1956-07-23

Hon. Siuari S. Garson (Minister of Justice) moved: that the house go into committee at the next sitting to consider the following resolution, which has been recommended to the house by His Excellency:
That it is expedient to introduce a measure to amend the Royal Canadian Mounted Police Act to provide for the payment and recovery of succession duties payable on pensions and allowances; also to extend in certain cases and under certain conditions the time and service that may be counted for pension purposes; and further to provide the funds for the additional liability to the R.C.M.P. pensions account resulting from general pay increases.


[Stage Direction]
Motion agreed to.


[Stage Direction]
Motion No. 94-Mr. Richardson:
For a copy of all correspondence exchanged between the Minister of Public Works and the premier of Quebec, the mayor or any other officials of the city of Montreal, regarding the proposed housing redevelopment project in Montreal since July 1, 1956.
Motion agreed to.

[Stage Direction]
Motion No. 95-Mr. Diefenbaker:
For a copy of all correspondence which passed between the Department of Public Works and/or Defence Construction (1951) Limited, Central Mortgage and Housing Corporation, and Builders' Exchange, in Halifax, Winnipeg, Calgary and Vancouver, since the 1st day of June, 1956.
['Mr. Speaker, it is my impression-but I should like to check and make sure that my impression is correct- that we have not yet signed. If we have not yet signed, I am sure consideration is still being given to signing.']
Mr. Dickey:: Mr. Speaker, perhaps the hon. member would let this motion stand for today. I want to have a word with him about it.


Mr. Speaker:: Is that agreed?


Mr. Diefenbaker:: Agreed.
Motion stands.



[Stage Direction]
On the orders of the day:
Mr. H. O. While (Middlesex East):: Mr. Speaker. I would like to direct a question to the Secretary of State for External Affairs.
My question arises out of an article in this morning's Montreal Gazette which is headlined "Nasser caught in own ruse".
Will the government review its current foreign aid program in the light of apparent double-talk going on in Egypt and elsewhere?


Hon. L. B. Pearson (Secretary of Slate for External Affairs):: Mr. Speaker, our foreign aid program is covered by the United Nations arrangements for technical and other assistance and the Colombo plan. These two matters are continually under review and I do not think there is any necessity for carrying that review further at this time.


[Stage Direction]
On the orders of the day:
John George Diefenbaker: Mr. Speaker, I should like to direct a question to the Secretary of State for External Affairs and ask him if he is now in a position to comment upon the fantastic statement made by Mr. Armstrong of the securities and exchange commission of the United States to the effect that Canada is being used as a base for the infiltration of communist investment in United States corporations, particularly those manufacturing secret material?


Lester Bowles Pearson: Mr. Speaker, we have made inquiries of all departments and branches of the Canadian government in order to ascertain whether any complaint has been received by any agency in connection with this matter and the advice is that no such complaint or inquiry has been received from Washington. It seems a little surprising that the chairman of the securities and exchange commission, if he has any anxiety in regard to this subject, should not take it up through the appropriate channels with the Canadian government at the same time he mentioned the matter to the internal security subcommittee of the United States Senate.


John George Diefenbaker: When Mr. Armstrong made his statement was it supported by any evidence or was it just a generalization?


Lester Bowles Pearson: From the reports we have received it was merely a generalization not supported by evidence.

Inquiries of the Ministry


[Stage Direction]
On the orders of the day:
Hon. W. E. Harris (Minister of Finance):: Mr. Speaker, last Friday the hon. member for Nanaimo (Mr. Cameron) invited me to comment on the situation arising out of the withdrawal of the United States and British offers of financial help to Egypt in connection with the Aswan high dam project and asked whether I would instruct the Canadian executive director of the international bank to press that institution to finance the project notwithstanding this change in the situation.
I am sure that the house will agree that the offer of aid by one country for a particular project in another country or the withdrawal of such an offer are not matters on which it would be appropriate for me to comment. It may, however, be useful to the house if I recall some of the main facts connected with the role of the international bank in the Aswan high dam project.
The project itself is a very ambitious one consisting of three main elements: First, the construction at Aswan of a dam 400 feet high and three miles long to store the waters of the Nile; second, the use of the stored water to extend perennial irrigation to some two million acres of land, which would raise by one-third the amount of irrigated land in Egypt; and third, the installation of hydroelectric production and distributive systems of a capacity which would more than double the hydroelectric power available to Egypt. The estimated cost of the project and ancillary works is $1,350 million, of which $400 million is represented by private investment, leaving $950 million to be publicly financed. Of this $400 million is represented by foreign exchange requirements and the balance of $550 million by local expenditures on goods and services.
Mr. Eugene Black, the president of the international bank, and members of his staff have been engaged in discussions with the Egyptian authorities and studies of this important and complicated project during the past two or three years. At the end of 1955, Mr. Black indicated that, given the existence of certain conditions, he would be prepared to recommend to the bank's board of executive directors a loan or loans to Egypt for the Aswan high dam. After a careful study of Egypt's economic prospects, the management of the bank concluded that the maximum external debt which the Egyptian economy could be expected to service in respect of the project would be of the order of half the foreign exchange costs, or approximately $200 million. Accordingly, if the project was to be
TMr. Pearson.]

executed without prejudice to the Egyptian economy, it would be necessary for the Egyptian government to find elsewhere the remainder of the needed foreign exchange without imposing additional debt charges on the economy.
The house will be aware that the governments of the United States and United Kingdom had indicated their willingness to provide together on a grant basis some $70 million toward the foreign exchange cost of the first stages of the project and that they would be prepared at a later date, in the light of the then existing circumstances and subject to legislative authority, to give sympathetic consideration to financing the later stages of the project as a supplement to bank lending.
With the withdrawal of United States and United Kingdom offers of assistance, it would appear that the availability of the total foreign exchange requirements of the project on a basis which will not unduly encumber the Egyptian economy can no longer be regarded as assured.
The international bank has issued no statement with regard to this matter. I would not wish to suggest that with regard to any particular project the management of the bank should depart from the normal lending criteria which have been established not only in the interests of the bank itself but of the borrowers. I think the house can be certain that if at some future time a proposal for a bank loan for the Aswan project comes before the executive directors of the bank it will be given careful and sympathetic consideration.


[Stage Direction]
On the orders of the day:
Mr. Sianley Knowles (Winnipeg North Centre):: Mr. Speaker, I wish to direct a question to the Secretary of State for External Affairs. Has Canada yet signed the United Nations declaration on political rights of women? If not, is consideration being given by the government to signing this convention?


Lester Bowles Pearson: Mr. Speaker, it is my impression-but I should like to check and make sure that my impression is correct- that we have not yet signed. If we have not yet signed, I am sure consideration is still being given to signing.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Harry Oliver White: Mr. Speaker, I should like to direct a question to the Minister of National Defence arising out of an article which appeared in the London Free Press of Saturday, datelined Chatham, Ontario. According to the article Private Tunks, on compassionate leave from Germany, had this to say:
If it were not for the parcels of food from home there would have been mutiny long before now. Canadian troops were on British rations and they are not used to getting bully beef day after day. We might get two eggs a week.
Has the government any knowledge of these allegations? Are Canadian eggs, bacon, cheese and other Canadian products being used for Canadian troops overseas or are they being purchased elsewhere?


Hon. R. O. Campney (Minister of National Defence):: Mr. Speaker, I have not heard from Private Tunks. His comments on the food are not in accordance with my views with respect to the food I saw issued to the army during my visits to Europe. However, in view of the fact that he has raised the matter I shall look into it and see whether the commodities in which the hon. member is interested are being issued as rations.



TELEVISION


[Stage Direction]
On the orders of the day:
Mr. Clarence Gillis (Cape Breton South):: Mr. Speaker, I should like to direct a question to the Minister of National Revenue. Is the minister in a position to satisfy the curiosity of a lot of people in the city, including members of this house, as to whether the Moore-Parker boxing bout to be held in Toronto will be televised?


Hon. J. J. McCann (Minister of National Revenue):: Mr. Speaker, I am informed that it was not possible to make arrangements. The Toronto papers carried an advertisement this morning to the effect that there would be positively no television.



CRIMINAL LAW


[Stage Direction]
On the orders of the day:
Mr. E. D. Fulton (Kamloops):: May I ask
the Minister of Justice whether it is the intention of the government at this session 67509-399
Inquiries of the Ministry to introduce any legislation based on those matters on which the joint committee on capital and corporal punishment and lotteries has reported?


Stuart Sinclair Garson: The matters upon which that joint committee has reported and will be reporting are tied into a larger subject with which the recommendations of the Fauteux report are also concerned. Our thought was that we would give careful consideration in the Department of Justice and in other interested departments of the government to all these matters, before we confer with the provincial governments, by which many of the aspects of law enforcement and administration of justice will be administered, and before we bring any legislation into this house. So I do not think there is any possibility at all of our bringing in legislation in the present parliamentary session.


Edmund Davie Fulton: With respect to those portions of the Fauteux committee's report which lie exclusively in the legislative competence of this parliament, such as the changes recommended with respect to those sentences which have an option of fine, would it be the intention to introduce legislation on such matters at this session?


Stuart Sinclair Garson: No. This is, as I am sure my hon. friend will appreciate, a very large subject; and all these various parts of it are closely related to one another. We think the wise policy is to consider it as a whole, by ourselves and also in concert with the provincial governments.



BOX CARS, QUOTAS AND MARKETING

[Stage Direction]
On the orders of the day:
John George Diefenbaker: May
I direct a question to the Minister of Trade and Commerce. In view of the fact that just one week remains before the end of the crop year, will the minister say what report, if any, he has as to what is being done to accelerate the number of cars available for the shipment of wheat so that farmers, particularly in those areas where quotas are low, will be able to market a reasonable amount? Will he also say whether or not consideration has been given to permitting the farmers to market wheat they still have on hand from the 1955-56 crop after the beginning of the new crop year?


Right Hon. C. D. Howe (Minister of Trade and Commerce):: Mr. Speaker, the last report I had was dated last Wednesday night. It indicated that the number of points on the 4 bushel quota had been reduced to 30. I am

Inquiries of the Ministry sure those will be cleaned up, and I think that most 5 bushel quota points will be cleaned up by the end of the crop year. All C.P.R. cars are being concentrated on the low quota points.
A new development is that as of last Friday the quotas were removed from oats so that all oats can be shipped now free of quota restrictions. The reason for that is that the demand for oats is considerably larger than the visible supply. Stocks in store at ocean and lake ports are low. There is no hold-up as far as unloading box cars is concerned, and I think another week will improve the situation. Quotas will end at midnight of the 31st of July. However, in the new crop year which will begin on August 1 an effort will be made to give first preference to points that did not ship their fair quota during 1955-56.


John George Diefenbaker: I want to thank the
minister.


Mr. W. G. Weir (Poriage-Neepawa):: May I
also ask the Minister of Trade and Commerce if it will be possible to give special consideration in the new quota arrangements to those areas that have suffered crop failures in the last two or three years and in the ordinary sense are deserving of an even greater opportunity to deliver this year?


Clarence Decatur Howe: Mr. Speaker, I
stated some time ago that a special effort would be made to give prompt attention to the island country north of Winnipeg which has had two successive crop disasters. I think I can assure my hon. friend that a special effort will be made to extend that preference to all areas that have had crop failures during the past year.



CIVIL DEFENCE


[Stage Direction]
On the orders of the day:
Mr. W. M. Hamilton (Notre Dame de Grace):: I should like to direct a question to the Minister of National Health and Welfare. Was the absence of a civil defence organization in the city of Montreal estimated to increase greatly the casualties in that area in the test exercise just completed?


Hon. Paul Martin (Minister of National Health and Welfare):: Mr. Speaker, the hon. gentleman was kind enough to give me notice of his intention to ask this question. In reply I would say that the umpire, General Hatton, has given an answer which I may use on this occasion, and that answer is in the affirmative.



REPORTED RECOMMENDATION OF MEDICAL ADVISER TO GOVERNMENT

[Stage Direction]
On the orders of the day:
Mr. A. W. Stuart (Charlotte):: Mr. Speaker,
I should like to direct a question to the Minister of National Health and Welfare arising out of a recent press and radio report. Has the hon. member for Broadview (Mr. Hees) been recommended to the Prime Minister and the members of the cabinet as a medical adviser?


Paul Joseph James Martin: Mr. Speaker, my hon. friend did not give me notice of his intention to ask that question but I do not think I require much notice. In view of the importance of the question, however, I would want to give it further consideration.



AGRICULTURE


[Stage Direction]
On the orders of the day:
Mr. W. M. Howe (Wellington-Huron):: Mr. Speaker, I should like to direct a question to the Minister of Agriculture or, in his absence, to his parliamentary assistant. In view of the loss experienced by farmers of Ontario owing to late seeding and of the present difficulty experienced by them in haying and harvesting operations, all caused by wet, backward weather, is the government considering some type of crop insurance similar to that operating in the western provinces under the Prairie Farm Assistance Act?


Mr. Roberl McCubbin (Parliamentary Assistant to the Minister of Agriculture):: Mr. Speaker, I can assure the hon. member for Wellington-Huron that all these matters are taken into consideration. If the provincial government will discuss the matter with us, we will see what we can do with respect to it.



TAXATION


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


Mr. Fleming:: Mr. Speaker, is it the intention of the minister to make a statement on the motion?


Walter Edward Harris: Mr. Speaker, I spoke twice at the resolution stage, on one occasion at considerable length, I think, or at greater length

than I usually speak. Having in mind my earnest request to hon. members opposite that, if possible, they might find it desirable to state their party position with fewer speakers than has been the custom up to the present time, I feel that I should not speak now but I shall probably wind up the debate.


Donald Methuen Fleming: Mr. Speaker, we are now dealing with the motion of the Minister of Finance (Mr. Harris) that Bill No. 442 be read the second time. In reference to the entire proposal of the dominion government as contained in the bill, our position was stated by the Leader of the Opposition (Mr. Drew) at the resolution stage on July 16. That resolution was passed on division. The house is now asked to carry into legislative form and effect the formula which was the essence of the federal government's proposals. We are asked to do so with full knowledge that no provincial government has yet given its approval to those proposals and indeed with full knowledge that there has been widespread disapproval of the government's proposals on the ground of their inadequacy. I therefore say, Mr. Speaker, that the effect of reading this bill the second time would be, as I understand it, to give effect to a principle that the formula contained in the bill is adequate and ought to be adopted.
The question that we ought to ask ourselves is similar to that which my leader put before the house when he spoke a week ago. To paraphrase it, I would say the question before us is whether or not at this time there is evidence that the proposals of the government, and in particular this formula, will satisfactorily meet the demands which are actually now imposed upon provincial governments, municipal councils and boards of education throughout Canada and particularly whether they will be adequate over the five-year period during which the new scheme is intended to be in effect.
I point out at the outset, sir, that this is enabling legislation. If it is adopted, it will vest very wide powers in the Minister of Finance, and the powers vested in him include the power to legislate in the form of regulations.
As to the details of the formula, suffice it to say at this point that it is an actuarial maze to most people. The formula itself would undoubtedly confuse most citizens. Talk of tax equalization payments, provincial revenue stabilization payments, tax rental agreements, gross national product, average personal income, and other expressions in which this formula abounds make it very difficult for the average citizen to appreciate
67509-399J
23, 1956	6287
Federal-Provincial Financial Arrangements the niceties of the formula. Indeed, it would be interesting, particularly in the light of the fact that no Liberal member spoke on the resolution, except the Minister of Finance, to put some of them to a test on the grasp of the details of this formula which they are now asked to approve. Every citizen, however, is interested in the result.
I propose to look at this formula in terms of the results that will follow from its adoption in legislative form. Surely, that is a fair test. Let us then put the new proposed formula in its proper perspective. It is estimated by the government that it would make available to the provinces in return for certain forms of revenue now constitutionally open to the provinces to collect on their own behalf a total this year of $653 million, which represents an increase of $115 million or 20 per cent over the sums that would have been paid to all provinces under the type of agreement now in effect if all the provinces were parties to it this year. It is evident at once that, so far as the provinces themselves are concerned, the new formula, in relation to the scheme which has been in effect for the past nine years, does represent an improvement. It is better. But, sir, we must go farther and ask ourselves if it is good enough, good enough today and good enough to be carried into legislative effect for the full period of five years commencing in the spring of 1957.
The problem, as everyone knows, arises from the fact that there are certain fields of taxation which under our constitutional division of responsibilities are common to both the dominion and provincial fields. If we look at the constitution with regard for the history of the intervening 89 years we must recognize at once, as fairminded men and women, that the provinces in these common fields of taxation have at least equal rights with the dominion.
Indeed, there have been times when it was argued that, because the provincial authorities were confined to taxation in its direct form, there was a constitutional priority created in their favour in that field. But at any rate, sir, whatever may be the validity of that argument, it is undeniable that constitutionally the provinces have at least an equal right and an equal status with the dominion in the fields of direct taxation.
Historically the provinces have claimed a priority because they were the first to occupy those fields.


Mr. Pickersgill:: That is not correct.


Donald Methuen Fleming: Well, the statement of the Minister of Citizenship and Immigration can not change the facts.


John Whitney Pickersgill: No, but the facts are-
6288	HOUSE OF COMMONS
Federal-Provincial Financial Arrangements


Donald Methuen Fleming: The facts are these, that the provinces were in those fields. When did the dominion go into the field of direct personal taxation? It came in in 1917.


John Whitney Pickersgill: When did Ontario-[DOT]


Donald Methuen Fleming: And when it did it came in with the assurances given by the then minister of finance that this entry into the field of direct taxation-of course, the personal and corporation income tax-was to be for the duration of the war only.


Walter Edward Harris: That was his hope and expectation.


Donald Methuen Fleming: And the name given to that act was the Income War Tax Act.


John Whitney Pickersgill: Will the hon. gentleman say when Ontario-


Some hon. Members:: Sit down.


John Whitney Pickersgill: Could I ask the hon. gentleman a question?


Donald Methuen Fleming: If the hon. member will sit down he will have an answer. I am dealing with the point raised and if he will refrain from further interruptions I think he will receive his answer.


John Whitney Pickersgill: We will see.


Donald Methuen Fleming: The federal government gave that statement at the time in 1917. I have drawn attention to the fact that the name given to the act indicated that it was a temporary entry, and that name survived the revision of the statutes in 1927. It was only in 1948 that a new measure was brought in bearing the name of the Income Tax Act to replace the old Income War Tax Act, and recognized that the federal government is in the field of income taxation to stay.
And, sir, look at the field of succession duties. The federal government entered this field during wartime, only in the year 1941. The provinces had been in this field and in the other fields long prior to that time.
At any rate, sir, we have this position, that constitutionally the provinces have at least an equal right in the field of direct taxation and historically they were the first to occupy it.


John Whitney Pickersgill: Mr. Speaker, the hon.
gentleman has not answered my question.


Donald Methuen Fleming: I would make this statement in conclusion.


John Whitney Pickersgill: May I ask the hon. gentleman a question now?


Donald Methuen Fleming: Perhaps the hon. member would be good enough to let me make my concluding remark. The dominion has no priority in these fields. Let it be made perfectly

clear and categorical that in these fields of direct taxation with which we are concerned in this measure, the personal income tax, the corporation tax and the succession duty, the federal government has no priority.


Walter Edward Harris: Has anyone asserted that it has?


John Whitney Pickersgill: No one has ever asserted it.


Donald Methuen Fleming: I will be glad to have the question of the Minister of Citizenship and Immigration now.


John Whitney Pickersgill: The question I should like the hon. gentleman to answer is this. In what year did Ontario and in what year did Quebec first impose personal income tax? Let us settle this question of history.


Donald Methuen Fleming: The answer, so far as Ontario is concerned, to the self-satisfied grinning Minister of Citizenship and Immigration, is this, that the Ontario legislature had enacted a corporation tax before-


John Whitney Pickersgill: I asked about personal income tax.


Donald Methuen Fleming: Will the minister sit down and wait for his answer.


John Whitney Pickersgill: The hon. member is evading my question.


Donald Methuen Fleming: The minister is bobbing up all the time and he cannot wait for his answers.


Mr. Rowe:: Make a speech later yourself.


Donald Methuen Fleming: If the minister wishes to make his speech let him rise and make it like a man at the proper time and refrain from his endless, everlasting and senseless interruptions. I am trying to answer the hon. gentleman's question and if he will remain quietly in his seat without interrupting when I am half way through he will receive an answer.
The Ontario legislature clothed the municipalities of Ontario with the right to levy a personal corporation tax before the federal authority entered this field. Thus the field had been occupied by the provinces.
So far as the province of Quebec is concerned, I have not the answer here, but as the minister appears to lack it I shall be glad to obtain it for him.


John Whitney Pickersgill: What I would like to know is, what is a personal corporation tax?


Donald Methuen Fleming: When this field is entered into or when negotiations are entered upon with a view to arriving at understandings or divisions of the fields of taxation between the dominion and the provincial authorities, let us remember, as the dominion

government is prone to forget, that the provinces are in those fields not by leave of anyone; they are there as of right. It is their constitutional right. When there are suggestions from the dominion government about allowing the provinces to occupy some of this field, referring to that as a concession, we have a measure, Mr. Speaker, of the error in the federal government's thinking.
Now, sir, the first subject I think we should refer to in assessing the adequacy of the formula proposed in this bill is what has been the answer of the premiers of the ten provinces of Canada. They are the spokesmen not merely for the provincial governments; they must constitutionally be the spokesmen for thousands of municipalities in this country as well. They have this problem to wrestle with all the time, the problem of inadequate revenues and expanding responsibilities. Every provincial government in Canada has it and every municipal government I have ever heard of has it as well.
What then do these spokesmen for the provincial and municipal levels of government have to say about the federal government's formula? Well, there is not one province that has given approval to the federal government's formula.


John Whitney Pickersgill: That is not true either.


Donald Methuen Fleming: 
Walter Edward Harris: They are allowed to enter by reason of our withdrawal from the field.


Donald Methuen Fleming: That is a cute way of putting it, I must say. The fact is that the minister used the word "allow". It was a condescending sort of permission given by the federal government to these provinces to enter fields which they are constitutionally as much entitled to occupy as is the federal government.


Walter Edward Harris: They can occupy them.


Donald Methuen Fleming: And indeed, there have been denunciations on all sides about the rigid
23, 1956	6289
Federal-Provincial Financial Arrangements take-it-or-leave-it attitude adopted by the federal government with reference to its formula.
Sir, there have been premiers who have said that so far as the so-called conference this year was concerned it was really no conference at all. Some of the premiers were called here in the midst of sessions of the provincial legislatures. They absented themselves from them or those sessions were suspended in order that the premiers might attend the conference and all they were faced with was the rigid take-it-or-leave-it attitude of this government. I wish to say at once, sir, that while there are federal rights and interests that must be protected and safeguarded-no one denies that-nevertheless this rigid and inflexible, this hard take-it-or-leave-it attitude, is foreign to the spirit of confederation, and there has been altogether too much of that rigidity and inflexibility in the attitude of this government all through the years during which the problem of dominion-provincial fiscal relations has occupied the attention of all those governing the dominion and the provinces. So it was amazing indeed to hear the Minister of Finance a week ago today say in the most cooing terms in reference to the treatment of the provinces that "we have not reached and would not expect to reach unanimity of agreement on the proper division of these tax fields." What an impressive statement, indeed what a monstrous understatement of the facts in the light of the statements which provincial premiers have made about the inadequacy of this present federal formula!
We do not plead that the provincial governments have any absolute veto in regard to federal proposals, but the unanimity of the attitude and expressions of the premiers speaking for all the provinces and all the municipalities in Canada must be deeply impressive to anyone who approaches this problem with a desire to see a sensible Canadian solution found.


John Whitney Pickersgill: There was no unanimity.


Donald Methuen Fleming: There goes the babbling Minister of Citizenship and Immigration who is physically incapable of restraining that tongue of his. If he wishes to speak, let him rise like a man in the ordinary course in debate and make his speech and not be throwing in these twitterings.


John Whitney Pickersgill: Just-


Donald Methuen Fleming: He is still at it; he just cannot stop doing it because he has absolutely no control.


John Whitney Pickersgill: Stick to the facts.

Federal-Provincial Financial Arrangements


Donald Methuen Fleming: He is still at it; he cannot help it. I suppose we should feel sorry for him and deal with him rather in pity and sorrow than in anger. I do not deal with him in anger at all. I deal with him in very good humour.
If there had been any question at all about the attitude of the provinces I am sure it was more than eloquently evidenced by the outcome of at least three provincial elections which occurred recently in Quebec, New Brunswick and Saskatchewan. There certainly is no approval found in the results of those provincial elections for this federal formula or the high-handed and hard attitude taken by the federal government in its approach to the problem of dominion-provincial fiscal relations.
As the Minister of Finance (Mr. Harris) seems to have forgotten and as the Minister of Citizenship and Immigration (Mr. Pickers-gill) seems never to have known what the provincial premiers have said about this federal formula, let me remind the house of some of the statements which these premiers have made from time to time. Here is a press statement of January 31, 1956 quoting Premier Hugh John Flemming of New Brunswick as saying that the January 1956 proposals:
. . . come as a disappointing culmination of a now long series of meetings and submissions of various kinds rising eventually to the level of a federal-provincial conference.
He went on to say:
No consideration is being given to our special needs and responsibilities at this time in our history.
Mr. Duplessis is quoted in the following month as having said:
Just as long as the people in Ottawa insist on trying to make the people believe that they are doing the provinces a favour and that they are making a gift to the people of Quebec, then relations between Quebec and Ottawa will remain as they were.
Mr. Duplessis went on to say that the whole question is bigger than dollars and cents.
Premier Frost of Ontario was quoted at that time as saying:
-we feel strongly that a formula that provides a special payment to all provinces except Ontario fails to meet the special needs of this province.
Premier Bennett of British Columbia is quoted as saying:
In so far as they apply to a province like British Columbia which is not dependent on fiscal subsidies, is experiencing an unprecedented growth and requires a greater allocation from the cultivation of income tax fields to keep pace with a development which apart from its provincial worth will yield vast returns to the nation.


Walter Edward Harris: Why do you not quote the
other sentence he used?


Donald Methuen Fleming: The minister may quote
Premier Bennett as much as he wishes, but I doubt if he will derive much comfort from that.
Then Premier Campbell of Manitoba is quoted as saying:
However Manitoba was still disappointed that so little attention had been paid to the question of the actual financial requirements faced by the provincial governments in the next few years.
And again:
It is our recommendation that before any new pattern in federal-provincial relations is adopted a thorough reassessment of the relative responsibilities and revenue sources of the various governments in Canada should be undertaken.
That is the Liberal premier of Manitoba speaking about the formula that this house is asked to approve today.
Then in March Premier Frost of Ontario dealt with the proposal of the federal government as a take-it-or-leave-it proposal. Speaking of the federal government he had this to say, which I am sure will be recalled:
They were wrong in 1945, they were wrong in 1952 and they are wrong today, and they will find out how wrong they are in about five years when they come face to face with the realization that today's lack of foresight will bring this country to the brink of economic disaster.
Those are very serious words. Then concerning the one-day re-convened conference of that time he had this to say:
I have never seen a dominion-provincial gathering which had less purpose than the one which ended today at four-thirty.
I would remind the house that the provincial premiers left important responsibilities at home in their legislatures in order to attend that conference.
It is not amiss to recall that the voice of Nova Scotia was heard. Speaking in January, the then premier of Nova Scotia, now Senator Connolly, is reported as saying:
So few people in Canada are aware of what really is involved in these tax-freezing agreements. This is the greatest jackpot, the greatest distribu-iton of wealth in our history.
Later on he said that since the provinces are reluctant to impose their own taxes on the people they must continue to forfeit by agreement their tax rights and eventually, especially if national health insurance comes in, may yield these rights altogether and make Canada a unitary state.
Those are serious words.


Stuart Sinclair Garson: Do you approve of them?


Donald Methuen Fleming: I think those words ought to be very carefully weighed by the government which has adopted such a high-handed, rigid and inflexible attitude.


Stuart Sinclair Garson: Do you approve of them?


Donald Methuen Fleming: These provincial premiers have stated in so far as the provisions of this bill before us are concerned-


Walter Edward Harris: May I ask a question? Is the hon. member saying that he disagrees with what Senator Connolly said or is it a question of the amount which the provinces get or a question of the surrender of their autonomy?


Donald Methuen Fleming: Both questions are involved and always have been. There is no secret about that. Those questions have always been involved. In the present case we say, as we have always said, that the federal government has not given proper recognition to the constitutional position of the provinces, and in reference to common fields of taxation, where the federal government has made proposals, it has done so without regard for the constitutional position of the provinces or the needs and burdens of those provinces.
The premiers of the four Atlantic provinces have met recently. Just a fortnight ago the premiers of these four Atlantic provinces assembled at Fredericton, and out of their meeting came a demand on the part of the spokesmen of those four provinces for a recognition of the fiscal position of those provinces, which this federal government has not yet at any time given to them. They demanded assistance in the development of natural resources, and to Premier Smallwood of Newfoundland is attributed in the press statement this expression of his views:
As an example of the profit which goes from provincial development to the national government. Premier Smallwood cited the Labrador share of the Ungava iron ore development. A project which cost Ottawa nothing, he said, would eventually provide $100 million a year in revenue. Newfoundland would gain only $1 million a year in increased revenue.
Where do the other $99 million go? They go to the federal government, this government which persists in saying that it will not depart by the dotting of an "i" or the crossing of a "t" from the formula that it has put forward and on which it has taken this senseless "take-it-or-leave-it" attitude.


John Whitney Pickersgill: May I ask the hon. member a question?


Donald Methuen Fleming: I suppose we might as well have it.


John Whitney Pickersgill: Will the hon. gentleman quote what the premier of Newfoundland said about this proposal on the day of that one-day conference? It has been made public, and he will find Mr. Smallwood accepted it.


Donald Methuen Fleming: I do not happen to have it at the moment, but if the minister has it and wants to read it he will have his opportunity
23, 1356	6291
Federal-Provincial Financial Arrangements in the debate if he adheres to the rules of the house and makes his own speech for a change.


John Whitney Pickersgill: I accept the rulings of the Chair.


Donald Methuen Fleming: It is about time he did, because no one has deviated from them as often as the Minister of Citizenship and Immigration. He has broken every one and he has bent every one almost beyond recognition, and he smugly snickers about them all the time because he thinks it smart to do so and get away with it.
I have dealt with the attitude taken by the provincial premiers as spokemen for the provincial and municipal governments in this country. I now ask the question, is the unanimous attitude taken by the provincial premiers


John Whitney Pickersgill: It is not unanimous.


Donald Methuen Fleming: Is it reasonable?


William Earl Rowe: The minister says it is not unanimous.


Donald Methuen Fleming: If the minister says so, that does not change the facts. The fact is that there is not one provincial premier in this country who has expressed approval of this formula.


John Whitney Pickersgill: That is not true. The
premier of Newfoundland has.


Donald Methuen Fleming: Mr. Speaker, are we to have any order?


Mr. Speaker:: May I ask the Minister of Citizenship and Immigration not to ask any questions unless the member who has the floor accedes to his request, and not to interrupt the member while he is speaking.


Donald Methuen Fleming: Questions are one thing, but these statements smuggled into the speech of the member who has the floor are another.


Some hon. Members:: Oh.


An hon. Member:: He is spoiling your speech.


Donald Methuen Fleming: I should hate to think my speech is so bad that it could be spoiled by senseless and inane interjections by the Minister of Citizenship and Immigration.


John Whitney Pickersgill: What I said was true.


Donald Methuen Fleming: He cannot hold himself. I suppose we should feel sorry for a man who cannot stop that tongue wagging.
As I said, having dealt with the position taken in public statements by the provincial premiers, I come now to ask the question, is the attitude that the provincial premiers have taken reasonable? We have to ask ourselves the question, in weighing this issue, whether

Federal-Provincial Financial Arrangements we are entitled to overlook the position taken by these provincial premiers and blandly and blindly legislate this formula into statutory effect.
Let no one underestimate the importance of the provinces and municipalities in the field of government of this country. They are the governments that are closest to the people. Anyone who has had experience of municipal government and has entered the federal field is well aware of the fact that is the form of government that is closest to the people. It is a form of government much older than our federal form of government in this country.
Today Canada is facing a period of very rapid development. We have talked freely in this house about the rapidity of the development of resources in this country today. The development of all the resources of this country except those in the territories is constitutionally vested in the provincial jurisdiction, and it is relatively little help that the provinces are receiving from the federal government in the form of conservation of resources or other forms.
New enterprises are created by individual effort and initiative, and then what happens? What is the result on governmental responsibilities and revenues? Let us take an example or two. When a new mine is opened up and development begins, the first thing that is called for is the construction of roads into the mine and the provision of the other services which in unorganized portions of the province are the responsibility of the provincial government. Then, when staff comes in and the little community is established, what is the form of government that then must assume the burdens? It is the municipal form of government. The demand at once is made for the construction of streets, and the provision of schools, police and fire protection, health and welfare services and municipal administration. The cost of every one of these municipal services, all of which are demanded by the people, is rising in astronomical proportions at all times.
But what is the government that derives the first revenue from this new enterprise? I say to you, sir, it is the federal government. The first time a pay cheque is given by that enterprise to an employee, the federal government steps in to receive its first cut on the first pay cheque.
The figures that I ascribed to Premier Smallwood in the extract that I read from his statement indicate the tremendous benefit that the federal government derives in respect of revenues from the development of new enterprises. But it is only at a later stage that the municipal and provincial governments begin to derive their revenue benefits.

In the meantime the burden of providing the services that are required in that particular municipality falls on the municipal government and also on the provincial government.
Take another example: the construction of a new industry in a town or a city. On whom does the burden fall of providing the services that are required for such an industry and for the employees of that industry? It is the municipal government. The first burden falls on the municipality. But what level of government derives the first revenue benefit? Again it is the federal government. Out of the first pay cheque comes the federal cut.
There is a situation which must be recognized and, in my respectful submission, has not been recognized by the federal government in its relations with the provincial premiers. Sir, Mr. Harvey Perry, director of the Canadian Tax Foundation, has summed that situation up in these words:
Given peace and prosperity the provinces and municipalities will henceforth bear the brunt of the cost of providing expanded government services and facilities for a rapidly growing country, whereas their revenue sources, being less elastic, will rise more slowly than those of the federal government. It is also becoming clear that barring war and depression the relative needs of the federal government for revenue to support functions in its own sphere will decline in the foreseeable future whereas the federal treasury is the one that will reap the greatest share of the benefit from an expanding economy.
If you want any further example of what an increase in population in an expanding municipality means, just take the experience of the city of Edmonton. In the brief it recently submitted to the Gordon royal commission it gave the estimate that if an increase of 175,000 takes place in the city's population over the next quarter century it will be necessary to construct 500 miles of streets and sidewalks and 450 miles of sewers and water mains and to connect 180,000 utility services of all kinds. The brief pointed out that 1,100 schoolrooms and 3,200 hospital beds will have to be provided for this increase in the population. The brief concluded:
Such a program suggests expenditures in the nature of $300 million over the next 25 years for schools, hospitals and general capital requirements.
Sir, statements of that kind are entitled to be taken with the greatest gravity. When there is talk about "rich provinces" people usually think in terms of the stage of development that a province has reached in regard to its resources, but here in a debate of this kind what we must concern ourselves with is the burden cast on all such provinces as well as those that are not classed in that category, the burdens that are increasing so rapidly with the pace of development of resources.

A word now about the outlook of the provinces and municipalities in relation to their revenues and fiscal future. The proportion of the tax dollar that is going to the three levels of government is always a fruitful source for study. In 1939 the dominion collected 47 cents out of the total tax dollar in this country. In 1955 it collected 68 cents. In 1939 the provinces collected 23 cents out of the Canadian tax dollar, and in 1955 the provinces combined collected only 17 cents of that dollar.


Walter Edward Harris: You have not taken into account the transfer payments.


Donald Methuen Fleming: We are speaking now of the revenues collected by the provinces in relation to the tax dollar paid by the taxpayer.


Walter Edward Harris: But you have not credited the provinces or municipalities with the transfer payments made by the federal to the provincial governments.


Donald Methuen Fleming: The minister speaks of the payments transferred to the provinces and by the provinces to the municipalities. We are dealing now with the tax dollar collected by the three levels of government. In 1939 the municipalities' share of the tax dollar was 31 cents. In 1955 it was only 15 cents out of that tax dollar.
What of the burdens of the municipalities and the provinces all this time? Current expenditures of provincial governments have increased very substantially in the post-war period. Total current expenditure, excluding provision for tax repayment, increased from $402 million in the fiscal year 1946-47 to $1,261 million in the fiscal year 1955-56. Almost every category of provincial expenditure has greatly increased. Between the fiscal years 1946 and 1955 total current expenditure of provincial governments increased 98-6 per cent, while Canada's population increased only by 26-9 per cent. Highway expenditures increased 154-9 per cent. Public welfare and relief expenditures increased 123-8 per cent, and education 102-8 per cent. In other words, sir, the provinces are being called upon today to provide services which are thrice as expensive as the services provided in 1946.
The Minister of Citizenship and Immigration asked for some enlightenment on the position of the province of Newfoundland. Well, I am glad to give him that needed information. In the brief it submitted to the Gordon royal commission the government of Newfoundland stated that its road program would necessitate an expenditure of at least $5 million annually on capital account, that water and sewerage systems would involve $1 million annually, and schools and hospitals at
23, 1956	6293
Federal-Provincial Financial Arrangements least $1,500,000 each year for the next 25 years. The brief went on to stress how much below the general level of services those of the province of Newfoundland are compared with those prevailing in other provinces. In discussing the financing of necessary expenditures the brief concluded that the province's "ability to provide the means both for overcoming the present deficiency in social capital and meeting the requirements of prospective growth is very limited." Then the province asked the federal government for substantially increased grants for highway construction and other purposes.
What of the position of the provinces and municipalities in regard to capital expenditure, because every member of the house knows that necessary capital expenditures were deferred during the war by provinces and municipalities and that a tremendous backlog had accumulated by the beginning of the post-war period? The trend in post-war capital spending by both provincial and municipal governments has been sharply upward. In 1946 total capital expenditures of provincial and municipal governments and their agencies amounted to $276 million, representing an increase of more than 80 per cent over the previous year. Since that time every province's capital expenditures have increased many times over, from $138 million in 1946 to $677 million in 1955. Municipal capital expenditures, although rising somewhat less than those of provincial governments, had increased by 1955 to more than four times the 1946 level, from $138 million in the earlier year to $546 million in 1955. While it may not be possible for the provincial and municipal authorities to carry out their total planned capital spending for 1956, there can be little doubt that these expenditures will be higher than in 1955. Provincial governments and their agencies have announced the intention of spending $941 million on capital account in 1956, and municipal governments $603 million.
I turn now to current municipal expenditures. Here we will see that on current expenditure the burden on the municipalities rose from $348 million in 1946 to $873 million in 1955. In the latter year education accounted for 32 [DOT] 7 per cent of the total, general administration, including police and fire protection, 31 per cent, public welfare 14-5 per cent, highways, roads and streets 14-7 per cent, and debt charges, excluding debt repayment, 7-1 per cent.
Every hon. member here knows well the situation with respect to his own municipality. I intend to mention only three in particular before passing on to another subject. In its brief to the Gordon royal commission the city of Montreal, Canada's most populous city,
6294	HOUSE OF
Federal-Provincial Financial Arrangements stated that the volume of municipal investment presently necessary, and which the city considers should already have been undertaken to make up deficiencies accumulated since 1934, totals $503,300,000. Included in this huge sum are waterworks, $40,300,000; collector sewers, $33 million; local improvements, $17,500,000; parks and playgrounds, $40 million. A substantial part of the total backlog involves expenditures necessary to relieve traffic bottlenecks in the city: expressways, $147 million; subway, $87 million; parking, $10 million; tunnels or bridges to the south shore of the St. Lawrence river, $60 million.
Or look at the city of Quebec, Mr. Speaker. In its brief to the Gordon royal commission it said:
Whereas our budget is $12,700,000, including school costs, some cities with approximately the same population (225,000) have at their disposal a budget varying between $15 million and $20 million. As you can see, the margin is a substantial one. The present situation leaves us no alternative but to reduce expenditures more and more, while putting off urgent works until a later date. We cannot act otherwise under the present circumstances without further weakening the financial structure of our city and the economic well-being of its citizens.
The last example I have taken is the city of Halifax which in its brief expressed grave fears that it would be unable to raise the required revenue in future years because of its limited real property tax base. Other municipalities submitted briefs to the same effect, my own city of Toronto among them, drawing attention to the prodigious burden laid upon the metropolitan area by the need for providing new school facilities, new transportation, water, sewerage and other new works required.
Mr. Speaker, education must have a special word of mention because education affects all the municipalities across the country and is today faced with a situation that can only properly be described as critical. As a result of increase in the birth rate and increase in immigration the school population has been rapidly enlarged. The cost of providing school facilities becomes greater all the time. The pressure on existing school facilities has now become so acute that in many schools the facilities are admittedly hopelessly inadequate, either in point of quality or physical extent, to provide for the growing school population. In many schools the children are simply being taken in relays, with all the strains that this imposes on staff and upon administrative machinery and all facilities.
The Minister of Finance and the government have been often urged in this house to recognize the fact that the sources of revenue open to the municipalities and to the


provinces are inadequate to provide for the expanding cost of education, as things stand today. In approaching this present renewal of fiscal arrangements between the dominion and the provinces, the Minister of Finance had a golden opportunity to recognize that inescapable fact and to do something to meet it; but, Mr. Speaker, as things stand at the moment, he has thrown away that opportunity. The increase that is offered in the new formula over the amount provided by the existing agreements cannot be pretended by anyone to meet the needs of the provinces and of the municipalities in relation to education. There is in this country no governmental function more important than education. The benefits of education are not confined locally in the municipality or even the province. For example those excellent universities in the maritime provinces which are educating so many in proportion to the population there are doing so not just for the benefit of the maritime provinces. The benefits of the excellent university education available in the maritimes are transmitted throughout the whole of this country as the graduates go elsewhere, as do many of them.
Student enrolment is bound to increase in this country by leaps and bounds at all levels of our educational system. University enrolment in Canada is expected to rise from
66.000	to somewhere between 110,600 and 135,200 by the fall of 1964. In Ontario it will jump from 20,400 last year to 42,700 in the same period. The median of the all-Canada projection is 123,000, an increase of
57.000	over the present, and that is just by the year 1964. In Ontario alone the increase will be 22,000; that is, 40 per cent of the Canadian increase will occur in the province of Ontario.
By and large, I think the provinces have done all they can to assist the municipalities. Indeed, in his comment of July 18, Premier Frost had this to say:
Education in its primary, secondary, vocational and university phases has added immense burdens, and we have by no means even begun to feel the full weight of the problem. As a province we are not static and our problems continue to grow. Today we have a school population in primary and secondary schools of approximately one million. This population has been built up since the beginning of this province. But the next 10 years alone will see 750,000 children added to this enrolment.
That is an increase of 75 per cent in the next ten-year period. It is a staggering increase and the cost of providing educational facilities for that staggering increase in the school population will be literally colossal. I am sure I do not need to detain the house with more figures in this field.

The plight of the municipalities is desperate. I think the provinces have done all that lies within their power to help the municipalities. In Ontario grants to the municipalities in the last twelve years have risen from $18 million to $185 millions and 45 per cent of all provincial government revenue now goes to the municipalities from the provincial treasury. But it remains a fact that 84 per cent of all municipal revenue comes from the direct levy on real estate which has now become virtually a capital levy and is crushing in the burden it casts upon the home owner.
Mr. Speaker, I leave this subject with this observation. Provincial burdens are bound to increase. Municipal burdens are bound to increase. One could cite many examples of that fact.
I now wish to say a word-and I shall not be long-about the attitude of the dominion government. During the war practically everybody accepted the necessity of centralization. It was done to meet a crisis and legislative jurisdiction was concentrated at Ottawa to an unprecedented degree. Similarly, the tax-collecting functions of government were concentrated to an unparalleled extent here at Ottawa. But much of the mentality that pervaded the federal government's thinking in those war years has been carried into the years of peace. I should be the first to concede that the federal government has assumed increased burdens in this post-war period. But I do say that this increased burden which the federal government is wont to parade has not been commensurate with the increase in its revenues from these common sources of taxation. The camel got its head into the tent, and instead of being content to share the tent with the former occupant has been busy trying to push the camel driver out.
In the present measure, the extent to which the federal government will permit the occupation of these joint fields by the provinces with the dominion, without the unhappy incident of double taxation, is just 9 percentage points out of 47 percentage points that the federal government levies on the taxable income of corporations and just 10 per cent out of the levy on personal income tax and one-half of the succession duties. The way in which the federal government has proceeded through this take-it-or-leave-it attitude indicates they are now proceeding to the next stage in their tactics of divide and conquer. They applied that method in 1946 and 1947 and later, first of all on the provinces with weaker fiscal positions. Their approach, if they repeat these tactics of divide and conquer, in that way will be inimical to
23, 1956	6295
Federal-Provincial Financial Arrangements national unity. I warn the government of the consequences, though they do not seem to care.
What needs to be done at the outset as a preliminary necessity is that the federal government should recognize the constitutional position of the provinces, but they have not shown a disposition to do so. Sir Wilfrid Laurier, who does not seem to be listened to any more by hon. members opposite, long ago drew attention to the dangers of separating the responsibilities of tax collection from tax expenditure. He said that would always lead to extravagance. The late Mr. Mackenzie King, in 1945, had something similar to say to those hon. members opposite who have not completely forgotten him. He said:
There will, however, be no solution of existing problems which involve financial outlays so long as one government or agency is the taxing agency and another government or agency is the spending agency. In other words we must return as regards our revenues and expenditures as in all else to responsible government in the fullest meaning of that term, whereby the governments that spend public moneys must be the governments which through the agency of taxation raise what is to be spent.


Walter Edward Harris: Would you mind giving me the reference?


Donald Methuen Fleming: That language, as I understand it, does not preclude the entering into of an understanding between the federal and provincial authorities. I am not suggesting that the language is intended to go that far. But I do draw attention to this. We are not going to have a return to what may fairly be called responsible government unless there is an adequate recognition on the part of the federal government of the constitutional position of the provinces, the heavy burdens and the need for adequate revenues for the provinces and municipalities to discharge these heavy burdens of expenditure.


Walter Edward Harris: I should like the reference to Mr. Mackenzie King's remarks.


Donald Methuen Fleming: That was in 1935 at the dominion-provincial conference.


Walter Edward Harris: There was not one in 1935, as I recall it; or was there?


Donald Methuen Fleming: It was in 1935.
With the recognition of financial responsibilities and the need of revenues to meet them, let the federal government adequately recognize that these fields of common taxation are those that the provinces and the municipalities must depend upon to sustain the revenues or provide the revenues they need to discharge their responsibilities. They do not possess the unlimited sources of revenue that the federal government has.
6296	HOUSE OF
Federal-Provincial Financial Arrangements
Now, sir, I come to this concluding observation. I think this formula ought to be judged by the results which it will create. The provisions that will accrue to the provinces from the three features of the formula are inadequate. A new conference between the federal arid provincial governments is altogether desirable, if the federal government will not go to such a conference with the same attitude as it went to the conference in 1955 and 1956. There is no use, of course, in having a conference if the federal government is simply going to continue to take this rigid, inflexible, take-it-or-leave-it attitude. On the other hand, if the federal government will give adequate recognition to the constitutional position and the needs of the provinces, and will genuinely seek an understanding to meet their needs, then a new conference should be called.
There is no use, so far as Her Majesty's loyal opposition is concerned, asking us to approve a form of dominion-provincial fiscal arrangement which has not received the approval of a single provincial government. If there could be, on the part of the federal government, a change of attitude, and after that change in attitude they will call a new conference, then fruitful results I am certain could be achieved. It would necessitate a fall session of parliament. We would be quite happy to see a fall session in order to achieve this praiseworthy object. We realize that these agreements are going to run out at the end of the present fiscal year, March 31, 1957 and therefore the legislation, to allow adequate planning by all governments concerned, must be passed this year, 1956. We are quite prepared, if the federal government will follow the course we have urged, to come back if necessary for a fall session. But we say that the provision made by this measure for the provinces is inadequate.
If hon. members opposite ask me what our position is I can say to them that we would do more for the provinces than the federal government has shown it is willing to do in this measure. We believe the federal government can do more and can afford to do more.
Let there be no question about our position in reference to other features of this matter of federal-provincial fiscal relations. We recognize completely the principle of equalization grants, sharing the revenues which if the federal government were not in this field would accrue simply to the provinces. We recognize the claim of the provinces in a weaker financial position; we certainly do. So far as we are concerned that recognition' is axiomatic, basic and fundamental in our approach to this subject.


We look upon provinces like the maritimes, which have not the hinterland territory and undeveloped resources, broadly speaking, that are available to most of the other provinces. We say that account must be taken of those differences in the prospects for future development. Those provinces such as the maritimes-and I am not confining this to the maritimes-in a weaker financial position have been neglected by this government far too long.
I say again the provisions made by this formula, which is the only one that this government is prepared to put forward or agree to, will result in either double taxation, the imposition of new or increased sales taxes, bankruptcy or stagnation or, as the former premier of Nova Scotia warned, in a unitary state. So far as we of Her Majesty's Loyal Opposition are concerned, sir, we do not wish to see any of these things happen. We believe we have ample warnings from competent provincial sources of the dangers of these results flowing from a continuance of the adamantine attitude of the government opposite in these matters. Benefit will accrue, as it always has accrued, to the dominion' and to the federal treasury from strong provincial fiscal positions.
If hon. members are to be told now that the way for the provinces to meet their crushing needs is to go out and levy additional taxes in these fields of direct taxation and in that way create double taxation, I remind hon. members that it is the same taxpayer who will be paying these increased taxes and the plight of the taxpayer in his aggregate burdens is something concerning which we have reminded this government on more than one occasion.
The Minister of Finance knows that he is headed for a huge surplus in this fiscal year; that surplus may run from half a billion dollars to a larger figure, if the government does not dissipate it in extravagance or if it does not hide it, as it has done in other years, by putting great sums of money into various pockets of the government exchequer.
The government apparently has decided that it prefers that the provinces and the municipalities be starved, that they should be compelled to remain in a financial strait-jacket, in order that the federal government may put on a grandstand show next spring and use tax reductions following this enormous budget surplus as election bait.


Walter Edward Harris: Would you oppose it?


Donald Methuen Fleming: I ask the government to take a responsible attitude in this matter and recognize the imperative needs of the provincial and municipal governments. This

formula is at best a makeshift; it is no solution of the problem. What is needed is a government with a realistic and sympathetic appreciation of the responsibilities and burdens and	problems	of	the	provinces	and
a wholesome respect for the constitutional position of the provinces and the constitutional rights they possess, as well as responsibilities they bear.
The Minister of Finance in speaking a week ago today said that times and men change. Well, we hope that the men opposite who are responsible for conducting negotiations with the	premiers	of	the	provinces	canchange.	If they	cannot	change,	thenin the fullness of time, or when the electorate	is given	an	opportunity,	there
will be an opportunity to change the men; but I do urge with all seriousness upon hon. members opposite that while they hold the responsibility-and I am not discounting the weight of the responsibility that rests upon them-they do take a far broader, far more realistic attitude toward the burdens of the provinces and municipalities and a much more imaginative approach to the need for finding a solution.
Therefore, sir, apart from all other considerations, some of which I have mentioned, I give this house in conclusion ten reasons why, because of its utter inadequacy, we of Her Majesty's Loyal Opposition cannot support this bill and why we shall on second reading vote against it:
First, it makes inadequate provision for Prince Edward Island; second, it makes inadequate provision for Nova Scotia; third, it makes inadequate provision for New Brunswick; fourth, it makes inadequate provision for Newfoundland; fifth, it makes inadequate provision for Quebec; sixth, it makes inadequate provision for Ontario; seventh, it makes inadequate provision for Manitoba.


James Joseph McCann: Put them all together.


Donald Methuen Fleming: Eighth, it makes inadequate provision for Saskatchewan; ninth, it makes inadequate provision for Alberta; and tenth, it makes inadequate provision for British Columbia.


Mr. Richardson:: May I ask the hon. member a question? This is just for the purpose of clarification. I understood the hon. member to say, about five or six minutes ago, that the federal authorities had unlimited sources, for revenue, I presume. By what authority does he state that proposition?


Donald Methuen Fleming: The British North America Act which clothes the federal authority with power to raise money by any mode or system of taxation whatever. It is written in the
Federal-Provincial Financial Arrangements plainest terms in the British North America Act and I am sure my hon. friend has only overlooked it for the moment.


Andrew Wesley Stuart: I hesitated to interrupt the hon. member when he was speaking, but I should like to ask him a question at this time. I think the hon. member said in his opening remarks that no Liberal members had spoken in the debate at the resolution stage.


Donald Methuen Fleming: I thought so; if I overlooked any, I am sorry.


An hon. Member:: You were not here, you wouldn't know.


Walter Edward Harris: There were at least two who spoke.


Donald Methuen Fleming: I will check the record again, Mr. Speaker, and if I find I am mistaken I will express my regrets to the two hon. members who spoke.


An hon. Member:: You were away at the time so you wouldn't know.


Donald Methuen Fleming: I only hope that if they speak again they will be a little more outspoken.


William Earl Rowe: They were not very important or they would not have been overlooked.


An hon. Member:: There were three or four who spoke.


Mr. Harold E. Winch (Vancouver East):: Mr. Speaker, on every occasion when bills are introduced in this House of Commons, it happens that some hon. member will say- and rightly so-that it is an important bill, or perhaps that it is the most important bill to be presented to the house in the course of that session.
As far as I am concerned, Bill No. 442 which we are now discussing on second reading is without doubt the most important bill that can possibly come before this house at this session.
This provides us with the opportunity of what we might term a five-year review of the responsibility of the governments and the financial possibilities of the three realms of government in this country meeting their responsibilities, because Bill 442 gives the power of signing new five-year agreements concerning financial arrangements. It is the time for very serious consideration and review of the situation as it exists governmentally and financially in this country. Because of the importance of these things, this bill is one that should not be discussed with high flights of eloquence or emotionalism but rather it should be discussed in as calm and dispassionate a manner as is humanly possible.
6298	HOUSE OF
Federal-Provincial Financial Arrangements I take the position that there are two fundamental facts we have to keep in mind in considering this bill and all that it means. First of all we must remember that many years ago the fathers of confederation laid down the terms of union. I am convinced that no one of any party or of any sense will criticize the sincerity, integrity and brilliance of the fathers of confederation. They laid down what in effect is the fundamental constitution of this country and the jurisdiction and constitutional rights. I think I am safe in saying that at this time no one would contemplate any revision of the British North America Act which would in any way interfere with, change or abrogate the constitutional rights of the governments of this country. However, as men change and as times change we have to recognize that even with all their brilliance, even paying them the highest compliment for the remarkable job they did, at the time of confederation there could not possibly or conceivably have been any idea of the progress and development which would occur in this country and the changing responsibilities of government. That is something which could not have been conceived so many years ago.
Therefore, those of us who are now members of the House of Commons, I feel, have the responsibility of recognizing the basic principles and precepts, of recognizing the correctness of the jurisdiction and constitutional rights, and we should at this time endeavour when we consider a bill which lays the foundations for a new five-year contract to analyse the situation as it is and to see if we can devise a fiscal policy which will enable all governments to meet their new and growing responsibilities.
I said that there were two basic considerations which we had to keep in mind, and the second is that each one of us loves the province in which he resides and the constituency which he represents. Some of us live in provinces which are wealthier than others and we want to see the best that is possible in our own constituency and our own province, but I am afraid that in discussing a matter of this nature too often we consider it from the provincial and not from the national point of view. I say that as one who has some knowledge of that attitude because I spent 20 years in a provincial legislature.
Mr. Speaker, the lights are out, but hon. members need not worry about that, because I am giving them the light in the sense it is required.
At one o'clock the house took recess.



COMMONS AFTER RECESS

[Stage Direction]
The house resumed at 2.30 p.m.
Harold Edward Winch: Mr. Speaker, I want to dissociate myself completely from the rumours that are now flying around the corridors of the parliament buildings. I do not believe that the Minister of Finance has taken a page out of the book of the Minister of Trade and Commerce and by putting out the lights brought in a new system of closure. The lights went out at 12.45. If my memory is correct, when the war started in 1914, Earl Grey looked out of the windows of the foreign office in Great Britain and said, "The lights are going out over Europe." It may seem a strange analogy, but I want to say that in my estimation the Minister of Finance at this time, in the introduction of Bill 442, had the opportunity of putting on the lights for the Canadian nation by a new alignment of fiscal policy. I am sorry that he failed to throw the switch.
At the time of adjournment, I was pointing out that, although we recognize the thinking of provincial governments, and of citizens in provinces, for the maintenance of their own standards and the utilization of the benefits of their own resources, I thought-and I definitely do-that if we are real citizens we have to recognize that Canada as a nation can only be built up by a national attitude and not a parochial one.
The hon. member for Eglinton, in his one-hour talk this morning gave us the general views of himself and the party for whom he spoke. He concluded his remarks by stating that there were ten reasons why the official opposition was not going to support the second reading of this bill. I realize that it is a general practice to make one's remarks and conclude with points of a specific nature, but I am going to reverse the procedure. I am going to begin with ten points and then deal in general with them later. In doing so we would like to make this point very clear; that is, that the development of Canada and the status of all citizens in Canada is dependent upon our being a nation and not a series of parochial provinces.
This is based upon something which I think should be axiomatic, that Canada is not built up as a nation by the wealth of one, two or three provinces, by the industries in certain sections or by the activity of individuals in certain areas. The national wealth and well-being of Canada is the work of every solitary individual in the Dominion of Canada. It means that, irrespective of our position in various provinces, the work of the pioneers in the far outskirts of Canada, the work of those of what have been referred

to as the poor provinces of Canada, make up the national well-being of Canada. It very definitely is the feeling of this group, for whom I am speaking at the present time, that therefore every citizen of Canada is entitled to the best that can be given to him, irrespective of the province or part in which he lives, be it in a city or in a pioneering outskirt of our country.
With that being understood, as I have said, I am going to reverse the procedure of the hon. member for Eglinton. I am going to lay down ten points first and speak to them generally afterwards. I can assure you that our group has given very serious consideration to Bill No. 442. We believe that the following factors deserve the attention of the government and deserve the consideration of the members of this house on the second reading and at the committee stage of this bill:
1.	The C.C.F. group in this house is of the opinion that it is both advisable and necessary in the Canadian interests to continue dominion-provincial fiscal arrangements relative to income tax, corporation tax and succession duties.
2.	It was found necessary for the federal government in time of war, in the national interest, to ask for a dominion-provincial agreement, and in our opinion it is just as necessary to retain the policy in time of peace, whether it be under an expanding economy or with the possibility of a recession.
3.	Our federal group deplores the policy change of the federal government in that their latest proposals constitute a retreat from the basic principles and would appear to indicate a desire of the government to recede from an over-all taxation plan that prevents dual taxation and gives to the federal government a greater supervision of and influence upon the Canadian economy.
4.	The government proposals fail to recognize the fiscal needs of the provinces.
5.	Under the three plans submitted by the federal government there is no real incentive to the provinces to sign a tax rental agreement as there is no benefit accruing to those that come in as compared with those that stay out.
6.	Any dominion-provincial fiscal arrangement must recognize the increasing responsibilities that provincial and municipal governments have without the taxation power to finance the same.
7.	A municipality being the child of the provincial government, an understanding must be reached between the dominion and provincial authorities that a degree of benefits granted by the dominion, perhaps outside
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the taxation agreement, to a fair extent be passed on by the provincial government to the municipal governments.
8.	Any dominion-provincial taxation agreement must include as part of the contract, or by declaration of government policy-and I emphasize that-the assumption of a degree of federal financial responsibility in the fields which constitutionally are the responsibility of provincial governments or municipalities, but the cost of which is beyond their taxation abilities.
9.	Without change in the provisions of the British North America Act, and recognizing the responsibilities and jurisdictions of provincial and municipal governments, the federal government in outlining the tax rental proposals must include therewith financial aid in the field of education, highway construction and capital participation in resources conservation and development as being for the general good of Canada.
Finally, No. 10. Although Canada anticipates an expanding economy, the dominion authorities agree to plan, in conjunction with the provincial and municipal governments, for joint financial participation in necessary works that can be undertaken in time of recession; and further agree to make available to municipal authorities low interest loans to enable them to meet the commitments required because of industrial development and population increase for which the municipalities must make a heavy capital investment for services and the federal government receives the greatest taxation gain.
The C.C.F. group in the House of Commons put those ten points forward as being the important factors that should be considered in discussion on second reading and in the committee stage of Bill No. 442. I said, sir, that after outlining these ten points I would speak in the time available on the general aspects in support of the same. When the leader of this group, the hon. member for Rosetown-Biggar (Mr. Coldwell), spoke at the resolution stage he reminded the house and the government of the contention of the government of the day when the first proposals were made for a dominion-provincial taxation agreement in the three fields that are under discussion. The statement is of such importance that I want to repeat it. The statement of the federal government with respect to the proposals outlined in the green book in 1945 was:
To do these things fully and without destroying the federal system, the dominion government considers that it should have full and exclusive freedom to tax personal and corporate income and estates so that the restrictive effects of double and competitive taxation may be avoided and so that income earned and wealth accumulated nationally

Federal-Provincial Financial Arrangements can be fully and efficiently taxed for national purposes and the mutual advantage of all provinces.
Sir, that was an important statement. It is one that I personally agree with completely. Because of the exigencies of war it was found necessary by the federal government to operate as a nation, and they required not only certain controls but the over-all supervision of the national economy if we were to wage a successful war. All the provinces agreed. But, Mr. Speaker, we want to say this very definitely, that it is just as important for Canada to win the peace as it was for Canada to win the war. I know that can be called a trite statement but it is not. Having been blessed with the resources we have and having in mind the capabilities of our people, we should see to it that there is a reasonable standard of living and degree of prosperity for all the people of Canada, not just those in the wealthy provinces. Winning the peace means the development of Canada by applying the abilities, policies and national direction which we employed in winning the war in order to bring about the greatest good for all the people of this country.
In the event of a recession, and nobody knows whether or not we may encounter another one, it cannot be controlled by any province but only by the national government. We feel strongly that the powers and supervision that enabled Canada to play the wonderful part it did in the winning of the war should also be applied to the winning of the peace.
This, of course, takes me back to my opening remarks as to the responsibilities of various governments. The jurisdictions and constitutional rights are laid down by the British North America Act but the responsibilities have increased to an extent not known when confederation took place. It is regrettable that the present bill does not take into consideration the realities of the situation.
At the resolution stage a member placed the facts on the record with regard to the expenditures of government. In case they have been forgotten I should like to do so again. According to the government's own figures federal government expenditure from 1945 to 1955 increased from $4J billion to $4| billion, or 5-5 per cent. Provincial government expenditures increased from $384 million to $1J billion or 291-9 per cent, and the costs of municipal government went up by 276 per cent.
As pointed out by the hon. member for Eglinton (Mr. Fleming) this morning, the municipalities and the provinces have had to make terrific capital expenditures. This, sir, has resulted in an amazing situation because

in the proceedings at the last dominion-provincial conference we find this:
It is noteworthy that, in these post-war years of prosperity, the indebtedness of the provinces, municipalities and their agencies has risen from $2-977 billion in 1945 to $5-715 billion in 1953, an increase of 92 per cent, while the federal government debt has actually been reduced from $18-438 billion to $18-276 billion.
It should not be necessary to emphasize the practical implications of these figures. Undoubtedly at the time of confederation it was thought that fiscal policies could be arranged on the basis of increase of population. That no longer applies today. One of the greatest needs in realigning fiscal policies with governmental responsibilities is a recognition of the fiscal needs of the provinces and their children, the municipalities. I think we must also have a recognition of the fact that the revenues of the federal government are dependent entirely on the prosperity of the provinces. They being dependent upon the prosperity of the provinces, we need now a recognition by the federal government of the necessity for conservation of the resources of the provinces. Literally, that matter is strictly a provincial responsibility. But if our resources are depleted and collapse, so will the revenues of the federal government. Some advances have been made but not nearly enough. The economy of British Columbia depends to a great extent on our forest resources. In the past they have been given away or they have been stolen. Our resources have been mined, not forested. In recent years there has been some change in policy, but a provincial government is completely unable to do the kind of reforestation that is required. It is absolutely impossible financially for them to do it. It is to the interest of the federal government to see that reforestation takes place and to see that our forests are not destroyed by fire. As it is in forestry, so is it in almost every other aspect of our national resources. We think it is only reasonable to ask this government, when they consider introducing a bill as they are now doing, to recognize the situation as it exists. If they want to be selfish in their own interests they must play a greater part financially in the conservation or the replacement of the natural resources of all of the provinces of the dominion. They must also play a part in the development of the natural resources. In this modern day and age we are reaching a stage where it is completely impossible for provinces or municipalities to finance required developments. This statement applies particularly in such matters as-and I agree they are within provincial jurisdiction and come under provincial rights-hydroelectric power, the Saskatchewan dam and developments in

the maritimes which they need most desperately but which they are completely unable to provide because of the financial limitations. Surely, Mr. Speaker, it is reasonable to ask the government themselves not to take a parochial stand as a national government but to recognize that they have now responsibilities for development and for conservation. As pointed out by the hon. member for Eglinton (Mr. Fleming), costs in the fields of highways and education are now completely beyond the fiscal powers of provinces and of municipalities.
I come back to this point. I state quite honestly and bluntly that we as provincial citizens need to have an understanding of our national well-being. I say also that we need to have from this government a national picture or understanding of provincial and municipal well-being. It is most necessary that in this proposal embodied in Bill No. 442 the government recognize that it is not facing up to the problems of Canada as they exist today. I believe that the ten points this group has outlined are important ones. I believe that they are uppermost in the minds of the provincial premiers of the ten provinces of Canada. I should like to consolidate the opinion. I have read the proceedings of the federal-provincial conference. I have read as much as I could of the information supplied. From reading the statements of all the premiers, I think the opinion has been very well put in a telegram from one of the premiers at the request of the editor in chief of the Toronto Daily Star. After being asked his position the premier of Saskatchewan sent this telegram which reads as follows:
. . . new tax proposals as placed before parliament Ottawa almost completely disregard all representations and evidence advanced by provinces supporting our need for more adequate share of direct tax fields jointly occupied by both levels of government. Saskatchewan has consistently argued proposals have three main weaknesses, first level of payments much too low to relieve increasingly serious financial strain on provinces and municipalities with pyramiding costs of education, road building, health and social services, and urban growth. Second, proposals are related solely to revenues from direct tax fields. They make no provision for fiscal needs of poorer provinces struggling to achieve decent minimum services despite scant revenues from alternative tax resources. Third, instead of seeking co-operation of provinces in maintaining efficient co-ordinated tax system new proposals encourage double taxation and may seriously weaken fiscal powers of Ottawa in combatting major economic crisis. Moreover tax proposals advanced in isolation without needed integration in national policies for aiding public investment and economic development, meeting special regional needs, or stabilizing farm income. One redeeming feature of new proposals is that equalization plan for first time clearly recognizes right of all provinces to share more equitably in tax proceeds from personal and corporate income derived from whole country.
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From my reading I think that is the consensus of the premiers of the ten provinces of Canada. I want to reiterate this statement, Mr. Speaker. We firmly believe that the interest of Canada demands a new financial understanding between the provinces and the dominion. We believe that, without change in the British North America Act, it demands that the federal government shall give more generous assistance to the provinces and municipalities in meeting responsibilities that were never thought of many years ago. May I say, Mr. Speaker, that in my estimation the Minister of Finance (Mr. Harris) had a remarkable opportunity at this session and at this time to do a wonderful job for Canada and to do basically what was done at the time of confederation, namely to lay down a plan for the future of this country. I regret that in Bill No. 442 he has not shown any indication that he understands the situation in Canada or the need for revision of fiscal policy so that all governments can meet responsibilities. From all that has been said in the past and what I have read, I think the Minister of Finance should be told of the old Indian proverb that an elephant has two sets of teeth, one for show, the tusks, and one for action inside. I am afraid that this bill, and what has been said in support of it by the government, is for show, for public consumption, but when you get down to the teeth inside, those that mean action, it does not recognize the problems that are facing Canada as a nation.
I sincerely hope-because I see I have only one minute left-that the minister, through you, Mr. Speaker, will understand that there is no carping criticism from this group; there is no parochialism. We believe in Canada. We believe in the constitutional rights of the provinces as laid down by the B.N.A. Act. We believe it is possible to produce a plan, a fiscal policy, that will enable all the provinces to come into agreement and thereby not only make it a greater nation but establish more equalized standards in all fields in this dominion. It can be done, and we hope the minister will do something more than is contained in Bill No. 442 at the present time.


Mr. Solon E. Low (Peace River):: I should like to take just a few minutes, Mr. Speaker, to deal with some of the things that were put forward by the speakers who have preceded me. With a good deal of what they have said, I can agree. I find myself in disagreement with some of the things. Certainly, I think we must all agree that the bill that is now before us is one of the most important measures, if not the most important, to come before parliament this year. I hope that it will be treated as an important measure and
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Federal-Provincial Financial Arrangements one that deserves tremendous consideration because from it will devolve the happiness, contentment and welfare of our people for the next five years.
The hon. member for Vancouver East (Mr. Winch), who just finished speaking, in the earlier part of his address mentioned the necessity for greater supervision by the federal government over the economy of Canada. He mentioned the need for thinking nationally and, it seemed to me, as advocating a greater measure of centralization of authority. As I listened to him develop his topic I could not help coming to the conclusion that he apparently forgets one very important matter, that is that all the material wealth that is produced in Canada, all those things we get and enjoy in what we call the standard of living, come from our natural resources. In the last analysis every dollar of taxation taken by all the governments of Canada has to come out of the wealth that is produced by those natural resources. Evidently that is something that my hon. friend forgot. These resources belong to the provinces. The development of these resources was given as a responsibility to the provinces under the British North America Act. The provinces are certainly entitled to the money coming from the development of their resources, first to pay all the costs of development in the provinces, and secondly to take care of the needs of the people in those provinces for services. Now, those are fundamental things,
I think, with which every other province can agree. If the people of any province use the wisdom, vision and care in the development of the resources within its boundaries, then Canada as a whole will be richer and every government in Canada will benefit in some way.
The reverse is true, also. If they do not use wisdom in the development of their resources, if they fail to use care, judgment and efficiency, then everyone in Canada will be poorer. But some benefit must accrue to the people of a province if they do work hard and if they make their resources yield in abundance. If you deny them that benefit of hard work, wisdom and care, then the detriment to development will certainly follow.
While we agree that sharing with the less fortunate provinces in a measure is desirable and is provided for in this bill-it is a principle with which we can all agree-I am sure that if federal supervision of Canada's economy is carried too far or if federal taxation is carried too far, then that great discouragement to the development effort is bound to come and Canada will be poorer and not richer. We have to be careful, therefore, how far we go with these matters. It


seemed to me the hon. member for Vancouver East put forward a principle and then argued against it.
I should like to turn for just a moment to what the hon. member for Eglinton said this morning. I agree with him that the three fields of taxation which are now open on a combined basis between the provinces of the dominion belong just as much to the provinces as they do to the dominion. We could argue from now until doomsday and nobody could possibly prove otherwise. You may bring evidence to support a certain view or you may bring evidence to support just the opposite view. But in balance I am sure the evidence will support the contention that the personal income tax, corporation income tax and succession duties belong just as much to the provincial government as they do to the federal government. Consequently, we cannot look upon the formula the Minister of Finance (Mr. Harris) has worked out as doing anything for the provinces, except in so far as the tax equalization and revenue stabilization do help the poorer provinces. I say that the 10, 9, 50 per cent formula is not completely fair. I think that something more than that could be done. I am not going to suggest a formula that would be more appropriate. The Minister of Finance is capable of doing that because he has all the information.
The second important thing the hon. member for Eglinton (Mr. Fleming) mentioned this morning, and with which I thoroughly agree, was that the provincial governments are not happy about the formula. They do not believe it gives sufficient weight to the needs of the provinces in relation to their responsibility nor to the municipal governments in relation to theirs. The main reason why the provinces are not happy is, as has been stated, the very great problems they face in connection with burdens devolving upon the municipalities. I think the provinces could take care of their own affairs quite nicely if it were not for their creatures the municipalities and the heavy burdens they carry.
The hon. member for Eglinton this morning mentioned the city of Edmonton in my own province, a city that has grown so quickly as to have practically burst at the seams. It has seen an almost unprecedented growth. Over the past several years there has actually been incorporated into that city every month a good size town as far as population is concerned. This means that every one of the services has had to be tremendously expanded and the costs of that expansion have been borne very largely by the people in that city who were already established there. Edmonton, of course, is only one example and there are a great many others

that one could name. Their plight today is a very serious one and it should be given the most earnest consideration by the minister, as I have already indicated in my previous remarks.
There are two main reasons why we are critical of Bill No. 442. In the first place, Mr. Speaker, it proposes to make into law a formula and a set of taxation provisions which the provinces have not approved in conference with the federal government. It is a unilateral proposal placed before the provinces to accept or reject as they wish. If they accept it they go along and take what the federal government is doling out under the 10-9-50 formula. If they reject it, then in order to get revenues they must resort to double taxation which, of course, as the minister knows full well, very few of the provinces would be prepared to do for the simple reason that the people will not put up with double taxation.
The confusion that would result would be monstrous, and that is something we do not want to develop in this country. I look upon this whole proposal as a denial of the partnership principle upon which a smoothly working federal democracy must be based.
I think the time is long past, Mr. Speaker, when any one in Canada with any sense at all could possibly look upon the federal government as the superior and the provincial governments as the inferiors. I think the time has long since passed when we consider that this government has a priority over the provincial governments in the fields of taxation. I think what we have to do is look upon the relationship between the dominion and the provinces as a partnership, and the nearer we can get to a partnership arrangement the better it is going to be.
It seems to me, Mr. Speaker, that if the partnership principle is to be observed it must then call for agreements and an approval of a proposal put forward by the Minister of Finance to the premiers or governments of the provinces. If the proposal is not accepted by the majority of the provinces in a good spirit, then it seems to me the best the federal government can do is to say, "All right then, you propose something," and call the provinces together and consider the matter further in the light of the wording of the detailed proposal. When that time comes I am certain that good sense will prevail and that the provinces and the federal government in partnership can work out something that will be acceptable and that will succeed in bringing to the provinces and municipalities what they need in order to be able to carry on.
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We stand for partnership, Mr. Speaker, between the provincial and the federal governments and it must be a real partnership. Therefore, the relationship between the dominion and the provinces cannot be satisfactory if there is any thought of their being superior or inferior, senior or junior or a prior claim or this or that in the field of taxation. We have to keep in mind the fundamental need.
We are critical of this measure for another reason, Mr. Speaker. The formula does fall short of providing the provincial governments with a sufficient share of the tax revenues available to the governments of Canada today. The big reason for making that statement, of course, is that the provinces have a terrific problem on their hands in connection with the financing of municipal needs. I am convinced that the major issue in Canada's political life today is the financial inability of the provinces and their creatures the municipalities to perform the duties and carry out the responsibilities allotted to them under the constitution.
I think we have to approach a matter of the kind we are now considering under Bill No. 442 with one question uppermost in our minds, and here it is. Does it do all that is possible to ensure that the provinces and municipalities can fully discharge their responsibilities under the constitutions?
Now, if it does this then we can go forward; if it does not, then we have to oppose it. Does it do all that is possible to ensure that the provinces and their municipalities can fully discharge their responsibilities under the constitution? That is the spirit in which I am trying to consider this measure. The division of powers and responsibilities provided by the British North America Act was, in our judgment, a wise division and I do not think it could have been wiser.
As I consider it, it did at the time divide the powers and responsibilities as wisely as men could possibly have conceived, but over the years since 1867 a great many new situations have arisen which were not foreseen by the fathers of confederation.
A short time ago a study was made in the province of Alberta by some competent people concerning the problem of municipal finances and the relationship between the provinces and the municipal governments. I want to quote just briefly from the report of that study:
When the constitution of Canada was set up by the British North America Act of 1867 even the most forward looking statesmen could hardly have anticipated the complicated functions of government which were to develop over the years.

Federal-Provincial Financial Arrangements
Almost the total population of Canada was rural. It was an age of individual self sufficiency supplemented by mutual assistance of neighbour to neighbour. The fathers of confederation found this good and saw in this pioneer spirit the future greatness of Canada.
National defence, regulation of international trade, a criminal code, the opening up of the west -these were the concern of government and these could best be handled at federal level. Little was left even for the provincial governments. A member of the legisature for Prince Edward Island sizing up the situation stated "in this house scarcely anything should be left for us to do but legislate dog taxes and the running at large of swine."
The worry was to prevent a government of so little field of responsibility-
Such as the provincial government.
-from becoming unduly costly in administration. To quote Galt in his Sherbrook address, "Every effort has been made to reduce the cost of local governments, so that local machinery should be as little costly as possible for it would not do to affront the intelligence of the people and tell them we had devised an expensive kind of machinery to do a very insignificant amount of work."


Walter Edward Harris: He did not stay in politics very long after that speech.


Solon Earl Low: Well, perhaps not, but just the same he had a point of view. It does have a bearing on the present question. I continue:
With such a conception of the role of provincial and municipal governments it is little wonder that the federal government reserved to itself a perfectly free hand in revenue raising by any means of taxation, direct or indirect while it specifically limited the rights of the provincial governments and their creatures, the municipal governments to direct taxation and certain privileges of licensing.
Certain significant trends were soon after to be observed. By 1891 a third of the population was living in urban areas and it was already evident that the local governments must assume new and ever increasing responsibilities little dreamed of by the fathers of confederation. The next half century was to see a continued concentration of urban population with a corresponding decrease in rural population. This trend has continued until in Alberta today there are less than one-third of the people engaged in agricultural pursuits, while in the U.S.A. the rural population is reported to be less than 10 per cent of the total.
I might say that the figures show that the rural population in Canada is something just over 20 per cent. That indicates the trend which has occurred and which places a greater responsibility upon the local government and less, naturally, upon the federal government. We are not overlooking the fact that in time of war or threat of war the federal government must take the prior position; we agree with that. But it seems to us that as peace comes we must recognize the forces which have been at work to change the burden of responsibility largely over to the local governments. That is why I say that the argument that this bill does not sufficiently meet the needs of the municipalities and the provinces is one reason we have to criticize it, and quite severely.

Let me deal for a minute with what the provincial and municipal governments have done to find new ways of raising revenue. I did not realize how resourceful the municipalities have really been over the years until I read this study. I was amazed to find that all the following taxes have been used by the municipalities in the provinces:
Property Taxes Real property Personal property Frontage tax Stock in trade tax Animal and vehicle taxes Tenant's tax Multiple entrance tax Business Taxes
Ad valorem tax
Specific business taxes (e.g. floor space) Advertising taxes Commodity Taxes Coal Tobacco Gasoline
Electricity and gas Transaction Taxes Franchise taxes Insurance premium taxes Mortgage taxes Telephone taxes Telephone toll taxes Parimutuel taxes Slot machine taxes General Sales Taxes Income Tax Poll Tax Amusement Tax
Bless my soul, what else is there? I have not heard of a tax on going to the bathroom more than once a day, but that is about the only one which seems to have been overlooked.
It is interesting to note that taxation by municipalities has become a real business. It has developed over the years as a profession to the point where tax commissioners are to be found in municipalities whose sole business it is to hunt up new taxes which may be applied in order to scrounge more revenue out of the pockets of the people. They forget apparently, as do my hon. friends opposite, that every single dollar of taxes must come out of the pockets of the people, and they are the same pockets whether it is the federal, the provincial or the municipal government which does the taxing. Surely they have scraped the bottom of the barrel in many places.
I should like to turn for a minute to indicate what this burden on the municipalities really has been and is now and what efforts have been made to lighten it and what is still left to be done. About six years ago the government of my province approached this matter seriously with a view to determining what could best be done to help the municipalities which were going further and further into debt and finding it more and

more impossible to carry on the services required to be carried on.
That province started to increase direct grants and indirect assistance to the municipalities in an effort to lift their burden. The figures I am giving are taken from the budget address of the Hon. Mr. Gerhart for the year 1955-56 in which he indicated the total amount of assistance which had been granted by the provinces to the municipalities in various forms. I am going to calculate it as a percentage of their total revenues and when I do so I think hon. members will be surprised.
During the six fiscal years ending March 31, 1956 the direct financial assistance granted to the municipalities for the purposes of education, public health, highways, grants in lieu of taxes, municipal assistance, and grants for public aid totalled $208,034,734. There were no strings attached except that the money was marked for the various fields indicated. To give a total amount may not seem to indicate much, but I think it indicates much more when you show it as a percentage of the ordinary revenues of the province for any particular year.
I shall take 1955-56, the last year I have. In that year the total direct grants from the provincial government to the municipal government amounted to $59,069,555 or $60 million in round figures. That is more than 38 per cent of the total revenue on income account of the province. I challenge any province in the Dominion of Canada to match that. They cannot.
Let us go further. In addition to the direct financial grants the government of the province of Alberta gave to the municipalities indirect financial assistance by way of free medical and hospital care for old age pensioners and other public health and welfare services amounting to $7,886,400. That was in the year 1955-56. That brought the total direct and indirect financial grants from the province of Alberta to the municipalities up to $66,955,000, or $67 million in round figures. That may not mean very much unless you show it as a percentage. That sum of $67 million approximately, given in direct and indirect assistance to the municipalities of the province, amounted to 44 plus per cent of the total revenue on income account for that year. That is partnership and I think it stands as an example to Canada.
Of course people will say, "Oh, but you have the money." It is true that our revenues have increased. I can remember my first year as provincial treasurer when I was dealing with a total budget of $20 million,
23, 1956	6305
Federal-Provincial Financial Arrangements and when I compare it with the budget today of $205 million 1 realize that I was living 40 years too soon.
So also have the responsibilities of the provinces increased. The provincial government is doing its best to help the municipalities carry the burden. In addition to all the direct or indirect financial grants, amounting to over 44 per cent of the total revenue on income account in 1955-56, my province granted to the municipalities $39 million in loans for the purpose of developing and increasing their services to the people in the way of sewers, waterworks and that sort of thing, at rates ranging from 2 per cent to 3J per cent, and made it unnecessary for them to go into the money markets of the country bidding against each other for the sale of their debentures. That was in addition in one year. Over the six years about which I have been speaking, my province granted to the municipalities low interest rate loans in that form for a period of 20 years totalling $149,433,000.
With those figures before you, you would think the municipalities in my province would be in clover, but the facts were mentioned the other day by my hon. friend from Jasper-Edson (Mr. Yuill), a mayor in a typical municipality, who said that after all this assistance that had been granted by the provincial government to the municipal government, over which he has some jurisdiction, the tax rate on property was 47 mills. Let us stop to think about it. That is a fairly average figure that you would find not only in the municipalities in my province but in every other province. It would be worse in many. I say we have to take those things into consideration when we think about a bill of this kind.
That is one of the reasons I asked the minister, before he brought in this bill for second reading, to get off by himself, take a second look at it, and come back with something that would more nearly meet the need of the provinces and municipalities. I say that a similar picture could be painted in every province in Canada. British Columbia, for example, is looked upon as being a very wealthy province, and will be one without question. As she is now in the throes of a magnificent development, money has to be available for that development. They are trying to build a railway as a Pacific coast outlet for a great part of the country in the north, because the railways would not do it. That is costing them a huge sum of money. They have to build pioneer roads and access roads to ensure the development of their resources.
Education was mentioned the other day. In education what a terrific burden they will
6306	HOUSE OF
Federal-Provincial Financial Arrangements have to bear in the next few years because of the large increase in the numbers of students and the need for more schools and staffs and all that sort of thing. They are faced with the necessity for developing power, which is a very costly business. One could speak for hours about the problems they face. I hope some of the boys in British Columbia will see fit to do that. How are they going to do it if the provinces cannot obtain from the development of their resources sufficient money to enable them to finance this expansion? If they have to come here every now and then to plead with the federal government to give them a hand-out, I am sure we are not going to get that development.
I could talk about New Brunswick and the problem they face down there in trying to improve their standard of living by industrialization. They have not many industries, and as a consequence their standard of living has suffered. They need power, and to get power the provincial government feels it has to go into terrific debt. There again development may be retarded because of difficulty or inability to get money for that kind of development.
It seems to me that with all these things the minister would be well advised yet to call in the provincial governments, put the problem before them and let them see the wording of this bill. If they are satisfied with the wording of the bill, and indicate that they are satisfied with it, I shall keep quiet and go along with it. If the minister wants to play the partnership role, he could do no better deed than that. If they are not satisfied; if they feel it is too rigid; if they feel it does not give the minister and themselves flexibility enough to negotiate better arrangements within the framework of the bill, then he should attempt to change it, but I do not believe he should try to put it through and make it law before he has the approval of the provincial governments. Otherwise he is destroying the partnership principle, and that is not conducive to the smooth working of democracy. I am going to leave it at that point for now; I may have something more to say at a later stage.


Mr. W. Ross Thatcher (Moose Jaw-Lake Centre):: Mr. Speaker, I should like to take part very briefly in this debate, because I think this is one of the important bills to come before parliament this session.
Hon. members will recall that the original dominion-provincial tax agreements were formulated during the war years, largely as a result, I suppose, of the depression. The objectives of those agreements were threefold; first, to eliminate duplication and inefficiency in taxation as much as possible;


Donald Methuen Fleming: Mr. Speaker-


Some hon. Members:: Sit down.


Donald Methuen Fleming: Mr. Speaker, if an opportunity is to be opened to refer to earlier debates this session and to comment on them, it will have to be opened for all.


Some hon. Members:: Oh, oh.


Donald Methuen Fleming: I hear some uncouth members over there-
6308	HOUSE OF
Federal-Provincial Financial Arrangements


Mr. Speaker:: Order. The hon. member for Moose Jaw-Lake Centre was indicating to the house that he has found himself in agreement with the government on several matters during this session. He went on to say that if the house would permit he would take a few seconds to enumerate them. I take it that there are some objections to that course, and I will have to ask the hon. member for Moose Jaw-Lake Centre to avoid that course.


Wilbert Ross Thatcher: Thank you. I had hoped that the hon. member for Eglinton would have given me 30 seconds at this time.


An hon. Member:: He is not big enough.


Donald Methuen Fleming: Mr. Speaker, I have no objection to the hon. member stating that he has supported the government, if that is his wish, but he has no right to go on to make comments in detail, as he was doing, on the reasons therefor. That is quite out of order. If the debate is to be opened up it should be opened up for all, and hon. members opposite might just as well save their very uncouth remarks.


Some hon. Members:: Oh, oh.


Wilbert Ross Thatcher: Mr. Speaker, I am aware of the rules of the house, and I must admit that the member who has just spoken is technically correct. I should have liked to mention several other occasions when I found myself in agreement with the government, such as the national health insurance plan and so on.


Paul Joseph James Martin: With which the hon. member for Eglinton disagrees.


Edmund Davie Fulton: Which one?


Wilbert Ross Thatcher: After a good deal of consideration over many months I have become convinced that the Liberal party, which is built on the cornerstone of free enterprise and the competitive system, has done a good deal in recent years to bring about our present prosperity and to promote full employment.


Some hon. Members:: Hear, hear.


Wilbert Ross Thatcher: As hon. members know, for 15 months I have sat in the house as a member without party affiliation.


Mr. Lennard:: Just one more chicken coming home.


An hon. Member:: He has a place to roost.


Frank Exton Lennard: He is coming home. He belonged over there in the first place.


Wilbert Ross Thatcher: During that time I have thoroughly examined the platforms and programs of the other groups in the house,


and I am convinced that generally speaking my own political thinking is in line with that of the Liberal party. Under these circumstances, Mr. Speaker, I indicated this fact last week to the Prime Minister (Mr. St. Laurent), who was kind enough to say that I would be welcome in the party he leads. I believe that by taking such action, in the immediate period ahead I can best serve the constituency and the province from which I come. For that reason I propose to sit as a government member from this time forward.


Hon. James Sinclair (Minister of Fisheries):: Mr. Speaker, in rising to take part in this debate on dominion-provincial taxation agreements I And that I have not taken part in financial debates during the last four years, since I have been Minister of Fisheries. I, of course, took a very active part during the four years I was parliamentary assistant to the minister of finance. They were four very happy years for me. I recall particularly the debates of 1952, when the last tax agreements were before this house.
I propose to do a little recollection of events of those days when I discuss the agreements this afternoon.
But I am sure that just for the moment even the hon. member for Eglinton (Mr. Fleming) will permit me, as the first government speaker since the hon. member for Moose Jaw-Lake Centre (Mr. Thatcher) made his statement, to welcome the hon. member to the Liberal party. The hon. member in his 11 years here has been an able and active member of this house and a particularly industrious member in the drudgery of committee work, and we are very happy to have him here. If I may be pardoned one personal reference, may I say this. Most hon. members know that since 1945 the hon. member for Moose Jaw-Lake Centre, the former independent member for Comox-Alberni, Mr. Jack Gibson, and I have been very close friends despite our political differences. I am very happy to have had some part in converting both those two gentlemen to the Liberal party.
As I said when I started, this debate this year reminds me a great deal of the debate that took place when I was parliamentary assistant in 1952. There has not been much change in the arguments put forward by the opposition. The cry is that these agreements are not good enough and that the provinces are not getting enough money. So say the premiers. Their point of view is, I think, a little more understandable than the agreement with this view by members of the opposition.
I find, of course, that there is a real change in the new proposals. The most significant

one, of course, is the 20 per cent increase in payments promised next year. That is, $115 million more in the first year is to go to the provinces than is provided under the present agreement. As the hon. member for Cape Breton South (Mr. Gillis) very wisely remarked in his very statesmanlike speech last week, if a trade union leader went back to his union and said, "I have obtained for you a 20 per cent increase in wages" or if a company president reported to his shareholders that profits had gone up 20 per cent, there would be great praise. If a political party were able to increase their vote by 20 per cent the hosannas of praise would rend the skies. So I say there is reason for appreciation of the fact that under the new agreements the provinces are going to get 20 per cent or $115 million more.
My hon. friend the leader of the Social Credit party called that sum niggardly. He called $115 million niggardly. That beats even the famous remark which the Minister of Trade and Commerce (Mr. Howe) is once alleged to have made about $1 million. The only remark I can think of that came close to it was when the former member for Fraser Valley, George Cruickshank, asked the then prime minister, Mackenzie King, after he had announced a $5 million grant to Fraser Valley, and 75 per cent of the cost of flood relief, whether that was just a token payment. I think the comment of the leader of the Social Credit party that 20 per cent or $115 million the first year is niggardly is in that class.
Neither the previous minister of finance nor the present Minister of Finance has ever contended that these agreements are the final solution of an extremely difficult problem. There has been much mention today of the difficulties of governing a federal state. In the United States, for example, there are no direct tax payments as between the federal government and the state governments, though there are many grants in aid. Last year the Leader of the Opposition (Mr. Drew) and I had the good fortune to have dinner one evening with Prime Minister Menzies of Australia. The talk naturally got around to the subject of federal-state relations. I was amazed to learn that in Australia there is no such agreement or no such bargain. The federal government passes on the budgets of each of the states and decides what money they should be allowed. We have not followed that system. We have tried to negotiate reasonable agreements between the federal and provincial governments.
We Liberals believe in a strong national government. We also believe that in the government of a country of this size it is
23, 1956	6309
Federal-Provincial Financial Arrangements important that there may be effective local governments both at the provincial and municipal levels. I think most Canadians agree with that statement. As a matter of fact there is only one Canadian political leader in recent times who has disagreed and actually advocated the concentration of all power in the hands of the federal government and the elimination of provincial governments. His name is Colonel George Drew. I refer hon. members to Hansard of 1952, volume IV, page 3564, which contains a great many references to speeches made by Colonel Drew when he was leader of the Ontario provincial Conservative party. Let me quote a speech he made before the Canadian club in London, as quoted in the Toronto Star of February 23, 1935:
For Canada, harassed by debts, labour troubles, and conflict in company, insurance and labour laws, Col. Drew saw in one strong central government the solution, instead of an utterly mad jig-saw puzzle of ten conflicting governments.
Then listen to this:
If we were starting all over again who would be crazy enough to set up ten governments in Canada?
There are two or three more. Let us pass on now to what was said two or three years later. On November 10, 1936, he was reported in the Toronto Globe as follows:
Canada must eliminate the costly inefficiency of ten governments doing, in most cases, the job of one or else sink in the rising tide of fascism.
We have not sunk in the rising tide of fascism. The federal government and the ten provincial governments have done a pretty good job of governing Canada. Even more delightful is this pronouncement in 1938-the years are rolling by-when he was speaking in Montreal on December 10 of that year, as reported in the Montreal Gazette. This time I can tell the hon. member for Kamloops that he was reported by a good Tory paper, namely the Montreal Gazette, since he objected to the quotation from the Toronto Star. Mr. Drew is reported to have said this:
way to get back to the ideals of confederation, to the ideal of a strong central government, is for Ontario as the largest province to sit down and say to Ottawa:-
Listen to this; this is Colonel Drew, leader of the Conservative party in Ontario, speaking:
We have acquired rights it was never intended we should have.
That is the province of Ontario.
We have duplicated services. We propose to hand back to you all things of necessarily national character and retain only those things necessary for the good functioning of local government.

Federal-Provincial Financial Arrangements
Then as late as 1941 in Halifax at the bar association meeting he was saying this, as reported in the Halifax Herald of April 25, 1941:
"What we need greatly is to look at government from a business point of view," he said, "paralleling methods that a private business with a head office and nine branches would employ to promote more efficiency. Preservation of a nation's integrity must come from a strong centralization feeling," Colonel Drew continued. Canada's main problem was its decentralized government system, and the speaker declared, "solution of that problem would insure continuance of the national structure."
I think those views are worth remembering because, as far as I know, it is the only expression of opinion by anybody in this House of Commons that all power should be concentrated in Ottawa. Most of us believe in the federal system, with a strong national government and effective local governments; and we realize that in our federal system the problem of finance will be very difficult because of the fact that we still have just the one main source of income, namely the Canadian taxpayer.
In this country the problem of the federal government is especially difficult. If we were an old and static society, most public works would be built; but we have one of the most dynamic and most rapidly expanding economies in all the world. So from every part of this country, at every level of government there are demands for more public services; demands to the federal government from provincial governments and to provincial governments from municipal governments. Not only do governments face demands on them, but business in Canada finds tremendous demand on it for added capital, far greater demands than can be met in Canada. So if they want to continue to expand they look abroad for foreign capital. But we cannot satisfy all these demands, either national, provincial, municipal or in business. What we try to do is work out a reasonable compromise, a moderate way which will give top priority to those things of most importance.
The general advantages of these tax agreements have been stressed many times by many hon. members. They include the avoidance of double taxation, something that is extremely important, and the avoidance of unnecessary waste in having duplicate tax administrations. Another point not so often mentioned is the importance of having equal tax rates across all Canada. Before the war, when each province was in the field, the poorer the province the higher were their tax rates so they could get revenues, and therefore the less likely was industry to go to that province because of the higher tax rates.

These tax agreements have helped level that out by providing a uniform system of taxation across the country. More than that, it has given the opportunity to have equalization as between the provinces. Not all our provinces are equally endowed with natural resources; not all our provinces have had equal advantages out of confederation and especially out of our tariff structure. These tax agreements are affording a measure of justice there.
There is one great weakness I have always seen in these tax agreements, the weakness of centralization. I am not thinking of the sort of centralization Colonel Drew was talking about between 1936 and 1941. These tax agreements centralize the tax criticism in Canada on the head of the unfortunate federal Minister of Finance. We do the taxing and get the blame and the provinces get the money and spend it and get the credit. As you know, political kudos more often comes from the spending of public funds than it does from the taxing of these funds of out of the pockets of the Canadian taxpayers.
Again and again in our history it has been said it is a bad principle that one body taxes and another body spends. In some provinces our school boards are set up in such a way that they fix their requirements and the city council has to raise the money. This has always been a source of friction. One of the things which has a great restraining effect on the government levying taxes is that they must justify to the taxpayers the needs which require that money. When one government taxes and the other government spends, there is not that direct connection or restraint.
We have also heard that the power to tax is the power to destroy. I suppose the destruction envisaged is of business. I tell you that overtaxation by government contains in it the elements of destruction, the destruction of that government. I think every government at every level is very careful not to tax any more than it has to do. But today, of course, the provinces naturally clamour for more money as do the municipalities, and as do certainly the members of the opposition. They would like to raise our tax load and have us merely pass that money over to these agencies to spend. Well, we would be not unlike the cat which pulled the hot chestnuts out of the fire for the monkey.
As I say, I feel the new plan is a great improvement over the old. First of all, as I said, it offers 20 per cent more revenue; second, equalization payments raise the revenues up to the level of the average of the two wealthiest provinces, Ontario and British Columbia. This is a recognition of the uneven tax collections which prevailed when the provinces levied their own taxes. It is

also a recognition that there is a concentration of industry which prospers out of all Canada but which is concentrated in the two central provinces. It is also a recognition of the fact that the provinces in Canada vary greatly in the resources at their command. The very great advantage is, I think, that there is no compulsion. The provinces do not have to sign these tax agreements in order to get the payments to carry out the equalization process, but can levy their own taxes in these fields.
I think, too, there is something to be said for the simplicity of the present formula. It is easily understood; 50 per cent of the succession duties. 20 per cent of the corporation tax that we collect-that is 9 percentage points out of the 45 percentage points making *up the corporation rate-and 10 per cent of the income tax.
The fifth point which is an improvement is that if the provinces do not regard this as sufficient they are quite free to do as Premier Duplessis has done, go out and collect their own taxes. They can still get the equalization payments. Finally there is the stabilization guarantee. This may not be so important now, but it was very important in 1945 as a guarantee that these grants would not fall in the event of a recession or a depression. Our super-optimist here, Right Hon. C. D. Howe, was confident there would be no depression after the war but there were a lot of Cassandras, most of them in the opposition, who foresaw a depression. This guarantee was regarded as very useful then and it is very useful now. Though somewhat in the background it is still an important feature of these agreements.
Let me turn to the criticism now. It is simple enough. We are not paying enough money to the provinces. I can understand the position of the provincial premiers. Theirs is a provincial responsibility, and they want more money to develop their provinces. They do not have the responsibility for federal taxation, so they ask us for more. They certainly have got more in recent years from many sources. Two members, the hon. member for Okanagan-Revelstoke (Mr. McLeod) and the hon. member for St. Paul's (Mr. Michener) put on the record figures from a recent statement by the Canadian tax foundation showing that in the 10 years since 1945 federal expenditures have gone up by 5-5 per cent, provincial expenditures by 293 per cent and municipal expenditures by 276 per cent. This is a striking indication to the people of Canada how frugal has been the federal government in that 10 year period, because our expenditures have gone up only 5 * 5 per cent. It is also a pretty good indication that the provinces and municipalities
67509-400i
23,	1956	6311
Federal-Provincial Financial Arrangements have done pretty well in raising money to meet their extra expenses.
In addition, of course, the federal government has given large amounts in many purely provincial fields. National health grants since 1948, which have helped out in the field of health, a provincial matter, totalled $188 million, relieving that load on the provinces. The trans-Canada highway, under the old agreement we have given so>
far $82 million for road building. Social welfare so far has amounted to over $900 million a year. Before the war the federal government spent about $60 million in that field. All this aided the provinces and' took part of the load from their shoulders.
Speaking about the 1952 debate, I was reminded of a very fair statement made by that eminent authority, Premier Frost, before the Ontario legislature in 1952, in passing the dominion-provincial tax agreements:
"It is true the 1945-46 federal proposal was a comprehensive plan, involving besides tax powers, such matters as timing grants for capital works, old age pensions and a scheme of health insurance," he admitted.
Now, listen to this.
"I am continually surprised at how many people are still unaware of the great extent to which this program has already been implemented."


Edmund Davie Fulton: Obviously somebody over there is surprised, too.


James Sinclair: Surprised that Premier Frost was already impressed in 1952? How he should feel now with the 20 per cent increase I can leave to him to tell you.
As well as the new tax agreements there are other offers of help to the provinces. Our recent offer has been to increase our contribution to the trans-Canada highway from $150 million to $250 million, another $100 million to the provinces for road building. Then there was the unemployment assistance bill put through by my colleague* the Minister of National Health and Welfare-(Mr. Martin), under which we agreed to pay half the cost of unemployment assistance for-those not covered by unemployment insurance over the base load of -45 per eemt^ which would cost about $25 million in a year such as 1954-55. Then there is our offer to extend hospital insurance to the nation, which will cost the federal government about $180 million a year.
This federal government has certainly assisted the provinces since the Liberal party came to power in 1935. As I say, I can understand the provincial premiers asking for more because their responsibility is provincial. I find it difficult, however, to understand the attitude of opposition members in asking for more unless they, with national

Federal-Provincial Financial Arrangements responsibility, indicate where the more is to come from. Just two hon. members have lightly touched on this.
The federal government has no Midas touch. We cannot create gold and give it to the provinces. There are just four ways that have been indicated for finding the extra millions, the extra hundreds of millions to listen to some of the members, or the extra quarter of a billion to listen to one of the provincial premiers, which have been requested. The first way is to increase federal taxes. There is one thing even the opposition are agreed upon. They will not vote for tax increases. The Canadian taxpayer today does not want an increase in federal taxation. The second method is to cut present federal expenditures and give the provinces the savings. We do not hear very many statements in this house as to how specific savings can be made in federal expenditures.
Hon. members will recall that some years ago, on October 25, 1950, to be exact, the Leader of the Opposition spoke in Saskatoon and as reported by the Canadian Press said he could cut half a billion dollars from the federal expenditures without affecting essential services. Well, I was intensely interested in that speech, because I was parliamentary assistant to the minister of finance at that time. When he returned to the house hon. members will recall that I as parliamentary [DOT]assistant to the minister of finance implored him to help the government by telling us where we could save half a billion dollars a year of the taxpayers' money, to give us specific details. He did not. AH he did was babble about a Hoover commission.
He took it to the people in the election of 1953. Hon. members will remember that this claim was the principle plank in the Tory platform. They claimed that if elected they would save the Canadian people half a billion dollars a year. Well, the Canadian people did not believe-that; but I would have thought if the Tories were sincere in this claim when they returned to parliament each one would have stood up and suggested substantial savings totalling half a billion dollars to show that they were right. They have not mentioned it in the last three years.


Edmund Davie Fulton: May I ask the hon. member a question?


James Sinclair: Surely.


Edmund Davie Fulton: Is the minister aware that the new-found colleague he has just welcomed into the Liberal party has supported the statement that substantial moneys could be saved by the appointment of a commission along the lines of the Hoover commission?


James Sinclair: My hon. friend knows that the hon. member for Moose Jaw-Lake Centre has had a long and extensive education since he divorced himself from the academic theories of socialism and embraced the practical verities of the Liberal government. At an earlier time in his innocence he may have swallowed the Tory propaganda, which the Canadian people did not accept-


Edmund Davie Fulton: Answer the question.


James Sinclair: -but he has learned a great deal since then.


Edmund Davie Fulton: You say he is the kind of man who swallows propaganda, do you? That is a fine compliment for your new colleague.


James Sinclair: I just want to go through some of the major items of expenditure. The sum of approximately $lf billion is spent on national defence. One of the most vivid impressions I have of my two and a half month visit in Russia is the fact that any Russian respect which exists is due more than any other single thing to the collective strength of the 15 free nations through NATO. Just because things are now easing up I think it would be a tragedy for any of the free nations to relax their defence efforts. We must, of course, meet half way every gesture of friendship which Russia makes, but we must certainly keep our defences up. I do not think any Canadian taxpayer would want us to reduce this expenditure at this time.
The second largest item of expenditure we have is for social security, a sum amounting to over $900 million, which is up from the $60 million spent by the federal government in the pre-war period. Old age pensions come under this heading. We remember, of course, that it was the Tory majority in the Senate which blocked the first old age pension bill brought forward by the Liberal government, but even the Tories have learned since that time that old age pensions have a value, and they would not cut old age pensions.
Concerning family allowances, we remember that John Bracken, then the leader of the Tories, thought this was a brazen political bribe. Premier Drew said he would fight this iniquitous legislation in every court of the land. But today the Tories, like the hon. member for Moose J aw-Lake Centre, have learned and they support family allowances. I do not think they would want them cut to make more money for the provinces.
Other items are unemployment insurance benefits, pensions to the blind, disabled and health grants; in all these fields the demand


Mr. Blackmore:: Tell the truth for once in in your life.


James Sinclair: I do not want to appear unfair. Perhaps he is not alone in the Social Credit party in requesting the printing of money for the western provinces.
I wish to turn now to British Columbia, since I am the minister from that province.


Stanley Howard Knowles: There are two of you.


James Sinclair: There are two of us now, that is quite right. Our first wartime tax agreement gave British Columbia $12 million. That was in 1942. That was more than we had ever been able to raise ourselves in this field of taxation. This year under the old agreement our province gets $50,715,000, which is four times as much as we got the first year. Next year under the new agreement we will get $55,430,000, which represents a 10 per cent increase over the previous year.	.
A very curious attitude is held by the premier of British Columbia and his Social Credit colleagues in the house. When facing British Columbia they declare that British Columbia has never been more prosperous.
6314	HOUSE OF
Federal-Provincial Financial Arrangements They report that it has a huge budget of $280 million, and the highest per capita taxation and the highest per capita spending in Canada. The British Columbia budget was only $30 million the year before the wartime tax agreement came into operation. They boast of a surplus of $25 million this year, and proclaim that our province is going to be free of all debt in 1962.
But when they face Ottawa they have a very different story to tell. They tell us that British Columbia is poverty stricken and must have more money. They tell us Ottawa must help not only with tax dollars but that we must move into purely provincial fields such as education, highways, toll bridges, flood relief on a minor scale, and even assist their provincial railway. They tell us Ottawa has to help poor poverty-stricken British Columbia.


Mr. Patterson:: You don't mind taking money from it.


James Sinclair: 
More than that, this return points out that in this is not included central costs of government and of the national research council and our foreign service. That federal expenditure of $355 million in British Columbia was approximately $75 million above even the record provincial budget of $280 million. This talk by the premier and his followers has not deceived the people of British Columbia, nor has it deceived those who write the editorials for our leading newspapers.
The July 18 issues of both the Vancouver Sun and the Vancouver Province have splendid editorials commending these new agreements. I might note that the Vancouver Sun and the Vancouver Province have not been very friendly to this government in the last six months. The Vancouver Province says that we are standing in the middle of the road with these tax rental agreements, trying to make a good job of our federal responsibilities and helping the provinces to do their job. The Vancouver Sun points out that any federal tax increase to give more money to the provinces will have singularly little appeal to the ordinary Canadian taxpayer, for it is out of his hide that these taxes come. It says that the taxpayers would welcome another dominion-provincial conference, not as to see how to raise more money out of the taxpayers but to see how we can reduce taxes and put more money in their pockets.
I want to say this in conclusion. I hope when other opposition members speak they will be more helpful to my colleague the Minister of Finance by pointing out exactly how this federal government can get the extra hundreds of millions of dollars they are requesting for the provinces, and what tax increases they are ready to support to get these millions. It should be remembered that this frugal federal government has increased expenditures by only 5-5 per cent in the last ten years.
I have been rather hard on the opposition, but I should like to commend the speech made by one hon. member of the opposition, the hon. member for Cape Breton South. It was a wise and statesmanlike speech, in very marked contrast to the speech of his leader, the leader of the C.C.F. party. I have listened to the hon. member for Cape Breton South since I came to this House of Commons. He has a wise and sensible approach to the matters with which he is dealing, and no doubt it will not be too long before he also will be crossing the floor of the house to join the hon. member for Moose Jaw-Lake Centre.


Mr. J. Wilfrid Dufresne (Quebec West):: Mr. Speaker, the bill submitted to the hon. members of the house for their consideration violates principles which are absolutely indispensable to the survival of this country. It gives a new interpretation, also temporary, to those principles which nevertheless have been clearly set out in the act of 1867. I am no expert in constitutional law, but I do know that all historians and jurists are unanimous in admitting that the constitutional provisions regarding the financial powers of the federal government and the provinces are extremely clear and precise. In the past when the interpretation of some of the provisions had given rise to any ambiguity they had been referred to the courts either by the federal government or by the governments ol the provinces, and even in some cases by private individuals. The courts have handed down their interpretation, which has been duly accepted by jurists and politicians.
On this question of financial relations the federal government has adopted an attitude which to my mind is apt to be highly prejudicial to the future of confederation, whose very basis it is undermining. Since the Rowell-Sirois report there have been a very great number of proposals made by the federal government to the provinces. These proposals have been modified several times because of the criticism to which they have given rise throughout this country. Over this 20-year period all the provinces have in turn expressed their complaints with regard to a policy which leaves their future status highly uncertain. The time at my disposal does not allow me to quote each and every criticism offered on this score by politicians belonging to the main parties of this country, Liberals or Progressive Conservatives, members of the C.C.F. or Social Credit parties.
Each and every proposal submitted since 1937 is contrary to the democratic ideal. They run counter to sound political doctrine, and I am sure that most of the great political figures of the past would be most firm in denouncing them. In a speech which he delivered at Somerset on August 2, 1887, a few days after his appointment as leader of the Liberal party, Sir Wilfred Laurier stated:
The principle whereby one government collects revenues and another government spends them is altogether false. It can only lead to extravagance.
This principle, denounced by a former leader of the Liberal party, is at the very basis of every financial arrangement entered into by the federal government and the provinces over the last 20 years.
A little later, at a time when Honore Mercier was preparing to call the interprovincial conference of 1887, Sir Wilfrid
23, 1956	6315
Federal-Provincial Financial Arrangements Laurier warned him against the danger of requesting an increase in grants from the federal government. He said:
These successive Increases in grants, carried out at random and disproportionately, really constitute a means of corruption in the hands of the federal government. All too often this increase in grants paid by the federal government has been little else but the payment of a bill rendered for political betrayal.
The former prime minister of this country and predecessor of the present Prime Minister, Right Hon. W. L. Mackenzie King, speaking in this house in 1930 said:
When on a previous occasion we were discussing this matter of grants from one treasury to another, I said I thought it was an unsound principle; in fact, I think I used the expression that it was a vicious principle to have one body raise the taxes and another body spend the people's moneys thus raised.
Finally the Quebec Liberal newspaper Le Soleil, on February 13, 1947, published an article whose terms still hold true today:
The nine sisters of confederation do not all share the same views on this problem. Six or seven would enjoy receiving financial assistance from the central government and would therefore be willing to renounce for a time claim to those powers of taxation claimed by it. Quebec and Ontario still seem firmly opposed to this plan. Their opposition is based on motives which are sufficiently convincing not to be taken lightly. Any concession is difficult to withdraw later, as has been amply demonstrated by recent experience.
It would be well to remember that the present attitude of the Hon. Maurice Duplessis and Colonel George Drew resembles that formerly adopted by some of their Liberal predecessors. Matters settled by compromise often present both advantages and disadvantages. In the case we are dealing with today, the main cause of the problem is to be found in the federal government's haste to create new provinces whose natural resources are too restricted. They soon found themselves in difficulties either by reason of administrative incompetence or as a result of insufficient revenue. Their situation was further aggravated by the practice of extensive immigration also attributable to the central authorities. There is nothing to justify the statement that such errors will not be repeated. Those conditions make it readily understandable that the defenders of provincial rights should be cautious before being drawn into a project leading to the centralization of powers in the hands of federalists . . .
Such evidence, to which hundreds of other statements could be added, is sufficient to prove that the very principle of these proposals is absolutely false and contrary to the democratic idea. The government collecting the revenue must spend it to fulfil the obligations imposed upon it by the constitution. It is nonsense that a government should collect revenue for the purpose of distributing it to other governments. That is a practice contrary to a principle for which our forebears fought, namely no taxation without representation.

Federal-Provincial Financial Arrangements
Secondly, to my mind such a policy tends by nature to disrupt the harmony which must exist among all provinces in the Canadian federation. In 1942 a number of provinces felt that they were wronged by the federal proposal. In 1947 other provinces expressed the opinion that they were not treated with justice. This year the same protests are to be heard. This year we even witnessed a meeting of the four Atlantic provinces who wish to join hands for their mutual help and the protection of their interests.
We are witnessing the slow but undeniable formation of a bloc of provinces within confederation. Instead we should have ten provinces closely united and working together for the progress of Canada, with the full co-operation of the federal government. Unfortunately the policy of fiscal agreements will not achieve that unity, because there will always be one or other of the provinces that will feel wronged with regard to its rights, and that is precisely what makes the position of a province like my own extremely difficult in the face of such a problem.
The Quebec government is certainly to be commended for having kept the discussion well above private interests and political expediency. Above all, the position of the Quebec government is a juridical one based upon the soundest constitutional theories. The province of Quebec earnestly wishes to preserve the rights and privileges it was granted by the act of 1867. The province of Quebec is opposed to bargaining, and does not believe that this is a matter to be assessed in dollars and cents. Besides, Canadians of French expression believe this problem affects the rights and privileges they were granted by the act of 1867 and, if we consider the history of financial relations between the federal government and the provinces since 1941, we cannot evade the conclusion that they always endeavoured to safeguard the essential rights of confederation.
Mr. Speaker, you know what the attitude of the Quebec government was in 1937 in the face of the problems set out by the Rowell-Sirois commission, and you know that at the federal-provincial conference of January 14, 1941, the provinces of Ontario, British Columbia and Alberta were squarely opposed to the implementation of the recommendations of the Sirois report, claiming that that was a peacetime document tending to ruin provincial autonomy. The province of Quebec remained neutral in that discussion and, in April of the same year, the federal government gave up the consideration of the Rowell-Sirois report to ask the provinces, as a provisional arrangement and only for the duration of the war, to vacate the personal
[Mr. Dufresne.l
and corporation income tax fields. In return the federal government offered to indemnify the provincial governments. As a matter of fact, in the period from September 1, 1941, to 1946, the province of Quebec received slightly more than $102 million, or $20 million a year, to allow the federal government to collect the sum of $2,258 million.
In August, 1945, the federal-provincial reconstruction conference was held in Ottawa. In the course of that conference the federal government made to the provinces proposals similar to those contained in the Rowell-Sirois report, but those proposals were a little more generous. In January, 1947, the government at Ottawa submitted a new proposal for grants which was to serve as a basis for the agreements of 1947. Two provinces, Quebec and Ontario, rejected those proposals. Those two provinces reorganized in part their own systems of taxation and levied a new tax of 7 per cent on corporation income. From April 1, 1947, to March 31, 1952, the province of Quebec would have received, had she signed the agreement, a sum of $378,175,000 and during the same period Ontario would have received $444,688,000.
In December, 1950, the provinces met again in Ottawa to discuss the renewal for 1952 of the fiscal agreements of 1947. On the whole the provincial premiers declared themselves in favour of a renewal of the agreements. The premier of Quebec, Hon. Maurice Duples-sis, stated however that, generally speaking, he disapproved the substitution of a system of federal grants for the fiscal powers essential to democratic governments. The premier of Nova Scotia, the late Hon. Angus L. Macdonald, whose government had signed the agreements of 1947, spoke to the same effect:
X do not believe this problem can be met by means of grants. I repeat what I have so often said, namely that the ideal solution would be to divide the responsibilities of the governments and give each of them the necessary sources of revenue to discharge their responsibilities. That is the ideal. I do not know whether we can achieve that end now or later, but it is the end towards which we should strive. Under the circumstances, grants evidently do not appear to me to be the solution.
During the months that followed negotiations continued between the federal government and the provinces, and finally, in 1952, nine provinces decided to sign with the federal government a fiscal agreement for a period of five years. Quebec was the only province that refused to accept the federal grants.
Yet, owing to its fantastic development, the province of Quebec needed additional revenues. In February, 1954, the legislature decided to levy a tax on personal income. That tax amounted to approximately 15 per cent of the federal tax. Such a step was

extremely democratic, because the people of Quebec could accept or reject the government's decision. In fact during the month of June last the electors of the province of Quebec gave a new mandate to the Union Nationale administration and increased its membership in the legislature. I greatly rejoice at the turn of events, which proved to the whole nation that in my province the democratic ideal is still stronger than in any other part of the country. The province of Quebec has not feared to practice the principle of no taxation without representation for which our forefathers fought. It has not feared to base its decisions and actions on that principle.
Today the federal government submits a new series of proposals which would remain in force until 1962. Those proposals are intended to replace the fiscal agreements which will expire next year. In my opinion they are a little less drastic than the previous proposals, and they seem to take into account a little more than in the past the fact that it is a matter of renting provincial rights. They are also more generous because they do not compel the provinces to sign agreements, even of a temporary nature, with the federal government. The signing of a temporary agreement on provincial rights is surely the equivalent of a renunciation, and no government conscious of its responsibilities is happy to abandon its rights and prerogatives.
However, those proposals stem from the same centralizing trend noted in the recommendations contained in the report of the Rowell-Sirois commission. True, the amounts proposed are much more generous than those recommended by the commission which inquired into the fiscal relations between the federal government and the provinces. If we took only that fact into consideration we could say that the provinces acted wisely in compelling the federal government to give them increasingly larger sums over the years. However, the main weakness of that policy is the fact that nobody knows whether those agreements are of a temporary or permanent character. A period of five years is a very short span in the life of a government; in my opinion we must necessarily deal with longer periods.
Those responsible for the federal administration have maintained for almost 20 years that these agreements were temporary, that is, limited to a certain number of years. This may mean that if an emergency arose the federal government could end such agreements, keeping to itself the full tax revenues. That is the interpretation put on those proposals by some public men. Others, on the contrary, feel that these agreements are in fact of a permanent nature even if they are 67509-401
23, 1956	6317
Federal-Provincial Financial Arrangements modified every five years. They certainly are permanent in peacetime and such, I believe is the true interpretation of all the discussions which have been held on that matter for the last 20 years.
There is no doubt, however, that this system of grants creates uncertainty in provincial quarters, since the provinces do not know whether or not in fact such agreements are permanent or temporary. No one can settle that matter; only the future will tell. Provincial governments carry very heavy responsibilities, especially in this period of economic development and prosperity. Their commitments in the fields of education, welfare, public works and natural resources development are burdensome. They have very heavy responsibilities, as all of them must undertake important projects of a permanent nature for the implementation of which their revenues are inadequate and which must necessarily be paid for through borrowing. I wonder what would happen if a provincial government were to try to borrow from lending institutions a huge sum of money on the guarantee that it would repay such loans out of federal grants. I am almost sure that the financiers would ask how the government intended repaying the loan should an emergency situation arise in Canada. It is the uncertainty of such a policy which, I believe, causes uneasiness among provincial governments.
I am convinced that the most logical and most simple attitude would be to go back to the very words of the act of 1867 and take them as the basis of our policy. It is at least the opinion of the government of the province of Quebec. I take the liberty of recalling that opinion by quoting an excerpt from the brief submitted by the Quebec government to the Rowell-Sirois commission. In fact the stand taken by the province of Quebec is neither complicated nor equivocal. I quote:
In its opinion, confederation is a pact voluntarily accepted and which can be modified only through unanimous consent. The province intends to respect every clause of this pact and expects others to do likewise.
It is at the same time a form of government freely chosen in preference to legislative union, as it can better ensure the protection of the minorities and national development in peace and harmony. That choice was made after careful consideration by statesmen of the two great races and of the two political parties, by statesmen whose unquestionable vision and perspicacity were not obscured by the confusion of a troubled period. The province of Quebec believes that that system is still the best to meet the needs of a large country made up of different races.
In the last analysis, the province of Quebec is willing to co-operate in any endeavour of common interest provided it does not conflict with provincial rights; to help in the implementation of any appropriate and reasonable reform within the framework of the constitution and, generally
6318	HOUSE OF
Federal-Provincial Financial Arrangements to work hand in hand with the federal government and other provincial authorities towards the welfare of the nation as a whole, provided the rights of all concerned are respected.
It is a clear and definite stand. The province of Quebec does not wish to take unfair advantage of the difficulties of other provinces. It has always placed that problem above political contingencies and party interest, on the level of principles, through respect for confederation and responsible government.
The other day, Mr. Speaker, the hon. member for Hull (Mr. Caron) was deriding provincial autonomy and from the bottom of my heart I pitied him. I pitied him because in the discussion of this matter he could not rise to the true human values. He could not understand that his province had sacrificed grants of millions of dollars out of respect for the rights won by our ancestors. He could not understand that his province could remain faithful to the past, to the memory of those who fought so that we might enjoy freedom. He could not understand that the real political problems are not money problems but questions of principle. He could not understand that in defending these principles his province remained the bulwark of Canadian confederation.
The people of my province, even though they have launched a campaign to attract industries, are a generous people, a people capable of fighting anew for responsible government and in the defence of minority rights. Our forebearers turned down the money and honours of their victors in 1760, but fought 30 years later to preserve the colony for the English crown. The hon. member for Hull should remember history and also keep in mind the sorry record of Adelard Godbout and Georges-Emile Lapalme. They too had forgotten history but they found that the people of Quebec remember the past and want to be faithful to their traditions. The hon. member for Hull should help his party come back to the letter and the spirit of confederation. His constituents would be most grateful to him if he did.


Mr. Raymond Bruneau (Glengarry-Pres-cott):: Mr. Speaker, for some time now this house has been engaged in a debate concerning federal-provincial relations. I now propose to deal with this subject from the historic, constitutional and economic points of view.
At the time of confederation Sir John A. Macdonald, father of the Conservative party and its greatest man, was in power. A cursory glance at the report of parliamentary proceedings between February 3 and March 14, 1865, suffices to enlighten us on what this


great leader had in mind at the time. He was careful to state that he would much have preferred a legislative union wherein all powers would have been concentrated in a single central government and that if he gave up that idea it was only because he realized that confederation would have been impossible under such conditions.
While he had to give up his ideal, Sir John nonetheless stated that confederation should take the form of a centralized federal system so that, unlike what had taken place in the United States, or unlike what was to take place later in Australia, residual powers would be left to the federal government, provincial powers, as set out in a moderate list, being essentially those of a local or private nature and adapted to the position of the provinces as Sir John saw it. The federal government would have the power to designate provincial lieutenant governors or to revoke such appointments. Moreover, the federal government was empowered to disallow or set aside legislation passed by provincial legislatures within the year following their adoption.
Even to this day it is not without some surprise that we note the very few difficulties and little discussion to which this distribution of powers between the federal and provincial governments gave rise. Sir John A. Macdonald's explanation was that the delegates had understood the necessity of setting up a strong and powerful central government.
Obviously our political situation has changed a great deal, and for the better, since 1867. To whom do we owe this? First of all to the supreme court and the privy council who, in their interpretation of the constitution, have set things rights by clearly stating the rights of the provinces, by virtue especially of that clause relating to property and civil rights.
It may be of interest at this point to remind the house that in 1867 Hon. Mr. Mer-cier tried to have the constitution amended to the provinces' advantage, but without reference to the federal government. In that year Mercier, who was then provincial premier, called the first interprovincial conference which met in Quebec from October 20 to 28, under the chairmanship of Oliver Mowat, then premier of Ontario. This conference was attended by the premiers and other representatives of five provinces, that is Ontario, Quebec, Nova Scotia, New Brunswick and Manitoba. Federal representatives had also been invited to attend, but Sir John A. Macdonald declined the invitation on behalf of the government.

The 18th resolution adopted by this conference reads as follows:
That, in the opinion of this conference, the various provinces of Canada, through their respective legislatures should, as soon as possible, take such steps as may be required to obtain from the imperial parliament amendments to the British North America Act consonant with the above resolutions.
As was reported by Professor Norman Rogers to the select committee on the British North America Act, a member of which at that time was the present provincial minister of finance for Quebec:
The conference also decided that those resolutions should be transmitted officially to the federal government in order to request its help in bringing about the amendments which were the subject matter of those resolutions. Sir John's federal government refused to support the proposed amendments. However, the resolutions were transmitted through the ordinary channels to the secretary of state for the colonies, who Mr. Rogers said, officially acknowledged receipt of the resolutions but took no steps concerning them.
It would take too long even to summarize all the resolutions but I should like to quote a few brief excerpts.
Thus, it is stated in the preamble that:
[DOT] . . the maintenance of provincial autonomy is necessary to the future well-being of Canada; that, if that autonomy is to be maintained, it is obvious that the constitutional act must be revised and amended.
The following significant words are also to be found:
. . . that several provinces are not in a position to provide, by means of direct taxes or otherwise, for the increase in necessary expenditures and have t!me,t0 time requested from parliament and the federal government an increase in the amount of the annual subsidies.
Oddly enough, nowhere was it deemed advisable to request a new distribution of taxation powers in these long and numerous resolutions from the provinces, in which several amendments to the constitution were sought. Not only that, but it seems that the provinces never considered as a threat to their autonomy an increase in their subsidies. They even went further; and mind you, they were the ones who had provincial autonomy at heart. They passed the following resolution:
That, in the opinion of this conference, it is possible to find a basis for the final and unalterable settlement of the amounts payable annually by the dominion to the various provinces for their local purposes and the maintenance of their governments and legislatures.
And the "final and unalterable" amount proposed, should the population exceed at some time one million and a half, was $240,000. Compare the amount proposed with that offered today by the federal government, keeping also in mind the fact that the proposals made today by the federal government 67509-401J
23, 1956	6319
Federal-Provincial Financial Arrangements are not for a "final and unalterable" amount. They do not involve final agreements, but rather five-year agreements which are moreover subject to review.
Today's problem of federal provincial relations dates back to the financial difficulties experienced by several provinces during the depression years of 1930 to 1935. At that time the western provinces, unable to meet their obligations because of the drought and the fall in the prices of agricultural products, were on the brink of bankruptcy; and all across Canada unemployment placed an intolerable burden upon local governments. The federal government had to give temporary financial assistance to Alberta, Manitoba and Saskatchewan. It had also to take over the task of solving the unemployment situation as best it could. The Rowell-Sirois commission was appointed in 1937 to study this urgent problem and, without going into details, it may be said that the present agreements are the results of the commission's recommendations.
The commission had, in effect, recommended (a) exclusive federal jurisdiction in the field of personal income tax, of corporation income and of succession duties; (b) full federal responsibility for unemployment; (c) acceptance by the dominion of charges entailed by provincial debts; and (d) payment of subsidies by the federal government so as to put all provinces in the position of providing average provincial services without having to increase the incidence of taxation.
The federal government has since then accomplished more than was recommended in the report, and has done all in its power to come to an agreement unanimously acceptable to the federal government and to the provinces. Far from assuming a rigid and arbitrary approach, as was claimed by some for political purposes, it has on several occasions compromised with the provinces and accepted their suggestions.
I leave now the historic aspect of the question to deal as briefly as possible with its constitutional aspect and, finally, with its economic aspect. Let us see what the constitution has to say in the matter. I shall just read out

without changing anything, of course-part of the text of sections 91 and 92 of the British North America Act of 1867: First we have section 91, which says in part:
. . . the exclusive legislative authority of the parliament Canada extends to all matters coming within the classes of subjects next hereinafter enumerated; that is to say:
3. The raising of money by any mode or system of taxation.
6320	HOUSE OF
Federal-Provincial Financial Arrangements ; Then section 92, saying that:
In each province the legislature may exclusively make laws in relation to matters coming within the classes of subjects next hereinafter enumerated; that is to say,-
2. Direct taxation within the province in order to the raising of a revenue for provincial purposes.
What do these paragraphs mean? They mean exactly what they say. First of all, the federal government has the exclusive right to tax, by any method or system it chooses, either direct or indirect, and that only for their own provincial purposes may the provinces resort to direct taxation.
Indeed, were the federal government to exceed its powers, either in levying income tax or succession duties, what would happen can easily be imagined. Thirty-five years ago, that is in 1917, the Conservative party introduced the federal income tax. Is it possible that during this long period, from 1917 to 1952, no provincial government, no individual taxpayer would have raised the so-called unconstitutionality of this act in order to have it declared ultra vires and unconstitutional? Everybody knows that such an argument is absolutely groundless. I need not stress the point any further. There is obviously nothing in this to prejudice provincial autonomy, no more now than in 1917, when the law was first introduced by the Conservative minister of the day, Sir Thomas White.
Whatever may be said today, nobody could convince us that the tax rental agreements between the federal government and the provinces are contrary to the spirit of the constitution, or an encroachment upon provincial autonomy. Is this not the very same sort of agreement that Ottawa concluded with all signatory provinces? Are these agreements not clear and definite? They are in black and white, and anybody who can read should be able to realize it. Are they not strictly and absolutely fair? In other words, is not the federal government guaranteeing each province an amount which not only is equal to the amount of taxes the provinces are losing, but is even more substantial?
The federal government is in no way encroaching upon this provincial field, because under the very terms of those agreements royalties and rights concerning their natural resources are levied and collected by the provinces themselves who also collect income tax on mining or forestry operations. Anyone doubting it has only to read, inter alia, section 3 of the agreement between Canada and British Columbia signed on July TO, 1952. All agreements signed to date have in effect been signed for a period of five years. The fact is that several provinces

to veterans, family allowances, etc., that whole program which the federal government undertook to implement and which it has actually implemented under agreements with all of the provinces. Let us add about $440 million interest on a national debt incurred almost entirely during the two great wars. Finally let us add $300 million paid annually to provincial governments in grants or under tax rental agreements. That leaves only $700 million for all other services combined.
Now let us consider whence these revenues are derived to meet these extraordinary expenditures; what sources of taxation produce these revenues. A government, to remain in power, must levy fair, equitable and well balanced taxes. Income tax is the main pillar of the whole structure; it brings the federal government more than $2i billion, divided just about evenly between personal and corporation income taxes. The amount levied through income tax therefore corresponds to our defence expenditures and part of our social security expenditures. Another $1 billion of national revenue is derived from what I would call domestic taxation on commodities, that is the 10 per cent sales tax paid by manufacturers to which, in several cases, is added a special 15 per cent excise tax, and the very high taxes on alcoholic beverages, beer, wine and cigarettes. Over and above all these we have customs duties which yield from $300 to $400 million, and succession duties which, although they yield no more than $30 to $40 million, are most useful in certain cases as a means of controlling income tax.
I have said enough to start drawing conclusions, the main one being that the federal government cannot give up direct taxation, and income tax in particular, without giving up its whole national defence and social security program. It is inconceivable that the provinces should take over national defence; not only would this be ultra vires, but it would cause chaos and anarchy. Neither is it conceivable that the dominion should give up nor that the provinces should take over the entire responsibility for social security, a responsibility which the federal government assumed at their request; a responsibility which, as I said, cost $1 billion and which would double every provincial budget. Except for Quebec and Ontario, such an arrangement would in no time bring ruin and bankruptcy to all the provinces, even if the income tax were returned to them.
What, then, is the solution? For the moment there can be no other than the status quo, with the compensation provided for under temporary tax rental agreements.
23, 1956	6321
Federal-Provincial Financial Arrangements
Do the tax rental agreements really infringe upon provincial autonomy? Ever since confederation grants have been paid under the constitution. At first these grants were proportionately higher than they are today, accounting for more than half the provincial revenues. But no one ever complained, nobody ever asked that they be withdrawn; on the contrary, every one of the provinces without exception constantly endeavoured to have them increased. They are hardly justified today in saying, "Stop handing out federal grants and let us levy more taxes". So we may safely say that federal grants do not infringe upon provincial autonomy.
Federal tax rental agreements are voluntary and temporary. No province is under any obligation to sign an agreement, and when it does so it is only for a fixed period of time. Proof that the agreements are beneficial to the provinces may be found in the fact that several of them, when the agreements expired, felt the need to renew them and actually did so. Far from encroaching upon the provincial field, the agreements guarantee and safeguard provincial autonomy.
The fact that the federal parliament levies income tax does not deprive the provinces of their right to do so. But it is easily seen where this would lead. What would happen if 11 governments resorted to the same taxation? Is it not more reasonable, fair and economical to have but one collecting body, which then passes on to the provinces their rightful share on a per capita basis?
From the point of view of distributive justice, Canada's wealth being mainly centred in Ontario and Quebec where the more important corporations have their headquarters, and considering the fact that the other provinces contribute their share to the development of such corporations, that our-first allegiance is to Canada and the fact that the prosperity or poverty of one part affects: the country as a whole, is it not fair and just to have our income tax centralized and them distributed, as I said, on a per capita basis?.'
I sincerely believe that the federal-provincial tax agreements can but strengthen our federal system. Such agreements guarantee each provincial government a sound financial basis and full freedom of action, as well as complete autonomy in relation to all matters which, by virtue of our constitution, come within its jurisdiction.


Mr. B. R. Leboe (Cariboo):: Mr. Speaker, in speaking for a few moments concerning Bill No. 442, which is generally referred to as the federal taxation agreement bill, I would like to preface my remarks by quoting from the words of the Minister of Finance as found at page 5990 of Hansard. I would like to

Federal-Provincial Financial Arrangements read this into the record at this point because I intend to refer to some of the comments that have been made here by the minister. The first quotation is as follows:
During the past 15 years, with the consent and often at the urging of the provincial governments, the federal government has taken on heavy expenditures, for objectives which have not been considered, traditionally or constitutionally, federal responsibilities. I think particularly of those in the field of social welfare where payments for unemployment insurance, family allowances, old age pensions and assistance and like measures now cost us close to $900 million a year, and this is constantly rising. In addition, we have commitments to the provinces in health, trans-Canada highway, university and vocational grants, among others, that add substantially to our costs.
Further on in the minister's speech he mentioned a program of hospital insurance and said:
We have further agreed in principle to assume costs in connection with a national health insurance program that could easily total over $180 million in a year. Both these are constitutionally the direct responsibilities of the provinces.
Further on in his address the minister said:
I think it becomes quite clear that there is a very practical limit to our ability to dispose of our revenue sources and it is our view that this limit has been reached under present circumstances with these proposals at this time.
What I have in mind, Mr. Speaker, is that I think we have lost sight of the point that the federal government in its taxation policy has taken to itself a large portion of taxes, and has not returned sufficient of the moneys collected to the provinces for the particular items the minister has cited as being constitutionally the responsibility of the provinces. One way in which that matter could be settled very easily would be to turn the money back to the provinces and let them deal with it.
3 agree in principle that there should be some legislation which would provide fiscal arrangements to equalize payments as between those provinces which have a great deal of natural resources and those provinces which have fewer natural resources. I think that is right in principle and, as a matter of fact, as I recall it the premier of the province of British Columbia reiterated that statement in his presentation to the government on December 14, 1952.
I think it is unfair to deplore the fact that the provinces are making demands on the federal government. The only reason for the provinces making demands on the federal government is because the federal government has already taken the money from the provinces, and they want back more money than they are presently receiving. To put forth the argument that there are provinces asking for help and therefore we

have to go out and increase taxation is simply putting the cart before the horse. What we have to face up to is that the federal government collects the money and it is the duty of the provinces, as it were, to try to get back their fair share.
I go along with those who say that we should avoid as much as possible duplication of taxation. I think that is only common sense; but I must say again that I do not agree with the idea that when the federal government collect money they alone have the sovereign right to spend that money. I agree that there have been compensatory payments to the provincial governments, but those governments feel that those payments have not been enough. I think the minister pointed out in his statement that this is true. He said that the federal government have found themselves paying out money and instituting things which are constitutionally the responsibility of the provinces. That being the case then the federal government, rightly or wrongly-I am not arguing the point-have certainly found themselves in the position of holding the purse strings while the provinces find themselves in the position that they must come to ask for assistance because the money has been taken from them.
Some reference was made by the minister to the responsibility of the federal government as a unifying force. Referring to the federal and provincial governments the minister said, as reported at page 5987 of Hansard of July 16:
Each has its own assigned responsibilities, but it is the federal government that must provide the unifying force that makes a nation out of what would otherwise be a confederacy of the loosest sort.
The question which arises in my mind is how good a job has this government been doing, when we find across Canada echoes of discontent in the matter of provincial-federal relations. If this government is going to provide that unifying force there must certainly be ultimate co-operation on the part of the federal authority. Every means must be taken to get the provinces to come and work out something which will be mutually satisfactory to all concerned. I do not for a moment consider that Bill No. 442 is going to help in creating that unifying force in Canada. The reason I say that is that Bill No. 442 seems to be a mould into which this government expects the provincial governments to fit. If that sort of thing is considered by this government to be a unifying force, then I cannot agree with it.
Where is the financial policy of this government going to lead us in the field of social services? As I said before, I am not arguing

the point as to whether the federal government should or should not be in that field. The thing that is important is the fact that the federal government's financial policy has led to a 47 per cent loss in the purchasing power of recipients of social assistance, and this is also true of pensioners and those who invested money years ago in annuities. It is my opinion that the present thinking in Canada is that it is the responsibility of the federal government to bring those who have been thus adversely affected by federal financial policy to a position where they will have the same purchasing power they had ten years ago. That would mean that all recipients of social assistance, all pensioners and those living on annuities would have their particular funds brought up by 47 per cent.
Of course the first thing we will hear echoing across the country is that that would be inflation. I do not agree that that is necessarily so. In the first place, such an increase of purchasing power could be distributed to those people by the creation of money by the Bank of Canada, just as the ordinary banks create money needed for lending to industry or for other purposes. If this money were created by the Bank of Canada for the government it should be spent into circulation by increased payments to recipients of social assistance and those who are on pensions and annuities.
The money so created and issued to the government and sent into circulation in that manner would find its way as cash payments to the retailer, which would be reflected into the business of the wholesaler and the manufacturer. In many cases the manufacturer would then be able to pay off a certain percentage of his bank loan and having done so, the money would go out of existence at that point. Any time a person pays off a bank loan that amount of money goes out of existence and reduces the over-all money supply of the nation by that amount, just as borrowing money from the bank increases the money supply.
I submit that there is no reasonable ground to believe that this is going to cause inflation. What it does mean is that these people who to my mind are the responsibility of the national government in this respect, because it is the national government that has control of monetary and financial policies in this country, would have their purchasing power brought up to where it was ten years ago. If the financial policies of this government have robbed our people of 47 per cent of their purchasing power it should be the duty of the government to bring back the purchasing power of those people to where it
23, 1956	6323
Federal-Provincial Financial Arrangements was ten years ago. Not only is it a moral obligation, it is the duty of the government so to do.
Let us suppose it is fair to say that higher prices are caused by the demands of people in the lower income brackets and are not caused by there being a greater demand than supply. As I have looked over the picture in Canada and studied it I am convinced, whether or not any other hon. member is or is not convinced, that it is not the matter of supply and demand that regulates the prices of commodities today, it is the cost of the article that is produced which regulates the price and therefore affects the purchasing power of the people and the taxation which will follow in its wake.
If that is true, then placing increased purchasing power in the hands of the wage earner, which is the only way they can increase their purchasing power, is bound to push up prices. If it does push up prices then we are going to find ourselves faced with increased credit buying. Credit buying in this country-or consumer credit, as it is called-has reached an all-time high. If I might quote a prominent banker, I would say it is a dangerous situation in the nation today. That being so, our job must be to supply the purchasing power to these recipients of social assistance and bring them up to a reasonable standard of living. I pointed out how this could be done, and I feel that it is our responsibility to look at the situation realistically. I mentioned a few moments ago that this purchasing power in the business cycle would tend to reduce the amount of credit buying-


The Acting Speaker (Mr. Applewhaile):: Order. I hesitate to interrupt the hon. member because this debate has, 1 know, covered a very wide field over federal-provincial fiscal matters, but I am sorry that I am one who is finding it a little difficult to connect the hon. member's line of thought with the federal-provincial tax agreements which are the subject of the bill. I am going to ask him if he will please make that connection so that I and the rest of the house may follow it.


Bert Raymond Leboe: I shall do the best I can, Mr. Speaker. Though not an expert, I certainly will do all I can to co-operate with you in that regard. If I could be allowed a moment to explain what I was trying to do, it was to show where the government could get some money without getting it out of the taxation field at this time, by monetization which would reduce taxation and cause benefits to both federal and provincial governments, thereby making the agreements between the federal government and provincial government much easier to reach.
6324	HOUSE OF
Federal-Provincial Financial Arrangements If I have associated my remarks with the agreement in that respect I shall give you the idea at least of what I was trying to get at.
It follows also that such a policy would mean that the people would be able to participate to a greater degree in the development of their own country. When we speak about the development of our own country we are certainly talking about the tax field.
If I may be permitted, I suggest that a courageous provincial government that is stepping out in the development of its natural resources is certainly going to make a more favourable tax field in which the federal government is going to participate. Such a government that is stepping out and creating a favourable tax field would certainly cause a financial vacuum to appear in that field, and a financial vacuum appearing in the field would have to be filled.
If our tax structure, either at the provincial or federal level, is such that there are no Canadian savings brought about, we are going to find that far more foreign capital from the United States, France, Great Britain and other places is going to come into the provinces to fill that vacuum. One of the things that stands behind the anxiety of the provincial government over the development of its natural resources is the fact that salaries and wages will not release enough money to buy back the thing that is produced. That being so, extra dollars that are added to the money supply of Canada from outside investment certainly supplement the purchasing power of individuals within that province enabling the people to consume 100 per cent of its production and thereby be in a better position as well to pay the taxes, municipal, provincial or federal, that are levied upon those individuals.
On the matter of development, the Monetary Times for the month of July, 1956, has a special report on British Columbia, and I should like to quote very briefly from this magazine:
British Columbia smashed business and industrial records right and left in 1955-and will do it again in 1956.
That's the economic picture in the province that claims the fastest growth in Canada; the forward-striding giant of the west which looks on today's record expansion as a mere stepping stone to future greatness . . .
Production records tumbled like ninepins in 1955; capital flowed into B.C. from the rest of Canada, from the United States and Europe.
This certainly creates a more favourable tax field for both the provincial government and the federal government, but with this development come many responsibilities. Some of them have been mentioned here today, and I shall run over them briefly:


education, roads, highways, bridges, social services, municipal aid and debt reduction. Those are the responsibilities, and it is not my purpose here to go into them in great detail and quote vast amounts of figures and statistics. All our departments, whether provincial or federal, have access to reams and reams of statistics which have been used in judging what is best to be done in their particular fields.
I just want to mention one reference, in closing, to the statement that has been kicked around in this house for some time with regard to a strong central government. To my mind the emphasis on the word "strong" has been put in the wrong place. The emphasis by the statesmen in the past regarding a strong central government has not been, as I see it, on their ability to collect taxes, their ability to give orders and their ability to do other things of that nature, but I think that their meaning of a strong central government is one that is strong in character and strong in justice.


Mr. J. W. Monleiih (Perth):: We in the
official opposition are not in favour of the present proposal to return to the provinces something in the neighbourhood of $653 million. It just is not enough. We feel that the federal government is approaching the whole question of federal-provincial agreements in an improper frame of mind. It is obvious that the Minister of Finance feels that anything returned to the provinces is a cost to the federal purse. That is not so, as the provinces have as much right in the field of direct taxation as has the central power.
In actual fact the federal treasury should have been returning more funds to the provinces over the past several years. It then would have been possible for the provinces to undertake more of those projects which are their responsibility and expand greatly such things as highway construction, educational facilities, and hospitalization. Whilst provincial aid to municipalities has multiplied over the past 10 years or so, such aid could have been greater, and municipalities need not have become as financially hard-pressed as they are today.
Earlier today the hon. member for Eglinton dealt with the over-all picture in Canada as related to these proposed agreements. The hon. member for Quebec West dealt with how they would affect his province. I propose to get down to the very grass roots level of these agreements and how they will affect such level. I propose to support my argument by reference to some startling statistics concerning my home city of Stratford. What

has happened in Stratford has happened in varying degrees in practically every other municipality in Canada.
In 1945 the school tax rate was 11-6 mills. In 1955 it was 26-2 mills, an increase of 14-6 mills in the 10-year period or approximately 126 per cent. In 1945 all other taxes were at a rate of 27 mills. In 1955 they were at a rate of 44-5 mills, an increase of 17-5 mills or almost 65 per cent. There has been an over-all tax rate increase in that 10-year period of 32-1 mills, to a rate for 1955 of 70-7 mills. This represents an increase of something over 83 per cent. May I also point out that there is a further increase of 4 mills in 1956, bringing the current year's total rate to 74-7 mills.
I should like to illustrate just what this means in dollars. In 1945 the total tax levy was $563,000. In 1955 it was $1,335,000, an increase of $771,900. In other words the citizens of Stratford paid over 137 per cent more actual taxes in 1955 than they did in 1945.
Let me say a word concerning the actual financial assistance received by the city of Stratford from the province of Ontario during this period. In 1945 the amount was $85,554 and it was earmarked for educational purposes only. I do not have the figures at hand for 1955 but the total to be received in 1956 is $288,832. As the amount received for welfare from the province is not at the moment available for the year 1945, I am going to deduct the amount to be received in 1956 from the above mentioned figure of $288,000 odd so it will be comparable, and by so doing I arrive at a provincial rebate this year of $273,232. This is an increase in eleven years of $187,678. In that period the provincial payments to Stratford have more than trebled. It is an increase of more than 210 per cent.
A moment ago I mentioned that the 1956 over-all tax levy is 74-7 mills. To meet the same commitments the city would of necessity have to have a rate of practically 90 mills this year if it were not for the provincial help I have mentioned. At this point I should like to congratulate the mayor, the members of the city council, the industrial commission and the chamber of commerce, who have all worked together so co-operatively in an endeavour to bring industry to Stratford, and how this affects Stratford is also of importance. It has assisted in increasing the over-all assessment of the municipality by something in the neighbourhood of 33 per cent during the last ten years. In that 10-year period the population has increased
23, 1956	6325
Federal-Provincial Financial Arrangements by slightly over 14 per cent. There have, however, been the costs involved in providing facilities for these new industries and citizens. Let me stress the fact that an increase of population of about 14 per cent must mean the raising of more dollars to the extent of more than 137 per cent, despite help being received from the province of Ontario which is greater by 210 per cent than ten years ago.
The net debenture debt of my home city has increased from $479,152 at the end of 1944 to $1,866,547 at the end of 1955. In other words, more money is owing on debentures by well over 200 per cent than was owing 11 years ago. On top of all this Stratford is faced with the immediate consideration of capital expenditures totalling something in the neighbourhood of $lf million for a collegiate institute addition, sewer farm extension, storm sewers and local improvements not yet financed. Stratford has grown. There are more industries and there is a larger population, but who reaps the tax benefits? The federal treasury. Who pays the costs of that growth? The city of Stratford.
My home town, Mr. Speaker, is no different from hundreds of municipalities across Canada. These municipalities are the responsibility of the provinces, to which they must look for assistance. If the provinces in turn are going to do their part in the distribution of the tax dollar, they must receive a more practical share of the total taxes received by the federal authority.
Let us take a quick look at what has happened to our taxing picture over the last several years. In 1930 the federal taxing authority took 40 * 5 per cent of our tax dollar. In 1951 they took 70-9 per cent. That is an increase of 30-4 per cent of each tax dollar. The provincial take in 1951 was 17-2 per cent compared with 20-2 per cent in 1930, and the municipalities received 11-9 per cent in 1951 compared with 39-3 per cent in 1930.
Let us face facts. The municipalities are receiving less than one-third of the portion of the tax dollar that they received in 1930, but their obligations have increased tremendously in proportion. They, the municipalities, must receive more assistance from the provinces. The provinces must be in a position to fulfil their obligations, and to make this possible the federal government must make a more equitable deal with the provinces in these present agreements.


Mr. Roland Michener (St. Paul's):: Mr. Speaker, this afternoon we heard some quotations from the past, in fact quotations which go back into an era very different from that in which we are living today. The Minister of Fisheries (Mr. Sinclair) found some satis-

Federal-Provincial Financial Arrangements faction in statements made in 1935 and 1938, which laid a certain amount of emphasis on centralization, the policy which was adopted and which has been practised by this government since 1942 at the latest. In fact it was this government which instituted the Rowell-Sirois commission from which the ideas which are now prevalent in our federal system had their main source.
I do not think we should accept statements of a vintage which preceded the report of that commission as expressing the present views of the people who made them at that time. There are many more current observations on this problem which is before the house. I should like to bring the house up to date at least to post-war comments on what has been happening in our federal system.
The earliest and most extensive conference after the war, when an effort was made to sort out the problems which had arisen as a result of the centralization of the war, was the conference of 1945-46. That was quite an extensive and extended conference, at which there was ample opportunity for the statesmen of this country to express their views on the fiscal relationship between the provinces and the central government and to try to point the direction which should be taken in the years that lay ahead.
It was clear that the country was moving out of a wartime era into one of peace. The conference was named by Mr. King a conference on reconstruction, and it was a conference on reconstruction. Its purpose was to try to chart a course by which some of the effects of the concentration of authority in Ottawa during the war could be sorted out effectively and to the satisfaction of the different governments of Canada.
I should like to remind the house of the view that was expressed on that occasion by one of the maritime premiers, namely Hon. Mr. MacMillan who represented the province of Nova Scotia. On August 7, 1945, as found at page 127 of the report of that conference, he read a report which was presented to the federal authorities as expressing the view of the province of Nova Scotia. It was a report compiled by Dr. Dawson, and was in these terms:
The province along with all other provinces had been manoeuvred by war exigencies into a position where it will be extremely difficult to resist future dominion demands for extensions of power. The relinguishment of a large part of the provincial taxing power through the dominion-provincial agreements of 1942 and constitutionally valid but temporary wartime powers assumed by the dominion have given the federal government a whip hand which it apparently does not intend to give up readily. It is, however, the dominion's power to levy unlimited taxes in all fields that is the big club that can be held over provincial heads. If, for example, the dominion should persist in 
imposing an initial 30 per cent income tax, should increase its existing rate of succession duties and should retain a heavy corporation tax, it could render almost completely nugatory the provincial power to impose those direct taxes which are essential to solvency. For any provincial tax imposed in addition to these onerous dominion levies would impose an intolerable burden on the taxpayers of the province. The province in short has lost its bargaining power. It might, it is true, have lost it without the war, but in ordinary times no dominion government would have had the temerity to dictate the proposals contained in the agreement of 1942 without giving more in return and without a long period of negotiation and bargaining.
That is a fairly forthright statement by one of the Atlantic provinces presented in 1945, when the pattern was being set.


Walter Edward Harris: Do you agree with that?


Daniel Roland Michener: I think there is a good deal of substance in it.


Walter Edward Harris: Yes; but you do not agree with it.


Daniel Roland Michener: In my earlier remarks at the resolution stage I advised the minister of my views, namely that I felt this process of centralization for the purpose of maintaining a high level of employment, as he himself puts it, had been carried too far in justification of the retention by this government of the authority which developed during the war. I do not believe anyone today would suggest that we go back to the conditions of 1935, 1937, 1938 and 1939 and the pre-war operation of our fiscal system. But that is a very different thing from saying that one disagrees with the complaints of those provinces who feel that they have been improperly held out of rights which are theirs	constitutionally, without a corresponding relief from obligation.
Mr. Speaker, the crux of the matter is the relief of the provincies from obligation. The Minister of Fisheries and the Minister of Finance have made a great point of the provincial responsibilities which have been assumed; and we must recognize the fact that the federal authority now pays for many things which were formerly at least responsibilities of the provincial authorities, whether or not they had ever gone very far in dealing with those responsibilities. The family allowance is an early example of that. On its own initiative, without the concurrence of the provinces, the federal government undertook to distribute throughout the country revenues which it raised under the powers it got during the war. Obviously that procedure has had some effect on the responsibilities of the provinces. Then you come along-


The Acting Speaker (Mr. Applewhaite):: Order. It being six o'clock I do leave the chair.
At six o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at eight o'clock.
Daniel Roland Michener: When we rose, Mr. Speaker, I was speaking about the federal government's expenditures in the field of provincial jurisdiction. I had been reminding the house that the Minister of Fisheries and the Minister of Finance make a considerable point of the amount of money the federal government is spending annually for the benefit of the people in the provinces, and to some extent in the discharge of provincial responsibilities. A figure of $900 million was mentioned as the sum total of a variety of social welfare expenditures which are said to come in this category.
I think it is well to place beside this statement the figures for tax collections by the federal government in the three fields of direct taxation, that is the personal income tax, corporation income tax and succession duties. Those are the three fields of taxation which the federal government has enjoyed almost exclusively and which have become a great source of the additional revenues which are now focused in Ottawa, as contrasted with the period before the war when there was little money raised in these tax fields.
I have the figures for 1954. They are not the latest, but will illustrate the amounts which these three taxes bring into the federal coffers. In 1954 the personal income tax brought in $1,284 million. The corporation income tax was very little short of that; it was over $1 billion. The succession duties, the third of these direct taxes, brought in over $73 million; at least that was the federal tax, I think, before the allowance for the provinces that have concurrent taxes in the estate duties field. The total of these three taxes was $2,418 million or about five times the total revenues and expenditures of the federal government in 1939. It is at least over four times the total amount that was received in Ottawa and spent by the federal government in that year. This $2-4 billion from these three fields of taxation shows the expansive power of these taxes in a growing economy. It is these taxes which are the subject of this bill.
It is the problem of sharing these taxes with the provinces which we are debating, and the method of doing it. I am not going to discuss the formula which has been devised,
23. 1956	6327
Federal-Provincial Financial Arrangements but I would accept the proposition which the Minister of Fisheries gave, I think in error, that the provinces should have a 20 per cent abatement in the income tax field.


John Whitney Pickersgill: He said 20 per cent of the tax.


Daniel Roland Michener: A 20 per cent abatement.


John Whitney Pickersgill: No, he said 20 per cent of the tax.


Daniel Roland Michener: I understand the formula.


John Whitney Pickersgill: The formula is 9 percentage points which is equal to 20 per cent of the tax.


Daniel Roland Michener: If all of them are stated on the same basis it is not as confusing as it was this afternoon. That is the amount of money that is involved, approximately $2-5 billion. I daresay it will be more than that this year. If one accepts the proposition, which is a legal one, that these fields are really the joint property of the two levels of government, then one can only say that in the absence of agreement, equality is the rule. If both levels of government were today taxing at the rate which brings in this return to the federal government, there is something over $1,200 million which represents the provincial 50 per cent of that tax yield. That is a very substantial sum of money, and one which I think shocks the Minister of Finance when it is called the provincial share of the yield because what the provinces get is substantially less than that.


Walter Edward Harris: Because they never shared the tax.


Daniel Roland Michener: Neither did the federal government; neither government occupied this field. I am trying to show that this is entirely new revenue that has been developed during and since the war as a result of our expanding economy, and the provinces have been excluded from this field except to the extent of the tax rental agreements or to the extent they choose to tax on their own.
If you add up the amount of money which is being paid to the provinces under the tax rental agreements, which is a total of $350 million for the current year, and the amount which is being paid out by the federal government and for which it is taking great credit in those fields of provincial jurisdiction, some $900 million, you arrive at $1,200 million, which is still only 50 per cent of the amount of money the federal government is receiving from these taxes which, as I say, are properly, on any legal basis of construction of the constitution, the joint preserves of the provincial and federal governments. That is the result, even crediting the dominion with
6328	HOUSE OF
Federal-Provincial Financial Arrangements the payment of this $900 million for the benefit of the provinces, and crediting them with that full payment even though it has been a unilateral transaction in many cases because the federal government has decided that these payments shall be made and the provinces have been the beneficiaries without, in some cases, having been consulted.
The items making up the $900 million are well known. They are family allowances, $383 million; old age assistance, $91-4 million; blind persons pensions and allowances, $3 million; general health grants, $33-7 million; other grants, $29 million, making a total of $540 [DOT] 7 million. Then on top of that you have the old age security payments which are not shown on the balance sheet because they are supposed to be financed out of separate taxation. This will amount to $367 million in the current fiscal year, making a total of $908 million.
I think in order to maintain any sense of proportion in considering the position of the provinces, one has to set off those figures of tax collection against the claims of the federal government that by this $900 million they are lightening the load of the province. Looking at the problem from that point of view, if the provinces are content to credit the federal government with $900 million paid on their account; if they feel that is the best way that tax money could be expended in the meeting of their responsibilities, then all right. But that is not the proposition with which we are confronted. The provinces have had these payments made by the federal government and have, it is true, received advantage from them, but these have not been made under any comprehensive scheme of adjustment of responsibilities and of revenues.
The minister himself has laid down as one of the three principles by which he is activated in trying to arrive at a fair disposition of this matter, the proposition that the provincial revenues should be commensurate with their responsibilities. There are two sides to the equation. There are responsibilities and there are revenues. It is a question of whether the provinces would prefer to have these revenues or to have the dominion government collect and spend them in the interests of the provinces in the discharge of their duties.
I recall that the other day I said that one of the provincial premiers of the same political persuasion as the Minister of Finance, Mr. Hicks, in dealing with this problem in a speech in Toronto before the Canadian Club, said that these fields of provincial responsibility, which are being dealt with in a way by these large payments made from the federal treasury, have been transferred to


Ottawa unwittingly and without the decision of the governments concerned or the decision' of the people, and this did not seem to be a fair way of modifying our federal constitution.
Those figures might be supplemented, I think, with some other reflections on the sources of federal revenues. I have a table here which shows the amount of money collected in the year 1955 from each of these three direct taxes from the various provinces of Canada, and as I am speaking to this matter largely as the representative of an Ontario constituency, I think it is proper to put on the record the amount of tax that comes from that province in these three fields.
In 1955 the individual income tax paid by people in Ontario was $633 million out of a total collection of $1,284 million, roughly 50 per cent of the total income tax collection in the whole of Canada. The same thing is true in the corporation profit tax field. The collection from corporations was $512 million from the province of Ontario out of a total of $1,060 million, again just short of half. In the succession duty tax field the collection in Ontario was $34,366,000 out of a total of $73,944,000.
I do not propose to pursue that except to show, as I will presently, that the federal government is enjoying great revenues because of the industrial expansion and activity which this country has experienced in the post-war years, and that generated by those activities there is a corresponding need on the part of the provinces to provide the services.
If all these direct taxes collected in Ontario were added together they would be in excess of $1,100 million and if one placed against that total the amount of the federal payment to Ontario under the 1952 tax agreements one would find it is a small and pitiable amount in comparison. The minister will know the amount, but I think the current year's payment to Ontario is in the neighbourhood of $163 million. That is about 14 per cent of the yield of those three taxes in that one province.
There is one other set of figures which I ask the house to permit me to give, though figures are not usually very interesting, and that is a comparison of the federal grants, or payments as I prefer to call them, under the tax agreement to the province of Ontario, with the payments the province has had to make to its municipalities to maintain their solvency without excessive taxation of the citizens of those municipalities.
I will give you first the federal payment to Ontario under the 1952 agreement. They

begin in the fiscal year 1952-53 at a sum of $123 million. For the current year 1956-57 there is shown a payment of $151 million. I believe I said it was $163 million but actually $151,700,000 is the estimated payment to Ontario this year. That is an increase of 23 per cent over the period of five years which the agreement covers. I tried to give figures on this when I spoke on the resolution, but X have them documented a little more carefully now. The grants of all kinds which the province of Ontario made to its municipalities in 1952-53 represented a total of $97,665,000. I call the attention of one of the hon. members from the province of Alberta to this figure, because he challenged any other province to match the grants which the province of Alberta has been making to its municipalities. In 1952-53 the sum of $97,665,000 was paid by the province of Ontario to the municipalities.
I would like to recall to the house that that is very largely the result of the foresight of the present Leader of the Opposition, who instituted grants of that kind for educational purposes in 1943. The necessity for them has been substantiated throughout the years, and these educational grants comprise a very large part of these payments from the provincial treasury to the municipalities of Ontario.
In the course of the five-year period the $97,665,000 rose to $184,700,000 for this current year, 1956-57. That is almost double- in fact it is 97 per cent more-as compared to the 23 per cent increase in the same period which the province received under its arrangements with the federal government.
I was referring, Mr. Speaker, to some quotations which are more recent than those which the Minister of Fisheries was able to find. Apparently he has not received any books in his library since 1939 or 1940, but there are the proceedings of the conference held in 1945-46 at which a good deal was said about this principle of grants as a solution to the relationship between the central government and the provincial governments. I presented Mr. MacMillan's statements on the subject, and I would like now to refer to a statement or two made by the present Leader of the Opposition who attended that conference as the premier of Ontario. Mr. Drew at page 14 of the proceedings of April 29, 1946, said this:
There is no question of generosity on the part of the dominion government or lack of generosity. There is no question of selfishness on the part of the provinces or of lack of selfishness. What we are discussing here is the allocation of taxes paid by the same taxpayers across Canada. What we are seeking is a procedure by which these combined taxes may be channelled into the most effective courses to the advantage of all the people who live in the nine provinces.
Federal-Provincial Financial Arrangements
That is still the problem today. It is not a question of centralization or not; it is a question of allocation for the benefit of the people of Canada in their two capacities as taxpayers and recipients of the services of the federal and provincial governments.
At page 21 Mr. Drew said:
The whole system of subsidies is wrong and should be brought to an end just as soon as a complete and exhaustive analysis of our tax structure can be carried out for the purpose of establishing a new tax structure in Canada.
He went on to quote a learned authority on public finance, Professor Jensen, who said:
Subsidies here defined as transfers from the central to the intermediate or local governments merely as devices for balancing intermediate and local budgets in normal times should not be tolerated and as devices for aiding the latter in emergencies they should be scrutinized with the utmost care. They tend to weaken the responsibility of the receiving governments by making them clamorous beggars at the door of the federal government.
Then follows quotations which have been heard in this house at least once, from Sir Wilfrid Laurier, on the same subject. Mr. Drew at page 22 said:
All Canadians must face the very dangerous theory inherent in all this and now affecting huge sums of taxpayers' money, namely, that one government in Ottawa should collect money without any definite limit and hand it over to governments which can spend it without the responsibility of collecting it, without answering directly to the taxpayers who provide it.
In case some hon. members may say this is an indication that the Leader of the Opposition or this party is against subsidies in any form, I will say now we do not take that position. We recognize the principle of the equalization grants which have appeared under various names such as fiscal need grants and national adjustment grants, as they were called in the proposal which the Ontario government made in 1945. The Leader of the Opposition made it clear that he recognized that this was an essential factor of our federal system, due to geographical and other conditions of inequality, when he said:
Before closing these remarks it perhaps should be said again in this open conference that the Ontario government has at all times expressed its belief in the principle of fiscal aid to those provinces which from time to time require special financial assistance and that Ontario which proposed the setting up of a national adjustment fund for that purpose keeps that proposal before this conference.
That position was made abundantly clear when the Leader of the Opposition spoke here a week ago Monday during the resolution stage.
I should like now to refer to the background of Ontario's need for revenue of its
6330	HOUSE OF
Federal-Provincial Financial Arrangements own in these fields. I am using some figures which when I saw them struck me as being most forceful, and which were prepared by the deputy minister of economics for Ontario. These were used in an address to the Empire club in Toronto in April of this year. Dealing with the growth of the population in Ontario he said:
While our population has increased 43 per cent since 1939, our output of primary iron and steel, motor vehicles, electric power and dwelling units has trebled.
Referring to agriculture he said:
Agriculture, with a fifth fewer farmers and a fourth smaller labour force, has increased its manpower productivity by 75 per cent and output by 28 per cent.
That is a very remarkable achievement in production.
Then speaking of population he gave what to me were striking figures, although I knew that the bulk of immigration had settled in the industrial provinces. Referring to the growth of population in Ontario he said:
In recent years it has been increasing at an annual rate of nearly 150,000. This growth of nearly 3 per cent annually, which is nearly double the annual rate of increase in the United States and exceeds that of the rest of Canada, stems, of course, from two main forces-our natural increase and immigration. The immigration to this province from foreign countries has been at an extraordinarily high level since the end of world war II. In the past decade, 636,000 immigrants, 52 per cent of all those coming to Canada, have settled in Ontario, bringing new trades and skills, their capital and their savings.
That created the responsibilities which have been mentioned here and which devolved upon the municipalities. The natural rate of increase in the province was 94,000, that is the excess of births over deaths, which is a very remarkable figure. The birth rate which has increased substantially has apparently reached a plateau and is continuing at that high level. The normal family although it is not what it used to be in the days of my youth, seven, eight or nine children, but is now three, four or five children, is larger than it was immediately before world war II.
On this basis Ontario in the next five years will have 700,000 more people, and it is expected that the population of the province will be 6 million by 1961 and 8-2 million by 1975. That is really a remarkable figure when one realizes that no one would have dared to predict a population of 5 million for Ontario by 1965 just a few short years ago. All this of course brings responsibilities. The rise in number of births means that there is a larger proportion of younger people in the population. Today there are one million people in the elementary schools of Ontario, and it is estimated that in 10 years three-quarters of a million more will have to be


provided for. That is an increase equal to three-quarters as many as there are now, in the short space of 10 years.
Then there is the problem created by the need for skilled and technical workers in all fields. The serious shortage of engineers and technicians has received considerable attention, but there is also a shortage of physicians, physicists, chemists, accountants and virtually all professional classes, even economics. There is a desperate shortage of dentists. This is a condition for which there appears to be no immediate remedy. I think the people of this province and of this country must be prepared for a shortage of highly skilled workers during the next quarter of a century.
I see my time is running out, but I should like to say a word about capital investment in the province. In the last 16 years nearly $19 billion has been invested in the province of Ontario, and very little of that was due to the efforts of the government in Ottawa. There are only two items in the list of factories, machinery and equipment, commercial buildings, housing, utilities, schools, highways, roads, hospitals, waterworks, sewage and similar undertakings to which the federal government has made any contribution. I refer to housing, where loans have been made, and to highways, where there has been some contribution to the trans-Canada highway. In the case of hospitals there have been some grants in aid made jointly with the province.
I have here the figures of the expenditures in some of these major fields such as education, the provision of highways, the provision of sewage systems and other services for the industrial parts of the country during the next 10 years. These will run to a total of something like $8 billion. That is a lot of money for a province which has no great tax field, which has only a certain amount of leeway, which is living in a sense within the confines of a strait-jacket or in a suit which is too small for its present size. That is a problem which this house has to deal with in considering what kind of agreement should be made between the federal government and the provinces, none of which are satisfied at this stage.


Mr. F. S. Zaplilny (Dauphin):: Mr. Speaker,
I believe it will be a matter of general regret in this house and perhaps elsewhere that this bill is brought before the house when we are coming close to the end of the session. The great importance of this matter has been emphasized by various hon. members. We are now discussing the question of dominion-provincial relations generally and tax agreements in particular, which have to do with the whole national economy and the

survival of the nation as a whole. Had the bill been brought in earlier and submitted to a standing committee after second reading it is quite possible that we might have had the advantage of the experience and knowledge of experts in the field of dominion-provincial relations, who could have offered some sound advice. However, now that we are faced with the question I should like to draw attention to one or two principles which have not been emphasized too strongly up to this point.
Before doing so I should like to refer to something said this afternoon by the Minister of Fisheries when he made his contribution to this debate. The main theme of his contribution seemed to be the claim that this measure should be considered as satisfactory because it was rather generous, because it represented an increase of approximately $115 million over the previous arrangement on the part of the federal treasury, or about a 20 per cent increase. It was on that theme that the minister built up his argument.
Those of us who regard this problem as serious, as a nation-wide problem and certainly not one that should be used as a political hot potato to be chased around, rather deplore that sort of approach by one of the ministers of the government. Had it come from one of the private members supporting the government one could put it down as a member arguing the case for the party he supports; but coming from a cabinet minister, placing it on the level that the government is being very generous and that the opposition members really have nothing to complain about because what is being offered now represents $115 million more than what was offered under previous arrangements, is putting it on a very narrow basis.
In my view the real question is not whether this offer represents a larger amount, either in dollars or in percentages, as compared with what was offered in previous years. The real question is whether this bill is going to be effective in bringing about a solution of the problem that has been before this parliament and this nation for over 25 years, the problem of finding a means of sharing the available revenues in the most equitable, efficient and sensible manner among various levels of government. It is not a question of whether this represents an increase of $115 million or 20 per cent; it is a question of whether the revenues that are available, whatever the figure may be, can be so arranged as between the provincial governments and the federal government- and, of course, including the municipalities- so that the people of Canada, who are after all citizens of the same nation whether they
23, 1956	6331
Federal-Provincial Financial Arrangements live in one province or another, will feel that their tax dollar is being as efficiently and sensibly used as possible in the various fields.
I think we would be further ahead if we approached it from the point of view of each one placing himself in the position of the taxpayer of this country, not as a Manitoban or an Albertan or a Torontonian but as a citizen of Canada, and asking ourselves this question: "When I part with my tax dollar, how do I want it spent, and how do I think is the most efficient and productive way in which that money can be spent?" If we can answer that question to the satisfaction of the taxpayer of this country, regardless of whether he lives in one part of the country or another, I am sure he will feel that we are approaching this matter from a national point of view.
Of course the Minister of Fisheries, in making his speech, used part of it to welcome a newcomer to his party. I could not pass that up, because it was a rather unusual situation that I have not previously witnessed in this house, as a good many have not. The hon. member for Moose Jaw-Lake Centre made his speech this afternoon, which certainly cannot be characterized as a maiden speech-he made that some time ago-but, considering that we were witnessing the first speech of a new Liberal, we shall have to call it a maternity speech. I hope he is successful in convincing his constituents-


An hon. Member:: Don't worry about him. Start worrying about yourself.


Frederick Samuel Zaplitny: -that the party on the basis of opposition to which he was elected three times has suddenly changed so much that he has been put into the position of having to defend that party and the government. However, I leave that to him.
The problem that is before the country today, and has been before it for about 25 years, is the inadequacy of tax bases for the provinces upon which to raise the necessary revenue to fulfil their responsibilities under our constitution. Secondly, it is the problem of the inequality of standards of living and standards of services offered in the various provinces across Canada and the desire of the Canadian people to set up some sort of minimum standard, at least, which should be enjoyed by every Canadian in order that he may have a feeling of national pride that as a Canadian he has certain inalienable minimum rights and privileges. Third, it is the problem of the inefficiency and inconvenience of what is called double taxation.
I do not like to use the term "double taxation", because I think it leaves the wrong
6332	HOUSE OF
Federal-Provincial Financial Arrangements impression. When people hear the term "double taxation" the inference is created that because the federal parliament imposes certain taxes and the provincial legislatures impose certain taxes, that means the taxes are going to be twice as much or that necessarily they will be higher than if they were left to one jurisdiction alone. Of course that is not so. The term "double taxation" really means that you have taxes imposed by two different jurisdictions upon the same taxpayer, perhaps using two different methods and standards of collection. I think it is the desire of Canadian people generally that there should be a minimum of duplication in the raising of revenues, not because of the taxation involved but because it is an inefficient and inconvenient way in which to raise the necessary revenues.
Those seem to be the three central problems. I think we have to go behind them and ask ourselves also, how did those problems arise? Quite evidently this is something that has not arisen during the past few years but has been a sort of accumulation over a long period of years. How did we get into that condition? First of all the British North America Act, which is accepted as Canada's constitution, is now 89 years old. When the fathers of confederation met and conceived this nation and made the request to the parliament of Great Britain for an enactment to set up confederation, no one at that time could have conceived some of the developments that have taken place.
I should like to draw attention to one or two of those developments that I do not believe have been mentioned up to now. One is the mass concentration not only of wealth but of financial power in certain parts of this country. When Canada became a nation there was a sort of equality. Perhaps it was an equality of relatively low standards of living at that time, but at least there was a sort of equality within the various components of this nation. We had not felt the effects then of the tariff structure, because that had not yet come into play. We had not yet started feeling the effects of the building up of huge corporations which has had the effect of concentrating wealth and power in certain areas of the country. But as time went on we began to feel those effects, and in my view we are now in a position where I think in the next two years, probably, or in the next five or ten years, we are going to feel those effects at an accelerated rate. It is my view that the concentration of financial power is increasing at a greater rate today than it was 10 years ago, and cerainly at a much greater rate than 20 years ago. As we go into the field of
[Mi. Zaplitny.]

specialization, automation and the high speed business methods of the new era, we are going to find that the concentration of financial power is going to accelerate and the problem is going to become greater and greater and more acute in a short time.
Then, of course, there have been the effects of the two world wars. It is not necessary for me to review what those effects were; they are well known to the members of this house and to the people of this nation. We know that under the stress of the first and second world wars certain things were done which had the effect of disrupting the normal occupations and methods in this country, and had the effect of further accelerating this accumulation of financial power.
I should like to mention here that apart altogether from the kind of legislation we are now considering, and the dominion-provincial conferences which we have once in a while, there are some things that are basic to this problem of the concentration of financial power, which will have to be faced.
I believe there are two things that can prevent that concentration from becoming far more serious than it is. One of those has been advocated by this group on many occasions; finding fields of public ownership, particularly of public utilities, in which the public themselves can participate in the management of their own affairs and therefore, of course, in the management of their own revenues. We can tax as we like, but we must recognize what has been pointed out by many economists, not the least of whom, if I may call him such, is the present Minister of Justice (Mr. Garson), who in many of his speeches when he was premier of Manitoba made this kind of argument which I think was very sound. I doubt if he would make it now, but I believe it is quite sound.
He pointed out that the whole business of taxation, particularly the taxation of corporations, is in one sense an illusion because, as he pointed out in one of his speeches at that time, all the corporations do is pass on the taxes imposed upon them in the form of increased prices of the products they sell to the public, so that in the end the consumer pays every nickel of taxation in this country. You may say that we impose so much individual income tax, so much sales tax, so much corporation tax, so much of other kinds of taxes, but in the end it is the individual consumer who buys and pays for the products that are manufactured or produced in Canada, who pays every nickel of the taxation, because, it is all passed on to him in the prices of the goods he has to buy.

That being so, the only real way in which the people of Canada through their various levels of government can have full and complete control over their own revenues is by participating in the greatest possible way in the management of their own affairs. One of the ways in which that can be done is through public ownership, whether it is done on the federal level, the provincial level or the municipal level. The other way it can be done in order to avoid this concentration of financial power in the hands of a few corporations in certain areas of the country is through co-operative ownership. In my opinion this is one of the finest ways in which the production of wealth and the revenue derived from that wealth can be kept within the community to serve the needs of that community rather than having it all drained off and channelled into one huge financial empire, with no loyalty to any part of the country, and which only cares about its own affairs.
I believe these two factors have to be taken into account when we are discussing the problems that arise with respect to the question of sharing revenues. In my opinion, prior to this kind of legislation, if it cannot be done in the midst of it, if I may put it that way, a dominion-provincial conference should have been called not so much for the purpose of finding a method or a formula to meet the immediate problem of how to share the revenues of the country but rather a constitutional conference. I will grant that an attempt was made not so many years ago to have that kind of conference. Unfortunately, for one reason or another it did not go very far and was not resumed. But I think it is even more important in the long pull, if we are to operate our federal system efficiently, to have a constitutional conference of the provinces with the federal officials and take a good, cool look at the provisions of the British North America Act with the amendments that have been made.
I say that because a great many of these petty and sometimes partisan arguments that come up in a debate of this kind could be avoided if the fields of endeavour, responsibility and jurisdiction were more clearly defined than has been the case up to this time. Certainly we would avoid the one thing which has been deplored by speakers on both sides of the house, and that is the question of one government raising the revenue and another government spending the revenue. Personally I do not think it is the worst thing that could happen in a country, particularly a country like Canada, but it is an undesirable way in which to handle our revenues.
23, 1956	6333
Federal-Provincial Financial Arrangements
If there were a constitutional conference, and if those who participated took a good look at things, had expert advice, decided what from now on could be more efficiently handled on the provincial level and what in the national interest could be more efficiently handled on the federal level, and then suggested to parliament and eventually to the parliament of Westminster further amendments to our constitution based upon the results of that conference and arising out of commop agreement among the representatives of the provinces and the dominion, we would do away with a great many of the difficulties that arise at a time when we are wondering how best to share these revenues.


Walter Edward Harris: Is that not what the Rowell-Sirois commission did?


Frederick Samuel Zaplitny: The Minister of Finance asks if that is not what the Rowell-Sirois commission did. I do not quite agree with him that that is what the commission did, if that is the view he holds. What the commission did was to investigate, do a good deal of necessary basic research work and get a great many facts and place them before the government or parliament. The commission's duty was not to propose definite constitutional amendments. They could make certain general recommendations, which they did. They also supplied the background material upon which such decisions can be based, but only the elected representatives of the people can go to the extent of actually recommending the necessary amendments which have to be made to the constitution.
I believe that until we have a conference which will devote itself much more fully and deeply to the question of our constitutional relationships, many of these problems are going to arise again and again. I think what is also required are conferences within the provinces between the municipalities and the provinces themselves. Certainly after such a constitutional conference as I have mentioned had been held; after there had been some clarification and the best possible job had been done within the terms of the agreement among those participating so the provincial jurisdictions knew exactly what their responsibilities were, the provinces would then be in a position to call in the officials of the municipalities within the provinces. Then they could decide in conference to what extent certain changes would have to be made in their various municipal acts and other legislation dealing with municipalities. That should be done in order that there might be some clear-cut idea in the minds of those who are serving the same taxpayer on the municipal, provincial and federal levels.
6334	HOUSE OF
Federal-Provincial Financial Arrangements
I think the very worst thing that could happen, and during this debate it has almost happened, would be a competition in passing the buck or trying to make good fellows of ourselves by saying, as the Minister of Fisheries did, "Well, here we are and we are offering you $115 million more." What business have we to offer anything to anybody? Whether members of this federal parliament or of a legislature or of a municipal council we are trustees, and very temporary trustees at that, of certain moneys which are given to us by the people of the country who trust our wisdom to the extent that they feel we will spend those moneys in the best possible interests of all the people concerned. But for the federal government to take the attitude that it has certain moneys which it is in a position to give or grant or hand to any province is, I think, looking at the matter from the wrong point of view.
That is why I suggest there should be some clear-cut arrangements made in order that the various levels of government will know exactly what are their responsibilities. It is quite conceivable that as to many of the things which today are considered to be, and are in the legal sense, the responsibility of the provinces, the time may now have arrived when the provinces themselves will agree that those responsibilities should be transferred to the federal jurisdiction. Having done that piecemeal in a great many respects already, it may perhaps be felt that certain of .the responsibilities should now more properly lie within the jurisdiction of the provincial governments. But let there be a clear understanding of those terms and arrangements before we begin to talk actual money.
I want to add this. I believe I should say this because in a sense it has a bearing on this very legislation that we are now discussing. There are certain things this parliament can do to ease the burden on certain parts of this nation which have been referred to as not as well developed as or retarded in relation to other areas. We have to take a good look at our tariff structure. Certainly no one will deny that our tariff structure right from the beginning, its setting up, has had the effect of concentrating industry in certain parts of our nation, which has had the result of asking the people of other provinces which are not favoured by such industry actually to subsidize this industry in the form of higher prices because those industries enjoy that certain protection. That is one of the things this parliament could do without in any way disturbing the autonomy of any province and without in any way having to amend the constitution.
TMr. Zaplitny.]

By reducing our tariff duties on certain products we could come materially to the help of many of those provinces which today find themselves in an inferior position financially.
Those are some of the things that could be done. I think most of all we in this parliament must somehow train ourselves to understand that we are here not as federal representatives as such but rather that we are here as representatives of the same taxpayers who are represented by the members in the provincial legislatures and in the various municipal councils. We should therefore try not to approach these jurisdictions on a competitive basis or on the basis of saying "We can do better than you can".
Let the taxpayer decide who can spend his money most efficiently. Let those who are in the various levels of government lay before the taxpayers in clear terms what in their opinion should be the responsibility of each level of government. Let us approach the whole question from a national point of view so that the people across the country will feel that we do not have a bunch of politicians at the top scrapping amongst themselves for the credit for what is done. Rather let them feel that they are willing so to apportion the revenues of the nation so that each government at every level will have the opportunity to discharge its responsibilities.
Because it is in the position of having access to the greatest volume of revenue of all, I think this parliament should lean over backward to avoid making the provincial governments feel as though they are getting a handout, or as though they are being put on the spot by having a piece of legislation thrown at them on a take it or leave it basis. I think the provincial governments should be made to feel that we are willing to sit down as mature people and say, "Here is a nation with a federal system. There are certain revenues that must be raised. Let us find out what is the best way of doing it so that each level of government may discharge its constitutional responsibilities".


Edmund Davie Fulton: Mr. Speaker, in discussing this bill this house is dealing with what is undoubtedly one of the most difficult problems before the dominion parliament and indeed before the nation as a whole, namely the problem of so adjusting the financial relations between the dominion and the provinces that each governmental authority may be enabled to discharge the responsibilities which are placed upon it.
Before coming to some of the details I desire to discuss tonight I should like to make a suggestion, and I do this in all seriousness. In my opinion one of the reasons there has

been so little progress made in solving this problem-and here I am not wishing to overlook real progress where it has been made- or one of the reasons I do not think we have yet set out our feet firmly on the path of an over-all solution, is that we are trying to fit dominion-provincial relations and the problems of the fiscal relationship between the governments into the strait-jacket of preconceived financial proposals and then cutting the limbs-the arms and the legs- of the various governments in order to fit that garment which has been tailored in the workshop of Harris and company-


John Whitney Pickersgill: Harris tweed.


Edmund Davie Fulton: -instead of measuring the customer and finding out what are his real requirements in the year 1956 and the next 20, 50 or 100 years. I do not think one can go too far in matters of this kind. You must be realistic. But what should be done is to assess the requirements of the future that can be measured; then tailor the garment to fit them. The government here is approaching the problem from its own preconceived notions of what should be the size, type and colour of the garment, and then forcing the customer into it. If a leg sticks out here or a foot sticks out there, they cut it off and stuff it in somewhere else.


James Sinclair: You should change your tailor.


Edmund Davie Fulton: The people of Canada will do that at the next election, because the people of Canada-and particularly the provincial and municipal governments-do not like having their necessary expenditures chopped off and curtailed in that way so as to fit the preconceived notions of the federal government.


John Whitney Pickersgill: Does not the hon. gentleman believe in autonomy?


Edmund Davie Fulton: Yes, but a severed limb is not very autonomous. I think this is what the trouble has been. Of course, what the government is suffering from is gangrene and lack of circulation, especially to the head. We know that.


James Sinclair: That is a Tory complaint.


Edmund Davie Fulton: I wish that were not quite so obvious in their approach to this problem of dominion-provincial fiscal relations. I am putting this forward as a serious proposal, that what is needed, rather than trying to force our relationships into this pre-tailored fiscal garment, is a meeting of all the governments with a view to assessing their needs and what if any exchange of constitutional responsibilities can be arranged by
23, 1956	6335
Federal-Provincial Financial Arrangements mutual consent. Then having reached agreement on this point, arrange a federal-provincial fiscal program which will enable the various governments to discharge their agreed responsibilities.
That will be difficult, Mr. Speaker. I know that. But no one can overlook the difficulty or pretend that it does not exist. Confederation was also difficult. I would say it was infinitely more difficult in 1867 with the problems of communication and the limited resources at the disposal of that collection of colonies which even then were not fully self-governing. I would say that the difficulties which were confronting them were infinitely greater than the problems confronting Canadian statesmen today in arriving at a similar solution. But our great misfortune is that in the ranks of the present government we have not a statesman with the same vision as those statesmen of 1867.
Since we are forced to approach this problem within the terms prescribed by the legislation laid before us by this government, suffering as it does from the disadvantages I have outlined, we must deal with the arguments advanced by the government as to why it can not meet the legitimate requests of the provincial authorities.
One set of these arguments was advanced today by the Minister of Fisheries. Indeed, he devoted a great deal more time to a resume of the obstacles in the way of enabling the provinces to discharge their responsibilities than he did in a serious attempt to find a solution. I do not think even he would deny that the provinces and municipalities are faced with problems mounting more and more to emergency proportions as one surveys the field of education at the primary and secondary levels as well as the higher learning institutions, the field of the provision of highways, and other provincial responsibilities.


James Sinclair: I agree with that, but so is the federal government faced with exactly the same problem.


Edmund Davie Fulton: The minister invited certain suggestions as to the solution of the federal government's problem. I intend to suggest to him some quarters from which he could find a solution, quarters which I think will be particularly welcome to the Minister of Fisheries. I think he mentioned four problems one of which at least would have to be met by the federal government if it was to be able to find the surplus revenues to meet the requests of the provinces.
One in which I am particularly interested and to which I intend to refer tonight is the one to which he said an answer might be
6336	HOUSE OF
Federal-Provincial Financial Arrangements found in the reduction of federal government expenditures. He referred to certain statements made by the leader of the official opposition. I have not his exact words, but as I took them down I think they went something like this. We do not hear very many concrete suggestions as to how expenditures can be reduced. He went on to recall that in a speech at Saskatoon, I think it was, the Leader of the Opposition had said that $500 million could be cut from federal expenditures without reducing essential services. In fact, as the Minister of Fisheries further recalls to us, that was made one of the planks of the Conservative election platform in 1953.
The minister went on to remind us also that he was parliamentary assistant to the Minister of Finance at that time and that he had shortly thereafter, and for a number of years thereafter, asked the Conservatives in the house to suggest specifically where expenditures could be reduced by the amount of $500 million. He used a rather uncomplimentary expression, and I shall not repeat the exact words, in which he said the Leader of the Opposition had nothing more specific to suggest than that we should have a commission along the lines of the Hoover commission in the United States.
It is true that that suggestion was made and is still made by the Conservative opposition, that if this government really put its mind to it, it could save upward of $500 million without reducing essential expenditures. We have advanced specific examples of waste, extravagance and duplication of services on the part of this government.


John Whitney Pickersgill: Repeat them.


Edmund Davie Fulton: I do not know what is the use of casting pearls before swine, because if-


John Whitney Pickersgill: Never mind the pearls, just give us the facts.


Edmund Davie Fulton: -these individuals were exposed to these suggestions before and were completely impervious to them-


John Horace Dickey: To what are you referring?


Edmund Davie Fulton: -it may well be that the reason they do not accept them or attribute to them any merit is the source from which they come.
What I propose to do is suggest to them now a source from which they might find these proposals somewhat more acceptable. We all witnessed in this house today a rather touching scene. Whether it was a process of osmosis, a delayed reaction, or whatever it may have been I do not know, but the results speak for themselves. We saw the hon. member for Moose Jaw-Lake Centre (Mr. Thatcher)-I am sorry I do not see him
TMr. Fulton.]

in the house. I am looking in the quarter of the house where he previously sat with the group of independents, but perhaps his seat has already been moved. Maybe I should look opposite in the ranks of the Liberal party. I do not see him there. I do not suppose it is any use looking in the ranks of the C.C.F. party which he left over a year ago.


James Sinclair: You tried to get him as a Tory.


Edmund Davie Fulton: I was tempted to look in the ranks of the Social Credit party, recalling that they made him a certain concrete offer in reference to his own province of Saskatchewan, but I understand he turned them down. To that extent, at least, I give him credit for intelligence.


James Sinclair: He turned the Tories down, too.


Edmund Davie Fulton: One place I do not have to look is behind and about me in the immediate ranks of this party-


An hon. Member:: He knows better.


Edmund Davie Fulton: -because this is one quarter from which no offers were submitted.


James Sinclair: Have you consulted the hon. member for Greenwood (Mr. Macdonnell) before making that statement?


Edmund Davie Fulton: I say this, that I endeavoured to indicate to the hon. member for Moose Jaw-Lake Centre, for whom I have great personal regard and affection, that I would be discussing his recent change of heart tonight but I was unable to reach him.


John Whitney Pickersgill: On a point of order, Mr. Speaker; I was not here this afternoon but I understand that the hon. member for Eglin-ton (Mr. Fleming) raised a point of order as to whether this subject could be discussed. Surely if it could not be discussed by the hon. member for Moose Jaw-Lake Centre himself there cannot be a debate about him.


Edmund Davie Fulton: It is nice to know, Mr. Speaker, that when he is signing these letters the Minister of Citizenship and Immigration (Mr. Pickersgill) is concentrating on his signature. He says he was not in the house, but I believe he was and had he been listening he would have appreciated that the point of order raised by the hon. member for Eglin-ton was quite different.


John Horace Dickey: The point you are trying to make is that the rules only apply to other parties, and not to the Tories.


Edmund Davie Fulton: In attempting to deal seriously with the suggestion made by the Minister of Fisheries, who after all was previously parliamentary assistant to the Minister of

Finance, that one of the difficulties in the way *of this government meeting the requests of the provincial governments was that this government cannot reduce expenditures, I am seeking to advance a suggestion from a quarter which I thought would be acceptable to the government but apparently is not acceptable to the Minister of Citizenship and Immigration I suggest that if it is not acceptable in this case he will have to follow the lead of the Prime Minister, with whom I understand the course followed by the hon. member for Moose Jaw-Lake Centre was discussed, even if it was not discussed with the Minister of Citizenship and Immigration. May I say that one of the methods suggested on numerous occasions by this new-found colleague, this Moses in the bulrushes-


John Whitney Pickersgill: I am rising on another point of order, Mr. Speaker.


The Acting Speaker (Mr. Applewhaiie):: the Minister of Citizenship and Immigration is rising on a point of order, we will hear him.


John Whitney Pickersgill: I submit, Mr. Speaker, it is a rule of this house that if an hon. gentleman reads something from someone else, he must indicate whether or not he agrees with it. I think we should be told whether or not the hon. gentleman is endorsing what he is about to read.


Mr. Ferguson:: That is nonsense.


Edmund Davie Fulton: Mr. Speaker, I understood that it was Your Honour's alter ego who was writing the new book on rules and not the Minister of Citizenship and Immigration. I certainly hope that the one has more relationship to the rules than the other would obviously have if it were ever produced. I suggest that the minister go on signing his letters and leave the house to serious discussion.


John Horace Dickey: Oh, is somebody else going to speak?


An hon. Member:: You should.


Edmund Davie Fulton: In the course of the remarks the hon. member for Moose Jaw-Lake Centre used to address to this house he suggested a number of methods by which federal expenditures should be reduced. I am prepared to admit that an isolated statement, an isolated suggestion or an isolated criticism of the government, one single incident, would perhaps not be indicative of such a critical trend or frame of mind that an hon. member could not overcome it in himself and find himself a home on the other side of the house. Those on the other side of the house could properly say that a single aberration and not indicative of a frame of mind or
23, 1956	6337
Federal-Provincial Financial Arrangements trend of thought that was really critical or indicated a philosophy diametrically opposed-


James Sinclair: Those are big words.


Edmund Davie Fulton: -and therefore the transition can be made easily. They could properly say there is not too big a gap and the bridge can be easily constructed. But we remember what the hon. member used to say as we listened to him in those days. I think I will ask just where the government obtained its engineering advice to build this monumental bridge that must have been necessary to span the gap between the line of think outlined to us by the hon. member for Moose Jaw-Lake Centre in his former happy days and the policies and practices which he has now embraced or with which he has been surrounded-


James Sinclair: Take your choice.


John Whitney Pickersgill: Surrounded like a boa
constrictor.


Edmund Davie Fulton: That is exactly what the Liberal party is, of course, a boa constrictor; and, Mr. Speaker, it certainly swallowed quite a big meal a few years ago, because it has been asleep ever since.


James Sinclair: I resent that.


Edmund Davie Fulton: I am afraid that during the process of digestion the people of Canada have suffered.
You will recall, sir, that the Minister of Fisheries treated with scorn the suggestion made by the Leader of the Opposition that one way of finding reductions in expenditures would be to set up a commission of inquiry into governmental methods in Canada along the lines of the Hoover commission in the United States. It is interesting to note that there is one suggestion which was emphatically and vigorously supported by the hon. member for Moose Jaw-Lake Centre, and if the Minister of Citizenship and Immigration cares to ask me now if I support it I will reply to the question which he might address to me by saying that this is a suggestion made by the hon. member for Moose Jaw-Lake Centre with which I thoroughly agree, that there should be a commission of inquiry.


John Whitney Pickersgill: That does not save money.


Edmund Davie Fulton: Well, you certainly are not saving it. If the Minister of Citizenship and Immigration as a supporter of the government is reflecting their attitude that they cannot save money, then they might have that election which we are inviting them to hold to let the people of Canada who want their money saved elect a government that is capable of saving money for them.
6338	HOUSE OF
Federal-Provincial Financial Arrangements


John Horace Dickey: Santa Claus has come to town.


Edmund Davie Fulton: One of the particular methods by which the hon. member for Moose Jaw-Lake Centre thought this government might save money was by the abolition of subsidies.


An hon. Member:: You have a parliamentary assistant in the form of the hon. member for Winnipeg North Centre (Mr. Knowles).


Mr. Reinke:: You had better have a little consultation with your pal over there.


Edmund Davie Fulton: I wish to place on the record a few remarks made by the hon. member for Moose Jaw-Lake Centre on May 31, 1955, as reported at page 4305 of Hansard. I want to point out that this was after the hon. member for Moose Jaw-Lake Centre had shuffled off the coils of socialism-


Some hon. Members:: Hear, hear.


Edmund Davie Fulton: -and had advanced to the happy state of independence. As recorded at page 4305 he said:
Over the years our estimate books have contained a great many subsidies.


James Sinclair: What year of Hansard is that?


Edmund Davie Fulton: 1955.


Stanley Howard Knowles: The minister has not received it yet.


Edmund Davie Fulton: I continue:
I am quite prepared to admit that once a subsidy is commenced, usually because oi an emergency, it is very hard to get rid of it, even if the emergency has ended. There are literally dozens of subsidies in the estimates book. During the supper hour I looked through the various departments, and would like to mention a few. For cold storage warehouses there is a subsidy of $500,000; there is a grain subsidy of $15,500,000-
This comes from the stalwart independent from the prairie province of Saskatchewan who has been embraced gladly, willingly and with open arms by the government.


Russell Earl Reinke: You would do the same.


Edmund Davie Fulton: I continue:
-there is a maple sugar subsidy for pails to the amount of $100,000-


John Whitney Pickersgill: Is the hon. member supporting that? Perhaps he might tell me whether or not he agrees with it?


Walter Edward Harris: It does not exist any more.


James Sinclair: Are you against that?


Julian Harcourt Ferguson: I am; I am dead against it.


Edmund Davie Fulton: I have not joined the government.


Julian Harcourt Ferguson: Put that in your pipe.


John Whitney Pickersgill: A Daniel has come to judgment.


Edmund Davie Fulton: I continue:
-there is a C.B.C. subsidy to the amount of $18 million; there is a coal subsidy of $10 million-


Some hon. Members:: Are you against that?


Edmund Davie Fulton: -there is a gold subsidy of $11 million-


Some hon. Members:: Are you against that?


Edmund Davie Fulton: -there is a subsidy on government annuities of $1,300,00(1-


John Whitney Pickersgill: Is the horn, gentleman against that?


Edmund Davie Fulton: -there is a butter subsidy of about $1,225,000;-


Some hon. Members:: Are you against that?


Edmund Davie Fulton: I do not know whether Hansard caught what I said:
-there is a butter subsidy of $1,225,000; there is a subsidy to McGill University for a coal gas turbine of $100,000.


John Horace Dickey: Are you against that?


Edmund Davie Fulton: Many of these may be useful; many of them are probably desirable. .	.	. But I do think that
once these subsidies have been put on the books, from time to time somebody should review them, and make certain that the original need continues. An outside body, not having to worry about the political results, could go over these subsidies and make recommendations to parliament-
Apparently in those days the hon. member did not have to worry about political results. -as to whether or not any could be discontinued, or whether there was room for reduction in some particular item.
The hon. member for Moose Jaw-Lake Centre discussed the possibility of reducing the expenditures of the government and of examining critically the subsidies that were paid, and recommended particularly the appointment of a royal commission to investigate governmental efficiency. It is of course questionable, to say the least, whether or not the hon. member is scheduled for a position in the cabinet, but this translation opens up interesting speculation.


John Horace Dickey: Jealousy will get you nowhere.


Edmund Davie Fulton: I assure the hon. member the last thing I would be jealous of is anyone who joined the Liberal party. I can imagine no surer method of political suicide than that.


An hon. Member:: Sour grapes.


John Horace Dickey: Except your own.


Edmund Davie Fulton: There are rumours to the effect-


An hon. Member:: Rumours; did you hear that?


Edmund Davie Fulton: -that the Prime Minister is toying with the idea of relief from the burdens of office. He would be less than human-


An hon. Member:: Ask George Hees; he'll tell you.


James Sinclair: Dr. Hees, get up and take a bow.


Edmund Davie Fulton: -if he did not. The Minister of Finance is rumoured to be ambitious in terms of advancement, and who knows but the finance portfolio may soon be opened up. If so, what more useful convert, what more useful evangelist could be found than this recent convert to the Liberal ranks who is so fruitful in suggestions and ideas for reductions in expenditure.


An hon. Member:: More fruitful than the Tory party, anyway.


Edmund Davie Fulton: Whether the axe will really chop clean or whether the edge will be dulled and blunted-


An hon. Member:: It couldn't be duller than your speech.


Edmund Davie Fulton: -as the hon. member is surrounded by the coils and tentacles of those who cling to office is, of course, quite open to question.


Russell Earl Reinke: Talk, talk, talk.


Edmund Davie Fulton: Another thing the Minister of Fisheries dealt with specifically-


Russell Earl Reinke: Talk to the bill.


James Sinclair: Mr. Speaker, may I ask just one question of the hon. member?


Edmund Davie Fulton: If it is short.


James Sinclair: This afternoon the hon. member addressed one short question to me and before doing so he asked permission. More than that, I am grateful that he sent word to me in this building to come down so I would be here when he spoke this evening. He is referring to the speech I made and I would like to direct one short question to him. Is the whole case of the Tory party for the reduction of a half-billion dollars based entirely on this one speech made by the independent member for Moose-Jaw Lake Centre?


An hon. Member:: You mean the Liberal member for Moose Jaw-Lake Centre.


Edmund Davie Fulton: No, it is built on several of his speeches, and on a speech of his to which the Minister of Fisheries contributed substantially; also on the facts of the situation as we know them today, as we see them, and as the minister in days gone by was wont to
23. 1956	6339
Federal-Provincial Financial Arrangements admit that the suggestions made by the hon. member for Moose Jaw-Lake Centre were sensible suggestions which deserved serious study.


James Sinclair: I was teaching him.


Edmund Davie Fulton: Another point made by the minister was that no member today is willing to reduce expenditures on old age pensions.
I took down the minister's remarks and I have summarized them to indicate him saying that the Tory party in the Senate blocked the first suggestion by a Liberal government for old age pensions. Notwithstanding the fact that the minister would make that sort of statement, the fact is that it was the Conservative government which first introduced old age pensions. It would be interesting to know how the minister-


Paul Joseph James Martin: Would my hon. friend permit me to ask a question?


Stanley Howard Knowles: When the minister is through I will have one for him.


Paul Joseph James Martin: Will my hon. friend tell me and tell the house when the Conservative government ever proposed that there should be an old age pension program for this, country? Is it not a fact that in 1926 the Conservative Senate rejected a proposal of the federal government? I have given my-hon. friend long enough to answer.


Edmund Davie Fulton: I did not think that I had let. myself in for a speech on the part of the-Minister of National Health and Welfare.


An hon. Member:: Answer it.


Edmund Davie Fulton: I shall give the minister time to find his own answer. He is not unable to. find an answer. The minister knows very well what are the facts of the situation. He knows very well that the Conservative party was a pioneer in the field of social security-legislation, in both the dominion and provincial fields.


Paul Joseph James Martin: On a point of order-


The Acting Speaker (Mr. Applewhaite):: the Minister of National Health and Welfare-is rising on a point of order-


Edmund Davie Fulton: Surely I can finish the sentence.


Mr. Marlin:: On a point of order-


Edmund Davie Fulton: The Conservative party was a pioneer in this field in both the dominion and provincial spheres of responsibility.


The Acting Speaker (Mr. Applewhaite):: The
Minister of National Health and Welfare has risen on a point of order.


Murdo William Martin: The hon. gentleman has said that I knew very well the first suggestion;
6340	HOUSE OF
Federal-Provincial Financial Arrangements came from the Conservative party. It is against the rules of this house to say to one hon. member that he knows something perfectly well when that hon. member has repeatedly said the opposite. I do not know that that is the fact.


Edmund Davie Fulton: That is not a point of order.
I really cannot be responsible for the ignorance of the Minister of National Health and Welfare.


The Acting Speaker (Mr. Applewhaite):: I
think perhaps there is a point of order which has not been raised by either hon. gentleman. As is natural, the debate has covered a wide field, but perhaps the hon. member for Kamloops (Mr. Fulton) would not mind me telling him that his time is limited and perhaps the house as a whole would not mind me stating that the question before the house at the moment is not who is or who is not responsible for welfare legislation in this country but whether this house is or is riot going to vote in favour of the principle of a five-year federal-provincial tax agreement as submitted by the government.


Edmund Davie Fulton: If the Minister of National
Health and Welfare really is so ignorant perhaps I may be permitted to give some instruction. The proposal made by the Bennett government which was in office between 1930 and 1935 was in the form of increased contributions to the provinces so they might pay old age pensions. Contrast that with the record of the Liberal government under Mackenzie King immediately preceding, who said he would not pay a five-cent piece to any provincial Conservative government. I also remind the hon. gentleman and all those beside him of the fate suffered by the Bennett social security legislation at the hands of the succeeding government under Mackenzie King, and my hon. friends opposite are the direct successors of that government.
Those are the facts; and although they do not like to be reminded of them I think it is well every now and then to try to pull aside the curtain and peer behind this mist of Liberal mythology to see what are the facts as to the contributions made toward the welfare of Canada by the different political parties of this country.
The point I had started on was that there is one hori. member of this house who has made specific suggestions for a reduction in old age pension expenditures, and that is the new convert, the recent delegate, the hon. member who has just been welcomed into the ranks of the Liberal party, the hon. member for Moose Jaw-Lake Centre. Those suggestions by the hori. member will be found at page 3347 of Hansard for May 2, 1955.

Then there was another speech made by the hon. member for Moose Jaw-Lake Centre which I think should be discussed at some length and very seriously. It is true that it was made in the days when he was still professing socialism. This speech was made during the session of 1952-53 and will be found at pages 2534 to 2538 of Hansard for that year. I hope you will allow me a little time because of the interruptions, Mr. Chairman'. There are some interesting contributions by the Minister of Fisheries to be found on those pages. I know the minister will like to be reminded of them, and the house will certainly enjoy them. At that time the present hon. member for Moose Jaw-Lake Centre, who was then the member for Moose Jaw, indicated some positive ways in which expenditures should be reduced. He was highly critical of the Minister of Finance in connection with his budget and he said, as reported at page 2534 of Hansard of March 2, 1953:
I say that cuts in federal expenditures are possible, desirable and feasible. Large sums could be saved, I suggest, by the introduction of sound business methods into government.
The Prime Minister, who apparently was consulted by the hon. gentleman as to his forthcoming venture into this new and interesting field, is in the house now and he can tell us whether he agrees with his most recent convert. Then' at page 2535 the hon. member for Moose Jaw-Lake Centre referred to defence expenditures and suggested a number of ways in which they could be reduced without reducing the efficiency of that department.


James Sinclair: Such as?


Edmund Davie Fulton: Such as the elimination of cost-plus contracts. Does the minister want me to give some quotations? I quote from page 2535:
In this past year a high percentage of the construction contracts awarded by the Department of National Defence was on a cost-plus basis. I contend that the practice has cost the Canadian taxpayers many millions of extra dollars.
And again:
-if you look at the public accounts for this year, pages N-23 to N-65, you will find that in the last fiscal year the Department of National Defence alone let 231 contracts on a cost-plus basis, valued at well over $106 million. Small wonder that our defence is costing so heavily.
He then went on to point out that it cost four times as much in Canada as it did in the United Kingdom to maintain one man in the armed services. He then went on to say:
It is now fairly clear that the government has tossed money around recklessly on defence in the past year.

And later:
I charge this government with milking the Canadian taxpayer in those years to provide frills in defence spending.
He then went on to discuss a report by Mr. Arthur Blakely of the Montreal Gazette. He then gave some further details, and at page 2537 he summarized as follows:
In view of evidence like that, how can any Liberal say that the average taxpayer is receiving value for his defence dollar?
A little later on:
Personally I sincerely believe that defence costs could be cut not by 10 per cent but by 15 per cent or 20 per cent if the government really got down to business.
There is an amount of $1,770 million for defence, not very much less than it was some years ago. One-fifth or 20 per cent of $1,700 million, giving them the benefit of the doubt, is $340 million. That goes a long way toward meeting the $500 million objective suggested by the Leader of the Opposition, and it would be met in that one field alone. This is the suggestion of the hon. member for Moose Jaw-Lake Centre. I wonder that they did not take him over there sooner. I hope that his recent physical conversion will be productive of these reductions in expenditure which we, as well as he, have been advocating for some years. Then in the course of the same day the Minister of Fisheries intervened and had some interesting things to say, as recorded on page 2538 of Hansard.


James Sinclair: What year?


Edmund Davie Fulton: March. 2, 1953. He said:
But now that I am on my feet-
A position in which ministers are sometimes surprised to find themselves.
-may I say that I am always amazed at the absolute Inconsistency of the hon. member for Moose Jaw-


James Sinclair: He was not speaking to me then.


Edmund Davie Fulton: -when he rises to make a speech.
A little later:
As 1 said, he has now reversed himself and has got back to the party line, no doubt in anticipation of the coming election.


John Whitney Pickersgill: I hope the Minister of
Fisheries is right again.


Edmund Davie Fulton: That was the Minister of Fisheries-he was then Minister of Fisheries- who told us today that he was responsible in large measure for the conversion of his latest apostle.


James Sinclair: He is continuing his education.


Edmund Davie Fulton: I think my time is nearly up.
Federal-Provincial Financial Arrangements


James Sinclair: Go on.


Edmund Davie Fulton: I have heard it suggested as a truism of political life in days gone by, and in other forms of activity as well, that when you find yourself in a position where you cannot beat them the thing to do is join them.


An hon. Member:: Are you coming over, Davie?


Edmund Davie Fulton: I wonder in fact whether the danger lies more to the member for Moose Jaw-Lake Centre or to the Liberal government, and whether in fact the member for Moose Jaw-Lake Centre will advocate from within the same largely sensible policies that he advocated when he was outside. Then I think the conversion, the translation, or the transition will not be too disadvantageous to the Canadian people; but I would warn the member for Moose Jaw-Lake Centre that often it is found that the promises, the lures and the enticements held out are not realized in the performance.


An hon. Member:: Is that what you found in your party?


Edmund Davie Fulton: I hope the hon. member will be able to carry forward the vigorous apostle-ship he has shown in the past in advocating reductions in government expenditures because we know they are possible. I hope the government and the Minister of Finance who, with his colleagues, welcomed the hon. gentleman into their ranks today, will take to heart and give practical application to the messages he preached in the years gone by, and that the hon. member will not find that in order to rest happy in the ranks of his new-found colleagues he will have to give up those very sound and profitable philosophies which he held.
In closing, I can just wish the hon. member for Moose Jaw-Lake Centre luck. I hope he finds in his new surroundings sufficient advancement and recompense to warrant the somewhat startling departure he made from his previously stated intentions. Reading at page 3069 of Hansard for the day on which he explained the reasons for his departure from the party to which he had formerly given his allegiance, he said:
For the remainder of the present parliament I propose to represent the constituency of Moose Jaw-Lake Centre as an independent member. I shall not apply for membership in any other party.
As I have said, these transitions are interesting to observe. One can understand that the Liberal party, reaching out for something that would give it favourable propaganda, might have conceived of this as a highly desirable time to be able to
6342	HOUSE OF
Federal-Provincial Financial Arrangements announce this particular transition. But I doubt, in the light of the statements which we find on the record of Hansard, that in fact it represents a change of heart by either the hon. member himself or the government, which has welcomed him today with all outward signs that they intend to give him a real home.


Mr, F. G. J. Hahn (New Westminster):: Mr. Speaker, it is not my intention to take too much time. The fact is that I had not intended to take part in this debate, but when we heard, in the philanthropic way the Minister of Fisheries has of dealing with the province of British Columbia and the revenue received from that province, I thought it was only fair to him and to the house that others who did not believe the same way he does should have the privilege of saying so and indicating their reasons.
I am satisfied that the leader of this group and others who took part in the debate on behalf of this group have thoroughly indicated our point of view with respect to the tax agreement itself and the clauses that are in it. Possibly we shall have more to say on the bill when the individual clauses are discussed.
However, the minister took a great deal of delight in referring to sessional paper 237A, which was in the name of the hon. member for Moose Mountain (Mr. McCullough) on June 20 this year. I intend to refer to that sessional paper, but not immediately. In trying to prove his point, he first referred to an expression the leader of this group had used in referring to the $115 million as being a niggardly sum. Possibly in the view of the government it is, when certain members of the government ask, "What's a million?". However, when a government can show a profit of some $750 million, I must say I feel that we should be able to get a little more than $115 million out of it, especially when the same federal government and the same minister point with such pride to the fact that it is through the frugality of the federal government that they have been able to hold down the increase in expenditures to 5 [DOT] 5 per cent as compared with the municipal increase of 276 per cent and the provincial increase of 292 per cent.


James Sinclair: In fairness, I should like to point out that it was not I who said that. It was the hon. member for Okanagan-Revelstoke who pointed with pride to the fact that federal expenditures had increased only 5-5 per cent in the past 10 years. I was quoting him.


Mr. Hahn:: I have no doubt that the minister was quoting him; in fact he so indicated earlier this afternoon. I am also agreeing with the figures, but I am taking exception to the fact that it is said to be due to frugality on the part of the government, and the fact that the interpretation put on it by the Minister of Fisheries is that the government should be given credit for this frugality. I interpret it in two other ways. I would rather suggest that this discrepancy in the increases shows that the federal government is not assuming its fair share of municipal and provincial costs of operation and that the federal government, the municipal districts and the provincial governments are not sharing the costs of operation of government in this country in proportion to the needs that we must face at this time.
I do not want to spend too much time on that, but I do wish to refer to the sessional paper. First of all may I say that on page 31 of the report of the Department of National Revenue for the year ended March 31, 1955, it is indicated that the total amount taken in customs and excise was $86,265,000. That is the tax taken from the province of British Columbia. The sessional paper indicates that excise taxes, domestic and excise duties amounted to $19,689,000 and $15,650,000 respectively, making a total of some $35,340,000. There is a slight discrepancy of some $51,925,000 that is collected in the province of British Columbia and is not shown on the sessional paper.


James Sinclair: There is a very simple explanation.


Frederick George Hahn: I am sure the minister has one. I have been told not only by this minister but by other ministers, and I am going to take their word for it, that you can explain figures in any way you like, that you can use statistics at your own pleasure. If you want to refer to statistics in respect of unemployment insurance there are two sets of statistics, one which suits the unions and one which suits the government. We have two sets here, one that suits the Minister of Fisheries and one that suits the Minister of National Revenue. Then farther down in the sessional paper we have an asterisk followed by these words:
Customs duties and excise taxes on imports are not included as such figures are available only by port of entry which is no indication of the point of consumption.
I would say that is quite an omission, especially when one considers that British Columbia has approximately one-tenth of the population of the country and that the total

amount of customs duties collected, as indicated in the report, was some $427 million. In other words it is a simple matter to say that you cannot decide who the consumers are in this case, but certainly when you are estimating something it is just as simple to say that as one-tenth of the population is in British Columbia therefore one-tenth of the $427 million is a fair estimate of what would be consumed by the people of that province. Therefore the federal government must have received about $42,750,000 in customs duties which are not shown on this paper. I do not know why the amount is not shown here and why the figures are shown in the fashion they are. I am disturbed to think that our sessional papers should conveniently not show some of these things.
Added to the other discrepancy of $51,925,000, that makes a total of $94,675,000. Just by way of interpolation, I notice that the Minister of Finance looks quite unhappy. I am sure he would have liked to finish this bill this evening and I can feel for him, but he should learn to silence the Minister of Fisheries. That is one of the problems of the house. If he and the Minister of Citizenship and Immigration would keep a little quieter possibly it would have its effect on some others of us.


Walter Edward Harris: Mr. Speaker, the best speech in this debate was made by the Minister of Fisheries.


Frederick George Hahn: I am very pleased to hear that, but that, of course, is a matter of opinion. The Minister of Fisheries drew attention to certain other factors when referring to the sessional paper, but he failed to point out to the house that customs duties were not taken into account, and I am satisfied that the Minister of Finance, being the fair minister he is, will agree that possibly the Minister of Fisheries was in error in that particular.


Stanley Howard Knowles: He is a fair minister.


James Sinclair: Mr. Speaker, in all fairness I do not think the hon. member should call me in error because I quoted from a return to the House of Commons prepared not for a Liberal member but for a C.C.F. member.


Solon Earl Low: Probably you did not look it over before you quoted it.


James Sinclair: Do you look over every return to the House of Commons personally?


Edmund Davie Fulton: Certainly, when you quote it.


Solon Earl Low: Especially when you quote
from it.


Stanley Howard Knowles: Maybe I can get into this too.

402J
23, 1956	6343
Federal-Provincial Financial Arrangements


The Acting Speaker (Mr. Applewhaiie):: think I should point out to the house that the hon. member for New Westminster has the floor.


Frederick George Hahn: Thank you, Mr. Speaker. You are very kind indeed.


Solon Earl Low: A failure to give information in the return.


Frederick George Hahn: With respect to what the minister had to say and having to do with the error, I suggest that the minister was in error in not pointing out to the house that the sessional paper had the specific note:
Customs duties and excise taxes on imports are not included as such figures are available only by port of entry which is no indication of the point of consumption.
He did not read that part of it to the house.


Solon Earl Low: A little matter of $42 million is not much.


James Sinclair: You say that $115 million is niggardly.


Frederick George Hahn: I go to another item, expenditures by the federal government in the province. Section C refers to interest paid on government of Canada bonds based on the original distribution, by provinces, of the ninth victory loan bond issue. That depends on the interpretation one wants to put on it. Here is a matter of $36,195,000. I am satisfied that the minister would agree that this is an expenditure by the federal government in the province and not a payment to the province; therefore I do not think the impression should be left that the province got something. I would say that a big share of that money is being received by the banks in the community. It is true that a good portion of that amount will be made available through loans and so on, but at the present time the provincial government does not get it and it is not a gain to the province.


James Sinclair: I did not say it was.


Frederick George Hahn: No, I realize you did not. You did not mention that figure at all.


James Sinclair: It is a payment in the province of British Columbia, not to the provincial government.


Frederick George Hahn: Very true. I agree with you, but when the banks in the locality have an accumulation of the bonds I am satisfied that they find their way in due course to the central bank.


James Sinclair: The people's savings in the banks buy these bonds.


Frederick George Hahn: This is not savings. It is government bonds and in all likelihood they were sold to the banks. I know just as well as
6344	HOUSE OF
Federal-Provincial Financial Arrangements the minister does that there are thousands of people who did have these bonds. I know there are many thousands of them who bought them originally with the intention of keeping them as long as possible, in the same way as the minister and other members of the house did, but these people have been forced to sell them to the banks because they needed some ready cash, so they are in the hands of the banks today.


Mr, Sinclair:: But when the banks buy them they buy them with the savings of the people who put their deposits in the banks, so the people own these things indirectly.


Mr. Johnston (Bow River):: And the federal government taxes it away from them.


Mr. Nicholson:: Who is making this speech, anyway?


Frederick George Hahn: With all this assistance I am sure the house will recognize that we are getting somewhere or nowhere, as the case may be. However, it is interesting to note that with that amount added we have a total amount of $130,870,000. I am not satisfied with the minister's interpretation that the people in the province have that money completely in their hands, because I feel it is in the hands of the banks. I know that where money is in the hands of the banks I have a great deal of difficulty in getting my hands on it.


James Sinclair: Now you are talking like a C.C.F.'er.


Frederick George Hahn: Maybe the minister has hopes that I will lean to the C.C.F., but I assure him that will not be the case.
Mr. Speaker, if we add that $130,870,000 to the reported figure given to the province, namely the sum of $270,857,000 which the minister quotes, it will make a grand total of $401,727,000. Against that the minister has said that the government expended $355 million, from which I would take that $36 million, so that we in the province of British Columbia actually are receiving only about $320 million as compared with the total amount we have given to the federal government of some $401 million.


John Whitney Pickersgill: You had better send those figures to the Auditor General.


An hon. Member:: We would not send them to you, anyway.


Frederick George Hahn: On page 2 of this same report we find this; and I am particularly interested in page 2 because in the past two sessions of this parliament I have tried to arrive at some figure that the government would present me with having to do with the amount that


is expended in the province of British Columbia in the way of defence production. I am pleased to note in section D of this report, "Estimate of major expenditures by government departments or agencies within the province", subsection (d), "Defence production, $221,000." Here are one-tenth of the people of the country and they receive the tremendous sum of $221,000 out of our total defence production expenditures, according to the estimate as set down here. I am pleased that this order for return gives us in British Columbia an idea of what we might expect will be spent in that province.


An hon. Member:: I could not get the figures.


Frederick George Hahn: You could not, I could not nor could anyone else because it was not desirable to indicate them at that time. We have set down in the same section, or rather in subsection (j), as far as national defence is concerned in British Columbia, $92,222,000. That is a substantial increase. But, Mr. Speaker, I think everyone will recognize the fact that a national defence expenditure is not an expenditure for the province of British Columbia alone. It is an expenditure that is intended for the over-all defence of Canada like any other training that we might feel would be necessary. In all fairness I do not think this expenditure of $92,222,000 should have been included as an estimate of major expenditure by governmental departments within the province. It is expended within the province. But even if we assume the suggestion is correct that we receive the expenditure in the province-that is for troops and so on who get it-it does not help in the building of the province in the same way as, let us say, defence production.
In any event, $92,222,000 out of the $1| billion the minister said we expend on our defence program-he indicated earlier, I am sure, that $lf billion is our over-all expenditure; I think that was the figure for defence expenditure estimates, at least-is only one-twentieth Canada's total defence expenditure. If we are going to carry on and recognize that equalization of taxes is a good thing-and I agree that it is a good thing- certainly we should have some semblance of agreement on it. I would say that it is not being carried out in any reasonable way, especially when one stops to consider the vulnerability of the west coast province to attack from those whom we suppose to be our enemies.
The minister said "Where is the money coming from?" He said, "Are we going to increase federal taxes?" I would say to the minister, "No, there is no need to increase federal taxes". I should like to make a suggestion to him, because he has such an

optimistic Minister of Trade and Commerce who continually tells us that the gross national product is going to expand. I should like to suggest that there is no need to increase taxes because your taxes are bound to increase every year as your gross national product expands. Hence the Minister of Finance will not have any trouble at all in finding this money. He just must keep the gross national product increasing. Then on your tax basis, or on the basis as it is today, you will receive more in taxes.
I see the minister shaking his head. I do not mean the Minister of Finance; I mean the Minister of Fisheries. From the negative shake of his head am I to understand that he does not agree with me when I say that if the gross national product increases, the Minister of Finance will get more revenue?


James Sinclair: That is when we cut taxes for the Canadian taxpayer, something that is very popular.


Frederick George Hahn: Oh, yes; probably we will have that next year for election purposes. But at the same time I am satisfied that this government could make themselves just as popular if they were to help the municipalities and the provincial governments a little bit more. I am particularly interested in the municipalities in an indirect way, through the provincial governments.
Savings were mentioned. The minister said, "How can we save?" Mr. Speaker, the question was raised as to savings in so far as the department could make them. I think it was suggested earlier that the minister for Moose Jaw-Lake Centre was quite in agreement-
23, 1956	6345
Federal-Provincial Financial Arrangements


James Sinclair: He is not a minister yet.


Frederick George Hahn: -that they could have saved several hundred million dollars.


An hon. Member:: What do you suggest?


An hon. Member:: Ten o'clock.


Frederick George Hahn: If you will give me a minute or two longer I will be finished.


An hon. Member:: Go ahead.


Frederick George Hahn: When the estimates of the Department of National Defence were before us we asked that we be privileged to have a special committee set up for the purpose of examining into those estimates. We had certain charges made by highly respected men in Canada, by military men such as General Simonds, who indicated that all was not well in that department.


Mr. Goode:: Do you support what General Simonds said.


Frederick George Hahn: If the hon. member had been here he would know what I said.


Tom Goode: I listened to every word the hon. member has said.


Frederick George Hahn: In the discussion of the defence estimates I suggested that-


The Acting Speaker (Mr. Applewhaite):: Order. It being ten o'clock perhaps the hon. member for New Westminster will move the adjournment of the debate.
On motion of Mr. Hahn the debate was adjourned.


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


Tuesday, July 24, 1956