1956-07-03

[Stage Direction]
On the orders of the day:
Mr. Donald M. Fleming (Eglinton):: Mr. Speaker, may I ask the Minister of National Revenue, in relation to the program of C.B.C. television broadcasts, which I understand is to commence this evening and run over the next six weeks on the subject "This is Ottawa", reviewing the history of the Ottawa area, if he thinks it is proper that this series should omit any participation by the Governor General or the mayor and any scenes pertaining to Rideau Hall or Earns-cliffe while including scenes of Laurier house, the dominion bureau of statistics and other buildings?


Hon. J. J. McCann (Minister of National Revenue):: Well, Mr. Speaker, I must admit that the hon. member for Eglinton is much more familiar with the proposed program than I am. I know nothing about it except what I have seen in the newspapers and heard announced on television; therefore I cannot give an opinion that is worth anything with reference to what is to be on the program or the nature of it. I am not consulted about programs.


Donald Methuen Fleming: Will the minister look into this in relation to the fact that apparently there is to be no participation by the Governor General nor any scenes pertaining to Rideau Hall or Earnscliffe, and no place in it for the mayor of Ottawa.


James Joseph McCann: Mr. Speaker, I shall refer
the matter to the C.B.C. and when I get a report from them I will announce it in the house.



PIPE LINES


[Stage Direction]
On the orders of the day:
Mr. H. R. Argue (Assiniboia):: Mr. Speaker, I should like to direct a question to the Minister of Trade and Commerce. Can the minister say whether Trans-Canada Pipe
Lines Limited has control of sufficient steel at this time to ensure completion of the western section of the pipe lines, or would a prolonged strike in the United States make it impossible to complete the line?


Right Hon. C. D. Howe (Minister of Trade and Commerce):: Mr. Speaker, I will admit that my hon. friend in his efforts to stop the building of the pipe line has had an assist from the steel strike in the United States; nevertheless, unless it is a very prolonged strike, I think the line will still be built.



SHIPPING


[Stage Direction]
On the orders of the day:
Mr. F. G. J. Hahn (New Westminster):: Mr. Speaker, I should like to direct a question to the Minister of Transport, notice of which I communicated to him earlier this day. Would the minister consider amending the regulations respecting the navigation of minor waters so that some measure of control could be maintained over freighters and tugs which do not observe the proper speed limit, and thereby do much damage to fishing boats and their floats?


Hon. George C. Marler (Minister of Transport):: Mr. Speaker, the hon. member was good enough to give me notice of his intention to ask this question, but I have not had sufficient opportunity since his call earlier this morning to make the inquiries necessary for me to form an opinion as to whether or not it is desirable to make any change.


EXTERNAL AFFAIRS
[Stage Direction]
On the orders of the day:
Hon. George A. Drew (Leader of the Opposition):: Mr. Speaker, I should like to direct a question to the Acting Prime Minister. Is the right hon. Minister of Trade and Commerce in position to make a statement about a report carried by the United Press that Canada has clamped down on the delivery of jet planes to Israel, and that this is causing a great deal of concern in view of the delivery of Russian planes and weapons to Egypt?

Inquiries of the Ministry


Clarence Decatur Howe: Mr. Speaker, there has been no change in Canada's policy with reference to shipping airplanes to Israel. The matter has been under consideration for some time; it is still under consideration, and until a decision is arrived at the situation will remain unchanged.



CITIZENSHIP AND IMMIGRATION


[Stage Direction]
On the orders of the day:
Mr. A. B. Patterson (Fraser Valley):: Mr. Speaker, I should like to direct a question to the Minister of Citizenship and Immigration. Could the minister advise the house what decision has been reached relative to the request made by the municipalities that the Indian affairs branch co-operate in the program of mosquito control in the Fraser valley?


Hon. J. W. Pickersgill (Minister of Citizenship and Immigration):: Mr. Speaker, the hon. member for Burnaby-Richmond (Mr. Goode) and Senator Reid have made urgent and pressing representations to me on this subject and I hope a decision will be reached in the near future.



POST OFFICE ACT


[Stage Direction]
The house resumed, from Monday, July 2, consideration of the motion of Mr. Pickersgill (for Mr. Lapointe) for the second reading of Bill No. 351, to amend the Post Office Act.
Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, I have read the remarks of the genial parliamentary assistant and others who spoke last night in this debate, and I find that I misheard one or two of them. There is no necessity for me to take up the time of the house in continuing the debate now. I shall have certain questions to ask when we get into committee.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Robinson (Simcoe East) in the chair.
On clause 1-Transfer of contract.
Mr. Diefenbaker:: Mr. Chairman, I should like to ask the minister one or two questions in connection with this matter, particularly in view of the fact that he has stated that this amendment merely legalizes what has been done over a period of years. I should like to ask him how many cases there have been during the last five years, year by year,


where transfers have been made from the holders of contracts during the period of the contracts, in each case what was the remuneration given or provided for under the tender; and was there any increase in the amount paid in respect of the contract in consequence of the assignment, transfer or substitution of another person in the place of the original tenderer? If the (parliamentary assistant could give that information it would pretty well cover the situation.


Mr. Kirk (Shelburne-Yarmoulh-Clare):: Mr. Chairman, I have not the figures for the five-year period, but foi the year ending September 30, 1954, there were 303 transfers made of contracts under $1,000 and 162 of contracts over $1,000. In no case was there any increase in the price. That is one of the conditions of the amendment.


Frederick George Hahn: I have learned that the minister has received from time to time certain requests respecting an extension of letter boxes in certain towns from which rural routes emanate. I was wondering whether or not any consideration has been given to the thought that in such areas and towns where we have a number of rural routes operating from a central office and they have no letter carrier system, letter carrier boxes be placed in those towns and it be embodied in the contract that it include the picking up of letters from those boxes to be taken to the central post office for delivery.


Mr. Lapointe:: If I understood properly the question of the hon. member for New Westminster, I think he refers to letter boxes for the receipt of letters being mailed. Is that correct?


Frederick George Hahn: Yes.


Hugues Lapointe: Generally speaking the
policy is that the letter boxes are installed in areas where there is a letter carrier service, and they are not installed where there is no letter carrier service and where people go to the post office anyway. There are exceptions to these rules when the exigencies of the service, if I may use that expression, make it justifiable. As a rule, a rural mail contractor who does the delivery to the rural mail boxes on that route will usually have included as part of his contract the picking up of the mail in that letter box. Of course if in so doing he increases the length of his route, he should be compensated accordingly.


Frederick George Hahn: The question resolves itself in this way, however, in so far as certain of these towns from which rural routes emanate are concerned. Some of them are quite large, but they are not large enough for a letter carrier system. The suggestion is made that

the outlying districts might have letter receiving boxes, so that when the rural route carrier comes by, he merely stops, picks up the mail and takes it to the post office, thereby saving citizens a long walk from the outskirts of the town into the post office for that particular purpose.


Hugues Lapointe: I know that is done in some areas. As applications are made at various localities, they are studied in order to find out whether such a service can be given without increasing the cost of the contract or the length of the route the contractor would have to cover.


Herbert Wilfred Herridge: This slight amendment simply requests something that apparently the department has been practising for years, and I have noticed it being done; but I have noticed also on one or two occasions that a contract was transferred to someone who, in the opinion of the people in the district, was not nearly as capable or as responsible as the original contractor.
My question is this. What does the department do to make certain that a person to whom a contract is transferred has satisfactory equipment, has the capacity and the ability, and has the same bonding as the original contractor?
In addition, in order to avoid the minister having to rise twice, I am going to ask another question. Do the inspectors emphasize what is the responsibility of a person who signs a bond for one of these contractors?
I remember speaking to an aged clergyman in my district once when there was some possibility of the contractor failing in his obligation, and when he realized what he might be responsible for he nearly had a heart attack. He did not understand what he had signed. I think something should be done to inform the person who signs a bond what are his responsibilities.


Mr. Kirk (Shelburne-Yarmouth-Clare):: The
departmental officials study the case of the individual to whom the contract may be transferred just as carefully as they do the case of the original contractor. It is up to the departmental officials to be satisfied that he is capable and can supply the necessary equipment, the bondsman and so on.


Herbert Wilfred Herridge: That process is all gone through again?


Thomas Andrew Murray Kirk: Yes. As far as the bond is concerned, I do not know about your friend the aged clergyman, but I would hate to think he would sign a bond without having read it very carefully. Attached to each contract is a bond, of which I have a copy here, and I think he can tell
Post Office Act
from this that he is responsible for operating the route should the original contractor default in any way.


Herbert Wilfred Herridge: I think the department has run into several cases of that sort where people have signed these bonds. I believe something should be done to draw to the attention of the person who signs the bond what they are responsible for and not just leave it to them to read the fine print in the contract.


Mr. Montgomery:: I should like to ask a question or two. Does this clause apply to any contracts other than rural carrier contracts and, if so, what other contracts?


Thomas Andrew Murray Kirk: This section applies to any contract. It says:
The Postmaster General may . . . substitute another person for the contractor under any contract for the conveyance of mail . . .
That would include rural routes, suburban services, side services, stage services, city services and so on; any contract for the conveyance of mail.


Gage Workman Montgomery: I was looking at this from the standpoint of the rural carriers. What is the average cost of calling for tenders where you have to post notices for three weeks, when a contract runs out?


Thomas Andrew Murray Kirk: At
the moment I do not know what is the actual cost of the calling of the tenders, but I certainly could find that out and let the hon. member know. However, I can say that the cost of the contracts that were transferred during the last year that we transferred contracts was considerably less than the amounts we were receiving in the form of tenders that were called for the new contracts.


Gage Workman Montgomery: In transferring a contract from one rural mail route contractor to another contractor when the term of the contract runs out, has it been the practice of the department to make the arrangements without calling for tenders?


Thomas Andrew Murray Kirk: No
When a contract is transferred it is transferred because in some cases the original contractor has died and his estate wishes to have it transferred to the son or widow, or in other cases because the contractor may have moved from the village or may have sold his store or farm; but when the four-year term has expired and the contract runs out, tenders are then called.


Gage Workman Montgomery: That is the point. It looks to me as though the last two lines of the section permit a change in that principle. If the minister or the parliamentary assistant

Post Office Act
can assure the house that there is no intention under this bill to renew a contract with the party with which the arrangement has been made without calling tenders, then I would be quite happy with it.


James Ralph Kirk: am sorry; I must have misunderstood the first part of your question. The latter part of this amendment says:
. . and the provisions of this act apply to the person so substituted as though he were the original contractor.
You will remember that when you were speaking last night you said that the system we have been following for some time had been very satisfactory and you hated to see it changed. You may not have used those exact words but I believe that was the gist of your comments. As reported at page 5594 of Hansard you said this:
-which has otherwise been a good one, namely the tender system, subject to renewal for the remainder of the term of the contract.
What we are really asking for is this. We are asking through this amendment to be permitted to carry on what has been done ever since confederation. The amendment is being introduced as I mentioned last night, owing to some question having arisen in the mind of one of the legal experts in the Department of Justice, who questioned whether the act was worded in such a way that we did have permission to do that, even though in the contract which every contractor signs there is section 27, which says:
The said contractor shall not have it in his power to transfer his interest in this contract without the special written sanction of the Postmaster General.


Gage Workman Montgomery: That fairly well answers the question, except that to my mind this act leaves it open, under section 31. That will be new. I presume that now you are going to introduce an amendment, you will make the present section 31 subsection 1 and this amendment will be subsection 2. So we will say under subsection 1 of section 31 as it is now the department may renew a contract without calling for tenders if they consider it in the interests of the service, and the service provided has been satisfactory.
When this bill is passed do you consider that you will have the power to do that? We will say that A gives up a contract; he dies or he moves away and you arrange that the contract is taken over by B. B carries it on for the remainder of the term, whether it is two years, three years or whatever it may be. At the end of the term of that contract do you feel that, under this act, you will be able to renew that contract under section 31 as it now stands, without calling

for tenders? I think you can. If so, and if the department has that in mind, I should like to ask the minister to consider an amendment.


James Ralph Kirk: The
transferee has exactly the same rights as the original contractor.


Mr. Johnston (Bow River):: As far as I am
personally concerned, I should like to say that I do not like this amendment. It seems to me that it leaves it open to something; I was going to use the word "skulduggery" but I suppose that "indiscretion" would be the better word. It appears to me that when a person has a contract and then, for some reason or another, decides to forgo that contract and so advises the department and makes a recommendation, the department may or may not act upon that recommendation. But at the end of that four-year period when tenders would ordinarily be called, this puts the others in that community who desire to tender on that contract in an extremely embarrassing position.
It is embarrassing to this extent. They are at a great disadvantage to start with because this other fellow already has the advantage of having concluded that former contract. It goes almost without saying that when tenders are finally called, the government would favour the one who had the contract. In that sense it does not leave itself open to a free and competitive form of tender. When the department receive these new tenders they look them over, but they do not necessarily have to take the lowest tender. They look them over and say, "Well, now, this fellow has been carrying on for the last four years under the original contract, and we see no reason why he should not be given the new contract". People who are tendering under those conditions are at a very decided disadvantage.
I cannot see, either, why the department should not call for tenders when the original contractor decides to terminate his contract. There is no great expense attached to it. It is a routine procedure with the department, and surely it would take no time and practically no expense to call for tenders again. This would leave it open to everybody, and everybody would have an equal opportunity. I say again that the man who is recommended by the original contractor has a decided advantage over all the other tenderers when the four-year period is up and tenders are called again. The very fact he has given some service may lead the department to say, "Well, his services have been satisfactory and we do not know anything about this other fellow, so we will let him carry on for another four years."

I do not think that should be permitted. It seems to me the department itself should be very eager to get out of that position where doubt is cast upon the department in this regard. I think they should call for tenders and give everybody an equal and fair opportunity to offer their services and have no embarrassment attached to it.


Mr. Knight:: On the same point exactly, Mr. Chairman, it has occurred to me to ask if under this act there could be collusion between the former contractor and someone to whom he desired to give that contract. I mean, almost at the expiry of the old contract the original contractor could make an arrangement with his friend, and so long as that person was satisfactory to the department he would be allowed to carry on. It seems to me if tenders were called it would avoid a great deal of the criticism of the hon. member who has just spoken.


Thomas Andrew Murray Kirk: the original contractor requests a transfer, and if the transfer is made it is only made if the departmental officials who have checked on the matter feel he is capable of carrying on and giving good service. Then if at the end of the contract period he is giving good service and there are no undue complaints in the area, it is automatically renewed.
So far as the part about calling for tenders is concerned, I may say that the contract is always awarded to the lowest tenderer, except in a rare case when on checking the department finds he is not capable of carrying out the contract. I know of a case that happened in my own riding. A gentleman tendered for the contract and said he could carry it out. He said he had a car, but the departmental officials found that while he had a car, unfortunately it was minus wheels, a starter and a generator. He had no credit with which to get a car and he could not get any bondsmen. He did submit a tender.


Charles Edward Johnston: Is it a fact that the department always accepts the lowest bid? I do not think that is so, because there may be a situation where a man puts in a bid when he knows he is not going to make very much out of the mail contract. It may be that he has another business and he may say, "Well, I will have enough people coming to my store that it will more than offset any loss I have on the delivery of mail." In that case his bid may be very low. I do not thinfr it is always the practice of the department to accept the lowest bid.
Then there is another case. Suppose the original contractor recommends someone who is not satisfactory to the minister or to the department, then tenders would have to be
Post Office Act
called. Why does the department not call for tenders in the first place? I would think there would be many instances where that would occur. I do not think the department is going to save itself much trouble, and I can see where this would lead to a lot of dissatisfaction and questionable practices. I do not think it should be allowed to continue.


Thomas Andrew Murray Kirk: The
contract is awarded to the lowest tenderer if he is capable of performing the work; that always happens. I gave an extreme case that occurred in my constituency. If a man believes people will cut in he tenders low and the contract is awarded to him. As far as the system itself is concerned, as I mentioned two or three times this system has been in vogue since 1867, since confederation, and we have had a lot less trouble by using this method. Those of us who represent rural or partially rural constituencies realize it is very difficult to find people who are interested. Sometimes a local contractor has to give it up and through a personal friendship he is able to find someone to carry it on. Sometimes we call for tenders in these rural areas and we receive no tenders, and we have to call for tenders two or three times.
To return to your main point, the tender is awarded to the lowest tenderer.


Robert Ross (Roy) Knight: Is there any reason why the original contractor has anything to do with who his successor shall be, except that I think you stated that it saved trouble for the department? What is the idea of having the original contractor interested in his successor?


Thomas Andrew Murray Kirk: I
think a brief answer to that, Mr. Chairman, is that very frequently the original contractor may have served for some years; he has equipment and he knows the route and sometimes through a personal friendship he is able to make an arrangement and transfer his equipment to someone who is willing to carry on.


Robert Ross (Roy) Knight: From what you state I gather it is virtually a family contract which would exclude others.


Mr. Jones:: Does the original contractor
contact the department before making the transfer, or does he just quit the job and say that he is leaving. What obligation does he have toward the department, if any? He has to make application to the department for the transfer and I think he makes his recommendation. What does the excuse have to be; sickness or bankruptcy or just his whim to give it up? Has he any responsibility?

Post Office Act


James Ralph Kirk: In
the vast majority of cases the contractor has died and his route is transferred to the widow. Most of the cases are like that. There are also cases where the man sells his farm or business and wants to move away, or perhaps for some other reason. There are very few cases where the man wants to give it up because of some whim.


Mr. Hodgson:: Mr. Chairman, these mail carriers become more than mere mail carriers, they become part of the community and do a great many favours for people other than just carrying the mail. In the case of a person moving away or quitting his job or dying and a new man taking over, I think that should be by contract and the lowest tenderer should get it providing his qualifications are all right. I have known some cases where in advertising for a mail carrier, the qualifications were probably equal and the prices came within $10 to $15 of each other, whoever handled the patronage for the Liberal government in the area got the job.


An hon. Member:: And it should have been a Conservative.


Clayton Wesley Hodgson: As far as contracts are concerned, if a man is doing his job satisfactorily I do not think the job should be put up for tender when the four-year term is up. That man should have a renewal without any tender whatsoever until such time as he wants to quit himself or until he is too old to carry on. Putting these things up for tender every four years creates a lot of ill feeling within the area, and frequently you get a carrier who is not as good as the previous one. This keeps it within the patronage system, when you renew the contract of a man who is capable and doing the job well.
In my riding last year there was one mail carrier's route put up for tender for no reason at all. He had a petition signed by every box holder on the route, which was sent to the department, but despite this his job went up for tender and was given to another man for the sake of $10. Probably the other man knew how much to tender less than the other fellow; I don't know about that. I think the more you get away from contracted jobs the better it will be for the mail service, the post office department and everyone concerned; but in the case of a new man coming on or a new route being established, then it should be handled by tender.


Gage Workman Montgomery: Mr. Chairman, the point involved here is, I think, a point of principle. I object to the last two lines of the bill because I am satisfied, as the hon. member

for Victoria (Ont.) has said, that some person can get a mail contract who has never tendered.
I am quite in sympathy with the department making arrangements to carry on for the remainder of a term; I think that is good business. As I said last night, I think it is good business to retain the tender system because it has worked very well; but under these two lines in this bill you are inserting the thin edge of the wedge whereby the tender system may disappear.
This is designed to make legal what the department has been doing in the past. As I understand it, the department had not been going beyond making arrangements for the remainder of a contract term. I would be quite willing to have that done; but when that term runs out then I think tenders should be called for that particular contract, because a new person is entering the field and I do not think it is in the interests of the public to handle it in any other way. I think it is putting too much responsibility on the district superintendent or whoever looks after this.
I believe there would be far less fault found if you were to open it to tenders and give the people a chance. As I understand it, it does not cost very much to call for tenders. If we cut out the last two lines of this bill I think the department will have succeeded in accomplishing under this bill what they desire. In other words they will be legalizing the things they have been doing, which I am quite in favour of them doing.
This bill goes further than that. This bill is going to interfere with the principle of permitting a new carrier to get his job under the old tender system. It permits me or someone else to take over from some other person, keep the job for a few months under an arrangement with the department, and have that contract continued from four years to twenty years, with a raise in pay every period under section 33 as amended in 1953, and keep it to myself as long as I render good service.
That may work all right, but we are taking away from the people the right to have a chance to get that job, and I do not agree with that. I am going to suggest, therefore, that the minister consider an amendment, unless he is able to point out to me that the last two lines are important. I move:
That clause 1 of Bill No. 351 be amended by striking out all the words after the word "agree" in line eleven, and in lieu thereof add the following:
"but such substitution shall be only for the remainder of the term of the contract."


Owen Lewis Jones: In view of the answer given by the parliamentary assistant just now, i1

seems to me that where one of these cases arises through the death of the contractor, provision should be made in the bill to take care of such a situation. The clause reads in part:
-that no additional expenditure is involved, substitute another person for the contractor for the conveyance of mail, if the contractor and the person to be so substituted agree.
If one of the parties is dead how can he agree? I think that is where the trouble would start.


Hugues Lapointe: The answer is that it is usually some member of the family of the deceased who is ready to take over.


Owen Lewis Jones: It does not say so.


Hugues Lapointe: That is done in order that the contract may remain within the estate. There is generally a member of the family who is willing to take over the contract.


Owen Lewis Jones: That should be stated in the bill.


Hugues Lapointe: It is not necessary.


Charles Edward Johnston: * In my submission this is a bad bill, in that the government is now practically doing away altogether with the calling of tenders. In the case of almost any contract, if the original contractor does not wish to renew at the end of four years all he has to do within the last two months of the term of the contract is to say that he is going to give up the contract and is recommending so and so. That will be done in a great many cases and the government will not have to call tenders for any of these rural mail routes. The government is just leaving this thing wide open to patronage and everything else.
I think that is a terrible thing to have happen and I do not think this bill should be allowed to pass. The government will be put in the position of having to call tenders for only a few contracts, because in many cases within two months of the expiration of the contract, if the original contractor does not want to carry on he will simply recommend somebody else. No tenders will be called for the new contract, and the same thing can be done time after time. There will be no need for the department to call for tenders and we will be going back to the patronage system. I am not saying they will do that, but I do contend that this would add to that type of practice.


Hugues Lapointe: I think the answer to my hon. friend is to be found in the figures given by the parliamentary assistant in connection with transfers. The transfers in that one year represent only 3-6 per cent of all rural mail contracts; in other words, the change
Post Office Act
of contract from one person to another represents only 3-6 per cent of all contracts. I have no doubt that the hon. member is familiar with the manner in which these contractors do their work. I am sure he knows how these contractors handle their responsibilities, and he knows perfectly well that most of the contractors make this a personal job. They give most of their time to it. On reading Hansard I noticed that during the course of the debate one hon. member made reference to the long and reliable service which is given by some of these rural mail contractors. I think the same condition exists in all our rural communities, and those of us who represent rural communities are aware of that.
It may be that a contractor has been doing this work for many years and has rendered good service to the public. In many cases it is the contractor's only occupation. As was mentioned, in the case of the death of a contractor, in many cases the only people who are familiar with the work are the contractor's family, who very often have done the work for the contractor. By making this transfer a continuity of efficiency in the handling of rural mail is possible. There is nothing new in the practice which this amendment seeks to legalize. As was mentioned before, it has been done ever since confederation, and all we are doing is making sure that the act provides for the continuation of this practice.


John George Diefenbaker: What created the doubt in the legal interpretation of the section?


Hugues Lapointe: My understanding is that it arose following the revision of the Post Office Act in 1952. I believe the treasury suggested that those amendments did not provide for this.
At this point I should like to refer to the amendment moved by the hon. member for Victoria-Carleton. I regret to say that it is not possible for the government to accept this amendment. One point which should not be forgotten is that when such transfer is made, the department must make sure that the person who takes over the execution of the contract for the remainder of the period is bound by the Post Office Act in the same manner as the original contractor. In other words, he must be under the authority of the Postmaster General in the same manner as was the original contractor. That is done by the very lines which my friend wants to delete from the clause, which read:
-and the provisions of this act apply to the person so substituted as though he were the original contractor.

Post Office Act
If those words were deleted there would be no binding contract between the new contractor and the Postmaster General. There would be nothing which would bring the new contractor under the Post Office Act. That is the sole reason for those words being put in the clause. It is quite true, as the hon. member mentioned, that by putting the new person in the same position as the original contractor he is given the same rights, but if we delete those words we take away the authority of the Post Office Act over the new person.


John George Diefenbaker: Would the minister accept the amendment of the hon. member if it were added to the section rather than deleting all the words after "agreement"?


Hugues Lapointe: I do not think I would accept it. As I have said, the purpose of this amendment to this section is purely to enable us to continue legally what has been the practice and what has been found to be the most efficient way of proceeding with the transfer of these contracts. I did not quite get the wording suggested by the hon. member who has just spoken, but I think I know what he had in mind. In fact I could have thought of a wording which would have been simpler and would have effected the same thing he wants to accomplish, but it would not suit the purpose of the department at this time.


Mr. MacLean:: I agree that the objection taken to the amendment by the minister may be fairly valid for the reason he gave; nevertheless I do not see how the minister could have any objection to the purpose of the amendment if it were changed slightly to accommodate both the minister's point of view and that of the hon. member moving the amendment.
As I see it, if I interpret the bill correctly it means that a transferee who is asked to complete a contract and who, according to the last two lines of this bill, will be in the same position as the original contractor is, in fact, in a better position than the original contractor in some regards, because the original contractor, if he got the contract by being the lowest tenderer, ran a certain risk. He had to tender fairly low in order to get it or run the risk of not getting it if he made his tender a little higher.
The person substituting may be doing so at a time when the contract has been in force long enough to allow the minister to increase the rate of pay. It would appear, if I interpret this correctly, that there is a minimum time during which the service must be performed before an individual is eligible for an increase in pay. Before a contract is transferred the original contractor may

serve practically all of that required interval, and then somebody else substitutes and almost immediately becomes eligible for an increase in pay. If I am not right I should like to have it pointed out to me what in the act prevents that.


Hugues Lapointe: He has to wait two years.


John Angus MacLean: The minister, I believe, said he would have to wait two years. I read through the act rather quickly, I must admit, but I failed to see where that is so if, as it says here, the person who is substituting is in exactly the same position as though he were the original contractor.
Second, the minister said that this practice has applied recently to only 3 per cent of the contracts let. He gives that as an assurance that it would not become a general practice in the future. It would seem to me, if this practice was carried out in 3 per cent of the cases when, it turns out, it was not even legal, after we legalize it the practice may become more widespread. After all, if this bill is passed the rural mail carrier- I am thinking t>f him especially-is in the position that his contract becomes almost part of his estate, because as long as he gives satisfactory service it will be extended indefinitely.
I think that is a good policy if a man is giving satisfaction. But when he wants to give up his contract all he has to do is give it up short of the date of termination, and then he has the privilege of recommending a successor to himself. Then that successor in turn is in the same position as the original contractor. As long as he gives good service he can carry it on for the rest of his working life if he wants to. In that way the mail contracts can be handed on from generation to generation without ever being put up for tender.
It seems to me that while at the present time it may not be a practice that will apply generally, nevertheless we are making it legal for a practice to creep in whereby mail contracts are something to be inherited, not to be won by submitting the lowest tender.


Herbert Wilfred Herridge: I should like to ask the minister one more question. What will happen in this case? I know of an instance where a man took over a contract for a year or two from an original contractor. According to the usual practice in the past, tenders had been called because the term of the original contract had expired for that mail route, but a contract had not been awarded. What happens in a case like that, if this legislation goes through?


Hugues Lapointe: I am afraid I do not quite understand the hon. member's question. Tenders had been asked?


Herbert Wilfred Herridge: Tenders had been called but the contract has not been awarded.


Hugues Lapointe: Not awarded, for what reasons?


Herbert Wilfred Herridge: Not yet awarded.


Hugues Lapointe: I did not quite get the question.


Herbert Wilfred Herridge: Will the person who bid on that contract, who was the man who took over the original contract, automatically continue the contract when this passes?


Hugues Lapointe: Yes, he would continue while the process of calling for tenders and awarding a new contract was taking place. He would continue executing the contract, but if there were a lower tender than his, then the contract would be transferred to the lowest tenderer.


Mr. MacKenzie:: I have been very closely associated with rural mail problems for a number of years. I do not know how it works in other districts, but I am honest when I say that in western Ontario there has been no political activity of any kind in the Post Office Department.


An hon. Member:: You are lucky.


Hugh Alexander MacKenzie: I think that is pretty general. The hon. member said the contract should be tendered for every four years, or at least when the contractor resigns or wishes to leave his contract. I have been opposed to the tender system ever since I have had any interest in the rural mail carriers' problems. There is no other employee handling Her Majesty's mail that has to do this work by public tender. I think the public tender system is very vicious, and I believe the amendment that was made in 1953 did something to equalize the pay of the rural mail carriers and has done a good deal to restore some confidence and equity among the rural mail people themselves.
Under the 1953 amendment a tender can be called and an adjustment in pay can be made after two years, or only once during the life of the contract. That situation is not very equitable, because since the 1953 amendment a rural mail carrier who may only be a year or a year and a half from the expiration of the contract may apply for an increase in pay but he cannot have any further adjustment during that period, and he must renew before he can ask for another increase. Consequently he cannot ask for another increase
Post Office Act
for two more years. Therefore the situation at the present time is that it is possible for one person to get an increase in pay in a little over two years while another person would have to wait probably four years. Of course I appreciate that would be taken care of after everybody had renewed and all were in the same boat.
However, to come back to the tender system again, I think the quicker we get away from that system and adopt some other system the better it will be. I am not going to suggest for a minute that the matter should be left entirely in the hands of the Post Office Department and whatever government may be in power at the time, because a lot of political patronage could creep in under those conditions. Nevertheless I do think that the public tender system should be done away with at an early date. The awarding of contracts, rather than being done by public tender, could come under the civil service commission or some other body. Under the present system a person can apply by public tender and ask for an increase in two years' time, and it it quite possible that somebody who wanted to get a particular route could tender at much below the regular price accepted across the board and then ask for an increase in two years and under the present act have his pay increased by the officials to the average across the board.
I cannot see any danger in this amendment. As the Postmaster General has said, it is just making something legal that has been done for a long time. Finally, may I say that to my knowledge I am quite certain that in Ontario particularly there has not been any political patronage.


Mr. Michener:: As the last hon. member has said, the purpose of this clause is to make legal what has been done for a long time. The amendment is to assure that it does not make legal anything more than that. I think the minister is quite prepared to accept the amendment if it does not destroy the effect of the section, whereby the substituted contractor is put in the same legal position as the retiring contractor. I have an amendment which the hon. member who moved the original amendment might agree to have substituted, or which I shall move as an amendment to the amendment.


The Chairman:: Order. May I say to the hon. member that we have an amendment before the committee. Do I understand that the hon. member who moved the previous amendment is requesting that he be allowed to withdraw it?


Gage Workman Montgomery: Yes, I would be willing to do that.

Post Office Act


William Alfred Robinson: Has the hon. gentleman unanimous consent to withdraw the amendment?


Some hon. Members:: Agreed.
Amendment withdrawn.


Daniel Roland Michener: In place of the amendment which has been withdrawn I move, seconded by the hon. member for Victoria-Carleton (Mr. Montgomery):
That clause 1 of Bill 351 be amended by adding after the last word the following words: "until the expiration of the term of the contract."
The minister will appreciate that this leaves the section intact. It has the effect of putting the substituted contractor in the legal position of the retiring contractor during the unexpired term of the contract but does not carry it beyond that, as the section would if it were left as it is. If the minister is prepared to accept the amendment, I shall say no more. If not, I should like to say a few words.


Hugues Lapointe: I quite agree that the amendment as worded by the hon. member for St. Paul's would have the exact effect that the member who proposed the previous amendment wanted to achieve. In fact, when I was answering the remarks of the hon. member for Prince Albert I said I could have thought of an amendment which would have attained his end and would have been more simple. However, I regret to say that we cannot accept the amendment, and there is one reason I want to mention which has not been mentioned up to now.
It has been the experience of the department that in most cases the transferee, the new contractor, the person who is willing to take over the contract, will not accept the transfer of the contract and assume the obligations of the original contractor unless he is put in the position of having all the rights of the original contractor. He will not take over for a short period of only six months, eight months or even two years without having some assurance that if he performs his work satisfactorily he will have the same privileges as the original contractor. Therefore when such a situation arises the department has to enter into temporary arrangements. The officials of the department go into the locality and try to find someone who is willing to carry on for the balance of the contract.
It is all very nice to say that the sureties under the original contract are bound, but it may be that they are not in a position to carry out their obligation. There is quite a bit of difference between being able to enforce a contract in so far as the persons who signed as sureties are concerned and making sure that the people get good service which, after

all, is what we have in mind. Therefore we have to go about and make temporary arrangements, and it has been the experience over quite some years, I might say without exception, that these temporary arrangements are very costly to the department precisely because the person who is willing to enter into such arrangements knows that the duration will be very short. Therefore very often the balance of the contract will have to be executed at twice the cost of the original contract or what it would be if we simply transferred the contract as has been the practice in the past. We try to avoid these temporary arrangements as much as possible because of the high, uneconomic cost of such operations.


Daniel Roland Michener: In view of the minister's unwillingness to accept the amendment, and I thought from his earlier remarks that he would, I should like to say a word or two about this section. The minister has referred to 31 per cent of the contracts being transferred by this substitution method in the course of a year. As I understand it, these are four-year contracts, and if that is the case does that not mean that 12 per cent or more of the contracts in force are affected? In any event, it seems to me that if there is a diffidence on the part of some new contractor to come in and fill the unexpired term the proper course, if it is not worth while for the person to do that, is to call for a new contract in the usual way.
Let there be no mistake that the effect of this section, as has been said, is to make it unnecessary to call for tenders. A man can come into a mail delivery contract by substitution under this clause and at the end of the unexpired term his contract can be renewed just as though he had been the original contractor. He could go on then for a number of terms and serve in this capacity without ever having tendered.
This change would make it possible, if it were desired to do so, to bring about a situation in which a good proportion of the contractors in the country were serving without ever having tendered as required by the act. If it is desired to abolish the tender system, why not do it and amend that provision of the act? Let us not approach it through any back door. I think it is clear that this is a back door which could be used for the purpose of permitting a man to enter as a substitute first without having to tender, and then permitting the renewing of the contract without him having to tender, and that process could go on indefinitely.
On that account, as has been stated already, I object to this clause, as do many of us, and shall oppose it unless the amendment is put

in which keeps the tender system or brings it into effect when the unexpired term of the present contract is up for renewal.


Mr. Carter:: Mr. Chairman, I should like to say a few words in support of what the minister has just said. I presume hon. members who have spoken are thinking in terms of the situations that arise on the mainland where the mail contractor carries the mail from the train to the post office; in other words, he brings the mail from the post office to the train, takes the incoming mail and brings it back. I do not know how lucrative these jobs are on the mainland and how much competition there is for them, but I can assure hon. members that in my province they are not very lucrative and that it is extremely difficult to get people to take them at all.
In Newfoundland, of course, we have an entirely different situation because most of our people live in communities scattered around the coast line, and the mail is brought by a coastal boat. You therefore have three kinds of contractors. You have one contractor who meets the ship at the wharf at the port of call and carries the mail from the wharf to the post office. He had previously brought the mail down to the wharf when the steamer entered the harbour. He picks up the incoming mail and carries it back.
That is one type. Then you have another situation where a carrier brings the mail from one settlement to the port of call. That is an extremely difficult situation. If the port of call, for instance, is A and the community is B which is, say, 10 miles away, the courier in community B very often has no idea at all when the coastal ship will arrive at the port of call A. He must take the mail there in time to catch the ship. That very often means that he must go several hours ahead of time, because after six o'clock the telegraph offices are closed, and he does not know whether or not that ship is going to come during the night. Hence he is obliged to take the mail there. The situation may develop that he is obliged to stay there all night. He may decide after twelve o'clock that the ship in not coming and, instead of paying his board and lodging there, go back to his own community B.
That means that the next day, weather permitting, he must come back again and pick up the mail the ship has landed after the ship is in. Hence it is an expensive proposition because it means that the courier, who is a fisherman, must lose a day's fishing sometimes. It means that he may get stormbound while at the port of call and be obliged to pay board and lodging overnight. It means 67509-356
Post Office Act
all sorts of expenses that are not considered at all when these contracts are drawn up.
Then you have the third situation in which the mail is landed at a certain central port of call and you have a contractor who carries that mail around a circuit, calling at five or six different communities, probably travelling a distance of 40 or 50 miles. That is the most difficult situation of all because it involves all sorts of expenses, maintenance and vagaries of wind and weather which it is almost impossible to take into account at all, with the result that people who undertake these contracts soon find that they are losing money and they get out of them as quickly as they can.
I have had some cases in which we have not been able to get a postal service at all because we have not been able to find anybody who would carry the mail for what the post office considered a proper rate or a remunerative rate, considering the revenue which the service would yield.
As I said, some hon. members have expressed fear of patronage, but from my own experience I see very few opportunities for patronage in my province. The way the thing works there is that when a service is under contract, the regional supervisor or one of the local officials is the man who is obliged to search around and find out from the postmaster or some other people in the community who is willing to perform the service and for what price; and he is obliged to do a great deal of searching. When he has found somebody who is competent, with the necessary equipment such as a boat and so on- there is probably only one; there is probably nobody else interested-then he advises the authorities here in Ottawa who in turn advise the minister, and a contract is drawn up on that basis.
Very often the service is postponed and the contract is turned down because they cannot get a contractor to do the job for what the department is prepared to pay. In actual practice in my province I would say there is hardly any possibility of patronage. It is so difficult to get people to perform this service that if this amendment were carried, it would make the situation even worse and would cause hardship, particularly in my own riding.
(Translation):


Mr. Dufresne:: Mr. Chairman, the bill now introduced by the Postmaster General is, I feel, quite dangerous.
In explaining the matter a while ago, the minister gave an example where, on the death of a rural mail carrier, this measure would allow the department to let the contract or

Post Office Act
the unexpired portion of the contract to anyone it chose. The minister pointed out, for instance, that the members of the deceased contractor's family could very well carry on with the work since they were already in possession of the necessary equipment.
Still, Mr. Chairman, it seems to me that the contract being no longer valid from the time of the demise of the contract holder, the minister should call for new tenders. It could be possible, in this way, to bring about substantial savings. It is possible that some people would submit lower tenders. In the method we are asked to approve today, there is some danger that attempts be made to use political influence, which would be bad for the department and those who intend to tender.
Let us suppose, for instance, that someone signs a contract and dies the next day, It seems to me that the contract should automatically become void and that new tenders should be called so that those who had tendered on the original contract and whose tender had not been accepted could tender again. It seems to me that the department would save money by calling new tenders. If contracts are awarded for a period of four years, I think it would be very important that new tenders be called.
I am afraid that the minister's refusal to accept the amendment submitted by the hon. member for St. Paul's (Mr. Michener) implies that the department has in mind some purpose about which the house cannot obtain any information. I do not want to suggest that the minister is harbouring some ulterior motive, but I believe that several members realize the danger which would attend the practice now contemplated, and we want to warn the department against this bill.


Hugues Lapointe: Mr. Chairman, to answer
briefly the hon. member for Quebec West (Mr. Dufresne), I would point out and repeat that we are not introducing a new practice; we are only putting into the act what has been the practice followed by all governments since confederation.


J.-Wilfrid Dufresne: It is admittedly dangerous.


Hugues Lapointe: That it has been dangerous -I never heard the hon. member for Quebec West or his colleagues on the other side of the house complain about it so far. However, it must be realized that it is very hard to establish a general rule and to have it

applied with equity to all cases because, as was pointed out by one of the hon. members from Newfoundland who spoke before my hon. friend, conditions vary in various parts of the country, in various ridings of the same province. While it is quite possible that in some places a swarm of interested tenderers answer every call for tenders for a new contract, in some other places it is quite impossible to find any tenderer at all. As a matter of fact, I know some cases in my own riding where for three years the department called for tenders and was compelled every time to make temporary arrangements because nobody was interested in this particular contract.
Now, another factor to be considered when the hon. member refers to the saving of money is that, according to the experience of the department for the past few years, every time we have called for new tenders, the contract has been awarded at a higher price than that paid to the former contractor. Moreover, as I pointed out just now, in answer to the remarks of the hon. member for St. Paul's, when temporary arrangements have to be made for a limited period, the cost is often doubled, because nobody wants to accept a temporary contract with the department, and to get the necessary material and equipment without being sure of keeping this contract for a long enough period so that, far from saving any money, this procedure would increase operation costs.


J.-Wilfrid Dufresne: Would the hon. minister answer another question? For instance, as he was explaining just now, when a rural mail carrier dies and the department wants the contract taken over by some other person appointed by the Post Office Department, does the department award the contract to the new incumbent at exactly the same price as to the former contractor?


Hugues Lapointe: Yes, this is one of the conditions of the transfer; the new appointee must assume the discharge of the contract for the remaining period on exactly the same terms as those provided in the former contract.


J.-Wilfrid Dufresne: I am satisfied with these explanations.
(Text):


Daniel Roland Michener: I should like to ask the minister a question as to the application of this section. We have heard about the rural conditions, but I imagine from earlier answers that this section applies to some fairly sub-

stantial contracts in the cities. I am not just sure where the mainland begins, but I think perhaps Toronto is on the mainland. I understand that Prince Edward Island is not on the mainland, but wherever it may be what would be the annual value of the largest contract which could be dealt with under this substitution method? What would be the annual value of the largest contract for the conveyance of mail?


Hugues Lapointe: My understanding is that the largest firm contract for a definite period of time in an urban area is in Montreal, and that contract is for around $1 million. I have not the exact figures here.


Daniel Roland Michener: Is that per year?


Hugues Lapointe: Yes.


Daniel Roland Michener: Would it be possible for a contractor to hold more than one contract under the act?


Hugues Lapointe: Oh, yes, a contractor is not limited to tendering on only one contract. The fact that he has already executed a contract with the department does not prohibit him entering into a second contract.


Daniel Roland Michener: Then in effect, Mr. Chairman, as I understand the answer a contract for around $1 million a year which is held by A could be transferred to B, with the consent of A and the minister, without any calling for tenders and from there on could be held by B in perpetuity without B having tendered for it. It seems to me that illustrates the danger of instituting a system by which contractors may be allowed, particularly where large sums of money of as much as $1 million are involved, to transfer their contract to another person.
While I am on my feet I should like to record another weakness of the section. As I understand the minister, this section has been used where the contractor has died and it is desired to make some family arrangement by which his apparatus can be used to complete the contract for the unexpired term. As the section now reads the contractor who has died must agree before the substitution can be made.


Hugues Lapointe: Every contract ties down the estate of the contractor. He contracts for himself and for his heirs.


Daniel Roland Michener: I have looked in the act to see whether or not the definition of "contractor" includes his heirs and assigns but I see nothing to that effect.
67509-356J
Post Office Act


George Carlyle Marler: It is elementary, is it not?


Hugues Lapointe: It is in the contract itself. Briefly, that clause says that the Dominion of Canada enters into a contract with... hereinafter called the contractor, his heirs, executors and administrators of the one part.


Daniel Roland Michener: Mr. Chairman, with due respect to the interpretation the minister has given, this section should avoid breaking the law as it has been broken in the past and as I am afraid it will be broken in the future, because if this section is passed the law will be that the minister may substitute any person for the contractor under any contract for the conveyance of mail if the contractor and the person to be substituted agree. There is no mention of heirs, executors and administrators in the statute.


Hugues Lapointe: I am informed, Mr. Chairman, that the legal expert of the Department of Justice finds that the clause is sufficient to meet the point raised by the hon. member. Of course, as he knows, free legal advice is worth what you pay for it, but that is the only kind I can get.


Daniel Roland Michener: Mine is free too, Mr. Chairman.


Clayton Wesley Hodgson: Mr. Chairman, without the amendment this bill leaves wide open another avenue of the patronage system. That is, when a man dies or quits his contract the patronage man in that little area can say, "Well, John Brown is going to finish out his term," and at the end of the term, whenever the four-year term is up, it will not be advertised at all and the contract can be renewed to that same man.
The hon. member for Burin-Burgeo and the hon. member for Lambton-Kent said there was no patronage in their areas in the Post Office Department.


Hugh Alexander MacKenzie: That is right.


Clayton Wesley Hodgson: Do you know the reason for that? It is because you are a Liberal member. If you were a Conservative member in a riding you would very soon see that there is lots of patronage used.


Hugh Alexander MacKenzie: Don't be silly.


Clayton Wesley Hodgson: I am talking about my own riding, and I think I know my own riding better than the hon. member for Lambton-Kent.


Mr. Regier:: Mr. Chairman, last evening on second reading I attempted to be as reason-

Post Office Act
able as I possibly could in looking at the request. I endorsed it on the understanding that I now realize only I had, that this was to fulfil only the unexpired portion of a contract and that at the end of that time tenders would be called.
At this time I fail to see any reasonableness in the minister's unwillingness to accept the amendment, which would merely ensure that at least once in the lifetime of every one of these office holders he would have to submit himself to a public competition, to bids. I see nothing wrong with that. I do not think anyone should be permitted to inherit a job. We do not have that in ordinary employment and I do not think we should have it in this type of employment either.
Some hon. members have mentioned the difficulties involved in getting any mail carriers at all in certain areas. There may well be areas of Canada where mail carriers are underpaid and others where they may be overpaid; and to have the occasional, at least a once in a lifetime, tender for each of these positions might serve a very useful purpose. It might bring those that are paid too much into line and in those areas where they are unable to get anyone to volunteer to take the position it might serve as a useful tool to convince the hierarchy in the Post Office Department that a higher rate of remuneration is necessary in that area. I fail to see any reasonable argument that the minister has put forth for his refusal to accept this amendment, unless he is willing to abolish the whole idea of calling for tenders, in which case the method now in vogue would have to disappear anyway.
The minister spoke of the difficulties in making temporary arrangements. That is no argument at all, because acceptance of the amendment would not add one single temporary arrangement to the deal. If there was no one willing to take over for the unexpired portion the minister would have to call for tenders in any event, and there would be no such thing as a temporary arrangement any more than is the case now. I feel very keenly that tenders should be called for, not necessarily at the beginning of a man's service but at least within a reasonable time; and I think it should be, as the amendment proposes, at the end of the contract period.


Hugh Alexander MacKenzie: Mr. Chairman, I want to say this one additional word. It has been suggested by various speakers that if this amendment carried no public tenders would be called at all and it would be a matter of perpetuity. Of course it does not work out that way, because what they are asking

for has been in operation for many years and there have been a lot of public tenders called within the past few years, every year as a matter of fact. The main reason for that is that, in the rural districts particularly, carriers are underpaid and there are very few people who are willing to take over contracts on the present terms. Consequently there are many public tenders called.
I do not know if the minister has this information, but I wonder how many public tenders have been called for mail contracts, let us say within the last year?


Hugues Lapointe: I think the number of
tenders called was roughly 1,500 in the last year.


Hugh Alexander MacKenzie: Fifteen hundred in the last year?


Hugues Lapointe: Yes, roughly.


Mr. Hamilton (Notre Dame de Grace):: Mr. Chairman, on that point, the minister says approximately 1,500 tenders were called in the past year. Could he give us a breakdown as to how many of those were for new routes and how many were cases where a four-year contract had run out and tenders were being called again.


Hugues Lapointe: I am sorry but I do not have that figure. I have the number of tenders called for contracts but I do not know whether they were new routes or renewals or transfers for the unexpired portions of four-year periods. I do not have that breakdown, but I might be able to give it to the hon. member when we are discussing my estimates.


William McLean Hamilton: May
I point out this is most interesting. The parliamentary assistant took up from my remarks last night the fact that 162 contracts over $1,000 had been transferred in a 12-month period, and he read that into the record again today. The minister came down and had this all worked out to a decimal point, 3 [DOT] 6 per cent of the total number of contracts for that period, but he cannot tell us how many contracts expired at the end of a four-year period and were renewed by means of calling for tenders.
I will suggest right here and now, Mr. Chairman, that the minister probably is not anxious to bring that information into the house because if he did it would show that very few, if any, of these contracts are recalled for tender at the end of the four-year period, and that the department has been using this system of transferring contracts from one individual to another in order to pacify certain individuals in certain parts of the country and that is why they

are so anxious to hang on to it. I believe that is very obvious. If the minister were on top of his department, if he had any real intention of helping this house by having adequate information available for us when we wish to discuss a measure of this nature, he would have come here with a decent set of statistics.
We have asked only three or four questions relating to statistics in the course of the afternoon. What has happened? The minister says, "I think the biggest contract is one in Montreal for about $1 million." He did not know the answer to that. We asked him how many contracts were called for tenders in a given 12-month period and he replied, "I think there were about 1,500." He does not know the answer to that. We asked him how many of those were contracts for new routes and how many represented contracts which had expired and were being called for tenders again, and he does not even think about that nor attempt to answer it.
These are important matters in connection with an item of this kind, Mr. Chairman, and I suggest it is highly improper for a minister to come to this committee without complete information concerning the type of operation that is affected by a piece of legislation.
I am quite sincere in saying that. If a minister is going to come here and ask us to deal with legislation which affects himself and which has to do with the mail service of this country from one end to the other, I submit it is improper and unfair and unrealistic and unbusinesslike to ask us to do that on the high plane of a purely legalistic basis without any relation whatsoever to any facts. Every time we have asked for facts we have been given the answer "I do not know, but I think" or "I do not know at all." Having said that and just to sum-


Hugues Lapointe: By way of introduction?


William McLean Hamilton: No,
by way of introducing something which I feel should be brought to the attention of the minister and which I hope he will take to heart in an attempt to rectify this sort of practice in the future. When the estimates of the Post Office Department were before the estimates committee the departmental officials were present. We know from experience that they had all the facts available. You could ask those officials for the information you wanted and they were able to pop up with it. Each one came in with a stack of books. The minister is in exactly the same position today. He could have in front of him as many officials as he wished and they could have their books and records. Why he did not do it, I do not know.
Post Office Act
By way of conclusion rather than by way of introduction, it does seem to me that the minister has demonstrated clearly this afternoon that he will not accept any amendment to the bill before the committee that would cause tenders to be called for when letting these contracts. As I understand it, we have taken the position that in the event of inability for whatever reason of a man to carry on a rural mail contract, certain temporary problems are presented. We are in sympathy with those problems and we understand what those problems mean. We say to the minister that he can place that contract where he wishes for the duration of the contract, provided of course that it is not placed at a higher rate.
However, if it was proper that tenders should have been called for the original contract, then we submit that it is proper that tenders should be called when the contract passes to a new holder. We feel that the proper time for that is when the four years of the contract have run out and the contract comes up for consideration. The minister has refused to give any consideration to such a course of action. As someone has pointed out, he has refused to give any adequate reasons.
His first reason is that disruption occurs when the original contract holder cannot carry on. We are prepared to go along with the minister on that. But there would be no disruption two months, six months or two years after that had happened. There would be plenty of time in which to call for tenders.
The minister has said, "We are not prepared to do this. We want the privilege once a contract has been let of getting our hands on it if we possibly can and placing it with someone we designate." It might very well have been that in the initial stages of this debate we considered these contracts as minor and involving perhaps $3,000 or $5,000; but as was brought out by the hon. member for St. Paul's, we find now that in some cases these contracts are quite sizeable. There is only one place that I know of where the department is operating its own mail conveyance system, and that is in Windsor. That is being carried on on an experimental basis and I believe consideration is being given to installing an experimental system in Ottawa. But in major centres like Montreal, Quebec, Halifax, Toronto, Winnipeg, Vancouver, Calgary, Edmonton and right down the line we find contracts of $50,000, $100,000, $300,000 and even $1,000,000. Any of those contracts are capable of being transferred under this legislation.
We are offering an amendment which would bring these things out in the open and

Post Office Act
offer people a decent chance to tender. The government would then be doing its business in the way it should be done. Personally I think it is most regrettable that the government refuses flatly to follow a proper and legitimate course of action and attempts to hang on to the old system. It may be sanctified because it has been in operation since confederation, but it is not necessarily the sanctification of purity. Anything which will permit a $1,000,000 contract to lie around for the government to handle at its discretion is something to which this party is not going to agree.


Hugues Lapointe: Mr. Chairman, I think the hon. member for Notre Dame de Grace will admit that in putting forward his views in support of the amendment proposed by the hon. member for St. Paul's he may possibly have exaggerated. I think upon reading his own remarks the hon. member will find that he stated that the minister has refused to give information to the committee. That is a statement which the hon. member knows to be both untrue and unfair. If there is any hon. member who is in position to know what information has been available from the Post Office Department it is the hon. member for Notre Dame de Grace. The hon. member made more use of those facilities than any hon. member when the estimates of the Post Office Department were before the estimates committee, of which the hon. member was a member.
The hon. member will recall that I told the members of the committee that the officers of the department were there and that any information they wanted would be available and they could put any questions they wanted. I told the members of the committee that we would make everything as available as possible, and that whatever information was desired would be given. That was done. When the hon. member for Notre Dame de Grace accuses the minister of withholding information he is making a statement which is both unfair and untrue.
With regard to the propriety of the behaviour of the Postmaster General, I suggest that the hon. member for Notre Dame de Grace should be the last one to make a remark of that kind in this house.


William McLean Hamilton: In view of the minister's remarks would he tell us, first of all, the exact amount of the largest contract which has been let under this system; second, exactly how many contracts were called for tender in connection with this section in any 12-month period ending in the last year; and third, how many of those contracts represented new routes

and how many of those were contracts which had expired at the end of four years and were being recalled.


Hugues Lapointe: I repeat that I do not have all these detailed statistics.


An hon. Member:: You should have.


Hugues Lapointe: I wonder whether I might be permitted to speak.


An hon. Member:: I said, "You should have."


Hugues Lapointe: This is the kind of information that is asked for and is always given on estimates. I am not in a position to furnish detailed statistics about every operation of the Post Office Department, and I do not pretend to be able to do so. If I spent my time trying to secure these statistics I would not be doing the rest of the work of the department that I am called upon to do. These statistics are available and will be given to to the hon. member, but the hon. member has no right to say we are withholding information from him, and he knows it.


J.-Wilfrid Dufresne: Why not give it this afternoon? It is in connection with the bill.


Hugues Lapointe: For the simple reason that it is impossible to foresee, as far as I am concerned-and I plead guilty if I am not capable of doing so-what type of detailed information might be asked concerning the whole operation of a department. That is what the discussion on estimates is for; that is what the estimates committee sat for at the demand of the opposition, and that was what was done before the estimates committee. When my estimates come back before the house I shall have that information and I shall be pleased to give it.


Daniel Roland Michener: With respect to this section and its effect, I should like to ask the minister how many contracts in the Toronto area have been the subject of substitution under the practice which this section will approve, who are the contractors and what is the value of the contracts? If the minister has the information here, I shall be glad to have it; if not, I shall be glad to have it when it is available.


Hugues Lapointe: I shall endeavour to get the information.


Daniel Roland Michener: I should be glad if the minister would take the greater Toronto area and indicate what contracts have been subject to the practice which this section will authorize for the future.


Hugues Lapointe: I shall get the information but I venture to say that would be very

limited, because this applies mainly to rural mail contracts-not necessarily but, in effect, mainly.


John George Diefenbaker: I thought the minister gave me that information for one year. He must have it before him.


James Ralph Kirk: gave it for a one-year period for the contracts in all Canada, but I did not have it broken down by postal districts.


Robert Ross (Roy) Knight: I have a question which I asked the minister before but which he probably missed. He will not have to look up any statistics to answer this one. Is there any logical reason, except inconvenience to the department-I think that was the expression that he himself used-in a case requiring a substitution to be made for a contractor under an existing contract, why at the expiry of that contract tenders should not then be called for the further duration of such contract? What is the reason? Is there any reason outside of the inconvenience the minister has already mentioned?


Hugues Lapointe: I did add that in such a case temporary arrangements have to be made to ensure the continuity of the service, and that these are very costly. They are much more costly than the regular contracts, so that purely from the economic point of view it is not a good practice.
Second, very often we cannot find a person with whom to make these temporary arrangements. I wish hon. members would believe me when I make the statement that there are areas in this country where nobody is interested in getting these contracts and the department has great difficulty in finding people capable of giving the good service that we wish to maintain.


Robert Ross (Roy) Knight: I think the minister misunderstands me. I am assuming that the temporary arrangements have been made and have been in operation perhaps for a year or two. Then the date of expiry of the initial contract arrives. What is the logical reason why contracts should not be continued?


Hugues Lapointe: That is not a transfer but a temporary arrangement which has been made. Then at the expiration of that temporary arrangement tenders are called.


Gage Workman Montgomery: I did not quite get the minister's last answer. If it is as I thought it was, that is fine. Did I understand the minister to say that at the termination of a contract entered into by arrangement, tenders will be called?
Post Office Act


Hugues Lapointe: Yes, if it is a temporary arrangement. Here is the point. I think I can clear up what my hon. friend has in mind. If the contract is transferred


Gage Workman Montgomery: That is not temporary?


Hugues Lapointe: That is not a temporary arrangement. If the contractor ceases to execute his contract for one reason or another and there is no transfer, then we make a temporary arrangement with someone to ensure that, right from the date, the service continues, and that temporary arrangement may be for the balance of the contract or for a period of only one year if the contract had been in effect for only a short time. At the expiration of this temporary arrangement, tenders are asked.


Gage Workman Montgomery: The minister says it is expensive to enter into temporary arrangements. It is not an expensive arrangement to call for tenders. To call for tenders you have only to post a notice for three weeks. I presume that four or five weeks is the longest period between the time the contract comes up and tenders are opened or a contract awarded. I should like to know if I am wrong in that. I should like to have some idea of how long it takes.
Here is the point that seems objectionable. Let us say that Mr. A, who has a contract, has decided he is going to give up his contract. Invariably one of two things happens. Either he has his successor selected or he does not care who gets it. Supposing he has his successor selected, then the arrangements have been practically made between the two of them, and it has just to be either confirmed or disapproved by the department.
I should like to know who is going to decide in that triangle whether or not it is in the interests of the public to permit the second contractor, the man selected by the first contractor, to have that contract. It says here that the Postmaster General may do this, but I quite understand that the Postmaster General has to depend upon his advisers and he gets the best advice he can. I want to say right here that so far as my area is concerned better departmental officials could not have been selected. I have all the confidence in the world in them, but I believe that this very legislation is going to create a bigger problem for them than if the tender system were retained. I am satisfied of that.
Then there is another point. This is a country in which people should have a chance to tender on these things. If it is good business in the Department of Public Works or any other department to let contracts by tender, then it is good business in this department,


Hugues Lapointe: In the case mentioned he would be handled, to use my hon. friend's expression, in the same manner as the original contractor would have been had his service suddenly become unsatisfactory. The general practice is that the people in the community complain to the postal authorities in the district. An investigation is then made and if it is found that the man is not executing his contract according to its terms and is not giving proper service he may be reprimanded if the matter is not serious or if it is serious the Postmaster General has the authority to cancel the contract in the same manner as he would with the original contractor.


J.-Wilfrid Dufresne: And then call for tenders.


Hugues Lapointe: And then he would call for tenders.


Gage Workman Montgomery: The minister was asked to provide certain information and I understood he said he would give it to the members who had asked for it. I should like to have that information placed on Hansard if it can be done so that it will be available to everybody.


Hugues Lapointe: I will do that on the estimates.


Owen Lewis Jones: The information given us this afternoon has to my mind changed the whole

picture regarding the bill. We are now told that the contracts may be anything between $1,000 and $1 million. Obviously what applies to a $1,000 or $2,000 family contract or a small rural route would not apply to a $1 million contract. Therefore it seems to me that if the minister cannot accept the two or three excellent amendments suggested by the official opposition he should consider placing a limitation of $3,000 or $4,000 on the operations of this bill so that over and above that all contracts will automatically have to go to tender. I think there should be a limit if he will not accept the amendment suggested by the official opposition, and I ask the minister to consider placing such a limitation on the operation of the bill. In the meantime I suggest that we report progress and tackle the problem again after he has had time to think about the matter.


J.-Wilfrid Dufresne: There is one thing I think we should make clear. A few minutes ago the minister said that all information was available from the various officials of his department. I agree that whenever we ask for information from the officials we are bound to get it and do get it, but all the information asked for this afternoon by the hon. member for Notre Dame de Grace or even by the hon. member for St. Paul's is absolutely in connection with this bill. We are being asked this afternoon to adopt a bill when we have not got the information necessary to study the bill. All the information sought is in connection with the bill. The minister claims that we can get all this information and no doubt we can, but I ask the minister to postpone third reading of the bill until members of the opposition have the privilege of getting the information they require.


Mr. Barneti:: I And myself interested in the question raised by the hon. member for Okanagan Boundary. Like him I had thought in terms of the sort of contracts that arise from time to time in my own district. They are mostly quite small contracts and very often the conditions are such as other hon. members have been describing. The difficulty is to find somebody willing to take on the contract rather than the reverse being the case. But when large contracts in urban areas are involved it certainly puts a different light on the matter as far as I am concerned. I think that the minister should either agree to what the hon. member for Okanagan Boundary has suggested with respect to some limiting figure being placed on the application of this section or he should at least give some indication to the committee that the invariable practice of the department with regard to these large contracts has been and

will continue to be to call for tenders. Personally I am not familiar with the practice of the department in those circumstances, but as this matter has come up I for one would like to have some further explanation and discussion of this aspect of the question before the section carries.


Charles Edward Johnston: May I also say that having been informed of the tremendous amount of money involved in these contracts I am of the opinion that this information only adds further to what I said previously about this being a very poor practice. The minister says that all he is asking is that a practice which has been in operation since 1867 be legalized. In effect what he is asking us to do is to legalize a thoroughly bad practice, and I think that is evident to all members of the committee. When you consider that contracts ranging from $1,000 to $1 million are involved, then surely there should be no objection by the minister to calling for tenders. If it has been the practice of the department simply to let these contracts on recommendation, then that in my opinion throws an entirely different light on the situation and only magnifies the problem with which we are faced.
I agree with the suggestion made by the member for Okanagan Boundary. If the minister will not do anything else, surely he should put a limit on contracts let in the fashion which he says has been the practice ever since 1867. That is a long time for a thorough bad practice to be kept in force in this country, and certainly we should not be asked to legalize such a terribly bad practice.


Mr. Bell:: The minister put something on the record that I think should be cleared up. He suggested, and there is something in his suggestion, that the main reason he wished this amendment to be adopted in this form was that it was difficult to renegotiate contracts if they expired for various reasons towards the end of the four year term. In other words, if it were necessary to renegotiate in the last few months he might have difficulty in getting a new contractor to fill out the balance of the four year term if he could not promise him something more after the final expiry date. I suggest that the word "may" in the proposed new clause takes -care of that and that the only weak defence that has been made is not valid because if a contract did fall through in the final few months the minister could at that time, if he wished, renegotiate a completely new contract. I therefore think there has not been even one small defence made this afternoon for this clause.
Post Office Act


The Deputy Chairman:: Is the committee ready for the question on the amendment?


Mr. Green:: Mr. Chairman, may I suggest to the minister that, in all fairness, he should endeavour to obtain the answers to these questions which have been asked. I have been listening to them very carefully, and I think that all of them have to do with the subject dealt with in this bill. The minister has one of his officials before him. If that official does not have the information that is sought, the usual course would be for the minister to summon some other official who can give him those answers. I suggest to the minister that he should move that the committee rise, report progress and ask leave to sit again this day. By this evening he could have obtained the necessary information and then the difficulty will be overcome. But he really is putting the members on this side of the house who are dealing with this bill in an impossible position when he simply refuses to answer questions-


Hugues Lapointe: I did not refuse.


Howard Charles Green: -and says that they could have been asked in the estimates committee or that they can be asked when the estimates come up for discussion later on in the session. That is not the practice in this house, as the minister and all the rest of us very well know. Here we are dealing with a bill to amend the Post Office Act in one particular regard. It is an aspect of the Post Office Act in one particular regard. It is an aspect of the Post Office Act which has always aroused great interest. I have never yet failed to see a debate arise when rural mail was under discussion. There are many members in this house who are vitally interested. I urge upon the minister that he take time out now to get the answers to these questions. In the meantime let us get on with some of the other business that is before the house.


Some hon. Members:: Question.


Edward Turney Applewhaite: Is the committee ready for the question on the amendment?


William McLean Hamilton: Mr. Chairman, earlier this afternoon the minister took umbrage at my having remarked that he refused to answer certain questions. In the course of his subsequent remarks-and I took down his words-in stating that he was open, and wanted to give us this information and everything else, he then went ahead to say that he did not have some of this information and he said, "I do not intend to" give this information to the house. Those were the minister's words. Those five words are the key to the situation, when the minister said, "I do not intend to". Those remarks

Telegraphs Act
are on Hansard. I see the minister looks at me questioningly, Mr. Chairman.


Hugues Lapointe: Mr. Chairman, I certainly do not recall having said that I did not intend to give information to the house. The whole purpose of my remarks was just the opposite. I would be most surprised to find that I used those words.


William McLean Hamilton: Mr. Chairman, I would draw the minister's attention to the fact that he specifically used those words.


An hon. Member:: No.


Mr. Mcllraiih:: Put them in context.


William McLean Hamilton: The
minister left us very specifically with the feeling-


Hugues Lapointe: Mr. Chairman, may I move that the committee rise and report progress?


Edward Turney Applewhaite: And ask leave to sit again when?


Mr. Harris:: Later this day.


Edward Turney Applewhaite: Mr. Lapointe moves that the committee rise, report progress and ask leave to sit again later this day.


Some hon. Members:: Carried.


Edward Turney Applewhaite: Is it the pleasure of the committee to adopt the motion?


J.-Wilfrid Dufresne: Does that mean that the minister will give us the information we asked for this afternoon?


An hon. Member:: Sit down.


Edward Turney Applewhaite: I am sorry to intervene. The motion having been put, I am afraid it is not debatable. It is, of course, votable. Is it the pleasure of the committee to adopt the motion?


Some hon. Members:: Carried.


[Stage Direction]
Motion agreed to.
Progress reported.
The Acting Speaker (Mr. Applewhaite):: When shall the committee have leave to sit again? Later this day.



TELEGRAPHS ACT


George Carlyle Marler: the second reading of Bill No. 212, to amend the Telegraphs Act.
He said: Mr. Speaker, the purpose of the present bill, as is said in the explanatory note, is to provide for the control of submarine cables terminating in or passing through

Canadian territory, excluding, however, submarine cables wholly under fresh water. My remarks, Mr. Speaker, will bear only on those that are affected by the bill, although I fully understand that in ordinary parlance the word "cable" would have a very extensive meaning.
I think it would facilitate the discussion of this measure if I were to set forth the pertinent facts so that the purposes the government has in mind may be clearly understood.
The part of the Telegraphs Act which deals with what the act calls "marine electric telegraph companies" and which prescribes the formalities to be followed by a company that desires to construct a telegraph wire or cable to connect any province with any other province of Canada or to extend beyond the limits of any province, was originally enacted in 1875. Section II of the original enactment- 38 Victoria, chapter 26-provided that until (a) the company had submitted to the governor in council a plan and survey of the proposed site and location of the cable and its approaches at the shore and of its stations, offices and accommodations on land and of all the intended works thereto appertaining; and until (b) such plan, site and location had been approved by the governor in council; and until (c) such conditions as he thought fit for the public good to impose touching the said telegraph and works had been complied with, the company might not exercise any of the powers conferred upon it by the act.
Though more than 75 years have elapsed since the Telegraphs Act was first enacted by parliament, there has been no substantial change in the language of the section to which I have just referred, and consequently no change in the formalities that must be observed by a company which wishes to lay and operate a submarine cable. I think hon. members will agree that it does not often happen that an enactment remains unchanged in substance for such a long time. The fact that there has been no change in the formalities to be followed is, I believe, explained by the way in which improvements in the general field of communications have developed.
When the act was passed originally in 1875 a submarine cable had a very limited capacity. In fact, it seems that at that time a cable usually carried two simplex circuits, each capable of transmitting about 26 words per minute. As the years passed improvements were made in the quality of cable construction and it was found possible gradually to increase the capacity of cables, but I should like to point out that the increase was not extraordinary if judged by present-day standards. In fact, the ultimate appeared to have been reached in 1923 with the installation of what is called a nonloaded cable

which, with the adding of repeaters, carried six circuits with a total speed of 252 words per minute. This is equal to 42 words per minute per circuit.
I think I should add that the older cables also were improved by various means so that their capacity with two circuits is now about 84 words per minute. Loaded cables were first introduced across the Atlantic in the mid-1920's and they made it possible to increase the number of circuits in the cable and also the total speed of the cable to as much as 500 words per minute. I mention these facts in order to point out that despite the improvements which have been developed the capacity of a cable was such that, of itself, it imposed an economic limitation on the number of cables that might be laid and consequently upon the number of additional circuits that might be established to compete with those which had been previously laid.
A further limitation upon the laying of new cables resulted from the development of wireless telegraphy or radio. As hon. members know, improvements in this field of radio have made it possible, in a relatively recent period, to use radio both for the transmission of telegraph signals and also for telephone conversations. In fact, since the expansion of this form of communication began in earnest only two new trans-Atlantic cables have been laid.
About 1950 a new technique was adopted to increase cable capacity and in that year the first submerged repeater to be placed in operation on a trans-Atlantic cable was installed at a distance of about 170 miles from Newfoundland in a cable laid in 1881. There is no unanimity apparently among technical men as to the extent to which repeaters will increase the speed of a cable. Some believe they will double the speed and others that they will treble it. No doubt the rate of increase depends upon a number of factors such as the nature of the cable, the distance from the shore, the kind of repeater, and so on.
I regret that it has seemed necessary to deal with these somewhat technical matters which, at first sight, seem perhaps not to be entirely relevant to the bill in order to stress one point in particular, and that is through improvements, installed in the cable itself or elsewhere, the capacity of most if not all of the trans-Atlantic cables has been increased over that which they originally had when the formalities prescribed by the Telegraphs Act were accomplished and when the requested approval of the governor in council was given. In stressing this point, I express no criticism of 67509-357J
Telegraphs Act
the action of any company in increasing the capacity of one or more of its cables, because the Telegraphs Act does not seem to prohibit it from doing so.
However, I must admit some concern that as the act now stands, once the requested permission to land the cable has been granted its capacity may be changed, perhaps quite substantially, without either the knowledge or consent of the government. Perhaps if the change in the capacity of a cable were to remain within the range I have indicated there might not be cause for great concern or for legislative action. However, the progress of science has gone much further and the development of coaxial cables with built-in repeaters, and their use for trans-oceanic communication, have completely changed the whole situation.
Hon. members will appreciate the significance of this development from the fact that the new trans-Atlantic telephone cable which is now being laid between Newfoundland and Scotland, and which is expected to come into operation later this year, will have a capacity equal to about 40 times the capacity of all existing trans-Atlantic cables. In this project two cables are being laid, one in each direction, and the transmission of each of these cables is at present expected to have a capacity of at least 800 telegraph circuits at 60 words per minute each. I say that the new cable is at present expected to have a capacity of 800 telegraph circuits, but the estimated total number has increased over the original figure and it is possible that at a later date it may be increased further.
I would point out, Mr. Speaker, that in speaking of the capacity of the trans-Atlantic telephone cable, and expessing it in terms of the number of circuits as I have just done, I want to make it clear that its primary purpose is for telephone and not for telegraphic purposes. I have merely used the number of telegraph circuits in order to emphasize the word-carrying capacity, so to speak, of these modern coaxial cables in relation to those that have already been laid and are now in operation. But I think the most important point to be stressed in that connection is that the introduction of the coaxial cable with the built-in repeaters has completely revolutionized the whole picture of trans-oceanic communications. I hope that hon. members have appreciated the fact that this trans-Atlantic telephone project, in effect, involves the laying of two cables that have 40 times the capacity of all the other cables that are already in existence. I think that in those circumstances hon. members will appreciate the necessity of amending the Telegraphs Act in order to meet the situation.

Telegraphs Act
At first sight, it might appear as if section 22-


The Acting Speaker (Mr. Applewhaite):: Before the minister commences the second part of his speech, I might point out to hon. members that it is now five o'clock and the house will proceed to the consideration of private and public bills.


George Carlyle Marler: I have only two or three minutes more, and if I had consent perhaps I could finish my remarks.


Some hon. Members:: Agreed.


The Acting Speaker (Mr. Applewhaite):: With unanimous consent, the minister will continue.


George Carlyle Marler: Thank you. I was just saying that at first sight it may appear as if the provisions of section 22 of the Telegraphs Act give the governor in council all the authority that is required, and that by the simple expedient of either granting or withholding approval on plans, site and location of the cable, the government may permit or may prevent the laying of new cables. In fact, however, the matter cannot be resolved in such a simple way; first, because the problem does not always arise in a way that admits of a yes or no solution; and, second, because under the present act there is no continuing control or regulation of the actions of a company with regard to the cable itself.
I should like to emphasize that if one reads section 22 of the Telegraphs Act, it will be found that what is contemplated seems to refer to actions that must be taken and completed before the cable comes into operation. In a word, they do not appear to be of the continuing character that would prevail and continue after the landing permit has been granted and the cable comes into operation. The problem, moreover, is complicated by the fact that most of the trans-Atlantic cables that are landed at some point in Canada serve primarily for the transmission of messages between the United States and the continent of Europe, or for what may be called through traffic.
The cables comprise two segments, one from Europe to Canada and the other from Canada to the United States, but they do serve also, although to a much lesser extent, for the transmission of messages originating in or destined for Canada. This is a complication because in a given case there might be no objection whatever to granting permission for a cable to carry through traffic, while there might be very real and valid objections to the provisions of facilities additional to those already established to meet Canadian requirements. Or alternatively, it

might appear desirable to limit the number of circuits to be opened in Canada. The present act does not appear to contemplate the attaching to the landing permit of conditions of a continuing nature and therefore does not seem to provide for revocation of the landing permit if the conditions are not observed.
The government believes that by establishing a licensing system it will be in a better position to deal more flexibly with applications for permission to land cables, to control the opening of circuits into Canada, and to regulate increases in the capacity of cables; and the amendment before the house has been drafted with these objects in mind.
There is one further point I wish to mention and that is the routing of messages originating in Canada. I am sure that hon. members share the feeling I have that it would be desirable if this business were routed to the cable heads in Canada over facilities located in Canada and owned and operated by Canadians. This would have the obvious effect of giving Canadians the maximum benefits to be derived from the business which they themselves originated.
Of course, I appreciate, just as I am sure hon. members do, that it would not always be possible for this to be achieved and that sometimes there would be reasons, such as the interruption of communications, overloading of facilities or other circumstance which might make it desirable in order to avoid delay that the traffic be carried over facilities in the United States; but in a general sense I think that Canadian traffic ought to move to the cable head by means of Canadian facilities. I feel sure the various companies operating cable facilities share this view and that so far as this is not now being done they will co-operate in helping us to achieve this objective; but I think I should point out that the proposed licensing system would enable us to exercise some measure of control over the routing of traffic originating in Canada.
I trust that with these explanations the bill will commend itself to the members of this house. May I add that if the bill receives second reading I shall then move that it be referred to the standing committee on railways, canals and telegraph lines.



PRIVATE BILLS

[Stage Direction]
On the order:
Walter Edward Harris: Mr. Speaker, so far as I know it is not the intention that any of these bills shall be

called, although I speak subject to correction, and if that is so we might stand them all at one time.


The Acting Speaker (Mr. Applewhaile):: any hon. member of the house so desires, the public bills must be called one at a time but if there is unanimous consent we can revert to the business interrupted at five o'clock.


Some hon. Members:: Agreed.


The Acting Speaker (Mr. Applewhaite):: There being unanimous consent, the business reserved for private and public bills is considered as disposed of and the house will revert to the business interrupted at five o'clock.



TELEGRAPHS ACT


[Stage Direction]
The house resumed consideration of the motion of Mr. Marler for the second reading of Bill No. 212, to amend the Telegraphs Act.
Howard Charles Green: Mr. Speaker, in view of the fact that this bill is to go to the standing committee on railways, canals and telegraph lines there is no necessity to discuss it at any length at the present stage. I believe the minister is wise in referring it to that standing committee for several reasons. One is that there would appear to be some features about this activity which can be fully understood only after they have been explained by the experts and then I take it there may be some people who will be affected by this amendment who might wish to be heard before the committee and, of course, if the bill were dealt with in the house without being referred to the committee there would be no opportunity for such representations to be made.
We in the official opposition are curious about some aspects of this particular bill and while we are not opposing it at this stage we are reserving our right to do so in the event that the examination by the committee reveals the bill has features which in our opinion would justify opposition to it in the subsequent stages.
The minister opened his remarks today by pointing out that the Telegraphs Act has been in effect almost without amendment since 1875, a period of over 80 years. When he said that, it struck me as being rather strange that the bill having been so good originally and having been so good for over 80 years it should now be necessary to amend it and not by the usual type of amendment but merely by giving the government the power to license. In other words, here is another
Telegraphs Act
case in which we are establishing a licensing system to be fastened on the long suffering people of Canada. Apparently, judging from the minister's remarks, the main reason for taking this licensing power is to be able to limit the number of circuits. Evidently the government feels there are or may be too many cables and on that account there must be some power given to restrict them by licensing.
That would sound more reasonable if it were not for the fact the government itself is in the business in the shape of the Canadian Overseas Telecommunications Corporation, a crown company set up in 1949. It was set up at that time to take over external telecommunications but the minister of transport of that day on more than one occasion in the course of the discussion pointed out that it was not intended to give this crown company a monopoly. He may have been stretching his argument a bit but I find that at page 394 of Hansard for September 30, 1949, Mr. Chevrier had this to say:
It was asked whether the bill would create a monopoly. My reply is no, the bill will not create a monopoly.
And then he repeated that on the next page. The Leader of the Opposition (Mr. Drew) had been referring to the possibility of the crown company being given a monopoly and Mr. Chevrier replied:
In any event, whether it is or is not the case, the Anglo-American Cable Company and Commercial Cable Company are in direct competition with both Cable and Wireless, Limited and Canadian Marconi Company, Limited,...
The latter two companies were taken over by Canadian Overseas Telecommunications Corporation.
... so there is no danger of a monopoly. From what I understand, in the international field exclusive of the commonwealth field there are telecommunication services, both wireless and cable, that are quite strong and quite competitive in these services.
The minister was questioned further about that when the bill went before the committee in 1949, and at page 10 of the proceedings of the committee of November 8, 1949, we find this:
Some suggestion was made during the debate concerning monopoly. I will not go into that now because there are some technical officers here who will be able to do that. I do not think this nationalization will create a monopoly in any sense because there is a considerable amount of competition as it is now.


Mr. McLure:: May I ask the minister one
question?


Hon. Mr. Chevrier:: Yes.


Winfield Chester Scott McLure: Will this create a monopoly?


Lionel Chevrier: It will not, in so far as Canada is concerned.
We had that very definite statement by the minister in 1949. Even at that time there

Telegraphs Act
was some concern because there had been an agreement between various nations in the commonwealth with regard to telecommunications. In the very committee proceedings to which I have referred Mr. W. C. Connelly, superintendent of radio, Department of Transport, placed before the committee a memorandum relative to the subject under discussion. The memorandum points out that there had been an agreement reached between commonwealth countries for a reduction in the rates and that in that agreement the governments had agreed:
(a)	to maintain the policy of concentrating overseas telegraph traffic on the systems of Cable and Wireless Limited and its associates;
That was one of the companies taken over by the Canadian crown company.
(b)	to use their best endeavours to stop the circulation of traffic over foreign services using circuitous routes, and to resist the routing of traffic through foreign organizations not established in their respective territories where the Cable and Wireless Limited system has a suitable route which can carry the traffic;
I would point out the next two clauses.
(c)	to continue the policy of resisting the authorization or opening of new circuits which would be detrimental to Cable and Wireless Limited or its associates in the British empire;
(d)	to afford Cable and Wireless Limited and its associated companies overseas the opportunity of taking over on reasonable terms any external commercial wireless telegraph transmission services in the extra-European system at present operated by governments where or if such services compete with the companies' services;
That memorandum seems to be fairly clear as to the real objective in 1949 being to get a monopoly in external telecommunications services, and one wonders whether the amendment brought in today is not the next step to obtain that objective of a monopoly. There are other companies in the field which have been established for almost as long as the Telegraphs Act has been on the statute books of Canada and those companies are in a position to extend their services by way of additional circuits or to modernize their services. It may be that the real purpose of this bill is to force them out of business in Canada.
That brings up the question of whether the Canadian people are entitled to the benefits which would follow from fair competition, and I think that should receive the careful consideration of the standing committee. Any company operating under the Telegraphs Act is subject to drastic control, apart from the licensing control which the minister is now seeking to initiate. Such a company must obtain a charter from this parliament, and I believe they all have done so. Such a company must obtain a charter authorizing it to construct its cables.
IMr. Green.]
That control is set out in many sections of the act. The minister referred only to section 22. That section, in referring to any company coming under the Telegraphs Act, reads:
The company shall not exercise any of the powers by this part conferred until
(a)	the company has submitted to the governor In council, a plan and survey of the proposed site and location of such telegraph and its approaches at the shore, and of its stations, offices and accommodations on land and of all the intended works thereto appertaining,
(b)	such plan, site and location have been approved by the governor in council, and
(c)	such conditions as he thinks fit for the public good to impose touching the said telegraph and works, have been complied with.
That latter clause (c) gives the governor in council very wide powers. Section 24 provides:
(1)	Before commencing the construction of any such telegraph or work mentioned in section 23, or of any buoy or seamark connected therewith, the company shall deposit, at the Department of Transport, a plan thereof, for the approval of the minister.
(2)	In cases of emergency, for repairs to any work previously constructed or laid, the plan thereof shall be so deposited as speedily as may be after the commencement of the work.
Then section 25:
(1) The work shall not be constructed otherwise than in accordance with the plan as approved by the minister.
The section goes on to give the minister the power to remove the work if it has not been so constructed. Then section 26 provides for the use of lights and signals on ships used in connection with the work. Section 28 reads:
The minister may, at any time, at the expense of the company, cause to be made a survey and examination of any such work, buoy or sea-mark, or of the site thereof.
Section 29 gives the minister the right to recover any expense to which he is put by reason of checking the works of a company.
All these companies are also subject to control by the board of transport commissioners. As I read the act, the rates which they charge are subject to the approval of the board of transport commissioners. Section 31 reads:
(1) The company shall transmit all messages
(a)	in the order in which they are received or in such order as the board of transport commissioners for Canada may require or direct, and
(b)	at such rates as may be determined from time to time by the said board for the different classes of messages, or hours of the day or night during which such messages are transmitted, without discrimination within each class.
Section 32 provides:
The company may charge for the transmission of messages, and may demand and collect in advance such rates of payment therefor as are fixed by by-law of the company as its tariff rates and approved by the board of transport commissioners for Canada.

-giving the board of transport commissioners what appears to be full supervision of the activities of the company in the way of the charging of rates.
Now the minister proposes that there should in addition be a licensing control. He has given us no details of how that control is to be carried out. There is some suggestion that the crown company, Canadian Overseas Telecommunication Corporation, has a great deal to say in all these matters. Whilst, strictly speaking, the jurisdiction is given by statute to the Department of Transport, we hear rumours that the Department of Transport gets its advice from this crown company, which is certainly a competitor of the private companies.
We should be told in the committee whether the position is to be that the crown company is in effect to recommend the terms of the regulations and is to be the enforcing body. If that should come about, then we would have exactly the same position that has caused so much trouble in the radio field in Canada.
We should also be told in the committee whether this licensing control is to apply to existing companies already in the field or only to companies that enter it from now on. I take it from what the minister has said today that there is not much doubt that his intention is to cover all companies, no matter how long they have been in the business.
Does it also mean that all new outlets, all new circuits, are to be reserved to Canadian Overseas Telecommunication Corporation? That would have the result in the long run of putting the other companies out of business and creating a government monopoly. I believe that there is no such cable landing licence law in the United Kingdom and also that, whilst there is a law of that nature in the United States, it is not as far-reaching as the one now proposed by the minister. These details, too, we shall require in the committee.
I submit that we cannot be too careful in making changes at this time. On the surface they seem to be innocuous, but where we have had a business established for so many years and carried on in a satisfactory manner there should not be drastic changes made without very good reason, and in this particular case the fact that there is this crown corporation, with its officers no doubt anxious for more power and out to build their own empire, I think, makes it all the more necessary that we should be cautious before agreeing to make changes of this kind.


Thomas Speakman Barnett: I have been generally aware that some of the technological changes to which the minister referred in introducing this bill have been taking
Telegraphs Act
place. It just so happens that the main terminus for the Pacific cable is in my constituency, and I know, from conversations I have had, the results of some of those changes, as far as Banfield station is concerned. I also had the opportunity of seeing one or two of the installations in the province of Newfoundland when I paid a visit to that province. So I can readily appreciate that the time may very well have come when some changes to the existing legislation are necessary and desirable.
Quite rightly this bill is going before the committee, where we can hear some of the technical explanations involved given to us. I do not intend to attempt to discuss it at any length at this stage. I think I should make clear, however, that, as far as those in this group are concerned, we consider telecommunication by submarine cable to lie very clearly in the field which one can regard as a public utility service, and it is desirable that such services should be provided either under some appropriate form of public ownership or under public control, and that will be the point of view from which we shall approach the consideration of this measure when it reaches the committee stage.
Just how adequate the measure that the minister is now proposing will appear to us when we enter into that detailed discussion in the committee, of course, I do not feel I can say at this moment, but I feel I should indicate that, generally speaking, as far as I have been able to understand the bill, we are sympathetic to the purposes it is designed to achieve. The only qualms I have heard expressed about the bill, as a matter of fact, from the members of the group to which I belong in the house have come from my colleague, the hon. member for Nanaimo (Mr. Cameron), who happens to have some of the poles that travel from the Banfield station crossing a piece of property he happens to own, and he is hoping that this bill will not interfere with the present rental arrangement he has with regard to those poles.
Probably the application of this bill and its effect are going to be more widespread on the Atlantic coast than on the Pacific because of the large-scale activities that the minister mentioned of the transmission of messages between the United States and Europe and because, of course, of the larger centres of population in eastern Canada from which communications overseas travel. Nevertheless, I shall be looking forward with great interest to the study which this bill will receive in committee, as I know will those of my colleagues who also sit on that committee.

Telegraphs Act


Frederick George Hahn: We
in this group welcome the statement of the minister that he intends to refer this to the committee on railways, canals and telegraph lines, because it is only through that committee that we feel the bill itself will get the consideration it properly warrants.
There is one factor in the bill against which, I feel, we must guard, and it was brought out to a degree by the hon. member for Vancouver-Quadra (Mr. Green) when he suggested that this is another licensing bill. I feel that possibly its objective is to limit the field of communications to government-owned enterprises. We in this group cannot go along with what the hon. member for Comox-Alberni (Mr. Barnett) just suggested with respect to communications when he said that they should be handled by a public utility and therefore should come under public ownership. Rather, we consider that where we have technological advances such as the minister described the Canadian public certainly should receive the advantages of this technological progress, and we cannot support the bill if it is the intention to stop the progress in the field of communications in giving us all the good that we can expect from a healthy competitive system and not just a government protected operation.
We look forward to the government being in this public utility field only for the purpose of operating a cable where other private enterprises are not prepared to give service at a reasonable rate. The minister is sending the bill to the standing committee on railways, canals and telegraph lines, and I am sure that there he and his officials will be able to explain more fully the purpose behind the bill and possibly allay our fears concerning it. I hope that is so because I cannot see this group being in harmony with the setting up of a monopoly that would not give us the full advantage of the technological advances I spoke of earlier.


Mr. L. T. Stick (Trinity-Conception):: Mr. Speaker, it may be new to some members of the house but the first cable was laid between Europe and a place in my riding called Heart's Content many years ago. We in Newfoundland had cable companies before you had a Telegraphs Act in Canada. The first company that laid that cable was called the Anglo Newfoundland Telegraph Company. Since then we have had Western Union, which has eight or nine cables coming into my home town of Bay Roberts, and we have the Commercial Cable Company.
Reference was made this afternoon by the minister to the first telephone cable laid between Clarenville and Scotland. I understand that the return cable from Scotland to

Newfoundland will be under process of laying in a few days. All the companies I have named, with the exception of the last one, the telephone cable company, have been operating under charters from the government of Newfoundland for many years, and I think the terms of their charters are confirmed in the terms of union between Canada and Newfoundland. Unless this amendment affects the charters already granted, which I understand are included in the terms of union, and the operations of these companies, I cannot see how a monopoly can take place.
I rise to speak on this bill because it is a very important measure as far as our province is concerned. As long as there is no interference with the charters under which these companies operate in Newfoundland, I have no objection to the bill, but if this amendment in any way infringes upon these charters or curtails the operations of these companies I am afraid I shall have to oppose it.
This is very important for us in Newfoundland. I was at the laying of the trans-Atlantic cable last year. It is a very expensive undertaking. It is something which has been badly needed between Europe and America, and I understand that when the laying of the cable is completed some 30 telephone communications will be handled simultaneously. The traffic in communications between Europe and America is growing all the time. I am very glad that the minister is sending the bill to the committee so that these cable companies which have operated in Newfoundland for many years can make their representations to the committee and, if necessary, safeguard any of the rights they already possess. On that understanding I am in favour of the amendment provided it does not interfere with the operations of these cable companies which we had in Newfoundland long before you had a telegraphs act in Canada,


Mr. Deputy Speaker:: If the minister speaks now, he will conclude the debate.


George Carlyle Marler: Mr. Speaker, I am not going to attempt to deal with all the remarks that have been made but I should like to say one or two words before the debate concludes. In my remarks on the bill and in dealing with the history, so to speak, of the cables that now exist, and referring particularly to the trans-Atlantic telephone cable which is now in process of being laid, I particularly wished to stress the fact that technological developments, if I may call them by that name, have completely changed the picture from the time when the Telegraphs Act was adopted, when the word-carrying capacity of a cable was

distinctly limited, to the present time when we have cables of the nature of the transAtlantic telephone cable, a coaxial cable incorporating in it repeaters at intervals of approximately 40 miles apart, which has expressed in terms of telegraph circuits, as many as 800 circuits capable of carrying 60 words per minute each.
I cannot help thinking that this technological development makes it necessary for us to introduce legislation of the kind that is embodied in the bill now before the house. May I say to those who seemed to think that in the bill is the means of establishing a monopoly in favour of Canadian Overseas Telecommunications Corporation that it would not be necessary to adopt this legislation if the government had any such purpose in mind because, as I thought I made clear in my earlier remarks, by the simple process of saying no to all applications in the future to land cables it would follow that there could be no other cables added to those that now exist. Therefore if that had been the purpose it would not have been necessary to introduce this legislation in order to create the monopoly, to which the hon. member for Vancouver-Quadra (Mr. Green) referred. There is no intention, just as I may say there was no intention in 1949, of creating a monopoly in favour of C.O.T.C.
I had the occasion quite recently to read the debate at that time and to go over the evidence that was given by my predecessor. I do not think anything has happened in the meantime which would in any way invalidate the statements he made at that time.
The hon. member for Vancouver-Quadra expressed the fear that C.O.T.C. would be the regulatory body. I may say at once that no such thought has ever crossed the minds of those who have drafted the legislation or the officials of my own department. I should like to correct any impression that may exist that C.O.T.C. was our sole adviser in the matter of telecommunications. As the hon. member for Vancouver-Quadra well knows, there is a telecommunications division in the Department of Transport staffed with most competent officials, and when we need advice on matters in this particular field quite frankly it is not necessary for us to go outside the department itself. Consequently I can set at rest the doubts he may have in mind that C.O.T.C. would be the regulatory body either to enact or to administer the regulations which it is contemplated will be made if this legislation is adopted.
The next point was whether this legislation applies to existing companies. The answer to that question, of course, is that
Income Tax Act
it is intended to apply to all companies operating cables, and it is not intended that it would merely apply to the operation of cables that might hereafter be laid.
The hon. member for Vancouver-Quadra (Mr. Green) also referred to legislation in the United Kingdom. My information on that subject is that in the United Kingdom, under the Telegraphs Act, the Postmaster General is empowered to grant written licences on such pecuniary or other terms as he may deem proper, either generally or in any individual case to any company, person or body to transmit telegrams. My understanding is that at the present time there are no licences in force for the cables from Canada to the United Kingdom and that they are, if you like, so to speak on the sufferance of the Postmaster General. That is not the situation in Canada. I am not suggesting that the situation should be that all other cables should cease to exist. Far from it. If we wanted to create a monopoly, as my hon. friend fears, we certainly would not have proceeded to do it in this way.
Mr. Speaker, I fully realize that this is a technical measure and that there are many associated questions of a technical nature. It was my thought, in referring it to the committee, that hon. members would have an opportunity of obtaining such additional information as they needed in order to come to the conclusion, I hope, that the legislation is sound and that it deals with a situation that has developed since the advent of the coaxial cable.
Motion agreed to and bill read the second time.


George Carlyle Marler: that the bill be referred to the standing committee on railways, canals and telegraph lines.
Motion agreed to and bill referred to the standing committee on railways, canals and telegraph lines.



INCOME TAX ACT

Walter Edward Harris: the second reading of Bill No. 418, to amend the Income Tax Act.


Donald Methuen Fleming: Mr. Speaker, the Minister of Finance has moved the second reading of Bill No. 418, to amend the Income Tax Act. This cannot be a repetition of the budget debate nor, as the Speaker said on June 29, 1955, can the debate on second reading of the income tax amending bill be in itself a miniature budget debate. Had the rule been otherwise, there are many

Income Tax Act
things that one would have wished to discuss at this time including questions as to the credit restrictions and other matters of a financial or fiscal nature which are calling for attention on the part of the house at this present time.
It is not always easy, Mr. Speaker, to define the principle of the annual income tax amending bill. It is an annual bill and, in this respect, it presents an annual problem. In fact, the income tax amending bill is almost always just a collection of individual amendments, some related to each other and some quite heterogeneous. I suppose as close as we can come to the principle of such a bill, Mr. Speaker, would be to say this, that the Income Tax Act should be reviewed and amended with a view to correcting injustices, weaknesses and oppressive effects.
It is desirable that there should be a periodical parliamentary review not only of what the government may consider each year to be necessary amendments to the Income Tax Act but of the Income Tax Act as a whole. When this act was first brought before the house to succeed the old Income War Tax Act, it will be remembered that the bill was referred to the banking and commerce committee and that that committee undertook a review of that legislation. That review was perhaps not as extensive as some would have wished it to be, but at any rate the matter came before one of the select committees of the house.
There are many people who consider that, when they submit proposals to the Minister of Finance or the government's financial authorities in relation to needed amendments to the act, those matters automatically come before the house. Hon. members, of course, well know that they do not necessarily come before the house at all. They do not come before the house unless the government chooses to bring them before the house in the income tax amending bill. I do not intend to repeat at length what I said on this subject last year as reported at page 5436 of Hansard of June 29, but I think that from time to time public hearings ought to be conducted by a select committee of the house-and I think the banking and commerce committee is eminently suited for that purpose-at which time the committee could review the entire act and receive representations by interested bodies which have a case to make with regard to any features of the act, any shortcomings in it or the administration of the act.
My next comment relates to the language in which our income tax legislation is couched. To an ever-increasing degree our income tax legislation becomes more complicated. The problem of interpretation of our

tax legislation is becoming ever increasingly intensified. The act abounds in abstruse provisions, complicated sections, subsections, clauses, subclauses and provisos. It is written in terms that challenge the intelligence and understanding of specialists both of the legal and the accounting professions, and in many cases the co-operation of both is required in the interpretation of the provisions of the act. It is an unhappy paradox that the Income Tax Act, which most directly affects most people, is written in terms most difficult for them to understand. It may not be possible to go as far as one would wish to go in couching legislation on this subject in simple terms, but at any rate a serious effort ought to be made to do so.
This year, Mr. Speaker, the resolution preceding the introduction of the bill was perhaps the briefest that we have had. Certainly only three short resolutions were put before the committee of ways and means. The only three subjects which touched on the balance of ways and means and therefore found their way into the resolutions were proposals in relation to employees' profit-sharing plans, deduction of expenses of persons attending conventions, and depletion allowances. Those are all the matters of which the house was given advance information in the resolutions. Hence this year we approach a bill on which little information has been given at the preceding resolution stage.
I wish to submit to the house, Mr. Speaker, that our income taxes are too high. The minister has proposed no reductions in income tax this year. In the fiscal year which ended March 31, 1956 the government collected in personal income taxes $1,180 million.
In the fiscal year which commenced April 1, 1956, the minister has forecast that he will collect $1,265 million in personal income taxes. Similarly, under this same measure, the minister announced that collection last year from the corporation tax amounted to $1,035 million and forecast he would collect from the corporation tax this year $1,315 million.
Thus, it will be seen, Mr. Speaker, that out of expected revenues of $4,763 million in the present fiscal year, including $360 million of non-tax revenues, the Minister of Finance (Mr. Harris) expects to collect 26-5 per cent of his total revenue by means of personal income taxes and 28 per cent by means of the tax on corporations. In other words, sir, we are here dealing with a statute, the Income Tax Act, under which the minister this year proposes to collect 54-5 per cent of his total expected revenues, including those from nontax sources.

This leads me to make a comment, sir, on what we now know of the fiscal results of the first two months of the present fiscal year. We have the figures already for the months of April and May. The minister, in his budget speech, indicated that he is basing his budget forecast on a gross national product of "about $28 billion". We now know that in the first quarter of 1956 the gross national product was running at the rate of $28-3 billion or perhaps a little more than the minister took into account at the time he made his budget forecast. The dominion bureau of statistics daily bulletin of June 21, 1956, contains this paragraph:
The rise in Canada's gross national product which has been going on for a year-and-a-half continued into the first quarter of 1956, with the increase in the value of production from the fourth quarter amounting to close to 3 per cent after allowing for seasonal factors. This recent increase has raised the level of gross national product to an annual rate of $28 -3 billion or about 6 per cent above the annual average for the year 1955 as a whole, and 11-7 per cent above the first quarter one year ago. The continued advance in the first three months of this year was mainly a reflection of a further rise in the physical volume of production, with prices on average showing only a small increase.
It is quite evident, Mr. Speaker, that if taxes continue at the present rate and if the gross national product is thus to increase, unless the spending machine is just to be turned loose, a very big surplus for the present fiscal year is now assured.
Look at the results of the first two months of the present fiscal year. In the months of April and May, 1956, revenues amounted to $780,500,000 and expenditures to $506,300,000, so that in those two months the minister had a surplus of $274,200,000. Now, we have been told often that you must not count surpluses before the end of the fiscal year, and that is quite true. We are aware as well that there are certain expenditures that bulk larger in the closing months of the fiscal year than they do in the earlier months. But surely it is a fair test to apply the results of the first two months of the fiscal year to those of the previous year.
In those two corresponding months of 1955, namely, April and May, the revenues that were collected in the treasury were $611,300,000 and expenditures were $474,700,000. The surplus for those two months was accordingly $136,600,000. You will see, then, that while expenditures advanced this year in the two months from $474,700,000 to $506,300,000, revenues showed a very much larger increase from $611,300,000 to $780,500,000. The surplus for the two months increased from $136,600,000 in 1955 to $274,200,000 this year. The surplus thus practically doubled for the two
Income Tax Act
months. It is quite evident that given a continuation of the present high rates of taxation, a continuation of the present high gross national product without any deliberate turning loose of the government's spending machine, a very large surplus is assured for the fiscal year ending March 31, 1957.
I say, Mr. Speaker, that in view of these unchallengeable facts a reduction in the rate of income tax ought to be made now and ought to be made under the present measure. The government, in my submission, has no business, has no right, to go on exacting this very high rate of taxation when the end result is going to be a huge surplus of revenues over expenditures.
May I call it six o'clock, Mr. Speaker?
At six o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at eight o'clock.
Donald Methuen Fleming: Mr. Speaker, I had reached the point just prior to the dinner adjournment where I had submitted to the house that there ought to be a reduction in the income tax at this time. The failure of the present bill to make any provision for a reduction in the income tax must be measured against a background which is pressing on the attention of thinking Canadians these days with increasing seriousness.
Canada is suffering today from a lack of risk capital. In the first three months of 1956 Canada suffered a substantial current deficit which has been described in the daily bulletin of the dominion bureau of statistics of June 15 as follows:
Canada's current deficit from transactions in goods and services with other countries rose to a new peak for the first quarter of $345 million. This compares with $174 million in the first quarter last year and $255 million in the fourth quarter. This is about the same size as the highest quarterly deficit yet to appear which occurred in the second quarter of 1951. In relative terms too, the deficit is much higher than last year when it averaged almost 12 per cent of current receipts. At 25 per cent of current receipts it now represents almost the same proportion of current receipts as in 1930.
The new factor contributing to the large deficit was the massive size of the import balance on commodity account which amounted to $190 million. The deficit from all other current transactions of $155 million was slightly less than in the corresponding quarter last year. Until recently the principal elements in the current deficit in the past few years have originated in these "invisible" transactions in the absence of surpluses on commodity account. But since the fourth quarter of 1955 the appearance of a large import balance on commodity account has contributed greatly to the over-all current deficit and in this year it has been the major element for the first time since early in 1951.

Income Tax Act
That commodity trade deficit, Mr. Speaker, has reached very alarming proportions. In the entire year 1955, Canada had an over-all trade deficit on commodity account of $360 million, and in our trade with the United States alone Canada sustained a trading deficit of $840 million. In the first quarter of 1956, on commodity trading account, Canada sustained an over-all deficit of $190 million and in our commodity trade with the United States a deficit of $400 million. That was in the first quarter of this year; our deficit on commodity trading account with the United States was half what it was in the entire year of 1955 when this tremendous deficit of $840 million was incurred in our commodity trading account with the United States.
How is this deficit being paid? How is it being financed? It is being financed, Mr. Speaker, by borrowing capital from abroad and in effect as a nation we are going into debt by importing capital in order to pay for a current deficit in our trade. We are buying so much more from the United States than we are selling to her that we are paying for the difference, we are meeting the deficit, by borrowing in the form of imported capital.
As many distinguished and thoughtful Canadians are pointing out today, the most pressing need in our whole national program of investment so far as the source of capital for that program is concerned is of more Canadian capital for that purpose. Some leading Canadians have stressed this in recent days. For instance, at the conference of the investment dealers' association of Canada held last month at St. Andrews, New Brunswick, this note was sounded by several leaders in the industrial life of this country. Mr. Thomas W. Eadie, the president of the Bell Telephone Company of Canada, speaking of the tremendous need of capital for expansion in the next 25 years, said:
I see no reason why the major part of this vast sum should not be obtained from Canadian sources.
Mr. W. J. Bennett, the president of Atomic Energy of Canada Limited, speaking of the need for capital to finance development in the future, said:
I hope that a substantial part of this financing will be supplied by Canadian investment houses.
The report in summary concludes:
All speakers during the two days of business sessions predicted a big year ahead for Canada, a busy time for the investment business, and stressed the need for Canadians to invest in their country's growth.
Sir, where is the capital coming from Canadian sources to invest in this country's growth? There is only one source and that is

in savings; the savings of the people or the profits of enterprise, either corporate or personal.
The amount of capital that is going to be available in these forms depends on how much is left in the hands of those who earn after the Minister of Finance (Mr. Harris) has taken his tax cut out of those earnings. If we refer to the recent publication of the dominion bureau of statistics, national accounts, income and expenditure for the first quarter of 1956, we see on page 13 some interesting figures with regard to total personal savings.
In the year 1953 the total personal savings in Canada amounted to $1,588 million. In
1954	that figure had dropped substantially to $965 million. In the year 1955 it had risen somewhat to $1,312 million. In the first quarter of 1956 it was just $209 million. Now, that happens to be a little more than in the first quarter of 1955 but it is substantially less than the quarterly average for
1955	and correspondingly less than the quarterly average in some of those preceding years to which I have referred. Therefore, I say, Mr. Speaker, the need of creating Canadian capital, having regard to the needs of developing the resources of this country, is more pressing than ever before. If Canadian capital is to take a fair share and part in the development of the resources of this country it can come about only through the means of savings and they depend entirely on how much the Minister of Finance is going to leave of the earnings of people of this country after he has taken his tax cut.
Canadians have a high standard of living; they spend quite freely. Then where will they save? There is no relief in this bill from the present too high rate of income tax in this country. It is inevitable that we shall continue to lack Canadian capital as long as we have in this country the present crushing burden of income taxation. A reduction in the rate of income tax is very badly needed at the present time but none has been forthcoming and apparently Canadians for this purpose must await the election exigencies of the government.
I would like to conclude what I said on second reading of the bill, sir, by pointing to ten matters which should have been dealt with in the income tax amending bill this year but which have escaped attention on the part of the government.
The first, of course, is the fact that there are no tax reductions; I have already dealt with that.
The second is that no provision has been made for increases in the exemptions. These

exemptions of $2,000 for married persons and $1,000 for single persons have been in effect now for a very long time. Similarly, the exemptions of $150 for a dependent child under 16 years of age and $400 for a dependent child of greater age have been in effect for a very long time now. Those exemptions go back to the days when the Canadian dollar had some real value but they do not fit the situation today, and the Minister of Finance might well address his efforts and his thinking to the necessity for granting reductions in taxation by taking that first step of proposing to the house an increase in the present exemptions. We were reminded by a very distinguished Canadian tax authority just a fortnight ago that the man who was earning $5,000 before the war must make $10,480 today or his financial position has deteriorated. That was the statement of Mr. J. Harvey Perry, director of the Canadian Tax Foundation to a joint convention of the General Accountants Association of Canada and the Certified General Accountants Association of Ontario on June 16. He added:
Most people are working as hard as they can but it doesn't seem reasonable that 30 per cent or 40 per cent of every dollar they earn goes to government-it's discouraging.
So I submit that the minister should have proposed an increase in these exemptions.
Third, this bill proposes no definition of capital gains. I do not intend to go into this or other subjects at length, but I do wish to mention this subject. It has already had some discussion at an earlier stage in the present session. I simply wish to assert that very definitely a definition of capital gains is urgently needed in the Income Tax Act. It is a striking fact that our Income Tax Act contains no definition of "income" and similarly it contains no definition of what are capital gains. The income tax appeal board and the courts are now dealing with some very difficult cases in regard to what constitutes a capital gain as distinguished from income. The old judicial definitions are no longer adequate to protect from taxation under this statute gains which are of the nature of capital and should not be classified under modern conditions as income. I simply leave this subject with the quotation of the final sentence of a very brilliant discourse by Mr. H. Heward Stikeman, Q.C., on a recent occasion when speaking on the subject "The Vanishing Capital Gain". After indicating the number of rules that anyone must now observe if he hopes to preserve the capital nature of a gain, concluded:
Only by some legislative act can the uncertainty which now exists be removed.
The minister had a golden opportunity this year to bring in an amendment to give an
Income Tax Act
adequate definition to capital gains but he has taken no step in that regard.
Fourth, the minister has not proposed any increase in the present $20,000 limit set by section 39 of the Income Tax Act as the figure up to which corporate income is taxed at the lower 20 per cent rate instead of the 47 per cent rate. This figure of $20,000 as the maximum of corporate income for this purpose was set some years ago and it is high time, having regard to modern conditions and the depreciation of the dollar in the interval, that the maximum was substantially increased.
The fifth matter is the subject of contributions for pension purposes by recognized groups of self-employed. This is not a new subject, as it has been discussed regularly at each of the last three sessions to my personal knowledge, but again the minister has not devoted a syllable to the subject in either his resolutions or his budget speech. Here is a problem urgently crying for redress. Under section 11 of the act it is permissible for employer and employees to provide for approved pension plans and to deduct their contributions to such plans from their taxable income. But in the case of the self-employed members of professional and other groups, there is no provision in our law today even where the group is clearly defined to enable them to enjoy similar benefits under the Income Tax Act.
This has been the subject of effective representations to the minister or his predecessor by a number of leading national professional and other groups such as the Canadian Bar Association, the Canadian Medical Association, the Canadian Dental Association, the national labour bodies of this country, the Commercial Travellers' Association of Canada, and many others, in concert. It is to be noted that remedial steps in this regard have been taken in the United Kingdom where an intensive study was applied by a royal commission to the problem, but here in Canada we continue to await some action on the part of the government. I am renewing the pleas which I made, and which others have made on previous occasions, that the government propose amendments to the act which will make it possible for well-defined groups of self-employed persons to enjoy the benefits now extended to employers and employees under the act in relation to contributions to pension schemes.
The sixth matter is the position of the tax-exempt spouse. I mention this briefly as I spoke on it previously on June 29, 1955, as reported on page 5436 of Hansard of that day. This matter was the subject of representations

Income Tax Act
made to the minister by the Canadian Chamber of Commerce in February, 1955, and the following was their proposal:
When the income of a wife is over $250 but below $1,000, the excess of her income is in effect added to the income of her husband through a reduction of his marital exemption. If the income of the wife is composed of dividends, the 20 per cent tax credit is lost. Accordingly, it is recommended by the executive council that in such cases the husband be allowed the 20 per cent tax credit on that portion of the dividends received by his wife on which he has to pay tax.
I submit that that is a sound recommendation, but it has received no recognition from the minister in the two budgets he has brought into this house since those representations were made to him. I say that the present measure is lacking in that it continues to ignore this problem.
The seventh problem relates to alimony or maintenance payments, and here a glaring injustice and inequality exists, one that has claimed the attention of the income tax appeal board as well as groups associated with social problems. Section 11 (1) (1) of the act permits the deduction by a taxpayer of an amount paid in these terms:
(1) an amount paid by the taxpayer in the year pursuant to a decree, order or judgment of a competent tribunal in an action or proceeding for divorce or judicial separation or pursuant to a written separation agreement as alimony or other allowance payable on a periodic basis for the maintenance of the recipient thereof, children of the marriage, or both the recipient and children of the marriage, if he is living apart from the spouse or former spouse to whom he is required to make the payment.
The inadequacy of that definition has become more apparent during the past year than ever before. I am sure it has been brought to the attention of the minister and yet nothing has been done in the present bill to cope with it.
In the province of Ontario-I am sure the situation obtains in other provinces as well- if a payment is made by a husband toward the support of a wife, under a judgment of the Supreme Court of Ontario in an action or proceeding for divorce, then the amount may be deducted by the husband from his taxable income. But, if the money is being paid pursuant to an order made in the family court by a judge of that court acting with magisterial power under the Deserted Wives and Children's Maintenance Act, the payment that he so makes is not deductible by him from taxable income. Having regard to the fact that there are so many orders made in these cases in the family courts, you have some appreciation, Mr. Speaker, of the extent of the problem and the injustice that is created in such a multiplicity of cases.

That is one aspect of the problem. There is another. Last October a case came before the income tax appeal board and was adjudicated upon there by Mr. Commissioner Fordham. In a judgment that he handed down on October 12, 1955, he is quoted in the press as pointing out that the law now allows deduction of alimony payments only where there is a judicial separation or divorce; otherwise, alimony is not deductible, and in Ontario there is no such thing as judicial separation. His judgment proceeded to draw attention to the weaknesses of the present act and the injustices created by the definition that I have quoted.
For my part, I had assumed that, when that matter came to the public attention in such a direct way in the judgment of Mr. Commissioner Fordham, the Department of Finance would have taken note of the problem and we should have had before us now some new definition of alimony so that the injustice now so apparent might be remedied; but the present bill is silent on this subject as well.


Mrs. Fairclough:: He said that it was an obvious oversight in the drafting of the act.


Donald Methuen Fleming: My hon. friend from Hamilton West reminds me that Mr. Commissioner Fordham referred to this matter as an obvious oversight in the drafting of the law. These were his words:
This matter reveals for the first time, where the board is concerned, what appears to be a remarkable and unfortunate oversight in the drafting of (the law).
Although alimony, as such, is clearly deductible by the payer when a court has made an award of alimony in a decree, order or judgment for divorce, or a husband and wife have executed a separation agreement providing for the payment of alimony, . . . (the law) does not take cognizance of an action for alimony alone.
The matter is one that would appear to merit early consideration by parliament, as the fact that the appellant's wife sued for alimony alone and not for a divorce as well, presents an extraordinary ground for having to refuse the husband the right to deduct the amounts of any alimony payments from his taxable income.
This is a palpable and manifest injustice, and only parliament can correct it. It is not something that occurred to the members of this house when that definition was first introduced into the Income Tax Act. It surprised me not a little, in the face of that clear exposition of the problem by Mr. Commissioner Fordham as long ago as last October, that the subject has not been deemed by the Minister of Finance worthy of redress.
The eighth matter in which this bill is lamentably lacking is the want of clarification of foreign exchange transactions. This matter has been before the department actively

within the past year, and yet the subject is ignored in the present bill.
The ninth matter I should like to mention briefly is the subject of the so-called "nil" assessments. It is an extraordinary fact that, in the cases where the notice of assessment is issued showing the word "nil" in defining the amount remaining to be paid, it has been held that that is not an assessment at all. I am sure that must shock the sensibilities of most people. When they receive their notice of assessment-and most of them, I have no doubt, come in this form-and the word "nil" simply appears under the heading "balance payable", most people would certainly conclude that that was an assessment. It appears on a notice of assessment; but the courts have ruled on various occasions that that so-called "nil" assessment is no assessment at all, and therefore any correcting assessment at a later date becomes the original assessment.
This situation has left many persons and many business enterprises up in the air, in a condition of uncertainty as to their tax position, and it is creating much difficulty and suspense. Surely this is something that calls for redress, and yet it likewise has escaped attention on the part of the minister in the present bill. This has important results, of course, as all hon. members will appreciate, in determining the date under various provisions of the Income Tax Act from which time runs. I think it shocks the sensibilities of most members to find that a nil assessment is no assessment at all. That is something that calls for redress. In view of the finding of the courts, redress must come from parliament; yet the government offers parliament no opportunity in that regard this year.
The tenth and final matter that I should like to mention relates to an injustice that exists under section 116 (4) of the act and has been drawn to the attention of the government already on behalf of the Canadian Bar Association. Let me interject here that in selecting these ten subjects I am not suggesting for one minute that they exhaust the shortcomings in the present measure or the list of subjects urgently calling for redress in our income tax legislation; but, time being short and some of these other subjects having been touched on before, I shall not go beyond this last of my group of ten. Section 116 (4) provides:
The minister may, if he considers it advisable in a particular case, accept security for payment of taxes by way of mortgage or other charge of any kind whatsoever on property of the taxpayer or any other person or by way of guarantee from other persons.
Here is an actual situation that has arisen. A mortgage was taken by the minister and
Income Tax Act
registered as a second mortgage. There was already a valid first mortgage registered against the property of the taxpayer. The first mortgage having fallen into arrears, the first mortgagee sought to enforce his security. He sought to take foreclosure proceedings but he found that, while he could foreclose the owner of the equity of redemption, he had no power to take action to bring about a foreclosure of the second mortgage held by the minister. It may possibly be that he will have the right to sell under his power of sale, and in that way wipe out the second mortgage held by the minister. That may be a debatable point; I am not expressing any opinion on that subject at the moment; but the fact is that, if the first mortgagee in that case wishes to take the normal proceeding of foreclosure, he has no way at all of bringing about foreclosure on that second mortgage held by the minister. That is something that calls for redress. It is not fair, and that subject, although known to the minister and his department, has escaped all attention in the present bill.
So, Mr. Speaker, while the bill may look long in terms of bulk, and while many of its provisions are remedial in form and intent and will certainly have support on that basis, nevertheless there are many shortcomings in the bill. There are many injustices in our income tax legislation crying for redress which it lay within the power of the minister to propose in this measure but which have escaped the attention of the minister and of the department. I hope, Mr. Speaker, that the day is not far removed when some minister of finance will have the courage to grapple with these problems and bring forward legislative proposals for the redress of them.


Mr. A. M. Nicholson (Mackenzie):: Mr. Speaker, I am afraid I have very little in common with the hon. member for Eglinton (Mr. Fleming). He said a number of things which I cannot accept. He complains about the income tax in Canada being too high. He says that Canadians have a high standard of living. I think it is a mistake to make general statements of that sort. Some Canadians have a very high standard of living. A great many Canadians have a standard that is not high enough.


Donald Methuen Fleming: I think the hon. member will agree that I was speaking about national standards in relation to national needs of capital and national needs of saving, and it was a matter of comparing them with other countries.


Alexander Malcolm Nicholson: I think the suggestion of the hon. member that we should be giving relief to the people who are fortunate

Income Tax Act
enough to be paying income tax is not the type of suggestion that should be made seriously at this particular time. It is true that the over-all Canadian economy is very buoyant. The hon. member for Eglinton referred to the last national accounts which have come to us, and while he was concerned about the slight drop in savings I think he might have mentioned that personal disposable income is up over 10 per cent for the first quarter of 1956 compared with the same period a year ago.
At the supper hour I received in the mail the Carrot River Observer. There is a publisher's note intimating that although he has been a newspaper publisher for 13 years and has been in Carrot River for eight years the last issue of the Observer will come out about the middle of July. The editor is leaving for the city to take a secretarial course for the next ten months. This points up the crisis that confronts agriculture. The people who have been supporting this newspaper derive their livelihood from agriculture, and there is no future for a newspaper in a farming community if the farmers are in the position that farmers all across Canada now find themselves. That should be a matter of some concern to us.
I should like to draw the attention of the house and particularly that of the member for Eglinton to the recent bureau of statistics paper on the distribution of non-farm income in Canada for 1954. A year ago I used a similar paper that dealt with income for the year 1951 and at that time a number of hon. members said: "Oh yes, but the position now is a good deal brighter than it was in 1951." What is the position in 1954? For the purposes of this study the family is defined as follows:
. . . a group of individuals sharing a common dwelling unit and related by blood, marriage or adoption. Thus, all relatives living together were considered to comprise one family unit whatever the degree of family relationship . . .
Then there is the following with respect to the definition of an individual:
"Individuals" in tables 14 to 23 are defined as all persons aged 14 and over receiving income in 1954 and whose major source of income was from sources other than farming or military pay.
This leaves out of consideration the 20 per cent of the Canadian people who are engaged in agriculture and who are in a depressed condition as has been pointed out before. But here we have the non-farm people. The Minister of Finance (Mr. Harris) does not consider that a single person earning under $1,000 a year should have to pay income tax. I think it would be a logical conclusion that for a single person $1,000 is the minimum that a citizen should have
if he or she is going to be able to get a fair share of Canadian income. But what percentage of Canadian individuals are getting less than $1,000 a year? We have a breakdown here according to regions. In the Atlantic provinces 54 per cent of individuals are getting less than $1,000. In Quebec the position is better in that there are 38.4 per cent who are getting less than $1,000. In Ontario the figure is 36.7 per cent, in the prairie provinces 42.2 per cent and in British Columbia 49.5 per cent.
I submit, Mr. Speaker, that with percentages of individuals getting less than $1,000 a year ranging from 36 per cent in Ontario to 54 per cent in the Atlantic provinces we should be worrying about this large sector of the Canadian economy rather than the fortunate Canadian citizens who are able to pay income tax. Let us look at the next group, the families, and I am going to refer to the percentages of families in Canada who are receiving less than $2,000 a year. In the Atlantic provinces 39-8 per cent are receiving less than $2,000 a year. In Quebec the figure is 16-6 per cent, in Ontario 9-8 per cent, in the prairie provinces 17-1 per cent and in British Columbia 17 per cent.
In a country as prosperous as Canada I am sure this is a matter of real concern to the Minister of Finance who should be regarded as the individual who is trying to see that the fiscal policy adopted is such that the 15 million people who live in Canada may have a fair share of the wealth produced by the activity of all our people and that the people in the different regions should, as a result of the fiscal policy, be able to do something about their general position.
In addition to the figures I have given regarding the position of Canadians generally, which I am sure is a very different position from that which the member for Eglinton has in mind, I should like to refer to the Bank of Canada statistical summary for April of this year and in particular to the report on consumer credit outstanding. At the end of the last quarter of 1951 charge accounts in stores stood at $283 million, and at the end of the last quarter of 1955 they were $376 million. Then we come to instalment accounts with retail dealers. For 1951 the figure was $123 million and by the end of the last quarter of 1955 it was up to $377 million. For finance companies this amount has jumped from $186 million to $610 million. Totalling all these, for charge accounts, retail dealers and finance companies the amount has increased from $309 million to $987 million. Those of us who remember the disastrous depression that occurred in the thirties and the crash that occurred in the late twenties should remem-

ber that one of the warning signals that was so obvious then was the disturbing increase in credit buying and the percentage of the expendable income that had to go to pay interest on debts which were mounting. The total for these selected items is shown as being $973 million at the end of December, 1951. That figure at the end of 1955 stood at $2,193 million. I therefore submit, Mr. Speaker, that with this large group of Canadian people who are not getting enough to pay income tax, the minister should not be unduly concerned about the fact that some Canadians are worrying about their corporation profits. The last report on corporation profits that I received from the bureau deals with the last quarter of 1955. It says this:
Corporation profits after taxes in the fourth quarter of 1955 rose an estimated $153 million or 53 per cent from $291 million in 1954 to $444 million in 1955. Cumulative profits after taxes for the 12 months of 1955 increased an estimated $426 million, or 35 per cent, over the corresponding period of the previous year, from $1,230 million in 1954 to $1,656 million in 1955.
The last taxation statistics supplied by the Minister of National Revenue (Mr. McCann) give us some interesting tables with regard to Canadians who pay income tax. I wish hon. members would keep in mind these figures which I gave and which show that in the maritime provinces 54 per cent of the individuals received less than $1,000. When it comes to those who pay income tax there is an interesting table showing the breakdown according to occupations. Medical doctors head the list with an average income of $11,200. Consulting engineers come next with $10,200. Lawyers and notaries are down a little bit with $9,900; accountants, $8,000; dentists, $7,400 and so on down the list. At the bottom of the list come nurses with $1,800. If you average out the incomes that are given by those who pay income taxes, you will find an average of $3,143. There is another breakdown giving the percentage of our people in these various categories.
Before the minister hastens to give relief to those who are paying income tax, I think it is imperative that he evolve a fiscal policy so that, some way or other the large number of Canadians who have never paid income tax may be placed in a position where they have ways of spending money so that we do not have in the maritimes, for example, 33 per cent of individuals under $500 and in Quebec 22 per cent under $500. The minister must do something about the situation where 90 farmers out of 100 in Canada do not receive a taxable income. I submit that he has machinery available so that assistance can be given.
I hope he will not take too seriously the 10 suggestions made by the hon. member for
Income Tax Act
Eglinton (Mr. Fleming). I was not able to estimate what reduction in the federal revenue would result if these proposals were acted upon. I am not going to make any suggestions to the minister as to where he should cut down. At one point the hon. member for Eglinton complained about the amount of money the people of Canada are paying in taxes. In view of the fact that the official opposition makes that criticism so often and never suggests a five-cent piece that could be saved in connection with the discussion of any particular estimate, I think it is not too constructive to suggest that the people of Canada are complaining about the taxes they are paying. I think the people of Canada want to be satisfied that the taxes they are paying are being spent wisely. I think they want to be satisfied that the old people and the young will get more favourable consideration than they are now receiving. I am not even going to press for the proposal that the hon. member for Winnipeg North Centre (Mr. Knowles) has made so frequently, namely that the 3 per cent floor relationship to the deductibility of medical expenses for income tax purposes should be included. This matter has been discussed and while the hon. member for Winnipeg North Centre made a very good case, it has been turned down. I am not going to press for this small percentage of Canadian people having relief in this particular connection.
I find that a year ago, when this matter was before us, I made some study of the position of the people who are paying large amounts in corporation taxes and personal income taxes. I find that the taxpayer who has an income of $100,000 a year is really asked to make a substantial payment to the income tax authorities. But I think most people will agree that if you are in that fortunate position where you have a taxable income of $100,000, you would not worry so much about how much you had to pay so long as you had a sizeable amount left. It appears to me that with $163 per day for 300 days in the year left for yourself, you should not complain too much. I find that a taxpayer who has an income of $200,000 a year, although he pays a large amount in dollars, has left $261 a day. I find that a taxpayer in a higher bracket still, one with $400,000 a year income, has left $419.38 per day. I therefore submit that, in planning for the future, the Minister of Finance (Mr. Harris) should keep in mind the fact that no nation can long survive with one group of people as prosperous as are one section of the Canadian people while such a large number of the Canadian people have not been able to get in a position-as single people or as

Income Tax Act
married individuals-where they are able to pay income tax of any sizeable amount.


Mr. Solon E. Low (Peace River):: Mr. Speaker, I do not wish to take much time on the bill that is before us, but I think there are some things that ought to be said at this stage in the hope that the Minister of Finance (Mr. Harris) will give them his earnest consideration and that perhaps, by the time we get to the discussion of the bill in committee, he will be prepared to give consideration to one or two proposals that I intend to make. I am glad to have the Minister of National Revenue (Mr. McCann) here to hear what I have to say on one feature of the bill because he is charged with the responsibility of administering the Income Tax Act while the minister is charged with the responsibility of dealing with financial policy as reflected in it. Now, I do not wish in anything I say to cast a reflection on either minister, but I am going to be somewhat critical of the attitude of some of the people who do administer the act. I am going to speak now in general terms.
This Bill No. 418, as I see it, is divided into two main parts. As I look at them, there are the general provisions that are there for the purpose of giving relief, if we wish to put it that way, to certain groups of taxpayers in this country, or perhaps it would be better to say to make the Income Tax Act in its application generally more fair. I think that the Income Tax Act is the fairest tax vehicle we have. I think the income tax itself is the fairest tax because it can be applied specifically according to ability to pay and it does not place a heavy burden or a heavier burden upon the poor than upon the rich, not by any means. It is one tax that is hard to hand on. For that reason I support the idea of the income tax, but I do think that all our efforts should be directed towards making its application as fair and just as can possibly be.
Unfortunately, I think that is not done in many instances today. I refer now particularly to the administration of the Income Tax Act, particularly in relation to the farmer taxpayer. I am not going to criticize for a moment some of the things that have already been discussed in this house in another debate such as the net worth statement and all that sort of thing. I am going to talk about the habit of the income tax department of leaving assessments too long and then expecting the farmer taxpayer to feel happy about having to dig up three or four times the amount of tax he thinks he ought to have to pay, and on top of that a penalty or penalties and then to try to put him out of business because he cannot pay immediately when the demand is made.
[Mr. Nicholson.)
I have in mind as an illustration of the thing against which I am complaining, the case of a farmer in western Canada who very faithfully, year after year, put in his income tax returns. He thought, according to his own best calculations, he was paying fair taxes. This went on for years without any complaints or amended assessments coming in from the income tax branch. After several years this man was stunned, almost, to receive from the department of income tax a demand for a very large sum of back taxes. They sent inspectors in to see him. They went over his books most carefully and they did not charge him with having wilfully neglected to pay his fair taxes. They did not suggest at any time the man had withheld taxes. But what they did do was to go back over quite a period of years and assess this man $30,000 of extra taxes, and penalties on top of it, for not having paid.
This man finally said, "Well, all I can do is try to liquidate some of my assets in order to pay." He did start to liquidate and he reduced the arrears and at the same time kept up his current taxes, by something like $18,000. Then, suddenly the department placed the matter in the hands of the exchequer court and got a judgment against him, in spite of the fact every year he had paid $3,000 or $4,000 on these arrears in addition to his current taxes. The exchequer court ruled in favour of the income tax branch and handed down a judgment against the taxpayer. While it is true that they have not yet asked the sheriff to execute the judgment by means of seizures, yet that judgment is hanging over the taxpayer's head. He is not in a position at the moment to liquidate some of his assets because they are tied up in very large holdings and large holdings just do not sell every day or sell easily without being sold at a sacrifice price. The branch, however, is hounding the man and threatening to have the sheriff make a seizure.
Now, Mr. Speaker, in my judgment that is not justice. The man is doing all he can. It has not been proven at any stage that he has wilfully or deliberately attempted to defraud the government of taxes. He is paying as much as he can. He has offered to continue reducing the liability by $3,000 or $4,000 each year in addition to his current taxes, to get it cleaned up. But no, sir, what they want to do is kill the goose that lays the golden eggs. They want to destroy his chance of paying that off by forcing him to sell his assets now at a sacrifice price. This does not give him a chance at all to pay off and to stay in business so he will continue to be a taxpayer. I have seen not only this case but other similar cases and they do not spell justice. It looks

to me as though it is shortsightedness on the part of the officials. I am sure that this case would not be brought to the attention of the minister. I believe that if it were he would take steps to have it corrected. But when we are dealing with the income tax people in these cases they say to us: Now look, we would like to be able to do something on this but we are bound by the act and the regulations under it. This is quite true; they are helpless.
I am, therefore, going to appeal in a general way, not on a specific case but in a general way, to the minister. While we are amending the Income Tax Act, let us make certain that we are doing it in such a manner that the administration of the act can be just to every section of Canadian society. I think that is our responsibility. I think we should always keep in mind that it is far better to have a taxpayer in business continuing to pay taxes than to force him out of business through seizures, judgments and whatnot, and perhaps prevent him from continuing to be a taxpayer. This does not help our situation in Canada one particle. It just shows the rigidity and inhumanity of some of our income tax regulations and the terms of the act. I am going to leave it at that for the moment with the appeal that the government give very serious consideration to that sort of thing to see if they cannot bring in changes in the administration of the act so we can find justice.
The second part of the act in my judgment, Mr. Speaker, is one which permits the federal government to enter into their proposed new tax transfer agreements with the provinces. Those have been negotiated now for quite some time. We think that there are several clauses which should be written in much more general terms than they are. I realize that I would be out of order in referring to specific clauses, and I do not intend to, but in a general way, in this part of the act we think that there are several clauses that are now written in such rigid terms as to hamstring the provinces in their negotiations with the federal government. In view of the fact that no definite arrangements have yet been arrived at between the provinces and the dominion as to these tax transfer arrangements, it looks to me as though-


Walter Edward Harris: Mr. Speaker, may I just interrupt my hon. friend for a moment. It was not our intention to proceed with any of those clauses dealing with that particular problem until later.


Solon Earl Low: I am glad to have that assurance; it just bears out what I was going to say by way of conclusion to this part of my remarks. If you did proceed with them as
Income Tax Act
they are presently written then it might be necessary for the government to come back with another bill amending the Income Tax Act, because the provinces may not agree to the terms under which they are at present written. I just draw that to the attention of the minister for the moment and ask him and his colleagues to look it over most carefully, especially sections 8 and 9, and see if it would not be possible either to leave them over until after the dominion-provincial conference is held or to write them in much more general terms in order to make provision for any changes that might take place in the negotiations when the provinces and the dominion get together.
Aside from those things, Mr. Speaker, I have little which I think should be said at this time.


Ellen Louks Fairclough: Mr. Speaker, I had not intended to speak on second reading of this bill but a few things have come up during the course of this debate on which I should like to comment.
In the first place I should say that under date of June 14, when the Minister of National Revenue (Mr. McCann) introduced his estimates in this house, I made some remarks which grew out of representations made in the estimates committee and at that time in commenting on my remarks the Minister of National Revenue told me that I appeared to be in the right church but was probably in the wrong pew. Therefore, Mr. Speaker, I suggest I am probably in the right pew tonight and I would like to say my prayers all over again, if I may.
There are a few matters on which I should like to remark. First of all I would like to support the plea made by the hon. member for Eglinton (Mr. Fleming) on behalf of self-employed persons who contribute to pension funds on their own behalf. In that regard I draw attention not only to those persons who are in one of the recognized professions but also to those persons who are engaged in business on their own behalf or in partnership. I would like to draw attention to the fact that frequently these people, under extreme hardship to themselves, manage to make contributions to a recognized pension scheme, a scheme which would ordinarily be recognized by the government, had they been employed by others, as an approved or accepted pension scheme or, in the terms of the new bill which is before us, a registered pension scheme and would probably be permitted to deduct from their taxable income the contributions which they make toward the annuity or pension they hope to receive when they are past earning years.

Income Tax Act
These people have no such relief under the law and I think I could do no better than to refer the minister again to the remarks made by the hon. member for Eglin-ton and to those which I made previously on the estimates of the Minister of National Revenue and to ask the Minister of Finance (Mr. Harris) to seriously consider this matter. It is a matter with which I am sure he is familiar; he has had representations made to him by the Canadian tax foundation, the bar association and others, and I trust it will not be too long before he will recognize the just claim of these people.
In the case of consideration of tax returns and appeals made from the assessments pertinent thereto by the income tax department, there are many things that attract the attention of taxpayers.
I recall late last autumn-I think it was in November-reading of a case which had come before the income tax appeal board where a man had supported his mother who was a semi-invalid and had claimed, because of supporting her in a self-contained domestic establishment, the usual $2,000 tax exemption. Then he married and his wife came to live with him and his mother continued to live there and because of the mother's delicate condition of health the wife continued her employment. What transpired was really something that should attract the attention of the Department of Finance because apparently it does not attract the attention of the Department of National Revenue.
This case came before Mr. Commissioner Fisher and in his judgment he pointed out that before marriage the man had been entitled to an exemption on taxable income of $2,000 and his fiancee on her own account had been entitled to an exemption of $1,000. However, after marriage although the wife was still entitled to an exemption of $1,000 by reason of earning more than her statutory exemption, the husband was allowed an exemption of only $1,400. In other words, he was exactly in the same position. He was supporting his mother in the same domestic establishment but his statutory exemption for her was automatically cut from $2,000 to $1,400.
In his judgment Mr. Fisher explained that that is the situation which prevails according to the provisions of the law. Mr. Fisher dwelt upon this matter at some length and pointed out that the evidence showed the man was in receipt of a very modest income and in his unmarried state he came under a
section of the Income Tax Act-and I am quoting from a portion of Mr. Fisher's judgment-which says:
. . . $2,000 may be deducted by a taxpayer who is:
"An unmarried person or a married person not supporting his spouse who maintained a self-contained domestic establishment and actually supported therein a person wholly dependent upon him and connected with him by blood relationship or marriage or adoption."
However, his status changed immediately when he married and instead of having some provision for the income which his wife would have to her credit he found his own statutory exemption was cut by $600.
Then time went on and the mother suffered a severe stroke which left her partly paralysed. The medical expenses mounted and finally they came to the place where, far from the husband supporting his wife, the wife was contributing to the support of her husband and his mother by reason of the illness. Therefore, in his 1953 income tax return this clerk-for such he was- claimed he was not supporting his wife, that she was in fact partly supporting him and therefore he was entitled to the $2,000 deduction. She was paying for the clothes, lodging and food for both but no relief could be given under the act. A report of this judgment appeared in the newspapers and the headline which drew attention to it read, "Couple better off unwed, admits tax board."
Had this woman gone to live with this man in a common-law union and had he continued to support his mother as he had before, he would have been able to claim $2,000 exemption, she could have claimed $1,000 exemption and they would not have suffered financially. But that is not the way we live in Canada. We have respect for our institutions and we have respect for the sanctity of human relations. It seems to me that it is a sorry condition which imposes a penalty on people for observing the moral status which we hope is incumbent upon all of us. I ask the minister to consider the situation which produces these results.
Speaking of marital relations, I should like to refer once more to a matter which was raised earlier this evening by the hon. member for Eglinton, who brought to light again a matter which I brought before this house on June 14 and previously in the committee. This case is known as No. 289 and was heard by the income tax appeal board. It had to do with the payment of alimony by a taxpayer in Ontario under a judgment by the court for the payment of a specific sum. I do not think I can do better than read into the record the words which I read previously. Inasmuch as the current bill gives no recognition to

this problem I am taking the liberty of putting these words once more on the record. In giving his judgment Mr. Fordham had this to say:
Much to the taxpayer's surprise, however, the minister disallowed such deductions-
That is, alimony deductions.
-and ruled that they did not come within the purview of the provision set out above.
That was under section 11 (1) (j).
At the hearing, it became plain that this was because the word "alimony" did not appear after "divorce" in the fourth line of paragraph (j) above. An appeal to the board duly followed.
Then the pertinent words are the following:
The matter reveals for the first time, where the board is concerned, what appears to be a remarkable and unfortunate oversight or omission in the drafting of the foregoing enactment. Although alimony, as such, is clearly deductible by the payer when a court has made an award of alimony in a decree, order or judgment for divorce, or a husband and wife have executed a separation agreement providing for the payment of alimony, subsection (1) (j) does not take cognizance of an action for alimony alone. No reference to such a proceeding is to be found in its wording. Hence, the unfortunate appellant cannot have the relief that is ordinarily afforded to those obligated to pay alimony periodically. The words "judicial separation" do not assist him, as the Ontario courts are without jurisdiction to entertain actions for judicial separation.
I am not a lawyer and I recall quite well that when I quoted those words previously the minister expressed some surprise and shook his head at hearing my quotation. However, I have inquired into the matter since then and I understand that there is no such thing legally as a judicial separation in the courts of Ontario. I thought that probably somebody had made a mistake when the minister shook his head on the previous occasion and I tried to find out just what the situation was. The legal niceties escape me, I admit, but I find that Mr. Fordham was quite correct and that there is actually no such thing in Ontario.
It would seem to me that in the drafting of this act those who had charge of the wording overlooked the fact that Ontario was in this position. It seems to me that because of that persons in Ontario who are caught under these provisions are at a disadvantage as compared with persons in other provinces. I once more ask the minister if he will please do something about this situation. It seems to me to be grossly unfair that a man who accepts responsibility of caring for the family he has undertaken to care for should not have the advantage of deducting from his taxable income the money which he expends in this way. Those persons who go through the normal course of divorce proceedings and are thereby free to engage in other marital connections in the future are placed in a different
Income Tax Act
position from this woman, who has no desire to do other than live apart and is thus circumscribed by the law from having the advantage of deducting for income tax purposes her living expenses.
There are a couple of other things which I feel constrained to put before the house on this occasion because previously I inadvertently got into the wrong pew. One is the matter of rental income which accrues to the benefit of an individual through the hands of an executor or trustee. Once more I bring this matter to the attention of the minister and the house because it is only a short time ago that the minister in bringing down some of his regulations-it escapes me whether it was in the budget or subsequently-exempted from surtax on investment income revenue derived from rental property. Under the conditions set out for estates and trusts in the T3 form under the section headed "Tax on Income in Hands of Executor or Trustee" appears a note reading as follows:
Rental income from real property and income from a business or farm operated by the executor or trustee are not subject to surtax in his hands.
Yet when these funds eventually are reported by the beneficiary as income he pays a surtax as investment income, largely by reason of the fact that there is no other place to record this income on the ordinary T1 form other than income received as investment income from estates and trusts.
As I said on a former occasion, the courts have several times, and almost invariably, ruled that income should not change its character by reason of passing from a source through a trustee to a beneficiary. Yet under our own income tax law, regardless of the law set out, the regulations in effect in the income tax department prohibit the taxpayer from claiming this income as earned income despite the fact that persons who have rental income on their own account and who receive it first-hand are able to claim it as earned income.
I recognize that this is a fairly recent concession of the department, that is, the concession given to the individual to claim rental income as earned income, and it may mean that the minister has not yet got around to allowing this same concession where the funds come to the individual through an estate or trust. But once more-this time I am in the right pew-I ask the minister to seriously consider this matter and to bring in the necessary amendment to the act if it requires that or, if not-and the latter is my view-simply instruct the department to make the necessary correction to the T1 form, which will place the income from revenue, even though coming to the taxpayer through an estate or trust, in the earned income bracket.

Income Tax Act
I suggest to the minister that it is as simple as that: a change in the printing of the T1 form. I do not believe it is a matter that requires an amendment to the act. The minister himself brought in this amendment a few years ago, and I think it is merely an oversight that could be readily rectified by changing the T3 and T1 forms so that the two categories of income, that is, from dividends or other investments and from rental income, be reported separately and be reported by the ultimate beneficiary in two separate brackets on his own income tax return. I ask the minister seriously if he will look into that matter.


The Acting Speaker (Mr. Applewhaite):: the hon. member for Saskatoon (Mr. Knight) will permit me, I should like to ask the house for a little assistance. We are on the second reading of a bill and we are supposed to be discussing the principle of the bill. I realize that this bill is a collection of disconnected amendments dealing with such subjects as railway companies, oil companies, solicitor-client privilege, pensions funds and so on, and may not be said to have any specific principle, but I must ask the house not to use this bill as a vehicle for every conceivable form of criticism or suggestion of and to the Departments of National Revenue and Finance, because there are a great many aspects of our taxation which are not included in this bill. The last thing I want to do is to make it difficult for any member to put forward his views, but I think perhaps at this time I should say that there may come a time when it will be necessary to say, "That is a little beyond the scope of this bill."


Robert Ross (Roy) Knight: I think it has been the custom of those who have preceded me to talk not about the particular clauses in this bill but about the particular clauses which are not in this bill and which should be. Before you pronounced your admonition, Mr. Speaker, I was going to do the same thing. I think I shall venture, in view of your kind remarks at the conclusion, to do just that, and I hope that the warning will have some effect upon my more immediate or less immediate neighbours. Of course, one has to draw the line somewhere.
There are one or two things about which I am disappointed in this act in that they are not mentioned in the act. One has to do with charitable donations. I think that what I am going to speak about can be defined as charitable donations. This is perhaps particularly applicable to my own province of Saskatchewan, where we at least think, whatever may be the opinion of those in other provinces, that we have adhered to our program of humanities first and that we

are in the lead in proportion to our population in the providing of decent living conditions for our older citizens. To do that costs money. We have to receive gifts-and I consider them charitable donations-in order to get the first payment for these propositions. Service clubs, churches and people who interest themselves in this sort of thing go out and ask people for money. The very first question they are asked is, "Are these payments deductible as charitable donations?" We have to tell them'that under the present law they are not.
I was very much astonished that when this was mentioned the other day here in the house, the hon. member for Vancouver South (Mr. Philpott)-I hope he did not mean it; I hope he was joking-said, "Why don't you just give it as a church subscription, and then it would be automatically deducted." As far as I am concerned, for me to do that would be dishonest. I do not know what it would be for my hon. friend. If I give a donation on the basis of a private payment for the building of an old people's home, I do not think that that is, after all, a church subscription. I know that that sort of thing is done. However, I have said enough about that, but I think that those payments should be deductible. I cannot see any difference between those and regular charitable donations.
Another matter about which I should like to say a word is the ceiling upon the old age pension payments. Of course, members and, I think, most of the public, are aware that we have to pay extra tax, as we should, to provide ourselves and others with old age pensions: 2 per cent extra on the taxable income. In other words, if I have a taxable income of $1,000, I pay 2 per cent extra or $20 extra for old age pension purposes. If I have $2,000 income, I pay 2 per cent or $40. If I have $3,000 taxable income, I pay 2 per cent extra or $60. But then- and it is a strange thing to me-at that point the schedule ceases to exist. From then on, irrespective of the size of my taxable income, I pay $60 only.
To me there is no justice in that; there could not be to one who thinks of things as I do. If a man has a taxable income of $10,000 or $15,000, he has to contribute only $60 from the wealth with which he has been blessed to help pay for the pensions of those who are not so able. I think something should be done about that. The Minister of Finance (Mr. Harris) should let that scale slide. I am thinking of a sliding scale. Let it slide. Let it keep on sliding.
Another thing I want to bring up is the matter of corporation profits. I have to confess to having two small investments in

Canadian corporations and they bring me in a total of approximately $40 a year. I discover that at the end of the year I am allowed to deduct one-fifth of that $40 not from the amount of money upon which my income tax is based, but from the actual tax itself after the tax is computed. I can see no reason or justice in that. I can see no reason why I should be allowed to deduct $8 from the actual amount of tax which I otherwise would have had to pay if I did not have these investments. I know that what I am going to say now has been disputed. I do not think it has been disputed in this house because I know it can not be disputed. I do not know what the exact figures are but let us say that a man has an income somewhere between $10,000 and $11,000. I see the minister is getting ready to interrupt. He has heard this mathematical formula before.


James Joseph McCann: We have heard it every year.


Robert Ross (Roy) Knight: You are going to hear it a lot more and as far as I am concerned the people throughout the country are going to keep on hearing it too. May I say to the Minister of National Revenue (Mr. McCann) that audiences are so aghast when they hear this that they simply do not believe that even this Liberal government could perpetrate such a thing.


Hazen Robert Argue: They will from now on.


Robert Ross (Roy) Knight: It is a fact that if a man is working as a doctor, a top mechanic or whatever you like, earns somewhere between $10,000 and $11,000 by so working and has a wife and a couple of children if he is a normal man, he discovers that he has to pay income tax of about $1,600. I say "about". I am getting away from pure mathematics. But if that same man were in the position where he had never done a tap of work in his life but had an income of between $10,000 and $11,000 a year from investments in Canadian corporations his income tax would be exactly nil. That is a word that has been introduced by the member for Eglinton (Mr. Fleming) and this is another nil. The amount of income tax he would pay would be exactly nil except for the aforesaid $60 that he would have to pay on account of the old age pension. If the Minister of Finance or the Minister of National Revenue, who was good enough to interject, can deny that statement, let them get up and deny it now.


James Joseph McCann: Do you take into account that the income he has has probably come from
Income Tax Act
corporations which pay 47 per cent on it before he ever gets it?


Robert Ross (Roy) Knight: I am very well aware of the argument that the corporation funds have already been taxed in the hands of the corporation. That is that old thing I have heard so often before.


James Joseph McCann: So is yours old.


Robert Ross (Roy) Knight: The minister will tell me that it is double taxation but the government is not so particular about double taxation being perpetrated in certain other directions which, if I had the time, I could mention here. But what I have stated is largely, if not mathematically, accurate and true. It is true, and to me it is a disgrace and a blot on our national life. Any government that can perpetrate that sort of thing or that would believe that sort of thing is right has an attitude towards things and people in which I cannot share. I know the argument is put forward that we want to encourage Canadian investment. There are other ways. We do not have to encourage it to that extent, to that degree or by that method.
As I have said, the people do not believe it. I said it once before in an election campaign and somebody wrote a letter to the Star-Phoenix and said: "This man Knight should not be allowed to go around telling lies. The thing is impossible, the thing is ridiculous. Of course anybody with an income of $10,000 has to pay a proportionate amount to the national treasury." Well, I countered that statement. I took an income tax form and went down to my hon. friend's department. I told them that I wanted the income tax form filled out in the name of Brown, Smith, Jones or whatever you like. They said, "What are the conditions?" I gave them the conditions. I gave them a hypothetical case. I put the income at $11,000 or $12,000 and said that the man had a wife and two children and was such and such an age. I told them I wanted to know what his income tax would be.
They asked from where the man derived his income. I gave them the names of certain Canadian corporations. I said, "I want you to fill that out and fill it out right because I am going to ask you to sign it when you have finished." The man laughed. I presume he knew what I was after. However, he did his work. I will say that for him. He filled it out and he said that the man would ordinarily pay income tax of $1,600 or $1,700 but because of the fact that he derived his income from dividends from Canadian corporations solely the only thing he would have to pay would be $60 towards the old age pension inasmuch he would have an exemption of 20

Income Tax Act
per cent or $2,000 on the $10,000 he received in dividends. I said, "Would you please fill that out and sign it?" He did so. I then went and took a quarter page in the paper as a paid advertisement, and they did not call me a liar after that.
I suggest that the minister look into that matter. It is iniquitous, unfair and unjust, no matter how you look at it. The Minister of National Revenue was talking about double taxation. I wish we could get some proper definition of what they are now beginning to call under the act, and I am referring to the act, "registered pension funds" because there is a considerable amount of confusion in that regard. I receive letters about it all the time and I am sure that other members do too. Let us take what used to be my own profession, teaching. Here we have a superannuation fund which we create. The province of Saskatchewan puts in so much, we put in so much and so on, and after a while you get a pension. In their innocence these people said that it would be fine if anybody wanted to pay in more than the amount that was called for. It would be a form of extra saving, and a lot of people put in a little extra money, $1,000 or $1,500, over the course of a good many years. But when they come to take the money out it is a different proposition. You take it out and you pay income tax on it.
We paid income tax on the money as we earned it, but when we put it in the fund it suddenly became engulfed in this lack of definition of what is properly a registered pension fund. Is it a savings bank? Is it a benevolent society, or what is it? Before we are through it may be a small loan company. At any rate, there is some doubt about the matter. When you go to take out your money and get back the money you put in you are told you have to pay income tax on it for the second time. That is what I meant when I reminded the Minister of National Revenue that in some cases they do not worry too much about double taxation.
The same question has arisen with regard to other provisions and other societies of one sort and another. I think the last letter I had was from a group of firemen in the city of Saskatoon. Because of some little technicality the department had decided that they were not operating what is called a registered pension fund.
The hon. member for Mackenzie (Mr. Nicholson) referred to the need of people who do not .pay income tax at all. I should like to say a word or two on behalf of those who have sufficient income to just pay income tax, and I shall be brief. I do not want to shut somebody else off. I shall simply say that I think these income tax exemptions

should be raised in view of our present prosperity. We hear a great deal about it from the government side. We hear about the increase in the gross national product, how well we are doing, how our surpluses are climbing. I think this is probably a direction in which these smaller people should get some help. I am all for the income tax. I think it is a good, fair and just method of taxation. However, I think there are some people now paying income tax who should not be paying it at all.
There is another thing I wish to mention and with this I conclude. I hope that this bill will provide for this point. The minister can inform me whether or not it does so. I am thinking particularly of farmers. I am not so clear about the matter of labour unions. I have not studied the matter. I am thinking of the business of conventions. Certainly I think that people who are gathered together in farm unions should be allowed to deduct the expenses of their conventions. I see the minister nodding his head although that does not appear in Hansard. I am asking the minister now whether it is true that, by a clause in this bill, from now on those farmers who attend farm union conventions will be allowed to deduct their expenses for income tax purposes?


Walter Edward Harris: There is one provision which may not be as wide as my hon. friend has suggested. However, there is a provision. We can discuss it in committee of the whole.


Robert Ross (Roy) Knight: When we come to committee of the whole I also want to ask my hon. friend what the situation is with regard to labour unions in the matter of attending conventions. I want to know whether that will come under the same heading.


Walter Edward Harris: It does.


Robert Ross (Roy) Knight: With those few remarks, Mr. Speaker, I think I will leave the matter until the committee stage.


Mr. E. G. Hansell (Macleod):: Mr. Speaker, I shall try to remain within the confines of this bill. Although you may think that I am somewhat remotely within the confines of it, I think that I am within the terms of the bill, at least as much as were some hon. members who have spoken previously. I was afraid that my friend the hon. member for Saskatoon (Mr. Knight), having been a high school principal for many years and being an educationalist, was perhaps going to steal or, shall I say,-


Hazen Robert Argue: Borrow?


Ernest George Hansell: -expropriate some of my material.


Hazen Robert Argue: He wants good material.


Ernest George Hansell: I want to bring to the minister's attention something that is lacking in respect of this income tax bill. After all, we always have an income tax bill which in the main revamps the income tax system of the country. I refer now to the fact that there is no exemption whatsoever for the taxpayer who supports a son or daughter who is going to university. A change was made in the Income Tax Act some years ago and at that time I was certainly under the impression that exemptions were allowed on behalf of income tax payers who supported their young people as they went through university. However, my eyes were opened when I found that it was necessary for me to support my young lad. It is a strange thing to me that this matter has escaped me over the years but, according to the Income Tax Act, if an income tax payer claims exemption for himself and his wife, he cannot claim exemption for a son or a daughter who is dependent upon him for his or her university education. To me that is a serious matter. A farmer, for instance, might raise hogs, cattle or something else. He is allowed to write off certain operating expenses as he raises those hogs and cattle. But here is a man who raises a family. It is granted that he gets the family allowance while his children are young. But the moment they come of age where they wear bigger shoes, eat like a horse, wear men's clothes and when the young daughters are obliged to wear more expensive clothes, he cannot claim exemption for them. It is all right if they are forced onto the labour market and earn their own living, but if they want to go forward to a higher school of learning such as a university and prepare to be an engineer or a doctor, the old man must foot the bill. I maintain that is not fair or right. I assert that the Income Tax Act should be amended in order to allow an exemption for a young man or a ypung woman going to university. Otherwise only the people who are in the higher income brackets will be able to afford to put their young people through university. People with moderate incomes just cannot afford to put a young man or young woman through university.
I calculate that it takes about $1,000 a year, even though the young man or the young woman may earn a certain amount of money during summer vacations. It costs a great deal to put a young man or young woman through university. There is the matter of clothes to wear and certain upkeep including board, fraternity fees, tuition and books. It costs a great deal of money. As a matter of fact, if the young person is not earning an income, we are allowed $400 67509-358
Income Tax Act
exemption for him or her but we are allowed that anyway when they get to a certain age, provided they are still going to school. But as soon as they graduate from high school and want to go to university we are then allowed the same exemption of only $400. That simply means this, Mr. Speaker. As soon as they arrive at the age where they are able to go to university, then there is no exemption from the income tax at all and no assistance whatsoever. I believe that the minister should take that matter into consideration and permit the $1,000 income tax exemption that is allowed. Here is where the discrepancy comes in. If a man does not have a wife, and manages to get along without one, he can send his boy to university and claim $1,000 exemption.


James Joseph McCann: Where would he get the boy if he has no wife?


Ernest George Hansell: But if he is married and has a wife to look after the home, he cannot claim that exemption. If he has a housekeeper to look after his home, he can claim exemption for her if he happens to be a widower, but he cannot claim exemption for his son. You cannot claim more than $1,000 for either a wife, a housekeeper or a son or daughter who is going to university. Now, that seems to me to be unfair. It seems to me to be ridiculous. I would ask the minister to give some real consideration to the amendment of the Income Tax Act so that some further exemption could be allowed to the people who are putting their sons and daughters through university.


Daniel Roland Michener: The
minister whose bill we are discussing has been quite frank in his acknowledgement about the rate of income tax and taxation generally in Canada. He, like everyone else, appreciates that we are living in an age of high taxation and has expressed himself from time to time as being concerned with relief from that high rate of taxation. He is equally frank, I think, in introducing this bill by saying that this does not to any extent relieve the Canadian payers of income tax from taxation. I think the major relief from taxation referred to in the budget is in another field.
Now, the problem of the rate of taxation is one that is frequently discussed and presented to the government. I think the words used by the Canadian Tax Foundation express about as succinctly as possible what I have in mind. They say:
The growth of social welfare expenses and defence spending has brought about in the past 15 years an unprecedented level of expenditures in relation to national income, and rates of taxation are very high today by previous peacetime standards.

Income Tax Act
Now, that is undoubtedly so, and apparently in the view of the government is to remain so at least for another year. In bringing in a bill of this kind it seems to me that, without dealing with the rate of taxation at great length or without dealing with the rate at all, there are a number of amendments by way of exemption and alteration which could be made which would improve the taxation system and give an incentive here and a disincentive, if I may use such a horrible word, in other places, or increase the social justice, if you like, of the tax system. I suppose the minister, in bringing forward most of these amendments, is making some corrections of one kind or another, removing an anomaly here and giving an incentive there. From that point of view one cannot complain too greatly about the contents of the bill. As has been said by other speakers, the complaint is rather about what is omitted from than what is contained in the bill. There are a great many moderate incentive provisions which have been suggested from time to time, which would not be costly and which would not affect the over-all rates but would achieve a very definite end in themselves.
I know this applies not only to the field of trade and commerce in the broad sense, that is the economy in the sense of its industrial progress, but also in the personal field to the individual in his daily occupation. We have had two or three specific examples of the kind of thing that might have been considered. I realize that the use of the income tax in the larger field of providing incentive in trade is a very important one and could be the subject of a very lengthy debate. I think, however, perhaps this is not the appropriate bill upon which to enter that field. I just illustrate the kind of thing I mean by drawing the minister's attention to the effect of taxation in certain fields as presented by the tax foundation recently in making a presentation to the royal commission. They dealt with the effect of taxation on the development of natural resources, for example; on fixed capital expenditure; on exports and so on over the broad field of the economy. As I say, that might better be discussed at another time, although it is of prime importance and deserves the attention of this house, particularly in some of the fields which have been brought to the attention of the house this session. For example, there is the encouragement of Canadians to invest on equal terms with foreign investors in the development of their own country.
I shall refer briefly to the incentives which affect the individual more directly, two or three of them. Before giving an example of that, I should like to say that this bill might
[Mr. Michener.l
very properly be brought before a committee because there are a good many minor matters which will only be incorporated in legislation of this kind and discussed fully in a special committee such as the committee on banking and commerce. There is not much opportunity in the committee of the whole house to move minor amendments to try to patch up various inconsistencies and injustices of the present tax law. The suggestion which has been made to refer the bill to a committee seems to me to have a great deal of merit, just to deal with what I might call incidentals, odds and ends of amendments which have escaped the minister's attention.
The first example I wish to bring to his attention is that of the allowance made for children. There is a case where our tax system seems to compare unfavourably with tax systems elsewhere. As recently as last May a public comparison was made of our attitude in this respect with that of the United Kingdom as shown by the new income tax tables made effective in Britain at that time. When compared to those in this country they showed that although income taxes are higher there than they are here, they grant much more consideration to parents than Canadian income tax laws do.
The Globe and Mail of May 4, in its editorial, had this to say in one paragraph:
Taking family allowances (paid in both countries) into account, it can be seen that at every level from $2,000 a year-$40 a week-up, British parents enjoy a substantially greater advantage in relation to non-parents than do their Canadian counterparts. Westminster, in short, would appear to have more respect for the family life, and its accompanying expenses, than Ottawa.
An example of that, I think, is the way allowances for children and the family allowance can operate where a child is born towards the end of the year. A father who pays taxes and has been blessed with another child in December is allowed the exemption of $150 from his taxable income.


An hon. Member:: Ten o'clock.


Daniel Roland Michener: Since I cannot conclude now, I shall continue at another time.


Walter Edward Harris: May I interrupt? I had hoped we would be able to finish second reading tonight. If my hon. friend was not going to be too long, and he never is, I wonder if we could let him continue and then dispose of the motion.


Thomas Speakman Barnett: I do not want to hold up the bill, but I did have a few things I wished to say on second reading of the bill.


Walter Edward Harris: Well, I did not realize my hon. friend had anything to add. Would it not be possible for him to say what he has to say tonight?


Thomas Speakman Barnett: Well, Mr. Speaker, I do not care whether I say it now or at the committee stage but my only concern is whether I might be ruled out of order at the committee stage in what I had to say.


Walter Edward Harris: Well, we will try it at the committee stage then.


Thomas Speakman Barnett: If the minister gave us a certain latitude on clause 1 I would be glad to make my comments there.


Mr. Deputy Speaker:: Has the hon. member unanimous consent to continue?


Some hon. Members:: Agreed.


Daniel Roland Michener: My remarks could be
deferred until the first clause is considered in committee and I would be content. I do not wish to become the cause for holding a lot of members beyond the normal hour. If the minister would be satisfied with that,
I could say what I have to say just as well on the first item.
67509-358J
3,	1956	5639
Income Tax Act


Walter Edward Harris: Mr. Speaker, there is no nominal first item here, as everyone knows, but I think we could agree at this time that when the bill is in committee of the whole we should hear the hon. member for St. Paul's and the hon. member for Comox-Alberni.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Robinson (Simcoe East) in the chair.
On clause 1-
William Alfred Robinson: Shall this clause carry?
Clause stands.
Progress reported.



BUSINESS OF THE HOUSE

Walter Edward Harris: Mr. Speaker, tomorrow we shall take the estimates of the Secretary of State for External Affairs and the Department of Mines and Technical Surveys.


[Stage Direction]
It being five minutes after ten o'clock the house adjourned, without question put, pursuant to standing order.
[Stage Direction]
Questions