1956-07-16

Mr. Stanley Knowles (Winnipeg North Centre) moved: for leave to introduce Bill No. 441, to provide for pay for statutory holidays for employees and for pay for work performed on statutory holidays.


An hon. Member:: Explain.


Stanley Howard Knowles: Mr. Speaker, the purpose of this bill is to make provision for at least eight statutory holidays with pay each year for all employees in Canada who come under the legislative jurisdiction of this parliament. It also provides for additional pay at overtime rates in the case of any employees required to work on statutory holidays.
This is a companion bill to Bill No. 211. Taken together they provide each year a minimum of two weeks' vacation with pay and a minimum of eight statutory holidays with pay for all workers in Canada who come under federal labour jurisdiction.
Motion agreed to and bill read the first time.



INTERNATIONAL WHEAT AGREEMENT

[Stage Direction]
On the order:
Government notices of motions-the Minister of Trade and Commerce-the following proposed resolution:
That it is expedient that the houses of parliament do approve the international wheat agreement opened for signature at Washington on May 14, 1956, and that this house do approve the same.
Mr. Speaker:: This is transferred to government orders.



ST. LAWRENCE SEAWAY AUTHORITY ACT AMENDMENT PROVIDING AUTHORITY TO CONSTRUCT AND OPERATE BRIDGE

Hon. W. E. Harris (for ihe Minister of Transport) moved: that the house go into committee at the next sitting to consider the following resolution, which has been recommended to the house by His Excellency:
That it is expedient to amend the St. Lawrence Seaway Authority Act by repealing
subsection 1 of section 14A thereof as enacted at the present session of parliament and substituting the following subsection therefor:
"14A. (1) The authority may, alone or jointly or in conjunction with the St. Lawrence Seaway Development Corporation of the United States, construct, maintain and operate, either
(a)	a bridge over Pollys Gut in the St. Lawrence river for the passage of pedestrians, vehicles, railway trains and for other like purposes, with all necessary approaches and facilities, from Cornwall island in the county of Stormont in the province of Ontario to Massena point in the state of New York, or
(b)	a bridge over the south channel in the St. Lawrence river for the passage of pedestrians, vehicles and for other like purposes, with all necessary approaches and facilities, from Cornwall island in the county of Stormont in the province of Ontario to the United States mainland in the state of New York."


[Stage Direction]
Motion agreed to.


[Stage Direction]
On the orders of the day:
Mr. Howard C. Green (Vancouver-Quadra):: May I direct a question to the Minister of Justice. Before I do so, I should like to say how very glad I am-and I am sure everyone else in the house feels the same way about it-to see him back. Could the minister give the house a report concerning the action taken by the Royal Canadian Mounted Police this summer in refusing to issue licences to prospectors or men engaged in similar work in British Columbia to carry a revolver? There is quite a lot of objection to that course being followed. Apparently this is the first year it has been done, and the result may be that some of these men will lose their lives.


Hon. Stuart S. Garson (Minister of Justice):: Mr. Speaker, in rising to reply to my hon. friend's question I wish to thank him for his complimentary reference to myself and to say that there is no person in the house any more glad that I am back than I am myself. With regard to the question which he has asked without notice-


Howard Charles Green: I did not realize the minister would be here.


Stuart Sinclair Garson: No, quite-my impression is that the Royal Canadian Mounted Police, in taking the actions which they did, have in every case administered the law as it stands. But I think I could perhaps give a more
5982	HOUSE OF
Inquiries of the Ministry satisfactory answer to my hon. friend if I checked with him in order to put myself in a position to explain how it was that they have administered the law in these cases to which my hon. friend has referred.


Howard Charles Green: I point out that apparently this practice has not been followed in earlier years and that for some reason or other the police have cracked down this year. It may be that the law should be amended but something should be done about it quickly because these men are forced to go into the bush without revolvers.


Stuart Sinclair Garson: The reason I answered in the way I did is that one or two individual cases came to my attention and I checked them and found that they had been dealt with in accordance with the law, and that what in my opinion was proper discretion had been exercised in those particular cases. I do not know whether or not these are the ones to which my hon. friend refers, and I think it would be helpful to me if he could give me the names of some of the cases he has in mind.


Mr. Herridge:: May I say that this is a matter of great interest to a number of my constituents, and I would ask the minister to inquire into the circumstances and what has been the practice in the past.



NEWFOUNDLAND-REQUEST FOR INVESTIGATION INTO DELAY IN PAY

[Stage Direction]
On the orders of the day:
Mr. C. W. Hodgson (Victoria, Oni.):: should like to bring to the attention of the Minister of Justice the back pay of the mounted police. I understand that in Newfoundland they are behind some three or four months and the amounts run from $43 to $55 a month for these constables. Will the minister look into the situation and give us a reply tomorrow?


Stuart Sinclair Garson: Yes, Mr. Speaker.



AIR TRANSPORT


[Stage Direction]
On the orders of the day:
Mr. J. G. Diefenbaker (Prince Albert):: should like to direct a question to the Prime Minister. Why was it that during the recent official trip of His Excellency the Governor General to western Canada he was required to travel in a more or less second-class unpressurized aircraft rather than one similar to that properly used by the Prime Minister and also those used by the Department of Transport? Surely His Excellency, as Her


Majesty's representative, should not be required to travel in a second-class aircraft.


Right Hon. L. S. St. Laurent (Prime Minister):: I quite agree with the hon. gentleman and I will inquire into the situation. I am quite sure there must have been good reasons for the fact that the C-5 was not available to His Excellency for that trip. I will make inquiries as to the reasons and make a further reply when I have received the information.



ROYAL CANADIAN AIR FORCE


[Stage Direction]
On the orders of the day:
Hon. George A. Drew (Leader of ihe Opposition):: I wish to direct a question to the Minister of National Defence. Has the minister taken any action in regard to 424 squadron at Hamilton as a result of the representations which have been made to him?


Hon. R. O. Campney (Minister of National Defence):: No, Mr. Speaker. I have received a number of representations personally and by letter from persons in Hamilton, and last week the chief of the air staff discussed the matter fully with a delegation of air force reserve officers from the squadron. These officers requested that they be given more time to prepare some further representations which they wished to make. That request was granted, and I believe they are now preparing some further data which they wish to take up with the chief of the air staff.


George Alexander Drew: In view of the fact that the subject is being given further consideration, will the Minister of National Defence consider taking steps to permit flying to continue at Mount Hope until the department has had an opportunity of considering the further representations which apparently have been invited as well as permitted?


Ralph Osborne Campney: Mr. Speaker, I shall be glad to take up with the chief of the air staff the question of whether flying should be continued under present circumstances at Mount Hope. I am not just sure as to the exact position at the moment.


George Alexander Drew: I have one further supplementary question in relation to the same subject. If there is in fact to be a reconsideration of this matter, as the minister has implied, would it not be reasonable to permit flying to continue so that the squadron may be maintained in being until such time as the decision has finally been made?


Ralph Osborne Campney: It might be, Mr. Speaker; but I am not familiar with the state of flying operations at the Mount Hope airport since the decision was taken. I therefore would wish to take the matter up with the chief of the air staff.



IRRIGATION


[Stage Direction]
On the orders of the day:
Mr. H. R. Argue (Assiniboia):: Mr. Speaker, I should like to direct a question to the Prime Minister arising out of the question I addressed to the Minister of Agriculture on June 26, and his reply that it would be referred to the Prime Minister on his return. I think the question is appropriate since we are about to launch into a discussion of federal-provincial relations. The question is this: Has the federal government now decided that the building of the South Saskatchewan dam would be in the national interest? Has the government made any offer to Saskatchewan as to the terms on which it would agree to proceed with such construction?


Louis Stephen St-Laurent: Mr. Speaker, the answer to the two questions is a negative one. No decision has yet been made that the government would take the responsibility of recommending that project as one that was in the national interest.



NATIONAL REVENUE


[Stage Direction]
On the orders of the day:
Mr. J. H. Blackmore (Lethbridge):: I wish to direct to the Minister of National Revenue a question of which I have already sent him notice. Has the minister received a letter from Dennis O'Connell, secretary of the Lethbridge chamber of commerce, stating that there were rumours that the income tax office in Lethbridge is to be closed and asking that the minister confirm that the rumours are well founded or deny that there is any truth in them?


Hon. J. J. McCann (Minister of National Revenue):: I thank the hon. gentleman for having given me notice of his intention to ask this question. The answer to the first part is yes. We have received a communication from Mr. O'Connell, executive secretary of the Lethbridge chamber of commerce. Following the policy of the department, and in the interests of economy, all other suboffices of the taxation division have been closed. The office at Lethbridge will be closed, effective
Inquiries of the Ministry September 1, 1956. It is felt that the taxpayers will be better served by dealing directly with the Calgary district office instead of through an intermediary suboffice.

On the orders of the day:


John Horne Blackmore: I desire to ask the Minister of National Revenue a question supplementary to the one which I have already asked here. Will he tell the house tomorrow, or as soon as he can get the information together, how many stations or income tax offices similar to the one in Lethbridge have been closed or are being closed in each of the various provinces?


James Joseph McCann: They have all been closed except Lethbridge, which will be closed on September 1. We find that running suboffices is not an economic thing, although at times during the year it is convenient for the particular residents of the community. But with modern transportation facilities, and with the full complement of people we need to run a tax office, we feel that Lethbridge can be better served from the main office in that part of Alberta, which is Calgary.


John Horne Blackmore: Mr. Speaker, I ask the minister if he can recall right off and give the house the number of similar offices that have been closed or are to be closed in western Canada this year.


James Joseph McCann: Well, there are none in western Canada because Lethbridge was the only suboffice we have in western Canada.



PUBLIC WORKS


[Stage Direction]
On the orders of the day:
Howard Charles Green: May I direct a question to the Minister of Public Works? Press dispatches from the west coast indicate that work on the fish dock in False creek in Vancouver has been stopped, or in any event has been delayed, and that the city council has protested to both this government and the provincial government. Can the minister give the house a report?
I tried to reach him before eleven o'clock but he was not in his office.


Hon. Robert H. Winters (Minister of Public Works):: Mr. Speaker, I am not aware of any stoppage of work. I looked at that site a few months ago and work was going on then.
I have received no report to the contrary, but I will look into the matter.
5984	HOUSE OF
Inquiries of the Ministry NATIONAL DEFENCE



RELEASE OF F-86 AIRCRAFT AS MUTUAL AID TO GERMANY

[Stage Direction]
On the orders of the day:
George Alexander Drew: I wish to direct a question to the Minister of National Defence. Does he intend to inform the house as to the general arrangements under which 75 fighter aircraft are to be delivered to Western Germany, as announced in the press over the week end?


Ralph Osborne Campney: Mr. Speaker, it has not been the custom to make announcements in the house with regard to transfers under mutual aid, but I have prepared some facts which I shall be glad to give to the hon. member and the house.
In accordance with the normal procedure which has been established to handle mutual aid, the advice of the supreme allied commander was sought last December in regard to the release of 75 F-86's which would become available during the latter part of this fiscal year.
The supreme allied commander recommended that the release of these aircraft would make the greatest contribution to NATO if the whole of these aircraft were released to the federal republic of Germany to allow the early build-up of the West German forces. This recommendation was further discussed with the standing group in early February and was later confirmed by the Canadian government, and as is the usual custom, the offer was made through diplomatic channels.
This is exactly the same procedure which has been used in the past for the release of other mutual aid, including fighter aircraft. Three hundred and seventy F-86's were transferred as mutual aid to the United Kingdom jointly by Canada and the United States in 1952-53. One hundred and seven aircraft were allotted to each of Greece and Turkey in 1954 and deliveries are just being completed.
There have been numerous transfers of items of mutual aid throughout the years and it has not been customary to announce any such transfers in the house, but references have been made to our mutual aid program in the white paper and in the discussion on the mutual aid item of the national defence estimates.


John George Diefenbaker: May
I ask a supplementary question arising out of the answer given by the minister? Who is on the committee of NATO that makes
[Mr. Winters.)

the determination as to the allotment of aircraft? Is its consent required to any allotment such as this being made? Has it been consulted in reference to the request of Israel for 24 fighter aircraft?


Ralph Osborne Campney: The committee which deals with and recommends the allocation of mutual aid, subject to the recommendation of the supreme commander, is known as the standing group. The standing group consists of a representative of each of Great Britain, the United States and France. The procedure that is followed, and which I have just outlined, is the usual procedure in securing the approval of mutual aid transfers.
The question to which the hon. member referred having to do with Israel has nothing to do with NATO procedure and has nothing to do with mutual aid. It is an entirely different matter. The procedure to which I have been referring is the one that covers mutual aid transfers to NATO allies.


John George Diefenbaker: May I ask the minister, is it a fact then that aircraft can be furnished to Israel or to any country by Canada without the other nations of NATO in any way being consulted as to whether or not they approve of that being done?


Ralph Osborne Campney: Well, Mr. Speaker, the
question of gifts, sales or disposal of equipment to countries other than those within the NATO alliance is a matter between the countries concerned, and has never been regarded as coming within the purview of NATO. If we make gifts or transfers within NATO, the procedure I have outlined is followed. If we are making transfers to countries outside of NATO, it is a matter of negotiation and discussion between the countries concerned and ourselves.



PIPE LINES


[Stage Direction]
On the orders of the day:
Stanley Howard Knowles: Mr. Speaker, may I ask the Prime Minister whether he is yet in a position to answer my question of Friday concerning Mr. Victor G. Bartram, general manager of Northern Ontario Pipe Line Crown Corporation, with respect to his directorships in private companies?


Louis Stephen St-Laurent: No, Mr. Speaker, I am not yet in a position to answer the hon. gentleman's questions.



ATOMIC ENERGY


[Stage Direction]
On the orders of the day:
Mr. Solon E. Low (Peace River):: Mr. Speaker, may I direct a question to the Secretary of State for External Affairs. Would he care to tell the house this morning how he feels about Dmitri Shepilov's suggestion that the nations reach some agreement other than within the United Nations or outside of it for putting an end to atomic energy experimentation and explosions?


Hon. L. B. Pearson (Secretary of Stale for External Affairs):: Mr. Speaker, I think that is a question that might better be answered in a general discussion on external affairs. However, I would refer my hon. friend to the statement made by the Minister of National Health and Welfare at the disarmament committee of the United Nations the other day which did give the present Canadian position on this matter.

On the orders of the day:


John Horne Blackmore: Mr. Speaker, I desire to ask a question of the Secretary of State for External Affairs supplementary to the one which was asked of him by the hon. member for Peace River (Mr. Low). When the minister goes into detail concerning the invitation which Canada apparently has received to discontinue the practice which we have been carrying on of training ourselves in the use of nuclear weapons, will the minister hold himself prepared to explain to the committee and the hon. members what weapons Canada could have recourse to which would help compensate for the colossal disparity of numbers which would be in existence once we engaged in a major conflict with the 800 millions of the communist world?


Lester Bowles Pearson: Yes, Mr. Speaker.



POST OFFICE DEPARTMENT


[Stage Direction]
On the orders of the day:
Mr. W. M. Hamilion (Notre Dame de Grace):: Mr. Speaker, I should like to ask the Postmaster General whether his deputy minister's announced intention made on Friday is of the irrevocable type or of the more liberal revocable type?


Hon. Hugues Lapointe (Postmaster General):: Mr. Speaker, like my hon. friend, I did read with interest the articles which appeared in the various papers on Friday. I was not surprised, since the deputy minister had
Inquiries of the Ministry announced publicly on three occasions, to my knowledge, before groups of postal employees that it was his intention to retire from the service after the universal postal union congress in 1957 and after 41 years' service. I must say that he had also, to my knowledge, informed his associates in the department and that he had informed me when I first took over this portfolio.


William McLean Hamilton: As
a supplementary question, did the Postmaster General study carefully the reasons given on Friday by his deputy for his proposed retirement?


Hugues Lapointe: Well, Mr. Speaker, I did read the newspaper articles. The only reason directly attributed to the deputy minister himself that I know of was that he felt that a man after 41 years' service in a high level position of responsibility such as that of deputy minister should, if he is capable, permit others to have access to these higher positions. That, to my knowledge, is the only statement of any authority that he did give. I have questioned Mr. Turnbull and he told me, and pointed out rightly, that the remainder of the statements in the various articles which had been attributed to him were purely newspaper speculation.


Mr. Hamilton (Noire Dame de Grace):: Mr. Speaker, as a supplementary question-


Some hon. Members:: Order.


Mr. Hamilion (Noire Dame de Grace):: This, Mr. Speaker, is a supplementary question.


Some hon. Members:: Order.


John Borden Hamilton: As
a supplementary question-


An hon. Member:: Order.


Francis Alvin George Hamilton: Mr. Speaker, as a supplementary question-


Mr. Speaker:: Order.


Francis Alvin George Hamilton: Mr. Speaker, as a supplementary question, would the Postmaster General inform the house where he saw the statement which he attributed to a press conference to the effect that the deputy postmaster general was retiring in order to allow others to move into his position?


Hugues Lapointe: Mr. Speaker, I am sorry; I did imply it was a press statement. I should have said it was a statement that came over the C.B.C. It was given by the deputy minister to the C.B.C.
5986	HOUSE OF
Federal-Provincial Financial Arrangements INQUIRY FOR RETURN HIGHWAY BRIDGES-FEDERAL CONTRIBUTIONS On the orders of the day:


Mr. F. G. J. Hahn (New Westminster):: Mr. Speaker, I should like to direct a question to the Secretary of State. When may I expect an answer to my question which was made an order for return on April 11 of this year?


Hon. Roch Pinard (Secretary of State):: shall inquire, Mr. Speaker.



PUBLIC SERVICE


[Stage Direction]
On the orders of the day:
Mrs. Ellen L. Fairclough (Hamilton West):: Mr. Speaker, I should like to direct a question to the Secretary of State. Since it is now a year from the time a vacancy occurred on the civil service commission and since there have been repeated statements to the effect that a woman would be appointed to that vacancy, can the Secretary of State report to the house what progress has been made with reference to filling that position?


Roch Pinard: Mr. Speaker, I did refer to that during the discussion of the estimates of the civil service commission, and when an announcement is ready it will be made in due course in the house.



TAXATION


Walter Edward Harris: that the house go into committee to consider the following resolution:
That It is expedient to introduce a measure to provide that the Minister of Finance may pay to a province, out of the consolidated revenue fund, in respect of any fiscal year in the period commencing on the first day of April, 1957, and ending on the 31st day of March, 1962
(a)	a tax equalization payment with respect to individual and corporation income taxes and succession duties;
(b)	a provincial revenue stabilization payment with respect to such taxes; and
(c)	a tax rental payment in accordance with a tax rental agreement that may be entered into by any province as an alternative to levying such taxes on its own behalf;
and also to authorize tax collection agreements with the governments of the provinces.
Motion agreed to and the house went into committee, Mr. Robinson (Simcoe East) in the chair.


Walter Edward Harris: Mr. Chairman, all the relevant correspondence and documents have been tabled from time to time in connection with (Mr. Lapointe.]

the various steps which were taken to arrive at the point we have come to today so I do not intend to take very long at the resolution stage in dealing with this particular matter; however, since the resolution does precede a bill which in many respects will be substantially different from the tax rental arrangements under which we have been operating since 1952, I think it would be appropriate to make some remarks and to place a few explanations before the committee.
As the resolution indicates, it will precede a bill which will implement the offer made to the provincial governments as a result of the several conferences held during the past 15 months. A great deal of study has been given to the subject of financial arrangements with the provinces in that time. We met first on April 26 of last year to decide what matters should receive consideration. We met again in June to work out an equitable method of sharing the costs of unemployment assistance, and our legislation with respect to this received the royal assent last week. On October 3, the main conference was held. At that time, while fiscal matters were the main topic of discussion, other important subjects of mutual concern were also considered. In November, we agreed to pay a greater share of trans-Canada highway costs. In January of this year, the sub-conference on health insurance met, resulting in specific proposals being made to the provincial governments for federal participation in a national scheme. The final conference on the fiscal proposals took place on March 9 and at that time the plan which is the basis of the bill was discussed in detail, it having been made available in a proposal by letter dated January 6. In addition to these ministerial conferences, numerous meetings have been held at the official level to discuss details of the various questions brought forward. Arrangements have been made for the continuation of these official meetings from time to time in the future.
Government in a federation is not a simple process for the provincial and federal governments. For that matter government in these times is not a simple matter anywhere, but additional complications are present in a federal state in the fact that by its very nature the freedom of action that exists in a unitary state is absent. For all this there is no questioning that it is the form best suited to our needs, for only in this way is a reconciliation possible of the differing factors of economics, geography, race, custom and

religion. The fathers of confederation understood this, even though some of them, including Sir John A. Macdonald, believed that a unitary state would have been more suitable in the circumstances then prevailing.
As I see it, the federal government has two purposes that are essentially complementary and not conflicting. It must perform those functions of national interest that are specifically assigned to it under the constitution and further, and this is of equal importance, it must act as a unifying influence, drawing together, by all proper means at its disposal, the constituent parts of the nation. The federal government is not the creature of the provinces nor are the provinces creatures of it. Each has its own assigned responsibilities, but it is the federal government that must provide the unifying force that makes a nation out of what would otherwise be a confederacy of the loosest sort. And so it follows that in the fiscal arrangements with the provinces, the federal government must follow a policy advantageous to the best interests of the whole of the country.
It is in this atmosphere that we have worked out what we consider to be a fair and logical approach to our fiscal problems with the provinces. I said "approach". I was not even tempted to say "solution" because no final solution is practicable, and in this fact lies much of the merit of these limited arrangements. Times and men both change, and our problems will change with them. Always, however, we should have a plan which is equitable and which makes it possible, in so far as this can be done, for all citizens of Canada, no matter where they live, to enjoy that reasonable standard of services that they have a right to expect.
There is, I am sure, no necessity for me to go into the background of federal-provincial financial relations at this time. The historical aspects of the subject are readily available and have been placed before the house on many occasions. I believe, however, that a brief reference to the events leading up to these current arrangements might serve a useful purpose.
The wartime tax agreements, while limited in scope, were the forerunners of the tax rental agreements of 1947 and 1952. They were intended as temporary expedients to permit the federal government to raise the necessary high wartime revenues as equitably as possible between taxpayers, while at the same time permitting the provincial governments to operate on an assured income sufficient for their needs in time of great national emergency. They were emergency solutions to a short-term problem and obviously never were intended to be applied
16. 1956	5987
Federal-Provincial Financial Arrangements to times when a normal expansion of provincial services would be required.
These agreements, that is those which were made at the end of the war-time period were strictly fiscal in nature and did not attempt to cover the broad social and economic fields as visualized in the original post-war proposals. Under the first post-war tax rental agreements, Canada rented from all the provinces, except Ontario and Quebec, the fields of succession duties, individual and corporation income taxes and corporation taxes, in return for payments which from a guaranteed minimum would increase with changes in population and gross national product per capita.
In the period of these agreements, April 1, 1947, to March 31, 1952, in line with decreasing costs of defence, the federal government was able to make substantial advantages available to the provinces by withdrawing from certain of the consumption tax fields it had occupied during the war. In addition, of course, we continued to withdraw from other fields down to and including 1953, when the stock transfer tax was dropped. We also shared with the provinces the returns from taxation of public bodies dealing with the generating or distributing of electrical energy, gas or steam. We are now proposing to allow the provinces to enter the field of taxation on insurance premiums, which at the current rate yields about $22 million a year. In addition, since 1948 there has been a large increase in the special grant programs, the most important of which in dollar amounts have been the national health program, on which over $185 million has been paid the provinces, and the trans-Canada highways program where these payments have totalled about $82 million to date.
Owing in part to their successful operation and in part to an extremely dangerous international situation, no basic changes were made in the principles of the tax rental agreements as renegotiated for 1952. The payments were on a more generous scale than before, and it was largely owing to this that Ontario entered into an agreement, along with eight of the remaining nine provinces.
When it came time to consider what should be done when the tax rental agreements expired at the end of this fiscal year, we carefully studied what had been accomplished in the years that they had been in effect. While no economic yardstick can be applied to measure the value of such things, some fairly obvious conclusions can be drawn:
5988	HOUSE OF
Federal-Provincial Financial Arrangements
1.	They have made possible the utilization of the corporation and individual income tax field, largely without disagreement or duplication.
2.	They have avoided unnecessary and wasteful administrative duplication of tax collection machinery with substantial savings to both taxpayers and governments alike.
3.	They have provided financial assistance to provinces that would have had difficulty in maintaining services at a reasonable level by their unaided efforts, thus compensating for a concentration of these taxing powers in a few of the provinces.
4.	They have provided the means of fiscal control through taxation which has proved a useful power on occasion.
These were the results that we had to evaluate and, while we were quite aware that the agreements were not without faults, we had to be sure that there was some more satisfactory approach to our mutual problems before we discarded what we had.
During the course of our meetings with the provinces, I suggested certain objectives that I thought we should keep in mind in seeking a solution to these problems. We should try to assure, as far as possible, that both the federal and provincial governments have access to revenue sources consistent with their responsibilities and at the same time we should promote simplicity, economy and equity in the tax system as a whole and in' the machinery of tax collection. In so far as is possible within our constitutional limits, we should endeavour to develop and maintain fiscal arrangements that will contribute to high and stable levels of employment and that will tend to moderate rather than exaggerate the ups and downs of economic activity.
While the tax rental agreements how in their tenth and final year have gone a long way toward meeting these objectives, in some ways they do not meet all the criteria to which some provinces attach particular importance. The proposals incorporated in this bill are designed to reconcile as far as possible these various conflicting points of view.
These new arrangements provide increased room for the provinces to utilize their taxing powers and at the same time to share through unconditional equalization payments the tax fields covered by these proposals. By this sharing, the equalization payments provide the fiscal assistance that will aid the provinces in meeting a standard of services that would not otherwise be possible.
Secondly, by means of the stabilization payments they place a floor under a large segment of the provincial revenue system which has from time to time in the past 

shown evidence of instability. It is our hope that the steady growth of this country will continue in a manner that will make the operation of this part unnecessary. Nevertheless, this is a policy of insurance that has been sought by the provinces, which have been conscious of their vulnerability to economic change in the light of past experience. The stabilizing effect of a provision of this nature on the public sector of the economy should not be minimized and its general acceptance emphasizes the importance of a strong and continuing federal position in fiscal matters.
Third, they provide means for the development of a method of preserving the simplicity and economy of our tax system in these three common fields of taxation.
These arrangements make it possible for us to retain these advantages that have been an essential part of the tax rental principle and at the same time provide freedom of action to the provinces.
These proposals provide an answer to a very substantial extent to the problems confronting us. By them the provinces will have available from the tax fields in which we are mutually concerned revenues that are in our view consistent with their actual responsibilities now and with those that seem likely to develop in the next five years. It is characteristic of the freedom of action that exists under these new arrangements that any province that feels it requires more or less revenue from these tax fields is entirely at liberty on its own responsibility to impose and collect at whatever rates it deems suitable without sacrificing the assistance the equalization and stabilization payments supply.
The problem of determining the financial limits of these proposals has not been an easy one. We have tried in every way to be sympathetic to the many legitimate provincial claims and at the same time reconcile them with our national responsibilities. It is our view that in the limits decided upon both questions have been met in so far as it is possible to reconcile the needs of our expanding expenditures with restricted if buoyant revenues.
I should like to have the committee's permission to table a statement illustrating the workings of these proposals in the first year of the new arrangements, 1957-58, and I would ask permission to have it put on Hansard.


The Deputy Chairman:: Has the minister permission?


Some hon. Members:: Agreed.


Walter Edward Harris: The table is as follows:
ESTIMATE OF THE OPERATION OF FINANCIAL ARRANGEMENTS UNDER PROPOSED 'FEDERAL-PROVINCIAL TAX-SHARING ARRANGEMENTS ACT' FOR THE FIRST FISCAL YEAR 1957-58 UNDER CERTAIN ASSUMED ECONOMIC CONDITIONS (see footnote)
(all figures in thousands except per capitas and percentages)
1. Estimated Population 1957	
2 Yield of Standard Taxes	
3.	Per capita yield of Standard Taxes	
4.	Equalization per capita to top 2 ($38.20)...
5.	Equalization payment for 1957-58	
ti. Standard Taxes plus Equalization payment	
7*	. .	-per capita
8.	Stabilization payment for 1957-58 1....
9.	Revenue available from 2% Provincial
Insurance Premium Tax	
10.	Total Revenue available 1957-58	
1L	-per capita
12.	Tax Rental Payment available in 1956-572.
13.	-per capita (1956 pop.)
14.	Increase in Proposed Formula in 1957-58
over 1952 Agreement Formula in 1956-57.
15.	Per cent Increase	
16.	-per capita Increase
17.	Tax Rental available in 1957-58 if the 1952
Agreement Formula were continued 3...
18.	-per capita
19.	Increase in Proposed Formula in 1957-58
over the 1952 Agreement Formula in 1957-58	
20.	Per cent Increase over 1952 Formula....
21.	Per capita Increase over 1952 Formula....
Nfld.	P.E.I.	N.S.	N.B.	Que.	Ont.	Man.	Sask.	Alta.	B.C.	Total432	108	703	578	4,700	5,509	867	929	1,172	1,377	16,3754,355	840	9,725	7,375	129,965	213,500	18,765	13,255	26,100	49,525	473,40510.08	7.78	13.83	12.76	27.65	38.75	21.64	14.27	22.27	35.97	28.12	30.42	24.37	25.44	10.55	-	16.56	23.93	15.93	2.23	12,150	3,285	17,130	14,705	49,585	14,360	22,230	18,670	3,070	155,18516,505	4,125	26,855	22,080	179,550	213,500	33,125	35,485	44,770	52,595	628,59038.20	38.20	38.20	38.20	38.20	38.75	38.20	38.20	38.20	38.20	38.39145	_	-	-	-	-	735	880235	70	780	565	6,325	10,170	1,110	660	1,580	2,100	23,59516,740	4,340	27,635	22,645	185,875	223,670	34,235	36,145	46,350	55,430	653,06538.75	40.19	39.31	39.18	39.55	40.60	39.49	38.91	39.55	40.25	39.8814,155	4,165	21,975	18,505	140,515	169,875	28,620	28,625	35,265	50,715	512,41533.54	38.56	31.71	32.58	30.48	31.78	33.36	31.49	31.51	37.82	32.082,585	175	5,660	4,140	45,360	53,795	5,615	7,520	11,085	4,715	140,65018-3	4-2	25-8	22-4	32-3	31-7	19-6	26-3	31-4	9-3	27-45.31	1.63	7.60	6.60	9.07	8.82	6.13	7.42	8.04	2.43	7.8014,890	4,270	22,865	19,320	146,620	179,290	29,620	30,010	37,990	53,330	538,20534.47	39.54	32.52	33.43	31.20	32.54	34.16	32.30	32.41	38.73	32.871,850	70	4,770	3,325	39,255	44,380	4,615	6,135	8,360	2,100	114,86012-4	1-6	20-9	17-2	26-8	24-8	15-6	20-4	22-0	3-9	21-34.28	0.65	6.79	5.75	8.35	8.06	5.32	6.60	7.13	1.53	7.01
1 he yield of standard taxes and the insurance premium tax have been increased by 6% per annum over the basic 1955 data. The distribution of taxable incomes profits and successions between provinces is on the basis of data presently available. 1956 Federal rates for individual income tax and succession duty have been used.
1	To bring up to tax rental payment available in 1957/58 if the 1952 Agreements were to be extended.
2 Estimated on Gross National Product at factor cost of $23.56 billion (Corresponds to GNP of $26.77 billion at market prices).
3 Estimated on Gross National Product at factor cost of $24.70 billion (Corresponds to GNP of $28.00 billion at market prices).
This statement is for illustrative purposes only

Federal-Provincial Financial Arrangements
5990	HOUSE OF
Federal-Provincial Financial Arrangements
This illustration, and it is only that, assumes, of course, certain economic conditions at that time. Briefly, the result is that in this first year there will be available to the provinces some $653 million, including the revenue from the insurance premium tax which is to be made available to them. This is nearly $115 million or over 20 per cent more than would be available if the present tax rental agreements were to be extended for all provinces into the year in question. This $653 million is made up as follows:
1.	Unconditional equalization grants . $155 million
2.	Revenue from individual income, corporation income and succession duties either by way of rental or by direct provincial impost without additional tax burden on the taxpayer	 474 million
3. Insurance premium tax	 24 million
$653 million
These payments are very substantial and, taken in conjunction with the growth factors that will operate and the heavy contingent responsibilities of the stabilization payments, make any greater payment impracticable at the present time under present circumstances. I know that this house is acutely aware of the very heavy stress laid upon the federal budget by the responsibilities of defence. These costs total almost 40 per cent of our expenditure and while they are more or less stabilized at this time we cannot be sure what outlay may be required to maintain our security.
During the past 15 years, with the consent and often at the urging of the provincial governments, the federal government has taken on heavy expenditures for objectives which have not been considered, traditionally or constitutionally, federal responsibilities. I think particularly of those in the field of social welfare where payments for unemployment insurance, family allowances, old age pensions and assistance and like measures now cost us close to $900 million a year, and this is constantly rising. In addition, we have commitments to the provinces in health, trans-Canada highway, university and vocational grants, among others, that add substantially to our costs.
We are under constant pressure from all sides to increase these forms of aid-I need not remind hon. members of that-and I need only point out as an illustration of this growing burden that since these present negotiations started in April of last year we have assumed responsibilities in connection with unemployment assistance which in a year such as 1954-55 would cost us $25 million. We have further agreed in principle to assume costs in connection with a national health insurance program that could easily


total over $180 million in a year. Both these are constitutionally the direct responsibilities of the provinces. If the presumed payments become a reality, this means that together with the increase provided by this bill our annual outlay for these matters to the provinces would have gone up by about $320 million as a result of our recent conferences.
I think it becomes quite clear that there is a very practical limit to our ability to dispose of our revenue sources and it is our view that this limit has been reached under present circumstances with these proposals at this time.
Under the rental agreements fiscal aid was an essential part of the payment made. Under the 1956 proposals any element of fiscal aid has been separated from the rental feature and payments will be based on the value of the field in the province concerned. By renting, the provinces may obtain the benefit of these taxes without a taxing statute and without administrative costs. However, much the same result can be obtained less directly and where a provincial government would prefer to have legislation of its own for individual or corporation income taxes that is consistent with the federal legislation at the rate allowed as offsets to federal tax, this government is prepared to enter into agency agreements for the collection of these taxes at a fee proportionate to the costs.
On the whole I think we have some reason to be gratified with the degree of acceptance which the principle of our proposals has received in the provinces. We have not reached and would not expect to reach unanimous agreement on the proper division of these tax fields. We have had our differences, but I think it is a matter of great satisfaction to all who have been concerned in these negotiations that they have been marked by sympathy and understanding of each other's problems.
To sum up, Mr. Chairman, the bill will provide for: (1) Collection agreements on behalf of the provinces; (2) tax rental agreements; (3) a tax equalization payment to those provinces in which the yield at the standard rates is below the average of the yields in the highest two provinces; (4) a provincial revenue stabilization payment to any province when the yield of the present proposal falls below certain floors; (5) abatement of tax in a province where there is no tax rental agreement is supplied in the Income Tax Act.


George Alexander Drew: Mr. Chairman, the statement just made by the Minister of Finance gives a somewhat comfortable interpretation of the situation which exists, an interpretation very much in contrast with what those of us who

have been reading the press were under the impression did in fact prevail. When the minister says that we have not reached and would not expect to reach agreement I must say that he is using a very mild and rather deceptive interpretation of the vehement denunciation there has been of the inadequacy of the proposals now put forward.
The minister has pointed out that there will be a very substantial increase in the amount of money to flow from the federal treasury to the provinces over and above what would have been payable under a continuance of the present tax rental agreements. There is no question as to that fact. That, however, should immediately bring to our attention the source of these revenues from which payments will be made. These are revenues that by tradition were primarily provincial revenues under the concept of confederation. This is not a case of a generous handout by the federal government. This is or should be an attempt to reach a just, sensible and reasonable solution of the use of the main fields of direct taxation which are the fields primarily open to the provincial governments.
I agree with what the Minister of Finance has said in regard to the extent to which this subject has been discussed in detail. I do not believe that it is necessary to review the history of the federal system on this occasion and particularly at the resolution stage. Nor do I think it is necessary to go into the history of the various stages by which we have reached this point. However, I think it is essential that we recall that if in fact we believe in the federal system, we must remember the basic proposition that the power to tax is the power to govern. We must remember that if one government becomes dependent on another government to the extent of a considerable part of its revenues, then its real right to govern as an independent body may become more than illusory; it may become a myth with serious consequences to the survival of the federal system in Canada.
We are not dealing now with something that has not been discussed frequently before this time. But it seems necessary to reiterate the basic proposition that wherever governments have become dependent upon other governments for their revenues in substantial measure, fixed upon some rigid pattern, the fate of those governments has usually been in jeopardy. That goes back over a long range of history. It has not always been the case that central governments made payment to the local governments. Actually in the Weimar republic in Germany after the first world war the situation existed under which the central government became largely dependent upon payments from the states. That
67509-380}
16, 1956	59gj
Federal-Provincial Financial Arrangements situation seriously weakened the central democratic government in Germany; it seriously weakened its capacity to meet the urgent problems of the times.
Here in Canada we have a case which has been paralleled in other jurisdictions over the centuries, and that is a situation where the provincial governments, as a result of certain historic facts, are becoming more and more dependent upon the federal government. What is more, the municipal governments are becoming more dependent upon the federal government and the provincial governments with which they are directly associated. It is customary for us to use the legal expression that the municipalities are the legal creatures of the provinces. It would always be well for us to remember that these municipalities are very real entities and not just constitutional bodies. They are very real entities which predate confederation itself. They are very real entities which in some cases represent the actual beginning of all our history. They are very real entities where the roots of our democratic system grow. Therefore the needs of the municipalities and the plight of the local ratepayer-whether he be a home owner, a tenant or an operator of a business-are things which we must have vividly before us when we attempt to assess the adequacy or otherwise of the arrangements that are made with the prov->-inces.
There sometimes may be a tendency to think of these large payments-and they are large payments-as something which simply affects the provincial governments in their various duties. Let me point out how heavy the responsibilities of the provinces are with regard to the municipalities. Merely as ar* example, and not because it happens that F had some close association with that province* for some time, I should like to point out what-happens in the province of Ontario, and I may say it happens in varying degrees in other provinces across Canada. Some 40 per cent to 45 per cent of the total revenue available' to the government of the province of OnteEim -whether by way of payment from the federal treasury or from its independent collection of money-is passed over to the municipalities or to various local municipal agencies. That percentage represents a tremendous proportion of the total money that goes to a provincial government. The figures are not available right across Canada with regard to the exact amount that is payable in that way to the various municipal agencies such as school boards and other local bodies of that kind. But what is abundantly clear is that when we consider the amount of money that goes to the provincial governments we are in fact also considering the position of
5992	HOUSE OF
Federal-Provincial Financial Arrangements the municipalities and in turn, of course, the position of the local taxpayer as well.
When I listened to the statement made by the Minister of Finance I could not help recalling the opening words of a pamphlet on the negotiations which have taken place up to the present time and which was written by Mr. J. Harvey Perry, the director of the Canadian Tax Foundation. I think I will read these words because they set forth fairly clearly not only the problem that confronts us but the way in which the general public looks upon these highly involved discussions which are represented in such a table as that which was put on Hansard this morning and which is now before us. These are the opening words in the foreword to his pamphlet which was published in February of this year:
Surgery in all its forms is now so complicated that the layman has long since ceased to understand anything but the simplest operation. Among the more baffling of the modern techniques is that employed every five years by our politicians in dissecting the Canadian body fiscal. Even the intelligent citizen earnestly trying to understand finds it difficult to decide whether this quinquennial quartering of the tax system involves highly skilled surgery or merely sophisticated butchery. In part this is attributable to the fact that the really vital incisions take place in the decent privacy of the conference room. But it also arises mo doubt from the frustration of attempting to *relate the periodical bulletins on the progress of the [patient, in which developments appear to be * expressed in the equivalent of algebraic equations, -with the ritualistic invocations and tribal incantations which mark all outward aspects of the *performance. This state of frustration the citizen [DOT]could probably ignore if it were not for a niggling feeling that all these events must in some way be of importance to his welfare.
In this, of course, the citizen is wholly right. These are matters of great importance to him, and he should have some idea of what is going on.
I have read those words, Mr. Chairman, because it must have seemed to many of the hon. members here that they were hearing something in the nature of tribal incantations when they heard flowing from the lips of the Minister of Finance some of those references to the discussions which have taken place and the formulae which are embraced in the various agreements which have existed in the past and which are now being supplemented by the measure under consideration. In fact, one might go a little farther. From the statements that have been made by many of the provincial premiers it would seem certain that this is not merely sophisticated butchery, but cynical butchery of our federal system. These statements must have come, and I am sure did come, to the attention of the members of the government. They do not come from any one single premier. They came from different premiers across Canada who have complained bitterly of the 

fact that whether the increase over the amount that would have been payable by a continuance of the tax rental agreements be $163 million or some other figure, these are hopelessly inadequate to meet the demands not merely of the provincial governments, but perhaps even more important of the municipal governments in relation to the rapidly pyramiding demands of our society at this time.
We have entered a period where old standards have simply become meaningless. We have been hearing of the crisis of education. It is more than that. It may well become a tragedy. Just today I was reading a statement that in Paris, France, there is great concern about the fact that only one-third of the number of pupils who ordinarily pass certain examinations in that city have passed on this occasion. This is a symptomatic problem. In order to meet the shortage of space, examination standards are being raised to a point where many children are being denied the opportunity for advanced education which they really need, and which this country needs at this time with the demands of technical and other skilled training.
This is no theoretical problem. This is a very real problem, a grave problem, and one with immense implications for the future of our country. It may well be that within the period of five years that these present agreements are to run, the demands on accommodation in our schools, our technical institutions and our universities, will have mounted beyond all recognition. If the present rate of growth continues in many parts of Canada, the schools of today will be hopelessly inadequate for the demands of five years from now. Already university accommodation is utterly inadequate for the present demands, let alone the demands of the future. At this time young people who have written their university examinations are waiting in suspense, not merely to know whether they passed their examinations, but to know whether they passed their examinations with a standard sufficiently high to get them through the gateway of the university they desire to enter. It is an agonizing situation. No longer is it a mere question of ability to pass examinations. It is a question how many can get into a university where the space is so severely limited. That is not a good thing for them; it is not a good thing for us and it is not good for the future of Canada.
Another thing which has its impact upon this whole situation is that, as we look at the tremendously increased use of mechanical equipment to do work that was previously

done by hand, we are seeing a rapidly increasing demand for higher training in the technical fields which will qualify young people to handle these delicate and involved machines which do these jobs that were earlier done by hand. This is going to mean that a higher percentage of our young people must have a higher standard of education. This is going to run the graph line of demand on space in our elementary schools, our secondary schools, our technical schools and our universities away up into figures that it is difficult even to suggest at this moment. It is in the light of that situation that we must examine the adequacy of what is now before us.
When Mr. Perry in his article to which I have referred, speaks of the fact that the citizen is coming to realize that this is a subject of great importance to him, I hope that it will be realized how vitally important this subject is to every citizen and particularly to the home owner who is now bearing a crushing burden of taxation in many municipalities across Canada today. There are municipalities at this time which are forced to charge taxes which are almost equal to a rental of a few years ago. This is only the beginning unless arrangements that are made today make it possible for these municipalities to meet their demands.
Now, in saying these things following the speech of the Minister of Finance, I wish to make it quite clear that the present formula has some merits in the acceptance of certain very important principles. As the minister pointed out, the proposal contemplates the continuance of a form of tax rental agreement, arrangements for federal collection of payments under those agreements, a tax equalization plan, a provincial stabilization fund which will protect municipalities against a severe drop in their revenues, and in turn an abatement in the federal taxation fields of personal income, corporation taxes and succession duties. The acceptance by the federal government of the place of the provinces and the right of the provinces in the field of income tax, corporation tax, succession duties and other direct taxes is, in itself, a welcome evidence of a return to the position which was always accepted without question over the years between 1867 and 1941, when the wartime tax agreements were signed. Unquestionably, the formulae put forward have some merit; undoubtedly, there are improvements over the fiscal arrangements made in 1947 and 1952; undoubtedly, many provinces will be compelled to enter into agreements with the federal government no matter what those agreements may be. They have no choice.
16, 1956	5993
Federal-Provincial Financial Arrangements
It will be recalled that after the first fiscal agreements were proposed many provinces held off for some time. Finally, however, most of them came in reluctantly and with complaints against the inadequacy of the agreements, which were demonstrated to be true as time went on. The complaints that have been made have been demonstrated to be true on each occasion and it is with that thought in mind that we should examine what is now before us.
Whether the provinces are compelled to enter into these agreements or not has nothing to do with whether these present proposals are satisfactory. Are they satisfactory in the minds of the provincial premiers and the representatives of the municipalities at this time? We know they are not. We know that right across Canada the strongest possible terms have been used to describe what may happen if the provincial governments and the municipalities are put in a financial strait-jacket which will limit their ability to meet the mounting demands that lie before them. It can only be said that there may be no choice.
The Minister of Finance (Mr. Harris) has told us that there were discussions. He has told us that government in a federation is not a simple process. It is not. It becomes increasingly difficult, however, if the rights of the provincial governments within that federal system are not fully recognized and that the dealings with those governments are not made on a basis of equality in whatever the allocated fields of responsibility are. It is not enough to admit in discussing the subject now before us that Canada is a federal state; it is not enough to repeat the tribal incantation that we believe in the federal system and that we are in fact children of a federation; it is not enough to say that we believe in the dividing of revenues that will balance the abilities of the governments to meet their responsibilities. The subject now before us is whether we really believe in the federal system sufficiently to do our utmost at this time to find real agreement with the provincial governments and with the municipalities which are very real entities indeed as to the allocation of taxes which will make it possible for them to carry out the heavy responsibilities which they cannot ignore and cannot shirk.
The true federal system admits that in their own fields the provincial governments have full authority over the responsibilities imposed upon them by our constitution. There are special reasons why the federal system must be conserved and strengthened in Canada. We have reasons of history; we have reasons which lie at the root of the very existence of one nation known as
5994	HOUSE OF
Federal-Provincial Financial Arrangements Canada here on the North American continent which cannot be ignored in discussing the solution of these problems. It is not only for reasons of history but also for reasons of geography that we must not merely give lip service to the idea of the federal system, but that we must do all within our power to vitalize that system, to give it living strength so that every government, federal, provincial and municipal, may meet the great and expanding responsibilities of the years of peace.
It was argued, and the argument was accepted by the provincial governments, that centralization became necessary during the years of war. Decentralization is equally necessary in years of peace. Decentralization is just as much a part of our federal system, and just as much a part in the needs of peace, as is the necessity of some measure of centralization to meet the compelling demands of war.


Walter Edward Harris: Hear, hear.


George Alexander Drew: We are now at another point of adjustment resulting from the agreement made in 1941. All that we are now discussing goes back to what took place at that time under the terrible demands of war. At h time when that war was in its most critical stage, the provinces agreed without hesitation to vacate their traditional fields of direct taxation with a clear understanding, however, that this was only for the duration of the war, and that once the war was over their historic position would be restored without impairment. We must remind ourselves of that consideration which was in the minds of the provincial governments when they signed the agreements in 1941.
We have listened to the details which have been put before us. We have a table which interprets in figures many of those details in somewhat complex form. But it is not necessary, I submit, to go into those details now. 1 am sure there will be general approval of some of the principles accepted in what has already been done; I am sure there will be a general approval of the principle of equalization grants, whatever the actual formula may be, or whatever the adequacy of the grants may be. Something of that kind was recommended first in the Rowell-Sirois report. I say it was recommended in the Ontario proposals of 1946 to the conference, which was held that year, under the name qf national adjustment grants. I mention that only to indicate that there has been general agreement for some time that the equalization of revenues in this country is necessary to make it possible for the less wealthy provinces of the country to give to


the people of their provinces the local services that are the constitutional obligations of those governments, whether they be provincial or municipal governments.
The question before us is not whether the right method has been adopted, whether the formulae are the desirable methods to reach these conclusions; the question before us I submit, Mr. Chairman, is whether or not at this time there is evidence that these agreements will satisfactorily meet the demands which are actually now imposed upon the provincial governments and the municipal councils throughout Canada and particularly whether they will be adequate over the five-year period during which these agreements will operate. I think that is what we must ask ourselves.
We have statements from every part of Canada that the requirements will not be met. We have ahead of us not merely the crisis in education but we have before us various problems of the most urgent nature which are increasing in importance by leaps and bounds.


John Horne Blackmore: Hospitalization, for example.


George Alexander Drew: Where in the whole of Canada today is there a single municipality that can say definitely it has been able to meet the demands for modern needs of roads and highways? Where is there a municipality in Canada today which would confidently say that under the proposals now before us they see the solution ahead of meeting the enormously increased demands for improved highways and roads which come from the rapidly increased number of automobiles in this country? Where is there a municipality in Canada today which sees in these proposals an adequate solution of hospitalization problems? We must remember that personal health is primarily the responsibility of the provincial governments, and in assisting the municipalities that come under our constitution it must be remembered that no matter what grants have been made or are contemplated by this government in the field of hospitalization or in health the main burden for anything that is done rests upon the provincial governments and the municipalities and will continue to do so.
We have the unqualified statement from municipality after municipality across Canada as well as from the provincial governments that these proposals will not make it possible for them to meet their needs even at the present level, let alone the rapidly mounting levels of the years immediately before us. Where is there a municipality in Canada today which is not having some problem

with its supply of sewers and water supplies for any rapid housing development that may be taking place? Where is there a municipality in Canada that has been able to keep pace with the demands that we always regarded as normal in days gone by where houses went into new areas that had been opened up? It must be remembered that there will be an increased demand for the supply of water, sewers and electricity and all the other local facilities which are far closer and of more immediate need to the people than most of the things which come from this government and those needs can only be met by revenues which are not even contemplated in the proposals now before us.
The Minister of Finance (Mr. Harris) said that he is not even tempted to say that this is a solution. That is certainly an admission of the reality. The fact that he is not even tempted to say this is a solution is a recognition that in his mind this is only another makeshift. By now it should have been possible for us to find some solution for the situation which arose as a result of the wartime agreements of 1941. Ever since those first agreements came near their termination there has been a demand from all the provinces for a satisfactory solution of the difficulties that were inherent in those agreements once we returned to a period of peace. It was recognized from the very beginning that those agreements were only makeshift and now in the admission of the Minister of Finance that he is not even tempted to suggest that this is a solution we have the bald declaration of the government that in 1957 there is going to be another makeshift for something that should have been solved long ago through the joint consideration of these governments.
We are now asked to go ahead with an arrangement which the government admits is a makeshift. We are asked to say it is expedient to adopt another makeshift at this time. We are asked to say that even after these long years the government has not yet been able to sit down and thrash out this subject to a point where we can hope to have some satisfactory solution that will prepare us for the years of peace. The agreements of 1941 were for war; we want agreements now for the years of peace, agreements which will work, agreements which will make it possible to ease the tax burden of the local taxpayer on his home, his business and his rental in a way that will make us better able to meet the keen competition we now face throughout the world.
We have seen something of what the dangers of inflation really are in the statements that have been made in the United
16, 1956	5995
Federal-Provincial Financial Arrangements Kingdom just within the past few days. Let us not blind our eyes to the fact that one of the gravest dangers we face in Canada is inflation based upon an excessive burden of taxes at the various stages at which taxes are imposed. Certainly unnecessarily high taxes are inflationary and not deflationary. They do not keep down the inflation and instead they add to the pressures of inflation because if taxes are unnecessarily high, as they are in many municipalities today, they have inevitably increased the needs of every individual for the amount that will be received for the purpose of meeting those taxes and to a point this contributes to the inflationary spiral. There are many other factors, of course, and I am not suggesting for a moment tftat there are not, and all these must be considered. But certainly in this competitive world the effect of taxation on our competitive position is one which we must not ignore.
What has happened in this case is unhappily typical of what has happened on other occasions. It illustrates the unfitness of this government to govern. The Minister of Finance has told us that there were meetings from time to time starting on April 26 of last year and then finally coming to a meeting on March 9 of this year. That should never have been dignified with the name of "conference". All that amounted to was that this government called the provincial premiers together for one day so that they might be told what this government was prepared to do. That is not a conference in any meaning of the word "conference". It is certainly not the type of conference that accepts in fact or in principle the relation of the federal and provincial governments or the place of the provincial governments under that system. It was said by more than one provincial premier that this was no conference at all. It was said that they could just as well have stayed away and been told by a letter what this government was prepared to do.
Once again it was a case of "take it or leave it". I know the Minister of Finance shrugs his shoulders.


Walter Edward Harris: No, he shrugs them in denial.


George Alexander Drew: He indicates that he does not agree with this. It certainly was "take it or leave it". Of course, he has used the very misleading suggestion that the provinces are quite free to go ahead and tax without any effect upon their position under agreements or otherwise. That is all right, if people are satisfied with double taxation. But what should be attempted now is not a makeshift but an arrangement that will avoid double taxation in Canada. This is not a case of avoiding double taxation in future. There
5996	HOUSE OF
Federal-Provincial Financial Arrangements should have been a real attempt to avoid double taxation which exists today. There would not be double taxation if the arrangements were in fact adequate for the needs of our provincial and municipal governments. There was none of the real spirit of confederation in that meeting; that was made perfectly clear by the statements that were made by the provincial premiers after they left. That criticism came from every part of Canada. Just over a week ago, the four Atlantic provinces made it abundantly clear that these proposals do not meet their expected requirements. Those provinces met and emphasized their need for greater revenues than will be available to them under these proposals if they are to carry out their responsibilities either under the provincial governments or through the municipalities, and particularly if they are to give to the Atlantic provinces the various rights of improvements that were contemplated in confederation itself.
As one who lives in one of the central provinces, may I say that a full recognition of the moral obligation due to the Atlantic provinces-and that includes Newfoundland as well as the three maritime provinces-and a just arrangement with those provinces is long overdue, merely as a recognition of what was said at the time when those provinces came into confederation. I am not going to quote the various statements that were made; it is not necessary. Every hon. member knows the extent to which those premiers went in emphasizing the urgency of their needs. Everyone who has gone through those provinces and has seen the need for improvement in many communities throughout those provinces knows that a recognition of their needs is something that is very urgent within this federal system of ours. Nor is it merely the Atlantic provinces that require recognition. The province of Saskatchewan has not benefited to the extent that many other provinces have. But it not only concerns those provinces whose average income is well below that of the more fortunate provinces from the financial point of view; it is also true that in the provinces with large financial revenues it has been pointed out that these proposals will not meet their demands, and it has been said that, with the pyramiding responsibilities of the municipal governments, we may well reach a disastrous position within the five years that the arrangements now before us would run.
As I said before, whilst there is no need to argue this in detail, one inescapable fact does emerge. These proposals are not satisfactory to the provinces. They are regarded as


inadequate by the provinces. If they are regarded as inadequate for their needs now, they will be hopelessly inadequate for their needs five years from now. Not long ago the Minister of Finance used these words:
We cannot at this time make any further material concessions that would adversely affect our revenues.
The government speaks of concessions. Actually there is no question of concessions involved. Under our own federal system, the only source of revenue available to the provinces is in the field of direct taxation. The most important of those taxes are, of course, the personal income and corporation taxes. Without arguing as to whether or not the provinces have a prior moral claim in those fields, the fact obviously remains that, since the British North America Act gives to the provinces only the field of direct taxation to carry out their tremendous responsibilities, and since those fields alone are available to the municipalities which do most of the things that are directly felt by the people themselves, then we must consider what the situation is in regard to these taxes and the need of the provinces in regard to those fields. Certainly, whether or not they have the prior claim, at least their moral claim is equal in those fields. They must have a right to levy such taxes as they actually require in the only field open to them, without the added burden of double taxation being imposed upon the taxpayers of this country.
There is no question of concession involved, either in meeting the demands of the Atlantic provinces or in meeting the demands of the other provinces. All that these claims are based upon is the legitimate need of the provinces and the municipalities, based upon the burdens which they cannot escape under our constitution.
The claim of the federal government that it is unable to make any better arrangements comes strangely at a time when we hear reports that there is likely to be a surplus well in excess of half a billion dollars during the current year. Where does that surplus come from? It comes from the very taxes which in earlier days were regarded as provincial taxes and concerning which the provinces and the municipalities certainly have as high a moral claim as the federal government itself. Whether or not the sums that are raised by the new proposals are higher is not the point. It is whether they are adequate or not. Whether or not the surplus reaches the figures that have been predicted, certain it is that there is going to be some large surplus at a time that this government claims inability to make any better arrangements with the provinces for their needs.

It is necessary at this time to recall the basis on which the provinces vacated these fields in the early part of the war. There are hon. members in the house who remember very well the basis upon which these arrangements were made. In his budget speech on April 29, 1941, announcing the details of the agreement which had been made, the then minister of finance said, as found at page 2345 of Hansard:
1 should like to emphasize that this is not an attempt to get the provinces out of these tax fields permanently.
The agreements which were signed at that time also offer explanations of some of the understandings that existed. In the agreements then signed between those provinces of Canada which did sign agreements with the federal government these words are to be found after a general statement in regard to the agreements. The federal government undertook in the year after the termination of the agreements:
... to reduce its rate of taxes by such an amount as will enable the province again to use the income tax and corporation tax fields and in particular the dominion undertakes to reduce its rate of tax on corporation incomes by at least 10 per cent of such incomes.
That was intended to be done within the first year after the termination of hostilities, a period which would be required for the readjustment. What was intended? Many of us know what was intended because some of us actually were present at the discussions which took place. It was intended that the rights of the provinces and municipalities would be respected and preserved. It was intended that the provinces and municipalities would have their positions in these tax fields restored without diminution. That did not mean as to the dollars and cents that were involved. It meant as to principle as well, and I mean "principle" spelled p-r-i-n-c-i-p-l-e. It meant that the place of the provinces in those fields would be fully recognized. What is more, it said that in particular the federal government would reduce its rate of taxation on corporation incomes by at least 10 per cent. That was not merely a declaration that they would reduce it. It was intended that this would avoid double taxation and would permit the provinces to enter that field to that extent.


Mr. Pickersgill:: There was no such statement.


George Alexander Drew: The Minister of Citizenship and Immigration interjects that there was no such statement. There certainly were statements to that effect.
16, 1956	5997
Federal-Provincial Financial Arrangements


John Whitney Pickersgill: When the wartime tax
agreements were made?


George Alexander Drew: I happen to have had the privilege of attending the discussions that preceded these arrangements, and I know perfectly well what the statements were that were made.


Walter Edward Harris: Would the Leader of the Opposition permit a question? By way of interpretation of what he read in connection with those agreements, how does he come to the conclusion that it meant no double taxation if all the federal government agreed to do was to vacate the field to the extent he has described?


George Alexander Drew: It was perfectly clear. Before the war there had been arrangements under which certain of the provinces were imposing taxes, and that was in the mind of those who were arranging the agreements at that time. It was understood that immediately afterwards those provinces that wished to do so would again impose taxes and that the federal government would carry out the arrangements which it carried out before the war with respect to collecting those taxes up to the amount imposed by the provinces and without double taxation. That was the simple and clear understanding at that time.


Walter Edward Harris: Is that not what the present bill does?


George Alexander Drew: This bill does not meet the situation because the minister knows perfectly well that at this time there is already double taxation in some of these fields. He knows that it has been made clear that under these arrangements it is certain that there will be further double taxation. My point is that these fields are fields in which the provinces have just as high a moral right and the governments of the provinces, within the realm of their own constitutional jurisdiction, have just as much right to be recognized in their ability to determine what is needed as has the federal government itself.


John Whitney Pickersgill: No one has ever denied that.


George Alexander Drew: I am very glad to hear that announcement for the first time. If it is not denied, then there is support for the argument I am making that the present proposals are unsatisfactory. If the statement made by the Minister of Citizenship and Immigration is correct, then I submit it is perfectly clear that when we are told by certain provincial premiers that double taxation will be the result of this situation most certainly there should be a pause and there should be an opportunity to get together and to really analyse what will be done.
5998	HOUSE OF
Federal-Provincial Financial Arrangements
I know the arguments that can be made, Mr. Chairman, about corporation taxes. The simple fact remains that what is called the abatement in the corporation tax field is 9 per cent and not even the 10 per cent that was stated in principle as being the very starting point, the minimum that was to come within a year after the war. To the extent that that was only a minimum at a time when the needs were not comparable in any way with the needs of today, the federal government is in default in principle even in relation to what was promised that long ago. Certainly this statement would have been meaningless if it only suggested that the provinces could go ahead and levy taxes and create double taxation because they could have done that at any time. There was never any uncertainty about that. The very fact that they can supports my point that there was a clear understanding that the percentage then indicated was a percentage which was to avoid double taxation.


Walter Edward Harris: You mean that if a province feels it ought to have anywhere up to 100 per cent of a particular field we would have to vacate it to that extent to avoid double taxation.


George Alexander Drew: That statement is just as absurd-


Walter Edward Harris: It is not absurd, not a bit.


George Alexander Drew: -as the suggestion that the federal government has the right to occupy it up to 100 per cent. It is just as absurd as to say that the federal government has the right to say that it will occupy it up to 90 per cent of all taxes collected in that field, and that is what it is saying now.


Walter Edward Harris: Oh, no.


George Alexander Drew: That is exactly what it is saying. This government is saying: Here are fields of taxation only open to the provinces and yet we are taking it on ourselves to say how much of the taxes collected will be collected by the federal government unless there is to be double taxation. It is an utter absurdity to suggest that the provinces of this country would make 100 per cent collection of the amounts now collected in income taxes and corporation taxes. It is an utter absurdity. The very fact that an absurdity of that kind is put forward indicates the weakness and the fallacy of the present position of the federal government when it takes it upon itself to say:	Here is how far we say we
should go. We say we have a prior moral claim up to 90 per cent of all the taxes collected in the income tax and corporation tax field. That is what they are saying. Who gave them that right in a field of taxation that is


the only field open to the provincial governments with all these heavy obligations with regard to hospitalization, highway construction and all the other things that they must do to carry out their obligations to the people?
It should be realized, Mr. Chairman, what happens when these various things are done. Where does all this money come from? Mainly from enterprises which are organized with the assistance of the provincial and municipal governments. Where do the corporation taxes come from? They come from corporations which, the moment they locate, must have light, water, sewerage, educational facilities nearby and roads and highways to them. These things all must be provided by the provinces, in the case of mining, forest and other operations of that kind. These things must be provided by the municipalities in many cases. These are the things that must be provided in order to make it possible for the revenue to be earned by these great corporations. Where do personal incomes come from? The larger incomes come from people who are engaged mainly in activities which also find their support from the provincial and municipal governments. If there is any question of a prior moral claim in relation to these taxes, the prior moral claim rests with the provincial governments and in turn with the municipalities operating under them.
As each ratepayer in the municipalities looks at this tax bill now, let him recognize the fact that with the growth that is taking place or should take place in those less fortunate areas there would come, even under these proposals, rapidly increasing taxes that will in fact assume crushing proportions within the life of this agreement. It is for that reason that it has been said by those who speak on behalf of the provinces that the consequences of this agreement can be disastrous if it is carried forward on this basis.
The Minister of Finance has spoken about the fact that there are pressures to get into fields that are not ordinarily occupied by the federal government. In the light of what has been said by the provincial premiers and of what has been said by the Canadian mayors and reeves association, it is clear that within the life of this agreement there will be further demands made upon this government which should not be made at all if there were a proper adjustment of taxes.
Recognizing the fact that there is a steady swing of population from the rural areas to the urban areas, and recognizing these mounting demands to which I have referred and which are going to produce not merely a crisis in education but also a crisis in highway construction and in the construction of many other services that are needed, I submit

that before a bill of this kind goes forward we should have a real understanding between the provinces and this government, and that we should not be asked to put into rigid form something which, by some of the provinces, is described as a strait-jacket. The position of the municipal taxpayer, of the home owner whom we should encourage, may well be disastrous under these proposals if the predictions of those best able to interpret their needs are in fact borne out by events.
The time is long overdue for a real examination of this question and an allocation of taxes which will take the load off the home owner and the municipal taxpayer. From provincial governments of different political complexions comes the same statement, namely that the present proposals will not make it possible for them either to meet their needs or to assure adequate revenues to the municipalities. The Minister of Finance has made it clear that this is just another stopgap.
This is a time when we should have a real solution of this problem. The governments of the provinces and the governments of the municipalities as well agreed to centralization for war. Let us now make a declaration of decentralization for peace which will make it possible for the provincial governments and the municipalities to carry out their full role under our federal system, and in the light of our rapidly mounting burdens. A government that fails to seek a solution of this problem and puts this matter into rigid statutory form before there has been approval is a government that is unfit to govern. I urge this government, even at this state, to withhold this resolution and to seek a real conference with the provincial governments at which there would also be representatives of the municipalities which are very real entities at this time, and to seek a solution for the years of peace that will make it possible for Canada to grow in the way it should. None of these great developments take place in a vacuum. All these developments take place in areas where their primary concern must be the assistance given by the municipal or provincial governments. As we look with confidence to the future; as we recognize the unparalleled opportunities of Canada at this time; as we recognize the bright prospects before our own people, let us ask-yes, let us demand-that the government have a real conference, not just a meeting where the premiers will be told what they are going to be allowed to have, and that there be worked out a lasting solution- and not merely a stop-gap-under which our federal system will grow and prosper in all its strength.
At one o'clock the committee took recess.
67509-381J
16, 1956	5999
Federal-Provincial Financial Arrangements AFTER RECESS
The committee resumed at 2.30 p.m.


Mr. Coldwell:: Mr. Chairman, in participating in the discussion of this resolution I think if I were to choose, as the clergy do on Sunday, a text for the view that I want to express this afternoon, I would find it in a paragraph of the Saskatchewan brief at page 82 of the transcript. The premier of Saskatchewan said this:
We cannot look with equanimity on any possible return to all the pitfalls of unrestrained tax competition, double taxation, and overlapping collection machinery . . . this conference must be sure that the federal government does not lose the effective control it can now exercise over the income tax fields so important in combatting depression and maintaining high levels of employment ... We fear that the plan the federal government seems to favour could seriously weaken the ability of the national government to carry out essential fiscal measures.
That, I think, pretty well summarizes the view that we take of the proposals that I believe are envisaged by this resolution.


John Horne Blackmore: From what document is the hon. member reading?


Major James William Coldwell: From the transcript of
evidence of the premier, the Saskatchewan brief to the conference, at page 82.
This morning, the Leader of the Opposition told us about what happened in Germany during the Weimar republic, which was largely destroyed because the federal authority was dependent upon the German states which comprised the Weimar republic. In looking at this matter under discussion I think we have to bear in mind how, when confederation was achieved, certain rights were given to the provinces in the constitution of our country. Those rights dealt with certain fields of taxation. But we must not overlook that the fathers of confederation in their wisdom, and I believe in their wisdom as time has passed, decided that this parliament should have the right to enter any field of taxation to meet the needs of our country as they might arise in the future.
It seems to me that we have to keep that in our minds because over the years the responsibilities of the federal authority have grown almost year by year. If we could vacate the fields of taxation which we have assumed, and which were also delegated to the provinces by the British North America Act-I immediately say I think no one is considering this completely-then, we should have to consider how we could curtail the expenditures of this federal parliament, and curtail them very drastically indeed. I am not minimizing the difficulties of either the provinces or the municipalities, particularly
6000	HOUSE OF
Federal-Provincial Financial Arrangements in certain fields, such as the field of education, which was emphasized this morning.
I believe, in fact, and we in this party believe, that without interfering in any particular with the control of education by the provincial authorities, this parliament of Canada should be making grants and assuming a very large responsibility for the encouragement of education in this country.
It is quite true that, in the competition in which we are now engaged, and likely to be engaged for a number of years, with nations organized along lines different from ours, with nations that are determined if they can to equal and surpass the highest level of activity and progress of the western democratic nations, fundamental to our meeting that competition is that we shall have the finest educational facilities that are available to us. Quite obviously with the present levels of revenues to the provincial governments, they cannot achieve or maintain those educational levels which are essential. The same thing applies, as again we were reminded this morning, to the particular field of highway construction. In recent times the automobile and the truck have together made it inevitable that this country shall provide, somehow or other, first class transportation facilities in the nature of highways. If they are to be uniform, if they are to be of a proper type to serve the entire country from coast to coast, then more and more I believe this federal authority will have to assume a greater responsibility for that facility.
So it seems to me that, in discussing the bill that will be placed before us and which will receive more detailed study of course on second reading and in the committee, we have to keep constantly in mind that today the people of Canada look to the federal authority for more and more assistance in a number of fields, and particularly two or three of them. I have mentioned a couple, but of course there is too the very important field of national health.
Well, now, what it seems to me to be is this. In this resolution and in the bill which will follow, the latest taxation proposals by the federal government mark the end in reality of the policy adopted several years ago of encouraging tax rental agreements as we have understood them. I might say this to the government. In at least two successive general elections the party of the government defended the tax rental agreements, and particularly defended them on the prairies and in the maritimes and alleged that the official opposition, at least given the opportunity, might seek to destroy these agreements.


It seems to me that in these recent days, and under the proposals which we now have, the present government have committed the very crime they warned that others would commit. I think the government has made a retreat from the position which it has taken since the end of the war. It is true that the tax rental agreements are still available as part of the new fiscal proposals. The proposed tax rental agreements are the ones which differ in kind as well as in degree from those at present available. Behind the tax rental agreements signed in 1952 lay this, I think, very important assumption, that all provinces contributed to the national income which however might, for reasons of geography and other factors, be more concentrated in taxable form in some provinces than in others. Accordingly, under these agreements, it was recognized that a fair rental of these taxation fields would have to take into account the revenues that a province might raise if national income were distributed.
Now, the new tax rental agreements at least-perhaps when the bill is before us we shall be able to see this more clearly or perhaps have the question I have in mind more or less refuted-take an entirely different view of the nature of Canada's national income. Income is now regarded as being earned entirely within the province -and that was an argument made before lunch today-and the tax rental is thus restricted to the amount that certain standard taxes might yield if imposed by the provinces. There is, I think, a long-run danger to be found in these new proposals. The equalization payments, by their very nature not available to the wealthiest provinces, like Ontario, will look to the people of that province like a subsidy which others get and which they are going to pay for.
This is the wrong attitude of course, but it is there and will be powerfully reinforced I think as time goes on and may invite powerful opposition to taxation policies that recognize the fiscal need of the various separate provinces. Under the 1952 and earlier tax rental agreements the payments named to be made as equalization payments were included in the tax rentals. Under the arrangement it was much more difficult to sustain a charge of subsidy to the poorer provinces. Therefore, in adopting their new policy the federal government risks calling forth a greater degree of recrimination and misunderstanding among the provinces than has been the case since the relief payments of the 1930's. I think one of the values of the former tax rental agreements was that they minimized the amount of recrimination

and misunderstanding that might otherwise have been in evidence. Consequently, this bears the mark of the beginning of the end of the fiscal foundation under the 1945 green book proposals which, as I recollect, at the time were welcomed on all sides of the house, and which followed a report which was universally regarded in this country as an outstanding report after very long inquiry, and a report which might guide Canada in her taxation and other policies over the next 10, 20, 30 or more years.
This statement is to be found in the proposals of the government of Canada of 1945 in the green book proposals at page 52:
To do these things fully-
I shall say more about those 1945 green book proposals in a moment. I continue: -and without destroying the federal system, the dominion government considers that it should have full and exclusive freedom to tax personal and corporate income and estates so that the restrictive effects of double and competitive taxation may be avoided and so that income earned and wealth accumulated nationally can be fully and efficiently taxed for national purposes and the mutual advantage of all provinces.
That was indeed a very important statement of federal government policy at the time. It seems to me that these high principles have now been abandoned and the ability of the federal government to use fiscal policies for the general welfare and in avoiding recessions and depressions has, under the proposals now before us, been very tragically weakened, to put it mildly. It must not be forgotten either that the proposal of the government of Canada to the dominion-provincial conference on reconstruction in 1945 included more than the fiscal arrangements encompassed in the tax rental agreements. The terms on which the federal government asked the provinces to lease to it certain tax fields included not only rental payments but undertakings by the federal government to do things that would ease the financial burdens on the provincial governments. And, as we have heard it said already today, the financial burdens on the provincial governments and on the municipalities over the last 10 or 15 years have become pretty well unbearable. Consequently, what was said in 1945 must be remembered when we are discussing the new proposals at the present time.
What were those former proposals, other than fiscal proposals? They were these: one, assuming complete responsibilities for old age pensions from age 70, without a means test, and by contributing half of the cost of old age assistance for persons aged 65 to 69. It may be said that the government has done that. As I shall show in a few
Federal-Provincial Financial Arrangements moments, while ostensibly the government did do that, the inflationary period through which we have gone has compelled the various provinces to make supplementary payments to the old age pensioners to improve their lot, or to provide them with free medical and other care.


Mr. Knight:: Both.


Major James William Coldwell: Or both together as in Saskatchewan, as the hon. member for Saskatoon says, which, in effect, is placing upon the provinces a further burden in connection with old age pensions that was not contemplated in 1945.


John Whitney Pickersgill: I am sure the hon. member wants to be fair. Will he permit a question? Is it not true that the rate of old age pensions now in effect is 33 per cent higher than that contemplated in the green book?


Major James William Coldwell: Yes, I quite agree. I can accept that, but let me say to my hon. friend that the cost of living has gone far beyond 33g per cent over what it was in 1945.


Stanley Howard Knowles: One hundred per cent higher.


Major James William Coldwell: Very much higher in actual fact; I am not going to argue about the percentage because it is a rather dangerous thing to do. Two: by assuming responsibility for assistance to the employable unemployed. That promise has not been fulfilled yet. Three: by introducing a system of health insurance giving complete coverage for all. That was an undertaking in connection with the 1945 green book proposals, and we have not seen it inplemented to any great extent, although, of course, the government might argue that the hospitalization plans and so on, as Mr. King said when they were introduced, were steps toward a national health plan. Four: a public investment policy to compensate for fluctuations in private investment and employment. Of course, we have not that.
Now, it will be remembered that when in the past this parliament has been urged to. proceed with these undertakings we haver always been told, yes, these undertakings were made but they have to wait, they have to be preceded by certain dominion-provincial taxation and other agreements.
Since 1945 federal expenditures have increased by 5-5 per cent. Of course I say immediately, to be fair, that the high expenditures of the wartime were in the 1945 period, but our expenditures for defence now have brought us up to within a measurable distance of what they were in 1945. Provincial expenditures have increased by 291 -9 per cent and municipal expenditures by 276 per cent. This failure of the federal government to
6002	HOUSE OF
Federal-Provincial Financial Arrangements implement fully its 1945 proposals has resulted in the heavy pressure from some of the provinces for a revision of federal-provincial tax arrangement that is now taking place and which we are going to discuss under the bill when it is before us.
Let us take the 1945 proposals one by one.
I have already referred to old age pensions, but I shall refer to them again. The assumption of complete responsibility for old age pensions from age 70 without a means test. In 1951 old age security payments of $40 a month-the government, of course, as the Minister of Citizenship and Immigration has interjected, offered $30 in 1945-financed completely by the federal government were made available to all. But since that time the government has allowed the cost of living so to increase, in spite of the representations of some of us on this side of the house, that the real value of the old age security payments has been substantially reduced in terms of buying or purchasing power. This has brought severe hardship to many of the old age pensioners of this country and many provincial governments have felt it necessary to provide additional assistance in the form of supplementary payments, to which I have already referred, free medical hospital benefits and other forms of aid, as well as, in .[DOT]some provinces, a supplementary actual cash payment. Thus, the government in its general -economic policy, by permitting the spiral of inflation in the post-war years, has reduced the burden of its commitments to old age pensioners by over one-third and has since put the responsibility for carrying that additional burden upon the provinces-at least, some provinces have assumed a part of that additional burden.
Let there be no mistake about it. The words were clear and explicit, and I shall read from page 51 of the green book proposals of the government in 1945:
The dominion's assumption of complete responsibility for old age pensions-
I underline the word "complete".
-from age 70 would relieve the provincial governments of an expenditure which has been growing and which will continue to increase rapidly in the future as the proportion of old people in the population rises.
The government's failure to live up to its full responsibility in this matter has meant that again the provincial governments are being called upon to bear a larger part of what the report calls "an expenditure which has been growing and which will continue to increase rapidly in the future." In fact, as I have said, some of the provinces are paying to old age pensioners over the age of 70 more than 25 per cent of the total amount of pensions than they had been required to pay
[Mr. Coldwell.i

before the Old Age Security Act came into effect. We say that the federal government must fulfil its responsibilities in the matter of old age pensions and provide for their payment at a level sufficient to maintain an adequate standard of living for the senior citizens of this country in order that the provinces can be relieved of this financial expenditure as they can legitimately expect to be in view of the government's statements in 1945. Secondly, the federal government proposed to accept responsibility for assistance to the unemployed employables. The federal government pointed out in 1945- and again I am quoting from the green book -that:
The dominion's assumption of responsibility for unemployment assistance would relieve provincial and municipal governments of a potential burden which in the past has constituted the most important single threat to real provincial autonomy. It has been a burden which grew in weight as provincial ability to carry it declined. In the past it has necessitated harsh reductions in essential services, harsh tax increases, and in the majority of cases also dependence on special grants or loans from the dominion.
In addition, the government pledged that:
.	.	. as rapidly as possible the Unemployment
Insurance Act will be widened to embrace all employed persons.
Then, too, there has been a failure on the part of the federal government to introduce a comprehensive system of health insurance and this has forced some of the provinces at least to increasingly heavy expenditures in that field. I see that the hon. member for Rosthern is in his seat. He will recall very well that in 1945, I think it was, a bill was actually drafted although never formally introduced in this house but reported I believe in the report of the committee of which he was the chairman for the establishment of a national health insurance plan.


Stanley Howard Knowles: 1944.


Major James William Coldwell: Yes; I have been corrected. 1944. There is the failure, too, of the federal government to participate to the extent necessary in the heavy capital expenditures that have been required for various public development projects. We have had several debates this session dealing with that matter and therefore I do not propose to elaborate on it. And now, in addition to the needs which the 1945 green book proposals were designed to meet, there is the almost overwhelming problem of the costs of education and the need for federal financial assistance to meet those costs.
I also think that a policy of de-emphasizing the tax rental agreement brings in its train the hazards of the inequity and complexities of double taxation. I think that danger

exists. The federal government has very quickly forgotten the lesson of the twenties and thirties. The Rowell-Sirois commission dealt with this matter. I am not going to read the three long paragraphs that I copied out with a view to putting them on the record because my time is running on, but I am going to refer the minister to the Rowell-Sirois report, page 111, where he will find the recommendations dealing with this problem of double taxation.
In respect to corporation taxes, a major criticism by the Rowell-Sirois commission was the-
. . . inevitable inequity, lack of uniformity, and lack of efficiency arising from the divided jurisdiction-
-in the realm of corporation taxation. In commenting on succession duties, the commission had this to say; and I am going to read this paragraph because it is shorter than the others. It said:
This legal situation has led to great unfairness and inequality in the amount of tax exacted from estates of the same size and bequeathed to beneficiaries bearing the same degree of relationship to the decedent. One estate having assets only in the province in which the decedent was domiciled and passing to beneficiaries within that province will be taxed only once; another estate of the same value having assets in several provinces will be taxed by each province on the assets locally situate within it, and will be taxed on a second time on the transmission of the property to the beneficiaries in the province in which they reside. It is plainly inequitable that two similar estates within the same province should be taxed substantially different amounts because assets of the same value are held in different forms.
May I point out that the wealth of Canada, which is the basis of all our taxation, is produced nationally. I want to repeat that. The wealth of Canada is in the final analysis produced nationally but the distribution of it person by person, industry by industry, region by region is often inequitable. As a matter of fact, there is a state of chronic inequity and this is shown particularly clearly in the regional distribution of income in this country.
I will put on the record a short table. It is table No. 3 from the federal-provincial conference proceedings of October 3, 1955.
Per Capita Personal Income By Province 1954
Province	$
Newfoundland	 638
Prince Edward Island	 648
Nova Scotia	 917
New Brunswick	 795
Quebec	 1,052
Ontario	 1,470
Manitoba	 1,085
Saskatchewan	 867
Alberta	 1,152
British Columbia	 1,435
The average for all of Canada is $1,193.
Federal-Provincial Financial Arrangements
Now, it is clear that the provinces with the lower personal incomes would have a greater difficulty in providing the same standard of services that other provinces enjoy. Either one or both of two things will happen. Either in order to provide the same standards the tax burden will become much heavier in the provinces with the lower income or the standard of public services will be lowered. I think that both might, and indeed would, happen. In any event there would be inequality for Canadian citizens resident in various parts of Canada.
I have another table dealing with the burden of provincial and municipal taxation province by province in 1953 but I am not going to deal with it; I may deal with it in the subsequent debate. But I do want to say that the problem we are facing in relation to this matter is, first of all, how best we can allocate to the various provinces sufficient funds in order that they may maintain a proper level all across Canada of services to people resident in those provinces. I do not think that can be done if we say that this parliament should vacate in any degree the taxation fields that are necessary to give to this parliament the revenues which we can reallocate across the country to bring about a reasonable level of equity from one end of Canada to the other. What I have been afraid of, as I have observed various discussions over the past few years in connection with this problem, is that more and more the government has retreated from the position it took several years ago. I am not going into the reasons for that this afternoon because they have been discussed in this house on several occasions but I have been interested in political developments in Canada long enough to know that we have had various proposals made from time to time regarding taxation in the various parts of Canada.
I remember, of course, how before the war we were told from time to time that, after all, the provinces could not be expected to assume these large responsibilties because in reality they were considered by the fathers of confederation to be little more than glorified municipal councils. I have never taken that centralist view. On the other hand, we have also heard it said that we were overgoverned, that the time had come when we should try to consolidate, for example, the three prairie provinces into one regional area with one government for the three provinces, or the three maritime provinces before Newfoundland came in, in the same degree. I do not believe that is feasible. It might have been feasible at the time of confederation, though I very much doubt that from the debate that took place at the time. It might have been
6004	HOUSE OF
Federal-Provincial Financial Arrangements feasible in western Canada perhaps prior to the autonomy act; I do not know. But X do know that such a proposition is not feasible at the present time.
Yet we are witnessing in our country a development of our economy where a few provinces may become richer and richer and, on the other hand, other provinces may become relatively at least poorer and poorer. This federal authority will be the authority that somehow or other will have to accumulate the necessary funds to redistribute across Canada so that the people, for example, in the maritime provinces may enjoy the same social services and the same standards of service as are enjoyed say, in the province of British Columbia, the province of Ontario or elsewhere in this country.
It is true that our natural resources are under the control of the provinces and, because some provinces are more richly endowed than others, their revenues will tend to increase out of all proportion to the revenues in the provinces where the natural resources are not varied and are not great. Accordingly any federal-provincial arrangement that depends in whole or in part on a re-allocation of taxing fields solely to the provinces will inevitably lead to the most pernicious of inequities as far as some of the provinces are concerned. That is the point I want to make.
The tax rental agreements, like the proposed equalization payments, have endeavoured to equalize the revenues realized in the corporation income tax, personal income tax and succession duty fields, and to that extent they are worthy of support. That is all to the good. However, not only are the revenues from those fields in need of equalizing. Tax yields generally in provinces like the maritimes are less satisfactory, and, in order to make the tax burden throughout Canada more equitable and in order to broaden the opportunities to Canadians wherever they may live, a distribution to the provinces of national income on the basis of fiscal need is essential. If that distribution to the provinces of national income on the basis of fiscal need is essential, then I think it follows that the federal authority must have the means of raising the required money to redistribute to the provinces of Canada.
We in this group are critical of the retreat of the government from the 1945 green book proposals and we regret very much that over the years they have receded from the position that seems to be inherent in the attitude of governments of the past and to have given colour to the more recent idea that this country is merely a collection of sovereign states when as a matter of fact


it is the creation of the parliament of the United Kingdom under the British North America Act. The allocation of certain powers was made under that act, not by agreement among the provinces, as is sometimes falsely alleged, not by agreement among sovereign states, but by an act of parliament based on certain resolutions that were passed by a conference which had no standing in a legal sense, for the resolutions were never approved by the legislatures of some of the provinces which came into confederation in 1867 or afterwards.
Consequently, we have to beware lest we are led into what I believe to be a wrong attitude in relation to these problems of assuming that what this parliament is actually dealing with are sovereign states which have certain prior fiscal claims and that we must always accept the allegation that they are indeed prior claims. We do not accept that view. We accept the view that Canada is a nation and that, as a nation, it has national responsibilities. If it has national responsibilities, it assumes national obligations, and in order to fulfil those responsibilities or those obligations assumed it must have the power and the necessary financial authority to carry out a national program. That national program surely involves that every Canadian citizen, whether he lives in one part of Canada or another, should have a certain equality and right in the social services and the same standards of social and other security to which every citizen of this country should be entitled.


Solon Earl Low: Mr. Chairman, with a good deal of what has been said by the speakers in this debate I am sure that we in this corner can find ourselves substantially in agreement. With a good deal of what has been said by the leader of the C.C.F. group, I am afraid we would have to take issue. In the course of what I shall say this afternoon in connection with the resolution now before us, I shall point out one or two of those more important things upon which we have to differ from my hon. friend, the leader of the C.C.F.
I turn now to the resolution. The language of the resolution that we are discussing today is like a velvet glove on a mailed fist. The language is bland and considerate and it makes it appear that the federal government is generous and thoughtful in its dealings with the provinces. But underneath a number of very dulcet phrases such as "the minister may pay to a province out of the consolidated revenue fund", "tax equalization payment", "provincial revenue stabilization payment" and "tax rental agreement as an alternative to levying such taxes on its own behalf"-as I say, under these,

which I am sure are dulcet phrases to the provinces-there is to be found by careful study evidence of a surprisingly hard and uncompromising attitude on the part of the government of Canada.
I thoroughly agree with what has already been said in this debate to the effect that certain principles enunciated in the resolution are good and must carry a good deal of comfort to those provinces which have not had a reasonable deal ever since the days of confederation and where, as my hon. friend from Rosetown-Biggar has pointed out, there is the need for equalization payments. Recognition of that need is set out in the resolution, and we agree that recognition of the principle of equalization grants is something that has been long overdue and is something with which we must agree. So there are some things in the resolution that we regard as good; and we are pleased to see the government's acceptance of the principles contained in those phrases about which I have spoken briefly.
If we were to judge solely by the resolution that is before us and by what the Minister of Finance said in his speech this morning we would doubtless have to agree that this government was trying to be fair and just in its dealings with the provinces. There is nothing in the wording of the resolution itself to which anybody could take strong exception. If all were as smooth and well in the field of dominion-provincial relations as the resolution seems to make it appear then we could pass the resolution quickly, take care of the bill very quickly and get off home for at least a token summer holiday.
Unfortunately the resolution itself is misleading, and when we get into a careful study of the government's proposals to the provinces, proposals which will be embodied in detail in the bill to follow the resolution, we find that all is not well. There is widespread dissatisfaction amongst the provinces of this country. When we consider the details of the government's proposition in' the light of all the circumstances and conditions we find them most unrealistic, and practically every province looks upon them in the same way.
That would be serious enough but there is much more to make the provinces very unhappy about the whole situation. The provinces think that the federal government is trying to ram a new formula for taxation and revenue division down their throats without taking the time and making the effort to work out in conference with them a formula which will be acceptable and much more realistic in its concept. I have talked
16, 1956	6005
Federal-Provincial Financial Arrangements to quite a number of people from the provinces, and without a single exception that is the attitude which they have all had.
Many of the provinces believed that when the federal government called them together something over a year ago, I believe a year ago last April, to consider extension of the tax rental agreements or some suitable alternative, as well as other important matters, the conferences would continue in intermittent session until a satisfactory settlement of the most important of the financial and taxation problems outstanding between the provinces and the federal government had been worked out and agreed to. I think they are entitled to this belief. There was nothing to indicate, when they were first called together over a year ago, that they would be called together, that they would draw up an agenda for a later conference, that the conference would take place and that at that conference a proposition would be put before them and then they would be dismissed to consider whether or not they would accept it. I think, as I said, that they were entitled to believe that they would be called together and perhaps would meet intermittently until an agreement had been reached amongst them.
However, as I say, they have been sorely disappointed. Instead of continuing in conference the federal government peremptorily put a proposition before the provinces and as much as said to them, "take it or leave it". I agree with the Leader of the Opposition when he said this morning that the way the provinces look upon this thing is that it is a take it or leave it proposition. They have had no alternative. This government has declared time and again, especially at election time, that they are promoters of unity and architects of smoothly working, successful federal union. But, Mr. Chairman, their attitude as expressed in the proposals they made to the dominion-provincial conference of October last, and in what they are obviously trying to do by asking us now to pass this measure at this time, cannot be considered as promoting unity or building a nation of happy, co-operative provinces.
The provincial governments almost 100 per cent consider that this measure is a breach of faith, and so some of them have told me. I believe I am correct in saying that they consider the "take it or leave it" attitude of the government is not the basis for a smoothly working confederation. As a matter of fact, persisting in the attitude adopted by the government today will not only wreck confederation but will make for serious disunity and, what is most serious, will result in a most objectionable measure of centralization of power and authority far removed from the
6006	HOUSE OF
Federal-Provincial Financial Arrangements individual citizen in this country, a centralization that is completely foreign to what the fathers of confederation had in mind. To pursue this whole matter of settlement of tax fields and revenue sources as it is now being pursued by this government can, in the minds of the provinces and their governments, result in tearing up the British North America Act.
I said that the government's proposition is unrealistic and niggardly. I am going to suggest four reasons why. Time of course will not permit me to do more in the 30 minutes I have at my disposal this afternoon, but perhaps later I will have something more to say and my colleagues will also present other reasons why they think that the whole proposition the government is making to the provinces today is unrealistic.
My first reason is this. The government's proposal fails to give anything like the weight that should be given to the burdens that are now on the provinces. It almost totally disregards the terrific strain which the demands of the next 20 years are going to place on provincial budgets, and it brushes off altogether too lightly the fact that every provincial government in Canada needs more money.
Much has been said already today about the burdens that fall upon the provincial governments. The Leader of the Opposition spoke about the crisis that looms in education. I agree with him. The crisis is now on us and it is going to intensify in the years immediately ahead. We all agree that education is a provincial responsibility. Educational costs, however, have skyrocketed during the past ten years. There has been a terrific increase in building costs, in salaries, in the cost of supplies, and the end is not yet.
Here is a specific example of the sort of thing that nearly every province is forced to deal with, and it gives substance to what the Leader of the Opposition said this morning and what I am saying now, that there is a crisis in education ahead of us. Let us take Ontario. My children are going to school in Ontario and I try to keep in touch with things as they are in this province. I am interested in education and I have tried to keep myself informed about Ontario education. I see municipalities like Ottawa telling the people in certain sections of the city that the city has to look upon them in future as second-class citizens, that they cannot allow them to have a school with a basement, a wood-working shop or an assembly hall because costs have increased to the point where they cannot tax the people any more to get such things. It is all right for the other parts of the city to have them but they cannot have them for the reasons I have suggested.


Today in Ontario the public, secondary and technical school enrolment is approximately one million boys and girls. It has taken 89 years to build up to that school population. The growth over these 89 years has been quite largely gradual and steady. But official forecasts indicate that in the next ten years there will be an increase of no less than three-quarters of a million students in the public, secondary and technical schools of this province, almost the same growth in ten years as has occurred over the last 89 years. A 75 per cent increase in ten years will put a terrible strain on an already heavily burdened provincial government and the even more harassed municipalities and school districts.
What about university education? As I understand it, there are seven universities in the province of Ontario. Ontario's seven universities now have approximately 20,000 students. By 1965 it is expected that they will have 40,000, if they can be provided for. That is what the Leader of the Opposition said this morning-if they can be provided for. But what if they cannot be provided for? Are they to be denied the advantage of a university education? Are they to be denied equality of opportunity with those who have gone before? They will be, unless we solve this problem, unless we divert it, unless we meet it in some way. I am told by competent authorities that by 1975 they expect to have fully 90,000 students in those universities in this province. That is a spectacular growth in 20 years if they can be provided for.
Are the provinces to be left to pay the huge costs of meeting this situation? It is not just a question of more students; it is a question of more accommodation, more teachers, more instructors, more administrative staff. Are they to be left alone to carry on? Let us not forget that Canada has been running behind in the output of the specialist class of students which was mentioned this morning by the Leader of the Opposition, specialists in engineering, mathematics and all that sort of thing. Yet we are told that Russia and the communist countries are going ahead rapidly. Are we going to turn over this big job of providing a national bank of ability and technical skills for the development of this country and to meet the demands of the future in war and in peace to the slender resources of the provinces and the municipalities which are already over-burdened.
I could speak about British Columbia and the situation there as I talked about Ontario. In British Columbia the enrolment in the secondary and technical schools in 1954-55 was 220,000; competent authorities indicate that in 1964-65 it will be 340,000, an increase of 50 per cent in ten years; in 1974-75

it is estimated it will be 420,000. In the one university in that province which is a provincial institution it is expected that the requests for enrolment will increase from 6,300 as they were in 1955 to 26,000 in 1975. How are they to meet that situation unless they are guaranteed some sort of assurance that their revenues will be adequate to meet their responsibilities?
I could talk about a good many other things such as polluted waters and the necessity of cleaning up that situation. It is going to cost this province $120 million per year over the next 15 or 20 years and there will be no hope for any return except the satisfaction that comes from having waters which are clean. How are they to do it? I could go into a lot of these things but I must hurry on.
My second reason for saying that the present proposition is unrealistic is that it does not take into account the great upsurge in national revenues which will result very largely from the work and efforts and planning of the provincial and municipal governments. My hon. friend, the leader of the CCF, if I remember correctly has said that the wealth of Canada is produced nationally. That is pure silliness. The wealth of Canada is produced by individuals, largely as a consequence of work done by the municipalities and the provinces. While it is true that there must be some fiscal need arrangement to help the provinces with the least to get along and have something like equality, I still cannot agree that the wealth of Canada is produced nationally. The money is produced nationally, no question about that, and often times in such meagre quantities that we cannot distribute what we produce.
When one considers the very considerable growth in the gross national product and the change in the industrial activity since 1937-38 he cannot help but be greatly impressed. I think I am correct in saying that back in 1937 the gross national product of Canada was only $3-5 billion; in 1955 it reached the very marvellous figure of $26,600 million, and it is expected to reach $28 billion this year. Does the Minister of Finance think it is going to stop there? Everybody knows that it will not with the development that will take place and we know can and will take place. I am sure that he realizes that revenues will pour in to this government very largely as a consequence of the work done in the provinces and the municipalities, carried on by individuals and individual enterprise. The provinces and the municipalities ought to feel that they are getting a fair share out of those revenues in order to help pay their costs.
16, 1956	6007
Federal-Provincial Financial Arrangements
These things are not reflected in the proposition made by the government to the provinces. I think we should all bear in mind that it is not next year or the next five years that we should be planning for; we have to look ahead at least 20 or 30 years and plan for them. We are on the verge of a spectacular development and the provinces must have pretty definite knowledge of what they can count on by way of revenues if they are to achieve anything like what they so much desire to do and what is expected of them. The government's proposal to the provinces is most inadequate.
The third reason why I say that the present proposition put before the provinces by the government is unrealistic is that it gives no consideration whatsoever to the almost maddening frustration presently felt by the municipalities of Canada because they are faced with rapidly rising costs, increasing demands for service, but have no more money to meet them unless they carry their present property taxation to the point of confiscation, at which point I claim it is at the present time. They in turn have to look to the provinces for relief and help.
Let us not overlook the fact that in the development of this country the dominion government must always keep in mind that its strong right arm is the provinces and municipalities. Are they going to cut off that strong right arm? I could deal at some length with that but I am going to leave it for the moment.
The fourth reason I say that this proposition is unrealistic is that the governments of the provinces rightly believe that they are as much entitled to the fields of taxation as is the dominion. I do not need to enlarge upon that. Let me just say that what we have before us is a niggardly settlement of tax fields that belong as much to the provinces as to the dominion. I say it is unrealistic to take any other point of view.
During the second world war the municipalities and the provinces were strictly secondary. They had to be so. We all realized that if Canada was to make an all-out effort that must be so. The provinces willingly vacated the three tax fields on the understanding that they would be returned to them one year after the war ended. I happen to have been a signatory of the first one in 1941 and I know that the federal government told us that they would be returned at the end of the war or one year later. That was not done. This government feared that when the war was over a depression might come with peace and therefore they continued the wartime arrangements.
6008	HOUSE OF
Federal-Provincial Financial Arrangements
Then war threatened again when North Korea invaded South Korea. Again it seemed necessary for security reasons for the provinces and municipalities to continue in a secondary position. Six more years have passed, years of cold war and the threat of a shooting war. It has now been sixteen years since the first tax transfer agreements were asked for by the government of Canada and during those years the senior government has come to look upon the provinces and municipalities as permanently poor relations of a second degree character.
It is easy to fall into the habit of thinking that centralization of power and authority for security purposes ought to be continued indefinitely and made a permanent arrangement. We believe that the time has come for a change of attitude on the part of the government. We face in this country an era of marvellous development. This development cannot possibly take place in the interests of all the Canadian people unless this government sets out on a deliberate and definite policy of close partnership with the provinces. You can never encourage close partnership by slapping 10 provincial premiers in the face or offending provincial governments; that is what you are doing when you put up to them a proposition like this one and then as good as say, "Take it or leave it".
Here you are bringing in legislation to give effect to a unilateral formula-that is what it is-for tax and revenue sharing; and if the bill to follow this resolution is couched in anything like the rigid terms of Bill No. 418, then it will become a stone wall behind which this government can and doubtless will take refuge when the provinces try to obtain a fair division of the revenues which will surely be available to this government in the years ahead.
With this bill made law, I can easily imagine what kind of reception the provinces will get if they come back in an effort to negotiate a better deal. They will be told doubtless in words something like these: "Parliament enacted this law and we are powerless to change it unless and until parliament shows a disposition to amend it. Sorry; we can't depart from the formula. Better go home and try to get along on what you've got." That is the way they will be dismissed. Let me point out that this could very well become a kind of closure imposed upon the provinces themselves.
I think the minister should not proceed with this resolution at this time. He should try to allay the fears of the provinces by announcing another conference some time this fall. If it could be called for October, and
[Mr. Low.l

if this government would attend that conference with a realistic attitude and with the true spirit of understanding partnership I am confident that an agreement could be reached with all or nearly all the provinces. There would then be time to prepare the legislation and get it ready to be made law early in the next session, as early as January. If that were done the provinces would not feel as if they had suffered, and when I say "suffered" I mean not merely a slap in the face but also a bad beating from this government this year.
I warn the Minister of Finance that the provinces are not at all happy about the miserable, penurious deal under which you have handed over to them and their harassed municipalities half your unemployment responsibilities, as was done just recently. There is not one satisfied province in Canada today. I challenge the minister to name one when he replies. But if the measure envisaged by this resolution is made law, then I warn him that the dissatisfaction will turn into hostility, and I am sure that feeling is not conducive to progress and sound development in Canada as we want to see it.
I remind the minister of something else in closing. I remind him of what has happened during the past 17 years. Those are the years during which the federal Liberal government has been centralizing financial and taxation authority in Ottawa. It is true that was to meet a particular situation, and we are not complaining about that. However, 17 years ago every provincial government in Canada except one was a Liberal government. One by one those Liberal provincial governments have fallen until today only three of the smaller provinces of Canada have Liberal governments, and even they are very dissatisfied and for good reason. I noticed just a few days ago where they met in Fredericton and worked out a permanent organization to seek a better deal. They are not satisfied.
Has it occurred to my hon. friends and the Minister of Finance, for whom I repeat I have very high regard, that the people of the provinces, who are closer to their governments, have turned down the Liberals by at least 12 to one on the basis of population, largely because they felt they had to turn to opponents of the Liberals for their own protection? I should think you boys over there would take a fairly careful look at the whole situation, and when you do you will perhaps give the Minister of Finance and the Prime Minister some fatherly advice, prominent in which ought to be instructions to withhold this legislation until a much more sympathetic effort has been made to find a more acceptable formula. It can be done.

You should bear in mind that a good many people, Mr. Chairman, are quite aware of the fact that since 1946 this government has piled up accumulated budgetary surpluses of more than $2 billion. This is the period during which municipalities all over Canada, and many of the provinces, have been forced to raise property taxes until they amount to sheer confiscation; and still in spite of that they have sunk into a slough of debt and interest which threatens to crush them. The people in the provinces and municipalities, I will tell you, are watching the federal finances at this time.
Moreover, they see that this year, when the federal government is trying to justify a niggardly settlement of tax fields which belong as much to the provinces as to the dominion, this government will likely pile up a huge surplus of three-quarters of a billion dollars. And when they see a good part of that surplus used in the 1957 budget as election bait, as it surely will be, they will be quite satisfied in accusing this government of callous indifference to the actual needs of the municipalities and the provinces, or lack of vision and responsibility, or both. In the light of all the facts, how can the government refuse to try to seek a less penurious, less objectionable settlement of the taxation field? The minister ought to do it.
I am going to leave it at that, Mr. Chairman, but I do feel very keenly that every effort ought to be made to work out a much more justifiable settlement than this represents, to see if we cannot get a happy, smooth working democracy in this country.


Walter Edward Harris: I was looking at the 1952 debate on the renewal of the tax rental agreements during that year, Mr. Chairman, and I noticed that only seven members took part at the committee stage. I am informed that I am not going to be as fortunate this time, therefore I think perhaps I should answer some of the remarks that have been made and some of the questions that have been raised up to this time. Perhaps it will be necessary to intervene on another occasion.
There seems to be an advantage to the Minister of Finance on this particular matter in that he is being criticized for completely different reasons, in fact conflicting reasons. Therefore I begin by saying that possibly under those circumstances I might be comforted in thinking I have arrived at perhaps the best solution.
We have the Leader of the Opposition, not perhaps directly but indirectly, repeating the argument he made in opposition to the tax rental agreements of the past. We have the leader of the C.C.F. party upholding the tax rental system of the past and criticizing any
16. 1956	6009
Federal-Provincial Financial Arrangements departure from it. We have the leader of the Social Credit party taking a position which I think may be described as somewhere between the two, except that he is opposed to the change now not on the grounds of principle but simply on the grounds of the money involved in the particular solution at which we have tried to arrive.
May I for the record repeat what I said in my budget speech in connection with this, and I point out that I made this statement this morning in a different form. On March 20, at page 2335 of Hansard, I said this:
But may I make it quite clear that not one provincial premier is on record as saying that this new tax-sharing plan is not as good as the present tax rental agreements; and I am prepared to go further and say that almost all of them have stated that the principle of the new plan is better than the present system.
From that day to this no one has questioned the validity of what I said. So I am prepared to say to the committee that while there may be, and there certainly is, a difference of opinion as to how much may be paid to a province, I take it that even in this debate except for the questions of the leader of the C.C.F. party there has not been anyone who has suggested that the system we have proposed to the provinces and which is now before the committee, is not better than the previous system.


John George Diefenbaker: Which premier said perhaps it was better?


Walter Edward Harris: I made the statement that no premier had said it was not as good, and I am prepared to say that most of them have said it was better. I say that because in all the meetings and in all the correspondence no premier has suggested that we should continue with the tax rental agreements as they are now in existence, even with increased payments, and they have all agreed at one time or another that this system is a better system for the purpose of distribution, if you like, of certain tax receipts among the provincial governments. Now, that is not to say that they have agreed on any detail whatever of the plan. I merely confine myself for the moment to the principle.
But may I go back and cover some of the points made by the Leader of the Opposition. I have been astonished at the repetition of what I consider a fallacy in his argument even today with respect to what happened under the wartime tax rental agreements. He has made the point, or has tried to make it, that when the federal government entered the field of taxation for wartime purposes by agreement we in some manner avoided carrying out the engagements that were made at the time so there has been a disadvantage to the provincial governments.
6010	HOUSE OF
Federal-Provincial Financial Arrangements I want to read what was contained in the wartime tax agreements with respect to this point. I am quoting:
The federal government undertakes-
-to reduce its rates of taxes by such an amount as will enable the province again to use the income tax and corporation tax fields, and in particular the dominion undertakes to reduce its rate of tax on corporation incomes by at least 10 per cent of such incomes.
That was the extent of the undertaking given at that time. May I point out what we have done. As from January 1, 1947, at the conclusion of those agreements, the federal tax rates were substantially reduced and the conditions met. Corporation income taxes were reduced by 10 percentage points and personal income taxes by well in excess of 20 per cent. These reductions were in excess of the levels of taxation prevailing in any province prior to the wartime tax agreements. Well, we went farther, sir. When we entered into the 1947 tax rental agreements we also agreed to certain conditions which we would meet at the termination of those agreements. We agreed to allow a deduction of provincial personal income tax up to 5 per cent of the federal tax, a deduction for provincial succession duties up to 50 per cent of the federal duties, and a deduction for corporation income tax up to one-seventh of the federal tax.
Our performance with respect to that undertaking is this. At the conclusion of the agreements these conditions were met exactly in the case of the personal income tax and succession duties, while in the case of corporation income tax a credit of 5 per cent was allowed, which was in excess of the one-seventh of the prevailing federal rate.
We have similar conditions in the 1952 tax rental agreements. We agreed at the termination of those agreements to allow a 5 per cent credit for personal income, a 50 per cent credit for succession duties and a 7 percentage points credit for corporation income tax. These conditions will be more than met with a 10 per cent personal income abatement, a 50 per cent succession duty abatement, and an allowance of 9 per cent-age points for provincial corporation taxes, as is proposed in the legislation before the committee at the moment. Therefore I am completely unable to accept the argument advanced by the Leader of the Opposition that we have failed at any time to carry out any engagement that was made, beginning with the wartime tax rental agreements.
When I interrupted the Leader of the Opposition this morning with respect to the argument he was making as to the result this would have, I gathered he had in mind that not only should we vacate those tax fields,


as we have done on successive occasions, but that we should continue the former arrangement, as he said, and I read from the Hansard typewritten sheets of his answer to my question-
Before the war there had been arrangements under which certain of the provinces were imposing taxes, and that was in the mind of those who were arranging the agreements at that time. It was understood that immediately afterwards those provinces that wished to do so would again impose taxes and that the federal government would carry out the arrangements which it carried out before the war with respect to collecting those taxes up to the amount imposed by the provinces and without double taxation. That was the simple and clear understanding at that time.
I asked at that point if this bill was not doing that and, of course, he said that in effect the bill may be doing so at the moment but that we had not done so in the past. I have examined the record, and I cannot find any undertaking whatever by the federal government to go on collecting taxes at the conclusion of the war period on the same basis as before. However, let me point out that we are offering to do it at the present time and the conclusion of the tax rental agreements.
The leader of the C.C.F. party has made a number of suggestions as to why we seem to be retreating from the position we took in 1945. He knows quite as well as I do-and I think I should repeat this although he has heard it many times-that the green book offer of that year was conditional on a great many things which were not met, including the fiscal arrangements contained in the suggestions in the green book. On the other hand, I think he can go through the green book, and while he can make arguments with respect to the price of goods to be purchased now as compared with the price at that time, he will find it somewhat difficult to pick out any offer we made at that time that has not been carried out or is not about to be carried out by offers that are now outstanding.


Mr. Winch:: I will be glad to do that.


Walter Edward Harris: Just a moment. This is from
the green book in which those offers were made conditional upon certain other arrangements being entered into, which have not been met, and for that reason the original offer was vitiated.
I take it his argument is that the tax rental agreements now in existence have met to a considerable degree the fiscal need of some provincial governments at least; yet because they hid the fiscal need element, they were to be preferred to the present system. Let me answer that very briefly by saying this. The present system will show

quite clearly the amount whereby the taxpayers of a given province are not able to contribute in these three tax fields to the extent of other taxpayers in other provinces, and we have based the equalization payment on the deficiency between any given province and the average of the highest two provinces. In this way everyone can see at a glance what that deficiency is from year to year, and will be able to decide whether or not this parliament should make a deficiency payment in this particular case to the extent that the legislation calls for.
I would suggest to the leader of the C.C.F. party that it is far better to know the extent of the fiscal need that is being met in this matter, so that if the argument should be made that this government is not aiding in this particular field we can see what is being done; and if the argument should be made that it is not enough we have the statistics on which we can base our decision on that argument.
I noticed also that he emphasized more than once in the course of his remarks that we seem to have given up some of the authority and the power we had to control by taxation the difficulties that we may become involved in if we have another depression. Well, now, sir, we are not doing that to any great extent. It is true that to the extent that a provincial government may elect to impose and collect its own taxes under the legislation now before us there will be that diminution, if you like, in the almost complete authority of this parliament to impose taxation in those fields which has existed when all but one of the provinces have made tax rental agreements, as has been the case in the last four or five years; and yet, sir, I suggest that that slight diminution, if it is serious at all, is not by any means serious enough to take away from this parliament whatever opportunity it may have to exercise by fiscal policy, some changes in the economy from time to time. If I had thought that there would be any other result I would not have presented this resolution in its present form.
I believe-and I think the leader of the C.C.F. recognizes this-one of the principal problems in carrying on with a tax rental system such as we had is that despite the expression of opinion in 1945 that it would be desirable to maintain that authority in this parliament against the possibility of a post-war depression-and I think I should add here that I never heard of anyone who did not expect a depression at that time; everyone was apprehensive, therefore the thinking and planning of everyone was coloured a little by that-it should be borne in
16, 1956	6011
Federal-Provincial Financial Arrangements mind that since that time we have had only the slightest of recessions in 1954 and during that time it was quite clear that the whole of the provinces of Canada were not going to be in agreement with the tax rental system that we began at that time. That is a political fact that ought to be considered and due weight should be accorded to it.
Therefore, as I said in my introductory remarks, when we came to consider what should be done when the tax rental agreements ran out we were obliged to think of another system that would meet the needs of the people and maintain in this house to a large extent the power and authority for taxation purposes that have been mentioned, as well as to recognize, if we come to the other argument, that the tax rental system imposes upon provincial governments some restraint on their autonomy, a restraint which is not good in the long run. So we had to consider whether some system might be devised under which if they wished they might return to taxation in those particular fields on their own terms to a certain extent.
Briefly the Leader of the Opposition and the leader of the C.C.F. party referred to the weaknesses of the Weimar constitution, and I think I could add one to it. My recollection is that the first constitution of the United States provided for maintenance of the central government by the governments of the 13 states, and it too fell by the way for the simple reason that you cannot have a central government dependent on the support of the constituent parts of that central government. For good or ill a central government must stand on its own feet and must be able to exercise the authority and powers which it is called upon to do by the constitution. Inevitably, in a country like Canada at least, the central government when times are not as good as they are at the moment would have to stand behind the provincial governments in any crisis that might arise, as it did in the depression which brought about all the things we are talking about now.
We should not overlook the fact that while the Leader of the Opposition seemed to suppose I should have found a solution to this problem in the past few years, the history of this problem only goes back to the depression of 25 years ago, and we have experimented with only one solution, which was the tax rental system to overcome the difficulties reported on by the Rowell-Sirois commission.
It is true the provinces accepted the tax rental system during the war simply on an emergency basis; the Leader of the Opposition is quite right in saying that. On the
6012	HOUSE OF COMMONS
Federal-Provincial Financial Arrangements other hand it is equally certain that a great many people in Canada would have desired that the Rowell-Sirois commission report be carried out before the war in one form or another, and that when the war ended there were a great many people who felt that the advantages of the single tax system in these particular fields should be maintained, that at any rate the advantages to certain provinces and communities by reason of distribution of these tax fields had been very great and should not be discontinued.
That has been the policy of this party. We have upheld the tax rental system in two general elections, as the leader of the C.C.F. party mentioned. We have been upheld in those general elections not because of the tax rental system itself but because the result of it was that we were able to provide the provincial governments with extra revenue they could not get by their own means, and in that manner they were able to provide services for their people which otherwise would not have been provided.
The leader of the C.C.F. party remarked that we might possibly be losing our powers to control unemployment. We have, of course, provided a means of alleviating the difficulties that arise with unemployment, but I suggest that the record of this government in maintaining a high level of employment over the past 10 years at least has been such that no criticism can be directed at it at the moment. We are today approaching a time when there will be a shortage of labour in Canada, and practically everyone who can work will be working. Indeed I think we have passed that point until now people are saying, "Let us have more hands." Everyone is working.
I do agree with one thing that is said with respect to succession duties. There is no question at all, sir, that this duty is one which in my opinion should be collected by the federal government and by provincial governments if they so desire, of course. It is true that the facilities for becoming wealthy in Canada are not confined to any municipal corporation or any provincial area, and that when great wealth is made it is usually made throughout the dominion. In my view in this particular instance it would be desirable to maintain the collection of succession duties for the purpose mentioned by the leader of the C.C.F. party.
A great deal has been said about the ill effects of double taxation. There is no question about it that double taxation is undesirable in Canada from a practical standpoint and from the standpoint of the taxpayer. He would prefer to make one return and deal with one government so that his

costs could be kept down and so on. On the other hand it should not be overlooked that we in this country have a federal system with provincial governments, and one should not expect to take away from them the right of taxation if they desire to do so, except by their own consent.
I must say the fact that some provincial government might choose to impose taxes in these fields rather than agree to a tax rental system does not bother me particularly because I realize that while there will be in that particular province a little bit of difficulty for the taxpayer in filling out more taxation forms and satisfying a second government instead of only one, I think this will be accepted by the taxpayer in that province on the basis that the provincial government in its wisdom feels it is desirable to enter this field either for maintaining its autonomy or for the purpose of obtaining a greater revenue from the particular tax than that which we would be able to provide by the tax rental agreement.
The leader of the Social Credit party has perhaps given greater condemnation than any others of the offer we have made. As I said at the beginning of my remarks, I am not in a position to say that under some conditions we could not have provided a greater percentage in the standard rates than we have at the present time. All I can say is that we met in conferences, and may I say at this point that they were conferences. There was discussion, and there was no take it or leave it attitude. Although I was not a member of any other conference I have spoken to many who were members of previous conferences, and I have been told by them that these several conferences were conducted in a better spirit than any others have been, which is an indication that we were not adopting a take it or leave it attitude.
I pointed out at the conference last year that I thought perhaps I was the only minister of finance or provincial treasurer present who would show a deficit during the last fiscal year. My recollection is that one of them mildly disagreed with me on the ground that in his province there was apt to be a deficit under certain conditions. I think the committee should bear in mind that we did have a deficit in our fiscal matters in the last fiscal year. It is true that this year we expect to have a surplus as I indicated in March and that surplus is due, as everyone knows, to the increased activity in the country together with the delayed effect of the payment of corporation income taxes.
This, of course, does not redound to our complete advantage under the system we have here. As corporation and individual

income taxes and succession duties increase, the provincial governments will receive the appropriate increase that we have provided in the legislation. We are not tying them down for five years to the maximum amount they are going to receive next year so that from then on they are constant while we take the extra payment; by no means. They are getting their share of the increased payment if there is an increased payment of tax in these fields.
On the other hand, and this should not be overlooked, we are guaranteeing the provincial governments that they shall not fall below a certain level, no matter what those payments may amount to. That guarantee is a very essential and very desirable part of those arrangements from the standpoint of the provincial governments. It might happen that we shall not have to use the guarantees we have given. As I said this morning, we should hope that conditions in the country would be such that it would not be necessary, but I think we have to accept the fact that as difficulties arise this government must see that on all occasions the revenues of the provincial governments do not fall materially or drastically because of conditions arising throughout the country as a whole.
The leader of the Social Credit party has called these proposals niggardly. I have been finding it difficult to understand this language, sir, because the document I tabled this morning indicates that if the tax rental agreements have been good from the standpoint of payment-and no one particularly has said they were not reasonably good-surely this is better, when every province receives at least as much under the proposals before the committee, and in most cases more than they would under the tax rental agreement if it were extended into the following year. I do not know what one would consider an adequate increase in provincial revenues from year to year might be, but let me point out that this means a 20 per cent increase in the payment from this government to the provincial governments. Further than that, the amount being paid comes, I think, to an average increase in provincial budgets across the country of about 8 per cent, and in some cases more than that. It seems to me, whilst I would not be in a position to judge whether any provincial government would feel that it ought to have more than that, if you find an average of 8 per cent it would mean that some had around 11 or 12 per cent. That is a fairly substantial increase in gross revenues in any year, and provincial governments probably would not be in any particular financial strait-jacket, as has been suggested during this debate.
16, 1956	6013
Federal-Provincial Financial Arrangements
Now I want to point out one other thing. The Leader of the Opposition made some fun over my remark about not having a solution to this problem. I said a moment ago that we have been only experimenting with it for less than 20 years. We have only had a report suggesting something like this for less than 20 years. I should not suggest that we could arrive at a final and conclusive solution at this time. We have followed only one system up to the present time, tax rental agreements negotiated separately with the provincial governments. We are now attempting here a solution which is not final-that is why I did not use the word-and which even the Leader of the Opposition described as having merit.
In fact I suggest now that it has this merit, that when the terms have become known it will be seen that about the only argument that might be made against it is with respect to the amount of money involved under any given circumstances, and that the need of the provinces is clearly set out. The federal government makes certain payments under certain conditions; and for these reasons the provincial premiers who studied it, whilst dissatisfied no doubt with respect to the amount of money involved, have not, as I have said, suggested to us that any other system would be better than the one we have suggested here.
When the bill is before the house, of course, I shall go into much greater detail than I have done today; but 1 suggest that if any increase in contributions to the provinces to the extent of 8 to 12 per cent is going to be described as niggardly, then 1 am afraid I shall not be able to carry on a discussion on that basis. I suggest that it is a good increase, one which may not perhaps be acceptable in some quarters, but which does not tie down the provinces over a period of 20 years, as has been stated here today.
I realize that the provincial governments, like this government, cannot plan just from year to year, though we only tax from year to year. We must be aware of the problems that are going to arise from time to time, but this government engages upon programs which are not completed in one year. We have programs going on which we know will not be completed for another three or four years. We have embarked upon them with what money we get from year to year in the meantime to complete them. Therefore we limited the proposal before the committee to five years.
I for one would doubt that in five years' time the system would remain precisely what it was. At that time, as I said this morning, there will perhaps be different
6014	HOUSE OF COMMONS
Federal-Provincial Financial Arrangements men dealing with this matter, with different ideas as to whai ought to be done, but this plan is good for five years. I do not think it is going to destroy the municipalities and provincial governments in the meantime. What is more, I think it is going to be advantageous to them. At that time, if a change is required perhaps it may be worked out. In the meantime I suggest that we ought to rely on the opinion I have given, namely that so far no one has suggested a better system, and we can discuss it in detail when we come to the bill.


Mr. Nowlan:: I am not going to get involved in a discussion with the Minister of Finance as to what may or may not have been suggested or what may or may not have been done in years gone by. The Leader of the Opposition and others who have participated in this debate will have an opportunity of speaking again at other stages, and I am sure the record will be dealt with effectively at that time.
The minister has given us a fairly long dissertation upon his philosophy and the philosophy which he thinks motivates those who have proposed this resolution. I cannot disagree with him in everything. As the Leader of the Opposition said this morning, there are good points about this legislation. As was said, opinions may differ as to whether this is scientific surgery or sophisticated butchery.
We saw a difference here this afternoon among the leader of the C.C.F. party and the leader of the Social Credit party and the Leader of the Opposition. Like the three blind men dealing with the elephant in the dark, one felt the leg and one felt the side, one felt the trunk, and they each got a different reaction. So it is not something on which one can be dogmatic in every respect. There have to be qualifications in anything which may be said. However, I would take some objection to what the Minister of Finance said to the effect that the support which his party got in elections in the past had been partly attributable to the fact that people in some provinces realized they were getting moneys as a result of those tax rental agreements which otherwise they would not have got. Actually I do not think that can be justified at all, because those agreements, as the Minister of Finance knows full well, were not designed for the purpose of distributing the wealth in any way. As a matter of practice, in the end federal agreements were made with the wealthier provinces which were much more lucrative than those made with the provinces which had less, and which were compelled to sign because if they did not sign they would

starve to death. It had nothing whatsoever to do with the distribution of the means of this country in any shape or form.
If one reads the history of this, one sees how complicated it is. The minister made reference to the Rowell-Sirois report and the studies carried on before the war.
There is no question but that at that time it was envisaged by that commission that there should be a centralization of taxation, a recasting of federal responsibilities and duties under confederation. Many things were envisaged then including, of course, the fact that taxation was necessary as a fiscal instrument in order to control or deal with depressions. That is one factor the member for Rosetown-Biggar referred to this afternoon, and I think the Minister of Finance suggested it. I believe he will admit that today the emphasis is placed on central banking and on monetary policy, and that the government realize that perhaps in that field they have a more effective weapon to deal with depressions should they come, so they are not so dependent upon taxation and therefore have been willing to relax some of the powers of taxation which they previously controlled.
There are many criticisms one could level. I propose to deal only with two this afternoon and to do so briefly, because the ground has been covered in general by other speakers and there will be others speaking as well who will perhaps develop the other points. The Minister of Finance says, "Oh, there have been conferences, and it is unfair to suggest that there have not been conferences." Well, you can call them conferences, Mr. Chairman. We have also had consideration in this house which lasted 15 seconds. That was deemed consideration. We have the minutes here of the conferences, and we can see what voluminous documents they are. They certainly are conferences only by courtesy. They made long speeches. In fact they took all one day complimenting each other all around the table, and then wont onto camera on the second day. But surely no one is going to suggest, least of all the Minister of Finance who understands the complicated constitutional problem with which this country is confronted, that in such a short time as was taken by these conferences one could attempt to deal with the various problems confronting the governments of Canada today.
The minister says, "Oh, my, we have only spent 25 years considering this and we have made remarkable progress because we have got away from the leasing type of taxation agreement and now, after 25 years, we are going to try something else which is a step

beyond that, and only a step, and which is only going to tie our hands for five more years." He admits, and quite wisely I think, that after 30 years there may be somebody else there who will be able to deal with this matter in some other way. Yet during that 25 years the constitutional problem in this country has only been brought particularly into crisis since the war.
Certainly there was no great need of haste, no great need of immediate decision in the horse and buggy day, in the red school house day, even in the days not too long prior to the second world war. But the pressure which has been brought to bear on the provinces and municipalities by circumstances over which they had no control at all necessitates and requires that some decision be arrived at on the over-all picture rather than a piecemeal attempt to deal with it by this so-called conference when, as a matter of fact, the premiers of the provinces were called together and told, "Here is our proposition; now, take it or leave it."
That is essentially the situation. This time they were given an escape clause if they did not want to take it. They were given a part of the back yard in which to play. It was not fenced off but they were told, "If you do not want to accept this, then you can go and play in the back yard. We will give you a little part of it where you can exercise your own taxation powers." In other words we have a feudal complex which arose first out of wartime pressure, and having made use of the last agreements for their own ends the government now feel that they should have the right to control these moneys collected by the central taxing authority, whatever the effect may be on the provinces and municipalities.
We in this party believe and have said time and time again that there should be a reallocation of responsibilities, that there should be a reallocation of taxation powers, and that this should be done by a constitutional conference properly called where these matters could be given consideration, where time could be given to them, and where the problems of Canada in the last half of the twentieth century could be faced. One of our objections to this type of agreement is that it fails to recognize that problem. The government says to the provinces, "We are being a little bit more generous. However, you do not have to lease. If you do not want to, you will be given a little bit of space in the back yard in which to play, but we are going to continue to exercise control over the collection of revenues and how we shall spend them."
What did the Minister of Finance say this morning? I made a note, and I think I took
16, 1956	6015
Federal-Provincial Financial Arrangements him down correctly. After dealing with the responsibilities of the provinces he said, "In our view"-there is the feudal right, the seigneur surveying the field-"this proposal will give the provinces the revenues necessary to meet their needs in so far as possible." He said, "in our view". There we have the view of the government of Canada determining what revenues are going to be necessary for the provinces and determining that in so far as possible, whoever may control that possibility-


Walter Edward Harris: That had regard to these particular taxation fields, not other revenues.


George Clyde Nowlan: That had regard to the matters envisaged by this resolution and the control of the taxation fields. Then the minister went on to say all the things that Canada was doing for the provinces. He listed them and suggested that they ran into several hundred million dollars. That is true, Mr. Chairman. There are many things being taken over by the dominion, some of them I think necessarily so, and many more that perhaps should be taken over. But our objection is that they are being taken over indirectly. The government is coming in through the back door and doing something which should be done through the front door, and should be arranged definitely and fairly and on a basis on which agreement can be reached between the provinces and the dominion.
Frankly, some of us get rather tired of being told at election time that so and so, Paul somebody, is giving the people the baby bonus or is giving increased old age pensions, as if the government were reaching down into its own pocket for the money and giving it to the people out of generosity, when as a matter of fact the money is provided by taxes collected in fields which, at one time at least, were constitutionally believed to belong to the provinces at least as much as, if not more so, than the dominion.
So the time has come, as the Leader of the Opposition and others have emphasized today, with the increased problems confronting the municipalities and the provinces, to deal with this matter on a more constructive basis. Surely the time has now come after 25 years-and we admit that part of that time was a period of war with all the stresses, strains and difficulties of war; no one will question that for a moment-when these matters can be dealt with on a more constructive basis, a long term program worked out and the problem dealt with in such a way that the responsibilities of the municipalities and the provinces, which are suffering from an impossible burden of taxation, which are called upon to perform services in the field of education, the field of highways, the field
6016	HOUSE OF COMMONS
Federal-Provincial Financial Arrangements of public health, for which they have not the money, may be met now and dealt with on a long term and permanent basis.
It is true, as the minister says, that the dominion has heavy taxation and financial burdens. We realize that; but it is quite possible and I hope and think more than likely, that within the next year, two years or three years that lie ahead the heavy burden resting upon the dominion will lighten substantially because of improvement in the international situation, reconsideration of defence expenditures and the rest of it. The burdens resting on the provinces and the municipalities certainly cannot lighten in any way. They are going to increase. Their revenues are frozen until they are given reconsideration and until the whole situation is dealt with properly and, after conference, they are relieved of some of the responsibilities, with the federal government taking them over in a proper way rather than doing it indirectly, casually and in a haphazard and piecemeal way as has been done heretofore.
The hon. member for Rosetown-Biggar said a while ago that the federal government needed these increased revenues so it could deal with the requirements of the provinces and the municipalities. He intimated that he hesitated to advocate anything being done which would result in a reduction of income to the dominion. I think it has been pointed out today that there is little probability of a reduction of income to the national treasury. If this expansion goes on, and we know it will go on, over the long-term period-there may be minor areas of recession-with our natural resources there is bound to be an increase in the national wealth of this country.
There need be little worry about the dominion finding itself in a strait-jacket in dealing with the problem. As a matter of fact it has been pointed out by the Leader of the Opposition that the probability is that we will have a surplus of $500 million or $750 million or some such astronomical figure at the end of this fiscal year. Yet what happened? The provinces are given a little largess, a little gesture of help, and then the Minister of Finance says "In our opinion that is enough for you to carry out your provincial responsibilities".


Walter Edward Harris: Out of these taxes.


George Clyde Nowlan: Take those taxes out and the problem facing at least some of the provinces will be most difficult indeed. That is one reason I, and I believe there are many others, am opposed to this resolution at this time, because it fails to deal with the problem with which this country is confronted and

with which this country must deal. We have played with it for 25 years. We are now facing a crisis, and an immediate solution must be found. This is not something which can be deferred for five years, during which time, as the hon. member for Peace River has said, if there is not sufficient revenue it can be said that the House of Commons in its wisdom decided that such legislation should be passed and therefore there is nothing more which can be done.
There is another matter about which I wish to speak for a moment and which has particular reference to certain provinces. The minister said this is justified because it provides for the distribution of wealth among those provinces which are not as well endowed as some of the others. I am entirely in agreement with that principle. If you go back to the conference of 1945 you will find that the proposal then made by the premier of Ontario, the present Leader of the Opposition, suggested that out of the tax revenues which were to be allocated, 10 per cent should be set aside as a national adjustment fund for the provinces.


Walter Edward Harris: Ten per cent of the provincial revenues.


George Clyde Nowlan: The revenues with which he was dealing at that time. At least he suggested that principle, and it is one that certainly should be recognized. There certainly is something wrong with the principle suggested by this government in this resolution. Again it is based on a per capita formula. A rather involved formula is proposed whereby you take the average of British Columbia and Ontario and apply that on a per capita basis, and the provinces below that average are to be reimbursed on that basis. That does not take into consideration at all the ability to pay as well as the population itself.
If you want to see the results of the application of the per capita basis just look at the payments made to the universities. The universities in the maritimes receive, as I pointed out the other day, in one case only $80 per student, while a university in another province receives over $400. If the Minister of Finance wants an argument with respect to that I can give him one which he certainly cannot accuse of being partisan. I would refer him to the argument advanced by the premier of Nova Scotia at the conference in April. At that time the premier took violent objection to the proposal that this should be worked out on a per capita basis.
I am not going to quote his words, but he went on to say that you could have a province with a per capita income of $900 and you could have another province where

the income was $1,200, and then you could work out something on a per capita basis, but the fact remained that the people in the provinces having only $900 of income would have very little left after paying their federal taxes with which to pay their provincial taxes, whereas in the other province, though they might feel that they were being overtaxed and undoubtedly could claim an increased burden of taxation, nevertheless they would have greater means with which to pay the provincial taxes to meet the provincial requirements. In the case of the poorer provinces they would not be able to do that and would have to rely almost entirely on the per capita grant. The province which fell below the average would be given something. But a formula should be worked out that would recognize the capacity to pay of the individual as well as the number of heads in a province. That the government has not done.
The maritime provinces submitted formulas to the conference under which they sought equitable treatment. One province approached [DOT] the problem in one way and worked out a mathematical formula which could be justified. Another province decided what they needed in order to carry on their services, and they translated that into a formula. They both arrived at virtually the same formula. I am not going to try to check those formulas now because the minister knows very well that they were presented to the conference. But with what result? In this letter of January 14, 1956, to the premier the Prime Minister said this:
At the same time we made it clear that the present government had no intention of abandoning the objective of the tax rental agreements which is to make it financially possible for all the provinces whatever their tax base to perform their constitutional functions themselves and to provide a reasonable Canadian level of provincial services without an abnormal burden of taxation. That is the foundation of the policy of the federal government.
If that is the foundation I certainly say they failed to build on that foundation. The premiers of the Atlantic provinces made it abundantly plain that the foundation is most unstable. It reminds me of what was said about the man who built his house on the sand. The rains fell and the winds blew, his house fell, and great was the fall thereof. This is a sand foundation which you are constructing under the financial structure of Canada. We must have something that will provide a more stable fabric on which this country can be built, something which will provide rock and not sand.
What the end will be it is difficult to say, but it is not one which is going to add to the standard of government of the
16, 1956	6017
Federal-Provincial Financial Arrangements provinces of this country. I should like to quote from a letter written by the premier of Nova Scotia, and again I state that he can not be considered as being a Conservative partisan. On January 12 of this year he wrote to the Prime Minister as follows. I am only going to quote in part. The Minister of Finance said that these agreements were an advance over anything which has gone before, or something to that effect. This letter states in part:
The present proposal in essence does not approach this objective-
That is the objective I just read.
-any more nearly than do the existing tax rental agreements. Indeed, one might observe that it differs from the tax rental agreements only in that:
(a)	it substitutes the per capita yield in the two highest provinces from three fields of taxation for the gross national product; and
(b)	it provides for an "equalization payment" to each province which falls below the average, whether or not that province chooses to vacate the three tax fields.
In principle it gives no greater recognition to the fiscal needs of the provinces than did the tax rental agreements. I wish to impress upon you that the federal proposal compensates for lack of tax potential in only three fields of taxation and leaves the less favoured provinces (as do the tax rental agreements) with a per capita rate from local sources of taxation far below the national average.
Then he goes on to say:
If, therefore, your letter of January 6 finally sets forth the position of the federal government with respect to federal-provincial arrangements-
It did, pretty well.
-relating to these three tax fields, it would be my hope that in some other way consideration might still be given to the position of this and some other provinces, as urged by myself and several other provincial premiers during the October meeting.
That is the statement of the Liberal premier of Nova Scotia with respect to these tax agreements. I have a letter here written by the premier of New Brunswick which appeared in Hansard for January 31, 1956. It is a letter to the Prime Minister dated January 27, 1956, in which he said:
Our government is now asked to accept a situation which does practically nothing to relieve the special disabilities under which we have laboured for so long. The formula which we presented to the conference envisaged transfer payments to our treasury of some ten millions of dollars more than we were receiving annually under the 1952 tax agreements. This amount is based on a realistic appraisal of our minimum requirements, if we are to be able to carry out our constitutional responsibilities. The proposal of your government would increase payments to New Brunswick by about $1 million annually, 10 per cent of our indicated requirements.
This small percentage of the $10 million special adjustment grants envisaged by our formula will not enable us to provide the health and social needs, the educational facilities and services, the public works, the material benefits and cultural advantages-all of which are the birthright of an industrious and enlightened people.
6018	HOUSE OF
Federal-Provincial Financial Arrangements
That is the statement of the premier of New Brunswick with respect to these tax agreements. Now, we are told that this is a solution of the problems of the have-not provinces. It is no such thing. It is only a palliative. It makes no approach to an actual solution of the problems at all. New Brunswick requested $10 million, and actually Nova Scotia and New Brunswick were within a few dollars of each other as to what was required by each province in order to put them on a basis where they could satisfactorily perform the services required of provincial governments in this country today. They were refused and told that 10 per cent of that was the amount to which they would be entitled. I do say, Mr. Chairman, that is not the way to deal with the legitimate demands of the provinces.
When the Minister of Finance tries to stand up, smile and shrug his shoulders and say, "I did not hear anyone say they were dissatisfied with it", or something to that effect; "I did not hear anyone suggest anything better"; he knows that many of the provinces are in a position where they have to accept this whether they like it or not.
It is true it is an improvement over the days when people were allowed to starve. You are allowed now to eke out an existence because of the largess of this government which has pre-empted to itself this whole lush area of taxation, which undoubtedly it should occupy to a greater extent than it did in the earlier days, I grant you; but let us see that the moneys are divided properly. Let us see in particular that we have no more thoughts about this being for the benefit of the have-not provinces, as the minister told us, provided for them at the expense of the haves, because that is simply a fairy story and has no relation whatever to reality.
For these two reasons and others, I propose to vote against this resolution when the times comes.


Mr. Gillis:: I feel it is my duty to say a few words on these agreements, Mr. Chairman. Having had something to do with many agreements, may I say that I do not ever expect the time to arrive in this world when two parties will get together where money is involved and come away with a satisfactory agreement. There is going to be something wrong with it. If there were not the two people would not be human. At least I have never seen one that was completely satisfactory to all concerned.
I have always supported the dominion-provincial agreements, because I remember back to 1939. I think the measure of the agreements, if you are going to be realistic about it, can be seen if you ask yourself the
[Mr. Nowlan.l

question whether you are better off with the agreements or without them. I can answer that in the affirmative so far as Nova Scotia is concerned. I do not want to go back to 1939. This province under the present taxing agreement is much better off than it would be if there were no agreement.
I think the main principle behind the dominion-provincial agreements, and the main reason I support them, is that in a country like Canada where you have a huge centralization of the wealth-producing organizations in two provinces, following the pattern in the United States, the only way you will get a redistribution of wealth to the other provinces under the present mechanics of society is through these agreements.
While I am on that point I might add that so far as I am concerned I did not come into this house to fight a party, either Liberal or Conservative. When I joined the group I joined, my quarrel was with the order of society under which I grew up through the thirties into 1939 and another war.	My
quarrel was not with the Minister of Finance, the Prime Minister or the Leader of the * Opposition.	My quarrel was with the
mechanics of society which left people in the circumstances in which they were previous to 1939. I see in these dominion-provincial agreements, as in the other social security measures for which the present government is legislating, at least a move in the direction of changing things from the way they were and bringing about at least some degree of equalization and sharing the wealth.
This morning the Leader of the Opposition was emphatic in saying he did not agree with the centralization of finances and the centralization of taxing powers in the hands of the federal government. He believed that decentralization was necessary. I agree that decentralization is necessary in this country, not only in the field of finance but in the field of industry. Decentralization of industry is a very important point.
While there has been a lot said by the hon. member for Peace River and others in this debate on the question of financing education in the provinces, I think the main reason for that problem is that there are a great many municipal difficulties. Premier Frost made it quite clear at the conference of mayors. He said the development had taken place so fast in this province it had created municipal difficulties with which they were not going to be able to contend, such as more schools, more sewers and streets. He suggested at that time he thought the time would have to come when everybody would have to begin thinking in terms of decentralization.

As I see the proposition of the Leader of the Opposition, it is this. While there is a concentration of the wealth-producing organizations already in the two central provinces, to ask the federal government and the members of this house to go back and place the taxation powers in the hands of the provinces would mean a further concentration of wealth in the central provinces, because of the greater industrial development and the larger fields of taxation that exist in those provinces as compared with the other provinces that are not so highly industrialized. I think the proposition would mean not only a complete centralization of the industrial development of the country in those two provinces, but if the taxation powers were handed back to the provinces you would have an 80 per cent centralization of the taxes that are paid in this country in the two central provinces. Of course that would be good for them, but it would be bad for the part of the country from which I come.
I realize that there is not a province in Canada that suffers to a greater extent with respect to municipalities financing education than the province from which I come; but I do not think that going back to the system of taxation that existed prior to those agreements will help the municipalities. In fact it will hurt them in that part of the country. I read one very good survey made by the province of Saskatchewan. It was research into school financing. It came out last year and was a beautiful job of research right across the country. I have seen several other pamphlets put out by qualified people. None of those people suggest that you are going to benefit the provinces or municipalities in the field of education by reverting to the taxation system that existed before these agreements. Every one of the briefs and analyses that I have seen hark back to the same question, namely more federal aid to education.
You see, you cannot keep on demanding that the federal government do all these things and at the same time take the position that you are not going to give them the power that is necessary to weld this country together as a nation and try to bring about some equality. I took a look at our own position, and with all due respect to the letters that were read by the hon. member for Digby-Annapolis-Kings, I do not agree with him. Naturally, if I were on the bargaining side of the table and I was a provincial premier I would stick out for every last nickel I could get. I would do that in negotiating for any organization or for any group of people. That is the job of the negotiator. I believe more money could be used in the maritimes, but to say that this
16, 1956	6019
Federal-Provincial Financial Arrangements particular agreement did not do something for the province of Nova Scotia is to ignore the facts. Anyone who has taken the formula, the method of applying it as related to the population of the provinces, what the agreements were previously and what they will be when this legislation comes into force, will see that it has improved considerably. In fact the amount of money that Nova Scotia will receive under the present agreement, with the equalization, indicates that Mr. Hicks did a pretty good piece of collective bargaining, though he left the bargaining table and went back to his province not satisfied. I do not think any negotiator who is looking for some money for the people whom he represents should ever be satisfied. It is bad psychology to say you are satisfied.
In going through the agreement-and I did go through it pretty thoroughly, because I did a radio broadcast on this agreement some time ago, and to do that you have to examine the situation-I found that Mr. Hicks went back to the province of Nova Scotia with an increase of 20-1 per cent for that province. I am sure any union representative in this country who goes into a meeting with a corporation and comes out of the board room and tells the membership for whom he is negotiating that he got a 20-1 per cent increase in wages tells them something that is welcome news. It would be unexpected in many sections of industry today, but that is exactly the position in Nova Scotia.
I am not looking only at the amount of money they get at this time. I am concerned with this argument from different sections of the house and different parts of the country, and largely from provinces that are able to look after themselves, that we should get back to the system that existed previously to those agreements. I refer to the arguments that these agreements were war agreements; that they were emergencies. I believe that if the war had not broken out when it did in 1939 we perhaps would have had a revolution on the North American continent. We had a million and a half young men on the streets of this country with nothing in sight for them. If you went to Toronto even in 1940 you found hundreds of young men sleeping in the basements of churches. To say that these were war agreements designed to take care of war emergencies is to ignore the facts. I believe that those agreements would have come in any event. Had there been no war the trend we are following today would have had to be followed in order to bring about some equality in this country.
I would like to warn those who are saying that the agreements have no value and that the provinces are not getting enough-no,
6020	HOUSE OF
Federal-Provincial Financial Arrangements they are not getting enough-that I am prepared to hang on to the principle we have established and to continue the process of collective bargaining with the federal government in order to get the amount that we do need, in time. I think it is democratic to continue to bargain with them rather than to throw away something we have now that has a great deal of value.
If tomorrow we handed over the fields of taxation to the provinces the benefit would accrue to Ontario and Quebec. To some extent British Columbia might benefit, but to some extent every other province in this country would suffer. The important thing to remember is that by cancelling these agreements and giving back the provincial fields of taxation you would dry up the field of social security. In my judgment without these agreements, without the reallocation of the wealth from the centre to the frontiers of the provinces that have not any great industrial set-up, high succession duty collections and so on, the federal government would not have the money in the treasury to make improvements in old age security pensions, family allowances and these other things which in fact are merely redistribution of wealth and of great benefit to the whole economy of this country.
It is not giving anybody anything, because the people who are getting the money are spending it on the essentials of life. That in turn creates purchasing power, and the purchasing power in turn keeps the wheels of industry moving and keeps the employees working and producing. At the present time the federal government is committed in the field of social security alone to spend some $650 million a year. That is a lot of purchasing power in the social security measures alone. In addition to that, of course, under these agreements the maritime provinces are much better off than they were. I told the committee a moment ago that Nova Scotia is 20 [DOT] 1 per cent better off in cash under this new agreement than it was under the old one.
If we continue the process of collective bargaining we may arrive at the point where we can strike a happy medium and provide equality right across the country, but I believe we should examine our criticism very carefully. I do not know what happened at the conference in Fredericton; at least, I did not get very much news out of it. About all I heard on the newscast was that they held a meeting of four provincial premiers at Fredericton. They decided to set up a permanent organization. They appointed a secretariat. Mr. Hicks said that freight rates was one of his greatest difficulties; that the freight rate
rMr. Gillis.l

increase would make it more difficult for all industry in Nova Scotia to market their goods in the central markets.
I did not hear anything about these agreements. The premier of Newfoundland said they were going to get all they wanted. That is a good collective bargaining attitude. The premier of Prince Edward Island said they were going after what they wanted and he thought they could get it. I did not hear what the premier of New Brunswick had to say. He convened the conference.
I hope they will stick together, because in the final analysis this particular question is not political but economic. It is a question of bread and butter for the people in the provinces these premiers represent. I am sure that each one of them realizes, if they examine their position today and their position prior to the agreements, that they are in a much better position today than previous to the establishment of these agreements. I think this is in keeping with the trend of the times. You cannot turn the clock back and you cannot look back to prewar days to try and get a picture of what you should do today, because we are living in a spanking brand new world.
I believe that in 1939, when the war broke, the other scheme as it then existed died a natural death, and when we emerged from that war we began to build a brand new world. We are mapping the world anew. We are getting propaganda and practical demonstrations from these other countries. If you look at these things in a material way alone you can get the economic side of the picture. We have no yardstick by which to measure the future, because we are prodding into the unknown.
While some people may quarrel with this idea of centralization, I think there has to be a head to the nation. There has to be some organization that has the responsibility of giving assistance, direction and guidance in the development of our resources. There has to be some authority. As in the case of a man with eight or nine children, there has to be a boss in the house. You cannot let everyone be boss and arrange their program and do what they like on their own. The father has to take the lead and assume the responsibility for establishing law and order in the home.
Canada with its ten widely scattered provinces and with people coming in from different parts of the world has to have a good central organization, and I think that is what was envisaged at confederation. I believe anyone who sits down and reads the British North America Act as I have attempted to

do realizes it was the intention of the fathers of confederation to have a central governing body. I believe that definitely was why the maritime provinces made the sacrifices they did. They realized they could not sit off in a corner by themselves and never help to build a nation. They were aware of the geographic problems they were going to have and the difficulty of marketing their products. They lost 50 of their basic industries. The first seven banks in this country were established in Nova Scotia, and that money was used to develop the markets and resources of that province. The resources were highly developed and their market was across the road.
They sacrificed all that; and although when you read the record of that period you find men like Howe and others making quite an issue of that particular position, nevertheless the people of the maritimes were prepared to go along with that and build a nation. I think you will find that in the maritime provinces today the people are more national minded than in any other section of this country. You do not have any difficulty selling the people down there on the idea of building this country as a nation.
The hon. member for Peace River said this afternoon that the wealth of the nation is produced by the people. Sure it is, but it is not produced just in one province. The gross national product is produced by the whole country working in co-operation. You will find Cape Bretoners cutting wood in British Columbia and you will find British Columbia machinery building the causeway down in Cape Breton. You will find Ontario machinery all over this country. The product of one province being sent to another and the economy of one province complementing the economy of the others is assisting to build this country as a nation. While the individual may work with his hands and produce the wealth, nevertheless he is not doing it as an individual but as a Canadian. In so doing he is trying to build the Canada of the future as a bigger and better place for his children to inherit.
As far as I am concerned, I have already put myself on record with my own people shortly after that conference took place. I knew the importance of this agreement to the part of the country I come from. I made it my business to sit down and examine the formula and work out the exact amount of money we were going to receive under this agreement, as compared with the agreement that will expire. As I said before, in cash it amounts to an increase of 20-1 per cent which the premier of Nova Scotia is going to have to play around with. I think he will realize-
16, 1956	6021
Federal-Provincial Financial Arrangements of course, he is young yet and he is new and we will have to be patient with him and help him all we can-


Robert Henry Winters: He is coming along.


Clarence Gillis: It has always been my position that I will oppose you on principle. I will try to defeat you but if I do not succeed and you are elected to run the affairs of this country then as a citizen it is my job to help you in every way I can and to kick you around when I think I have to, and that is the position I am going to take.


John Whitney Pickersgill: A very sound doctrine, too.


Clarence Gillis: Whether I like it or not he is the head of the government in Nova Scotia and he has a tough job to do. I am not going to make it any tougher for him, but if he is not trying to do the job to the best of his ability I am going to kick him around and show the people that he should not be there, that we should get another man. But I agree with the hon. member for Queens-Lunenburg, the Minister of Public Works; I think that as a new premier he is learning very well.


Robert Henry Winters: He is doing a great job.


Clarence Gillis: 
Some hon. Members:: Hear, hear.


Clarence Gillis: Another thought I would like to leave with the committee just before I sit down is that I do not think we are going to solve all the problems of the maritimes under this agreement. I think the main problem of the maritimes is development. We have to try to get back to the position we were enjoying in 1867. With all due respect to the
Federal-Provincial Financial Arrangements confreres of the four provincial premiers, I hope they will do something.
The Atlantic provinces economic council has been working now for the past two years.
It has a good secretary and some of the most important and competent people in the man-times are on that council, with their main objective that of trying to bring some stability into that province. With that, coupled with measures of this kind, I think in time we are going to bring that part of the country back to its feet by developing industry that will work on the vast resources of those provinces. There is plenty of power in Nova Scotia. It is thermal power, and it is produced reasonably. I believe that any industry locating there can obtain power as cheaply as in any section of Canada. That is my information. There is a ready supply of power in the province of Nova Scotia and particularly the part I come from.
I do not envisage that anything is going to completely solve our problems in that part of the country until we get working on them ourselves and building the economic processes that will use the materials that exist in that part of the country. This, supplemented by the kind of legislation we are discussing today and coupled with the efforts of an organization like the Atlantic provinces economic council, will lead us to a solution for the problems of the maritimes.
Whilst I support these agreements for the value they have and the work they are doing, I do not envisage them as the kind of legislation that is going to solve our problems down there, because what we need is development. What I think would help Ontario is the realization that it is overdeveloped and has developed too quickly, and that its municipal problems are going to become greater and greater for the reasons stated by Mr. Frost at the mayors' conference. When they come to that realization there is a chance that some of the industry that is rushing in here because it is close to the main market and the main centres of population will be farmed out so as to bring about a better balance in the economy of the country and some protection in the event of war.
Mr. Chairman, my time is almost up, but I want to assure the house and the Minister of Finance that as far as I am concerned I am prepared to support this agreement as a step in the right direction, with the hope that the collective bargaining process in time will bring us to the point where we get something that is more satisfactory to everybody in the country.


Mr. Stuart (Charlotte):: First I should like to say that I agree with what my hon. friend


from Cape Breton South has said regarding the problems encountered by the maritime provinces, and I think he has been very fair in his reference to this legislation. We all know that the tax rental agreements were emergency agreements at the beginning of the last war. At that time they were never intended to be of a permanent character; they were for wartime only. After the war the federal government was prepared to discontinue the wartime agreements and let the provinces get back to a system they had followed previously of collecting their own revenues and spending at will.
I well remember the first conference that was held in Ottawa after I came here in 1945. At that conference there were seven of the nine provinces that felt that something along those lines should be done. Two of the provinces were opposed to it. Of course in the original tax rental agreement all the provinces were involved. The prime minister of that day stated that unless all the provinces agreed it would be impossible to work out any agreement with the federal government. I well remember that the premier of New Brunswick at that time, Hon. J. B. McNair, fought vigorously at that conference for an arrangement that he felt would be beneficial to the province of New Brunswick.
I was proud of the stand he took at that time, and I believe that it was through Hon. J. B. McNair and some others that the arrangement we had during the war was carried on afterwards. I believe they deserved a great deal of credit.
In order to determine whether or not this arrangement we are discussing at this time is generous and fair, the reasonable method to use, in my opinion! would be to decide the amount that any province might collect from the fields that are rented to the federal government and then decide whether or not the arrangement under this proposal is fair. In looking over the figures that were supplied today by the Minister of Finance, I find that the tax fields rented by the province of New Brunswick to the federal government would yield $7,375,000. When I look down the list, I discover that under the new formula the province of New Brunswick will be paid $19,320,000. As the hon. member for Cape Breton South has said, those are the facts on which one must determine whether or not the arrangement is fair. When I look at those two sets of figures I am convinced immediately that as far as the province of New Brunswick is concerned, it is fair in every way.
Surely an agreement whereby for every dollar taken out of the province in taxation nearly $3 is returned could not be looked upon as a niggardly agreement. That is what

thus relieving the federal government of that enormous responsibility. There is over $600 million involved in these agreements. I think we must all realize that is an enormous amount of money. In fact it is practically the same as our total revenue in 1939.
That is the amount we are turning back to the provinces today. Should the federal government decide that some other plan the provinces might have was a better plan, or should there be dissatisfaction with the manner in which the agreements were negotiated by the federal government and the provinces were told to collect their own revenue and spend the money as they wished, I am sure that in the province from which I come the services we now enjoy would be greatly curtailed and any thought of improving services in the future would be forgotten.
Under this arrangement, as I have stated, we are receiving nearly $3 for every $1 taken out. I believe we should all be prepared to acknowledge that fact, and at the same time be prepared to state publicly and otherwise that in the opinion of the citizens of that area the agreement is fair and just so far as they are concerned. I agree with the principle completely because, as I have said, it is just another effort to distribute the wealth of the country fairly in order that the same services may be provided for all citizens, regardless of the part of the country in which they may live.
I know it has been most helpful to the citizens of the maritime provinces, and I hope that not only will the agreements continue for this period but that the criticisms we hear from certain sections will not be sufficiently strong to convince the Minister of Finance or the government that these agreements should be discarded because the provinces, which are finding it very difficult to get along financially at this time, would be then placed in a more difficult situation.
The member for Cape Breton South has suggested that this tax rental arrangement is not a cure-all. I am sure we can all agree with that. There is no one who would be more willing to acknowledge that fact than the Minister of Finance. He has suggested today that this is a matter that has been given a lot of thought and consideration, and that in the opinion of the greater percentage of the provincial premiers and treasurers who attended the meeting this proposal was an improvement over the old agreement. I agree that it is an improvement over the old agreement, because any agreement that provides a greater amount must be an improvement. It is true that the generosity which has been extended to the maritime provinces under this agreement will be of more benefit.

The one cure-all for that part of the country is cheap power, and at the present time that is something we cannot see in prospect. I do hope the day will come when we can develop electrical energy in the Atlantic provinces at a cost comparable to that in other parts of Canada. When that time comes I can see some hope for the development of manufacturing and industry. Until we can find some way to develop electrical energy at a more reasonable cost than is possible at the present time we must carry on as we have in the past.
I believe that conditions there at this time are much better than they were 15 years ago, as the hon. member for Cape Breton South pointed out. I believe they will improve in the next 15 years. I assure the Minister of Finance that the people I represent consider that this arrangement will be helpful to the citizens of our province. I am prepared to support it, and I know in doing so it will be approved by those who receive the benefits.


John Horne Blackmore: Mr. Chairman, we are discussing a measure the heart of which seems rather difficult to get at. There seems to be a considerable amount of disagreement among hon. members who have spoken as to interpretation. I believe that in general most of the hon. members who have participated have forgotten that this measure is a direct descendant, shall I say, of the Rowell-Sirois commission and the Rowell-Sirois report, and also that the Rowell-Sirois report was put before the conference with the provinces on January 14, 1941, and was unconditionally rejected by three of the premiers, conditionally rejected by three, and supported by only three. It is the fact that three premiers of Canada were free enough, brave enough and patriotic enough to reject that recommendation that makes it possible for us to consider this measure today.
If we can all keep that in our minds it will help us to view this measure against a background which might considerably modify our attitude toward it. We can now ask ourselves who were behind the Rowell-Sirois report? Who were the people who caused the Rowell-Sirois commission to be set up? What was the aim of those people? Are those people aiming to accomplish the same thing today? Is this measure designed to be a move in the direction of the achievement of the objectives which the movers behind the Rowell-Sirois commission and the Rowell-Sirois report had in mind years ago?
The danger we face is that the same men who designed the Rowell-Sirois commission
16, 1956	6025
Federal-Provincial Financial Arrangements and the Rowell-Sirois report may be in position today to influence very forcibly the present government, this Liberal government which is the successor of the government of William Lyon Mackenzie King, who I believe against his will set up the Rowell-Sirois commission and who I believe against his will called the provinces together in January, 1941 and asked them to decide in war-time on a matter which threatened the peace and harmony and unity of this nation.
There will be some who will say that is pretty extreme. Maybe it is, but I am afraid it is not. Everywhere we look today we see restless pressure for centralization. They are not content to allow people to govern themselves. We are working in NATO to deprive people of their sovereignty as nations, in organizations like the United Nations to deprive them of their sovereignty as nations. We have already accepted Bret-ton Woods with the object of depriving nations of their sovereignty. We are talking of world government to accomplish the same objective. It is everywhere in the air and everywhere in the press if we just listen and look. Can we expect that the men who are fundamentally and signally behind this centralization movement may not be seeking for centralization in Canada which could destroy the British North America Act?
When Major C. H. Douglas, the founder of Social Credit, was in Alberta in 1934 he told us that the two most perfect constitutions in the world were the British North America Act and the constitution of Australia. He told us that the powers who were seeking for centralization in the world were seeking by every means at their command to destroy those constitutions. Until they can destroy the British North America Act the sovereignty of the provinces cannot be destroyed. It will not matter very much if they get complete control of the central government of Canada because the provinces can denounce the decisions which that central government may make.	J
I think a fairly good case can be made out for the general proposition that there is danger in this measure on the very score that it is a measure designed to weaken the British North America Act. One thing about it that leads one to suspect that is the fact that for the first time, as I recall, the bill has been sought to be introduced as a sort of enabling legislation. The bill had been planned to be introduced before the provincial premiers were called together in conference to make a decision. As I recall it that is so, if I am not right, then bring along the evidence. I do not have all the information, but I have quite a little bit respecting these matters.

Federal-Provincial Financial Arrangements In this case the provincial premiers did not meet and agree with the federal government as to the details which would be embodied in the act which will follow this resolution. The resolution is worded, apparently, to make it so that, as the hon. member for Peace River pointed out, the decision will in large measure already have been made before the provincial premiers come together in a conference. At least there will be a law on the statute books of Canada which can be used as a means of exerting most severe pressure on the provinces which, under the circumstances of tension, a measure of confusion and haste and all that kind of thing, can be used to cause a number of the provinces to weaken in their stern resolution to resist any encroachment upon the fundamental rights of the provinces to provincial autonomy. There is the great danger as I see it, and that is the great danger that more than one premier sees in this measure.
Now, if this kind of procedure is adopted at this time, then five years from today, using this as a precedent, another measure could be adopted just a little more severe. The first thing we know in perhaps 15 years we shall have the provinces in a position where everything will be almost cut and dried before they get together to discuss the arrangements to be made.
While mine is going to be probably more or less a philosophical approach to the whole matter, I suggest that some of the evidence which I feel I can adduce before the house will be most interesting to a great many members as evidence upon which they can base their thinking.
I think there is no doubt that it is agreed that after the premiers rejected the recommendations of the Rowell-Sirois commission in January, 1941, and the dominion came back to them with the proposition that they would have a tax transfer agreement, in connection with which there was a certain amount of financial reward to the provinces. It is agreed that the end result financially to the provinces of the tax transfer agreement was beneficial. It is agreed by everyone that, when we came to the next two agreements, which were tax rental agreements, the net result was beneficial to every province, I think, probably, even to Ontario and Quebec, though I am not in a position to judge very well in respect of those two provinces. Certainly there was a substantial amount of financial advantage to provinces like Alberta, British Columbia and the maritimes. As a matter of fact every province in the dominion benefited, except perhaps Ontario and Quebec; they might have lost.

Now, in this resolution, we come to a third type of agreement. We had first the tax transfer; then we had the tax rental agreements twice, and now we come to another kind of agreement, apparently. The name of it is given here in the last part of the resolution as "tax collection agreements". I believe it is sound for each of the provinces as a whole to say, in effect, to the dominion government -Alberta, for example, might say this. "We as a province do not possess the necessary power to tax the Canadian Pacific, for instance, and make them pay. We have not the power to tax many other corporations". Most provinces would say almost exactly the same thing. Now the dominion government has full power to tax these corporations and make them pay their share of taxation toward the financial well-being of this country. Alberta, therefore, would say to the dominion, and the other provinces along with Alberta would say the same thing, "You tax them, and then divide the money up between us and yourself". This would be sound so long as the province of Alberta took the initiative, and the other provinces likewise took the initiative.
When, however, we get to a point where the central government says, "We are going to tax all these corporations and we are going to give you, the provinces, what we think you ought to get according to a formula," then that is approaching the problem from exactly the opposite to the right method. The first approach, where the provinces take the initiative and agree as to what should be done, is the democratic method. It is the method which you would expect to be used in a federal state where each of the members is a sovereign province under the queen.
That, constitutionally speaking, is exactly the state of affairs here in Canada now, and that is exactly the state of affairs I believe I want to hand down to my children, that the provinces be sovereign just as the fathers of confederation made them. If the dominion government, in this measure now before us, is beginning the method of taking the initiative and telling the provinces what it is going to do, then it is just exactly the opposite of what ought to prevail under a federal state; it is undemocratic, it is dictatorial and it is contrary to the British North America Act. It will result ultimately in the destruction of the British North America Act.
I hope I have made clear the general attitude I have in mind when I approach this measure. I strongly suspect, Mr. Chairman, that this method of procedure is the beginning of a mode of approach which will result

in the dominion government taking the initiative, assuming command and telling the provinces what is going to happen. Because I believe that I am going to oppose this resolution with every bit of strength I possess. I believe it would be a good thing for the government to withdraw the resolution and call a provincial conference first. If it takes six weeks, let both parties talk the thing through and come to an understanding. Let the dominion have the provincial premiers put their case and listen. After they put their case then let our Prime Minister say, "What would you provinces suggest as an acceptable method of approach in respect to this matter? Obviously the tax rental agreements have been good for all the provinces, and very likely the tax collection agreement would be, whereby the dominion government collected certain taxes and divided them up amongst the provinces as they, the provinces desired they should be divided."
With that point of view, we the dominion government, say to the provinces, "Well, now, what is the best method of procedure; what is the best formula? How much money is involved? How much do you think we ought to have, because you know quite well, we, the dominion, have to have money to run the country. We have to have money if we are going to do more and more, as we have been doing"-the government has been doing that, and has been doing all the things the hon. member for Charlotte mentioned. All the things he said concerning the benefits which this government has conferred upon the various provinces are true. No one is challenging that.
Well, the Prime Minister would say to the provinces, "Now, you know we must have money and you must have money. Here we have a chance of raising money by taxes, corporation and income tax levies, succession duties. What is your idea?"
There would then be a wide divergence of opinion. I suggest they all should then do just what would be done in any public meeting. They should say, "Let us appoint a committee of the different provinces. Let them take this home, if they want to, and study it. We want this committee to come in and make recommendations that will seem to them equitable and advantageous in the circumstances." What an entirely different method of approach that would be.
The Prime Minister may say, "Well, I have not the time." I do not say he has, but he certainly has plenty of officials who have the time if he would tell them to go in there and listen to the provinces and let all work out the problem with the assistance of the dominion officials in the way of pointing out
16, 1956	S027
Federal-Provincial Financial Arrangements the difficulties confronting both sides. What difference does it make if it takes more than six weeks, if, at the end of that time, the provinces feel that there has been a straightforward approach to the problem with the objective of getting for everybody concerned the very best solution?
I think possibly I have placed my case before the committee in a general way. There will be those who will disagree. I would be surprised if there were not. I would think there was something wrong with me if everybody agreed with me, nevertheless I think there is a germ there. I have heard a great many people, prominent persons, express very much this same idea.
Now may we turn to the resolution just as it is? I have made this little introductory statement so that people could see what I am driving at. For the members of the committee and for those who will read Hansard out in the country I propose to examine a few aspects of Canadian financial history as those aspects may be related to this particular problem before us.
Meanwhile we have got so far away from the resolution that I think it would be well for me to read it so that those who read these remarks will know what we are talking about. The resolution reads:
That it is expedient to introduce a measure to provide that the Minister of Finance may pay to a province, out of the consolidated revenue fund, in respect of any fiscal year in the period commencing on the first day of April, 1957. and ending on the 31st day of March, 1962
(a)	a tax equalization payment with respect to individual and corporation income taxes and succession duties:
(b)	a provincial revenue stabilization payment with respect to such taxes; and
(c)	a tax rental payment in accordance with a tax rental agreement that may be entered into by any province as an alternative to levying such taxes on its own behalf;
and also to authorize tax collection agreements with the governments of the provinces.
This is the resolution we are talking about. Now, you will know, of course, as those out in the country would not know, that this resolution is the precursor of a contemplated bill, one measure in a considerable series of financial measures in Canada, commencing with the Dominion Notes Act of 1868 and including in the series, first, the Finance Act of 1914; second, the Finance Act of 1923; third, the Bank of Canada Act of 1934; fourth, such acts as have been passed by this house to legalize the tax transfer agreement and the tax rental agreements between the dominion government and the provincial governments which followed the rejection in January, 1941, by the provinces of the proposals recommended by the Rowell-Sirois
6028	HOUSE OF COMMONS
Federal-Provincial Financial Arrangements commission on dominion-provincial relations, set up by Prime Minister King on August 14, 1937. For those who want to find out where the authority is for that, may I refer to Mackenzie King's opening address to the premiers on January 14, 1941, at page 1 of the minutes of proceedings of that conference.
This present resolution appears to mark a new departure. It could be called an introduction to a tax collection agreement. It assumes that the coming dominion-provincial conference upon tax rental agreements will accept once more a dominion-provincial tax rental agreement of the general nature of those already accepted in years gone by, the difference being that this is a tax collection agreement.
It would have appeared more becoming if the conference had been held first and the provinces consulted before the bill was introduced, as I have already pointed out. Thus the provinces would be still in the position of taking the initiative, and the dominion would be acting as an agent for the provinces.
Now, the centralizers just hate the thought of an agent. They talk about the fears that the dominion will fall apart; there will not be any coherence. How in the name of common sense did we "cohere" up to the time the Rowell-Sirois commission was set up? We "cohered" pretty well then. We made a magnificent combination in world war I, and we accomplished a war effort that considering our resources probably surpassed that of any other community on the face of the earth. There was no big stick hanging over us in those days.
What held us together? The love of the union jack; the love of the king; the love of Canada; the love of the dominion; the love of righteousness; the love of Britain. These were the things that held us together, and these are the things that will hold us together in the future, far more solidly than any other consideration like laws, acts or agreements. Therefore those who believe in centralization and who fear that this dominion will fall apart if the central government does not have the power to command them need to revise their opinions in the light of the facts. We Canadian people are people who love great ideals, we people in Canada from coast to coast.
No, I do not hesitate to say that we look upon the dominion as an agent of the provinces put here to do a job for the provinces, just like the democracies in other countries. The government is their agent, their representative that exists for them. They do not conceive of themselves as existing for the government. That is the concept of the
[Mr. Blackmore.l
communist dictator people. Our attitude is entirely different. Therefore I do not hesitate at all to use that expression. Thus the provinces would be well in a position to take the initiative and the dominion would be acting as an agent for the provinces.
Now, then, by mentioning the individual income tax, the corporation income tax and the succession duties, the resolution reminds one of the Rowell-Sirois recommendation. I do not propose to go into that in any great detail at the present time, although I propose to go into details later on. Generally the Rowell-Sirois commission recommended that the provinces vacate income tax, corporation tax and succession duties as fields of taxation, in favour of the dominion, in consideration of certain financial benefits which the dominion would return to them.
I am not going to deal with that in detail at the present time. I am told that my time is up for the present. Therefore I shall make an end of these remarks at the present time, with the promise that when the time comes for me to speak again I shall deal with it then.
(Translation):


Mr. Balcer:: Mr. Chairman, it would be superfluous for me to remind the house that we are now discussing one of the most important matters of national interest. Indeed, this year the matter of the federal-provincial financial relations seems to attract much more attention in the other provinces than it has in the past, but for us, citizens of Quebec, that problem always remains our main concern.
This year, the house is called upon to decide on a proposal different no doubt in its form from the proposals made previously by the federal government. First, the amounts offered the provinces by the federal government are a little higher than before; the government will therefore claim that this proposal takes greater account of provincial autonomy than did the previous centralizing proposals, since provinces are given a free hand in the matter of direct taxation: up to 10 per cent of personal income tax, 9 per cent of corporation income tax and 50 per cent of succession duties.
However, Mr. Chairman, this is no solution to the problem, and the amounts that the province of Quebec may receive are totally inadequate for its present and future needs

since the economic and industrial development now going on in Quebec is but a beginning. Moreover, the constitutional rights resulting from confederation are no more respected than they were before.
Naturally, we could hardly expect a complete change of policy after the famous speeches delivered by the right hon. Prime Minister (Mr. St. Laurent) on board the Saxonia and at the Reform Club, when he tried, in the strongest terms, to ridicule the stand taken by the government of the province of Quebec on that matter. Besides, this centralizing stand was reaffirmed by the four other federal ministers from Quebec and by the non-co-operating Liberal members, as my friend Mr. Mongrain called them during the last provincial electoral campaign.
They bore down heavily on the autonomous policy of Mr. Duplessis. They jested mightily about it, with results that are now rather well known.
While federal Liberal ministers and members did their utmost to belittle, in the eyes of the electors, the decentralizing policy of Quebec's premier, their provincial leader, Mr. Lapalme, stated on the same hustings that the federal government owed the province of Quebec $300 million which he promised to recover should the provincial Liberal party be elected. However, we must admit that the federal Liberal members did not say much on that point; they did not insist upon it, any more than they talked about the matter of the Chateau Maisonneuve, which only they can settle.
In fact, the resolution moved by the hon. Minister of Finance (Mr. Harris) and upon which we are called upon to pass judgment, is not the result of a conference between the federal government and the provinces; not at all. We are not being asked to ratify an agreement between the dominion government and the provinces, an agreement reached following long negotiations where every party concerned had previously examined the proposals made. On the contrary, once again the federal government acted in a centralizing and unilateral way. It called the provinces together, read its proposal and asked them what they thought about it, made a few minor changes here and there and said: "Do as you wish; this is as far as we can go," knowing full well that the provinces are not in a position to do without them, even though they found the amounts altogether inadequate.
16, 1956	6029
Federal-Provincial Financial Arrangements
The federal government proposes the 10, 9 and 50 per cent formula with equalization, but warns the provinces that it does not intend to add one cent. If you want more money, it is very simple, all you have to do is to levy additional taxes, or increase the present ones. If your municipalities are overburdened by heavy expenditures, and if your school boards cannot supply all the necessary schools and class rooms for a school population that has nearly doubled in the past fifteen years, the only thing to do is to levy new taxes or increase your taxes on real estate, even though those taxes are already too high and have long exceeded the limit.
As for the federal government, it dries up all other sources of taxation but says to the provinces and municipalities: "Levy new taxes", as if the provincial and municipal taxpayers were not the same taxpayers who are already so regularly and thoroughly fleeced by the federal government. As if those taxpayers were living in Africa! No, Mr. Chairman, those taxpayers who live in municipalities and in the provinces are the same ones who are faced with urgent needs; they are the same ones who must pay excessive taxes to the federal government, which is wallowing in wealth.
Mr. Chairman, may I call it six o'clock?
At six o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at eight o'clock.
Léon Balcer: Mr. Chairman, prior to the dinner adjournment at six o'clock, I was saying that the federal government was wallowing in wealth while the provincial governments and the municipalities were facing the greatest difficulties. Here in Ottawa surpluses have been recorded practically every year since the end of the war, and these surpluses of $100 million, $200 million or $300 million which have been accumulated since the war now reach a total of close to $2 billion. That is an extravagant figure, and even this year many experienced people claim that the federal government may end the year with a surplus of close to three-quarters of a billion dollars.
That means, Mr. Chairman, that the federal government will have overtaxed the provincial and municipal taxpayers to the tune of $750 million, which makes absolutely no sense. And the proof that it does not make

Federal-Provincial Financial Arrangements sense is that the federal government feels so rich that it rushes into adventures as scandalous as its gifts and its loans of more than $150 million to the pipe lines of Mr. Murchison and his friends in the United States.
These much talked of surpluses, Mr. Chairman, are piled up by this government at the expense of the provinces and the municipalities themselves. If this country is now experiencing an unheard of industrial development, which in turn fills the coffers of the Minister of Finance, it is due first of all to the provinces which are called upon to make the first disbursement, though they have to wait long after the federal government has helped itself, before they get anything out of it.
If you want examples, they are very easy to find. Take the case of all the new industries which come and settle in the towns of our province. First, the municipality has to ensure water, sewer, street or road services, garbage collection, snow removal, schools, etc. Most of the time, the municipalities have to grant tax exemptions and seek assistance from the provincial governments for the establishment of each of the municipal services, and, finally, the provincial governments have to help school commissions give these new developments new school buildings almost every year.
After all those expenses caused by a new development have been made, the federal government establishes mail service for instance, but here again, only after receiving delegation after delegation, after requesting that a sidewalk be built and that there should not be more than 80 feet between one house and the next, that the federal government agrees to provide letter-carrier service, even if it takes only one hour per day, at a cost of approximately $500. It is probably the only immediate expense that would be incurred by the federal government in a new development.
And all the time the plant is being built, the federal government,-which did not have to pay a single cent for this new development, collects the sales taxes on materials, income tax from the first pay day of each worker, and so on; and later on it collects taxes on corporation profits as soon as the manufacturer is making any money.
For a more concrete instance, take the case of Chibougamau.

The province of Quebec had to build a road costing more than $6 million from St. Feli-cien to Chibougamau, right in the middle of the woods, where there was not a living soul, and even before a single ton of ore could be processed. This road enabled an absolutely virgin area to become one of the most important mining centres of this country. Out of the pay cheque of each miner, out of the profits of each of these companies that were developing the fields, the federal government took the lion's share before the province even received a cent, though it was the province that had paid so much to bring this new development into being.
When everything was done and the strides of mining would have called for the building of a railway, it had to be demanded for years in this house. The companies, the chamber of commerce of the Lake St. John district, and the municipalities had to prove with figures to the Minister of Transport (Mr. Marler) that the federal government could make a profit as soon as this railway was established. The companies were even asked to give written undertakings before the government agreed to build this railroad-


Mr. Villeneuve:: None was given.


Léon Balcer: Even when those gentlemen of the Department of Transport and of the Canadian National Railways had all the necessary evidence on hand, they required a further six months to think it over before they agreed to invest funds in a venture the outcome of which could no longer be doubted by anyone.
At present the north shore of the St. Lawrence is witnessing an unparalleled development:	Baie-Comeau, Seven Islands,
Labrieville, Havre St-Pierre, Schefferville, all those municipalities are mushrooming, producing for the country and paying taxes that are increasing steadily each year.
The province of Quebec is building roads in the most rugged country and large dams to provide electricity for the new economic development not only on the north shore but in the Gaspe peninsula and the rest of the province. Cities are built, schools go up by the hundreds and the federal government gets millions of dollars out of it while the provincial government spends its funds. And if you ask for a railway to link this new industrial empire to other parts of the country, the Minister of Transport says you are a dreamer.

To give another example concerning my riding, I am going to mention the harbour of Three Rivers, one of the few whose operation is paying the federal government a profit.
The Three Rivers harbour, Mr. Chairman, lacks modern equipment and sheds. Very often the goods of our manufacturers are left on the wharves, exposed to rain and weather, because of the lack of sheds. The amount that the federal government proposes to spend on improvements to this harbour, from which it derived millions of dollars, is $35,000, and this only after the representations of the chamber of commerce of Three Rivers, and those of municipal authorities, which I have been echoing in this house.
Do you know what the chairman of the national harbours board said when the board sat at Three Rivers? This gentleman told us emphatically that if new companies in Three Rivers needed additional wharves, the board would not impede that development and would make sure that they be given to those companies once they are established there.
The federal government, which does not want to give up its privileged position as far as taxation is concerned, a position in which it has entrenched itself during two world wars, always resorts to the same pretext, national defence.
Every time anyone talks about income tax reductions, the government answers that it is impossible on account of national defence. Whenever public works are required that would help industrial development, we are told that it is impossible because of national defence. And whenever the provinces ask for more generous treatment by the federal government, they too are told that it is impossible on account of national defence. However, although the necessary national defence expenditures are high, at present, they are not likely to increase as the years go by, while the expenditures that the provinces must assume in order to ensure the industrial development of Canada are and will be steadily increasing from year to year.
Besides, is it not obvious that Russia tends to transform her threat of military conflict of these last years into a threat of economic domination. And the western countries, such as England, are going to reduce their war budget, their national defence expenditure, to undertake a greater economic development.
16, 1956	6031
F ederal-Provincial Financial Arrangements
Canada will no doubt have to follow that example, and while federal defence expenditures will be on the wane, the provinces will have to face the prospect of economic warfare and pay the costs of it should the present fiscal agreements remain in force.
The Minister of Finance makes much of the fact that one of the most interesting features of the present federal proposals is that the province of Quebec will be in a position to receive the same amounts as the other provinces without having to sign any agreements to that effect, agreements which the people of Quebec province would never, in fact, have signed, as was so often demonstrated in the past.
It is high time that the people of Quebec should cease to be placed in an inferior financial position and to lose vast sums of money simply because its government, answering the all but unanimous views of the people, has refused to be a party to agreements which run counter to its traditions, to the traditions of the province, to its autonomy and to those rights guaranteed to it by the constitution of this country. However, the proposals brought down by the Minister of Finance in this resolution do not solve the problem within the meaning and the spirit of the constitution, not even for the next few years. What is in fact required is a federal-provincial conference in which the federal government and the provinces will consider the steps to be taken for a fair distribution of taxation fields, so that the provinces may play their part in their own sphere. As the Leader of the Opposition (Mr. Drew) so aptly stated, the power of taxation means the power to govern, and the government of the province of Quebec must enjoy its own powers of taxation so as to be able to administer that province which, no matter what is said, is different from the others because of its language and its faith.
Education is the guarantee of the survival and development of the French Canadian race on the North American continent, and it is the duty of the Quebec government to preserve it with jealous care. To do so, it must have the power to legislate on all matters pertaining to education within the province. The power to legislate cannot operate soundly without the power to tax for the same ends, and that power cannot operate soundly if the province is at the mercy of the central government's subsidies.
That is why, Mr. Chairman, while the federal proposals are an improvement as far

Federal-Provincial Financial Arrangements as the amounts to be paid the provinces are concerned, I consider first that these amounts are inadequate to meet the enormous responsibilities of the provinces in the economic development of the country, of which they are the main architects.
And then I feel that, while the federal proposals acknowledge for the first time that the provinces have a certain right to direct taxation, that acknowledgment is still utterly inadequate, for the federal government should not dry up the source of that taxation in order to pile up unjustified surpluses.
For these reasons, Mr. Chairman, I will vote against the resolution of the Minister of Finance.


Mr. Caron:: Mr. Chairman, I listened very carefully to the wailings of the hon. member for Three Rivers (Mr. Balcer), uttered with the sluggishness of a litany. And, while he was speaking, I was asking myself how it happens that he and his leader are not entirely of one mind.
It is true that the Leader of the Opposition dealt with the question of provincial rights, but was laying stress especially on the amounts of money, as if the amounts of money were more important that the provincial rights themselves. As for my hon. friend from Three Rivers, I grant that he discussed the question of autonomy, that same old story on which they have been harping for fifteen years, especially in the province of Quebec. But he dwelt at some length on the wealth of the federal government. He dwelt on the financial side of the question, and I wonder whether his purpose would not be to sell that autonomy, if the amount offered was high enough to attract his attention.
Indeed, his friends complain everywhere that their autonomy is jeopardized. In what way is their autonomy jeopardized in this resolution?
Now, the first part of the resolution provides:
A tax equalization payment with regard to individual and corporation income taxes . . .
sparsely populated, or owing to bad soil conditions, or an unfavourable economic position preventing them from developing their farm economy, or their industry as they should be developed-the federal government pays certain sums of money from its regular revenues. This plan seems extremely logical, because the country consists of ten provinces forming a single unit. Now, just as in the human body, the whole body is affected when an arm aches, the same happens in a national body. This is why, in order to make Canada a prosperous country able to play its full part in the world, the federal government has thought of giving some of the poorer provinces some additional fields of revenue, so as to enable them to emerge from their difficulties.
How can this gift of revenues from the federal government to the provinces who need them jeopardize the economy of the other provinces? I know that my honourable friend, who is a lawyer, would have great difficulty in proving before an impartial jury outside of this house that this would in any way prejudice the autonomy of any province. Part of the revenues of Ontario and British Columbia, as is the case for others, is taken, but these two provinces will receive nothing; the poorer provinces will benefit.
With regard to industry, the province of Quebec which occupied the first place in 1939, now comes in fourth place, precisely because of the activities of the friends of the member from Three Rivers, who are now administrating it. The federal government takes pity on the provincial government for its unsound administration of the affairs of the province. The province needs something to get over its troubles.
It may be that the population of the province of Quebec has been deluded. If we made a thorough study of the means the provincial government has taken to achieve its ends we may believe that the population of the province of Quebec has not been deluded but robbed. The hon. member knows the methods which have been used by his Quebec friend.


Léon Balcer: You remind me of school chil-
It is merely an act of distributive justice on the part of the government, which offers to share the revenue it always got and will be getting, even if there were no agreement, with the poorer provinces, in order to help them overcome the difficulties they have to face. It is not a matter of asking whether anyone is happy about it. To establish a certain balance with regard to the provinces who are experiencing very special difficulties from a lack of revenue because they are
dren. When, during a hockey game among school children, one team is behind 22 to 1, it may admit defeat but says that the referee was against it.


Alexis Pierre Caron: The remarks just made by my hon. friend leads me to think that he has not yet reached full maturity.
I wonder if an impartial jury would accept what the hon. member for Three Rivers has just stated, namely that the province has been wronged because the


federal government has decided to make her a gift to enable her to overcome some of her difficulties. For all the parties concerned, it is only an agreement signed between the provinces and the federal government. How could the rights of the provinces be encroached upon if, as a result of negotiations with the representatives of the federal government, the provincial governments finally agree to accept as a fair amount what will be given to them in exchange for certain taxation powers? How can one say that there has been an encroachment upon the rights of the provinces when those same provinces have accepted the agreement? If any province refuses to sign the agreement, if she does not accept it, its autonomy will not be jeopardized. It is contended that so much has been lost due to the fact that the agreement has not been signed, but nothing has been lost if there has been no agreement. It is just like the parable of the vineyard. The worker hired in the first hour received no more than the one hired in the last. However he received just as much. This was distributive justice.
I do not think that the member for Three Rivers is convinced of the truth of what he is saying. The very tone of his remarks demonstrates that fact. He claimed that the premier of Quebec had been ridiculed when he had brought up the subject of autonomy. Well, that is quite possible. We may very well have held him up to ridicule. But he who has always spoken of provincial autonomy has never been able to respect municipal or educational autonomy. More particularly has he been no respecter of the autonomy of trade unions, since he has denied workers the right to think for themselves. We also have the right to criticize the government of Quebec on that score. There are a great many other charges too that we could level at the friends of the hon. member for Three Rivers. During the recent Quebec elections Mr. Duplessis, in his speeches and campaign publicity, claimed that all existing pensions were paid for by the Quebec government, that they were granted by the provincial government, which even added family allowances. Why, the government of the province of Quebec never paid a single penny in this respect. With the help of any advertisement that appeared in the papers, I could prove that the provincial government claimed credit for establishing family allowances. They do not have the courage, nor the honesty, to say that the old age pension for those 70 years old or over is paid in full by the federal government. Let them be honest enough to admit that the federal government pay 50 per cent of the pension for people between 65 and 70. Let
16, 1956	6033
Federal-Provincial Financial Arrangements them be honest enough, when they request the federal government to respect provincial autonomy, to respect the truth.


Léon Balcer: No wonder Mr. Lapalme was beaten.


Alexis Pierre Caron: I am sure, Mr. Chairman, that the people have realized that the provincial government tried to mislead them. Besides, the hon. member for Three Rivers continues to mislead them by his remarks. He claimed that it took years and years to get a railway line in the Lake St. John area. That line was approved as soon as it became necessary. Surely, the federal government was not to build a railway when there was no need for it or when eventual profits did not justify the undertaking.
Obviously, he has nothing but criticism towards this government as regards the port of Three Rivers. The board responsible for the administration of that port, an independent body, promised to reorganize the port of Three Rivers when the need is felt, if there is an increase in the number of industries. But that is not what the hon. member for Three Rivers wants. He would have the government venture into an undertaking without considering all its aspects. The hon. member for Three Rivers says to the people of Quebec that, when a reduction of income tax is requested, the answer is that it cannot be granted because of national defence. No one can deny that the problem of national defence is paramount.
Canada, like the United States, Great Britain and every other country in the world, feels that this is a problem of the greatest magnitude. We know that the threat of war continues in the world, and that as long as it does all governments will continue to prepare to defend their rights and liberties. The government, along with every other government in the world, is working for national defence and striving to ensure that the hon. member for Three Rivers retains the right to speak as he has just spoken in this house. And this will hold true as long as this threat hangs over the world.
National defence is, at the moment, a necessary evil. If we wish to continue to live in peace in this country we must remain prepared. As the Latin proverb puts it, he who wants peace must prepare for war. The United States are spending enormous sums in this country to help us in defending the continent, since Canada is far more vulnerable than their own land.
Is not France obliged to spend huge amounts for its defence? It is the same thing in Great Britain, the same thing in Italy, the same thing again in every democracy in the world.

Federal-Provincial Financial Arrangements The hon. member for Three Rivers is ill-inspired when he is blaming us for doing what every NATO country is doing.
At any rate, I have more confidence in the opinions of our Secretary of State for External Affairs (Mr. Pearson) and our Prime Minister who are in a position to get all important and valuable information, than in the lucubrations of the hon. member for Three Rivers.
The government of the province of Quebec should stop recriminating; it should stop indulging in petty politics and the like; it should stop destroying in order to try to lift itself up. The hon. member for Three Rivers should stop his demagogy.
The Ottawa government is proposing sound and wise measures, such as to help the provinces to solve their problems. As far as I am concerned I support the federal government in everything it is undertaking with a view to helping the provinces to lead an easier life and to meet their needs.
(Text) :


Mr. McLeod:: Mr. Chairman, I feel rather hesitant in rising to my feet after the display of emotional oratory we have just heard. I do not blame the hon. gentleman a particle, because this is something which should arouse deep feelings. My only regret is that I will not be able to do justice to it. What the minister said in introducing the resolution did not salve my feelings a particle when he used phrases such as "implement the offer." That is good proof of what we claim this to be, that it is nothing less than an offer by the federal government to the provinces and is not anything in the nature of an agreement as we are given to understand it is.
Then we heard the phrase "allow the provinces." That is another phrase I do not like. I do not think it is up to this central government to allow the provinces any rights so far as taxation is concerned. These tax rights were granted to them many years ago when this confederation was first born, and I do not think phrases such as that help to ease a situation which to say the least is packed with dynamite.
Those speakers who have spoken thus far have certainly covered the ground quite fully, and it is rather hard to find something new to bring up. The Leader of the Opposition did a splendid job this morning in outlining the general principles on which our opposition to the bill to follow this resolution should be based. The resolution states:
That it is expedient to introduce a measure to provide that the Minister of Finance may pay to a province, out of the consolidated revenue fund-
I do not like that "pay to a province, out of the consolidated revenue fund." I should like to ask a question. Where does the money come from that is placed in the consolidated revenue fund? Is it not money that has been collected from the various provinces and the people who reside in them? A sentence such as that would give the impression that a dole is being handed back to the provinces from this general revenue fund. It may be a payment from the consolidated revenue fund, but in my opinion it is nothing more nor less than a refund of a small part of the money the central government has collected from the provinces.
Then we come to paragraph (c) of the resolution, which says:
(c) a tax rental payment in accordance with a tax rental agreement that may be entered into by any province as an alternative to levying such taxes on its own behalf;
There is talk there of an agreement, but from what we can gather from the expressions of opinion in the different provinces from one side of Canada to the other it is very doubtful if there will be any agreement. If an agreement is made, how has it been reached? Further, I cannot see any possibility of this being anything more than a one-sided agreement to which the federal government alone agrees. Then why the rush in introducing this legislation at the present time? Why not wait until there is an agreement?
I wonder if there is any sinister motive, such as the idea that the central government can go to the provinces, once the bill following this resolution has been passed by the house, and say, "This is what has been passed by the parliament of Canada. It is up to the various provinces to attach their signature to it in order to close out what has been approved by this parliament as representative of the people." I think possibly that is the principal motive, in order to strengthen their hand in the forthcoming settlement which, at the present time, is very far off. I do not like this idea of the strong voice or playing from strength in so far as the central government is concerned.
The increasing authority this government are placing in their own hands is, step by step, vesting in this government the sole right to tax. There have been various other infringements of provincial rights which we have seen during the past few years. We are all well aware of the old saying that the right to tax is the right to govern, and what will follow this measure will certainly take away from the provinces the right to tax and substitute therefor the right of the federal government to perform all functions. There is also an old saying that whoever collects and handles the money will want to call the tune.


Now that the right of taxation is being delegated to the central government, where are the rights of the provinces? What has become of provincial autonomy about which we heard so much? This whole problem, Mr. Chairman, of federal-provincial relations and it is a problem-is to my mind being approached in the wrong way. In my opinion the provinces of Canada should be calling this conference and not the central government, just as at the time of confederation it was the provinces which called the conference to set up this central government. It is from the provinces of Canada that this central government receives its authority. I maintain that this still is an institution, and should always remain an institution, to carry out the wishes and the will of the provinces of Canada and the people who live in those provinces.
I agree that it is sound policy to have one collection agency. The way to have that agency set up would be for the provinces and the federal government to get together and work out some plan for the collection of these taxes through one central agency. Instead of that, at the present time we have the central government saying in effect, "We have decided that we shall collect all taxes on a national basis for the next five years, and we shall pay you a small percentage of what we collect in the provinces. A formula has been arrived at. We have carefully figured this out. If you want to accept it, it is there for your signature. It is our only offer, so take it or leave it".
Where is the idea of confederation about which we heard so much in the early days when this country had its birth? I am satisfied that if those statesmen who gathered around the conference table some 89 years ago-Macdonald, Brown, Tupper and Cartier -could see the turn events have taken since their day they would not be too well pleased. What would they think of the central government imposing its will and authority upon the provinces which they were so careful to agree should retain autonomy within the federation?
When a conference is called, it should be called to consider this whole problem. I believe all the provinces should be given an opportunity to lay their cards on the table. They have their problems. They have revenues to find to cover such things as health, mental institutions and so on. They need money for universities and technical training, a serious problem which was raised here today. They need money for roads, bridges, public buildings and all that sort of thing. Why not have all the authorities get together and lay that information on the
16, 1956	6035
Federal-Provincial Financial Arrangements table, then come to some kind of an agreement? It could be a tax rental agreement, or whatever you like to call it, and these points could be considered. We could work in harmony and close co-operation in the setting up of this single agency for the collection of taxes, but we should see that sufficient was left in the coffers or returned to the coffers of the various provinces in order to take care of those things I have mentioned.
It is not only the poor provinces but some of the wealthiest provinces that are having considerable trouble financing the increasing demand for services. This is a nation-wide problem which extends right from the Pacific to the Atlantic. It is not only in the federal field that the cost of government has increased. In fact we find that the increase in the cost of the federal government has been much less than for provincial and municipal governments.
For instance, in 1945 the expenditure of the federal government was $4,527 million. In 1955 it was $4,733 million, an increase of 5-5 per cent. In 1945 the total cost of the provincial governments across Canada was $384 million. In 1955 it had risen to $1,505 million, an increase of 293 per cent. Just think of that. In 1945 the municipalities, Mr. Chairman, had a total cost of operation amounting to $344 million. In 1955, 10 years later, it was $1,293 million, an increase of 276 per cent.
These figures show that we have federal increases in the cost of government of 5-5 per cent, provincial increases of 292 per cent and municipal increases of 276 per cent. This is something that must be given very careful consideration. Under the staggering costs these figures show, what can the provinces and municipal tax collecting agencies do when they find that their fields of taxation are being encroached upon by the federal authorities? They might well ask themselves, where is this money to come from?
There is one field of expenditure in my own province that I should like to spend a few moments on, and that is the matter of roads. The government of British Columbia has set up a five-year program for the building of roads into forest areas known as public working circles of that province. In the next five years they are committed to build 1,460 miles of roads. The total cost of those roads is going to be $41,350,000.
It is true that the British Columbia government will get some revenues from the forests that are tapped by those access roads, but what about the huge taxation that will also accrue to the federal government through access being provided and those areas opened up? It is estimated that in the area which

Federal-Provincial Financial Arrangements those roads will serve there will be a yearly take from the forest of $64,787,916. The total for the five years is estimated to be $323,939,580. From that staggering amount, Mr. Chairman, the central government is going to collect, by way of income and corporation taxes, a huge amount of money; yet in opening up those areas not a five cent piece will be given toward the staggering cost of $41,350,000.
Then we have our arterial highways and bridges. For these they have set up in the province of British Columbia a 20-year program. There are yet to be built 2,086 miles. The estimated cost of that program is $397,500,000. In that 2,086 miles are included 350 miles of the trans-Canada highway. The central government is contributing toward that. I am very glad to say that road will go through the most expensive area of British Columbia, so far as road-building cost is concerned, and I think a very wise decision has been made in that respect. There we have an outlay on arterial highways of $397,500,000 for the next 20 years.
But that is not all. There are also other, what we call in British Columbia pioneer roads, opening up new areas in the north and districts that have not yet been reached by highways. That mileage cost in the next 20 years will be $498,500,000 and the number of miles will be 3,530. If we add these together, Mr. Chairman, we find that for the next 20 years the province of British Columbia is faced with an annual cost of $44,800,000. That is the cost at present.
Those new roads that are being built into the undeveloped areas will tap the forest resources, the mineral resources, the gas and oil resources of the north, and the new agricultural areas. It is true there will be some wealth accrue to the government of British Columbia, but at the same time millions of new money will find its way into the treasury of the central government as a result of the opening up and the development of those areas, yet of the expenditure of $44,800,000 annually not a five cent piece will be contributed by this central government.
Then, of course, we come on down to what we call our country and feeder roads. I have not the figures on these, but I know it is a staggering amount. Of course that is something that is the problem of the municipalities and the smaller local governments of the province of British Columbia. I think it is only right that in arriving at any agreements with the provinces items such as these should be given consideration and should be taken into account.
I agree there should be a plan to assist the so-called have-not provinces, but this should

be done by building up the poorer provinces, not by tearing down the standards of the wealthy and more industrialized provinces. The old socialist slogan, even accepted by some today, and voiced in parliament since I came here, is that in order to make the poor richer the rich must be made poorer. This is just as outdated as socialism itself. It is not right that in this modern age, in approaching the question of balancing the standards of living, you might say, among the provinces, this same method should be followed. It is certainly not the ideal of free enterprise which we in this country profess to believe in; yet in reaching an agreement such as we have before us at the present time that is the system which is being used.
To back that up I should like to read a paragraph from the brief presented by the province of British Columbia on federal-provincial fiscal relations, just to show the committee that this is not my idea alone:
British Columbia has constantly advocated financial assistance to provinces in depressed economic circumstances, but there is a vast difference between one method of securing greater equality and another. One way is to level up; the other is to level down. One way is to raise the real income of the worse off without endangering the standards of living of those with special abilities who have the means to provide greater awards. The other is to deprive this group of the gains which would accrue from ability and potential worth.
Yet that is the policy which is being adopted by the central government in their approach to the problem we are considering at the present time. Wo believe that where there is criticism there should be some suggestions. I do not think it is right and correct for a person to stand up and tear down unless he has something to offer in return. I should like to present two or three suggestions for consideration. First, with respect to this resolution, I would like to see the whole thing done away with except the last line, which reads:
To authorize tax collection agreements with the governments of the provinces.
I would say the only way to arrive at such agreement is for them to gather around a conference table and sit there for days and weeks if necessary until an agreement is reached. Second, immediately call another conference with all the provinces and give sympathetic attention to the varying needs of the provinces, and careful consideration to all problems that are in the national interest such as education, health, highways, highway transportation and development of natural resources that are in the national interest. Third-and this is the most important; it is the environment under which these agreements are reached-endeavour at this

conference table to create a spirit of cooperation and let the provinces know that the spirit of confederation is not dead; that there is still such a thing as provincial rights, and that the federal government exists for the sole purpose of discharging the duty of administering the affairs of Canada in the interests of all the people of Canada and of all the provinces of Canada in which those people live.


Mr. Montgomery:: Mr. Chairman, like other hon. members who have spoken to this resolution I too am greatly interested in the legislation. As the minister said this morning in his opening remarks, we all know pretty much what it is going to contain. I was rather hoping he was not going to make such a definite statement, that an opportunity would still be left for bargaining and that it would not appear that an agreement was going to follow as a result of the legislation from which rightly or wrongly one gets the impression that the government is saying, "We will offer you this and if you do not like it you do not have to take it".
That just does not seem to me to be the way an agreement should be arrived at. An agreement is usually arrived at through a meeting of minds, and each party has an opportunity to present his views. I do not mean to imply that the provinces were not given an opportunity to discuss the matter, but from reports of the conferences that were held I cannot help but gather the impression that while the provinces were permitted to put forward their cases, their formulas and problems were not given the consideration I feel they should have been given because- and this is the ground on which I base my statement-if the provinces' propositions had been given consideration I do not think the premiers and officials of the provinces would have returned home and said that the offer which the Prime Minister submitted in his letter of January 6 was not sufficient to meet the needs and carry out the services of the provinces, which are fair and reasonable under the Canadian standard of living, or words to that effect.
The resolution itself, of course, is leading up to enabling legislation. I do not think there is any reason why it should not be brought in at this time. I do not agree with one of the speakers who suggested that the legislation should not be brought in. I can see no reason for not bringing it in, because it is enabling legislation. It seems to me, however, that the government should convince us that they are going to be fair in the agreements they present, and will give the provinces a fair opportunity to present their cases if they want us to support this
16, 1956	6037
Federal-Provincial Financial Arrangements resolution. The government should assure us that the views of the provinces will be considered and that through negotiation and by compromise something will be arrived at that is satisfactory to at least the majority of the premiers of the various provinces. As I understand the situation as it exists today, they are not satisfied.
Perhaps I could just digress for a moment. This whole matter arose in the dark days of the war when it seemed right for all the resources of this country to have been concentrated in a central authority in order to successfully prosecute the struggle in which we were then engaged, which was a life and death struggle involving Canada and her allies. At that time the provinces and municipalities under the agreements entered into were guaranteed as much as they had been collecting up to that time. During the latter years of the war and up until 1946 or 1947, when the agreements ran out, the people became accustomed to the system of single taxation. In many cases the provinces did away with the administrative machinery they had used to collect revenue, and as I said the people became accustomed to the single taxation system. In effect I think it was more equitable. I feel the central government has a better and fairer method of collecting income tax and succession duties, because it is sitting here like the head of a family. I believe it is true that the people would rather pay into one treasury than into several.
One opinion was extremely well expressed by Mr. Matheson, the premier of Prince Edward Island, during the negotiations last fall among the various governments. I am going to quote his words, because I think he expressed the feeling of the maritime premiers and the people of those provinces concerning the renewal of these agreements at the end of the war. This is what he said:
In 1946 we-
Referring to the provinces.
-accepted the tax rental agreement offer-
Notice that, "the tax rental agreement offer". You cannot get away from the idea, whether or not it is correct, that these have been offers, which have been presented to the provinces by the federal government, which has said, "That is all we can do; take it or leave it." Mr. Matheson said they accepted it:
. . . not because It represented some recognition of fiscal need but with a hope that during the lifetime of that agreement a more satisfactory formula would be devised. In 1952 the federal government proposed a new guaranteed minimum payment based on the one allotted to a province under the 1947 agreement with an increase proportionate to change in provincial population and per capita gross national product between 1942 and 1948.
6038	HOUSE OF
Federal-Provincial Financial Arrangements
He continued:
No recognition of a province's fiscal need problem or its tax-raising ability was taken into consideration in the reallocation or distribution of the tax moneys, but the same old factors were again used in the formula-the gross national product of Canada and the population of the provinces.
He concluded:
One of the principal functions of the tax rental agreements was that they were to ease the finances of the provincial governments possessing the lowest fiscal capacity.
Rightly or wrongly I believe that was the principle that was supposed to have been followed under the tax rental agreements from the beginning. The underlying principle was to make it financially possible for provinces whatever their tax base to carry out and perform their constitutional functions, and to provide a reasonable level of provincial services without abnormal burdens of taxation. This includes the province's responsibilities to the municipalities.
That brings me to another point I should like to mention. It has been stressed a great deal by all the speakers today, but I should like to say something further about it and I hope to approach it from a different angle. You may say that I am municipal minded. You may think I am altogether wrong. Perhaps I am; nevertheless I have views, and I know they are shared by many others.
The municipalities must be kept in mind when these agreements are entered into. With all respect, it seems to me that these negotiations between the provincial and the federal authorities have started from the wrong premise. I shall try to explain that. It seems to me that the governments have approached this from the top and gone down. To me the proper method of approach in arriving at any agreement which is going to give the people any relief from taxation and a fair division of the tax moneys collected from the people of this country is to start at the bottom.
It seems to me the first thing that should be done is that the provinces should be asked to lay before the federal authorities the requirements of their municipalities in so far as the real necessities that must be furnished by the municipalities to the people are concerned. We are all very familiar with those services which are the primary responsibility in so far as the taxpayers in our communities are concerned; education, hospitalization, roads, streets, water, sewage disposal, police and fire departments, and to a large extent the administration of justice. Those are essential services. I think the people of Canada have a right to expect a certain level of those services all across this country under


our constitutional set-up. I believe that has been brought out more than once by various commissions.
Therefore I am sorry I cannot agree with my hon. friend from Charlotte. I do not think the people are going to be satisfied, and I am very mild in that statement; because I feel, and a good many of us feel, that we in New Brunswick and in Prince Edward Island and in Nova Scotia deserve just as good schools, and our teachers should be paid just as much money; we should receive just as good equipment; our young people getting an education should have the same privileges as they would have in Ontario or any other province where they have a much broader base on which to assess. In a province like one of those in the east, the federal income tax people collect our income tax, which seems to come first; the corporations have to pay corporation tax; and the estates have to pay succession duty tax. Of course that does not come into municipal matters.
But take the municipal tax collector. The municipality has to assess for those schools, for the buildings, for the teachers, for the equipment, for the transportation. They have to find ways and means of getting that money, and the money must come from earnings. Earnings will depend very much on the type of industry in the locality. In our province we have to resort to poll taxes, which some provinces do not have to resort to. We have to resort to personal property tax in order to raise money locally to provide the best service we can in the way of education, hospitalization and these other services.
In rural municipalities it used to be that education did not cost very much. In fact I remember quite well that even in the period after the war the cost of running the schools in the municipality where I used to live was in the vicinity of $60,000 to $70,000. Last January the budget presented to the municipality for the same area was over $400,000. Even though, as Premier Matheson has said, the dominion did not take into consideration the fiscal needs, they may not have been impressed upon the federal authorities in 1946 because the period 1946-47 was when these costs commenced to rise. Prior to that, as I have just pointed out, the cost of education was rather a small item. It has kept going up until now it is a very large item. Still we have no more resources to tax. Our tax base is very narrow. Once the income tax is taken and the corporation tax is taken, we have to look to the province for the balance.
I am not going to criticize or brag about what our province has done. I am not familiar with what others have done, but I know,

because I have been connected with municipal governments right along, that our province has increased grants to the municipalities by a very considerable amount. As my hon. friend from Charlotte says, percentagewise it has not increased so much. I have no complaint about that, but they have received enormous sums. The point is that everything else has increased. The province has to spend more money on other essential services, and the revenue is taken up in meeting those other services.
That brings me to another point which I think should be mentioned. I notice that in that report there is an extensive list of services rendered by the dominion and the provincial governments, services in the fields of health, welfare, and education to some extent but not in the most necessary fields of education; it is for vocational training mainly. Then there is the field of agriculture and the field of national resources, for which there is quite an extensive table. However, what the provinces have to do is to meet those services dollar for dollar. I believe most of them are essential, but I feel that some of the services in that list, which the federal government has been offering to the people through the provinces on a share basis, are not as essential as education, health and justice.
There is another point I should like to mention. First, I claim that this federal authority and the provincial governments should find out the essential needs of the municipalities to provide at least the minimum service at the level of what we might call a Canadian standard of living.
Second, I think there should be an investigation into the essential provincial services that have to be rendered to the people in order to keep the province abreast of what the people expect by way of roads, bridges and various other things. I know we have a tremendous number of bridges in my province, and it is very expensive to maintain them. In addition, so many of the old roads are narrow. Demands are made for wider roads, and we also have heavier equipment using our roads today such as buses, trucks and so on. These are all essential provincial services.
Having established these minimum essential services, I claim that the federal government should then commence to consider what their minimum requirements are. After all, there is only one source of taxation and it is very foolish for two or three governments to try to see which one can get there first or get the most. I think it should be a sensible thing to sit down and say that those are essential, those are essential and we have certain other essential services. But after
16, 1956	6039
Federal-Provincial Financial Arrangements sitting here for four years and looking at some of the estimates I am satisfied, and I cannot be convinced otherwise, that the government can tighten its belt and furnish the essential services that are required with a lot less money than is being spent now.
There is one other factor I wish to mention. Industries from which income taxes and other revenues are collected settle in a municipality and the first government they contact is the municipal government. 1 know that the practice to which I am about to refer has been carried on over the past years and I know that, rightly or wrongly, it is still going on. I do not say it is right and I would not be surprised if the Minister of Finance said it was not the fault of the federal government and that it was wrong in principle. However, the fact is that when an industry settles in a municipality it immediately approaches the municipal governing body and asks for tax concessions. In many instances those concessions have been granted by municipalities in order to encourage industry to settle there. They have been granted in order to assist industry to get going.
But after they have got started, are doing well and are progressing, who gets the first returns? It is the federal government. They get them through corporation taxes and through income tax paid by the people who work in those industries. Then the municipality, which has to furnish the services for the industry, has to tax the land and the people. The municipality has to come second. As all members know, there is a limit to the extent to which you can assess real estate in the form of land; and I say without fear of contradiction, and I know hon. members from the province will support me, that in my province the municipalities have reached a point in taxing real estate beyond which we have no right to go. In fact it is a point beyond which it is not safe to go, because the people cannot afford to pay more taxes and retain their real estate. It will be cheaper to let the municipality take it.
These tax concessions are a fact and I think they should be taken into consideration when negotiations are being carried on between the provincial and federal authorities. In some instances the municipal authorities grant tax concessions to industries extending over a period of 20 or 25 years in order to keep the industries there, and during that period the municipalities fail to realize revenue from them. Rightly or wrongly, it is a fact and it should be taken into consideration.
I say again that I feel we start at the wrong place when we start at the top and go down. It seems to me that is exactly
6040	HOUSE OF
Federal-Provincial Financial Arrangements where these negotiations have been starting. The federal authorities figure out how much they must have to maintain their services, and then they say there is only so much left. Education, health and the administration of justice are three things that take a lot of municipal revenue. In case some of you do not know, may I say that it is surprising how much a municipality has to raise for the administration of justice in order to furnish the buildings and provide other things. As I say, I do not think these three things should have any boundaries.
I think every child and every other person in Canada should have an equal opportunity to acquire an education. Under the framework of our constitution this responsibility of course rests upon the municipal authority. That is why it seems to me that in all fairness we should find out what the essential services are and how much money it is going to take to provide a reasonable standard of education, a reasonable standard of health and a reasonable standard of justice throughout the nation. That would be one place to start.
I think there is a good foundation to be found for this argument in the past, and also good reason for us to be talking about it today. Reference has been made once or twice to the Rowell-Sirois report. There is a quotation from that report which seems to me to be applicable. It is to be found in chapter 5 of book 2, and has to do with adjustment grants about which I intend to say something later. It has this to say:
They are designed to make it possible for every province to provide for its people services of average Canadian standards and they will thus alleviate distress and shameful conditions which now weaken national unity and handicap many Canadians. They are the concrete expression of the commission's conception of a federal system which will both preserve a healthy local autonomy and build a stronger and more united nation.
That brings me to the second part of my remarks. According to the premiers, and they should know best, these agreements are not sufficient to bring the people of the provinces up to the standard of living which I think Canadians should expect. As a matter of fact I do not think they measure up by any means to the declaration of the Prime Minister when he set out what he thought- and I agree with him-was the intention of these agreements. His remarks are to be found in one of the letters and are set out at page 747 of Hansard of January 31, 1956. I think this is a declaration which should be lived up to, and if I felt it was being lived up to so far as the provinces are concerned I could very readily support the legislation that will follow this resolution. He said:

The present government has no intention of abandoning the objective of the tax rental agreements which is to make it financially possible for all the provinces whatever their tax base to perform their constitutional functions themselves and to provide a reasonable Canadian level of provincial services without an abnormal burden, of taxation.
That is in line with the Rowell-Sirois report; it is in line with what I said at the beginning I thought the idea was when they started out with these agreements. I think the agreements have been a good thing, and I think the maritime provinces want these agreements renewed. As a citizen of one of those provinces I believe it is far better to have agreements than to be compelled to go back into these fields of taxation, because we have such a narrow tax base.
We have no resources to tax, that is as yet. Unless the principle which has been recognized has been carried out, we will be faced with difficulties. In order to carry that out it seems to me that you have to go right back to my suggestion. You have to find out how much is required by the municipalities for education, hospitals, streets, roads, fire protection and so on. You have to find out what it is necessary for the provinces to do. When that has been arrived at-and there may have to be some compromise but I think it can be worked out-you have a point at which to begin. It seems to me that it could not have been approached from that standpoint or we would not have had all our premiers dissatisfied.
There is another situation we have in the maritimes which in my opinion does not apply in some of the other provinces. We were the original partners in confederation, and as was stated in the Rowell-Sirois report succession duties, income tax and corporation tax were considered as national taxes which should go into the national revenue. I agree with that. I believe the central authority can do the best job of collecting; but just because it can do that job of collecting, just because it got into that tax field during the war and finds it is a grand place to get money, is in my opinion no reason why it should want to hang on to it. I submit the provinces must be given sufficient so they can provide a reasonable Canadian level of provincial services, as set out in the Prime Minister's declaration. The formula which I understand will be incorporated in the legislation to follow is not going to do that.
Therefore I cannot see how I can support this legislation or any legislation that follows unless I have some assurance on behalf of my people that we are going to have sufficient money out of these agreements to permit us


to provide the same level of services which the richer and more fortunate provinces can provide. There are one or two other things I wanted to mention, but I believe my time is up.


Mr. White (Middlesex East):: Mr. Chairman, I rise to take part in the debate on this resolution tonight because the municipalities in the county which I have the honour to represent are finding that the revenue they are able to collect from real property is not sufficient. They are taking all they feel they can take, and the squeeze is getting tighter and tighter because of the increased need for new surveys, roads, bridges and educational facilities.
I do not propose to go into all the details of these agreements which have been brought out today, as I think they have been covered pretty well pro and con, nor do I propose to go into their history. I well remember that in 1945 one of the things I was asked to digest was the Rowell-Sirois report. Even to this day I have not been able to take in all its ramifications. However, I do propose to bring to the minister's attention some of the things which are happening in the municipalities. I mention the municipalities particularly because they are less able to expand their tax base than either the provinces or the dominion.
I would point out that no government can give anything until it takes something away from someone. While there may be three different levels of government doing the taxing, there is still only the one taxpayer, the one source of income. I think it was pointed out quite well today that the responsibilities of the federal government have been expanded and extended since the close of the war. No one can question the increased amount of social services which have been asked for, no doubt with more to be added. No one can question very much our expenditures on national defence. I think everyone is worried about the future as far as national defence is concerned, but I do think we have less to show for our national defence dollar than for any dollar spent by the municipality. I believe the municipality can show more for its tax dollar than any other taxing authority in the country.
We must consider the tax revenue which the municipalities receive and compare it with the services they provide in the way of education, roads and other things. I have here a breakdown of what one municipality does with the money it collects. Another thing we must realize that is out of every tax dollar collected, only 11 per cent is used by the municipality. That should make us
16, 1956	6041
Federal-Provincial Financial Arrangements wonder that they are able to do as much as they do with the little they get.
In the case of the municipality in which I live, 25 per cent of its tax dollar goes to the county; 45 per cent is used for schools, and only 30 per cent is used for township purposes. They have very little to use of the tax dollar they collect after the schools have taken 45 per cent and the county another 25 per cent.
People think rigid economy on the part of the federal government could provide some saving, but I suppose the minister will ask me where they should start. I find that with an election not too far away surpluses are piling up. Probably that is not attributable so much to the government's good housekeeping as to the increase in the gross national product which has taken place.
As I pointed out in the beginning, the municipal governments are really the weakest. They are not able to expand their tax base, nor are they able to demand from provincial or federal governments a much greater share of the tax dollar. The situation has become so serious in some municipalities that they are discouraging the opening up of new subdivisions and that, in a sense, is rather serious. These municipalities feel that for the time being they had better consolidate their position and let some other municipality take the influx of population and also carry the burden so far as schools, roads and other services are concerned. As the hon. member for Victoria-Carleton so ably pointed out, the municipality has to take care of education, streets, hospitalization, water supplies and sewage disposal. Those are only a few of the items.
When it comes to the question of water in southwestern Ontario, we are almost surrounded by the great lakes but the water supply problem is quite acute. The water resources committee of the province of Ontario is trying to aid the municipalities in securing water supplies in a co-operative way, in order that many municipalities can take advantage of the abundance of water that surrounds them. Then there are other municipalities which, in a sense, are stealing water right from under another municipality and selling that water back to the same municipality. They are also dumping the water back into the municipality in the form of a kind of diluted sewage, to the detriment of the neighbouring municipalities along the rivers or streams of the province. Municipalities are hesitating about installing improved sewage disposal facilities because of the tax rates. They realize that when these additional improvements are made, the tax rate must go up.

Federal-Provincial Financial Arrangements
There is another aspect of the problem of which all levels of government should ndt lose sight. When taxes are imposed on a land owner, he cannot pass them on to anyone. The taxes at other levels can become part of the cost of doing business, and they also become a part of the cost of goods that go into the export market. When the level of taxes becomes too high we find ourselves in a difficult position. I realize, of course, that taxes only become a small part of the cost of manufactured goods, but they are a part.
Now, I do not suppose anyone realizes the impact of all these problems better than the reeves and mayors of the various municipalities in the province. I do not intend at this time to go into the details of the various resolutions the reeves and mayors have placed before the various governments, but they are the ones who are closest to the people and their resolutions should be seriously considered.
There has been considerable said in the press and other places about United States investment in Canadian resources. I am just going to digress for a moment to point out that if more of the Canadian taxpayers' earned income were left in their pockets, more Canadian dollars would be available for investment in Canadian resources. I want to point out also that the federal government should be exemplary in its own tax-paying policies. The percentage of tax the federal government pays on its property should be 100 per cent, not a percentage depending on the concentration of federal properties in any one municipality. The federal government, in my estimation, should be in no different position from the ordinary taxpayers in this country. Why should they be in a preferred class? Some time ago there was a reference in the newspapers to a municipality on Manitoulin island that was threatening to sell some government property for taxes. I have not heard anything about it lately, but probably the minister will say something about it when he replies to the various criticisms that have been hurled at this resolution.


Walter Edward Harris: Don't base your case on that one.


Harry Oliver White: I mentioned earlier that it seemed strange how surpluses develop about the third or fourth year of any parliament. However, I have noticed that the surpluses are never used to alleviate the problems of the municipalities. The government always seems able to find what appears to be a better use for the money. I think it was back in 1953 or 1954 that the
rMr. White (Middlesex East).]
federal government took in by way of taxes about $4,509 million, or 67 per cent of all the tax moneys paid. In the province of Ontario the province got about 20 per cent, and the municipalities $900 million or 13 per cent. I understand that over the years the municipalities' percentage has been reduced to about 11 per cent.
I have some resolutions from some municipalities in the province of Ontario dealing with this question of dominion, provincial and municipal share of taxes. This is a resolution from the city of London, dated May 14, 1956. It says:
Whereas the last quarter century has seen great changes in the living standards of the people of Canada;
And whereas these changes have increased the variation in the personal income of the citizens;
And whereas the increased standards demand more and more public services both material and cultural;
And whereas the municipal governments are asked to supply many of those services from taxes based on values unrelated to modern incomes;
And whereas the municipal percentage of the total taxes paid has dropped from 29 per cent to 11 per cent despite the fact that mill rates have increased while provincial and federal rates have decreased;
Those are the factors presented in the resolution to bring to the attention of the authorities the plight of the city of London and the municipality of Long Branch near the city of Toronto. Last year the city of London paid $150,000 in sales tax to the senior government.
I just want to read one paragraph of another resolution of May 24, 1955:
And whereas this problem has been drawn to the attention of the dominion government on many occasions and, notwithstanding assurances that the submissions of this and other municipalities would be studied during the preparation of the annual budget of the dominion government, no action has been taken to afford relief to the municipalities of Canada by way of exemption from sales tax.
Here is one municipality that pays $150,000 in one year into the coffers of the government. I suppose the minister will reply by saying, "Well, we have to get the money somewhere", but it seems to me that this is a type of, shall I say, double taxation that puts an unfair burden on the home owner in the municipality.
Let me read one paragraph from the submission of the city of Fort William:
The high cost of financing capital improvements is threatening and seriously curtailing the expansion program of many municipalities in Ontario.
Then the survey commenced by the United Nations has this to say:
Wages, salaries in Canada rose 4] times, 1935 to 1952, and government spending six times.
Therefore the actual squeeze of taxes becomes greater and greater as time goes on.

Then the minister will recall that very recently the president of Stelco had this to say. I can remember when they were talking of taxes to control inflation. They were going to draw off surplus purchasing power in the hands of the consumers, but the president of Stelco does not go along with this idea. He said:
It is difficult to understand the argument that high taxes curb inflation, H. G. Hilton, president of Steel Company of Canada Limited, said today at the company's annual meeting.
"What difference can it make as far as inflation is concerned," asked Mr. Hilton, "if we as individuals spend or save our money as we see fit, or if our governments take it from us and spend it as they see fit?"
I think that answers in a way the claim that governments are taxing to help control inflation. In a sense it sometimes adds to inflation.
Along with other hon. members who have taken part in this debate, I was hoping that out of those conferences that have been held and the many things that have been said about them pro and con, probably some equitable solution to the problem would be found; and I think we shall hear more and more of this as time goes on.


Mr. Michener:: Mr. Chairman, at this stage in an 11-hour day I daresay that the keen edge of the minister's mind and his receptivity to suggestion or even to constructive criticism are somewhat dulled, so I shall begin by giving him the best of my thoughts on his resolution and save perhaps the more critical remarks for the morning.
It appears to me that the principles on which the minister justifies the resolution in the addresses he made on it are principles which everyone would accept. Perhaps the difference will be in the application of those principles. I refer to the first of those basic considerations for which he was striving, as enunciated in an earlier speech, and that was to make revenues available to the provinces consistent with their responsibilities. I am sure that is what every member of the house wants to secure by any federal-provincial arrangement, an assurance that the provinces will have the means of carrying out their responsibilities.
Then the next principle was that of maintenance of full employment. I think the minister said maintenance of a high level of employment. That is a theory that was raised with very considerable enthusiasm by all governments and parties some years ago and subscribed to with a great deal of zest on the hustings and in the House of Commons; and it is, of course, a much to be desired end.
16. 1956	6043
Federal-Provincial Financial Arrangements
The third reason behind this scheme of federal-provincial agreements was that of simplicity in collection, which all taxpayers appreciate; and equity, I think the minister said, to the taxpayer. I daresay the ends which he would define as being his ends are those that I myself think are desirable; that is, a strong central government with adequate resources to carry out its obligations, and strong and independent provinces with adequate resources to carry out their obligations. The real problem is how to achieve both of these results in an effective and harmonious way. I suggest that the basic test by which this resolution should be judged and by which the bill should be analysed when it comes before the house is whether it does tend to the maintenance of the confederation, of the federal principle of government.
Some people may ask, why should we maintain the federal principle of government? I do not think the minister is one of those. All of us recognize that times change and that there is a need for change in any constitution or in any system such as our federal system, and that from time to time there is a shift in emphasis with a change in the economy. Therefore since 1867 we have seen a great many conferences just like the one which recently concluded. I think there have been 17 interprovincial and federal-provincial conferences in all, and if one counted the conference which began on July 9 in the Atlantic province, the conference among the four premiers of the Atlantic provinces perhaps we could count 18. They have been ample proof of the need for reconsideration of the basis on which responsibilities and revenues have been adjusted in our federal system.
But the basic factors which were present in 1867 are as pressing and vital today as they were then. I think those factors are that Canada is a country of two races, two languages, two cultures; that there is diversity, and there needs to be local government to satisfy the needs of diverse groups. There is in addition the diversity of our geographical location and division, which does not need to be recalled to this house because it has often been mentioned. Those diversities are as real as they were then and need recognition today as they did in 1867.
The problem is to create unity in the face of so much adversity, as has been said by Professor Corry of Queen's University in a very apt phrase. While a substantial part of Canada desires local autonomy-and there is no question that the substantial part of Canada does desire local autonomy-it is clear that the federal system has not outlived its usefulness and is the only means
6044	HOUSE OF
Federal-Provincial Financial Arrangements by which we can achieve unity in this country. I think no one who speaks the French language would deny that over 30 per cent of Canadians ardently desire the right to be different. That seems to me to be the conclusion of all sound opinion; therefore, as I suggest, it is the basic test which should be applied to this resolution and to the bill which is to follow it.
There are two aspects to the resolution which the minister has presented, and they are separate, distinct and different in principle. The first aspect is that of the division of taxing powers, and you might call that the arrangement for the renting of tax fields or the sharing of tax fields, depending on where the emphasis is put. The emphasis has shifted since 1946. In 1946, when Mr. Ilsley introduced his budget after an unsuccessful attempt to reach an agreement among the provinces, the emphasis was on the central authority renting from the provinces their major tax fields; and those tax rental agreements which were entered into by most of the provinces at that time gave way in due course to a further series of agreements with a slight shift in emphasis. Now in 1956-57 the agreements are running out and a new arrangement must be found.
Despite the fact that these agreements have not met with acceptance by any of the provinces I think it is fair to say there has been decided progress in the approach the minister has made and in the ingenious development of the theory which has been developing over the course of 10 years. I would like to acknowledge the ingenuity and skill of the members of that great department of government who have devised the new formula.
The improvement which I acknowledge tonight and suggest exists here is that there is now greater evidence than there has been in the past of a desire to share those fields which are the property of both the provinces and the dominion. The emphasis in the past has been more on keeping control of those tax fields by the dominion and paying the provinces some subsidy by way of rental for the use of the fields, but one can see here that there has been an effort to achieve a balance between the two ideas of the rental of the tax fields to the federal government and the joint occupation of those tax fields or the sharing of them between the two levels of government.
The other aspect of the proposed agreement is that of subsidy, and it takes its form here in equalization payments. That is not a new

idea, as I shall indicate a little later on, but it is a vitally necessary part of the fiscal arrangements between the federal government and the provinces. It has been recognized since the time of the earliest agreements that some subsidies were necessary and some such payments had to be made to those parts of Canada and those governments which perhaps gained less from confederation; or shall we say, using the words of some of them, "suffered more from confederation" than others, and therefore had to be compensated to put them in a position of equality with the others.
We have had constant reminders of the feeling that certain parts of Canada have contributed more to and received less from this union. We have even had suggestions of secession from time to time, but perhaps they have not been too serious. I reemember that one wag gave a name to the secessionist movement in Alberta and British Columbia a few years ago. He suggested that when that part of Canada broke away the two provinces in their united form might very well be called "Albumbia". There have been rumblings in the maritimes from time to time, and it is not clear yet whether confederation has been accepted in the newest province, Newfoundland.
In any event I think our objective in trying to work out a new fiscal arrangement within the federal system is to allay as much as possible these feelings of injustice which to the minds of us on this side of the house appear to be pretty strong and rather widespread.
As I understand the position, the minister comes to the house with a resolution, but he is not in a position to say that if we pass the resolution and the bill any of the provinces will welcome it as a solution to their problem.
Mr. Chairman, it is ten o'clock.
Progress reported.



BUSINESS OF THE HOUSE

Walter Edward Harris: Mr. Speaker, we shall continue with this tomorrow and then take the resolution in the name of the Minister of Justice with respect to an amendment to the Supreme Court Act, then the second readings of bills in my name for several insurance companies, and then the Public Service Superannuation Act.


[Stage Direction]
At ten o'clock the house adjourned, without question put, pursuant to standing order.