1956-07-25

STARRED QUESTIONS


Mr. Knowles: 1.	Are civil servants or other government employees who are entitled to life insurance or a death benefit under part II of the Public Service Superannuation Act provided with any card, certificate or other document to show that they are covered by such protection?
2.	If not, will consideration be given to the issuing of such a card, certificate or other document so that such employees might have evidence of such protection?


Hon. W. E. Harris (Minister of Finance):: participant to the death benefit scheme does not receive evidence in the form of a card or document while he is still employed in the public service. However, should he on his termination of employment in the public service elect to continue his coverage, a document somewhat similar to an insurance policy is issued to him.
Consideration will be given to the issuance of some form of evidence to participants while they are actively employed in the public service.



OLD AGE SECURITY CHEQUES


Mr. Knowles: 1.	During the past 18 months, have there been any instances of old age security cheques being held in local post offices and not delivered to the addresses until a certain date?
2.	If so, has this been done on the initiative of the local postmasters or on the basis of orders or instructions issued to them?
3.	What persons issued any such orders or instructions?
4.	By what authority were any such orders or instructions issued?


Walter Edward Harris: 1.	Yes.
2.	On the basis of instructions issued to them.
3.	The chief treasury officer, Department of National Health and Welfare.
4.	The regular delivery date for old age security cheques since the inception of the act in 1952 was determined to be the last mail delivery day in each month. Inasmuch as the volume of mail to be handled might cause some difficulty in the post offices, arrangements were made to deliver this mail
to the post office prior to the release date for sortation purposes, with the understanding that delivery to recipients would be made only on the last mail delivery date in the month. This has recently been changed to be the last banking day in the month.



TRANS-CANADA PIPE LINES  ADVANCES BY CROWN CORPORATION

Mr. Hamilton (Notre Dame de Grace): 1.	What amounts have been advanced to Trans-Canada Pipe Lines Limited by the Northern Ontario Pipe Line Crown Corporation?
2.	On what dates were such advances made?
Mr. Dickey, Parliamentary Assistant, for the Minister of Trade and Commerce:	Mr. Speaker, the answer to the first part of the question is $6,775,000, which is the same amount as announced in the house several weeks ago by the Minister of Trade and Commerce. The answer to the second part of the question is June 18, 1956.



IMMIGRATION STATISTICS

Mr. Fulton: 1. What is the total number of Immigrants admitted to Canada during the first six months of 1956 (June figures preliminary)?
2.	What is the total number admitted in the same period in (a) 1955; (b) 1954?


Hon. J. W. Pickersgill (Minister of Citizenship and Immigration):: The answer to the first part of this question is 69,938. I might say that in so far as the June component of that figure is concerned it is an estimate, but we think it is pretty accurate. The figure for 1954 was 85,765 and for 1955 it was 58,417.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mrs. Fairclough: 1.	Who were the purchasers of stocks of butter released by the agricultural prices support board in 1956?
2.	What quantity was sold to each and at what
price?
3.	What were the terms of delivery?


P. F. R. A.  PRAIRIE PROVINCE PROJECTS, 1956
Mr. Caslleden: 1.	What construction projects in excess of $5,000 are being undertaken under P.F.R.A. in each of the three prairie provinces for the 1956 construction season?
2.	What is the location and estimated cost of each such project?

Inquiries o] the Ministry MOTIONS FOR PAPERS



PUBLIC WORKS CORRESPONDENCE

[Stage Direction]
Motion No. 95-Mr. Diefenbaker:
For a copy of all correspondence which passed between the Department of Public Works and/or Defence Construction (1951) Limited, Central Mortgage and Housing Corporation, and builders' exchange, in Halifax, Winnipeg, Calgary and Vancouver, since the first day of June, 1956.
Motion agreed to.

[Stage Direction]
Motion No. 96-Mr. Stanton:
For a copy of all letters, memoranda, telegrams and other documents exchanged during the past two years, between the Minister of Justice or any agent or person acting on behalf of the said department or on behalf of any other minister of the government, and any other person or corporation concerning acquisition of property at Joyceville for the purpose of extending the Kingston penitentiary.
Motion agreed to.


[Stage Direction]
On the orders of the day:
Mr. Howard C. Green (Vancouver-Quadra):: Would the Prime Minister tell the house whether there is to be any more legislation introduced during the present session and, if so, the nature of that legislation and when it will probably be introduced?


Right Hon. L. S. St. Laurent (Prime Minister):: Mr. Speaker, I understand that the Minister of Labour has a bill to amend the Unemployment Insurance Act which he has already mentioned in the house, and the Minister of Finance may also have another bill to be introduced.


Howard Charles Green: Is the Prime Minister able to tell us the nature of the other bill and when these two bills will be introduced?


Louis Stephen St-Laurent: The bill concerning the Unemployment Insurance Act is on the agenda for consideration by the cabinet just as soon as we can arrange to have a meeting. We hoped to have one at two o'clock this afternoon but it was not possible; it had to be put over until ten o'clock tomorrow morning. Just as soon as the bill is approved by the cabinet it will be introduced.


Howard Charles Green: What about the other measure?


Louis Stephen St-Laurent: I am not
in a position to say anything about the other measure.



AGRICULTURE


[Stage Direction]
On the orders of the day:
Mr. W. A. Pommer (Lisgar):: I should like to address two questions to the parliamentary assistant to the Minister of Agriculture. 1. Is there any research being done by the federal Department of Agriculture in the development of disease resistant sunflowers particularly for the southern Manitoba area? 2. Are any new soya beans which have a high oil content being developed for this specific area?


Mr. Robert McCubbin (Parliamentary Assistant to the Minister of Agriculture):: wish to thank the hon. member for Lisgar for giving me notice of his intention to ask these questions. The answer to the first one is yes. There is an intensive program at Morden in breeding oil seed sunflowers for resistance to rust. We have already released the variety "Beacon" which has proven to be highly resistant to rust in the southern Manitoba area. Other diseases of sunflowers are being investigated and related to the breeding program.
With regard to question No. 2, we are carrying on a selection program with soya beans at Morden in which selection is based on yield, high oil content and disease resistance. All of the early maturing hybrid lines developed at Ottawa are being tested at the Morden farm and constitute the material from which Morden selections are being made. In addition, hybridization work was initiated at Morden in 1956.



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Mr. Solon E. Low (Peace River):: Mr. Speaker, I should like to ask a question of the Prime Minister, a copy of which I supplied to him just a few minutes ago after he came into the house. The C.B.C. reported this morning that the Minister of Citizenship and Immigration (Mr. Pickersgill) had induced this government to provide financial help to Newfoundland to move people into more populous areas. If the report is true, will the government also be prepared to help other provinces with similar problems, for example with respect to displaced coal miners in the provinces of Alberta and Nova Scotia?


Louis Stephen St-Laurent: Mr. Speaker, I understand that this is one of the usual arrangements made by the
(Mr. Castleden.]

Department of Labour to provide alternative employment in areas where labour is required from areas where it is not required, and that the Minister of Labour can further develop the answer.


Hon. Milton F. Gregg (Minister of Labour):: Mr. Speaker, some time ago my colleague the Minister of Citizenship and Immigration (Mr. Pickersgill) brought to my attention the plight of families living in the small community of St. Brendan's, Newfoundland. From representations made it appeared that the prospects of their being able to maintain a livelihood in that community were extremely slim indeed. Consequently it seemed to me that it was worth the effort of having representatives of the Department of Labour and the national employment service jointly look into the situation. They were asked to do so and they have been doing so for some little time now.
That procedure is in general accord with activities that have taken place through the two agencies in other places in Canada during recent years. Sometimes the stress has been in the Department of Labour and assistance has been given in vocational training as in Westville, Nova Scotia and in my own constituency in Marysville, New Brunswick. Sometimes it has been the national employment service in co-operation with such a committee as Mr. Manning created in Alberta for moving families out from small coal mining towns to where they could get jobs elsewhere. In that case the provincial governments did not ask for financial assistance in moving but they did ask for and receive close co-operation and help in other phases of the move by our employees of the national employment service.
In this particular case I must say that I have not had the official report yet from my officials in Newfoundland but if it is as was outlined in this morning's broadcast, I will recommend favourable consideration on the matter.


Howard Charles Green: As a supplementary question, may I ask whether any legislation will be required in order to enable the government to implement this plan.


Milton Fowler Gregg: No. There has been authority now for four years giving the Minister of Labour authority to investigate and survey what we have been accustomed to call in the past special "depressed areas" and, if the situation warranted it, to work out a plan with the provincial authorities and to recommend it to cabinet for the purpose of bringing relief to bear with respect to moving workers from that area.
Inquiries of the Ministry PARLIAMENT HILL



PARKING ARRANGEMENTS IN LIBRARY AREA

[Stage Direction]
On the orders of the day:
Mr. George H. Hees (Broadview):: Mr. Speaker, I should like to direct a question to the Minister of Public Works. When does the government plan to make a proper parking area out of the at present disreputable looking area to the east of the parliamentary library? This is clearly open to view to all the tourists who are visiting parliament hill and is giving these tourists an extremely poor impression of the upkeep of this area.


Hon. Robert H. Winters (Minister of Public Works):: The rearrangement of parking in that area is under consideration.

On the orders of the day:


George Harris Hees: In connection with the area of which I spoke this morning, and which has been in the same condition for many weeks -there has been plenty of time for making decisions-can the minister assure the house that this area will be made into a respectable looking area in the very near future?


Robert Henry Winters: I have been away for a few days and I returned to my office only this morning. I will take the matter into consideration at once.



HOUSING


[Stage Direction]
On the orders of the day:
Robert Henry Winters: Mr. Speaker, while I am on my feet I should like to answer a question asked by the hon. member for Calgary North (Mr. Harkness) on Friday last. His question was as follows:
Is the minister aware that yesterday Calgary's largest building company had to lay off a quarter of its labour force because of lack of mortgage funds, and other companies there are in the same position? Is the government now prepared to make any change in its policy in this regard in order to enable house building to go ahead?
The situation is that between January and June of this year there were more houses started and completed in Calgary than during the same period last year; and at the end of June this year there were 2,219 houses under construction, substantially more than at the same time last year. During the month of June itself 500 housing units were started in that city. I think if the hon. member will look fully into the situation he will find that the reduction in labour force has been due to factors other than the shortage of mortgage funds.

Inquiries of the Ministry


Mr. Harkness:: May I ask a supplementary question? Does the minister know that the building companies in Calgary attribute the lay-offs entirely to the lack of mortgage funds?


Robert Henry Winters: No, I am not aware of that, but I am aware that that is not the situation.


Douglas Scott Harkness: The builders are the people who should know, I would think.
ELater;]
On the orders of the day:


Mr. J. G. Diefenbaker (Prince Albert):: Mr. Speaker, I would like to ask a supplementary question of the Minister of Public Works. Did he receive a complaint from the mayor of the city of Prince Albert within the last few days concerning the detrimental effect of his policy and what reply, if any, did he give to that?


Robert Henry Winters: As I said, I have been away for a week and I have received no complaint from the mayor of Prince Albert. It may have reached the office, but I have not seen it.
ELater;]
On the orders of the day:


John George Diefenbaker: I should like to direct a supplementary question to the Minister of Public Works. Is it not a fact that in the last few days he has received a number of complaints from across this country relative to the shortage of mortgage moneys and the unfairness of the new rate of interest? Did he not receive one from the mayor of the city of Prince Albert pointing out the detrimental effect of the shortage of mortgage moneys there and the fact that as a result many houses that had been started could not be completed?


Robert Henry Winters: Mr. Speaker, I just spent the better part of a week travelling in cities largely throughout western Canada and I did not receive a complaint of any kind.


John George Diefenbaker: You just do not believe them.


Mr. R. R. Knight (Saskatoon):: Mr. Speaker, I would like to direct a question to the Minister of Public Works following up the question asked by the hon. member for Prince Albert. I am not entirely satisfied with the minister's reply that he is getting no complaints about this. Does the minister not remember that he did receive complaints from the mayor of my city of Saskatoon and the city council some time ago concerning which I talked to him personally? What answer did he give?


Robert Henry Winters: The question asked by the hon. member for Prince Albert was rather more specific than that; he asked if I received complaints within the last few days.


The fact is that I have not received any complaints within the last few days.



VANCOUVER-REPORTED ACTION OF MINISTER RESPECTING LOW RENTAL HOMES

[Stage Direction]
On the orders of the day:
Robert Henry Winters: The hon. member for Vancouver East, Mr. Speaker, asked if I had received a letter from Mr. George F. Edwards, president of the senior citizens' association of British Columbia, under date of July 10. I find there is no record of any such letter having been received, but I have seen a mimeographed copy of the letter which was apparently sent to other people as well. The letter dealt with the policy of housing senior citizens.
The situation is as I set out when presenting my estimates earlier this year. Our general policy, of course, recognizes the position of our senior citizens. In government-sponsored public housing projects for low income groups, the government feels it is fitting and proper that a proportion of the units should be available to senior citizens in the appropriate income groups, but I think it would be unwise to assign any public housing projects exclusively to any particular class of Canadians. What we aim at is a good cross-section of all classes, races and creeds that comprise Canadian citizenship.
On the other hand, where private enterprise takes the initiative under the terms of the National Housing Act, even where the housing project is built largely with government funds as in the case of limited dividend operations, the owner may house anybody he wishes so long as the tenants conform to the income requirements.

On the orders of the day:


Mr. Harold E. Winch (Vancouver East):: Mr. Speaker, I would like to direct a supplementary question to the Minister of Public Works in view of his answer to my previous question. If, as the minister says, non-profit organizations which are in receipt of assistance from provincial governments are by a low interest rate from the federal government able to construct houses wholly and solely for senior citizens on a low rental basis, why cannot the city of Vancouver have exactly the same right?


Robert Henry Winters: Well, if the city of Vancouver by some means can arrange to constitute a limited dividend company, then it will have the same right.


Harold Edward Winch: Mr. Speaker, I would like to ask a supplementary question of the Minister of Public Works. Would the minister-I am convinced he is interested in the matter- explain how the city of Vancouver has

authority to constitute itself a limited dividend company, and beyond that why should a city have to do it and be denied the rights given to a private corporation?


Robert Henry Winters: Mr. Speaker, the city cannot constitute itself a limited dividend company as such. The hon. member, I think, is as well aware of the provisions of the statute as anybody in this house. There are means by which limited dividend companies can be set up, as the hon. member well knows, and where they are set up, of course, they can have the benefit of the statute.


Harold Edward Winch: By a city council?


Robert Henry Winters: No.


Harold Edward Winch: This is an offer by the city of Vancouver on the land.


Robert Henry Winters: There are limited dividend companies in Vancouver which are receiving the 90 per cent loan, and which are housing senior citizens.


Harold Edward Winch: But not the city council; and why not?



BROCKVILLE


[Stage Direction]
On the orders of the day:
Mr. Maurice Bourgel (Parliamentary Assistant to the Minister of Public Works):: Mr. Speaker, on Friday last the hon. member for Leeds (Mr. Stanton) asked when the landscape contractor for the Churchill park federal-provincial housing project in Brock-ville would commence work, and when the job would be completed. The work has already commenced, and the contractor is at present proceeding with it. It is expected that the finished grading work will be completed by August 15, and the seeding will be completed by September 15 of this year.



INDUSTRY


[Stage Direction]
On the orders of the day:
Mr. Michael Starr (Ontario):: I should like to direct a question to the Minister of Trade and Commerce. Can the minister advise whether the government has completed its inquiry into the matter of importation into Canada of motor vehicles and parts from the United States? If so, what action is the government prepared to take in respect of this matter?


Right Hon. C. D. Howe (Minister of Trade and Commerce):: The matter has been investigated. The postcards which were received 67509-4071
Inquiries of the Ministry in considerable numbers referred to the fact that in 1950 we imported from the United States 3,154 vehicles and last year 27,392 passenger cars valued at $58,886,000. The two situations are hardly comparable, in that in 1950 we were exercising import control' on a number of more or less luxury items which included automobiles, and therefore 1950 was an unusual year in that regard.
However, our imports of automobiles usually run as a proportion of the sales of automobiles in Canada, and the ratio runs between 5 per cent and 7 per cent. In 1951 we produced 282,714 units and imported 14,050 units, which was 5 per cent of the Canadian production. In 1952 we produced 283,534 units and imported 13,828 units or 5 per cent of Canadian production. In 1953 we produced 360,385 units and imported 23,501 units or 6| per cent of Canadian production. In 1954 we produced 287,191 units and imported 17,954 units, or 64 per cent of Canadian production. In 1955, we produced 374,945 units and imported 27,392 units, or 7| per cent of Canadian production.
It has been the policy of Canadian automobile manufacturers to produce models that sell in large volume in Canada and to import those models where the volume does not warrant the cost of tooling. This applies particularly to the higher priced cars, which have been in increasing demand in Canada in recent years as a direct result of the high level of prosperity in this country. Our importation of parts increases with our increased production of motor cars in Canada. In other words, the importation of parts increases proportionately with the production of motor cars in Canada.
It seems obvious from our study that there is nothing abnormal in the present situation. The impact of the strike at General Motors was felt during that period. More cars than usual were imported, but aside from that the situation seems to be quite normal.


Mr. Coldwell:: Do I understand that the minister's figures refer exclusively to the importation of United States cars and do not include the importation of other cars?


Clarence Decatur Howe: No, the imports from abroad are on a declining scale, as against the peak years. There are certainly fewer foreign cars imported, that is cars from overseas, than was the case three or four years ago, and fewer than immediately after the war. However, the question referred particularly to imports from the United States.

Inquiries of the Ministry CANCER



INQUIRY AS TO USE OF HOXSEY TREATMENT

[Stage Direction]
On the orders of the day:
Mr. C. E. Johnston (Bow River):: Mr. Speaker, I should like to direct a question to the Minister of National Health and Welfare or, in his absence, to his parliamentary assistant. On June 27 I asked a question regarding the use of Hoxsey cancer treatment, and at that time the minister said he would give me a report. I wonder whether the parliamentary assistant can tell us when the reply will be brought down.


Mr. F. G. Robertson (Parliamentary Assistant to the Minister of National Health and Welfare):: I will look into this matter and try to get an answer for the hon. member.



BRUCE COUNTY, ONT.    INQUIRY AS TO REQUEST BY PROVINCE FOR ASSISTANCE TO VICTIMS OF TORNADOES

[Stage Direction]
On the orders of the day:
Mr. A. E. Robinson (Bruce):: Mr. Speaker, I should like to direct a question to the Prime Minister. Has the federal government been asked by the province of Ontario for aid in assisting the victims of recent tornadoes in Bruce county?


Louis Stephen St-Laurent: Not to my knowledge, Mr. Speaker.


Andrew Ernest Robinson: May I direct a supplementary question to the Prime Minister? Will the federal government look sympathetically on such a request if it is made?


Louis Stephen St-Laurent: The federal government will look at every request that is made in the light of the general policies that have been established in that regard. Whenever there is a disaster that seems to surpass the capabilities of the locality where it occurs and the province requests assistance to come to the aid of those who suffer, the matter is very carefully considered.


Andrew Ernest Robinson: I have one more question, Mr. Speaker. I should like to direct it to the hon. member for Grey-Bruce. Is the minister aware of the tornado damage done in Bruce county recently? If so, would he care to comment on how the victims of such tornadoes might obtain assistance?


Walter Edward Harris: I am aware of the fact that damage occurred in a small cyclone-I think that is the proper term-about three weeks ago.


Andrew Ernest Robinson: Several cyclones.


Walter Edward Harris: I think the Prime Minister has outlined the procedure that might be taken.


John George Diefenbaker: You forgot to tell the Prime Minister.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Mr. John B. Hamilton (York West):: Mr. Speaker, I would like to direct a question to the Minister of National Defence. As a result of his investigation is the minister now in a position to give the house a report as to whether there has been any improvement in the quality of food being provided for the militia at Niagara camp?


Hon. R. O. Campney (Minister of National Defence):: Mr. Speaker, not at the moment.
I am having the matter investigated, but I have not received a report as yet.



REQUEST THAT JET PLANES BE


[Stage Direction]
On the orders of the day:
Mr. E. G. McCullough (Moose Mountain):: Mr. Speaker, I should like to direct a question to the Minister of National Defence. Has the minister received any complaints about low-flying jets over the city? I wonder if in view of the danger of these jets and the nuisance of the noise the minister would give consideration to preventing their flying over the immediate city area?
Hon. R. O. Campney (Minister of National
Defence): Mr. Speaker, I have not personally received any complaints.


Mr. Knowles:: Have you not heard them?


Ralph Osborne Campney: Yes, certainly I have heard them, but perhaps we will have to get used to modern flying.



NATIONAL REVENUE


[Stage Direction]
On the orders of the day:
Mr. J. H. Blackmore (Lethbridge):: Mr. Speaker, before the orders of the day are called I desire to direct a question to the Minister of National Revenue, notice of which I sent him.
What area, geographically speaking, has been and is now being served by the Lethbridge local income tax office? I would also like to ask this question. What would be an approximate estimate of the population in that area served by the Lethbridge local income tax office?


Hon. J. J. McCann (Minister of National Revenue):: Mr. Speaker, I am unable to answer these questions at the moment, as I have to obtain this information from the Lethbridge or Calgary offices. As soon as it is received I shall communicate it to the house.



TAXATION


Walter Edward Harris: the third reading of Bill No. 442, to authorize the Minister of Finance to make payments to the governments of the provinces and to authorize the government of Canada to enter into fiscal agreements with the governments of the provinces.


Solon Earl Low: Mr. Speaker, I move, seconded by the hon. member for Lethbridge (Mr. Blackmore):
That Bill No. 442 be not now read a third time, but that it be read a third time this day six months.
I do not move this motion with any desire to kill the bill nor with any desire to make it impossible for the government to complete legislation of this kind. There are some things within the bill with which we thoroughly agree. We think, for example, that inclusion of the equalization principle in the bill is good and necessary, particularly at this stage when there are provinces in Canada that are struggling to overcome their financial difficulties and trying to establish themselves in an expansion movement that will eventually help them to help themselves. We think that the equalization principle is sound and we are prepared to go along with it. We believe also that the principle of stabilization of revenues is good, and that is something we commend; we are not against that at all. We also believe that the increased refunds of tax collections to the provinces, provided by this bill, is something better than the provinces have had under the tax rental agreement.
I want you to note, Mr. Speaker, that I refer to the payments to the provinces as increased refunds of tax collections from the provinces. I like to look upon them as such. It is not a question of this government giving the provinces anything that does not belong to them. We have already made clear that in our view what the government of Canada is doing under these agreements is refunding tax collections from the provinces in a certain measure back to the provinces to help them to get along and to make it unnecessary for the provinces to impose double taxation with all the confusion that is bound to result from that sort of thing.
25. 1956	6417
Federal-Provincial Financial Arrangements
However, as I pointed out last night very briefly when I moved the amendment, the wording of the title and the wording of the bill itself at various places seem to indicate that the government of Canada feels that it is allowing the provinces something. I wanted to establish very definitely the principle that there is a partnership in this country and that what the government is doing is making available under a tax-sharing plan something that already belongs to the provinces but that it is being granted them under an agreement with which the provinces are ready to go along.
We look upon this bill as imposing a unilateral decision by this government on the provinces. That is our chief criticism of it. We feel it is unwise yet to go ahead with the bill before the provinces have considered the wording and have been able to convey to the government their feelings with regard to the whole bill. We look upon it as a denial of the partnership principle which is necessary if we are going to have a smoothworking federal democracy. The present bill and the present attitude of the government deny that partnership principle. The government's attitude seems to convey to the provinces the idea, "We are prepared to do something for you, to allow you this or allow you that, but you have to take it on our terms." I think that in principle that is wrong in every way.
We think there is still time to rectify the mistake that has been made in not submitting the bill to the provinces for their approval before it is enacted into law. That is the reason why we move the six months' hoist. We think the six months will give the Minister of Finance time to submit the bill to the provincial governments in conference, and he would still have time to have the bill made law before the end of the present fiscal year, when the old tax transfer agreements terminate.
We feel that the government and all the house should give careful consideration to this six months' period during which something further can be done to help the provinces to feel they are partners in this great Canada. I want to say that there seems to be very little noise made these days in defence of provincial rights. We want to defend those provincial rights. We do not want them to sell their birthright for a mess of pottage, and that is exactly what they do when they are dragged along with a unilateral proposal of this kind. So we feel very definitely that the government should make another effort, and I think they would be successful in carrying the provinces along with them if they would call a conference and try to satisfy the provinces that they
6418	HOUSE OF
Federal-Provincial Financial Arrangements were doing all they could. If they would call such a conference and place this very bill before them, and if the provinces indicated they were satisfied with it, they would hear nothing more from me about it, but I warn you that the provinces are not going to feel happy under the circumstances and I plead with the government to take these things into consideration and seriously give thought to the six months' delay.


Major James William Coldwell: Six
months' delay means something more than a six months' hoist to the bill, and it seems to me that would be very unfortunate. The bill has received consideration in the house, although some of us would like to have seen modifications in the bill, and probably after second reading the bill might have been submitted to the provincial premiers for further consideration. But I would hesitate to vote against a bill which embodies a principle with which we are in complete agreement, namely, that there should be a division of certain revenues that were allotted to the provinces and to the dominion by the British North America Act.
However, let it be said that in imposing these taxes in this parliament we are exercising the constitutional right to do so. I did hot go along with the idea that the provinces have a prior claim to these taxes.


Solon Earl Low: No, I think they have an equal claim.


Major James William Coldwell: I shall not argue the point as to equality, because after all there is not an equality between a province and this parliament. The British North America Act very clearly stipulated, or first of all stated, that there were three provinces which came into confederation. I think it is noteworthy that in the British North America Act those three provinces were made four provinces and it was stipulated that each province should have a legislature and that there should be one parliament for Canada. I have noticed with a good deal of misgiving that the legislatures of some of the provinces have been promoting themselves to parliaments of late and referring to the leading minister in those legislatures as the prime minister. To my mind that is completely wrong, and I think it is leading to a great deal of improper talk across Canada about the relation of the provinces and the dominion.
I could not support the six months' hoist which would kill the bill. I think the suggestion that there might be further conferences is a good suggestion, but let us be quite clear as to what the position is as between the provinces and this parliament. I readily admit that the provinces require more revenues, that


the municipalities require more revenues, but the dominion, with the consent of the provinces, has assumed more and more obligations that were probably originally intended to be assumed by the provinces themselves. That is particularly true with regard to property and civil rights in the social security and other measures that we have adopted and I hope will continue to expand in this parliament. It seems to me that while negotiation between the provinces and the dominion is right and proper we should be very careful indeed that we do not accept the view that this parliament has not a right to make decisions of this sort.
Since the tax agreements expire on the 31st of March next and since in my opinion it is quite essential that we shall have something ready and the provinces shall know that we have got something ready and make their proper preparations accordingly, the six months' hoist, which would bring this matter into next January or February because we are at the end of July, would mean that neither the dominion nor the provinces would have sufficient time to make their plans. Consequently, while we would have liked to have seen further negotiations after the second reading of the bill we cannot support-I am sure I speak for those with me although I have not had time to consult them-something that would kill the bill and make it impossible to do the thing that is essential for the welfare of the country by the first of April of next year.


Walter Edward Harris: 


Mr.   Speaker-Mr. Speaker@: If the minister speaks now he will close the debate.


Stanley Howard Knowles: Will he? There is an amendment.


Mr. Fleming:: He will be speaking on the amendment, not on the main motion.


Mr. Speaker:: I am sorry. The hon. member is quite right.


Walter Edward Harris: Mr. Speaker, very briefly I think I should add a few words to what the leader of the C.C.F. party has said. I would be the first to agree that there may be defects in the legislation. Experience has shown that when you draw a bill and pass it through the house you may find at a later session that you want to amend it, and in so far as there may be a deficiency in what we have done or in so far as there may be an improvement that can be suggested to us we will be glad to bring it back by way of amendment at the next session of the house. However, on the main issue, namely, the question of a distribution of the taxing powers in the manner we have

indicated in the bill and in the income tax amendments, I must say that I would have to disagree with a lot that has been said in the course of the debate so far. I do not admit that this is a partnership.


Solon Earl Low: I know you do not.


Walter Edward Harris: Each jurisdiction can impose these taxes if it so desires. There is no limit on the authority in either case, and until recently almost anyone in the opposition who criticized the tax rental agreements did so on the ground that we were invading and in some way abridging provincial autonomy. In the course of the debate on the resolution the Leader of the Opposition (Mr. Drew) spoke for an hour and ten minutes. I listened carefully and I read his address as it appeared in Hansard. I found no reference whatever to the phrase "provincial autonomy." We seem to have laid that ghost in the course of passing this bill through the house.
In addition, the hon. member for Eglinton (Mr. Fleming) spoke for an hour the other day and I do not think he used the phrase "provincial autonomy" either. I used it once and until provincial rights were mentioned now I think that phrase was not used in the course of the discussion. So we now have before the house a bill which apparently alleviates or, shall I say, minimizes the complaints that have been made with respect to provincial autonomy, and the provinces have a choice now whether they will enter into a tax rental agreement much like the old one but with certain advantages added or whether they will choose to reassert their taxing powers as they have the right to do.
That will be the situation on the first of April next in those provinces that now have tax rental agreements. In the case of the province of Quebec, of course, they have already and are now imposing taxes in these fields. Therefore it would seem to me that it would be proper for the legislatures of the provinces to consider at their next sessions, if they so desire, what they ought to do with respect to tax rental agreements or the imposition of taxes again. I repeat, therefore, that I think it desirable that the bill should be passed at this session, but I also repeat my promise that if in the course of discussing the bill with the provinces, as we will undoubtedly have to do over the next several months, we find that improvements can be made we will certainly bring them before the house.
I only add that by next June we will have to make final settlement on the tax rental agreements and during all that time we will not only be negotiating with them with respect to those settlements but we will be
25. 1956	6419
Federal-Provincial Financial Arrangements discussing the question of the regulations and procedures to be adopted to carry out this legislation. Under those circumstances, if there is a deficiency I think we will find it.


Donald Methuen Fleming: Mr. Speaker, in speaking on second reading of this bill on July 23 I sought to indicate the reasons why we of Her Majesty's loyal opposition feel that the bill does not do justice to the provinces nor to the municipalities of this country and why for those reasons we could not support the bill on second reading. At that time, sir, we urged a change of heart on the part of the dominion government and a recognition by it of the constitutional position of the provinces and the extremely onerous responsibilities that are cast today by the constitution upon the provincial and municipal governments of this country.
We said then that this whole question should be further reviewed and that there should be a new conference between the federal and provincial authorities if the federal government will show some change of heart and some adequate recognition of the constitutional position of the provinces and the needs and problems of the provincial and municipal governments. That is our position today. There ought to be a reopening of this whole question between the federal and provincial governments. No time should be lost in that regard, and out of that conference should come a very much better deal for the provinces and the municipalities.
It is true that the present measure does offer some improvement over the fiscal agreements that have been in effect during the past five years and which will expire on March 31 next, but the improvement is not nearly adequate and it does not afford sufficient reason for the provincial governments being tied up for the next five years, particularly at a period of tremendous national development of resources which throws such an abnormally heavy financial burden upon the provincial and municipal governments and which at the same time produces tremendous revenues for the federal treasury.
We have now reached almost the end of July. The present fiscal arrangements continue until March 31 next, eight months away. I think there is merit in the amendment that has been introduced by the hon. member for Peace River (Mr. Low). It does not deal with the bill finally but in effect it says to this government that we think that, in the next six months, they ought to carry out the plain duty that lies before them of taking this matter back in conference to the provincial premiers as spokesmen of the provincial governments and the municipal governments of this country; and that they should take it
6420	HOUSE OF COMMONS
Federal-Provincial Financial Arrangements back not in the arbitrary and rigid attitude which has characterized the approach of the federal government to this problem but rather with a view to arriving at a settlement and agreement in the spirit which the fathers of confederation exhibited when they met to overcome much greater difficulties than those which confront the federal and provincial governments today in approaching their common fiscal problems and relations.
For that reason, Mr. Speaker, I think the house ought to support the amendment which has been introduced. It affords an opportunity which, if it is used by the federal government as it ought to be used, could result-with a wholesome Canadian attitude on their part-in a very much more satisfactory disposition of the problem of common fields of taxation and very great fiscal responsibilities in a period of rapid development of the resources of this country. Within that six months' period we would hope that the government would come back to parliament with a very much better scheme than the one embodied in the present bill. As I sought to say in speaking on second reading two days ago, we would be happy to come back here to a fall session or to a session at any time in order to deal with a better measure, one that will afford adequate recognition of the constitutional position of the provinces and the heavy responsibilities Which they and the municipalities bear.
Therefore, Mr. Speaker, we consider that we are making a proposal that is good for all of Canada and that is good for the provinces whose administration of the resources that lie within their boundaries is going to have so much to do with the health of the whole Canadian economy in the years to come. If they are not to be healthy provincial administrations in a sound fiscal position, I submit to this house that the development of our resources is going to be checked. The administration of these resources, by our constitution, is confided to the provincial governments. They must be strong fiscally if they are to carry out their constitutional responsibilities. If they are hampered or if they are placed in a strait-jacket in that regard over a period of these next five years, which may be a period of critical importance in the development of this country, the federal government and the federal treasury are going to suffer.
We therefore say, Mr. Speaker, that here is an opportunity now to use valuable time- for no time should be lost-to re-examine the problem, to bring together the provincial premiers, and for the federal government to exhibit to them a wholesome recognition of the constitutional position of the provinces

and the responsibilities which, under that constitution, fall on the provincial and municipal governments. For this reason, Mr. Speaker, we propose to support the amendment introduced by the hon. member for Peace River.
Here are six precious months. Let this federal government use them to good advantage, to wholesome advantage, in the interests of the whole of Canada. If they do so, Mr. Speaker, I am sure this house will have the opportunity of giving approval to legislation that will represent a far more equitable distribution of the yield from common tax fields, a far more adequate recognition of the position that the provinces hold under our scheme of confederation; and that will not leave provinces and municipalities faced with colossal burdens and colossal expenditures far beyond their present capacity to meet, as is the situation today.


John George Diefenbaker: Mr. Speaker, I simply rise on a question of privilege. Last evening- and I am sure the Minister of Finance (Mr. Harris) made this statement without intending to leave a wrong impression-as reported at page 6399 of Hansard, after a suggestion had been made by the hon. member for Notre Dame de Grace (Mr. Hamilton) respecting the need for the creation of a department of dominion-provincial relations or something analogous thereto, the minister stated as follows:
It is not a new proposition. It has been advanced at one time or another in the house by the hon. member for Prince Albert.
I suggest to the minister that in that statement he is mistaken, for at no time have I advocated the setting up of such a department. I presume the statement was inadvertently made by the minister.


Walter Edward Harris: On the question of privilege, Mr. Speaker, may I say that I am bound to accept the hon. member's correction. However, I am sure that, if I have time, I can turn up the reference to it in Hansard. I have heard it myself in the house.


John George Diefenbaker: No; the minister has never heard it because I have never spoken previously on this subject.


Walter Edward Harris: Oh, yes.


John George Diefenbaker: On dominion-provincial relations?


Walter Edward Harris: Yes.


Mr. Roland Michener (St. Paul's):: Mr. Speaker, I wish to reinforce only one aspect of what has been well covered by the hon. member for Eglinton (Mr. Fleming). The minister himself recognized the possibility of

improvement with respect to the federal government's proposals to the provinces which are embodied in this bill and in which they are given their legal authority. Just this morning he recognized that possibility and he said that he would come back to parliament if that improvement were realized. We welcome that attitude. However, I suggest to the minister that unless he wishes to force his present views upon the provinces, he should not force this bill through at this time. Rather he should proceed with his negotiations until substantial agreement has been achieved.
I do not propose to review the discussion of the method of achieving agreement. It is not a short process but it surely can be accomplished if the government is prepared to grapple with the problem and to endeavour to convert these temporary agreements which come forward every five years for renewal as stop-gaps into some more permanent solution. That is where the government has been derelict, namely in not endeavouring to make a more permanent settlement which will command the substantial approval of the provinces. If we in this house were to give unanimous approval to the government's present proposals, what position would the provinces be in to secure any of those improvements which the minister recognizes as a possibility? They would be faced with a cut-and-dried plan which they must accept or reject. Their negotiating power would be weakened by the fact that all parties in this house had accepted the government's present proposals as being the ultimate when it is clear that we do not do so. The suggestion is that this bill be deferred. Perhaps six months is not the right time, and perhaps a shorter time would be better, but the suggestion that the government proceed with these negotiations before determining what the agreement will be strikes me as being a sound procedure. After all, that is the usual method of arriving at an agreement, making the agreement before drawing up the document and signing it. In this case we are drawing up and signing the document and then proceeding to negotiate again for an agreement.


Harold Edward Winch: do not think any of us need to kid ourselves at all, Mr. Speaker. An amendment to move a six months' hoist is not a move to adjourn, it is a move to kill. I believe that is the meaning of that amendment.
Now, I cannot agree with the previous speaker that the passage of this bill means that all parties are in anywhere near complete agreement as to its text or as to the procedure of the government in the making of their proposals. I hope, sir, that I made
Federal-Provincial Financial Arrangements it very clear when I spoke on second reading we are actually very disappointed in the provisions of this bill, and very disappointed in the fact that there has not been what we think is a sufficient recognition of the fiscal inabilities of the provinces and municipalities to meet the responsibilities of their governmental jurisdictions. But we do believe very much in the principle of there being an agreement between the federal and provincial authorities on these taxation fields.
Now, sir, all the provincial legislatures meet early in the spring of the year. If my knowledge is correct, the departments of finance of all provincial legislatures have to start on the work of their budgets not less than five months before their legislatures meet. If we, therefore, accept the basis of there just being a six months' hoist I say that we place the provincial governments in an impossible position in the drafting of their budgets for introduction at the session early next year. I believe that from a practical point of view we do have to accept the principle of dominion-provincial agreements at this time, whether we consider them satisfactory or unsatisfactory. It is a fact that if this bill passes, as I presume it will, the provincial governments are faced with the proposition that they can accept the bill in full; they can accept it in part or they can reject in entirety the propositions there set forth. So under the circumstances, Mr. Speaker, so far as I personally am concerned I agree with what has been said by my leader, that basically and from a practical point of view, even although we do not like what this bill contains, even although we think the government has not gone far enough, in basic principle we have to support the bill. We cannot, therefore, support the amendment which has just been moved.
I would like to say this. I would hope the Minister of Finance (Mr. Harris) would make some statement on the bill, in view of the criticisms that have been made and in view of the fact he must know that the provinces and municipalities cannot possibly for the next five year period finance their responsibilities through the amount of money that can be, by agreement on fiscal arrangements, granted to them. I would say that I go along with my friends on the right and my friends on the left in asking the minister to consider calling a further conference of the premiers of the provinces along with the representatives of the federal government, with a view to acceptance in part, in whole or rejection of Bill No. 442 and what it implies, and that the government by policy lay down additional assistance in those fields where the provinces
6422	HOUSE OF
Federal-Provincial Financial Arrangements now are caught, such as conservation, development, education and primary highways. I am convinced that one statement from the Minister of Finance now that he is prepared to discuss these matters in this coming year would make possible almost a full acceptance of the bill which is now before us.


Mr. Fernand Girard (Lapointe):: I feel, Mr. Speaker, that I have to rise now and explain that if we support the government on this bill it is not because we approve of what has just been said by the hon. member for Rosetown-Biggar (Mr. Coldwell) or even what has been said by the Minister of Finance (Mr. Harris).
(Translation) :
Mr. Speaker, when a moment ago the hon. member for Rosetown-Biggar (Mr. Coldwell) stated that he did not agree that the provinces have an equal or prior claim to those tax fields, I felt he was going back in time to some ten years ago and restating a grave misconception.
I have the definite impression that the whole debate has centred on the matter of money, while basically this has not always been the main issue. If we approve the bill before the house, it is precisely because it gives, especially to the provinces, the freedom not to sign the agreements.
If it was merely a matter of money, that is 10 per cent of income tax, 50 per cent of succession duties and 9 per cent of corporation taxes, we could no doubt still speak about the poor provinces and of the fiscal agreements; it would be a matter of exchanging money for money, and each province could then accept the amount that would suit her best. But it is above all a matter of principle. While the hon. Minister of Finance (Mr. Harris) has said that no one seems to have dragged in the ghost of autonomy, we are of the opinion that the matter of provincial autonomy is at the root of the problem. Let no one believe that, because there are poor provinces, the matter involved is only one of money and that the provinces, especially Quebec, would be satisfied with that.
Mr. Speaker, if in this debate the matter of money seems to have been the only important one, we should not forget that as far as we, the independents, are concerned, we approve the present bill solely because it is a step in the right direction, and more particularly because it enables the province of Quebec, which has every reason in the world to keep on fighting, to refuse to sign the agreements because she believes, and will continue to believe, that the matter of provincial autonomy is the crux of the matter.


We approve this bill not on account of the amounts offered but because we are free not to sign the agreement and because we can refuse to subordinate provincial autonomy to the central government.
I would like to say that we do not approve the motion before the house-at least I don't -since we have no intention of killing the bill, which would be the net result if such motion were carried. As I said, we are supporting this imperfect legislation because it is a step in the right direction. However, that does not mean that we are satisfied, on the contrary; as long as the federal government does not recognize that the provinces have the right to full deduction of the income tax levied by provincial authorities, we surely cannot feel satisfied.
(Text):


Mr. J. A. MacLean (Queens):: 1 have a few words I should like to say regarding this legislation, and I therefore intend to take this opportunity to do so. I rise only to speak to this amendment because, up to this point so far as I know, no voice has been raised from my province regarding this legislation. The conclusion might be erroneously drawn, therefore, that Prince Edward Island is satisfied with the agreement. We believe that there are two problems which this agreement tries to meet. One is a fair division of the tax resources of the country between the central government on the one hand and the provinces on the other. We feel that this legislation does not go far enough towards meeting the needs of the provinces. As a matter of fact, there seems to be reluctance on the part of the central government to admit that the provinces have any rights, or rights to the extent the provinces believe they have in any case. As a matter of fact some of the provinces believe the central government is trying to sell them a ride on their own horse.
When the colonies which now form Canada came together, the fathers of confederation believed a reasonable division of tax resources was made to meet the needs of the central government on the one hand and the provinces on the other. As I have already said, that is one of the purposes of this legislation, to bring that division up to date. There is another problem which this legislation should meet. It should try to remove the injustice which is the lot of some provinces as compared to others in that they have not been favoured to an equal extent by confederation.

We in the maritimes feel that we have contributed greatly to the success of confederation generally, and that we have not benefited in proportion over the years. The governments of the maritime provinces, and that of Prince Edward Island in particular, have striven to put forward their just claims in that regard and have met with varying success throughout the years.
On one occasion the then minister of finance said, and I quote from Sir Thomas White very briefly when he was minister of finance in 1912-I do not intend to take up much time of the house:
I have become enthusiastic about it, and I say that Prince Edward Island from the date of union has been hardly treated, and I believe that her dwindling population is, to a very large extent, due to the fact that she has been deprived of the subsidies to which she was justly and reasonably entitled from the dominion since confederation. I hope to show to the satisfaction of the house that this grant is not only justified, but abundantly justified. I hope that a new era will dawn for the province of Prince Edward Island when it gets this enlarged subsidy.
Then, the leader of the opposition, Sir Wilfrid Laurier, had this to say:
The one reason only which has impressed me- and it is not a constitutional reason, it is not a legal reason, it is simply a reason of equity-is the fact that Prince Edward Island has not profited by confederation.
As a result of these points of view the maritimes, and Prince Edward Island perhaps in particular, had these claims satisfied to some degree. Now I think the people of my province generally feel that a lot of these relative benefits which they gained through the struggle over the years have, for the most part, been wiped out by these new agreements and their position relatively is not now good. In referring to the table placed on Hansard by the Minister of Finance (Mr. Harris) on July 16, I note that the per cent increase over the 1952 formula in total is 21-3 per cent, whereas in the case of Prince Edward Island it is merely 1 [DOT] 6 per cent, the lowest of any province.
I believe the feeling of the people of my province was summed up by the premier of our province at one of these provincial conferences recently, the one on October 3, 1955. I think the people of my province support his point of view when he said:
Although we favour the continuation of the principles underlying the existing financial agreements, we feel that under the present formula we are not receiving a fair or adequate share. Our submission will indicate the necessity of and the right to substantially increased federal assistance for the public services which the province has undertaken, and in many cases pursuant to policies promoted by the federal government, which we were obliged to adopt.
25,	1956	6423
Federal-Provincial Financial Arrangements
I therefore think, Mr. Speaker, that very serious consideration should be given by the federal government to changes in the proposed legislation at the first opportunity which would bring back to their previous focus the claims of the maritime provinces and of Prince Edward Island in particular. I support the amendment and the purpose for which it was moved, namely, that an opportunity might be given for further consideration between the federal government on the one hand and the provinces on the other.


Mr. Speaker:: Is the house ready for the question?


John Horne Blackmore: Mr. Speaker, let it be known first of all that the object of this group in moving the six months' hoist is not to kill the bill.


Some hon. Members:: Oh, oh.


John Horne Blackmore: Please give me a chance to say so before you object. That is common sense, is it not?
As far as I can judge, it is quite possible for the minister to call a provincial conference as soon as this session is closed and, with the provinces, devise a bill which will be satisfactory to the provinces and then draft that bill and bring it into the House of Commons in the early days of the next session and have that bill passed before the time on which the other agreements expire. I think it is not beyond the possibility of this house to do that. I am sure hon. members would be quite ready to expedite the passage of such a bill.
The greatest anxiety that we feel as a group is that a precedent might be set, as I pointed out the other day, under which there will be a tendency to weaken provincial autonomy and consequently undermine the sanctity of the British North America Act. That was our whole reason in introducing the amendment last night. If the change had been made in the title of the bill which was envisaged by the hon. member for Peace River (Mr. Low) in his amendment, then there would have been written into the bill a specific guarantee of the sanctity of the British North America Act and we would have had no further objection whatsoever.
It has to be borne in mind, Mr. Speaker, that while we are dealing with provinces which are not populous at the present time, which number their populations in, say, 1J million, provinces such as Alberta and British Columbia, we are dealing with infants just beginning to grow into giants. Those provinces in 50 years time may have
6424	HOUSE OF
Federal-Provincial Financial Arrangements populations of 10 million and 15 million each. Now, measures we take in this house could easily abrogate the constitutional guarantees Of freedom of action which those provinces in those days with their great populations would need in the most urgent way. Therefore, in every move we make today we are building for the future.
I know there is a great deal of pressure at the present time to centralize control everywhere, as I pointed out when I spoke on a previous occasion. But that pressure to centralize is Marxism; it is communist, pure and simple, and it is being made by the agents of communism, the originators of communism, whom I characterized the other day as Turko-Mongolian reds descendants of Esau.
There will be those who say, "I do not understand". Well, there was a time when I could not understand, but I understand now. They are not the kind of people our forefathers were. Our forefathers, as early as we can find a record of them at all, insisted on local self-government and they met in their villages and elsewhere and decided what they would do and in large measure they governed themselves in their villages. Going back to constitutional history in Great Britain, you will And that everywhere written.
Our concept is just exactly diametrically opposite to the Marxist concept. Marxists are working for the centralization of power in the world so their people who now constitute only a very few millions of the world's total population shall be able to dictate absolutely the conditions of life for all the billions of people in the world. That is the object of centralization.
I indicated the other day that Major C. H. Douglas said that the British North America Act and the constitution of Australia are the two most perfect constitutions in the world. Perfect for what? Marxism? No. Communism? No. Turko-Mongolian reds? Oh no, it is just poison to all of them; but for British people, Anglo-Saxon-Celts, it is a perfect constitution and we want to keep it so. It is our anxiety in this group, lest something be done here in this bill by this house which might endanger those of the future, that has led us to take the position we have taken and to move this amendment.
I hope it is perfectly clear there is no desire to kill the bill or to kill the principle.


An hon. Member:: May I ask a question?


John Horne Blackmore: All right just a minute. I shall be glad to have your questions but let us have them in order, please, so the question


will appear on Hansard just as it was asked, and my answer will be recorded in exactly the way it was spoken. That is the only way in which the record will be worth while. If anyone wants to ask a question let him indicate his desire and I will answer it. The matter we are discussing today is too important to appear as a garbled report such as the Hansard people, capable and efficient as they are, can only produce if they cannot hear the questions that are asked and the answers which I give.
Now let me proceed to point out once more that we are not opposed to the principle of sharing taxation at all but we are opposed to the principle of weakening in any way the British North America Act.
When I was speaking the other day I pointed out that beyond a shadow of a doubt in my opinion the establishment of the Bank of Canada was accomplished by these very people who were seeking to centralize power and to put in Canada an agency through which they could control the destiny of Canada from London, for example, or from Basel, Switzerland, a thing which is not necessary at all.
We can control our own money here in this country and we want to keep that control right where it is.
I have said that we approve of the idea of sharing taxation.
I want to speak directly to Ontario for a few minutes, if I might. We have nothing but sympathy for the people of Ontario and for the province of Ontario and its needs for revenue. We fully realize that as industrial development has taken place in Ontario the burdens of government have increased, and inevitably so, if for no other reason than because the water supply which is used by industry has to be guaranteed by the provinces and the water has to be cleansed after industry is finished with it. All of these things constitute a burden on Ontario, as the hon. member for Peace River (Mr. Low) pointed out when he was speaking, and there are many other ways in which he indicated that the burdens of the provinces of Ontario and Quebec, our great industrial provinces, are greatly enhanced by the development of industry.
In case a depression comes along, what will be the position of the provinces in which there is a great labour population to become unemployed? It is immediately obvious that those industrial provinces, if they have wise governments, are going to be taking precautions to provide for situations of that sort. Because of all these things, I speak with great sympathy for the people of Ontario and Quebec, the highly industrialized provinces

of this nation. I am thankful they are where they are. I rejoice in them; they are a blessing to Canada.
One of the main things we have in mind in Alberta however, is that we realize in the case of a big company manufacturing agricultural implements or automobiles for instance, much of the profit of the company is made out in Alberta, Saskatchewan or Manitoba. We ask, is there any reason why that portion of the money which is made in Alberta, Saskatchewan or Manitoba should not be drawn off by a wise taxation policy in Ottawa and returned to us in those provinces where the money was made? We see no reason why that should not be done. Beyond that, there certainly must be great caution not to draw away from Ontario or Quebec the means of supporting the conditions which must obtain in those provinces.
I wish now to say a word or two about the four maritime provinces. One reason we do not trust this government in the main, and the whole set-up today, is simply that they are making no provisions whatsoever for permanently establishing the four maritime provinces in such a way that they can get along by themselves.
It is not good for a province to be on relief. The people in the maritime provinces do not want to be on relief. The people there are as fine as any people in the Dominion of Canada and probably there are no finer people in the British commonwealth. They are capable, independent, proud and self-sustaining. It is a source of the utmost mortification to them to have to come to Ottawa for more and more handouts, more and more subsidies and subventions and all that sort of thing. It is repulsive to them. The people in the maritime provinces ought to be put in a position where that kind of thing is not necessary. Up to the present time there has not been one single move made on the part of any Liberal administration since 1935 to enable those provinces to support themselves.
I appreciate all that was said by the hon. member for Charlotte (Mr. Stuart) the other day. I rejoice that assistance has been sent down to those provinces, but let us see what it was that happened to those provinces when they came into confederation-New Brunswick, Nova Scotia and later Prince Edward Island.
In the first place they lost control of their financial affairs. Very, very soon the ownership of the banks in New Brunswick and Nova Scotia passed into the hands of companies whose head offices were located in Toronto or Montreal. This meant that the policy of those banks in those provinces was
Federal-Provincial Financial Arrangements no longer subject to the control of the provinces of New Brunswick and Nova Scotia. That was one of the most serious things that occurred to them, just as it was with us out in Alberta. In Alberta in 1935, when the Social Credit government took over, do you know what we were paying for loans from banks? Eight per cent. The member for Peace River points out that even though the statutory rate was 7 per cent, those banks were charging 8 per cent. That 8 per cent was increasing the difficulty of the producers of every single commodity in the province of Alberta. It was a burden imposed upon us which we had no way under the sun of alleviating or removing.
Our railroad freight rates were imposed upon us. There is not a thing we can do about it except complain, and I should not be surprised if the day comes when we will tell the two central governments, "Keep your railways at home; we shall build our own, because we are simply not going to be saddled with the increasing freight rates which render it impossible for us to live." Once you get the people determined, they will get somewhere. We were, I repeat, under a set of freight rates which bled us white, both when the freight was coming out to us and when it was going back from us.
The same kind of condition exists in the maritimes, and there is nothing they can do about it. If they fail in a business way, we blame them, when as a matter of fact we ought to blame the policy of the government which allows the railways to prey on them as they do.
The maritimes moreover lost the power to determine what goods they were going to admit. Raw materials which they had been accustomed to getting from the United States and elsewhere they were prevented from bringing in, because the central government imposed a tariff against those goods. No matter how much those provinces needed those goods, they had to pay that tariff. The result was that many industries in the maritimes, I understand, were put in the position where they simply had to die. We cannot enable the maritimes to run their own affairs until we overcome that difficulty.
Furthermore, there were customary markets for which they had arranged with various other countries. Those markets were closed in large measure because of tariff policies and fiscal policies here in Ottawa.
What can we do to make up to the maritime provinces for these disadvantages that have been imposed upon them by being in the Canadian union? People will say, "I do not know what to do." "I do not know what to do" is just not good enough! It lies in the
6426	HOUSE OF
Federal-Provincial Financial Arrangements power of the government here-the Department of Finance-to devise means whereby those disadvantages can be made up and whereby those provinces can produce their own goods and consume them.
Why should the people in the four maritime provinces have to pay the cost of a 1,000-mile haul in order to get goods from Ontario and Quebec and have that cost added to every single thing they buy? There is something seriously wrong there. They used to manufacture their own. I do not wish to go into too much detail regarding that matter but I should like to commend the member for Saint John-Albert (Mr. Bell) for the very fine speech he gave the other day, and several other of the maritime members who have given speeches demanding a fair deal for the maritimes. All honour to these boys. There have to be scores of boys like them coming here from the maritimes and fighting until some intelligence manages to seep into the minds of the people in Ottawa.


Mr. Philpott:: You will notice that he did not vote against the bill.


Donald Methuen Fleming: He explained the reason for that afterwards.


John Horne Blackmore: Just a silly cheapskate interjection, altogether unworthy of the member who made it. The important thing is that this man stood for some consideration for the maritimes.
The Social Crediters maintain that by a wise use of the financial instruments at the disposal of the Dominion of Canada it is possible for us to set up in the maritime provinces a banking system of their own and a financial system of their own under which they can get loans at a cost such as we in Alberta, after setting up the treasury branch system, were able to get for 5 per cent instead of 8. All we in Ottawa need is to have the will to do it.
Would Ontario and Quebec members rather do that and enable the maritimes to carry on themselves, or would they rather commit their successors or their children and the generations coming after them to a perpetual burden of sending subsidies to those people to enable them to keep themselves? Which would you rather do? Certainly common sense indicates that you would rather give them a financial system of their own under which they can operate effectively.
Similarly with the fiscal policy and trade policy, it is possible for the financial authorities here in Ottawa to enable the people in the maritime provinces to use what the Social Crediters call a compensated discount on the price of their goods, bringing the prices down so low that it will be impossible


for goods from the United States or from Ontario or Quebec to compete with those goods, and thereby bringing the markets in the maritimes to the maritimes, which is exactly one of the fundamental rights of the people. People may say, "I cannot see how that is going to be done." The mere fact that the people now governing in Ottawa cannot see how it can be done indicates that they are unqualified for the positions they fill, because obviously it ought to be possible to render the maritimes capable of that.
I was in New Brunswick recently for some two weeks. I went all over that glorious province and kept my eyes and ears open. I was delighted with the perfect garden of Eden there was down there in New Brunswick. I was delighted over the fine soil there was and I was amazed, and still am somewhat confounded to think about it, that I drove along miles and miles of good New Brunswick roads and saw pastures, which would support the finest kind of cattle and the finest kind of animals and farming operations, raising what they call "cow pasture spruce" there. The mere fact that there exists in that province a set of circumstances under which the people cannot use their resources for the benefit of themselves, indicates that something is dreadfully wrong. The people did not know what it was that was wrong. They had ideas. I do not know whether the government that has just been elected down there knows; perhaps it does. If I talked with a Conservative down there, he said that this cow pasture spruce was growing there because of Liberal mismanagement. If I talked to a Liberal, he said he would explain it so that I would understand. But neither of them got around to doing that job so as to make the matter clear to me.
For this government right here, that situation poses a problem which is inescapable; if they are going to be worthy of the support of the Canadian people, something should be done. They told me in New Brunswick that they were shipping in milk in certain parts and shipping in cheese and butter, right in the presence of the finest pastures a man could put his eyes on. There is something seriously wrong there.
As I said a few minutes ago, I do not intend to go into too much detail except to say that there has been no indication on the part of the government at the present time in Ottawa that they even sense what is wrong down there or that they have any disposition to make it right fundamentally. It is one thing to give a person medicine to relieve pain from which he is suffering; it is another thing to cure the disease which is injuring him. It is the cure for the disease that is

injuring the maritime provinces that we must seek out and apply. That in large measure is a matter of finance.
Federal-Provincial Financial Arrangements completely erroneous statement of the Minister of Finance which he has left on the record without correction.
I think I have said enough to show that we are perfectly justified in moving this amendment on third reading of the bill. It is high time that the people of the country realized that something is radically wrong and ought to be made right before we go forward with a bill of this sort.


Mr. Speaker:: Is the house ready for the question?


Mr. Gordon Churchill (Winnipeg South Centre):: Mr. Speaker, there is one point I should like to raise at this stage and it comes about from remarks made by the Minister of Finance (Mr. Harris) last night. In the course of our discussion the Minister of Finance placed on the record a statement which he did not subsequently withdraw. As found at page 6402 of Hansard he said:
I have been listening all day to hon. gentlemen opposite, and particularly those of the Conservative party, and I have assumed that that question would be asked because every one of them has urged upon me an increase in federal taxes to take care of the provinces to a greater extent.
It was pointed out to him immediately that no one had asked for any such increase in taxes. He then shifted his ground and said that he would presume that we were speaking about the surplus. But in the middle of that half-hearted explanation he went on to say:
In any event let me point out that I am delighted to note this change in viewpoint . . .
I think there would be a much more satisfactory conclusion to this debate if the Minister of Finance had withdrawn that completely erroneous statement that we were asking for an increase in taxes to take care of the position we have been pointing out all along affecting the provinces and the municipalities. We have been suggesting a better division of the revenue derived by the dominion government and a better consideration of the plight in which the municipalities and the provinces have been placed and from the total revenue collected we suggest that a better sharing might result, but we have never at any time suggested that to meet the demands or obligations of the municipalities and the provinces a tax increase was necessary at this time.
In fact, we have pointed out year after year that there has been a great deal of waste and extravagance on the part of the government and the surpluses that have been piled up from time to time might better be used to assist those areas of our country that are in difficulty. Consequently I wish to draw to the attention of the house this


Mr. Speaker:: I declare the amendment lost. Shall the main motion carry?


Mr. Lennard:: One o'clock.
At one o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at 2.30 p.m.
Mr. Speaker:: Is the house ready for the question? Shall the main motion carry?


Donald Methuen Fleming: On division.
Motion agreed to on division and bill read the third time and passed.

The house in committee of supply, Mr. Robinson (Simcoe East) in the chair.
interim: supply


Walter Edward Harris: That a sum not exceeding $264,409,639.92 being one-twelfth of the total of the amounts of the items set forth in the main estimates for the fiscal year ending March 31, 1957, laid before the House of Commons at the present session of parliament; and a sum not exceeding $12,168,792.75 being one-twelfth of the total of the amounts of items set forth in the supplementary estimates for the fiscal year ending March 31, 1957, be granted to Her Majesty on account of the fiscal year ending March 31, 1957.
He said: This resolution, Mr. Chairman, asks for a grant of supply of one-twelfth of the amount of the main and supplementary estimates and in that connection I repeat assurances and undertakings I have given on similar occasions during this session.


Stanley Howard Knowles: Before this resolution carries, Mr. Chairman, there is one matter upon which I should like to say a few words. It concerns both the Department of Transport and the Department of Labour. I did indicate to each of the ministers concerned, prior to eleven o'clock this morning, that I would be raising this matter. I note that the Minister of Transport is present and I hope the Minister of Labour will arrive within a minute or two. The question relates to the subject about which I queried the Minister of Transport yesterday. As I have already indicated, it seems to me that it is of concern both to him and to the Minister of Labour. That is one reason for my raising it at this time, when one can talk to two ministers at the same time. My other reason for raising this matter now is that in at least one of the instances of the grievance to which I shall refer something could be done about it if action were taken now because it relates to something that is scheduled to come into effect in a few weeks.
I refer to the fact that the Canadian National Railways seems to be following, far more often it seems to me than is good for labour relations, the practice of letting some of its work out by contract and as a result by-passing certain collective agreements. As hon. members will recall, a number of us complained about this practice last year and the year before with respect to contracts to the R. F. Welch company which had the effect of by-passing collective agreements between the Canadian National Railways and the brotherhood of maintenance of way employees. I understand that matter has been cleared up, in fact that it was cleared up earlier this year. I took the opportunity to indicate to the Minister of Transport that I was pleased that that had been done. It so happened that shortly after I learned that the matter had been cleared up I happened to see Mr. Donald Gordon in another connection and I indicated to him that those of us who had complained about the matter were pleased to know that the union was again being recognized so far as that kind of work was concerned.
However, I am now informed that there are a number of instances in which the Canadian National Railways is doing this same thing. I learned, for example, that at Midland, Ontario, just a few days ago nine carmen's helpers, whose work was covered by a collective agreement between the Canadian brotherhood of railway employees and other transport workers and the Canadian National Railways, lost their jobs because the Canadian National Railways let that work out by contract to a private firm. I understand that similar action has been taken at

Sarnia, Ontario. In both of those cases the work was of the nature of cleaning freight cars, installing car doors and so on. I understand that at Sarnia the rate of pay under the collective agreement was $1.23 and a fraction per hour, but that the employees who enjoyed that wage under a collective agreement are getting only $1 an hour from the private firm to which this work has been let out by contract.
I am told that at the new express building built recently in Toronto the cleaning work has been contracted out at rates below those provided for in collective agreements covering such work. I have other instances before me of various places in Ontario and Quebec where this has been done, and it does seem to me, Mr. Chairman, that the railway is doing in this instance precisely what was done previously with respect to the brotherhood of maintenance of way employees. I would hope that the railway, which apparently came to its senses in that other instance, will realize that this is a practice which is highly injurious to labour-management relations and should be brought to a halt right away.
Yesterday, in my question to the Minister of Transport, I asked him also if he would look into the situation that is developing in connection with the restaurant in the union station at Toronto. This is a place with which most of us probably are quite familiar. I would point out that for many years that restaurant has been operated by the Toronto Terminals Railway Company. According to my information, the Toronto Terminals Railway Company is incorporated under Canadian law and is owned jointly by the Canadian National Railways and the Canadian Pacific Railway Company. I find that amongst the directors of the Toronto Terminals Railway Company are such persons as Donald Gordon, N. R. Crump and others from the two railways. I find also that the officers include Donald Gordon, W. A. Mather, R. H. Tarr, and others connected with the two railways. In other words, it is quite clear that the Toronto Terminals Railway Company is a wholly owned subsidiary of the Canadian National and the Canadian Pacific, which is owned by them for the purpose of operating the union station and providing the services at that union station.
However, the employees in the restaurant at the union station in Toronto, whose working conditions have thus far been governed by a collective agreement between the Canadian brotherhood of railway employees and other transport workers and the Toronto Terminals Railway Company, have been notified that their employment will terminate
Interim Supply
on August 31. As a matter of fact, on June 20 the employees of the company working in the restaurant at the union station, Toronto, received this communication which I should like to read:
I am directed to inform you that as from September 1, 1956, the restaurants and news stands in the union station will no longer be operated by this company.
The communication was from the Toronto Terminals Railway Company. I continue:
In the circumstances, I am required to give you notice that your employment with the Toronto Terminals Railway Company will terminate not later than the close of business on August 31, 1956.
It is regretted that at the present time there is no other work with the company which can be offered to you. If you wish it, however, your name will be listed as an applicant for such further suitable employment as might become available.
My information is that waitresses working at the union station iri Toronto are receiving $1 an hour at the present time under a collective agreement between their union and the company. Those waitresses have been told that their jobs end on August 31 because of the contract that is being let. Those same waitresses, so I am informed, have been offered their old jobs back under the new management after August 31 at 60 cents an hour. This is the direct result of this policy of letting work out at contract, namely, that these employees will take a reduction from $1 to 60 cents an hour. Likewise, I am told that short-order cooks working there are receiving $1.37 an hour under the collective agreement, but they have been offered 70 cents an hour by the company that is to take over that work.
Now, the Minister of Transport indicated yesterday, when I asked him a question on the orders of the day, that the Toronto Terminals Railway Company is not a railway coming under the jurisdiction of the Department of Transport; but I point out, Mr. Chairman, that it is a company owned by the two major railways in this country, and I point out also that the labour relations of that company are under federal jurisdiction and that the contract referred to which provides the wages I have indicated is a contract under the provisions of the federal Industrial Relations and Disputes Investigation Act.
It seems to me, Mr. Chairman, that this is a pattern that is a serious one and that every effort should be made to prevent it being continued. Certainly, it is inimical to good labour-management relations to have a company like the Canadian National Railways, or any of its subsidiaries, entering into collective agreements with trade unions and then

Interim Supply
undercutting, by-passing, nullifying those contracts by letting work out, as seems to be done in these cases.
As a matter of fact, I have in my hand a copy of an ILO news service release, which is dated April 16, 1956, press release 56/23, having to do with contract labour. This happens to relate to contract labour in the petroleum industry, but I draw attention to the fact that this news release points out that the international labour organization looks with disfavour on letting out work by contract and, as a result, getting around collective agreements. This news release calls for action by government to prevent employers getting around the rights of the union by letting out work on a contract basis. The document also indicates conditions that make possible sound relations and emphasizes the fact that collective agreements should be recognized and their spirit should not be broken, as is being done in this case.
I would point out that this release to which I have referred, while put out by the ILO news service, indicates that 15 countries took part in the session that discussed this matter. Remember that government, labour and management are all represented in the ILO. One of the 15 countries which took part in this discussion was Canada. I am sure that the Minister of Transport and the Minister of Labour agree with me that collective agreements should not be by-passed in this way, and toward that end I hope that either one or both of these ministers, the Minister of Transport and the Minister of Labour, will get in touch with the management of the Canadian National Railways and, if necessary, with the management of the Toronto Terminals Railway Company and see to it that as the matter was corrected, at least so I am informed, in the case of the brotherhood of maintenance of way employees, it will also be corrected in this case and that this practice will not be further extended.


Mr. Marler:: Mr. Chairman, I would like to take one or two minutes to reply to the observations of the hon. member for Winnipeg North Centre. He was kind enough this morning privately to supplement the information which was contained in his question yesterday. Before I come to it I would like to say this with regard to the question he asked yesterday, which was as to whether I was aware that the Canadian National Railways is again letting out to private contractors some of its work normally covered by union agreements, and would I look into this practice of by-passing collective agreements. I want to say that I immediately communicated with the management of the railway and, on the information that I was able to

give them by reading the question, they were quite unable to identify the situation to which the hon. member had referred yesterday. This morning the hon. member was good enough to mention specifically these cases which do not fall within the scope of the Welch contract to which he has referred and as to which there has been discussion in the select committee on railways and shipping owned and operated by the government.
I would like to tell the members of the committee, Mr. Chairman, that so far as the examples he has just mentioned are concerned, my consultation with the railway management has been very hasty in view of the short time that has been available, but with regard to the situation at Sarnia I would like to point out that the contract to which the hon. member for Winnipeg North Centre referred was entered into in May, 1955, not May of this year, and it was a contract entered into with an outside firm for the cleaning of the interior of box cars. There were six labourers and two helpers formerly employed by the railway who were affected by this change. In the case of Midland, the contract was entered into quite recently and, as the hon. member for Winnipeg North Centre said, it is of a similar character. This affected some 17 railway employees, consisting of 7 car helpers and 10 labourers. One of the seven car helpers had seniority rights from 1947 and another from 1952. These two have been placed in other railway employment. The others were new employees of the railway. I have not been able to get information about the situation in Limoilou, Quebec, but I take it the situation is somewhat similar there to that which exists at Sarnia and Midland. The management have taken some trouble in their communications with me to stress the fact that no complaints whatever have been received from the unions with regard to the arrangements at these points. I think, however, it has always been understood, though I have not read the collective labour agreement between the railway and its employees, that the company reserves the right to have work done on contract when it is demonstrated that this method is more efficient and less costly. Apparently, substantial economies have been effected at Sarnia over the past year. And, Mr. Chairman, I find it difficult, having regard to the obligations which rest upon the railway, to believe that it would be proper for me to intervene and to try to exert pressure on the management to do something that in their judgment ought not to be done. It seems to me we can only obtain the best management and operation of the Canadian National Railway system when management remains free to run the system to the best

advantage so as to procure the best results for the employees and for the public whom they intend to serve. I do not think it is in the interests, either of the employees or of the public, and therefore of the system itself, that they should be restricted to following the same pattern that they have always followed or that they should not be free, when the economics make it more desirable, to do by contract work that perhaps formerly was done by individual employees.
The hon. member referred to the situation in the station restaurant in Toronto. My recollection of the circumstances is the railway company decided that instead of running the restaurant themselves it would be run by a contractor, someone who tendered for the concession. I think the changes of employment are due exactly to the change in that operation.
I hope the hon. member for Winnipeg North Centre is not seeking to imply that the company should do everything in connection with the system itself and that under no circumstances should outside firms be asked to do by contract such operations as running restaurants and newsstands and so on. I do not think that is the hon. member's intention but I think the management should remain free to do what it considers to be good management of the system property.
There is just one final comment I would like to make. I do not know whether it was the intention of the hon. member to do so but there was an implication that the Canadian National Railways was trying to get around or by-pass the collective labour agreements. I do not believe the circumstances would justify that assertion. My experience with the management of the railway is that when it makes a contract it respects it faithfully and I am sure that is what has been done in this case.


Stanley Howard Knowles: Mr. Chairman, I thank the minister for the interest he has taken in this matter as indicated by the fact that he has been in touch with the management of the Canadian National Railways. There are just one or two comments I would like to make.
I am sorry that the Minister of Labour was not able to be here when I made my earlier remarks but I am glad he is in the house now and perhaps he has been informed as to what I had to say.
It seems to me, Mr. Chairman, that the Minister of Labour cannot be unconcerned about the fact that the result of the changes we have been discussing has been that a large number of employees will receive a lower wage than they were getting before. I do not think the Minister of Labour can take without concern the suggestion of the
Interim Supply
Minister of Transport that the management of the Canadian National Railways should be left free to make its own arrangements and that the government should not intervene when the result is that certain people who were formerly making $1.37 an hour are reduced to 70 cents and others formerly making $1 an hour are reduced to 60 cents. The Minister of Labour must be concerned about good labour management relations but certainly this practice hardly comes under that category.
I feel, too, that the Minister of Transport should also be concerned about this matter from the standpoint of the efficient operation of the railway. The minister seems to think if the railway runs its operations more economically than under a previous arrangement that that is good management, but I suggest, Mr. Chairman, that if the employees of the railway get the fear that this kind of thing is going to be extended, if the dining car employees become afraid that what can be done to the restaurant employees in Toronto can also be done on the dining cars, it is not going to help much so far as the morale of the employees is concerned and it will affect the running of the railway.
Surely a very integral part of the operation of the railway, in addition to the balance sheets of receipts and expenditures, is the question of the morale of the employees. I strongly urge that this kind of thing is not good for the morale either of the employees whom it directly affects or those who are afraid they might be next on the list.
It has been suggested by the Minister of Transport that he should not be asked to intervene in connection with this matter. I feel very strongly that both he and the Minister of Labour should look into this matter and should make it clear to the C.N.R. that employee conditions are an integral and important part of the operation of the Canadian National Railways.


Milton Fowler Gregg: Mr. Chairman, I regret that owing to another meeting I was not in the house when this discussion began but I think I know the gist of the discussion.
I can tell my hon. friend that as Minister of Labour I have not had direct representation from the employees with regard to the matter under discussion this afternoon. Not since the two parties agreed to work out their general agreements on the basis of conciliation board reports have I had any formal representations from the unions or the employees, and consequently I am not in a position to make any statement as to what should or should not be done concerning the matter in hand.

Interim Supply


Stanley Howard Knowles: Perhaps I might just point out to the minister, Mr. Chairman, that I stated in the first part of my remarks that I understood that the difficulty that existed so far as the Welch contract was concerned had been cleared up. What I was referring to this afternoon was another instance or several other instances so far as another union was concerned, namely the Canadian brotherhood of railway employees and other transport workers. I am sure that as the minister interested himself when representations were made by the other union, if representations come from this union he will give the matter his attention.


[Stage Direction]
Motion agreed to.	[DOT]
Resolution reported and concurred in.


Walter Edward Harris: that the house go into committee of ways and means.
Motion agreed to and the house went into committee, Mr. Robinson (Simcoe East) in the chair.


Walter Edward Harris: Resolved, that towards making good the supply granted to Her Majesty on account of certain expenses of the public service for the fiscal year ending March 31, 1957, the following sums be granted out of the consolidated revenue fund of Canada, namely:
1.	The sum of $264,409,639.92, being one-twelfth of the total of the amounts of the items set forth in the main estimates for the fiscal year ending March 31, 1957; and
2.	The sum of $12,168,792.75, being one-twelfth of the supplementary estimates for the fiscal year ending March 31, 1957;
as set forth in the resolution concurred in this day in the committee of supply.


[Stage Direction]
Motion agreed to.
Resolution reported and concurred in.
Mr. Harris thereupon moved for leave to introduce Bill No. 444, for granting to Her Majesty certain sums of money for the public service of the financial year ending the 31st March, 1957.
Motion agreed to and bill read the first time.
Mr. Deputy Speaker:: When shall the bill be read the second time? Now?


Stanley Howard Knowles: By leave.


Walter Edward Harris: the second reading of the bill.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Robinson (Simcoe East) in the chair.
IMr. Gregg.]
Clauses 1 to 4 inclusive agreed to.
Preamble agreed to.
Title agreed to.
Bill reported.
Mr. Deputy Speaker:: When shall the bill be read the third time? Now?


Stanley Howard Knowles: By leave.


Walter Edward Harris: the third reading of the bill.
Motion agreed to and bill read the third time and passed.

The house in committee of supply, Mr. Robinson (Simcoe East) in the chair.


[Stage Direction]
85. Departmental administration and payments to Canadian Commercial Corporation and other corporate agencies for services provided in connection with defence purchasing and production, $6,145,727.
Mr. Monleith:: On Friday, June 29, the
minister made some remarks, as recorded on page 5520 of Hansard, concerning a gun contract with Sorel Industries Limited of Sorel, Quebec. I should like to read a few paragraphs of the remarks he made at that time in this connection, beginning at the third line on page 5520:
In this connection, I should like to refer briefly to the contracts for the three-inch 50 calibre antiaircraft guns to which reference was made in the report of the Auditor General for the last fiscal year. These contracts were carried out by Sorel Industries Limited in its gun plant at Sorel, Quebec, on behalf of the United States and Canadian governments, and the difference of some $112,000 each in the cost to the two governments provides a good example of the heavy expense of re-establishing a facility to do this type of work.
Apart from minor extras for special equipment required by the Canadian navy, the difference in price was accounted for mainly by three items of expenditure which were considered to apply to Canadian account only, inasmuch as they related to the re-establishment of Canada's only facility for the production of heavy guns urgently required by the armed services at the outbreak of the Korean war. These were plant and staff house rehabilitation expenses totalling some $908,000, or $19,900 per gun; plant maintenance costs, covering partial compensation for the expense of retaining this highly specialized gun facility (which had little or no economic commercial use) during the period from 1945 to 1950, amounting to $35,074 per mount; and the pre-production and learning expenses amounting to $33,158 per gun. These figures represent general overhead costs of the first year's operations which could not properly be absorbed in the relatively small volume of production during that period, bearing in mind that the plant had to be re-activated and staffed from a virtual shutdown condition.
I should like to say a few words about these three items of expenditure to which

the minister referred. He had mentioned one, the staff house rehabilitation expenses, amounting to some $908,000. In the other two items he mentioned he gave figures as costs per gun. I should like to summarize those as the actual amount of dollars spent. The three items are: for pre-production and learning, $1,338,436; the cost of plant and staff house rehabilitation, $908,453; and portion of settlement with contractor to compensate for maintaining this highly specialized facility, $1,525,428. That comes to a total amount of $3,772,317.
I should like to refer to another item in connection with this contract. The actual profit, which was based on the 7 per cent figure, on the United States guns was $16,295 per mount and with 180 guns that amounts to $2,933,100. The Canadian profit per gun, owing to extra parts and so on, and as a consequence of the 7 per cent figure being somewhat higher, was $18,259. There were 46 guns under this contract, and that comes to a total of $839,914. Adding those two profit figures together, we come to a total, on the 7 per cent profit basis, of $3,773,014.
I should like to refer back for a minute to these three items which the minister mentioned as being peculiar to the Canadian guns. That figure is $3,772,317. It may be only coincidence, but it looks as though they are very similar amounts, and in the calculation here one would almost suspect that the contract might well have been considered on a 14 per cent basis, then cutting out half of it to put against the Canadian guns and splitting the other on a 7 per cent basis.
I mentioned these three items and I should like to say a few words about the third item particularly, the portion of settlement with the contractor to compensate for maintaining this highly specialized facility. That amounts to $1,525,428. Possibly we should go back and review briefly the history of plant as it existed at that moment.
In 1945 Sorel Industries Limited was relieved of any further armament orders relating to the second world war. The company was advised not to keep open in anticipation of further government orders for guns. Then came 1950 and Korea. Negotiations between the Department of Defence Production and Sorel Industries were reopened. Actual figures were agreed upon in March 1955, and a 7 per cent profit figure, which totalled $3,773,014, was determined, and also the total for these three items of $3,772,317.
Between 1945 and 1950, I should say, Sorel Industries operated as any other commercial
Supply-Defence Production corporation doing peacetime business without any hopes of further armament orders. They had been led not to expect any more.
I should like to review briefly the wording of this third portion of the expenditure of $3,772,317. The portion of settlement with the contractor to compensate for maintaining this highly specialized facility cannot mean to me anything other than compensation for loss of profits in the period 1945 to 1950. This sum of $1,525,428 was on this one contract only. The total amount paid to Sorel Industries Limited under this pretext was based on $80,000 per month for three years and came to a grand total of $2,880,000.
I feel that the company was paid sufficient mark-up on their contracts when they received a 7 per cent profit plus pre-production and learning expenses of $1,338,000-odd and the cost of plant and staff house rehabilitation amounting to $908,453. I cannot understand why they should be reimbursed for losses during the period from 1945 to 1950 when they had been told that they would be entirely on their own and not to expect any further government contracts. I have never heard of a similar contract where such a clause was inserted to cover a period such as this when the company was on its own operating as a private commercial business, and to me, sir, it appears to be an unjustified handout to the company of $2,880,000 of public money.


William Alfred Robinson: Shall the resolution carry?


Donald Methuen Fleming: Has the minister nothing to say about the matter raised by the hon. member for Perth?


Clarence Decatur Howe: The matter was discussed in a committee of the house of which I think my hon. friend was a member and I cannot believe that there was any fact that was not placed before that committee. Sorel Industries have the only heavy gun plant that we have in the country. It was closed down in 1945. Very valuable machinery was available there and when it was quite obvious that we would require guns for the Korean crisis we of course were anxious to make an arrangement with Sorel that the machinery would be kept intact for that purpose.
The owners of Sorel Industries took the view that as they had a plant that had to be kept closed between wars and opened during war they were entitled to a profit based on that situation. We took the view that perhaps they had some claim not for any profit between wars but to recover some of the dead loss which must be incurred in keeping a plant like that idle and keeping the machinery up as must be done if we are going to have the machinery when it is needed.

Supply-Defence Production
A settlement was made on the basis that we took, I think, one-half the loss that had been incurred in keeping the plant closed and we told them that as regards any work they would do in war they would get the same rate of profit that any other contractor would get regardless of the fact that the plant is only called upon in wartime. That was a decision made after a good deal of consultation. My officers made the recommendation and after examination I concurred. I think it was a reasonable settlement of the cost of maintaining a highly specialized plant for a purpose that is essential in war but has no place in peacetime. If there is any mistake involved I will take full responsibility for it. If there is good judgment I think I am entitled to the credit.


Jay Waldo Monteith: There is one point I should like to stress. The plant had been told that in the period following the end of the 1945 hostilities there would be no further armament orders and as a consequence I would feel that they should be on their own responsibility entirely as to what happened in that peacetime period up until further contracts were going to be negotiated.


Clarence Decatur Howe: It is a privately owned plant and we did not agree to buy anything in 1945. We said that we did not expect any further call for heavy equipment and that as far as we were concerned they could close the plant. Nevertheless, as owners of a private plant that had to be used in the Korean emergency I think you will agree they were under no compulsion to make guns for us at 7.2 per cent or whatever the percentage was of the rate of profit. The arrangement was made to work out something that would be fair and so that we would not have to make any different profit arrangement for the use of that plant. After all, I am accused by the opposition of wielding a big stick on industry. In fact we negotiate fairly with industry and I think we did so in this case.


Jay Waldo Monteith: Following that one step
further, I have nothing to say about the minister's wielding a big stick but I do have this to say. The minister indicates that when these contracts were entered into in 1950 the company did not have to make these guns at a 7 per cent profit figure. If they had been losing money, as is indicated, for the previous five years I would think they would be most happy to take a contract at a 7 per cent profit figure. Their straight profit figure aside from rehabilitation expenses and so on was $3,773,000 on this one contract only and there were many subsequent contracts.


Clarence Decatur Howe: If my hon. friend had a plant worth $25 million by anyone's estimate and it was his plant and he could do what he liked with it I doubt very much if he would keep it idle for five years, stand the cost of maintaining a $25 million plant in idleness and then be willing to take a contract at 7-2 per cent. I think he would have said: "That highly specialized machinery is now valuable and I had better sell it and cash in on some of the value." After all, we must be practical about these things. This idea that somebody must be glad to do something depends on a little wider consideration than my hon. friend gives it.


Jay Waldo Monteith: I do not agree with that. I think I am as practical minded as the minister. In fact, I think in some ways I am probably more so.


Clarence Decatur Howe: In a small way.


Jay Waldo Monteith: I am more money conscious and I would query, as I am doing, this $2,880,000 which has been given to Sorel Industries and which appears to me to be a handout for loss of profits from 1945 to 1950 when they had been told to close up and expect no more government orders.


Mr. Zaplitny:: Perhaps it would help to clarify the matter to some extent if the minister would tell the committee whether this company received any capital assistance either before or after 1945 and, if so, in what amounts and on what terms.


Clarence Decatur Howe: They did obtain some capital assistance in 1951 for some specialized machinery required for the manufacture of the 3 inch 50 calibre gun. The capital assistance took the form of machinery that was purchased by the government, installed in the plant and remained the property of the government. It was no handout to the company. It was simply installing certain specialized machines there that were required to carry out the contract.


Frederick Samuel Zaplitny: Perhaps the minister could supplement his answer by giving us the figures as to the amount of capital assistance given and on what terms. He states that machinery was supplied and that it is still the property of the government. In the meantime the company has had the use of the machinery and it was instrumental in providing the profit to which my hon. friend refers. What consideration has the government received in return for supplying the machinery? Obviously if it has been used by the company since 1951 the government is certainly entitled to some consideration for having supplied the

machinery. I should like to know in what amount and on what terms this machinery was supplied.


Clarence Decatur Howe: Machinery to the value of about $6 [DOT] 5 million was installed. I may say that is in addition to about $20 million odd of machinery that was in the plant prior to that time.


Frederick Samuel Zaplitny: Was that all done in 1951?


Clarence Decatur Howe: 1951 and thereafter.


Frederick Samuel Zaplitny: The other part of my question was, on what basis was the $6-5 million of machinery supplied and on what terms? Was that simply a form of subsidy on the part of the government to the company or was there some consideration so far as the government is concerned? Is the company under any obligation so far as the $6-5 million is concerned or can that be considered a subsidy to that company?


Clarence Decatur Howe: No. It is not
a subsidy at all. The government bought that machinery and it was installed in the plant. It is the property of the federal government. Whether any of it has been taken out as yet, I cannot say; but it will be taken out and probably installed in the arsenal at some time or other when we decide that we are not likely to need this machinery any more at Sorel. It is painted a different colour than the other machinery. It is listed in the government inventory and it belongs to the government.


Frederick Samuel Zaplitny: On the basis of that answer, there seems to be something still missing. The company has had the use of this machinery now for five years. It was installed in 1951.


Clarence Decatur Howe: Exclusively on government work.


Frederick Samuel Zaplitny: Yes.


Clarence Decatur Howe: The company is not allowed to use it on any private work.


Frederick Samuel Zaplitny: That is understood; but on government work for which they were paid a profit of approximately 17-2 per -cent. On the basis of ordinary depreciation, if the government were to claim that machinery now, it would be worth approximately $2 million. What does the government get out of the companies having the use of their machinery for five years? Do they get no consideration at all? It is not enough to say that they were working on government contracts. They were working on contracts for which they were paid a profit, and I would say it was a very adequate profit at that. Does that mean that
Supply-Defence Production the government puts this machinery into a privately owned plant for five years where it depreciates, or is used for that period? The fact that the government owns it at the end of the five years does not mean much, because it will be practically worthless as time goes on. Does that mean that the amount of depreciation on that machinery over a five year period is a direct subsidy to the company? I can see it from no other point of view.


Clarence Decatur Howe: Considering the fact that all the work being done was work for which the department was paying, it was rather a subsidy to the government. It would have been an additional cost had the machinery been installed by the company. The depreciation would have been paid that way and the contractor's profit would have been that much greater. At least the depreciation allowance would have entered into the calculation of profits, as depreciation is an item we must allow as a cost. We followed the usual practice in work of this kind. The United States government are quite happy about the arrangements which were made there. They paid, of course, for most of the work in Sorel. They had the larger part of the production. The arrangement was one that seemed to them to be a reasonable arrangement, and, as far as I know, no one is complaining except my hon. friend. It seems to me that when this is threshed out in the committee and the evidence is given there-I was not present but everyone else was-if committees are going to be used to collect evidence to use against the minister in the house, I do not think committees serve a very useful purpose in this house.


John George Diefenbaker: I think that is why it would be useful. That is an argument for having the committees.


Donald Methuen Fleming: That would be an argument for having the committees.


Frederick Samuel Zaplitny: I think that is a most unfair statement and in my opinion a most unparliamentary one. Certainly if a committee is set up in order to obtain information, and if the information indicates that either the minister or the government used poor judgment in connection with these contracts, the members of that committee or any other member of the house should not feel at all backward about using the information.


Clarence Decatur Howe: If the committee comes to the conclusion that there is something wrong or that there has been waste, surely it is the duty of the committee to make a finding of that kind and report it to

Supply-Defence Production the house. Then we will all be on even terms. But for individual members of the committee to go in there to pick up special facts and information that I cannot get without a good deal of study, and throw bits of information at me and expect me to know the answers, is a procedure which I think is a little bit unreasonable if they are used for that purpose. Why did not the hon. member raise the point in the committee and ask the committee to make a finding in this case?


Jay Waldo Monteith: I should like to say that this information I had presented has come from the committee and it has come from the minister's deputy. We asked questions and we received answers. I am convinced that the information that I have presented is correct, as represented by those answers.


Clarence Decatur Howe: That may be so.
But if there was something wrong, why did my hon. friend not move that the committee find that there was waste of government funds and move that a report be presented to that effect? Did my hon. friend move that in committee?


Jay Waldo Monteith: I would suggest that the committee tell the chairman of the committee to call a meeting of the committee and report.


Douglas Scott Harkness: The minister seems to have a most peculiar idea of the functions of a committee. He seems to think it should be for the purpose of white-washing the minister and the government and that, if it does not do so, it has been a failure as a committee.


Clarence Decatur Howe: No; quite the reverse. If the committee finds that there is something wrong, it is the duty of the committee so to report to the house.


Douglas Scott Harkness: The committee so far has had no opportunity to report. We have not had a meeting since the meeting we had in connection with this gun contract, as a matter of fact.


Mr. Dickey:: There have been no requests for a meeting of the committee from you or from anybody else.


Douglas Scott Harkness: To come back to this same matter, the minister says that we must be practical about these things. I agree that we must be practical. But in this particular case it seems to me we have an example of being impractical and improvident as far as the government is concerned. It is a very peculiar situation, I think, when you have a plant which the government told Sorel Industries that they should turn over to some civilian use or not keep in operation as a gun plant in 1945. As a matter of fact,
(Mr. Howe (Port Arthur).]
that was the evidence we had in the committee. The evidence also was to the effect, or at least there was an intimation, that Sorel Industries attempted to put some sort of civilian enterprise into it but failed to do so. Then in 1950, when there just happens to be some opportunity to manufacture guns, the government then goes to this plant and agrees to pay it a total of $2,880,000 to cover the costs of that business or of that plant standing idle for several years. The thing is just a ridiculous situation. As far as I can see, the government or the taxpayer had no responsibility whatever to reimburse Sorel Industries for whatever loss they may have experienced through having that plant sitting there and maintaining it for five years. Undoubtedly Sorel Industries made plenty of profit out of the plant during the war to begin with. I do not know who built the plant. Probably the government advanced the money or a good part of it for the building of that plant to start with.


Clarence Decatur Howe: That is not true. The plant was built as a privately owned plant.


Douglas Scott Harkness: Yes, but did they not get capital assistance and so on?


Clarence Decatur Howe: Later on they did.


Douglas Scott Harkness: Yes.


Clarence Decatur Howe: But in the end
they bought from the government all the assets that the government had there and paid for them in cash.


Douglas Scott Harkness: In any event you have a plant there which had got capital assistance with respect to the building of it in the first instance; and they made sufficient profit out of what they manufactured in it during the war to pay for it. Then five years later the taxpayer of this country is called upon to pay $2,880,000 to this company because the plant has been sitting there for five years after they had been told not to keep it sitting there as far as expecting any future contracts is concerned. The thing is just a ridiculous situation. As I say, I think it is an extremely improvident deal as far as the Canadian taxpayer is concerned.
In addition to that, this company got assistance of $908,000 for the cost of rehabilitating shops and staff houses and it got an amount of $1,338,000 approximately for the cost of making ready to resume production after this long shut-down, including cost of recruiting this labour, training this labour and so on. Therefore, all told, that company is being paid in cash over $5 million in order to make these guns. Now they are in a position that they are making certain other guns, I believe they are 105 millimeter guns.

But over $5 million in cash was being paid. In addition to that, as was indicated by the answers given to the hon. member for Dawson, the government has a great deal of machinery, upwards of $2 million worth, in there which they are making use of. In other words, the company has had extremely large grants and assistance from the dominion government.
In addition to that, they are given seven per cent profit on what they produced in that time. As a result of this information that we were given, it is very easy to see why the Canadian naval guns which were secured from them cost $112,000 each more than did the guns which went to the United States. Naturally the United States government would not put up money for payments of that kind because it is so unreasonable. I imagine that the United States government would never agree to making a share of these payments aggregating all told, as I say, over $3,770,000 on this one particular contract, plus another $1,300,000 so far as future contracts are concerned, and at the same time making loans on machinery.
In addition to these particular payments to cover the cost of the plant sitting idle from 1940 to 1945, I should like to know something more about this business of the cost of rehabilitating the shops and staff houses, including considerable plant machinery. When we were considering this matter in committee I asked how much of that was for rehabilitating these staff houses. I was told it was something in excess of $200,000. I said at that time, and I will say again, that it seems to me there is absolutely no justification for the taxpayers' money being used to rehabilitate or repair certain staff houses which are used by employees hired by this company. Questions were asked as to how much rent they paid for these houses or whether they paid any rent for them. It developed that they were sort of single men's dwelling places more than anything else; in other words, something in the nature of barracks.
We find that what these people paid for these staff houses was as follows: In 1951- this is for room and board-they paid $16 per week; 1952, $17; 1953, $16; 1954, $18. In other words, this $200,000 was given as a further subsidy to this company which enabled them to house their employees at much less cost than would have been the case if they had had to compete with other people building housing at commercial rates. In connection with this housing, I should like to ask the minister who built those houses in the first place? When were they built and who paid for them? I should like to know, in other words, whether the government paid for those houses to begin with?
Supply-Defence Production


Mr. Cannon:: Before the minister answers I think I ought to set the record straight concerning some of the remarks the hon. member for Calgary North has just made. In my capacity as chairman of the public accounts committee I think I should point out to the house that when my hon. friend said he was surprised at the difference of $112,000 in the case of the United States guns-


Douglas Scott Harkness: I did not say I was surprised.


Charles-Arthur Dumoulin Cannon: You said you did not like it.


Douglas Scott Harkness: I do not like it, but I am not surprised.


Charles-Arthur Dumoulin Cannon: In any case, you certainly criticized it, and gave the impression that it had not been explained. I think the house should know that the difference in cost between these guns was analysed, was placed before the committee and was examined in detail by the committee. I think we are entitled to take it for granted that the committee was satisfied, because the draft report of the committee has been submitted to the steering committee of the public accounts committee, and has been approved by the steering committee of which the hon. member for Calgary North is a member; and the report does not blame the government in any way for any of the matters that were looked into and that came to light in connection with this contract for the guns.
It was also said that we have not had a meeting of the committee lately. As I said before, we had a meeting of the steering committee the day before yesterday and a meeting of the committtee is called for tomorrow to have the whole committee approve a report that has already been approved by the steering committee. I felt it was necessary to put these facts on the record.


Clarence Decatur Howe: Thank you, Mr. Chairman. I suspected that, but I did not know it.


Douglas Scott Harkness: In reply to that I should like to say that we asked to have this particular gun contract investigated by the public accounts committee not very long after the committee had started to sit, I think at about the second or third meeting, as the result of one of the paragraphs in the Auditor General's report. This was some months ago. Eventually, after a long delay during which there had not been any meetings of the public accounts committee and after I got in contact with the chairman of the committee, we finally had a meeting on July 5, at which we had evidence in connection with this particular contract. The presumption was, when we left that meeting,

Supply-Defence Production that we were going to have a further meeting, which has never been held. As a matter of fact-


John Horace Dickey: It was never asked for.


Douglas Scott Harkness: It was asked for at that time. We went away with the presumption we were going to have a further meeting. In any event, certain questions which were-


Charles-Arthur Dumoulin Cannon: Will the hon. member permit a question?


Douglas Scott Harkness: -asked have never been answered.


Charles-Arthur Dumoulin Cannon: Will you show me in the record of the committee where you asked for another meeting? You never did ask for another meeting. While I am putting the record straight, may I say that when you or any other member of the committee asked for a meeting it was always granted.


The Deputy Chairman:: Order. I am afraid that perhaps through my own fault we are getting this committee into a situation which should not be allowed. The subject which was brought up for discussion by the hon. member for Perth, of course, is a legitimate subject for discussion under defence production estimates. The Department of Defence Production estimates were not referred to a committee; therefore the fact that a discussion took place in the public accounts committee does not in any way prevent this committee now from discussing it.
The agenda committee of the public accounts committee has not submitted its report, and a discussion of its proceedings at this time is definitely out of order. I think it is obvious that I permitted the hon. member for Iles-de-la-Madeleine and the hon. member for Calgary North to go further than I should. We are now in the process of discussing not the estimates of the Department of Defence Production, but the conduct of the committee on public accounts. I hope the statements made by the hon. member for Iles-de-la-Madeleine and the hon. member for Calgary North have been made and replied to by each of them to such an extent that we may consider the matter closed.
I am not ruling out of order any discussion about a particular gun contract which was let by defence production, but I am going to ask hon. members not to discuss the conduct of the committee on public accounts or its agenda committee until such time as it makes its report, which I believe is not very far off.


Douglas Scott Harkness: I should like, if I may, to say that at the very end of this day's proceedings to which the chairman of the public


accounts committee, the hon. member for Iles-de-la-Madeleine, referred, and after we had left these questions which you yourself will remember had not been answered, the chairman said:
We shall adjourn to the call of the chair. It remains for me to thank Mr. Golden and his officials who have been called to give us this information.
Now, I will get the required information from the department concerned, namely-
And so on. I believe the only thing anyone could take from that was that there was a further meeting of the committee to be held in order to receive those answers and get this further information.


John Horace Dickey: That is simply the normal procedure for the chairman of any committee.


Charles-Arthur Dumoulin Cannon: Not that another meeting would be held to get further information, but that another meeting would be held to draft our report and finish it.


Douglas Scott Harkness: I think no one could take any other meaning from it than the one I took, that we would have a further meeting.


John Horace Dickey: You are the only one who did.


Douglas Scott Harkness: I wonder if the minister could answer those questions?


Clarence Decatur Howe: I do not know;
I do not remember. These staff houses go back to 1940, and I do not know who paid for them then. I think probably they were built by the owners of the plant, which at that time was Sorel Industries Limited. We did not contribute any capital assistance, I think, until well into the end of 1940. But that is going back a long time and I would have to search the records. My hon. friend would not expect me to remember that.
The .fact of the matter is that this plant built for the government over $100 million worth of guns. They were paid for the work, as an over-all profit, 7-2 per cent. If you add in the costs that have been given here the profit was 10 per cent. If anyone can find any guns in the United States or in England that can be built for a profit less than the over-all cost plus 10 per cent, I would be very interested.


Douglas Scott Harkness: The profit would have been 14 per cent if you added in these other items.


Clarence Decatur Howe: Well, what are they? What do the other items amount to?


Douglas Scott Harkness: On this particular contract the other items amount to $3,772,316?


Clarence Decatur Howe: Yes.


Douglas Scott Harkness: Then there is this further amount of $1,300,000 odd which they have been given in addition?


Clarence Decatur Howe: That was cost; it was not profit.


Douglas Scott Harkness: These were not costs. This was the amount which was paid to them just because they had the plant sitting there for the five years from 1945 to 1950 to begin with, and it is the cost of rehabilitating those staff houses and other things along that line, which I can see no justification for the Canadian taxpayer paying. It was the cost, as it is outlined here, of making ready to resume production. Therefore in the three items the total is $3,772,000 odd. If you add that to the 7-2 per cent profit they were given it brings it up to a profit of more than 14 per cent.


Clarence Decatur Howe: The cost of preparing a plant for production is preproduction cost; it is not a profit. It is paying for the cost of assembling and training the men. How you can figure that to be a profit I am sure I do not know. My hon. friend is used to army life and I am used to production, but I never heard of production costs of that kind described as profit.


John George Diefenbaker: It sounds like gravy.


Douglas Scott Harkness: As far as that particular item is concerned, or part of it, you cannot consider it as profit; but I think there is no doubt at all that this $1,500,000 odd is just an extra profit and, as a matter of fact, I think that was brought out in evidence before the committee.


John Horace Dickey: Not at all.


Douglas Scott Harkness: Really what it came down to was an extra profit. Similarly, this amount which was given for rehabilitating staff houses cannot be looked upon as anything else but an extra profit. It is just a way of concealing profits, as far as I can see.


Clarence Decatur Howe: Who got the
profit?


Douglas Scott Harkness: So far as all these items are concerned-


Clarence Decatur Howe: Who got the profit in rehabilitating the staff houses?


Douglas Scott Harkness: Sorel Industries got it, of course. Who else got it? The money was paid over to them. If it had not been paid by the taxpayer they would have had to pay it themselves. As far as this $1,500,000 is concerned that they were given, they were given it just because they had the plant sitting there. They had failed, after having been told by the government to keep the plant sitting waiting for more munitions orders, and so forth, to establish any ordinary industry in it; and as a result of their
Supply-Defence Production failure to establish ordinary industry in it, which most other people were able to do, they were then paid $2,880,000 in 1950 and subsequently because they had failed to establish any ordinary industry in that plant.


Donald Methuen Fleming: Mr. Chairman, I was not a member of the public accounts committee and therefore do not intend to debate the proceedings in that committee; but I am interested in a contradiction in statements when I find it.
This afternoon the minister has expounded a most interesting theory as to the purposes which committees of this house are intended and are not intended to serve. He has said that if committees of this house are to be used to gather together information to be brought into this house and used to embarrass the minister on his estimates, then we should take another look at these committees, in effect, and decide whether we ought to have committees at all because it is a wrong use to make of them. I am not surprised at a statement like that coming from the minister, because it is quite in keeping with his whole political philosophy.
But here again this afternoon we have an interesting example of the application of the minister's political theory in that regard. This afternoon the minister was asked for an explanation of a figure which aggregates $2,880,000 which was paid as a profit, and is figured as a profit. The explanation given by the minister to this committee this afternoon was that this was paid to Sorel Industries Limited because that company was asked to keep its plant in idleness but available for military production if required. Now, the basis on which the minister sought to establish the payment-


Clarence Decatur Howe: That is not true. Your statement is not correct.


Donald Methuen Fleming: Mr. Chairman, that is what the minister said, if the record stands as the minister made his statement this afternoon. If that were the fact-


Clarence Decatur Howe: It is not the fact.


Donald Methuen Fleming: -the payment made to the company, of course, would be justified if they were asked to keep their plant in idleness and not to put" it to some other use.


Clarence Decatur Howe: The evidence is just the opposite.


Donald Methuen Fleming: Payments made to them for that purpose would be proper if the payments were reasonable.


Clarence Decatur Howe: My hon. friend is lost.

Supply-Defence Production


Donald Methuen Fleming: Mr. Chairman, are we going to have any order and is the minister going to respect the rules of the house, or is he going to break them all? Just sit down.


Clarence Decatur Howe: Who was it that was thrown out of this house?


Donald Methuen Fleming: The minister does not pay any attention to the rules of this house. He is at it again.


Clarence Decatur Howe: Who was it that was thrown out?


Donald Methuen Fleming: I said if that plant had been kept in idleness at the request of the government in order that the plant and its machinery would be available to be thrown into war production, or defence production, when required, it would be only proper that the company should be compensated for it, if the amount was reasonable, and that is the basis -I call upon hon. members to witness what was said-that is the basis upon which the minister this afternoon sought to justify the payment.


Clarence Decatur Howe: Mr. Chairman, on a point of order-


Donald Methuen Fleming: What is the fact?


Clarence Decatur Howe: On a question of privilege-


Donald Methuen Fleming: The fact is, as we have been informed-


Edward Turney Applewhaite: Order.


Clarence Decatur Howe: No such statement was made, and the record will not show it. My hon. friend can repeat it as loudly as he likes, and let him accuse me of breaking the rules.


Donald Methuen Fleming: It is perfectly typical for the minister to try to smuggle in a speech.


Edward Turney Applewhaite: Order. Perhaps
we ought to have a little order. The Minister of Defence Production rose on a point of order which actually was, I take it, for the purpose of denying the accuracy of a statement made by the hon. member for Eglinton. I would suggest that the hon. member for Eglinton complete his remarks and the Minister of Defence Production will then have ample opportunity to reply.


Clarence Decatur Howe: May I ask you a
question, sir? Are we still on item No. 1?


Edward Turney Applewhaite: We are still on item No. 85, which is departmental administration.


Clarence Decatur Howe: What are we going to do when we get to item No. 2, which is the item under which this matter could more properly be discussed?
IMr. Howe (Port Arthur).]


Edward Turney Applewhaite: I think there is a lot of merit in that, but I just do not see how I can start at ten minutes to four to say that this discussion should have been on another item when it has been going on since about 2.30. Perhaps it would suit everybody's convenience and promote efficiency if we tried to complete discussion of this particular incident on this particular item, as it is now perhaps nearly completed anyway. The hon. member for Eglinton.


Douglas Scott Harkness: On the point of order the minister brought up, I would have been glad to discuss this matter on item 87, but I reckoned on item 87 it would have been out of order and the minister would have said it was out of order.


Edward Turney Applewhaite: I point out to the
hon. member for Calgary North that we have decided the discussion is to continue on item 85. The hon. member for Eglinton.


Donald Methuen Fleming: Mr. Chairman, the only basis upon which the minister could have justified this payment of $2,880,000 to this company as profit would have been if the company had been asked to retain that plant and hold it available for government use. On no other basis could any such payment be justified by the minister, or by anyone else. But what do we find to be the fact? The fact, as disclosed by his deputy minister, is that the company was advised in 1945 not to keep the plant open. The statement was quite clear that the company was told in 1945, "don't look to the government. We are not telling you to hold that plant available to us; on the contrary, we are telling you not to keep your plant open".
Therefore the company evidently quite clearly was told at that time, "So far as that plant is concerned, you are on your own; you are warned. Do the best you can with it, but don't look to the government". But five years later what happens? At that time the government required the production of this plant for war purposes, and it was not sufficient at that time to provide the company with the cost of opening up the plant. No one would question proper costs of starting the plant up again for war production.


Clarence Decatur Howe: The hon. member for Calgary North does.


Donald Methuen Fleming: No; that is a very different thing. He is not challenging the minister's inclusion in these costs of production of things that were quite properly so classified. I am just stating the facts. It is perfectly clear. The minister can not come back and

change what has been said already in this discussion this afternoon by the hon. member for Calgary North.
But, sir, here we are dealing with a payment the government makes as profit, retroactive for the whole period of five years from 1945 to 1950, a period during which this company has been warned not to look to the government, that they were on their own. They had been told not to keep their plant open; yet when 1950 comes the government is not satisfied just to pay a fair amount to this company to get the plant in operation at that point. They say in an outburst of extraordinary generosity-perhaps not too extraordinary for this government, but an outburst that most taxpayers in this country would regard as extremely extraordinary and quite indefensible-to that plant, "Well, we will go back and say that we told you to look after yourselves for this five-year period, but we will now hand out $2,880,000 of the money of the taxpayers of this country as a payment equivalent to the profit you would have made if you kept that plant open."
The government not only did not ask them to keep the plant open but told them at that time not to keep the plant open for war purposes or for government purposes; yet here is a juicy sum of $2,880,000 handed out in 1950, five years later, apparently to give this company something that was not earned. Now, the minister drove some kind of bargain with this company-*


John Horace Dickey: A tough bargain.


Donald Methuen Fleming: -and the terms of the bargain included a payment which in my submission, based on what we have heard here this afternoon was a highly improper and unjustifiable payment, a payment made retroactively to give this company profit for five years for this plant. Whether it was sitting idle or whether it was in use does not matter, because it was not in use for the government and it was not kept in idleness at the government's request. Here we have the statement of the deputy minister of this department that this company was told in 1945 not to keep the plant open; yet they were paid $2,880,000 in 1950 for the consideration that they kept the plant open.
We have had, I think, a very telling example this afternoon of the benefit of having committees of this house do a little scouting, and particularly the benefit of having a committee do some scouting around this department.
When I spoke on June 29 in the opening discussion on the estimates of this department I urged that there should be a review in a select committee of the operations of this
Supply-Defence Production department. This department has now been in existence for the last five or six years. In the course of that period it has expended $6 billion, and there has not been a select committee which has had an opportunity to make a thorough study of it. It is true that the committee-


John Horace Dickey: Three sessions, three committees.


Donald Methuen Fleming: No, no. Again the parliamentary assistant is just repeating the same erroneous statements he made on June 29. The fact is that we had a committee on defence expenditure. The first year that committee met was before this department got set up and in operation.


Clarence Decatur Howe: No.


Donald Methuen Fleming: That is what I said on June 29. The two later years that committee sat no one -can pretend it did more than a bit of scratching on the surface. What we have seen this afternoon, sir, ought to be abundant evidence to satisfy any reasonable person that what is needed is a very detailed review of the administration of this department and of some of the contracts that have been entered into.
At the beginning of this session the Leader of the Opposition asked that the estimates of various departments should be sent to the estimates committee. Those that were sent were of the government's choosing, and we objected to their choosing. We asked that one of the departments at least of this minister should go to that committee.


Clarence Decatur Howe: You asked for trade and commerce.


Donald Methuen Fleming: Yes, and we would have been glad to have it. It is one for which we asked.


Clarence Decatur Howe: You did not say so.


Donald Methuen Fleming: We were turned down.


Clarence Decatur Howe: You did not say so.


Donald Methuen Fleming: We were turned down; the government would not accept any request from the opposition as to any department. They made the selection, and it will be left to the hon. members of this house and the public to ask themselves why it is the government wants to pick and choose what departments are to have their estimates and their administration reviewed in detail by committees.
Now, Mr. Chairman, it just so happens this afternoon that because another committee of the house, the public accounts committee, happened to have an opportunity to do a little looking into this particular contract and the

Supply-Defence Production juicy payments that were made to this company in connection with it, that we have had information from the deputy minister of that department to correct the statements made here by the minister this afternoon.
If that information had not been available to us through the committee I suppose we would have been in the position of having statements from the minister to justify this payment on the ground that this plant had been kept in idleness at the request of or for the benefit of the government. We know that is not the fact, and there is no justification for this payment; and I say all credit to those members of the public accounts committee who obtained the facts there and to the hon. member for Perth and the hon. member for Calgary North who have brought this information to the attention of this committee this afternoon and have established that there was a payment of $2,880,000 which, as the hon. member for Perth said this afternoon, was just a handout.


Clarence Decatur Howe: Well, Mr. Chairman, I have heard my hon. friend distort other situations-*


Donald Methuen Fleming: No, you never have.


Clarence Decatur Howe: -but I think the distortion of this particular matter-


Donald Methuen Fleming: You have never heard me distort the truth; not if you recognize the truth.


Clarence Decatur Howe: -excels his usual distortion.


John Horace Dickey: You hand it out; just take it for a change.


An hon. Member:: Sit still for a while.


Clarence Decatur Howe: The hon. member stated that I said in 1945 we asked the company to keep this plant ready for operation. The fact is exactly the opposite.


Donald Methuen Fleming: We know that now.


Clarence Decatur Howe: That was said in the committee and I have said it in the house. I knew it then and of course I know it now.


Donald Methuen Fleming: Why did you try to justify the payment?


Clarence Decatur Howe: The hon. member is trying to sneak in an extra speech just as he accused me of doing.


Donald Methuen Fleming: I asked a question.


Clarence Decatur Howe: You are the hon. member who was thrown out of the house for butting in.


Donald Methuen Fleming: And you are the man who should be thrown out today-


Mr. Stuart (Charlotte):: Get the facts.


Donald Methuen Fleming: -and when I was very improperly suspended on May 25-


Some hon. Members:: Ha, ha.


Donald Methuen Fleming: -by the vote of the majority of this house-[DOT]


Some hon. Members:: Order.


Donald Methuen Fleming: -here is the minister who should have been thrown out if he were not a member of the majority.


Edward Turney Applewhaite: Order. May I remind the committee that we are discussing, or should be, the estimates of the Department of Defence Production and that incidents which have been previously decided by actions of the house are closed so far as this discussion is concerned. May I say to the hon. member for Eglinton, as I said to the minister a short time ago, that the Minister of Defence Production should be permitted to make his statement and an opportunity will be given for reply.


John Horace Dickey: The rules do not apply to the hon. member for Eglinton.


Clarence Decatur Howe: The facts of the matter are that in 1945 we had to decide what facilities outside of those owned by the government we wished to keep active. In the matter of Sorel we looked into that, and it was a very costly affair to keep that plant active. We notified the company that we did not intend to do so. The company were told that they were free to dispose of the equipment and turn the plant over to civilian use. Well, they chose not to do so. The matter was considered and I know they had offers for some of the equipment. Some of the equipment was specialized and some of it was standard, and it was all very valuable. I know they received an offer from another government for the equipment. They came to see me and on my advice they did not accept the offer.
However, we had no obligations to the plant and we would have had no obligations had we never required the plant again. In other words, if the Korean situation had not come along and if we had not been again required to build heavy guns in quantity in this country we had no obligation to the plant.
Then we found in 1950-1949, I guess it was-that we did have a requirement for the plant.


Donald Methuen Fleming: 1950.


Clarence Decatur Howe: We did have it; and we naturally went to the company and said, "We need your plant; what arrangements can we make?"


John George Diefenbaker: Were there any other companies in the same position that received the same type of reward?


Clarence Decatur Howe: Here is another man. He is the hit and run artist. It is not time for him to hit yet. He had better listen for a while.


John George Diefenbaker: I wondered whether
Sorel Industries was the favourite company.


Clarence Decatur Howe: Just let me tell you the story. You can make your speech later, after you have picked up a few facts. Your arms will wave-


John George Diefenbaker: We are trying to get the truth.


Clarence Decatur Howe: You don't worry about the truth. However, we came to this point in 1949 or 1950. I do not remember when we decided that we were going to need the plant. However, we said, "We need your plant." They brought us a bill that showed us the cost of maintaining that plant without orders for the intervening period, and they said, "What about that? We shall require a special profit if the plant is to be used for a two or three-year period. If you want to make a long-term arrangement for the use of our plant that is one thing, but do you intend to give any undertaking that at the time these contracts are filled there will be a future for the plant?" We said, "No, we do not think that as part of the defence effort we should undertake to carry as part of our long-range equipment a plant of that size. We want to make an arrangement for the work incidental to the Korean emergency, and we want no continuing obligations."
A good deal of negotiation went on. My officers are familiar with it because they carried on the bulk of it. It was decided that we would pay a portion of the cost that had been involved in carrying on the plant. Incidentally, that was not a profit: it was made up of expenditures that had been made by the company, as indicated by their books. An arrangement was made that having given some compensation for that, we would treat them on the same basis as any other contractor and pay the costs ordinarily allowed for the work performed according to our own formulas of allowable profit.
We had then in hand an order for 48 guns for the Canadian navy. You may say it was not worth starting up a plant of that size to make 48 three-inch 50 calibre guns. Nevertheless it was the policy at that time to make sure that Canada was self-sufficient as far as naval production was concerned, and as
Supply-Defence Production part of that program the navy wished to have those guns manufactured in Canada.
We started up the plant on the theory that we were going to make 48 guns for the Canadian navy. The starting up expenses were based on the Canadian program. Later on we were able to obtain a share of the United States program for the same guns, and from then on we were able to divide our costs over a much greater base. In the end, I think, the situation worked out quite well. We finished up the United States guns to their complete satisfaction. They shared in the costs from the time their contract was entered in the books, and their participation very greatly lowered the overhead on the Canadian part of the project.
The two guns were not exactly the same. The Americans sent up a breech-block made by a special contractor in the United States who made the breech-blocks for all the United States guns. Our own navy wanted their own breech-block, and we had to tool up in Canada to make that breech-block. This accounted for some part of the difference in costs-not a great part, but that was the main physical difference between the two guns.
What we did there is what we would have done had we used a similar plant anywhere else. You say that we put in the bunk-houses. Certainly; when we use a plant that had not been active or had been active on a lower scale we give capital assistance, as we did in this case, to put the facilities in shape to carry out the work that we have for the plant. There was nothing exceptional about the Sorel situation, except that we picked up part of the cost of maintaining the plant and the equipment in the plant in idleness for the intervening five years.
My hon. friend from Eglinton said that it would have been quite all right if we had decided to do that in 1945. We decided not to do it then, but that does not alter the equity of the situation. When we found that we would profit by the fact that the plant had been kept intact, the equity of the situation, and the desirability of putting the plant on all fours with every other plant that had been in use in the interval, as far as the entitlement to profit was concerned, was considered by my officers and myself as a sufficient reason for making a settlement on part of the out of pocket costs of maintaining the plant over the intervening five years.


Donald Methuen Fleming: Now will the minister answer a question? Does the minister confirm the fact that this company was told in 1945 not to keep its plant open as far as the government was concerned?

Supply-Defence Production


Clarence Decatur Howe: Certainly; I
told them myself and I have never represented otherwise. My hon. friend is the only one that has represented that I said otherwise. I do not know whether I wrote them a letter advising them to that effect, but I told them in any event.


Donald Methuen Fleming: The statement of the minister just now completely obliterates any justification for the payment of $2,800,000.


An hon. Member:: In your opinion.


Douglas Scott Harkness: The minister, in replying to the hon. member for Eglinton, I think was attempting to represent me as saying something which was not just what I did say. What I was trying to get at here, as far as these two items are concerned, the cost of rehabilitating the shops and staff houses and the cost of making ready, were the amounts which were used for various things. I had said that I could see no justification whatever for the Canadian taxpayer paying $200,000-odd for rehabilitation of these staff houses. I should like the minister to give us a breakdown of this item, and I should like a breakdown of the other item later. I should like a breakdown first of the item $908,450 for rehabilitating shops and staff houses.


Clarence Decatur Howe: Do you expect me to give it from memory? This is only item 1.


Douglas Scott Harkness: The minister has his officials here, and possibly they could provide that for him. Perhaps he is not showing rnough confidence in them.


Clarence Decatur Howe: They tell me they do not have it. However, we shall get it as soon as we can and supply it to my hon. friend.


Frederick Samuel Zaplitny: The minister gave some
figures on the Sorel contract which are interesting. If I heard him correctly, he stated that this company has manufactured approximately $100 million worth of guns over a period of time-I did not catch the period-and for that they received a profit of approximately $7 [DOT] 2 million or 7-2 per cent. Let us take the period from 1940 to the present time. What was the total amount of capital assistance provided to this company?
The minister also stated in his address that a certain amount of that capital assistance had been purchased by the company over a period of time. Perhaps he could give us the figures as to what portion of that capital assistance had been purchased by the company, and at what discount price. Naturally they did not pay the value of the equipment


as at the time when it was put in; they must have received a certain discount.
Would he also at the same time tell us the balance of the capital assistance still outstanding, and the book value of that capital assistance at the present time? In other words' what I am trying to get at is this.
I have stated, and I think correctly, that over and above the 7-2 per cent profit admitted by the minister there is a very substantial element of subsidy to this company through this capital assistance, because the minister has already stated that the government provided certain machinery and equipment to be used in fulfilling these contracts. The company has received a profit for the fulfilling of the contracts. Therefore the use of that equipment, for which the government apparently received no other consideration, cannot be considered anything else but a subsidy over and above the 7 [DOT] 2 per cent profit. If that is not the case, the taxpayers of Canada should know what amount of subsidy goes along with that 7-2 per cent profit, so we will know actually what we are paying for this $100 million worth of guns.


Mr. Enfield:: Before the minister answers the question, I too was rather interested in the basis on which machinery or other equipment supplied as capital assistance was then sold to or taken over by the private industry concerned. I think the hon. member for Dauphin could have found some of his questions answered if he had read the annual report of the department. On page 27 it has this to say in this connection:
In line with the policy of encouraging private investment in defence production facilities, a number of important assets have been sold to the management companies. This is particularly true in the aircraft field where, by the end of 1955, sales of crown assets had been made to 13 companies. During 1955, negotiations were also concluded for the sale of the plant in Toronto housing the crown-owned facility for production of naval propulsion turbines.
It seems to me the picture is that if machinery and equipment are supplied to an industry then, when you make your contract for the production of goods with that industry, the consideration for the machinery is reflected in the price you are going to pay for the production of the goods. On this basis the machinery would remain as an asset in the hands of the crown. The title would remain in the crown. Then you get to the point: All right, what price do you receive when the asset is sold to the company? I think it would be very interesting to know how we fare financially at such time as the equipment is sold and turned over to the private industry concerned.
>


Clarence Decatur Howe: I doubt if we can go back to 1940. The department we are discussing was brought into being in 1950. I think the department of munitions and supply was wound up around 1948, and where the records are now I do not know. I suppose they may be in the records building. In any event these transactions had the blessing of continuous committees of this house for several years and the records were disposed of with the approval of the government agency that decides these matters. I am willing to go back as far as the records of the department will permit, but I do not think I can go back to 1940.


Frederick Samuel Zaplitny: Go back to 1950 at least.


Clarence Decatur Howe: I can do that. I shall be glad to.


John George Diefenbaker: I asked the minister a while ago by way of an interruption while he was speaking whether or not any other company had received the same treatment as Sorel Industries; a reward, as it were, for the period it was unoccupied and its facilities unused. Is there any other company that at the time of the Korean crisis or since has received a payment similar to the one we are discussing at the moment?


Clarence Decatur Howe: There was no similar situation. In the case of the aircraft plant we had spent a good deal of money to keep them alive and pay the carrying costs. As I recall, the only important war plant used in the last war that was allowed to close down was Sorel Industries. We decided it was too big an obligation to take on with no certainty that the plant would ever be required again, even in the case of war.


Mr. Dufresne:: I think I heard the minister say a few minutes ago that in 1945 the government had left some machinery in Sorel Industries. Can the minister tell us what Sorel Industries paid for the machinery left there in 1945, and also what was the original value of that machinery?


Clarence Decatur Howe: The machinery was paid for by Sorel. We left no machinery there. Sorel bought the assets of the plant on the usual formula which is the cost of the machinery less straight line depreciation at the normal rate provided for in the income tax regulations for the period in which the machinery was used. The machinery was bought on that basis, and when the plant was closed down in 1945 we had no assets in the plant and no interest in it.


Daniel Roland Michener: On the revenue side of the accounts there are some items which I should like to ask the minister to explain to the
25, 1956
Supply-Defence Production committee. They all relate to a transaction with Algoma Steel Corporation Limited. In the public accounts for 1952 there is reference at page DD-9 and page DD-12 to an Algoma Steel credit of $239,312.93 which is explained in these terms:
The credit in this account represents the final principal payment by the corporation in accordance with the terms of the agreement. This loan bears no interest.
Then in the 1953 public accounts at page DD-22 there is an amount of $4,401,652.26 shown under the heading, "Balances receivable under agreements of sale." In 1954 there are further entries of receipts on that account of $4 million-odd with this explanation as found at page DD-11:
This represents the balance due lor property disposed of under lease-purchase option agreement which terminates April 30, 1977, and provides for annual instalments, plus interest at 3 per cent per annum on the balance as follows . . .
Then there is a statement of the interest. Then in the public accounts for 1955 there is a final entry of receipts in this transaction. At page DD-7 under details of ordinary revenue there is an item, return on investment, Algoma Steel Corporation Limited, $123,406. That appears to be a long-range transaction, and if the minister can I wish he would give us the particulars.


Clarence Decatur Howe: It goes back to world war II. Certain facilities were put in Algoma as capital assistance facilities that Algoma did not feel justified in supplying themselves. They were supplied as capital assistance, and at the end of the war the assets were purchased by Algoma on the usual formula, cost less straight line depreciation, and the terms of the agreement obviously gave them some time to pay. Five to seven years was common, and I presume the payments referred to are payments made under these old agreements. Whether or not I can find them I do not know. The world war I stuff is not so accessible but I will see what I can find.


Daniel Roland Michener: This is world war II.


Clarence Decatur Howe: World war II, I should say.


Daniel Roland Michener: Does the minister have the total cost of these facilities and the payments that were to be made by Algoma in purchasing the assets under the formula of depreciation?


Clarence Decatur Howe: I cannot promise. I will get all the information I can. My hon. friend is now going back long before the department under discussion was established. The records of the old department have been

Supply-Defence Production filed away, but we will endeavour to get them and we will find out if we can.


Daniel Roland Michener: I thank the minister, but let me point out that this is current business.


Clarence Decatur Howe: Not current business for the department. When sales are made and agreements are made they become debts to the crown. The Department of Finance and the Auditor General would know about them, but the Department of Defence Production does not collect these accounts.


Daniel Roland Michener: I am not sure how the departments divide these matters, but in the public accounts these are details under the heading, "Department of Defence Production". I assume they are matters which the Department of Defence Production keeps under its eye in order to see that the proper payments are received. If the minister could get that information, I would appreciate it. I refer to the total cost of these assets or facilities. I assume they were for the purpose of providing war materials at the time.


Clarence Decatur Howe: I will get it if I
can. I cannot promise to do so, but I will get it if I can.


Daniel Roland Michener: And also the prices which were paid. I have one other question along the same line. Can the minister indicate to the committee any current transactions between the department and Algoma Steel Corporation Limited.


Clarence Decatur Howe: I do not recall any outstanding transaction, but I will be glad to look the matter up.


Daniel Roland Michener: Other than this one
transaction?


Clarence Decatur Howe: That was a sale of equipment installed during the second world war. I know of no similar transaction arising out of the Korean war, but I will be glad to look into the matter.


Daniel Roland Michener: Will the minister ascertain whether the department does any current business with Algoma Steel Corporation Limited and, if so, what sort of contracts are at present being negotiated with this company.


Frederick Samuel Zaplitny: 
Clarence Decatur Howe: As I understand it the rate the Department of National Revenue allows on machinery is 10 per cent per annum. That is under straight line depreciation. There are two methods. One is 20 per cent diminishing balance. But in transactions for the department we allow depreciation at 10 per cent per annum on a straight line basis. It is more favourable for the government.


John George Diefenbaker: I should like the minister to tell us what is the investment of the people of Canada and the interest they have in Sorel Industries. Is it as set out at page DD-21 of the public accounts for the fiscal year ended March 31, 1955? Is that amount $15,799,000?


Clarence Decatur Howe: No, we have not any such investment.


John George Diefenbaker: What is the nature of these figures setting out "Investment at March 31, 1955" with respect to Sorel Industries Limited?


Clarence Decatur Howe: I do not know what the significance is, I am sure.


John George Diefenbaker: That figure is to be found at page DD-21 of the public accounts.


Clarence Decatur Howe: I think my hon. friend includes the arsenal plant at Longueuil which we own.


John George Diefenbaker: This is "Investment in
Plant and Equipment" and various industries across Canada are shown. Included is Sorel Industries Limited, and the figure shown is $15,799,000.


Clarence Decatur Howe: I have the summary of capital assistance with contractors, March 31, 1956.


John George Diefenbaker: What is the total amount of capital assistance at the time to Sorel Industries?


Clarence Decatur Howe: The figure is $6,580,609.91.


John George Diefenbaker: That is since when?


Clarence Decatur Howe: That is on March 31, 1956.


John George Diefenbaker: This report is for the year ending, March 31, 1955, and it sets out that the total amount of investment in Sorel Industries is $15,108,024. During the year it increased by $931,000, and there were transfers of capital assets and the investment in this country is $15,799,000. I just wondered whether or not that referred to the answer to the question that was asked a while ago by the hon. member for Dauphin, and represented the amount the government of Canada has advanced to this company through the years.


Clarence Decatur Howe: No, that would not be the answer. He was asking what the investment in the company was from 1940. As I say, the investment up to 1945 was liquidated by a payment from the company to the government which transferred all the property to them. I am not just clear. Sorel Industries expanded their capacity by taking over a plant that the government owns in Longueuil, outside of Montreal. The only thing I can think of is that there must have been a combination of these two plants. But of course Longueuil is owned by the government and always was owned by the government, and all the equipment in it is owned by the government. I will send this sheet across to my hon. friend.


John George Diefenbaker: If the minister would just turn to the public accounts and give me an explanation of what this $15 million figure is, I should be obliged. It is to be found at page DD-25.


Clarence Decatur Howe: I am sorry, but I have not a copy of the public accounts.


John George Diefenbaker: I will send this copy over to the minister.


Clarence Decatur Howe: The Longueuil plant under this account is charged to Sorel. That is, it is put in the keeping of Sorel; it is turned over to Sorel for operation. Nevertheless the Longueuil plant and everything in it is owned by the government and will continue to be owned by the government.


John George Diefenbaker: The minister's figures a moment ago were some $6 million as the amount as of March 31, 1956?


Clarence Decatur Howe: That is right.
67509-409i
Supply-Defence Production


John George Diefenbaker: How does he account for the difference? What has happened during the last year whereby the indebtedness of Sorel has been reduced from $15 million to $6 million.


Clarence Decatur Howe: It was never an indebtedness. This is simply a list of crown assets charged to the various companies.


John George Diefenbaker: That would be indebtedness, would it not?


Clarence Decatur Howe: It is not a debt. It just shows that certain government capital assets are in their keeping. It is not a debt until the government sells the assets to them. If the government owns it, it can take it out. It is not a debt. That Longueuil plant in the figure quoted from public accounts was obviously charged to Sorel Industries Limited.


John George Diefenbaker: How much was the value of the Longueuil plant charged to Sorel Industries?


Clarence Decatur Howe: It must have been the difference; $9 million, probably.


John George Diefenbaker: Has the minister the figures there among his papers? That seems to be a lot of millions.


Douglas Scott Harkness: He is just guessing at $9 million.


John George Diefenbaker: That is so.


Clarence Decatur Howe: The Longueuil plant was built for the government. It was operated by the government during the second world war, and in fact after the second world war. When it was found that additional space was needed for heavy guns, operations there were transferred to the Quebec arsenals plant and this plant was turned over to Sorel Industries. I am sure that at that time the plant and the equipment in the plant were listed under Sorel industries, although it was government property.


John George Diefenbaker: If the minister would just find out from his officials why there Js this difference between $15 million and $6 million in a year? What was the amount for the Longueuil plant? The minister said approximately $9 million. I would ask him if he would get the exact figures in that connection, because he apparently has them before him?


Clarence Decatur Howe: No, I have not. We have the Sorel figure, but not the Longueuil plant. The Longueuil plant was built about 1940 or 1941 and it has always been owned by the government.

Supply-Defence Production


John George Diefenbaker: It still does not explain the $15 million for March 31, 1955, and how that $15 million item was made up? Did it include the Longueuil plant, and if so what portion of the $15 million represented the Longueuil plant? It is quite a large item, and one would expect some kind of a breakdown of it.


Clarence Decatur Howe: I gave the amount that was listed for the Sorel plant. We have it here. The balance must have been the Longueuil plant, but we will be glad to look up the original figure and tell you how it came about.


John George Diefenbaker: Of course $9 million is quite a lot, I would think.


Clarence Decatur Howe: I know, but the Longueuil plant does not enter into these estimates. It has not been operated by the department.


Douglas Scott Harkness: When was the Longueuil plant taken over by Sorel Industries?


John George Diefenbaker: What does this company, Sorel Industries, pay for the equipment and for the Longueuil plant? Has the minister got that? It must surely pay something for that?


Clarence Decatur Howe: The Longueuil plant was used for government work and we were not charged anything for it. I do not know whether they paid anything. I would be glad to look that up. My hon. friend wants to go back over about $17 billion worth of contracts and expects me to have the information-


John George Diefenbaker: No, this is March 31. 1955.


Clarence Decatur Howe: -expects me to remember the details of every one of the contracts that made up the $17 billion. I cannot do it, I will tell you frankly. If you will give me the definite information you want I will endeavour to get it. I am sure I can get most of it. If you want to go back into the dim past, to 1940 or 1941, I am not sure I can get it because I imagine those records are in central storage.


John George Diefenbaker: I know my hon. friend once said, "What is a million?"


Clarence Decatur Howe: That is a fiction that has been plastered all across the country by my hon. friend.


Donald Methuen Fleming: You originated it.


John George Diefenbaker: No, as a matter of fact I have kept it out of sight at all times. I would not refer to it at all, but I am saying it was said.


Clarence Decatur Howe: Even Maclean's magazine took the trouble to go back to try to get the origin of it. Now it has been exposed to the public, but my hon. friend keeps on saying, "What's a million?"


Donald Methuen Fleming: We all heard it.


Clarence Decatur Howe: It was never said.


Donald Methuen Fleming: We heard it.


Clarence Decatur Howe: My hon. friend now has made a statement, and I can pin him down on this statement. You find the exact page of Hansard where I said that and produce it, and I will resign my seat and go to the country.


Donald Methuen Fleming: Has there been an expurgation job done on Hansard?


Clarence Decatur Howe: My hon. friend makes these statements, and this is only typical of the statements he makes every day. This happens to be one on which I can pin him down, and perhaps he will apologize.


Donald Methuen Fleming: We all heard it.


John George Diefenbaker: Who has the floor now?


Clarence Decatur Howe: My hon. friend appreciates a fabrication.


Donald Methuen Fleming: I would appreciate your
making a correct statement. We heard you say, "What's a million dollars?"


Douglas Scott Harkness: I heard it myself.


Clarence Decatur Howe: Surely these
people had better put up now. You are very intelligent people with lots of spare time. While you are sitting around here trying to keep the government here by stringing out this session, surely you have time to go through Hansard and find this reference. We do not mind sitting here, you know. We realize that only five or six members run the house and the rest are up in their offices. Surely they could take half an hour and find that quotation?


John George Diefenbaker: I am not concerned about that million which did not amount to anything, but I am concerned about this $15 million that appears in the public accounts as the investment of the people of Canada in Sorel Industries, and charged to Sorel Industries.


Clarence Decatur Howe: It does not say so.


John George Diefenbaker: It would not appear there if the dominion government had not some interest. I have asked the minister a very simple question; how much was charged for this Longueuil plant? What was the value of the Longueuil plant? The minister says, "I have not got figures like that."


Clarence Decatur Howe: My hon. friend is on item No. 1, when general speeches are made. Am I supposed to have all the figures he can think of asking me to produce? I will get those figures and I will produce them, but I cannot do it now. I do not remember them, and I have not the information before me. I can give him the amount charged to the plant at Sorel, but I cannot give him a breakdown of the amount charged to Sorel Industries.


Frederick Samuel Zaplitny: I want to ask a question and I am sure the minister can answer it, because he does not have to dig through figures to do so. It is a matter of policy. I refer to the same matter now under discussion, this investment of $15 million of public funds in Sorel Industries, or in any private company. What is the policy of the government? What consideration does the government receive on behalf of the public treasury in return for putting that investment in the hands of a private company?


Clarence Decatur Howe: Lower profit is allowed. The profit margin is reduced in proportion to the amount of government-owned machinery that is used. The end product costs less because no depreciation for the equipment is charged. For instance, if a plant buys its equipment and additional profit is allowed the plant because it owns its own equipment. These adjustments are made as a matter of routine. We might pay a light industry 4 per cent for operation with government equipment, and if it buys equipment we might pay 5 per cent or 5 * 5 per cent.


Frederick Samuel Zaplitny: That is very interesting and very important, because I think it is important that the public should know on what basis these industries are paid for the contract they undertake for producing these materials.
Let me ask this question. The minister says a consideration is that the profit is not as great where there is an investment by the public in the form of equipment. At what point is that decision arrived at? For example, let us say the government lets a contract in 1955 for a certain quantity of guns. In letting that contract to a private firm, is it a firm contract on which a margin of profit is provided, or is there a total price provided, or is that an open contract to be adjusted at the time of completion? What type of contract is it?


Clarence Decatur Howe: It depends on the nature of the contract. If it is let by competitive tender of course it is a firm price. If it is for a product that must be built in a particular plant, there are many ways of getting it done and often the profit is to be
Supply-Defence Production adjusted. For instance, in aircraft production we have a starting rate and it is adjusted. As the learning curve proceeds and efficiency goes up the rate of profit is adjusted. It is a very complex business. I do not think I can explain it on the floor of the house. Perhaps I do not know it well enough myself to explain it, but we have a pattern in these things. If my hon. friend would like to have a committee next year I am sure my officers would be very glad to go there and they would be able to go into this thing. With the right kind of talent there and sitting as long as you like we could let the committee decide whether it is right or wrong, and not come back to the house and ask me to decide.


Frederick Samuel Zaplitny: If I may pursue one more question, I should like to point out to the minister that these are not the kind of questions on which we can obtain information in a committee, particularly in the public accounts committee, because they involve government policy. It is well known that officials of a particular department will not answer questions involving government policy, and I think quite rightly so. That is the responsibility of the minister concerned.


Clarence Decatur Howe: My hon. friend is not asking me policy questions; he is asking me questions for information, questions of fact. I would be glad to answer policy questions, but that is not what he is asking.


Frederick Samuel Zaplitny: I shall change the question slightly. Will the minister place before this committee the policy that is followed with respect to government contracts in the industries in which the government has an investment in the form of equipment such as, for example, Sorel Industries? I would suggest to him that perhaps the best way it could be done-he tells us it is a complex business, and no doubt it is, but that is all the more reason why the public should know all about it- would be to table one or two typical contracts so that all the terms of the contract would then be known. They could be used as an example. He could choose the contracts that would be the most typical, and then the public would have an opportunity to know exactly on what basis we are paying these companies.
At the present time I am firmly convinced that the margin of profit admitted or stated is not the true margin of profit, because there is an element of subsidy on account of the fact that there is this equipment supplied and paid for by the public treasury for which the government or the treasury receives no consideration. That must be added to the overall profit because there seems to be no other place to put it. If an example of a contract

Supply-Defence Production could be tabled so we could see ourselves just where that consideration comes, just where those adjustments are made that the minister mentioned, then I for one would be satisfied, and that is definitely a matter of government policy.


Clarence Decatur Howe: Mr. Chairman, I am sure there are hundreds of contracts filed with the Clerk of this house. Every contract is tabled in this house. I do not know what more I can table than is tabled.


Frederick Samuel Zaplitny: Did I understand the minister to say that every contract has been tabled in this house?


Clarence Decatur Howe: No; a number have been tabled. For instance, at every meeting of the defence expenditures committee a number of contracts have been tabled. If my hnn. friend will tell me that he wants a particular contract tabled I will be glad to table it. A report of the department indicates how many separate contracts were made during the year, and I know it runs into hundreds of thousands. Just to pick out one is difficult. Why does my hon. friend not pick out one?


Frederick Samuel Zaplitny: I will be glad to do that. If the minister would table the contract with respect to the guns manufactured by Sorel Industries that has been mentioned here this afternoon, that one would be quite satisfactory.


Clarence Decatur Howe: I am told that all these contracts were tabled in the public accounts committee. Is my hon. friend a member of that committee?


Mr. McGregor:: I never saw them tabled.


Clarence Decatur Howe: I am told they were tabled; I do not know.


Mr. Sinclair:: I would like to continue to discuss the point raised by the hon. member for Prince Albert, the hon. member for Eglin-ton and the hon. member for Calgary North. All three hon. gentlemen say they remember the Minister of Trade and Commerce saying, "What's a million?" We all know, of course, how inaccurate is the memory of the hon. member for Eglinton. The Minister of Trade and Commerce suggested that the Tories, since they have mentioned it so often, should go and get Hansard and show that he said, "What's a million?"
None of them moved, so I went out to the library and very quickly got Hansard for the second session of 1945, shortly after the hon. member for Eglinton entered the house. Here is the famous remark which the hon. member for Eglinton was so sure the minister made and so arrogantly said he remembered distinctly, as did the hon. member for Calgary

North. The discussion was on the estimates of the then minister of munitions and supply. At page 2251 of Hansard the minister had this to say:
I call the attention of my hon. friend-
His hon. friend is the financial critic of the Conservative party, the hon. member for Greenwood. I notice that the hon. member for Eglinton is aspiring to that job in the absence of the hon. member for Greenwood.


Donald Methuen Fleming: No, he is not.


James Sinclair: You are not worthy to aspire to fill his shoes. I continue:
I call the attention of my hon. friend to the fact that we are dealing with an over-all bill for some $1,365 million. This is only a break-down for purposes of discussion, and this amount is not being appropriated by itself: a bill in which this is included is being prepared. I dare say my hon. friend could cut a million dollars from this amount:	but a million dollars from the war
appropriation bill would not be a very important matter.


Mr. Macdonnell:: I suppose that is true.
On an estimate of $1,365 million, $1 million is about one-tenth of one per cent, or a little less. This is the statement which the hon. member for Eglinton has just said he distinctly recalls being, "What's a million?"


Donald Methuen Fleming: The arrogant Minister of Fisheries has just made one of his statements that has a very fishy flavour to it. Mr. Chairman, what particular passage the Minister of Fisheries has dug out in compliance with whatever request he received from the Minister of Defence Production will have to be his responsibility; but whether that is a passage about the same time or not, the fact is that members of this house did hear the statement, and it is a curious thing-*


John Horace Dickey: You produce it.


Donald Methuen Fleming: -that here we are at July 25, 1956-


Clarence Decatur Howe: It is a falsehood.


Donald Methuen Fleming: This statement, attributed to the Minister of Defence Production, "What's a million dollars?" has been referred to in this house and elsewhere, I suppose, hundreds and hundreds if not thousands of times; it has been quoted many times in the hearing of the minister and this is the first time he has been prompted to suggest that he never made the statement.


John Horace Dickey: It has been denied before.


Donald Methuen Fleming: It is a curious delay, Mr. Chairman, a long delay.


Clarence Decatur Howe: My hon. friend makes so many speeches and delivers so many falsehoods.


Donald Methuen Fleming: There he is on his feet. The rules do not mean a thing. He is up on his feet cutting into the middle of other people's speeches. He is not satisfied to let anybody else make a speech. The rules are only for other people; they are not for him. He has his cackling chorus taking up the story. There they go; there they are.
Now, Mr. Chairman, members of this house have made their comments. The Minister of Fisheries has brought up a passage and he is asking the house to say that is the only statement the minister has ever said that comes close to the one attributed to him. Well, statements by members have been made here this afternoon, and I do not know that anybody is going to change his statement. I certainly do not intend to, Mr. Chairman. I comment again; it was a curious demonstration; it is an amazing demonstration. After this famous statement has been carried right across this country; it has been discussed, I suppose, or referred to on every election platform or on the hustings for the last decade, and it has been referred to in this house on more than one occasion. Yet the minister, in this year of grace 1956, has suddenly discovered that somebody has made the statement that he made the statement, and he says now he did not make the statement.


John Horace Dickey: Which is true.


Donald Methuen Fleming: There may be a lot of credulous people in this house, Mr. Chairman, but I think this strains credulity beyond all possible recognition.


James Sinclair: I can perhaps answer this, too, because the hon. member for Eglinton has once again displayed his amazing ignorance about other people's speeches. He knows his own speeches very well because he keeps requoting them to us.


Donald Methuen Fleming: You have never heard me quote from one of my own speeches.


James Sinclair: The first time this was mentioned was in the 1949 budget speech of the financial critic of the Tory party who was then the member for Muskoka, I think it was, and who is now the hon. member for Greenwood. In the course of his speech he claimed the Minister of Trade and Commerce had said, "What's a million?" That was my first year as parliamentary assistant. I looked up the remark then and answered him immediately. That was the reason I could find this so quickly, not because I remembered my own speech. I went to the library and found my speech and came back with the answer in Hansard of 1945. At that time I put on the record not only what the Minister of Trade
Supply-Defence Production and Commerce had said in 1945 but what happened, and the Tory party has been lying about it from that day on.


Donald Methuen Fleming: Mr. Chairman, the fishy remark we have just heard does not affect in the least the facts as stated here this afternoon, and it is not going to deter anyone who heard the remark that has been referred to from referring to it whenever it pleases him to do so.


An hon. Member:: Whether it is right or wrong.


Donald Methuen Fleming: The remark has been referred to on many occasions in this house and the minister has not denied it in 11 years. I fail to understand, Mr. Chairman, what has given rise-


Some hon. Members:: Order.


Donald Methuen Fleming: -to this very interesting situation where suddenly out of the blue, on July 25-


An hon. Member:: The year is 1956.


Donald Methuen Fleming: -1956, apparently someone around the minister suddenly becomes conscious of the fact-


John George Diefenbaker: Perhaps they read
Maclean's magazine.


Donald Methuen Fleming: Yes. This remark has been referred to for 11 years, but it is only today that the minister pretends he has suddenly become aware of it. How extraordinary! It is just too much for human credulity, even the Liberal variety.


James Sinclair: One last suggestion, Mr. Chairman. I would suggest that this little pocket Mussolini put up or shut up. Let him now find the remark in Hansard; let him quote the minister using the words, "What's a million dollars?"


Some hon. Members:: Hear, hear.


Donald Methuen Fleming: Mr. Chairman, I do recall that in the last parliament the Speaker of that house, when I chose to draw certain comparisons between the attitude of one Mussolini and the Minister of Defence Production, thought it was an unparliamentary sort of remark and-


Clarence Decatur Howe: The hon. member only referred to you as a pocket Mussolini, though.


Donald Methuen Fleming: Pardon?


Clarence Decatur Howe: He only referred to you as a pocket Mussolini; that is different.


Donald Methuen Fleming: Well, I shall refer to the minister as a great big overgrown, overstuffed Mussolini.

Supply-Defence Production


An hon. Member:: He is certainly not overgrown.


Donald Methuen Fleming: Mr. Chairman, I have said what I have said, and I stand by what I have said.


John Horace Dickey: Which is nothing.


Donald Methuen Fleming: I am not the least bit impressed by these remarks of the sullen Minister of Fisheries.


James Sinclair: Put up or shut up.


Donald Methuen Fleming: We have had some examples that hon. members have not forgotten when surgical operations were performed on Hansard by the ministers this session.


James Sinclair: Back in 1945?


Donald Methuen Fleming: If those words I have referred to are not readily available in Hansard, then I can only infer that somebody has gone back and performed a surgical operation on Hansard similar to the one that was performed-


An hon. Member:: Name it.


Donald Methuen Fleming: -this session by the Minister f Agriculture.


An hon. Member:: How low can you get?


Donald Methuen Fleming: You ought to know.


Mr. Campbell:: Mr. Chairman-


Charles Edward Johnston: Mr. Chairman


Edward Turney Applewhaite: The hon. member for Bow River. Order. I think I should apologize to both hon. gentlemen. The hon. member for The Battlefords rose a moment ago and I incorrectly identified him as the hon. member for Bow River. The hon. member for Bow River also has a question and perhaps he would permit the hon. member for The Battlefords to speak first.


Alexander Maxwell (Max) Campbell: Mr. Chairman, I was just going to ask you if you could not get the house back to business.


Charles Edward Johnston: Mr. Chairman, my question will not be much longer than that of the hon. member for The Battlefords. I would like to ask the minister a question concerning the payment that was given to Sorel Industries in view of their being idle for the five year period. I understood the minister to say that after 1945, when the government informed Sorel they would not be getting any more orders and therefore they should turn their plant over to peacetime production, they had received offers to dispose of their machinery and came to the minister to get his opinion regarding it. If


I understood the minister correctly he said he advised them not to do that.
If that is so, then I would think the minister would have had to indicate to them the reason for saying that. Probably the reason would be, "Well, you should not dispose of the machinery because later on we may want"-and I use the word "may" advisedly-"to place an order for guns or something of that sort, and then you would have the plant ready".
If that is a proper inference and if that were said to the company, then I think in 1950 when the government came to Sorel and said, "Now here is an order we want you to fill" probably the Sorel company would be in a position-and rightly so-to say to the government, "You advised us not to dispose of our machinery but to hold it until such time as you placed an order with us. Therefore by right you should pay at least something for maintaining our plant and machinery up to this time". Is that the situation or not?


Clarence Decatur Howe: Well, no, I think that is putting it too strongly, really. They came to me and wanted to know what the view of the government would be about a prospective sale they had to another government. I said this government would not like it. I did not intend to intimate that if they did not make the sale we would probably use the machinery. I did not suggest that for a moment. Nevertheless, while we were unwilling to take any risk on having the machinery maintained in 1945, when we realized in 1949 that we were going to need the plant we took a different view of the situation. We felt something should be done to put the plant on something resembling a basis of equality with other plants and that we should bear a portion of the cost of maintaining the plant during the period it was closed down. That decision was made in 1949, but it was not determined by anything said in the past; at least I did not so consider it.


Charles Edward Johnston: I have another question to ask the minister, and it does not relate to Sorel Industries. I notice in the estimates that the amount to be paid is $22,002,628. I wonder if the minister could tell us the share each of the provinces receives out of this estimate?


Clarence Decatur Howe: I am afraid we cannot make a provincial breakdown. The difficulty is that the main contract is placed in one province but subcontracts may go to other provinces. Raw materials, for instance, may come from other provinces. We find we cannot make a breakdown) concerning

defence purchasing that means very much as far as a division among the provinces is concerned.


Charles Edward Johnston: I do not expect the minister could go into a detailed division, because I understand raw materials may come from one place and other materials from another; but I should not think it would be very difficult for the minister to say what portion of the contracts that are let are allocated to the various provinces. How much was given to Alberta, Saskatchewan, Ontario, Quebec, and so on? I would think that information would be very easy to obtain.


Clarence Decatur Howe: We do not keep records in that way for the reason given. For instance, a great many companies maintain head offices in Ottawa and their contracts are signed here. So far as we know they are Ottawa firms, but if we trace it back we find they are not Ottawa firms; they may be Halifax firms, for all we know. The records of the department just do not allow an accurate breakdown of work as between the provinces.


Charles Edward Johnston: Perhaps I could put it this way. It is not my purpose to embarrass the minister, but I should like to know what share of this $20 million-odd is received by industries in Alberta. I do not think we get any of it. It seems to me that this is an opportunity to encourage industrial development in all the provinces.


Clarence Decatur Howe: My hon. friend realizes that this $22 million is really an administration vote. It does not buy anything. There is $6 million for departmental administration and payments to Canadian Commercial Corporation and other corporate agencies for services provided in connection with defence purchasing and production. That is practically all spent in Ottawa; a little perhaps elsewhere. There is an amount of $500,000 for care, maintenance and custody of stand-by defence plants, buildings, machine tools and production tooling. That depends on where the closed-down production plant is; it could be traced, perhaps. There is $7,500,000 for capital assistance. That varies from year to year. The bulk of it is in connection with the CF-105 program and it is mostly spent in the province of Ontario; I should think it is practically all spent there. The payment of grants to municipalities in lieu of taxes on crown-owned defence plants is spread around the provinces, and that would apply wherever there are government-owned defence plants.
Under crown companies there is Defence Construction Limited. Some of that has probably been spent in Alberta. That is the work
Supply-Defence Production of supervising defence contracts that occur during the year. Then there is Canadian Arsenals Limited. I do not think there is any arsenal plant in the west now. There used to be one at Calgary but there is none there now. I should not think that any of that is spent in Alberta. I should think my hon. friend is correct in saying that practically none of this vote is spent in Alberta.


Mr. Hahn:: On the question raised by the hon. member for Bow River, I referred during another debate to sessional paper 237A, in which it was estimated that British Columbia was going to get $221,000 in defence production. I am wondering how they arrived at that particular figure in view of the answer that was given to the hon. member for Bow River. Referring to that specific figure at this time, it strikes me as rather difficult to understand. Here is a province, as I said in another debate, with one-tenth of Canada's population, getting an appropriation of approximately $221,000, which must have been arrived at by this department or it would not have appeared on the sessional paper, out of a total of some $22 million. That would be about 1 per cent of the total.
My question is this. I am wondering what consideration, if any, is given the placement of these contracts on a geographical basis. I am thinking more particularly, of course, not just of the net returns that are received by a province but of the matter of defence itself, and the fact that it would help labour in some of the more distant areas. I am not thinking specifically so much of the case of British Columbia; it could apply to any one of the provinces.
It would seem to me, whilst I can understand the minister's explanation up to a point, that here we have an instance of a contract possibly being let in Ottawa and then sublet in British Columbia. Indirectly they are getting some of it, and if the main office for that particular company happens to be in Ottawa, then British Columbia would be directly benefiting from it. But you have instances such as took place last year, where a firm in Quebec-I forget the name-was given a contract to make pallets. I understand they made some 750,000 in Quebec and sent them around through the Panama canal or some other way to British Columbia to be used in North Vancouver. It seems to me that there was no subletting of a contract there. Where we have the lumber and everything else required, I was wondering why these things are not let on a geographical basis.


Clarence Decatur Howe: When my hon. friend suggests that British Columbia does not get its share of defence contracts, I

Supply-Defence Production think he is hardly giving his province proper credit. For instance, I think British Columbia has a good share of all the naval shipbuilding in Canada, and shipbuilding is a very big part of defence. It has a very good share of defence airports. Of all the installations for defence throughout Canada, I think British Columbia has had its full share.
As far as the much discussed pallets are concerned, the fact of the matter is that we called for tenders for pallets delivered at Vancouver. We found that a firm in Quebec could make the pallets in Quebec, pay the freight to Vancouver and beat the price of pallets made in Vancouver. We did not believe it when we got the answer, but we found that it happened again, and so we placed the order accordingly. We are given a delivery point, and the terms of purchases are freight paid to delivery point, we think there is no reason to give the local manufacturer the job of making the pallets at an increased cost in spite of the advantage he gets from being on the spot rather than being 3,000 miles away.


Frederick George Hahn: I am very pleased with the answer the minister has given in respect to the pallets. It certainly explains a point that possibly contractors in British Columbia should keep in mind when they are bidding for some of these contracts.
The question I have in mind now is, how did this figure of $221,000 appear in sessional paper 237A if, as the minister says, British Columbia is getting its share of the contract? Certainly there is $22 million in contracts here. I should think that the $221,000 should include all the enterprises of which the minister spoke a moment ago. I can think of no way in which that figure would get on to the sessional paper unless it came from his department. Just a few moments ago, however, he told the hon. member for Bow River, as I understand it, that there was no way of breaking it down.


Clarence Decatur Howe: The hon. member is perhaps referring to the items that I read from the estimate book. These are not expenditures for contracts; they are services. For instance, the first item is for salaries paid to people who work for the department. I suppose we have perhaps a dozen or 15 people stationed in British Columbia who draw their salaries there. The next item is care, maintenance and custody of stand-by defence plants. I do not think we have in British Columbia any such defence plants. The next item is capital assistance, but there probably does not happen to be any capital assistance provided for British Columbia for this year. The next item is grants to municipalities. They would be comparatively small.


I am not sure whether we have any crown-owned plants there. The next item refers to Canadian Arsenals; and the arsenals are all in the east. Then there is Defence Construction Limited. There would be a share of that spent in British Columbia. Perhaps part of the amount mentioned is for salaries for inspection of defence projects there. Those are all the items covered by the $22 million. I am not surprised that the part of this particular $22 million spent in British Columbia is as stated in the return. The greater part of it is spent in Ottawa, right in this city.


William Alfred Robinson: The hon. member for
Quebec West.


Mr. Barnett:: I was going to pursue the same subject, Mr. Chairman. I should like to ask one or two questions on the figures used in the debate last night by the hon. member for New Westminster, because I think it is important that we get a clear picture. I take it from what the minister has said that the $221,000 set forth in the sessional paper is a proportion of the estimates of the Department of Defence Production and does not represent the value of the contracts that were awarded by defence production on behalf of the Department of National Defence.
The hon. member for New Westminster referred to one other figure in the same sessional paper. In subsection (j) reference was made to $92,222,000 having to do with the Department of National Defence. Can the minister explain to us whether the figure of $92 million odd includes the amount spent on defence contracts in British Columbia or whether that merely represents the operating account for the defence forces located in British Columbia?


Clarence Decatur Howe: I should think it would surely include defence contracts. You see, we make the arrangements for the procurement. We place the contract, but the money is paid by the Department of National Defence and the commitment is made against funds of the Department of National Defence. Therefore if that is a breakdown of national defence expenditures in British Columbia it would surely include all expenditures made by the Department of Defence Production, except the $22 million voted directly to cover administration.
(Translation) :


J.-Wilfrid Dufresne: Mr. Chairman, before going on to the various items, and since a general debate is allowed on the first item, I believe this is the appropriate time to speak on behalf of a group of employees who are now working for a crown company called Carde, at Valcartier. If my

memory serves me right, on September 27, 1955, a brief in favour of the 40-hour week for all employees of that company was submitted to the hon. Minister of Finance (Mr. Harris). The brief also dealt with salaries. According to the information I have received, I believe that the matter of salaries has been settled, but the employees concerned are still anxiously awaiting a decision on the matter of the 40-hour five day week.
I also understand that nearly all employees of that crown company are now on the five day 40-hour week. However, there are still a certain number, commonly known as guards, or as they are called in English, "security guards", who do not enjoy this same privilege granted to the other employees who work exactly at the same place.
(Text):


John Horace Dickey: Mr. Chairman, on a point of order, the hon. member is entering into a discussion of the Canadian army research and development installation at Valcartier, which comes under the Department of National Defence and for which the Department of Defence Production has no responsibility at all.


J.-Wilfrid Dufresne: May I ask the parliamentary assistant a question? What is that factory at Valcartier which produces ammunition for the Department of Defence Production? That is the one I am talking about.


John Horace Dickey: There is an arsenal of Canadian Arsenals Limited, but my understanding is that the hon. member was referring to the research and development centre there. If the hon. member wants to discuss the Canadian Arsenals plant I suggest that the appropriate time would be to discuss it on the item in the estimates relating to Canadian Arsenals, when we will have the president of Canadian Arsenals here and will be able to deal much more satisfactorily with whatever the hon. member has to say.


J.-Wilfrid Dufresne: I have no objection at all to waiting, but I do think I have the privilege at this stage of speaking on the question on which I have already started to speak. With respect to the parliamentary assistant wishing me to speak later on the subject matter of arsenals, I am ready to do so on items 91 and 92, but the fact is that I have something to say now regarding Canadian Arsenals.


An hon. Member:: What about the goat?


J.-Wilfrid Dufresne: We will speak about the goat at the proper time. Don't make a goat out of yourself. You are doing that too often.
Supply-Defence Production (Translation):
Mr. Chairman, I will continue with these remarks.
I was saying then that I was putting the case of a certain number of arsenal employees, particularly those who are at present employed at Valcartier and who belong to the Amalgamated Civil Servants of Canada. They have asked me in fact to be their spokesman in this house in order to bring to the attention of the department the fact that they believe themselves to be victimized because, unlike all other employees in the place where they work, they do not enjoy a five day, 40-hour week.
On the other hand these employees who are commonly called guards and who work 48 hours receive no more pay than those who work 40 hours.
I am told that until last year these guards were allowed statutory holidays and, if they were called upon to work on those days, they were paid overtime. I am also informed that this practice was discontinued during this year, so that the average pay of these guards has now fallen considerably below that of the other employees who are employed in a like capacity.
I am also told, Mr. Chairman, that at Valleyfield and at St. Paul l'Ermite, the guards who, I understand, are not on the 40-hour week either, have however the advantage of getting their uniforms, buttons and insignia supplied by the company that hires them, which is not the case at Valcartier with regard to the employees 1 just mentioned.
I am of the opinion that those guards are entitled to the same measure of fairness as the other employees with whom they work. After all, they are not only guards. They have taken the oath of special constables, which means that their work is of an important and particularly responsible nature.
Well, I shall be told that, before giving them the 40-hour week, their number should be increased. I am all for it. It would be necessary. If the 40-hour week is applied there, their number will, of course, have to be increased. However, I do not think the government would be any poorer if it agreed to add a few members to the existing staff, in order to grant this class of employees the same privileges as are granted to other employees of the federal government.
Moreover, Mr. Chairman, a great number of employees of other departments, doing exactly the same work, enjoy the 40-hour work week.
6456	HOUSE OF
Supply

Defence Production
Indeed, I am informed that some guards of the Department of Immigration and even of the national harbours board are on the 40-hour week. Moreover, I believe that the guards of penal institutions recently obtained the 40-hour week. The latter's work is therefore absolutely identical to that of guards working either for the arsenals or for crown companies.
It has often been said that the 40-hour week could not apply in certain areas because of local conditions. Well, Mr. Chairman, I believe that, as far as Quebec city is concerned, local conditions were not taken into account in the past, because most of the industrial and commercial establishments in that city do not grant the 40-hour week.
However, post office, customs and excise tax employees as well as other civil servants in various federal departments in the city of Quebec have been granted the 40-hour week.
Mr. Chairman, that is the only suggestion I wish to make at the moment. I am fulfilling a promise I made to those who requested my help. I respectfully submit to the house this matter of the 40-hour week which, I am told, is not enforced either outside the city of Quebec. However, if it is granted at one place, I believe that it should also be implemented at Quebec, but I would not like it to be done to the prejudice of civil servants elsewhere in Canada. If it is put into force elsewhere, I beg the department to grant the privilege of the 40-hour week to the employees in Quebec at the same time as it is granted elsewhere. I urge that this request be taken into serious consideration.
For instance, I suggest that the authorities of the Department of Defence Production and of the Department of Finance get together to study this matter in order to do justice to the employees I have mentioned.
Besides, I do not see why between 5 and 10 per cent of all those who are employed by the government are not enjoying the 40-hour week. Everyone should be on the same level. I therefore take this opportunity of requesting that the five day 40-hour week be granted to all civil servants, including guards employed by the arsenals and crown companies.
(Text):


William Alfred Robinson: Shall the resolution carry?


Mr. Dinsdale:: Mr. Chairman, at page 23 of the report of the department there is a


statement concerning government policy in making procurements in the United Kingdom as well as the United States. I notice that this year the purchases from both the United Kingdom and the United States have dropped as compared with other years. I conclude that situation results from the fact that the rate of procurement has decreased because of the decrease in demand. But in view of the over-all trade position of Canada in relation to both these countries and of our dangerous imbalance with the United States, I imagine that in the instances where heavy expenditures are involved, the policy of the Department of Defence Production is to encourage purchases in the United Kingdom as much as possible.
I wonder whether the minister can inform the committee just how the emphasis is placed with reference to the purchase of radar equipment. We are engaged in a rather large radar defence project. I imagine that much of the material must be purchased outside of Canada. Can the minister give us any details as to how much of this material is obtained in the United Kingdom or in the United States or is produced by our domestic companies engaged in those activities?


Clarence Decatur Howe: As far as radar and electronic equipment is concerned, Canada produces nearly all we use. Of the small balance, the bulk comes from England. In addition to that, a good share of the equipment that is manufactured in Canada is manufactured by a wholly-owned British firm, namely Canadian Marconi; not that that makes much difference. But I would say that of the radar equipment bought by Canada and originating outside of Canada, more of it comes from England than from the United States.


Walter Gilbert Dinsdale: Is it possible to give any statistics with regard to the size of the purchases or the amount?


Clarence Decatur Howe: We would have to analyse our purchases abroad and see how much of the equipment was radar equipment. It is sometimes rather difficult to determine which is radar equipment and which is something else. We often buy it as components. About all I can say is that we buy in England all the radar equipment that we can buy there. But with regard to specially designed projects, such as the mid-Canada line, there is some equipment that must be purchased in the United States because they are the only people who have

developed that particular equipment. Generally speaking, however, we make all 'our radar equipment in Canada.


William Alfred Robinson: Shall the resolution carry?


Douglas Scott Harkness: On page 16 of the report of the Department of Defence Production for 1955 there is a list of ammunition of various kinds. I will not read the list, but I should like to ask the minister where this ammunition is produced and particularly what percentage of it is produced by Canadian Arsenals.


Clarence Decatur Howe: Canadian Arsenals do all the filling. In the case of many types of ammunition, the components are made outside, but they are assembled and filled in the arsenals. That applies to all types of ammunition.


Douglas Scott Harkness: There is quite a bit of this ammunition that would not be of the filled type. I refer to 30, 50 and 20 ^ millimetre small arms ammunition, and anti-tank ammunition. Some of it would be solid shot. Has the minister any figures as to the percentage of our ammuntion production which takes place at Canadian Arsenals and as to who are the main suppliers in addition to Canadian Arsenals?


Clarence Decatur Howe: I have all the information here. Some of it is marked secret and some of it is marked confidential. I will give what I can here anyway.


Stanley Howard Knowles: Which are you giving us? Are you giving us the "secret" or the "confidential" information?


J.-Wilfrid Dufresne: Give us the private one.


Clarence Decatur Howe: As to the 105
millimeter shell, howitzer and gun, that is marked secret but I think I can say that the forging of the empty shell is by Canadian Car and Foundry Company, Montreal; 105 millimetre shell, semi-fixed, HE, forgings by National Steel Car Corporation, Hamilton; machining by Lindsay plant of Canadian Arsenals; 90 millimetre shell, fixed, forging and machining of the empty shell by Trenton Steel Works, Trenton, Nova Scotia; complex new type fuse by International Business Machines, Toronto. Production of filled rounds is well advanced. As I say, the rounds are filled in Canadian Arsenals plants, all of them. Three-inch 50 calibre cartridges, empty shell produced at Lindsay plant of Canadian Arsenals; three-inch, 70 calibre cartridge, Canadian Arsenals Limited. Four-inch calibre cartridges, empty shells produced by the Lindsay plant, Canadian Arsenals; 20 pounder high explosive shell, forging and rough turning by Trenton steel works, Trenton, Nova
Supply-Defence Production Scotia; machining of shells by Robb Engineering, Company, Amherst, Nova Scotia; 17 pounder shell, components by Acme Screw and Gear and Canada Cycle and Motor Company Limited, Toronto; shot assembled by Canadian Arsenals; filling and final assembly by Canadian Arsenals Limited; 40 millimetre cartridge, major components Canadian Arsenals Limited; 60 millimetre mortar bomb, forging and machining, Thompson Products Limited, St. Catharines, Ontario, filled at Canadian Arsenals; 81 millimetre, mortar type-is that enough?


Douglas Scott Harkness: Yes. I do not think we need take up any more of the time of the committee going down the list. Would the minister say it would be correct to say that the actual manufacture and forging of shells, cartridge cases and so forth, generally speaking is done by private companies and the filling is entirely done by Canadian Arsenals?


Clarence Decatur Howe: Yes, I said that.


Douglas Scott Harkness: Practically none of the actual forging and machining in the making of either the shell or the cartridge case is done by Canadian arsenals?


Clarence Decatur Howe: Well, the Lindsay plant is equipped to do that work and is used for odd sizes of ammunition where a contract to industry is not warranted. But generally speaking my hon. friend is correct, except for the Lindsay plant.


Douglas Scott Harkness: Are any of the plants of Canadian Arsenals, outside of the Lindsay plant, and particularly the plants where filling takes place, equipped to do the full manufacture of these shells, or are they only equipped to fill shells?


Clarence Decatur Howe: They are equipped to do all the manufacture of small arms, 20 millimetre and down, but all the artillery ammunition, no, except for the Lindsay plant.


Douglas Scott Harkness: Apart from the small arms it has to be a matter of getting the shell or cartridge case, as the case may be, made at some forging works or something of that kind. Then also in regard to ammunition there is an item that intrigues me. There is a new type of anti-submarine projectile being produced, and I wonder if the minister could give us any information as to what type of projectile it is; and is it Canadian Arsenals that are making it or some other company?


Clarence Decatur Howe: Yes. It is marked confidential, but we call it the "Squid". The empty projectile is made by Chatco Steel Products and the filling is by Canadian Arsenals.
6458	HOUSE OF
Supply

Defence Production


Douglas Scott Harkness: Is it an air to sea missile or a ship to submarine missile?


Clarence Decatur Howe: Ship to submarine.


Donald Methuen Fleming: There are certain questions I asked when I spoke in a general discussion on June 29. I wonder if the minister can now give us that information. The first question was as to the actual expenditure last year.


Clarence Decatur Howe: You mean by the department or the total of all purchasing?


Donald Methuen Fleming: By items; the expenditures were not complete when the estimates were made, and the figure as to expenditures is based upon the actual expenditures up to last autumn and then an estimate as to the expected expenditures for the balance of the fiscal year. Now could we have the actual figure with respect to each item.


Clarence Decatur Howe: These are the actuals for 1955-56; vote 85, $6,391,430.


Donald Methuen Fleming: No, that is the estimate. It is the actual expenditures that I wanted.


Clarence Decatur Howe: I am told that the actual figures only came in a few days ago. We do not appear to have them properly tabulated. Will it be all right if I produce them when we sit again in this committee?


Donald Methuen Fleming: I want them before this item is carried. I might say to the minister that on June 29 I indicated a number of questions and a number of matters on which information was requested so the minister would know what they were and his officials could gather the information together. I thought in that way we would make a contribution to expediting a review of these particular estimates. If the minister has not that one-


Clarence Decatur Howe: We seem to have your other questions except that one. We do not seem to have that particular figure.


Donald Methuen Fleming: I shall pass to another question and we can come back to that later, before this item is carried. I hope the minister will have it then. The next question I asked the minister was as to the relationship between his department and the Department of National Defence for which it is acting in so many ways as a buying agent. Is the relationship between the two departments precisely as it has been in the past?


Clarence Decatur Howe: Precisely the same.


Donald Methuen Fleming: In other words the Department of National Defence simply gives a requisition to the Department of Defence


Production on which that department acts without questioning the requisition in any case?


Clarence Decatur Howe: That is right.


Donald Methuen Fleming: I asked a question also concerning the revolving fund in the department. I drew attention to what the report of the department has to say about the revolving fund and made a certain comment on it. The page references are 53 and 58. I asked for more information concerning the revolving fund, and the use that is being made of it.


Clarence Decatur Howe: In the first place, there are inventories of strategic materials which are held as emergency stockpiles and which are subject to little or no outward movement. The second category, covering transactions in cloth and wool, involves both inventories and the sale of these items to contractors when required. While some items remain fairly static, there is a good deal of movement in and out of the warehouse. The third category covers components required in shipbuilding, ammunition, gun and aircraft programs. This is primarily a financing operation, as these items move directly from the supplier to the contractor for incorporation in the end item.
Where crown-operated warehouses are involved, a mark-up is charged, based on actual cost of warehousing and other charges. In all the other cases, actual costs of the components are charged to the revolving fund and recouped when payments are made for the end items.
The details of the revolving fund appear on page 53 of the department's annual report for the year ended December 31, 1955. Then the hon. member had some questions on the utilization.


Donald Methuen Fleming: I will come to that. But on the revolving fund, what is the maximum at any time that has been actually committed in that revolving fund? There is a total of $150 million made available by parliament under two grants. There was $100 million by the original act, and then a further $50 million provided in vote 825 of the supplementary estimates for the year 1951-52. Is the revolving fund being used now to the same extent as formerly, or are there the same demands upon it?


Clarence Decatur Howe: No; January, 1954, was the peak of the revolving fund. At that time there was $111 million out; as of March 31, 1955, $70 million, and March 31, 1956, $59 million. If the present activity is maintained or the downward tendency continues, it appears possible to operate within the statutory maximum of $100 million, and on that basis the supplemental $50 million

would seem superfluous. Incidentally, we do not keep that money in the bank in a special account. We have the right to draw down up to these limits, but, as I say, as things appear now we could drop $50 million from that authorization.


Donald Methuen Fleming: Well, as I understand the effect of the fund, the $100 million and the amount in item 825 of the supplementary estimates of 1951-52, by reason of the provisions of the act are available for the continued operation of the revolving fund. In other words, it is not like a normal annual vote. The act itself makes provision for the addition to the revolving fund, and unless there is some amending bill brought in the $50 million continues to be available as part of the revolving fund.
It is quite clear from what the minister has said, I think, that there has been no drawing on that additional $50 million for a couple of years now, and that the commitments on the revolving fund are likely to be reduced from this point on. Therefore I raise directly the question as to whether the time has not come for the return of that $50 million. In other words, surely the $100 million in the original act would be adequate, and parliament would be justified now in withdrawing the additional $50 million as being no longer necessary.


Clarence Decatur Howe: Mr. Chairman, I would not mind bringing in a bill at the next session to reduce the amount available to the revolving fund. As my hon. friend will understand, if the money is not used it does not leave the treasury. It is merely taking away the right to use the revolving fund to that extent. This department will have no objection whatever to a bill reducing the amount of the revolving fund to $100 million.


Donald Methuen Fleming: I realize that if the money is not used it remains there unused; but my concern is to maintain the principle of parliamentary control. In regard to expenditures out of revolving funds there is, I think, a particular reason, because revolving funds sometimes are hard to reconcile with the principle of parliamentary control. We have them in several departments. For instance, we have them in the Department of Transport, and the Auditor General has been asked more than once about the operation of those revolving funds, because of the necessity of maintaining the strictest parliamentary control. That is my interest in keeping the amount available in that revolving fund down to what is reasonably necessary to meet the foreseeable requirements of the department, and I welcome the statement of the minister that he is prepared to bring forward
Supply-Defence Production a bill at the next session of the house to remove that superfluous $50 million.


Clarence Decatur Howe: I can now give my hon. friend the information that I thought I could not give him. It has appeared from somewhere. Actual expenditures last year; administration, $5,831,835; capital assistance, $2,084,615.


Donald Methuen Fleming: Can the minister give us the amounts of the corresponding items in order here? Item 85 is the figure of $5 million.


Clarence Decatur Howe: Departmental administration, item 85, $5,831,835; item 86, $160,499; item 87,	$2,084,615; item 88,
$203,000; item 89,	$3,388,371; item 91,


Donald Methuen Fleming: The minister has not given item 91.


Clarence Decatur Howe: That is the last one.


Donald Methuen Fleming: Item 91 is the last one? Was there no expenditure at all for item 90?


Clarence Decatur Howe: No.


John Horace Dickey: That is the $1 item.


Clarence Decatur Howe: That is the $1 item.


Donald Methuen Fleming: I am always interested in getting these figures of actual expenditure, because they throw a good deal of light on the ' direction in which expenditures are moving. I consider it our duty to check these expenditures as closely as the rather awkward procedure in this large committee of supply permits.
Now, the book of estimates would appear to indicate that the department on this large first item of administration is budgeting for a reduction from $6,391,430 last year to $6,145,727 this year. In other words the book of estimates shows a decrease of $245,703. But it is always well to look beyond those figures to get the figures of actual expenditures, and here we find that the amount actually.spent by the department, the amount that was adequate to cover all the needs of this department under the administration item, was $5,831,835, which indicates that the department this year is not budgeting for a decrease as compared with last year's actual requirements, Mr. Chairman, but that the department is actually budgeting for an increase of $314,000; for the difference between this year's estimates of $6,145,727 and last year's actual expenditure of $5,831,835, according to my arithmetic, indicates the department is asking approval this year of a sum $314,000 larger than was spent last year. Therefore I ask the minister what

Supply-Defence Production accounts for the increase? Is there anything more that enters into the increase than increases in salary rates?


Clarence Decatur Howe: It is an increase of about 5 per cent. I do not think you would need to go beyond the increase in salary rates to make up the difference of 5 per cent.


Donald Methuen Fleming: The number on the staff of the department is almost the same as the year before, according to the book of estimates. If the minister says this is simply an increase in salary rates that is his explanation, but I do draw attention to the fact that on this item the department is budgeting not for a decrease, as the book of estimates would indicate, but for an actual increase over last year's expenditure.
The next question, Mr. Chairman, was in regard to the basis of purchase. I drew attention to the sentence on page 24 of the annual report of the department, which reads:
With the increase in Canada's industrial defence potential it has been possible to purchase more goods in Canada, to increase the number of cases in which contracts are placed on the basis of competitive tender, and to move from cost plus to target price or negotiated firm price contracts in those fields in which Canadian firms have gained more operating experience.
Looking at that statement I asked, as indicated at page 5524 of Hansard, for detailed information on the number and value and proportion of the total of contracts placed on competitive tender and the numbers and amounts and percentages of those placed on a cost plus basis, or a target price basis, or negotiated firm price basis.


Clarence Decatur Howe: Yes, Mr. Chairman. For the fiscal year ending March 31, 1956, over 116,000 orders were placed as a result of competitive tenders. In terms of value these contracts represented about 60 per cent of all contracts placed by the department during that period, a very appreciable improvement over the previous year when some 30 per cent by value were based on competitive tender.
The analysis of non-competitive or negotiated contracts for the last fiscal year shows that most of these contracts in terms of value were placed by the head office of the department. Contracts amounting to $242 million were in this category, while the balance of non-competitive contracts amounting to $11 million were placed by the district offices of the department.
Of the $242 million, $41 million were on the basis of firm price, $55 million were on the basis of cost plus, $14 million were ceiling contracts and $2 million were target price.


Donald Methuen Fleming: Would you give the third figure again, please?


Clarence Decatur Howe: Fourteen million dollars were on ceiling contracts. The balance of $130 million were placed on a price to be negotiated basis and have not been finalized.
Of the $11 million placed by district offices no breakdown is available, but most of these contracts would be under $10,000 and would be for items for which there is only one source of supply; for instance, spare parts for the repair or maintenance of items used by the services.
I would like to point out that because a contract is negotiated it does not follow that the terms are less favourable to the government. Rates of profit are maintained at fair and reasonable levels, and in many cases the department is receiving discounts that are equal to or more than those allowed by the contractor to his most favoured customer. Moreover, in most non-competitive orders an audit is performed and certain qualifications are imposed by the department on the determination of the costs upon which the agreed rate of profit is to be applied. Does that answer the question?


Donald Methuen Fleming: Yes. I thank the minister for that information. There is one thing I did not get clear as the minister was reading over the figures. I believe the minister said that 116,000 orders were placed as competitive orders which constituted 60 per cent of all contracts. Was that in number or amount?


Clarence Decatur Howe: By value.


Donald Methuen Fleming: I am sure, Mr. Chairman, that all hon. members would be glad to see an increase in the proportion of total business the department is doing which is now being done by competitive tender. May I ask the minister if the outlook is such that he considers this desirable trend may be expected to continue?


Clarence Decatur Howe: Well, it is doubtful. For instance, all the equipment for the mid-Canada line is very secret and the location of the sites is secret. It is impossible to do other than negotiate a contract. The CF-105 is similar, and we are breaking new ground there with a new aircraft. It is quite impossible, of course, to get anything like a target. All you can do there is proceed on the basis of cost plus until you get to the production stage; then after that there is a target arranged for a certain number of planes and a lower target is arranged for subsequent ones as the curve goes down. For defence procurement there is a limit to the amount of equipment that may be purchased by competitive tender. It means there must be at least two sources of the material before you can get competitive tenders.


Donald Methuen Fleming: Are we to infer that the minister thinks we now have hit the maximum in the proportion of contracts placed by competitive tender?


Clarence Decatur Howe: No, but we have hit a level where I would say it would be a toss up whether the percentage for next year would be greater or less. It depends entirely on the predominance of the work and the nature of it.


Donald Methuen Fleming: The next question relates to the Defence Production Act. As indicated at page 5523 of Hansard, I asked the minister how many orders have been made under that act, and I asked for their listing or classification under the various sections of the act. In other words, as I said at that time, what orders have been issued under each of the sections of the act conferring powers upon the government or the minister?


Clarence Decatur Howe: No orders are now in effect.


Donald Methuen Fleming: Excuse me, but the period I have in mind would be, let us say, from the beginning of 1955. If the minister has more figures we had probably better hear them first.


Clarence Decatur Howe: All the orders were revoked before 1955. There are no orders now in effect. The only orders issued under those sections of the Defence Production Act conferring powers on the Canadian government or the Minister of Defence Production are those covering the designation and control of essential materials. These consist of orders in council under section 30 of the act and orders of the minister under section 31 of the act. Other sections of the act referred to above are 21, 23, 24, 26, 27, 28, 29 and 33. No orders were issued under any of these sections.
I can give my hon. friend a list of the orders that have been issued since April, 1951, to
25,	1956
Supply-Defence Production May 31, 1954. The last one was issued on May 31, 1954.


Donald Methuen Fleming: Perhaps it might be convenient, Mr. Chairman, and would save time, if the list were put on Hansard without taking the time to read it, if that is the wish of the committee.


Clarence Decatur Howe: They have all been revoked and I doubt if it is worth cluttering up Hansard with that information. There is a long list here, but they are all orders that expired not later than 1954.


Donald Methuen Fleming: I would be satisfied if the minister could supply a copy to those hon. members who are interested.


Clarence Decatur Howe: I will be glad to do so. I will give my hon. friend this copy if he wants it.


Donald Methuen Fleming: Mr. Chairman, it is six o'clock and I would just make this one comment on the minister's last answer. It has not been found necessary by the government or the minister to issue a single order under this act since the debate a year ago on the continuation of the minister's powers under this act, and I think that is an eloquent tribute to the position taken by the opposition at that time on this matter.


Some hon. Members:: Oh, oh.


William Alfred Robinson: Shall the resolution carry?


Donald Methuen Fleming: No. It is six o'clock.
Item stands.
Progress reported.



BUSINESS OF THE HOUSE

Walter Edward Harris: We shall continue tomorrow with these estimates and then take the estimates of the Department of National Health and Welfare and the C.B.C.


[Stage Direction]
It being three minutes after six o'clock the house adjourned, without question put, pursuant to standing order.
[Stage Direction]
Thursday, July 26, 1956