion.
I call your attention to this, Mr. Chairman, the minister continued:
All corporations, regardless of size, will, of course, receive this relief on the first $10,000 of profits but, as I have said, the rate of tax on profits in excess of this figure will bfe increased by 3 per cent.
Now we have this amendment changing what was then contemplated, what we had welcomed and what I still think was a wise provision. I understand the reason for the change. As always happens, there are certain people trying to take an improper advantage to which they are not entitled; but I am still confident that the minister and his staff can, as I said in the other case, prevent improper advantage being taken of it. I think it will be a most unfortunate thing if this section is watered down to the point where it will be of little value. The provision as now introduced, whereby related companies will be regarded as if they were only one company, and only one of the related companies will have this $10,000 provision, is, I submit, going to destroy the effect of the section. I hope that the minister will be prepared, as I say, to exercise his ingenuity and that of his staff to prevent invasions of it and to preserve this highly beneficial provision which we were just on the point of getting. In other words, I hope that it will not be still-born.


Douglas Charles Abbott: This is a section to which we have been giving a good deal of care and thought. From the very outset we realized that we would have to insert in the act a provision to prevent the splitting up of large companies in order to take advantage of the 10 per cent rate. For instance, a chain store could incorporate all its stores as separate entities and get the benefit.
At the very outset, when I made my budget speech in March, we contemplated that the legislation would contain an appropriate provision with respect to related companies. Possibly the section which is contained in this bill is a bit more rigid than it needs to be;
Income Tax Act
I am not prepared to say that it is and I am not prepared to say that it is not. Over the last two or three months I have received many representations, and some highly constructive ones too, from various taxpayers. Certain suggestions have been made. The principal one was that we should consider those companies which were created prior to the adoption of the act as one group and not apply this rule to them. But that does not commend itself to me, and I am glad to see that the hon. member for Greenwood shakes his head.
It is an important question. It is a new thing; it is a new departure. It has never been tried either here or in any other country before. I finally came to the conclusion that, before I make a definite change, I want more time to consider the possible alternatives. Two or three have been suggested. I have not been able to convince myself that any one of them is the proper one. But the undertaking I would give to the committee is this. Between now and the time we introduce the 1950 budget I will see if we can work out a more satisfactory section. Since 1949 is the first year that the section will operate, there can be no objection to making any amendment which it was decided was desirable apply to the 1949 period. In other words, I should like to leave the question open for another two or three months in order to enable me and my officials to see if we can arrive at some more satisfactory solution, if one can be found. I readily give that undertaking. I have a completely open mind on the matter. I hope we may be able to find an amendment that will give the protection which I think is needed against abuse and yet that will enable the legitimate case to get the benefit of the section.


James MacKerras Macdonnell: May I
make one suggestion to the minister? I rather blush to make it because I have often talked in the house against discretion. But in order to get the benefit of this provision and to give it a fair start and until perhaps a more detailed protection against breach can be found, would not the minister consider using words to indicate that the minister shall have a discretion in those cases in which it is perfectly clear that an invasion of the act is intended? I do not think it would be difficult. It seems to me that no large company would dare to break itself up if it knew it had to face this test. With regard to small companies and new corporations, surely common sense would decide the thing. Where there is actually a separate enterprise that surely is the test.

Income Tax Act
Surely it is not really a test of shareholding; it is a test really whether there is a separate enterprise which is going to aid production in this country. I think that is what the minister had in mind when he made his speech last March. It seems to me it would be a great pity if his proposal is to be almost still-born by being hedged about in this way. Incidentally I think the section is going to be very difficult to administer. I do suggest to the minister that the loss to the treasury is going to be trivial. How many of these can you imagine taking place in the next few months? If you let your imagination run it could extend perhaps to say only a few hundred. The difference that you would lose as between the 10 per cent and the 33 per cent would be $2,300 a company. So if you had a thousand of them it would only be $2 million. It does seem to me-


Douglas Charles Abbott: What is $2 million?


James MacKerras Macdonnell: I am using an outside figure. I do not believe there would be a thousand, I do not believe there would be a hundred. I am giving the minister an outside figure to show what I think it is.


Douglas Charles Abbott: I thank my hon. friend. I will give consideration to every possibility here and I hope I shall be able to find a satisfactory solution. A number of suggestions have been made. As I say, I have not been able to convince myself yet that any one of them is the proper one. I have found from experience in these matters that unless you get something that is logical and sound in principle you get yourself into more trouble than you cure. Therefore I hope the committee will accept my assurance that between now and the time we have to look at this act again in the next few months I shall consider every alternative and see if I can improve the section, and of course any improvement will be made effective to the first period to which it applied, namely, the 1949 period.


James MacKerras Macdonnell: I do want to say one thing more.


Douglas Charles Abbott: I would be against the discretion, I must say.


James MacKerras Macdonnell: If the minister can find any other way I would prefer it. I do want to remind him of the very ample assurance which he did give last March.


Douglas Scott Harkness: I am glad to hear the minister say that he is going to give this further consideration. I have had some representations from coal operators in Alberta who believe that this will work considerable
IMr. Macdonnell (Greenwood).]
hardship on them. There are a number of comparatively small mines there which are subsidiaries of or related to other companies, or the stock is held by another coal mining company. For the most part these small mines in Alberta have had a rather difficult time to keep going as things have been. The application of this section to them is going to make it more difficult. I would hope that the minister would be able to find some formula whereby concerns of that kind which have been in this subsidiary or related position for a considerable period of time would not be penalized as a result of this new legislation.
I quite sympathize with and approve of the fact that there must be some means of preventing a large company from breaking down into small branches in order to escape taxation. But these small companies that have been in this position for a considerable period of time are not the ones to which the minister referred. I do believe that they require some consideration. There is also a precedent for that in the excess profits tax which was imposed during the war. I believe that companies which were also subsidiaries and so forth were in somewhat the same position as I have described. The excess profits tax did not apply to them and their parent company. But if the parent company was broken down it did apply to the whole thing. I think that something along the lines of that precedent might be applied so far as this section is concerned.


Douglas Charles Abbott: I shall study my hon. friend's representations.


Arthur Leroy Smith: I want to ask one question. The minister was very frank, as he always is, and said that he has not made up his mind with respect to the cure of the evil which he has in his mind.


Douglas Charles Abbott: If there is an evil here.


Arthur Leroy Smith: The minister enforces me greatly in what he has just said. If there is an evil, he is going to consider it. Would it not be better, Mr. Chairman, to consider that evil until a couple of months from now and then bring in legislation rather than do what is being done now, namely, bringing in legislation which the minister frankly admits he does not know is proper legislation or not?


Douglas Charles Abbott: No, I do not admit that. This is a new principle, and it is a very sound one, but the detail may be subject to improvement.


Arthur Leroy Smith: Mr. Chairman, I am sorry that I misunderstood the minister. I must frankly say that it was either my inability to understand or his inability to explain. The thing lies there somewhere


Douglas Charles Abbott: Fifty-fifty perhaps.


Arthur Leroy Smith: The principle that I am trying to enunciate is this. The minister frankly admits that he does not know whether this is the proper remedy for the difficulty. Would it not be better for him to use the great brain that he has and all the assistants that he has, building up to the great epitome of the brains of the country, and leave the thing alone and not legislate about it until he knows what he wants to do? That is his position now.


Douglas Charles Abbott: He knows perfectly well what he wants to do. He wants to have a rate of 10 per cent on the first $10,000 and 33 per cent for the larger companies. In the case of those so-called related companies, numerous subsidiaries, which represent a very small proportion I may say of the total companies who will get the benefit of this legislation, we might be able to evolve a little better rule. I do not say that we will, I am not admitting we will; I may find next spring that this restrictive provision will stay. If I can find that I can properly relax it I will; if I find I cannot, I will not. In the meantime I think the beneficial parts of it should be allowed to stand. I am not admitting for one moment that the law is defective. It is in principle a new departure, something that has never been tried so far as I know in any other country before. We shall proceed to some extent with the process of trial and error and see how it works.


Arthur Leroy Smith: Does the minister not think that the process of experimentation should be more confined than it is now? Leave it to the great brains which the minister has beside him, in front of him, behind him and all around him. He looks like the charge of the light brigade, except that the light brigade knew where it was going and he does not. He is suggesting that he does not know whether he is going to do a great good by taxing these dishonest corporations which are breaking themselves up into small units, or whether it will be more difficult for the honest little fellows who have lived all their lives within the law. It does seem to me that until he has a better answer than that to give to the House of Commons the legislation should not be proceeded with. He speaks about trial and error. I think he will find it more error than trial. Until he has made up his mind about something he should not say to us that he is going to try it on the dog. The dog may be dead by the time we come back next year. That is exactly the position which the minister has taken. Trial and error! I love good
Income Tax Act
phrases. That is a wonderful one. He is hiding behind that at the moment. I think if he would just let his new departure go for a month or two he might be better off and I think the country would as well.


Douglas Charles Abbott: I will just say one more thing. This clause will do exactly what I intend it to do, Mr. Chairman, as it stands. It may do a little more than I intend. If it does I will correct it. If that is the case I will correct it. It will certainly do what I intend it to do, as it stands now.


Arthur Leroy Smith: It could be confusing to an awful lot of little people.


Douglas Charles Abbott: And it will benefit the little people. It may not benefit people who have five or six or seven companies with a profit of $10,000 or less. But perhaps they cannot be categorized exactly as little people.


Arthur Leroy Smith: I know what your difficulty is; there is no question about it. Some of these big shots are splitting themselves up into splinter companies. It is all right to take care of them, and we will all be with you. But is it not just a little drastic at this moment, for that one reason, to turn on them now? You can make it. retroactive if you wish; you have a big enough majority to do it.
Section as amended agreed to.
On section 19-Foreign tax deduction.


Douglas Charles Abbott: There is an amendment to move here. This is a technical section which looks rather impressive on paper, but is actually very simple. This amendment is consequential upon the amendment in section 13 of the bill, under which a new procedure is established for the taxation of persons resident in Canada only part of the year. The new rule is of course, as hon. members see, that it is prorated for the time they are in Canada or away from Canada.


Alphonse Fournier: I move:
That paragraph (b) in subclause one of clause nineteen of Bill 176 be deleted1 and the following substituted therefor:
" (b) that proportion of the tax for the year otherwise payable
(i)	that part of the taxpayer's income
(a)	for the year, if section 28 is not applicable, or
(b)	if section 28 is applicable, for the period or periods in the year referred to in paragraph (a) thereof, from sources in that country that was not exempt from income tax in that country minus amounts that are deductible for the year or such period or periods, as the case may be, under paragraph (d) of subsection (1) of section 27, is of
(ii)	the taxpayer's income
(a)	for the year, if section 28 is not applicable, or
(b)	if section 28 is applicable, for the period or periods in the year referred to in paragraph (a).

Income Tax Act
thereof minus amounts that are deductible for the year or such period or periods, as the case may be, under section 27.";
and that the word "of" in the twelfth line of subclause two of clause nineteen of the bill be deleted and the word "on" substituted therefor.


[Stage Direction]
Amendment agreed to.
Percy Chapman Black: Is this retroactive? I have a complaint with respect to the year 1947, which accounts are not yet settled, where a person moved to the United States and has paid income tax in that country. He is now being charged for 1947. At the same time he has paid as a resident of the United States, where he is on a pay roll.


Douglas Charles Abbott: I am happy to assure the hon. member that this is not retroactive. It applies to the future, not to the past.
Section as amended agreed to.
On section 20-Trusts or estates.


Donald Methuen Fleming: What is the reason for shortening the period for the filing of trustee returns?


Douglas Charles Abbott: There are now two forms, the information return by the estate or the trust, and the tax return. They are to be combined in one form, and the information return and tax return filed at the same time. It is all filed at the time the information return was filed before.


Donald Methuen Fleming: Is there any reason for doing it this way? It will shorten the time for filing the tax return.


Douglas Charles Abbott: I am told that in the new form when anyone has made out his information return it is simply a matter of filling out one more space, and he at once has his tax liability.


[Stage Direction]
Section agreed to.
Sections 21, 22 and 23 agreed to.
On section 24-General.
Donald Methuen Fleming: This again raises the question of imposing a penalty by way of interest on amounts found to be owing when a return is assessed.


Douglas Charles Abbott: No, we are wiping that out.


Donald Methuen Fleming: The department is reducing the period from 20 to 12 months. That is the period after which the return was actually filed. There was some discussion at the resolution stage as to what constitutes the date of assessment. There are actually two forms going out at the present time known as assessments. There is the form brought into use in the present year, which purports to be a"n assessment of returns filed on or before
(Mr. Fournier (Hull).]
April 30, 1949. Many people have been misled by that assessment into thinking that that is their final assessment on their 1948 income.


James Joseph McCann: If the assessment is correct, it is.


Donald Methuen Fleming: That is only a provisional assessment. Many people were amazed at the rapidity with which assessments followed upon the filing of their returns for the year 1948. Actually, my understanding is that that is not the final assessment. Those returns are open to assessment at any time, quite apart from the long-standing provision in -the act in regard to the opening up of an assessment for any reason at the option of the department. Will the minister indicate just how he is going to apply this provision, and how the interest is to be calculated?


Douglas Charles Abbott: Under the old section which is now repealed, and for which this section is substituted, there was a penalty interest rate of one per cent on amounts due after assessment. That penalty of one per cent is eliminated now, and the same rate applies both before and after.


Donald Methuen Fleming: I think the Minister of
National Revenue might be able to tell us what progress is being made now in the reduction of the backlog of returns. Statements have been made from time to time indicating that reductions have been made in that large backlog.


Louis-René Beaudoin: Would there not be another occasion for the hon. member to ask that question?


Donald Methuen Fleming: This would be a most convenient place to do so, when we are dealing with the question of arrears. We have always asked the question at this point. The Minister of National Revenue may be able to tell the committee now what progress has been made in reducing that backlog. I was about to say that the last time this matter was considered in the house the number of returns in arrears was more than 2,000,000, and there was a substantial number more than five years in arrears.


James Joseph McCann: Very substantial progress has been made with the backlog. By the end of the current fiscal year, that is by the end of March, all assessments for previous years will have been made, and the taxation division will then be on a current basis.


[Stage Direction]
Section agreed to.
Section 25 agreed to.

On section 26-Municipal or provincial corporations.
Douglas Charles Abbott: I have an amendment to this section. Perhaps we had better call it eleven o'clock.
Section stands.
Progress reported.



MISCELLANEOUS PRIVATE BILLS

[Stage Direction]
Fourth report of standing committee on miscellaneous private bills.-Mr. Winkler.

Alphonse Fournier: Mr. Speaker, tomorrow we will take up first Bill No. 221, an act to amend the Customs Tariff. Then we will continue with Bill No. 176, an act to amend the Income Tax Act and the Income War
Business of the House Tax Act. When these two bills have been passed, we will move to go into supply and take up the estimates of the departments of fisheries, national revenue, transport, health and welfare, reconstruction and supply, post office, and mines and resources. We will begin with fisheries and then continue with national revenue. Later tomorrow I will tell the house as to the order of the others. I am not sure what ministers will be available.


Arthur Leroy Smith: I did not hear you say justice.


Alphonse Fournier: No, I did not mention justice.


Mr. Casselman:: You might as well throw it in.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
[Stage Direction]
2754


[Stage Direction]
Saskatchewan PREMIER'S OFFICE
Regina, November 29, 1949
Hon. Douglas C. Abbott,
Minister of Finance,
Ottawa, Ontario.
Dear Mr. Abbott:
Re rent control
Thank you for your letter of the twenty-third instant stating that the federal government is willing to amend orders 813 and 814, which provide for the recent rent increases, so that they will be inoperative in Saskatchewan. The Saskatchewan government is pleased to know that the federal government is prepared to co-operate with us to this extent. However, you will remember that our proposals were contingent on adequate assurance being received that our legislation will not be declared invalid by the Supreme Court of Canada. You stated, "I am advised that there is no reasonable doubt regarding this point and that a reference to the supreme court is unnecessary."
With due respect, as there is a difference of opinion as to reasonable doubt, we would again request that the question be submitted to the supreme court for a ruling. This point should be made absolutely clear in order to safeguard the interests of both the landlord and tenant. As the question of jurisdiction is already being referred to the supreme court, there seems little reason why a second reference should not be made.
If it is decided by the supreme court that the federal government has jurisdiction at the present time, it does not necessarily follow that by rescinding your power in regard to one province, the legislation that province enacts will be valid.
Frankly, my government cannot understand your reluctance to obtain a ruling. No constitutional lawyer can be certain on a point of this kind, which has never received judicial consideration. Landlords and tenants are entitled to every reasonable guarantee that can be given them that any provincial legislation that is passed will be valid. You are in a position to get that guarantee for them without much extra work or extra cost.
Again, with respect, in spite of your decided opinion that our legislation will be jurisdictionally valid, we must remind you of the fact that your law officers were of the opinion that the federal government has jurisdiction in the rent control field at the present time. This opinion did not, however, preclude you from making a reference of the question to the supreme court. At the time of that reference you stated:
"May I say at this point that the advice which the government receives from its law officers is that the existing federal regulations with respect to rent control are valid. But in a matter which concerns the welfare of so many Canadians, the government would not be discharging its responsibility to the people of Canada as it should if it did not take every precaution. It is possible that the courts would decide that our regulations are unconstitutional. We cannot disregard that possibility".
There you have stated your case frankly and, we think, correctly. You will note that that is also
our position. The government of Saskatchewan asks that on behalf of the welfare of the people of this province the "possibility" of a ruling by the supreme court contrary to you and your law officers' decided opinion cannot be disregarded.
With these doubts in mind, we therefore request that a second such reference be made to the supreme court. If your advisers are so certain of the outcome, the reference should be expeditiously dealt with.
Yours sincerely,
T. C. Douglas
Province of Manitoba OFFICE OF THE PREMIER
Winnipeg, November 29, 1949 Hon. D. C. Abbott, K.C.,
Minister of Finance,
Ottawa, Ontario.
Dear Mr. Abbott:
Re rental control
I acknowledge with thanks receipt of your letter of November 9, drawing to our attention the statement on the federal government's policy respecting rent controls which you made to the House of Commons on November 3.
In view of the possibility, as pointed out in your letter, that a supreme court decision may disallow the present controls, my government is of the opinion that at this time they should become sufficiently well informed on all phases of the matter that they would be in a position to deal adequately with any situations which may arise.
In order to do this we should secure a proper understanding of all the successive stages through which rental controls have passed. We must at the same time be certain that we have a proper understanding of the situation as it exists today, and the practical effect that the implementation of the latest orders will have on the problem.
In this consideration specific points have arisen on which we would find information from your department most helpful. For example:
(1)	What proportion of all rented units in (a) Winnipeg and (b) Manitoba, are still under control?
(2)	What facts and factors formed the basis for the government's decision that an increase in rents was justifiable?
(3)	What was the basis used in arriving at the maximum percentage of increase allowed, as set out in the recent order which you announced November 3, 1949?
(4)	In respect of the situation in Manitoba compared with other provinces, to what extent has the movement of rents in Manitoba kept pace with this movement in other provinces, and what is the relative present pressure on rent ceilings likely to be reflected in further rent increases when the new orders go into effect?
Any information with which you may be able to supply us in regard to these and other points having to do with the rental situation generally will be greatly appreciated.
Yours very truly,
Douglas Campbell

MINISTER OF FINANCE Canada
Ottawa, December 2, 1949
Hon. Douglas Campbell,
Premier of Manitoba,
Winnipeg, Manitoba.
My dear Premier:
I wish to acknowledge and thank you for your letter of November 29, which arrived in my office yesterday.
I shall endeavour to obtain as soon as possible the information you have requested, although it may be that the statistics relating to the first and fourth numbered questions in your letter may not be fully available.
Yours sincerely,
D. C. Abbott
MINISTER OF FINANCE Canada
Ottawa, December 2, 1949
Hon. T. C. Douglas,
Premier of Saskatchewan,
Regina, Saskatchewan.
My dear Premier:
Thank you for your letter of November 29, which I received a day or so ago.
As stated in my letter to you of November 23, the federal government agreed to suspend the recent changes in the rentals regulations as they apply in Saskatchewan, only on the condition that the Saskatchewan government gave a firm undertaking that it intended to introduce its own legislation not later than April 1, 1950, and requested the federal government to withdraw its rental regulations as from the same date.
The purpose of this arrangement was to create a position similar to what it would have been had your province acted at an earlier date and been ready to put its legislation into effect now. Otherwise, of course, we should not be justified in imposing more regid restrictions on home owners in Saskatchewan than we believe is proper and right in Canada generally, having in mind the purpose for which rental controls were imposed and the fact that virtually all other wartime controls have been removed. The entire arrangement depends upon your willingness to accept responsibility for the withdrawal of federal controls in Saskatchewan as from April 1, 1950. We cannot advise you as to the wisdom of such a step. Our position is simply that we are willing to withdraw the federal regulations in Saskatchewan so that there can then be no conflict between federal and provincial laws.
My colleagues and I have been giving further consideration to your request that another question be referred to the supreme court, relating to the validity of provincial legislation that may be operative after the federal government has removed its rentals regulations in that province. As you may have noticed from the press, our counsel notified the chief justice of the supreme court that it was possible that the reference might be amended as a result of correspondence that was taking place between the government of Canada and the government of Saskatchewan.
After a most careful review we are confirmed in our opinion that it is both unnecessary and undesirable to refer such a question to the supreme court. The validity of existing federal rent controls has been challenged in the courts, and we believe that we have a responsibility to the people of Canada to put the matter to a conclusive test with the least possible delay. Another question
45781-175*
Appendix
bearing on the validity of provincial legislation might confuse the main issue, would certainly not be a move calculated to help in bringing down an early decision, and might indeed defeat the whole purpose of making the reference at this time.
Moreover, there is no provincial legislation to refer to the courts. All that can be asked is a hypothetical question regarding the powers of the provinces to legislate with respect to tenant-landlord relationships, which no one has challenged even in wartime. The federal controls have been superimposed on provincial law. They have never occupied the field in the sense that they were the exclusive law relating to landlord and tenant. Hence when the federal regulations are withdrawn in any province the provincial law is the only law in that province relating to landlord and tenant.
I should perhaps add that when parliament is asked to extend the Continuation of Transitional Measures Act, we would be prepared to recommend the inclusion of a provision that the rentals regulations shall not apply in Saskatchewan after March 31, 1950, so that the federal government will not have the power to pass any subsequent orders under that legislation affecting rentals in Saskatchewan, thus making it impossible for the federal authorities to occupy any part of the field.
The reason I suggested December 1 as the date by which we wished to have your reply was that the notices required under orders 813 and 814 of the wartime prices and trade board will be available in all parts of Canada within the next few days, and we wished to avoid distributing these notices in Saskatchewan if, in fact, they were not to be used. At any time up to the effective date of orders 813 and 814, namely December 15, 1949, we shall, however, be prepared to amend our regulations so as to suspend the operation of orders 813 and 814 in Saskatchewan, provided that you accept the responsibility for future rent control in Saskatchewan by requesting that the regulations in their entirety as they apply to Saskatchewan be revoked after March 31, 1950.
Unless such a request is received before December 15, the orders referred to will go into effect in Saskatchewan as elsewhere in Canada.
Yours sincerely,
D. C. Abbott
Canadian Pacific Telegraphs
Quebec, November 29, 1949
Hon. D. C. Abbott,
Minister of Finance,
Ottawa
Your letter dated November 24 re the federal rent control was delivered to my office on Saturday and reached me yesterday. It will be submitted to the members of the executive council of the province at our first meeting Wednesday of this week. An appropriate decision will be taken as soon as possible. I have asked for a copy of every federal order in council concerning this important matter, but you sent me only the one mentioned in the booklet entitled "Codification Administrative, May 1949". We consider these federal orders in council essential. Will you be kind enough to send me, the sooner the better, a copy of said orders in council. Personal regards.
Maurice L. Duplessis
Canadian National Telegraphs
Ottawa, November 29, 1949. Hon. Maurice Duplessis,
Premier of Quebec,
Quebec, P.Q.
I have your telegram of November 29 re rent control. The wartime leasehold regulations PC.
[Stage Direction]
Appendix
9029 appearing on page 15 and following of Codification Administrative which I forwarded to you on the 24th of November is the only order in council of the federal government now in effect upon the subject of rent control. The preamble to P.C. 9029 gives a list of the orders in council made from time to time, but these are now revoked and replaced by P.C. 9029. The orders of the wartime prices and trade board and of the rentals administrator which I forwarded to you at the same time are the only orders of the board or its administrator upon the subject of rental control which have general application. Personal regards.
D. C. Abbott
OFFICE OF THE PREMIER Province of Quebec
Quebec, November 30, 1949
Hon. D. C. Abbott,
Minister of Finance,
Ottawa.
Mr. Minister of Finance:
I received today your answer by wire to the [DOT]telegram which I sent you yesterday and in which I informed you that I had not received the federal orders in council relating to federal rental control.
We have noted your telegram to the effect that there is at present in this matter only one federal order in council in force, namely No. 9029 dated November 21, 1941.
These two telegrams and your letter dated November 24, delivered at my office Saturday the 26th and communicated to me Monday the 28th, were submitted to my colleagues of the executive council at a first meeting, held today.
You said you would comment on only one or two of the many points raised in the letter I had written to you recently. You state that the federal government's offer respecting rent control was unconditional and without any qualification whatever. Then you added: "I therefore find it difficult to understand the statement in your letter of November 16, 1949".
Apparently my statement was misunderstood. However, the facts show that it was correct.
On October £3, 1948 you wrote to me this:
"The constitutionality of continuing federal rent control has already been questioned and is now before the courts."
And you added:
"The federal government does not wish to do anything to prevent any province from making provisions to deal with the situation that would arise should continuing federal rent control be held invalid."
I have underlined the word "should" to stress the conditional character of your proposal.
Then, in your letter of November 9 you say: "The government has therefore decided to refer the question of the validity of the rental regulations to the supreme court, in the hope and expectation that a decision will be given before the present legislation expires. As I have said, the law officers of the crown are of opinion that the rentals regulations are valid. They are also of opinion that both the law and the facts support the view that it lies within the authority of parliament to extend these regulations for a further period. Counsel will be instructed by the Attorney General of Canada to press this view before the court."
It is clear that the federal authorities continue to claim a right to set up federal rental control,
and this attitude of theirs constitutes an obstacle to the full exercise of the rights of the provinces in the matter.
Brilliant lawyer that you are, you should not be unaware that it is contrary to sound tradition and to the best precedents to anticipate a judgment of the court to which the question has been referred. Nevertheless, eight years after entering a field which we consider exclusively provincial, you refer to the supreme court the question of the constitutionality of your rental control and at the same time you anticipate the decision of the supreme court, thus complicating the matter still further.
You pretend to offer the provinces the power to set up rent control. Therefore you persist in asserting that you possess such a right, and you place the province in the position of acknowledging a right of which we do not recognize the validity.
You will admit that the existence of two controls, one federal and one provincial, would be likely to aggravate the problem and, if possible, to increase its harmful consequences. This is indeed what would happen should Ottawa persist in its attitude, and if we did set up provincial control in the present circumstances.
For the past few years, as the federal authorities well know, and as you admitted in your letter of October 23, 1948, as well as in your previous letters, the constitutionality of federal rent control has been seriously questioned: nevertheless you continue to exercise powers which complicate the situation gravely while stating your desire to have the question of constitutionality decided by the supreme court.
The fact that you persist in claiming that rent control is a federal matter and that you have decided to maintain this viewpoint before the supreme court; the fact that you state in your letter that the federal government's law officers are of opinion that your rent control is constitutional-all that produces a situation which has to be taken into account and raises further and grave problems which do not tend to facilitate the settlement to be desired, and which we desire, of the difficulties caused and intensified by federal organizations.
It is easy to foresee the deplorable and complicated situation which would result from provincial control when the federal government continues to lay claim to the rights in question and asks the supreme court to sanction them.
It seems to us that the federal authority should not have constantly done and continue to do things of which the constitutionality is seriously questioned and is being submitted to the decision of the courts.
In claiming, as it does, the right to set up and to maintain rent control, the federal government asserts the right to set up at any time a federal control in opposition to provincial control.
The unfortunate victims of the federal decisions in this matter already have enough to complain of without their troubles and annoyances being aggravated by complications raised by the existence of both federal and provincial control.
You cite the example of the Saskatchewan government, which is apparently ready to set up provincial rental control. That is a matter which concerns the government of Saskatchewan. We have a clear mandate to administer the affairs of the province of Quebec, not of the province of Saskatchewan. Moreover, conditions vary from province to province and, that is one of the reasons why the rights of the provinces in this matter should have been respected at all times.
In short, we reaffirm that far from offering to the province the full exercise of its rights in this field, the federal government continues to render the full exercise thereof practically impossible.

We respectfully suggest to the federal government that it should modify its attitude and make it consistent with the rights of the provinces and with the rights of the people concerned. By removing, as you could easily do, the further and grave difficulties which you have added to the difficulties inherent in the problem, you would help solve the question rather than make it more complicated and more difficult. As to the present government of the province of Quebec, it is always ready to assume its responsibilities, but it desires that the federal government assume its own without any further delay.
Yours sincerely,
M. L. Duplessis
Appendix

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Ottawa, December 2, 1949
Hon. M. L. Duplessis,
Premier of Quebec,
Quebec, P.Q.
My dear Premier:
This will acknowledge and thank you for your letter of November 30, which I have read with great interest. I assume from this letter that it is not the intention of the government of Quebec to assume responsibility for the control'of rentals at the present time.
Kindest personal regards.
Yours sincerely,
D. C. Abbott
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Tuesday, December 6, 1949