1958-01-27

Hon. E. D. Fulton (Acting Minister of Citizenship and Immigration) moved: for leave to introduce Bill No. 246, to amend the Indian Act.


Mr. Knowles (Winnipeg North Centre):: Explain.


Edmund Davie Fulton: The purpose of this bill is to amend section 12 of the Indian Act to ensure that from the day of the passage of the bill it will not be possible to strike off the Indian register those who are now registered, on the ground that they are alleged to be heirs of those who received half-breed lands or script.
Motion agreed to and bill read the first time.



MOTIONS FOR PAPERS

Right Hon. J. G. Diefenbaker (Prime Minister):: Mr. Speaker, the hon. member for Laurier suggested that he would like to have these notices of motions for production of papers called now before we proceed with government notices of motions. If that procedure is acceptable to the house I would ask that you act accordingly.


Mr. Chevrier:: Thank you.


Mr. Speaker:: Is the house agreed that I call notices of motions for production of papers next, deferring government notices of motions until afterwards? Agreed?


Stanley Howard Knowles: On that point, Mr. Speaker, may I say this. When we get back to government notices of motions I trust that all that will happen at the first stage is that the notice will be transferred to government orders so we shall still have orders of the day. In other words, it really is not necessary to delay government notices of motions, is it?


Mr. Speaker:: I think that is understood.



POWER DEVELOPMENT, LACHINE SECTION,

[Stage Direction]
ST. LAWRENCE RIVER Motion No. 48-Mr. Chevrier:
For a copy of all letters, telegrams, plans and other documents exchanged, since July 1, 1954, between the federal government and the government of the province of Quebec, and/or Hydro
Quebec, concerning the carrying out of works, including the development of power in the Lachine section of the St. Lawrence river.
Hon. George H. Hees (Minister of Transport):: After conversation with the hon.
member it is understood that the reference to works in the Lachine section of the St. Lawrence river means the Lachine section of the St. Lawrence seaway including the development of power, and on this basis, together with the usual reservation as to the consent of the province, there is no objection to the motion.


[Stage Direction]
Motion agreed to.

[Stage Direction]
Motion No. 50-Mr. Gauthier (Lake St. John):
For a copy of all correspondence and other documents exchanged from January 1, 1954 to January 15, 1958, between the government of Canada or any of its departments and the municipal authorities of the town of Alma, relating to the laying out and construction of a municipal airport at the town of Alma, (St. Joseph d'Alma), Quebec.
Motion agreed to.

Hon. Donald M. Fleming (Minister of Finance) moved: that the house go into committee later this day to consider the following resolution, which has been recommended to the house by His Excellency:
That it is expedient to introduce a measure to provide for financial assistance to the Atlantic provinces by authorizing the payment, out of the consolidated revenue fund, for each of the four fiscal years commencing on the first day of April, 1958, of an annual grant of seven and one-half million dollars to each of the provinces of Nova Scotia, New Brunswick and Newfoundland, and an annual grant of two and one-half million dollars to the province of Prince Edward Island, and also to provide as an interim measure that in its application to the fiscal year commencing on the first day of April, 1958, the definition of ' standard individual income tax" in the Federal-Provincial Tax-Sharing Arrangements Act, shall for the purposes of that act and any agreements made thereunder be read and construed as if for the words 'TO per cent" therein there were substituted the words "13 per cent".


Mr. Speaker:: I take it that motion is made with unanimous consent? Is it the pleasure of the house to adopt the motion?


[Stage Direction]
Motion agreed to.
3844	HOUSE OF
Inquiries of the Ministry

[Stage Direction]
On the orders of the day:
Stanley Howard Knowles: Mr. Speaker, may I address a question either to the Prime Minister or to the Minister of Finance. The question relates to the telegram which the Prime Minister sent to the premiers of the ten provinces last Friday. I include the Minister of Finance in my question since he told us about this telegram on Saturday. Have there been any replies from the premiers of the provinces to this telegram and, if so, could copies of these replies be made available before we enter upon today's debate?


Donald Methuen Fleming: Mr. Speaker, there have been no replies.


Stanley Howard Knowles: As
a supplementary question may I ask the Prime Minister or the Minister of Finance if they are satisfied that all the provincial premiers received the telegram that was sent last Friday?


Donald Methuen Fleming: Mr. Speaker, the government has full confidence in the excellent telegraph services of the Canadian National and Canadian Pacific railways.



NATURAL RESOURCES


[Stage Direction]
On the orders of the day:
Mr. J. A. Byrne (Kootenay East):: Mr. Speaker, in view of the serious situation in the coal mining industry of British Columbia and newspaper reports of the Japanese protest re British Columbia iron ore exports, would the Minister of Justice consider looking into the matter to determine whether this does in any way contravene the British North America Act?


Edmund Davie Fulton: Mr. Speaker, the matter has been brought to the attention of my department and is now being considered. I understand certain aspects are also being considered by officials of the Department of Finance.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Mr. Colin Cameron (Nanaimo):: I would like to address a question to the Minister of National Defence. Could the minister tell

the house if the customary white paper outlining the proposed expenditures of his department has been prepared by his officials and, if so, in view of the somewhat peculiar situation at the present time, would he consider distributing that paper before the house rises at the end of this session?


Hon. G. R. Pearkes (Minister of National Defence):: No, Mr. Speaker, it has not been prepared and it will not be distributed during this session.



ALLEGED OMISSION OF ATLANTIC PROVINCES FROM JAMAICAN TRADE MISSION SCHEDULE

[Stage Direction]
On the orders of the day:
Mr. H. J. Murphy (Westmorland):: I would like to address a question to the Minister of Trade and Commerce, or in his absence to his parliamentary assistant. In view of the disappointment expressed in the Moncton Transcript of January 25, 1958, by the Canadian Manufacturers' Association in the Atlantic provinces at the exclusion of this region, that is the Atlantic region, from the schedule of the present Jamaican trade mission, outlining particular items as follows:
Among other things, the Jamaicans are looking for lumber, stoves, and fish products. These are well known Atlantic products.

would the parliamentary assistant care to make any comment on this matter?


Mr. Thomas M. Bell (Parliamentary Assistant to the Minister of Trade and Commerce):: I do not believe this question is a proper one on orders of the day, but I will investigate it and see if there is any truth in the allegation.


Henry Joseph Murphy: Even though it is improper you will investigate it?



AIRPORTS


[Stage Direction]
On the orders of the day:
George Harris Hees: On Friday last the hon. member for Nipissing asked the following question:
Has a decision been reached concerning expanding the facilities of the administration building at the North Bay airport in its present location or is it proposed to go ahead with the original plan of moving it to the new location on the downtown side of the property?
This matter is still under study in view of the possibility that satisfactory arrangements can be made for expansion of the existing terminal facilities without moving to the new location. An early decision is expected.



HEALTH INSURANCE


[Stage Direction]
On the orders of the day:
Mr. R. J. McCleave (Halifax):: May I direct a question to the Minister of National Health and Welfare. Has the minister received any notice from the province of Nova Scotia indicating that province's intention to enter into the national hospital insurance plan?


Hon. J. W. Monleilh (Minisler of National Health and Welfare):: Yes, Mr. Speaker, I have received a letter from Mr. Donahoe of Nova Scotia indicating that they would like to enter into an agreement, and asking that the necessary steps be taken leading to execution of such agreement. I might add that I have also received a letter from Dr. McGrath of Newfoundland in which he stated that they will be prepared to enter into the scheme as of July 1, 1958.


Hon. Paul Martin (Essex East):: Can the
Minister of National Health and Welfare tell us whether or not the government of New Brunswick has asked for some clarification in this connection?


Jay Waldo Monteith: Mr. Speaker, I just do not understand what the hon. member for Essex East means by clarification.


Paul Joseph James Martin: Perhaps I can help my hon. friend. Has the government of New Brunswick within the past week addressed a communication to the minister asking him whether or not it is correct in certain interpretations as a condition precedent to its joining the federal plan?


Jay Waldo Monteith: It runs in my mind, Mr. Speaker, that such a letter has been received, but I would have to determine that exactly before I can state definitely.


Stanley Howard Knowles: May I ask a supplementary question, Mr. Speaker. Has the Minister of National Health and Welfare heard from the premier of Manitoba, or from any minister of the government of that province, as to whether Manitoba is prepared to join in the plan and, if so, on what date operations will commence?


Jay Waldo Monteith: I am afraid that question is in the same category as the previous question. I will have to take it as notice.



ATOMIC ENERGY


[Stage Direction]
On the orders of the day:
Mr. D. F. Brown (Essex West):: Mr. Speaker, I should like to address a question
Inquiries of the Ministry to the Prime Minister. Is the Prime Minister now prepared to answer a question I asked on January 22? Perhaps I had better repeat the question. Has he received a report, requested by the U.A.W. international union, on the construction of an atomic energy plant at Monroe, Michigan; and if so, is the Prime Minister satisfied that the public safety is assured?
Right Hon. J. G. Diefenbaker (Prime
Minister): I will give the hon. gentleman an answer to that question tomorrow. Any documents there may be in connection with this matter I have not with me at the moment.



UNEMPLOYMENT ASSISTANCE


[Stage Direction]
On the orders of the day:
Mr. T. A. M. Kirk (Shelburne-Yarmouth-
Clare): Mr. Speaker, may I ask the Minister of National Health and Welfare if the province of Nova Scotia has yet signified its intention to sign an agreement under the Unemployment Assistance Act?
Jay Waldo Monteith: I believe that is correct, Mr. Speaker, but I will take it as notice and advise the hon. gentleman definitely.


Hon. J. W. Pickersgill (Bonavisia-Twillingate):: A supplementary question. Could I ask if there has been any similar request from the government of Alberta?


Jay Waldo Monteith: No, Mr. Speaker, there has not.


EXTERNAL AFFAIRS
[Stage Direction]
On the orders of the day:
Mr. E. G. Hansell (Macleod):: Mr. Speaker, may I ask a question of the Prime Minister. I have not given him notice, but he might care to make a statement at a later date. Pursuant to public opinion that relations between Canada and the United States are strained, and that if such relations are continued they may lead to strife-this report is based on certain incidents-what is the government's view on this situation, and what steps are being taken to remedy any possible unhealthy relations?


An hon. Member:: What paper is that?


Ernest George Hansell: It is a Canadian Press dispatch.

Inquiries of the Ministry


John George Diefenbaker: I do not require any notice in order to answer that question. I do not know the source of the suggestion, but it is certainly nonsense to say that our relations with the United States are in that condition, or face such a condition.


Ernest George Hansell: Someone asked for the source of this information. It is a Canadian Press dispatch involving two or three columns.



ALBERTA


[Stage Direction]
On the orders of the day:
Mr. C. E. Johnston (Bow River):: Mr. Speaker, may I direct a question to the Minister of Mines and Technical Surveys. According to press reports 82 men were laid off at one of the mines in Drumheller last week, and one of the large mines in Can-more is closing because of lack of orders. Can the minister tell the house what plans the government has in mind for increasing the markets for coal so the distressed coal industry of Alberta may get some relief?


Jay Waldo Monteith: Mr. Speaker, in the absence of both the Minister of Mines and Technical Surveys and his parliamentary assistant I will undertake to see that my colleague receives notice of this question.



BUSINESS OF THE HOUSE


[Stage Direction]
On the orders of the day:
Mr. Daniel Mclvor (Fort William):: Mr. Speaker, I wish to direct a question to the Prime Minister. There is a hopeful announcement on the front page of this morning's Globe and Mail to the effect that the house will close on Wednesday. Is this government propaganda, or is it true?
Right	Hon.	J.	G.	Diefenbaker	(Prime
Minister): Mr. Speaker, I suppose the answer to that question would be only time will tell.


James Allen (Jim) Byrne: What about Newsweek? DOMINION-PROVINCIAL CONFERENCE



TABLING OF LETTER FROM PREMIER OF NOVA SCOTIA

[Stage Direction]
On the orders of the day:
Right	Hon.	J.	G.	Diefenbaker	(Prime
Minister): Mr. Speaker, I communicated with the premier of Nova Scotia asking whether or not he had any objection to the tabling of a letter which my friend the hon. member for 
Bonavista-Twillingate asked to have tabled, and I would now ask permission to do so.
John Whitney Pickersgill: Mr. Speaker, may I ask the Prime Minister if there was any other correspondence?


John George Diefenbaker: In answer to my hon. friend's question, there were one or two letters.


John Whitney Pickersgill: Mr. Speaker, could the usual practice be followed of having this correspondence made an appendix to Hansard?


Mr. Speaker:: With the unanimous consent of the house. Is the house agreed that the correspondence just tabled be printed as an appendix to today's Hansard?


Some hon. Members:: Agreed.
[For text of documents referred to above, see appendix, pages 3892-93.]



REQUEST FOR TABLING OF LETTER TO PREMIER OF NEWFOUNDLAND

[Stage Direction]
On the orders of the day:
John Whitney Pickersgill: Mr. Speaker, may I ask the Minister of Northern Affairs and National Resources if he has yet heard from the premier of Newfoundland about the letter respecting power, about which I asked a question a day or two ago?


Hon. Alvin Hamilton (Minisler of Northern Affairs and National Resources):: Mr. Speaker, not up until 2.30 this afternoon.



PUBLIC WORKS


[Stage Direction]
On the orders of the day:
Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, I want to direct a question to the parliamentary assistant to the Minister of Public Works based on a newspaper report of his visit to Trail, British Columbia, on January 18, where he addressed a certain convention. He is reported as having said:
Wlien you find out just what you can do and want to do, the federal government, and Howard Green's department, will see you get a good helping.
I would like to ask the hon. gentleman what he meant when he used the words "good helping".


Mr. C. W. Hodgson (Parliamentary Assistant to the Minister of Public Works):: Mr. Speaker, that will be up to the good judgment of the minister.



DOMINION-PROVINCIAL RELATIONS MEASURE TO PROVIDE FINANCIAL ASSISTANCE TO ATLANTIC PROVINCES, ETC.

Donald Methuen Fleming: that the house go into committee to consider the following resolution:
That it is expedient to introduce a measure to provide for financial assistance to the Atlantic provinces by authorizing the payment, out of the consolidated revenue fund, for each of the four fiscal years commencing on the first day of April, 1958, of an annual grant of seven and one-half million dollars to each of the provinces of Nova Scotia, New Brunswick and Newfoundland, and an annual grant of two and one-half million dollars to the province of Prince Edward Island, and also to provide as an interim measure that in its application to the fiscal year commencing on the first day of April, 1958, the definition of "standard individual income tax" in the Federal-Provincial Tax-Sharing Arrangements Act, shall for the purposes of that act and any agreements made thereunder be read and construed as if for the words "10 per cent" therein there were substituted the words "13 per cent".
Motion agreed to and the house went into committee, Mr. Courtemanche in the chair.


Donald Methuen Fleming: Mr. Chairman, to the present resolution and to the bill which it is hoped will follow upon the passage of the resolution, the government attaches very great importance, for it looks upon this measure as one that will bring aid to the provinces and municipalities of this country, and effective aid also in meeting the problem of unemployment. The terms of the resolution, I think, are clear. It is the hope of the government that it may be possible after adoption of this resolution to proceed with the motion for second reading of the bill tomorrow.
Fiscal relations between the dominion and provincial governments in this country are very largely governed by the Federal-Provincial Tax-Sharing Arrangements Act of
1956.	Apart from the subsidies provided for by the British North America Act, it is this statute which almost entirely governs the fiscal relations between the dominion and provincial levels of government in this country. Therefore, Mr. Chairman, in approaching this problem it was necessary for the government to take account of the fact that here is an existing situation. By the terms of the legislation arrangements were created for a five-year period, and pursuant to the statute agreements had been entered into between the former government and the governments of nine of the provinces.
Sir, I do not need to remind the house that those who compose and support the present government had in 1956 in the debate on that measure opposed it because they said it was inadequate in the provisions it had made for
Dominion-Provincial Relations the provincial share of the revenues from what are called the joint fields of taxation.
The act deals with the distribution, as between the dominion and provincial levels of government, of three sources of revenue; personal income tax, corporation tax and the succession duty. The act makes provision for three types of sharing. It first takes those three types of taxes called the standard taxes and provides that the provinces may by agreement receive from the federal collection of income tax 10 per cent of the personal or individual income tax collected, nine percentage points of the corporation tax and half the succession duty. That applies to the three standard taxes.
In the second place, the act provides for equalization payments. It takes the average of the two top provinces of the per capita yield from the standard taxes and makes provision for a federal grant, an equalization payment, designed to bring the per capita yield in each province up to that average.
Then there is a third form of grant or payment, namely stabilization. The purpose of the stabilization payment was to assure to all the provinces that none of them would lose in 1957, in the quinquennial period then beginning, any of the benefits they enjoyed under the agreement and legislation existing from 1952 to 1957. It happens that up to the present only two provinces, namely Prince Edward Island and British Columbia, have derived benefit from the provision of stabilization, but that provision is there as a guarantee to all the provinces.
Now, sir, none of the provinces was satisfied with the division of those revenues; none of them. We pointed that out in the discussions of this matter on July 23 and later, 1956. If there was any doubt of that in the mind of any hon. member he had only to attend the dominion-provincial sessions last November to realize that the provinces were quite dissatisfied with the provisions thus made.
I should like now to say a word concerning the November dominion-provincial conference, sir. The new government did not lay before that conference any hard and fast formula. It sought in the first place to create a new atmosphere, feeling that a new atmosphere was necessary and desirable if there were to be hope of achieving settlement of the outstanding fiscal problems between the two levels of government. The provinces were therefore invited to propose whatever it suited them to propose, and they did all respond.

Dominion-Provincial Relations
The Prime Minister did lay before the conference three particular suggestions indicating that in respect of those matters the federal government was prepared to take a course of action in compliance with the wishes of the provinces. In the first place he indicated the willingness of the present government to abolish the so-called threshold limit on unemployment assistance; in other words the provision that federal contribution to unemployment assistance should begin only when unemployment exceeded .45 per cent of the population in any province. In the second place he proposed that what amounted to a veto of a majority of the provinces on the application of hospital insurance in any province should be abolished. In the third place he indicated that the federal government was prepared to subscribe to and introduce an Atlantic adjustment grant.
There was discussion of these matters at the conference, and there was discussion of course of other matters. The provinces put forward freely their views on the wider question of the division of revenues from the three standard taxes. There was discussion of the extent of hospital insurance, and there was considerable discussion on federal-provincial co-operation in the development of national resources. At the conclusion of the two days which had been set aside for it the conference, as had been indicated well in advance, adjourned. The fruits of the conference I think fully justified the laudatory comments made upon the conference in all parts of Canada by a number of provincial premiers and by the press. I point out that an atmosphere was created from which one could be hopeful that when the conference is resumed there will be a good chance of arriving at a fiscal settlement.
Then, too, a communique was subscribed to by all the heads of government attending which has some significance with respect to the matter I should now like to discuss, namely the Atlantic adjustment grants. I feel it is a tribute to their breadth of vision and to their sound Canadian approach to the problem of the Atlantic adjustment grants that the provinces in other parts of the country put no obstacle in the way of proceeding to give recognition to the fiscal needs of the Atlantic area. They subscribed to this term in the joint communique:
It was generally agreed that the over-all economic position of the Atlantic provinces is now such as to justify some special grants in aid to the governments of those provinces from the federal government.
In other words there was general agreement that the fiscal position of the Atlantic provinces is such that there should be some

special consideration given to those needs in any reallocation of the revenues from the joint fields of taxation, or the standard taxes. Consideration had been given at the 1956 conference to a formula put forward by Premier Hugh John Flemming of New Brunswick on this subject. The essence of that formula in a word was that where the per capita income in any province falls below 85 per cent of the national average, that province should qualify for some special assistance. It happens that all four of the Atlantic provinces fall below that 85 per cent. This was very clear evidence that the formula was sound, and indicated the necessity of some special action for the benefit of the Atlantic provinces. This formula was based upon a five-year average for the years 1952 to 1956 inclusive, taking the population in the ages 15 to 69 inclusive as a basis for calculating the working population and determining the average personal income. Various elaborations of that formula had been prepared. The formula had commanded not a little discussion at the 1956 conference.
Following the adjournment of the dominion-provincial conference of November last, federal officials met together with representatives of the four Atlantic provinces and, I am happy to say, arrived at a formula that was unanimously accepted by the four Atlantic provinces after due consideration. Here again I think tribute is due to those who represented these provinces and sought to arrive at agreement.
This agreement was that any amount provided out of the federal treasury by way of Atlantic adjustment grant should be divided amongst the four provinces on this formula: Nova Scotia, 30 per cent; New Brunswick, 30 per cent; Newfoundland, 30 per cent and Prince Edward Island, 10 per cent. This left to be determined only the amount which the federal government was prepared to allocate to Atlantic adjustment grants out of the total yield from these standard taxes.
We decided, Mr. Chairman, that the amount we would recommend to parliament would be $25 million per annum. This figure was not simply taken out of the air. As a matter of fact it was very close to the figure that had been discussed on previous occasions when this original formula was put forward by Premier Hugh John Flemming. There were various ways in which the result of that formula had been worked out, and the one which had been most discussed arrived at a figure of $24,833,000, so we decided that $25 million, as the nearest round amount, was a sound figure to place before this parliament with the government's recommendation.

In the result, therefore, if parliament gives approval to the resolution and the bill to follow, the Atlantic provinces will receive in the four remaining complete fiscal years of the five year period covered by the Federal-Provincial Tax-Sharing Arrangements Act and the existing agreements, $100 million. The $25 million in each of these fiscal years will be divided in the following amounts: Nova Scotia, $7.5 million; New Brunswick, $7.5 million; Newfoundland, $7.5 million, and Prince Edward Island, $2.5 million.
One does not need to argue the fact that the Atlantic area deserved special fiscal consideration. The fact that this point was conceded by the other provinces leaves, I am sure, no room for argument on the subject. The government therefore, Mr. Chairman, believes that in submitting this proposal to parliament we are submitting a proposal that is fully justified by the economic facts of life in Canada; that will commend itself to the sense of fair play of Canadians in all provinces, and will assist in the Atlantic area of Canada in the development of resources, in enabling these provinces to raise the level of public services up to a point where they are comparable with those prevailing in other provinces of Canada, and will assist as well in the provision of employment.
I think I need say no more upon this subject of the Atlantic adjustment grants. I stress that we have given consideration to all aspects of the matter, and the bill that will follow will make clear the binding provision for the four fiscal years commencing April 1 next, and will extend throughout the entire lifetime of the federal-provincial tax-sharing arrangements act and the nine agreements that have been entered into with nine provinces pursuant to the provisions of that statute.
I now turn to the broader subject of fiscal relations between the federal government and the ten provincial governments. This government has made it very clear, Mr. Chairman, that it has no thought of imposing any dictate upon the provincial governments. At no time will this government adopt any take it or leave it attitude. As I indicated earlier, we approached a situation where agreements had been entered into by nine of the provinces, and where those agreements had another four years to run and the legislation under which they derive their authority had the same period to run.
This session of parliament has extended far beyond expectations and, as I do not need to remind hon. members, the sittings of this parliament have been very onerous and protracted. We have now been sitting, since about the beginning of December,
Dominion-Provincial Relations morning, afternoon and night and on Saturdays as well. In the face of these facts and the burdens that have had to be discharged in relation to the business that has been brought before the house; and the fact-let it not be forgotten-that we are only a minority government, it was impossible to reconvene the conference while parliament was in session and pursuing such a rigorous schedule of sittings. While we have been waiting hopefully to see some approach to the end of the session, it became quite clear latterly that there was no hope of concluding the session in time to reconvene the conference in time to arrive at conclusions or agreements in time to permit the provincial treasurers of the provinces to prepare their budgets for the forthcoming year.
As to the legislatures of the provinces, at least one of them has been in session for some time, and I think virtually all of them are being called to meet within the next several weeks. We did not need to be told how urgent was the need on the part of the provincial governments of knowing what they might expect to receive and take into their budgets in the forthcoming fiscal year commencing April 1.
Therefore, Mr. Chairman, as it became impossible to reconvene the conference in time to allow that to be done, the government decided that what needed to be done in the emergent situation was to provide as an interim measure some additional basis upon which the provincial treasurers could proceed to budget for this forthcoming fiscal year. Therefore in the second branch of the resolution we propose a measure which will be of benefit to all ten provinces of this country. It will assure for the fiscal year commencing April 1 next an additional sum of $62,203,000 for distribution among them on the relatively simple basis of increasing from 10 per cent to 13 per cent that proportion of the individual income tax which the provinces are entitled to receive.
There are many detailed calculations on all aspects bearing upon this matter which have been reduced to a table by the officials of the Department of Finance. If I had the leave of the house to do so I should be glad to propose that this table might be placed upon Hansard.


Some hon. Members:: Agreed.


The Chairman:: Is it agreed that the table be printed in Hansard'!


Some hon. Members:: Agreed.


Donald Methuen Fleming: The table is as follows:

Estimated standard taxes, equalization and stabilization at 13 per cent of federal tax on individual incomes, 9 per cent tax on corporation profits and 50 per cent of the federal succession duties.
Estimate of Benefits to Provinces under Federal-Provincial Tax-Sharing Arrangements Act (as in accordance with proposed amendments January 1958)
As applied to data of the fiscal year 1957-58
00
cn
For purposes of illustration only.
		(all money figures except per capitas in thousands of dollars)						
Nfld. P.E.I	N.S. N.B.	Que.	Ont.	Man.	Sask. Alta.	B.C.	Total1. Population (000) 1957 estimated	
426 99	702 565	4,758	5,622	860	879 1,160	1,487	16,558
Yield of standard taxes
2. Individual income tax	
2,046	298	3,9443. Corporation income tax	
2,691	403	4,5554. Succession duties	
184	137	1,4435. Total yield of standard taxes	
4,921	838	9,9426. Total yield-per capita	
11.55	8.46	14.163,082	43,778	96,693	8,791	0,361	13,933	25,324	204,2503,675	79,487	117,701	10,127	8,173	16,188	26,999	269,9996,563	22,781	23,932	1,529	808	1,986	4,967	64,33013,320	146,046	238,326	20,447	15,342	32,107	57,290	538,57923.58	30.69	42.39	23.78	17.45	27.68	38.53	32.53
Equalization to top 2 ($41.58)
7.	Per capita equalization	
8.	Equalization payments	
9.	Standard taxes plus equalization	
Revised preliminary amount payable in 1957-58 on present basis of 10-9-50
10.	Total of standard taxes, equalization and stabilization	
11.	Total amount due after proposed rate amendment
(including stabilization payment)	
12.	Increase due to proposed rate amendment	
13.	Proposed Atlantic provinces adjustment grant. .
Summary
14.	Total amount due under standard taxes, equalization and stabilization after proposed amendment	
15.	Total due from proposed atlantic provinces
adjustment grant	
16.	Total amount due after proposed amendments..
17.	Increase	
30.03	33.12	27.42	18.00	10.89 	17.80	24.13	13.90	3.05	12,793	3,279	19,249	10,170	51,815 	15,308	21,210	16,124	4,535	154,48317,714	4,117	29,191	23,490	197,861 238,326	35,755	36,552	48,231	61,825	693,06216,028	4,1360	26,407	21,254	179,002	216,011	32,350	33,071	43,636	58,983(2)	630,87817,714	4,136(l)	29,191	23,490	197,861	238,326	35,755	36,552	48,231	61,825(2)	693,0811,686 7,500	2,500	2,784 7,500	2,236 7,500	18,859	22,315	3,405	3,481	4,595	2,842	62,203 25,00017,714	4,136	29,191	23,490	197,861	238,326	35,755	36,552	48,231	61,825	693,0817 500	2 500	7,500	7,500	25,00025,214	6,636	36,691	30,990	197,861	238,326	35,755	36,552	48,231	61,825	718,0819,186	2,500	10,284	9,736	18,859	22,315	3,405	3,481	4,595	2,842	87,203
o
o
s
o
co
p) Prince Edward Island receives a stabilization payment based on the projected tax rental payment under the 1952 agreement applied to 1957-58. Under 10-9-50 this is $412,000, while under the amended rate of 13-9-50 it would be $19,000.
(z) B.C. receives a stabilization payment on the same basis as P.E.I. Under 10-9-50 this is $3,046,000. No stabilization will be due under the amended rate on the basis of 1957-58 figures.
These calculations, which are only illustrative of the effect of the proposed changes, are based on the latest estimates available for 1957-58 individual income tax collections, 1957 corporation profits and the average of succession duties 1955-56 to 1957-58. They are as used for calculation of the revised preliminary payments now being made for 1957-58.
Dominion-Provincial Relations

In a word, Mr. Chairman, the increases that will be brought about in the payments to the provinces will be as follows. We arrive at these amounts by taking the actual figures for the fiscal year 1957-58 and adding to those the additional amounts now provided for by the present resolution. I think that is a sounder and clearer way than to attempt to estimate what the yields may be in the fiscal year commencing April 1 next. The total of standard taxes, equalization and stabilization payments payable to the provinces in the fiscal year 1957-58 is $630,878,000. By including the $25 million adjustment grant for the Atlantic provinces and the additional amounts available to all the provinces by the increase from 10 per cent to 13 per cent in their share of the individual income tax, that amount will be increased this coming fiscal year to $718,081,000.
The figures that each province will receive under the new adjusted basis are as follows. Perhaps I might give this year's figure and then, following that, indicate next year's figure. Newfoundland, this year, $16,028,000; next year, $25,214,000; Prince Edward Island, this year, $4,136,000; next year, $6,636,000; Nova Scotia, this year, $26,407,000; next year, $36,691,000; New Brunswick-Mr. Chairman, I think I may leave this matter until we progress further in committee, because my time is passing and I wish to conclude my remarks. The figures in the table will all be on the record.


Paul Joseph James Martin: Why not table
the whole thing?


Donald Methuen Fleming: It is tabled. It is all in the
table. However, I thought it might be of interest to hon. members if I gave these figures. However, I do not wish to trespass on the time of the house.


Stanley Howard Knowles: I
wonder whether the minister would permit a question. I am sure the committee will give him extra time. The question is as to the apparent discrepancy in the figure for Prince Edward Island between what he told the house on Saturday and what is shown in the table. On Saturday he showed $370,000 of increase for Prince Edward Island under the change in the standard rate and $2,500,000 under the special arrangement. According to the table the $2,500,000 is there, but the figure under the other item is zero, and there are other discrepancies as well.


Donald Methuen Fleming: I will come back and deal
with those items later, Mr. Chairman, on questions. But I think I had better go on and complete my remarks now if the hon. member will permit me to do so. There is a question of stabilization payments that enters into the figures.
Dominion-Provincial Relations
I wish to make several observations about the nature of the provisions made in the resolution. The grants are unconditional. The provinces, however, have always represented that they needed an enlarged share of the revenues from these standard taxes in order to help their municipalities. Indeed, some of the provinces have gone further and have said they would use any additional provision made for them from this source to help municipalities.
There are therefore three conclusions that I think we are entitled to draw from this additional provision. The first concerns the municipalities, of which in this country there are approximately 4,500. We recognize the burden carried by these 4,500 municipal governments and the fact that they operate on a limited and, in a jurisdictional sense, static tax base. The financial health of the municipal governments has a good deal to do with home ownership. We are concerned about housing. We are concerned about the shortage of serviced land. We must be much concerned about the increasing burdens that are carried by the municipal governments in making provisions for educational facilities, roads and services, whether pertaining to land or social services. Therefore we consider we have every reason to look upon this present measure as a powerful aid to the municipal governments of this country.
A second observation relates to the provinces. We recognize the heavy burdens carried by the provincial governments of this country and the extent of their constitutional burdens. We who now sit on this side of the house have said before that too much of the tax dollar is going to the federal government. We respect the constitution; we are federationists, not centralists, and we must take into account the fact that the burdens carried by the provinces in the matters of education, highways, social services, etc., have been increasing in almost astronomical proportions. The burden of developing the resources in this country, so closely related to our prosperity in Canada, also rests in a jurisdictional sense, with the provinces, and we know that the growth of population in this country and the rapid development that have taken place in recent years have greatly added to the burdens borne by the provinces. This is best evidenced in those provinces where growth has been most rapid. We therefore consider we have every reason to believe that this measure will greatly aid the provinces.
The third matter I wish to mention is unemployment. The provinces and the municipalities are very important sources of employment and work in this country. There is very much work, undoubtedly, that needs to

Dominion-Provincial Relations be done in the provinces and the municipalities, and work done at the local level has this advantage: it does not uproot the unemployed and carry them elsewhere. It seeks to provide work where unemployment does already exist. The municipalities, particularly, have been hampered and restrained by high costs and difficulties of borrowing in recent years, and on them has fallen much of the burden of the tight money policy which has been prevailing in the past several years. That tight money policy has now been eased in line with the policies of this government, but we go further and say we believe that these funds now made available in this way will provide something better than easier loans or easier credit; they will provide grants. Therefore we look, through this measure, for the early amelioration of unemployment as the result of a works program to be commenced by the provincial and municipal governments.
In conclusion, there are several matters which I feel I should mention by way of clarification of the points which may occur to hon. members, perhaps foreshadowed by some of the questions asked last Saturday morning when this measure was announced in the house. In the first place, there is no increase in taxes involved in the present measure, no increase in taxes whatsoever. It is a tax-sharing, and not a tax-raising measure.
In the second place in at least one province it will have the effect of reducing taxes; and here I may say to my friend the hon. member for St. Antoine-Westmount, in expanding the answer I gave him on Saturday that the third statutory change, in addition to the two indicated in the resolution, will be in the form of an amendment to the Income Tax Act which will be introduced by the government at the next session of parliament, namely a measure to amend section 33 of the Income Tax Act by changing the figure 10 per cent therein to 13 per cent in order that the taxpayers of the province of Quebec may derive the full benefit of the deduction of 13 per cent. In that case it will apply to the tax rates in effect in 1958.
The third matter I would mention concerns the equalization principle. We have carried forward in this measure full recognition of the principle of equalization now embedded in the Federal-Provincial Tax-Sharing Arrangements Act. Indeed, of the $62 million provided a little over $17 million is ascribable to the equalization principle; and the equalization principle, as in the statute, is still tied to the average of the two provinces in which the per capita income is highest in

Canada. Therefore let there be full recognition of the fact that the equalization principle has retained its full recognition in the proposals now put forward.
The fourth matter concerns Newfoundland. This measure has no bearing whatever upon the present inquiry of the royal commission on the terms of union with Newfoundland.
Fifth, the provinces will still have the benefits of the tax yields calculated prior to the reductions which were brought about by this house in response to the government's tax reduction program last December. In other words the percentages payable to the provinces-this increase from 10 to 13 per cent- will be calculated on the basis of the rates in effect last year.
As my concluding observation, the present measure, bringing as we consider it does belated justice to the Atlantic area and belated assistance to all the provinces, carries the principle of the recognition of the fiscal need of the provinces further than it has ever before been carried in Canada's history.


Mr. St. Laurent (Quebec East):: Mr. Chairman, I hope the rosy expectations of the Minister of Finance with respect to the effects of the increases proposed in this legislation will be justified because whether we sit on this or the other side of the house, we are all equally concerned with the economy of our country. I may say at once that it is the intention of the official opposition to support both the increase in the direct tax revenue sharing with all the provinces and the special grants to the Atlantic provinces.
I wish to make a few observations on the proposed increase of general application under the direct tax revenue sharing arrangements, but I will leave the subject of the Atlantic provinces grants to the hon. member for Bonavista-Twillingate and other members of the opposition.
Of course no one can deny that during the war and ever since the war it has been an unavoidable necessity for the government of Canada to derive a substantial portion of its revenues from taxes on personal incomes, corporate incomes and, to a lesser degree, in succession duties. It is, I think, also obvious, and has always been obvious to everyone, that the burden of provincial and municipal treasuries has been rising because of the rapid growth of our population which requires increased provincial and local services and because of the increased costs of maintaining and expanding those local services.
It will be remembered that at the close of the war under the wartime arrangements, when all the then nine provinces were included, the provincial revenues from the

direct tax fields were about $100 million. For the present fiscal year the provincial revenues from the same fields, including equalization payments, were estimated by Mr. Harris at approximately $630 million when the subject was before the house for consideration in 1956.
From the table which the Minister of Finance has now placed on record in Hansard I gather that the total standard taxes, equalization and stabilization payments for the present fiscal year without the increase would be $630,878,000. That is an increase of considerably more than six times what it was at the end of the war. The proposal made in 1956 was that there should be an increase of approximately $114 million in the payments for the present fiscal year, over and above what it would have been, calculated on the basis of the 1952 formula. That is considerably more than the total increases which are proposed in this resolution, a resolution we are prepared to support.
The purpose of the present government in its tax revenue sharing arrangements is the same as the purpose of the previous government. It has always been recognized that it was proper that there should be some portion of the revenues available from these direct tax sources available for provincial services, and more than once I had occasion to state what was the government's policy in this regard. One of those occasions took the form of a letter addressed to all of the provincial premiers on January 14, 1955, in which I expressed it in the following words:
The present government has no intention of abandoning the objective of the tax-rental agreement which is to make it financially possible for all provinces, whatever their tax base, to perform their constitutional functions themselves and to provide a reasonable Canadian level of provincial services without an abnormal burden of taxation. That is the foundation of the policy of the federal government.
In the arrangements we proposed in 1956 a genuine endeavour was made to go as far as the situation at that period allowed toward achieving that objective.
At the present time the government feels it is possible to go beyond what was done then. The amount of the increase proposed is less than what was approved by parliament in 1956 but it is, of course, in addition to what was then being provided. It is being done by modifying one of the percentage rates in the formula which is the basis of the 1956 legislation.
We considered that formula was a good formula; that it provided for bringing up for each province the theoretical yield from taxes in this field of direct taxation to the average that proved to be the yield for the
Dominion-Provincial Relations two provinces in which it was the largest. We note with satisfaction that the equalization principle is to be maintained, and is regarded as the proper basis for the arrangements to be made in regard to this tax revenue sharing proposal.
During this session we have not, of course, had a national budget, and we are not therefore in a position to see accurately just how this will fit into the whole budgetary situation of the country at this time. That is the responsibility of the government, and I assume that the government has been fully conscious of that responsibility and of the effect on the budget of this and all the other substantial increases in permanent charges which have been made.


Donald Methuen Fleming: Would the right hon. gentleman permit me to remind him that there is nothing in these proposals which affects the current fiscal year? They will come into effect only in the fiscal year commencing April 1 next. And there will, of course, be a budget introduced for that year.


Louis Stephen St-Laurent: I appreciate that these provisions are designed to take effect in the case of the special grants for four years, beginning with the year 1958-59, and the other case for the fiscal year 1958-59 as an interim provision pending whatever other decisions may subsequently be made.
We do know, however, that the burdens of the provinces and local authorities have been increasing, and we do know that there have been changed conditions. When this formula was prepared it was regarded as a formula which should be adhered to, at least until something better could be found to deal with the situation; but it was understood that the percentage rates might very well be changed as conditions and needs changed. We do know that the needs of the local authorities are substantial, and we hope they can make good use of these additional funds in order to provide needed services and needed employment.
As I have said, we intend to support the measure, notwithstanding the procedure followed by the government in dealing with the provinces. With respect to that, I think it is well to remind ourselves of the contrast between the manner in which this has been dealt with at this time and the manner in which it was studied throughout 1955 and 1956 to bring about the tax revenue sharing arrangements which were incorporated in the statute of 1956. I shall merely point out what were the various steps taken in order to bring about an arrangement which, though it was not satisfactory in the amount it provided to the provinces, was on a basis which was declared by all the representatives of the provinces at the time to

Dominion-Provincial Relations be better and fairer than anything which had been devised up to that time in this regard.
The first move that was made in respect to the discussion of these federal-provincial fiscal arrangements was a letter I addressed to the premiers of all the provinces on January 14, 1955. It was on the lines that arrangements were being proposed for unemployment assistance to those who were not covered by the Unemployment Insurance Act, but at the same time it called attention to the fact that it was necessary that there should be a dominion-provincial conference before the end of 1955 in accordance with the terms of the agreements which had been in effect since 1952, and it contained the following paragraph:
It had always been understood that it would be necessary to hold a federal-provincial conference before the end of 1955 to discuss fiscal arrangements for the years which will follow the present tax rental agreements. In the light of recent developments it might be the desire of the provincial governments to have this conference held at an earlier date.
I shall accordingly communicate with you again shortly after my return from the commonwealth prime minister's meeting in London towards the middle of February with a view to working out arrangements for a conference at a time which will be satisfactory to all governments concerned.
I am referring to letters that were tabled at the time. I wrote suggesting that we might have this preliminary meeting for this purpose on April 21 and 22 if those dates were satisfactory to everybody. Further communications made it apparent that April 26 and 27 would be more convenient dates for this conference, and it did take place on those dates. It was then determined that there would be other conferences in the meantime to deal with the unemployment assistance problem, and that the formal conference to deal with federal-provincial fiscal matters would meet here on October 3. In the meantime there were meetings of officials to prepare the data for the conference. One of them, attended by provincial officials, met in July, 1955, in Ottawa and another was held in Halifax in September, 1955. The conference met and sat in open session on October 3, and then sat in committee for the three following days.
The matter of fiscal relations was carefully gone into at that conference. It is quite true that there were representations made by the premier of New Brunswick with respect to the advisability of there being a special grant for the Atlantic provinces. Similar representations were also made by Mr. Hicks, the then premier of Nova Scotia, and the matter was given careful consideration at that time.
On January 6 I wrote to all the premiers outlining the recommendations that the government would take the responsibility of making to parliament in that regard. This was


followed by further correspondence, as a result of which there were some modifications made in the proposals that were recommended to parliament. There was another meeting with the provincial premiers here in Ottawa on March 9, following which a revised outline of the proposals was addressed to each of the premiers on March 19, 1956. The legislation was introduced in July of 1956, and debated and adopted at that time.
The procedure adopted by the present government was much more summary than that. There was a two-day conference here, which I would imagine from the rosy expectations that had been raised by the declarations made by the Prime Minister during the election campaign it was felt would settle the fiscal relations between the federal government and the provinces.


Donald Methuen Fleming: Oh, no.


Some hon. Members:: Oh, yes.


Donald Methuen Fleming: Will the right hon. gentleman permit me to ask a question? Does the right hon. gentleman recall that correspondence was exchanged on that subject and tabled in this house prior to the conference, stating that it was recognized it would be impossible to reach definite conclusions in a two-day conference and there would have to be an adjournment of the conference to a later date?


Louis Stephen St-Laurent: I recall that there was correspondence tabled at that time, but during the election campaign it was suggested by the Prime Minister that this matter would be settled to the satisfaction of the provincial governments if the hon. gentleman's party achieved office. There were some of these promises which those of us who knew how these things could be done would have discounted, but which do not appear to have been discounted to the same extent by the general public, and they apparently were not intended to be discounted to the same extent by the general public.
The conference was held, and the Minister of Finance says there was no take it or leave it proposal put before it. In fact there was no proposal at all suggested. It is a very convenient excuse to say there were going to be no take it or leave it suggestions. The conference adjourned to meet again early in the new year. Well, it has not met early in the new year, and the prospects at the present time do not seem to indicate that it is going to meet at any time that could be considered early in the new year, if it meets at all within the first half of the new year.
The government is now attempting some implementation of the objectives that had been suggested during the campaign. It has

decided that it would recommend these immediate increases. It is with some satisfaction that we note that when the government does thus propose to make increases, which would be a small part of what the premier of Ontario, for instance, was stating to be absolutely necessary for his province, it does so by modification of three points in the percentage rate of one of the factors of the equalization formula that was recommended to parliament by Mr. Harris in 1956, and which was adopted by parliament.


Mr. Benidickson:: A Liberal parliament.


Louis Stephen St-Laurent: The government found no alternative to that policy which as to principle is an eminently sound one; so sound, in fact, that the Minister of Finance took some time to assure the house and thereby to assure the country that there was going to be no interference at all with the equalization policy that was contained in that formula and that the present increase, interim though it was, was an indication that the government intended to maintain the equalization principle that was the foundation of the act adopted in 1956. I think Mr. Harris will take some satisfaction from the fact that this is a recognition that the policy he put forth is being used as it should be used.
When we come back we shall use whatever good things there are in the policies of the present government, because they are not provided for a party; they are provided for the good of the country at large, and when they are such as to operate for the good of the country at large it is quite proper and laudable that they be made use of by those who have the responsibility of furthering the welfare of the country. But this is an added reason for our being prepared not only to go along with and support those increases but to accommodate the government, as the other parties have done, in making it possible to deal with this resolution expeditiously, without requiring that the usual notice called for by the rules be observed.
I think there will be general satisfaction in the fact that the present circumstances have been recognized as such as to require that this addition be made. With respect to the special grants to the Atlantic provinces, they are matters that did receive serious consideration but which had not up to that time been expressly agreed to by the representatives of the other provinces. A letter from the premier of Manitoba dated December 18, 1957, which has been printed as an appendix to Hansard, seems to indicate that it must be a great surprise to him that this matter
Dominion-Provincial Relations is being finally dealt with before the general policy of the fiscal arrangements applicable to all the provinces has been determined or let alone approached.
As I recollect the terms of that letter, it was felt that although the situation in the Atlantic provinces migh be somewhat unique at this time, whatever was done there should be in accord with a formula that could, if and when circumstances made it applicable elsewhere, also be extended to such other provinces. But these are details. What is important at the present time is to make this amount available, which I hope will produce some of the benefits of relieving the unemployment situation at the present time to which the Minister of Finance alluded.
However, though the economy of the country has been operating in terms very much larger than any of the amounts that can be fitted into a dominion-provincial fiscal arrangement, I hope that these amounts will produce something toward the very much desired objective of getting the economy back to the condition under which it was operating less than a year ago.


Stanley Howard Knowles: Mr. Chairman, when we too indicated our readiness to proceed with this resolution today without requiring the further 24 hours delay that the rules stipulate, that implied our readiness to support the legislation that the government proposes to bring before parliament at this time. We are prepared to give it our support because it is clear that the provincial governments are in need of additional revenues. Since this is the time of the year when provincial treasurers are preparing their budgets, it is desirable that they know at the earliest possible date what sums of money they can count on by way of payments under the Federal-Provincial TaxSharing Arrangements Act. Hence we shall vote for this measure.
May I also say at the outset that we are particularly pleased to support a resolution that proposes special grants for the Atlantic provinces. All of us in Canada appreciate the contribution made by those provinces and their people across the years to the development of this country, and in view of their special needs at this time we think it is appropriate that special adjustment grants should be provided for the four provinces down by the sea. Nevertheless, Mr. Chairman, there are some comments that we feel need to be made at this time.
First of all I want to say a word with respect to the basis upon which these special grants are being made to the Atlantic provinces. I speak as a spokesman for a party that is keen on something being done for

Dominion-Provincial Relations those provinces, but we think it should be done on the basis of a formula, on the basis of a principle, rather than a lump-sum handout decided upon by the government of the day. This smacks too much of the practice of charity and gets too close to the practice of political hand-outs at a particular time in the affairs of the nation.


An hon. Member:: Shame.


Stanley Howard Knowles: heard the word "shame" from across the way. I suggest that if there is any shame it is to be heaped upon the government for once again putting the Atlantic provinces in the position that they are getting a form of charity rather than something which is their right on the basis of a principle adopted by parliament.
I go all the way with the premier of my province and the premier of Saskatchewan, who along with others in the country have been saying that something should be done for the four Atlantic provinces and that it should be done on the basis of a formula, taking into account the per capita income of the various provinces, so that when the per capita income is low in the Atlantic provinces they will get special adjustment grants as of right, and so that if the same situation obtains in any other provinces those provinces will also get the special adjustment grants.
It seems to me that the present government has adopted a very unwise course so far as this matter is concerned, bearing in mind not only the rights of the situation but also the sensitivities of the people of the Atlantic provinces. Since my own forbears came from the provinces of New Brunswick and Nova Scotia, I think I can make that reference.
The other comment I wish to make is this. I am surprised that our friends across the way chose to deal with this matter on a completely unilateral basis. This is particularly surprising in view of some of the comments the Minister of Finance as well as the present Prime Minister, the Minister of National Revenue, and the former leader of the Conservative party, Mr. Drew, made in 1956; and I shall remind them of some of their words in a few moments.
The Minister of Finance and the Prime Minister both say this government is not handing this arrangement to the provinces on a take it or leave it basis.
The hon. member for Quebec East put it very well when he pointed out that the present government did not present anything to the provinces on November 25 on a take it or leave it basis; they did not present anything at all. However, they are now presenting to the provinces the proposition which

is in the resolution before us and this proposition is being presented on a unilateral basis; it is being presented to the provinces on a take it or leave it basis.
The Minister of Finance in answer-


Donald Methuen Fleming: Mr. Chairman-


Stanley Howard Knowles: have only 30 minutes too, just like the minister. The Minister of Finance in answer to a question on orders of the day today said the government had not had any replies from the premiers to the telegram supposedly sent to them on Friday of last week. On July 23-


Donald Methuen Fleming: Mr. Chairman, the hon. member has just said that the telegrams were "supposedly" sent. I made a statement to the house on Saturday morning that these telegrams had been dispatched to the premiers of the provinces, and it does not lie in the mouth of an hon. member to cast doubt upon a statement of fact made in the house by another hon. member.


Stanley Howard Knowles: I
will withdraw that word and instead of making that veiled reference I shall make a statement of fact. Shortly after one o'clock today, because of my interest in this matter, I sought to communicate by long distance telephone with two provincial premiers, the premier of my own province and the premier of Saskatchewan. I was unable to reach Premier Campbell. He was not in his office at the time. I did talk with Premier Douglas of Saskatchewan and as late as a little after one o'clock our time today, which would be a little after eleven o'clock in Regina, Premier Douglas told me that up until that time he had not yet received the telegram which the Minister of Finance said on Saturday had been sent on Friday by the Prime Minister. Mr. Douglas informed me that two or three times on Saturday and a couple of times this morning he had officials of the Saskatchewan government check with the Canadian National and Canadian Pacific telegraphs but up until the time of our telephone conversation he had not received the telegram to which reference has been made. In other words, Premier Douglas is in the position-I do not know about the position of the other premiers- where he has learned about this matter only on the basis of what he has read in the newspapers. I submit that is unilateral action in an extreme form.
I appreciated the reply the Minister of Finance gave to my question on the orders of the day, and the smile that was on his face when he made it. I always like to give the minister an opportunity to smile. When I asked whether he had any evidence that the premiers had received the telegrams

which he told us were sent on Friday he said he had confidence in the efficiency of the two telegraph systems. So have I, but in a matter as important as this I think there was an obligation on the government to make sure, by long distance telephone calls if necessary or by asking for replies by wire, whether or not the premiers had received those telegrams. But no, he does not know whether they received them. I have told him that one premier had not received it by noon today. He did admit today, on orders of the day, that he has had no replies from any of the premiers. This is the same gentleman, now Minister of Finance, who as the hon. member for Eglinton on July 23, 1956, as recorded at page 6296 of Hansard, said this:
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.


William Moore Benidickson: Perhaps we should adjourn the debate.


Donald Methuen Fleming: Do you want to try it?


Stanley Howard Knowles: What we are being asked to do today is what the Minister of Finance said he and his party would not do when they were sitting on this side of the house.


Donald Methuen Fleming: Nonsense.


Stanley Howard Knowles: Nonsense, my eye. The present minister carried out that opposition by voting against second reading of the bill and by voting for a six months hoist on third reading which was moved by the hon. member for Peace River.
I point this out to the Minister of Finance as well. I attempted to ask him a question in the middle of his speech, and I thank him for his courtesy in sending me a note to explain the matter. My question related to the discrepancy between the figures the minister gave on Saturday as the amounts of money the provinces would receive, and the figures contained in the table which he [DOT]placed on Hansard today. The figures as to the total amount to be received by the provinces are different in all 10 cases. In eight instances, let it be said, the provinces will receive a little more according to today's figures than they would have received according to Saturday's figures. In so far as two provinces are concerned, Prince Edward Island and British Columbia, they will receive less according to today's figures than they would have received according to Saturday's figures.
Dominion-Provincial Relations
The Minister of Finance has given me an explanation which is valid and which I accept, namely that the figures on Saturday did not take account of the stabilization payments. In other words, over the weekend the figures have had to be corrected in accordance with the threefold aspect of the formula upon which these amounts are calculated. It is all very fine for the minister to be able to explain this to us today. I point out to him that, so far as the provincial governments are concerned, all they have had to go on over the weekend is the figures they saw in the newspapers on Saturday. The government of British Columbia assumed from what they saw in the newspapers on Saturday that they were receiving an increase amounting to something of the order of $5,563,000 as a result of this change. They will learn from the newspapers today that instead they are going to receive an increase of only $2,842,000. In so far as Prince Edward Island is concerned, they learned from the newspapers on Saturday-perhaps they got the telegram, I do not know-that they would receive a total increase of $2,870,000. They will learn from the press today that the total increase will be only $2,500,000.
I suggest that because these increases are needed by the provinces, and needed in particular by the Atlantic provinces, we will vote for them. This unilateral action, however, is something that is rather difficult to understand from the government across the way. Listen to what Mr. Drew had to say about acting in this way when he spoke in the house on July 16, 1956, as recorded in Hansard at page 5995:
What has happened in this case is unhappily typical of what has happened on other occasions. It illustrates the unfitness of this government to govern.
The words of Mr. Drew come wafting across the Atlantic ocean to his party which is now in power.
The Minister of Finance has told us that there were meetings from time to time starting on April 26 of last year and then finally coming to a meeting on March 9 of this year. That should never have been dignified with the name of "conference". All that amounted to was that this government called the provincial premiers together for one day so that they might be told what this government was prepared to do.
At least the Liberals had the courage to call the provincial premiers here and tell them to their faces what they were being given. This government tells them by means of a telegram without knowing whether all the 10 premiers received that telegram. Mr. Drew went on:
That is not a conference in any meaning of the word "conference". It is certainly not the type of conference that accepts in fact or in principle the

Dominion-Provincial Relations relation of the federal and provincial governments or the place of the provincial governments under that system. It was said by more than one provincial premier that this was no conference at all. It was said that they could just as well have stayed away and been told by a letter what this government was prepared to do.
Once again it was a case of "take it or leave it".
Mr. Drew's successors did not do it by letter, as he suggested it could have been done by the Liberals; they did it by telegram which the premiers may or may not have received. Listen also to what the present Prime Minister said on July 24, 1956, as recorded at page 6370 of Hansard:
I believe this. I think it is fair to say that the attitude taken by the government at the last conference was an arbitrary one. The government simply said, "These are the terms." No opportunity was given for amendment or for amelioration of any terms. The recipe for a division of taxation was as final as the laws of the Medes and the Persians; and how similar that attitude was to the attitude of the government in this house, which is that power makes perfect anything they do.
Oh, how quickly our friends across the way have learned to act in that same manner.
There was no opportunity for negotiation; there was simply the attitude of a feudal lord bringing into being a modern feudalism and laying down the law to the vassals.
That is not the attitude, that is not the consideration to which the provinces are entitled under a constitution which allocates powers as between the federal and provincial governments. That is not an attitude which will remove the road blocks which today deny Canada the development which should indeed be heard. I feel that even yet if there were an attitude on the part of the federal government to negotiate, terms could be achieved which would be acceptable and which would go a long way towards solving this difficult and complex problem.
I have a few more of these quotations, particularly some from the Minister of Finance, but I have already indicated his attitude so perhaps I will save the others for later on in this debate.
May I say, Mr. Chairman, that any complaints that were made against the Liberal government really can be made ten times over against this government. The Liberal government at least called the premiers down here two or three times over a period of months and if there was not complete agreement, at least the knowledge as to what was to be done was conveyed to the provinces at a meeting here in Ottawa. In this instance, as I say, it is being done on a unilateral basis by this government simply saying, "Here it is; here is what we are doing for you; take it or leave it".
I think about the weakest excuse I ever heard any responsible government make is this excuse that the federal-provincial conference could not be called together again because of the protracted sittings during this session of parliament.
[Mr. Knowles (Winnipeg North Centre) .1


Some hon. Members:: Oh, oh.


Paul Joseph James Martin: Hear, hear; most ridiculous.


William Moore Benidickson: We would give them
mornings off.


Stanley Howard Knowles: Hon. members across the way may laugh if they wish to do so. I notice that the ones who are laughing were not the ones who were here when their party was in opposition. The ones who were here before know something about the responsibility of those who sit on the opposition side of the house. There was nothing said about parliament going to interfere with the conference when the election was under way last summer. I remind the minister that the agreed communique which was published after the conference said this:
It was agreed that a subsequent meeting be held as soon as possible in the new year in accordance with the proposal made by the dominion government in calling this conference.
The Conservative government was good enough to allow parliament to adjourn for a day and a night for an event which took place in this city not long ago and which, I suggest, was of much less importance than would be a federal-provincial conference. I am sure I can get unanimity for that sentiment.


Some hon. Members:: Oh, oh.


Stanley Howard Knowles: I suggest if it was possible to adjourn the house for that length of time we would have agreed readily to adjourn for two or three days or a week, if necessary, so that the important business of a federal-provincial conference could be carried on. I am still not convinced that it was necessary. Most of the federal-provincial conferences-especially the ones that have been valuable and effective-have been held while parliament was in session. I am satisfied that this job could have been done and that many people in Canada are laughing at the government for using this excuse that they could not call the conference into session again because parliament was still here.
I also want to say that I think the government is stretching a point when its ministers assert that they are proposing what is before us today because of the general agreement that was arrived at at that conference. I refer to the conference in November, 1957. I have read several times the agreed communique that was issued at the end of that conference. There was not very much that was agreed to, really. It was agreed that

certain things had been discussed, namely three: the threshold provision in the Unemployment Assistance Act, financing of hospital insurance and special assistance to the Atlantic provinces.
But in the matter of what was discussed with regard to hospital insurance, there seems to be quite a difference of opinion and the agreed communique does not resolve that conflict. The Prime Minister and the Minister of Finance say that what was understood was that something would be done about the date on which the act would come into effect. I welcome the fact that it is to come into effect on July 1 this year. I still think that a change in the act should be made at this session of parliament so that the provincial treasurers, in drawing up their budgets, will know they can count on that money as of July 1.
But if hon. members will read again the letter that Premier Campbell wrote to the Prime Minister under date of December 18, to which the hon. member for Quebec East referred, they will see that Premier Campbell understood that among the three things that were supposedly agreed to, so far as hospital insurance was concerned the point agreed on was the inclusion of mental and tubercular patients within the framework of that legislation. I say this to the government: You cannot have it both ways. You cannot claim you are doing what is before us today because it was agreed to at the conference and then refuse to do something else which, on the testimony of Premier Campbell and Premier Douglas, I may say, was one of the things that was agreed to at that conference. Apparently bringing tubercular and mental cases within the hospital insurance act has been forgotten, shelved or perhaps put off altogether because of the change of attitude on the part of the premier of one of the provinces of this country. But nevertheless the government used this so-called agreement as a pretext for going ahead on a unilateral basis.
I ask that the government and hon. members do what was suggested by the hon. member for Quebec East, namely that they read Premier Campbell's letter in which he points out that any agreement that was arrived at was because of the insistence of the Prime Minister that these matters be dealt with before any revision of the tax-sharing arrangements as a whole. In his letter of December 18, 1957, Premier Campbell makes it clear that this action was without any warning and that, as far as he is concerned- and Premier Douglas has taken the same position-the situation is this. Both these premiers say that so far as they are concerned, 96698-214
Dominion-Provincial Relations before you make special adjustment grants or before you do these other things that are going to take money out of the pot and affect the amount that is left for distribution you should reach agreement on the principle with regard to federal-provincial tax-sharing arrangements. I think the position taken by Premier Campbell in his letter, and supported by Premier Douglas, is a sound one. In the face of that letter, for this government to go ahead and do what is being done today on a unilateral basis is, in my opinion, a case of the government doing all the things that Mr. Drew, the Prime Minister and the Minister of Finance said were wrong when they castigated the former government for supposedly doing things on a take it or leave it basis.
In so far as this whole arrangement is concerned, Mr. Chairman, may I point out that Premier Campbell's letter of December 18 is not just to be sloughed off as just another of those letters, because on at least two occasions-on January 13 and January 20, to be exact-I asked the Prime Minister whether he had yet made a reply to Premier Campbell's letter. It is a lengthy letter. It goes into all these matters. It calls for anything that is to be done for the Atlantic provinces to be in the context of an over-all agreement. It is an excellent case. The first time I asked the Prime Minister the question as to whether he had answered this letter he said he would have to look up the files and find out what had been done. The second time he said that he thought his letter of acknowledgment implied that there would be a reply in substance later on. But without giving that reply in substance, or in other words without further consideration of the points made by Premier Campbell, we have this take it or leave it unilateral action today of which the provinces have learned by reading of it in the newspapers and by telegrams if by this time they have received them.
In the agreed communique of November which the Prime Minister tabled in the house on November 27, 1957 we find this paragraph:
Possible changes in the tax sharing arrangements act were discussed but it was understood that no endeavour would be made to reach conclusions on this matter prior to further consideration of the subject by the dominion government in the light of the public statements made by the provincial representatives in open sessions and the discussions which took place in committee.
Yet despite that statement, changes are now being made in the Federal-Provincial Tax-Sharing Arrangements Act. I know the minister will tell me that it is only on an interim basis. It is not interim so far as four of the Atlantic provinces are concerned. Those payments are fixed for the next four fiscal years. What is fixed is not only the amount but the principle of these payments being

Dominion-Provincial Relations made on the basis of charity, on the basis of a handout by the government of the day, rather than on the basis of a principle that would say to the Atlantic provinces, "You are getting this money as a matter of justice", and would say to the other provinces that if their per capita income fell to a certain point, they would get it as well.
But, Mr. Chairman, not only has the government taken this unilateral attitude so far as the Atlantic provinces are concerned but so far as all the provinces are concerned I suggest that this so-called interim basis is a fiction. Oh yes, this is interim in the sense that it applies only to one year-the fiscal year 1958-59. That means that so far as the other three years are concerned they are yet to be negotiated, but I suggest that so far as the 1958-59 agreement is concerned, this matter will drag on. A conference will not be held early in 1958, it will not be held in the spring of 1958; there will be an election in March or April and a conference will be put off until after that time, perhaps after another session of parliament, and by the time the conference is called we will be so far along in the 195859 fiscal year that it will be useless to continue to talk about the arrangements for this year. The only talk will relate to the three remaining years of the five-year agreement.
That means that at the present time the provincial treasurers in planning their budgets cannot build them up on the notion that these are interim arrangements for 195859; they will have to assume that the amount of money they are going to get out of this interim arrangement is all they will get for the 1958-59 fiscal year. They will also, of course, have to examine closely into the estimates tabled on Saturday and the estimates tabled today to determine what that amount will be.
In that connection I would point out that the provincial treasurers were told in 1956 that the new act then being put through parliament would provide them with certain moneys in addition to what they were receiving under the old agreements. I know that some of the provinces did not receive the extra amount that it was estimated they would receive; when the year actually came along experience was such that they received less. So the provinces, as I say, are in an uncertain position as to what they are going to receive but, of one thing they can be sure, no matter how much the Minister of Finance underlines the word "interim" this is on a take it or leave it basis for the 1958-59 fiscal year.


Donald Methuen Fleming: Nonsense.


Stanley Howard Knowles: We
know that the Conservatives, when they were in opposition, thought that this was an awful formula which the Liberals had brought in. In fact, we had them voting against it on recorded divisions at least twice. They opposed it all down the line, but they are now accepting the general formula and all they have done is to change one of the percentage figures from 10 per cent to 13 per cent. But the one change they have made is that one which produces the least increase in revenues for the provinces. It has been estimated that a one percentage point increase in the corporate tax would give to the provinces twice as much as a one percentage point increase in the personal income tax. The minister knows that there was a general urging at the session in November that the 9-10-50 formula be made a 15-15-50 formula. The Prime Minister sloughed that off by saying let it not be a case of 54-40 or fight, but the fact is that they have steered clear of the place where a change in the formula would be of real assistance to the provinces.
I therefore suggest that what we have in this whole matter today is an act of irresponsibility on the part of a government which, two years ago, was shouting loudly that this had to be done on the basis of cooperation but still today we have it on the basis of a straight take it or leave it proposition. They had a good deal to say about it, of course, in the election campaign, and the Prime Minister in Toronto on April 25, 1957-


Mr. Tucker:: Is this the blue book?


Stanley Howard Knowles: This is the blue book, not the red one.


An hon. Member:: Volume 2, is it?


Stanley Howard Knowles: see the chairman is telling me I have only a minute or so left so I will quote the Prime Minister speaking in Toronto last April as follows:
The 10 per cent of personal income tax and 9 per cent of corporate income tax offered the provinces was a "division thrown to us in the rather smug anticipation that it will meet our requirements".
I submit that we now have the right to say that this revised formula which is before us today, 13 per cent of the personal income tax and still only 9 per cent of the corporate income tax, is a division thrown to the provinces in the Conservative government's rather smug anticipation that it will meet the provincial requirements and I suggest it will not do the trick at all. I could go on but I see my time is just about up-


John Whitney Pickersgill: Who was the hon. gentleman quoting?


Stanley Howard Knowles: The
Prime Minister of Canada.


John Whitney Pickersgill: Is he sure it was not the
premier of Ontario?


Stanley Howard Knowles: thank the hon. gentleman for asking me to check that point. I have done so and I thank my friend for the correction; this was the premier of Ontario.


William Moore Benidickson: He will still be disappointed.


Stanley Howard Knowles: Perhaps I had better be sure that I have something from the Prime Minister during the election campaign to make up for that error, so I will turn over to a Canadian Press report in the Winnipeg Free Press. The Prime Minister on April 25, 1957 said that:
-a Conservative government, if elected, would immediately call a federal-provincial conference to settle existing problems. The federal system was threatened by "the centralization complex of the St. Laurent government" and a healthy balance of revenues between federal and provincial governments must be assured.
These will be my last words, Mr. Chairman, since my time is up, but those people across the way had a lot to say about the percentage of the tax dollar which the federal government has been taking in years gone by. The Minister of Finance has not bothered to tell us how much that percentage is corrected by the slight change which has been made today.


Mr. Marler:: It is not changed at all.


Stanley Howard Knowles: The
change is so slight it does not change it at all. In other words, the conference was called, it was adjourned, and it has not been called back. All the government is trying to do is get into the position where it can check off an election promise and say, "We have kept it", when they have not done so at all. All they have done is to take this unilateral action which belies the position taken by the members of the government when they were on the opposition side of this house, and that is not good enough.


Mr. Low:: Mr. Chairman, much, at least, of the elation felt by members over the increased assistance to provinces which was announced by the Minister of Finance on Saturday, and spoken of again today, has been dulled by the way in which the offer has been made and the arrangements worked out.
My hon. friend the member for Winnipeg North Centre has made an excellent case
96698-244i
Dominion-Provincial Relations against the way in which it has been done and I do not intend to labour what he said by any means but merely say I agree with it. There is indeed much to be said for the fact that under the arrangements for extra grants to the Atlantic provinces some figure was pulled out of the air and was offered to them as a lump sum rather than being laid down as part of a formula. I am sure all hon. members will realize there is a great difference between payments made under a formula which come to be considered as payments as of right and a hand-out which cannot be justified as part of a formula.
I suggest to the Minister of Finance that it would have been far better if he had worked out a formula and then made his payments accordingly-as has already been said-instead of the unilateral basis upon which this has been done, which is going to throw a good many of the provinces into a state of confusion.
The third thing about which I am concerned is that the new series of grants will be considered by the government as something final and that we may not get a dominion-provincial conference now for a long time. Furthermore, that this will be used as an excuse for not calling the conference back for a long time, particularly if the federal government now takes the view that it will have to budget for a deficit when it does bring in a budget, if ever. The excuse will then be given that we are spending much more than we are taking in by way of revenues and therefore we cannot countenance any requests from the provinces for a fairer share of the revenues of this country. That is the position we will get into and so it looks to me as though walls are being built to bolster the excuse that may be made if there are pleas for a fairer share of the revenue dollar of this country.
One of the things we have talked about so long in this house has been that very matter, the necessity for a fairer share of the revenue dollar so that the provinces and the municipalities can discharge the responsibilities placed upon them. They have demonstrated fully that they cannot do it in present circumstances. Along comes the government and says to the provinces, unilaterally: we will give you a 3 per cent increase and whether you like it or not you will have to accept that.
The Minister of Finance has said that he will call a dominion-provincial conference as soon as he can.
On Saturday an exchange took place between the minister and the hon. member for Winnipeg North Centre to which I should like to refer briefly because it has a bearing on this question. As recorded in Hansard at

Dominion-Provincial Relations page 3796, the minister had just concluded a brief interchange with the hon. member for Winnipeg North Centre. The passage reads as follows:


Donald Methuen Fleming: Broader questions can best be considered when the dominion-provincial conference reconvenes.


Stanley Howard Knowles: When will that be?


Donald Methuen Fleming: If my hon. friend could answer some questions I should like to ask him and his associates, it would be a great deal easier to answer questions like that. Obviously a great deal depends upon the willingness of this house to address itself to the essential business of the house and to expedite what needs to be done. We had hoped, as I indicated, that the dominion-provincial conference could have been reconvened this month, but the progress in the house has been so slow and there has been so much discussion of two or three measures that it has been impossible to take up the reconvening of the conference.
And then, as recorded on the following page, the Minister of Finance, speaking of the change in the hours of sittings had this to say:
I think the answer I gave to the last question should be enough to satisfy even the hon. member for Winnipeg North Centre. In November the hours of sitting were not nearly so rigorous as they have been since.


Stanley Howard Knowles: Who
changed them?


Donald Methuen Fleming: They were brought into effect by decision of the whole house, with no objection so far as I am aware from any party in the house.
I am sorry to have to draw to the attention of the Minister of Finance the fact that when the proposal was made by the government to increase the hours of sitting I pointed out very strongly the unwisdom of this course of action. I said it would probably increase rather than decrease the length of the session, and I moved an amendment to the government's proposal. My group in the house voted solidly for the amendment and against the government's motion to lengthen the hours of sitting. Unfortunately, the hon. member for Winnipeg North Centre and his group voted against my amendment.


Stanley Howard Knowles: Was
the amendment not to the effect that the hon. gentleman was against these lengthened hours being continued into January? We did not think the government would go through with such a proposition.


Solon Earl Low: We were just being a little more realistic. The important thing is that the Minister of Finance was wrong on Saturday, because we did object to the lengthening of the hours and if the government had been realistic about the hours of sitting I am satisfied that not only should we have made better progress but we should have settled this matter, not on an unilateral basis but on a partnership basis of the kind we have been advocating every year for many years.


Stanley Howard Knowles: The
Tories used to advocate it, too.


Solon Earl Low: Yes, is it not an unfortunate situation? When I was sitting on that side of the house and they were over here on my right-not on my immediate right, but jumping one-they used to talk in the same way about the necessity of introducing the partnership principle under which things would be done by conference and agreement. I do not know what has happened to them. I cannot understand it. Is there a disease over here? There must be. They have certainly caught it. I think we will have that area fumigated before we take office, because the thing is catching.
Unfortunately this will all be written into books. I suppose there will be red books and blue books from now until doomsday. That is the unfortunate part of having books; every time we speak our words are indelibly written down for all time. But I am going to say this: we will never settle this matter of the fair division of the tax revenues of this country until the partnership principle is introduced, and it is high time that some government got this into its system.
My mind goes back to another conference, one of the very first that was ever held on this question of fiscal arrangements between the federal and provincial governments. This took place in 1940 when there was held in this very chamber what was known as the Rowell-Sirois conference. It happened in the middle of winter at a time of great difficulty in the provinces. There had been a good deal of pressure brought by the provinces in favour of such a conference and the federal government, in order to placate the provinces, I think, more than anything else, had set up the Rowell-Sirois commission to investigate the financial situation in the various provinces.
Afterwards, when the report had been made, we came down from all parts of Canada to listen to the wise men in the temple of high finance. And I recall very well how the minister of finance of that day and his deputy were called out during the conference by the governor of the Bank of Canada, and a further conference took place in the hallway. Those men came back into this chamber and began to tell us what they would do, and I recall with considerable satisfaction how two men, the premier of my own province, who has been maligned for it ever since, and the premier of Ontario-Mr. Aberhart and Mr. Hepburn-rose one after the other and scotched that conference.
As I look back on that incident, on the proposals they made, and on the practice which has developed since, I thank God for

it, and if anyone wishes to get a clear idea of the developments which have taken place in dominion-provincial fiscal relations since that time to the advantage of the people of Canada, let them just look up the records and see what has happened since 1940 when the Rowell-Sirois commission reported and the conference of which I have been speaking took place. Since those days things have been humanized; we have cut down the institutionalism which seemed to exist in the minds of all those who had anything to do with dominion-provincial relations.
When I say to the Minister of Finance that I do not like the way the present arrangement has been made, it is because I do not think it will create any confidence at all among the provincial governments that this government intends to do what is right, or confidence that they will be able to get back into a conference and settle this matter on a basis of negotiation. But I am not overlooking the fact that the provinces who will receive the increases outlined in the paper which the minister has handed out to some of us today will be happy to have them. These increases are going to help them; there is no doubt about that. Moreover, this help is coming at a time when the provinces are facing a growing unemployment problem and conditions which, in some areas amounts almost to stagnation. As I say, these provinces are going to be very happy about what the government is doing.
I intend to support the proposal which has been made, and to show my good intentions in this regard I am not going to speak any longer, except to say this to the minister: make it abundantly clear to the provinces that you do intend to call a dominion- provincial conference as quickly as you can. And if you find that the hours of sitting are too long, then for goodness sake tell us that these hours will be shortened, and the rest of us will have a bit of a holiday watching you, and perhaps giving you a little bit of good advice on how to do it.


John Whitney Pickersgill: Mr. Chairman, my friend the hon. member for Quebec East indicated in the speech he made, which raised the tone of debate in this house to the level to which we were accustomed before the present government took office and thereby heartened all of us on this side of the house, that he was not going to deal particularly with the grants to the Atlantic provinces but was going to consider primarily the general proposition of the increases to the provinces as a whole. It will not surprise you, Mr. Chairman, or any hon. member if I say that as a member from one of the constituencies in one of the Atlantic
Dominion-Provincial Relations provinces my main interest is in these grants to the Atlantic provinces. I may say at the outset that I do not think there is any doubt they will be warmly welcomed in all those provinces. There is absolutely no doubt that they are badly needed if the provincial services in those provinces are to be kept up to a level at all comparable with the services in any of the other provinces because even the Minister of National Revenue with all his pride in Nova Scotia which has without question the highest services of the four Atlantic provinces would admit they have not been able to keep pace in recent years even with the development of services in Saskatchewan where such services are the next lowest perhaps for reasons of distribution of income and that sort of thing.
I want to spend a few moments considering how this matter was dealt with in the conference in November. I will read briefly from what the Prime Minister said in his opening statement at that conference which I think puts the matter in the framework in which this proposal should be considered.


Mr. Nowlan:: From what page will you read?


John Whitney Pickersgill: I propose to read from page A-5 of the record of proceedings for Monday, November 25. The Prime Minister is reported as saying:
But I want to make this clear at the beginning. We are not placing before you any take it or leave it attitude; we are not taking any hard or fast position. We are not placing before you any rigid formulae.
It was surely not necessary to use the word "rigid" because there was no formula of any kind, rigid or flexible. I continue:
This conference was convened to seek your ideas and your proposals. Clearly we cannot expect to solve all our major problems in two days, but we can hope in that time to have a general survey of many of them.
I have a feeling, sir, that having had that general survey the Minister of Finance who made a speech that sounded like a cold shower of rain at the end of the opening session had had enough and right there on November 26 the Minister of Finance was determined that this conference would never meet again.


Donald Methuen Fleming: Such nonsense.


John Whitney Pickersgill: The Minister of Finance can deny that if he likes but that is my opinion.


Donald Methuen Fleming: If I attempt to deny all the nonsense you utter I would be kept constantly busy at it.


John Whitney Pickersgill: I would now like to read from page B-l where the Prime Minister is reported as saying:
When we have your views and suggestions we want to study them in detail and prepare some

Dominion-Provincial Relations specific proposals to place before you at a mutually convenient time in the new year. This would be in accordance with the experience in one or other past conferences, and I believe it is the most acceptable procedure and the only feasible one under all the circumstances.
In other words the Prime Minister, unlike the Minister of Finance, admitted that that was the way it was done when we were in office. I stress these words:
-and I believe it is the most acceptable procedure and the only feasible one under all the circumstances.
Then on Saturday we had this diktat-and I spell the word for the benefit of Hansard. I think the Minister of Finance will understand. How does this compare with the attitude which was taken in the speech from the throne? Here are the words which the Prime Minister put in Her Majesty's mouth:
In domestic affairs my ministers look forward to meeting next month with the leaders of the provincial governments in order to discuss fiscal relations and to seek better understanding and arrangements of many aspects of our public finances.
Apparently they were seeking to achieve better understanding and better relations. Here is what the premier of Manitoba said about these better relations and the better understanding when he got the news on Saturday, as reported in the Winnipeg Free Press:
Campbell said on Saturday that although new offers will mean considerable extra revenue for Manitoba, he was disappointed in that it fell so far short of what Manitoba had proposed. He criticized the grants for not meeting the province's proposal for adopting a 15-15-50 formula-
I would remind the Minister of Finance that that was Mr. Frost's formula.


Donald Methuen Fleming: It was not Mr. Pickersgill's.


John Whitney Pickersgill: I continue:
-and for not being equalized to the yield in the highest province.
On the other hand he was glad to see the principle of equalization maintained for at least one year.
But Manitoba had expected something more permanent than a year-to-year basis, both from the point of view of equalization and "to the permanency of provincial revenues." "This means that Manitoba, along with the other less wealthy provinces, must continue to be extremely vigilant in seeing that the principle of equalization is not abandoned," he said. He feit that Manitoba deserved some of the credit that equalization had been maintained for a year at least.
I certainly agree with him. I think that Mr. Campbell and Mr. Douglas by the fight they put up at that conference, greatly assisted I am told in the later discussions by the premier of Alberta, preserved the principle of equalization which this government repeatedly refused under questioning in this house before the conference to say that it intended to maintain. I think this was retained
only because of the pressure brought to bear by those three premiers of the prairie provinces.


Donald Methuen Fleming: Such utter nonsense.


John Whitney Pickersgill: Why did not the Minister of Finance get up in his place when he was asked about this? He had plenty of opportunity and so did the Prime Minister. They were asked over and over again if they were going to maintain the principle of equalization. I also asked the Minister of Public Works when he was leading the house and the Solicitor General was asked too. Of course the Solicitor General said the government was going to make the grants on an entirely different basis. The Minister of Finance can examine Hansard for October 18 and read what was said by the Solicitor General.
The fact of the matter is that this government did not know what it was going to do. It did not have the faintest idea. It would not even assure us that the principle of Mr. Harris and the principle of my right honourable friend-the principle of equalization- would be maintained. This principle has gone further in terms of giving a fair deal to people all across this country than has anything else that has been done in our domestic affairs since confederation. The government would not assure us that it would be continued until Mr. Campbell, Mr. Douglas and Mr. Manning and a number of the other premiers insisted upon it at that conference. The government finally realized there was no other way of doing it and knew that they did not dare abandon it.


Paul Joseph James Martin: Of course there was no agreement reached at the conference.


John Whitney Pickersgill: I do not think I said there was any agreement at the conference. Let me continue with what Mr. Campbell said as reported in the Winnipeg Free Press:
He was also "greatly concerned" over the government's method of dealing with this matter.
"The provinces were promised another conference," he said. "We counted on that to make additional representation and to have an opportunity of discussing the federal proposals, whatever they might be, rather than this method which seems to be not just a case of take it or leave it, as they called the former government's actions in this field, but the imposition upon us of a unilateral decree."
I agree with what the hon. member for Winnipeg North Centre has said on that matter. I agree also with what he said about a national principle. What is more, I think it can be shown from the record that these grants were not even originally intended to be available to all the Atlantic provinces. I think if hon. members will look at page C-3

of the record, where the Prime Minister is reported, they will see that he talked specifically about those Atlantic grants. This is what he said:
Now may I turn for a moment to the subject of fiscal relations in particular. As I view the situation, the first problem we have to consider is the need for some special recognition of the situation of the Atlantic provinces. There is, of course, a royal commission considering the particular problem of Newfoundland in accordance with the undertaking in the terms of union, so I shall not endeavour to express opinions upon Newfoundland's position pending receipt of the recommendations of the commission.
I believe that we all recognize, however, that the Atlantic provinces as a group are confronted with greater difficulties in public finance than the rest of the nation, if they are to maintain the sort of provincial and municipal services that Canadians generally expect. The taxable capacity of the Atlantic provinces, even in the best of times, is significantly lower than that of the other provinces.
Further down on page C-4 we find the following:
The dominion government and I believe the governments of the provinces recognize the special problem of the Atlantic provinces. My colleagues and I are prepared to recommend to parliament some form of special assistance to the governments of the Atlantic provinces. I ask you to consider what the total amount should be and how best it can be divided, for it must not be forgotten that this assistance will be provided by all the people of Canada.
That is what the Prime Minister had to say on this subject in his opening statement. I should like to read what the premier of Nova Scotia said on this subject at page K-4. It is quite brief. To make the context clear, Premier Stanfield had proposed what he called a maritime adjustment grant. He said:
I have referred to my proposal as a maritime adjustment grant but let me hasten to add that we in Nova Scotia are not unmindful of the financial difficulties of our sister province, Newfoundland. I felt, however, that in view of the fact that the report of the royal commission established to inquire into the position of Newfoundland relative to the maritime provinces is pending, it would be presumptuous for me to suggest a solution to Newfoundland's problems.
Mr. Flemming, the premier of New Brunswick, used almost precisely the same language at page N-5 of the record. Perhaps, so that there will be no dispute, I should read it too. He said:
You will note that in discussing the application of special adjustment grants I have not included the fiscal situation of Newfoundland. My reason for omitting to do so is obvious, since the financial position of that province is now the subject of inquiry by a royal commission.
On the following day, when the premier of Newfoundland spoke, he referred to this statement by the Prime Minister and to the
Dominion-Provincial Relations statements made by the two maritime premiers, which I have just quoted. Here is what Mr. Smallwood said at page FF-2 of the record for November 26:
Yesterday Premier Stanfield in his magnificent speech, and Premier Flemming in his magnificent speech, each had a paragraph of identical meaning referring to Newfoundland. You, Mr. Prime Minister, referred specifically to Newfoundland but in other terms, I am happy to say.
I got the impression from these two friends of mine that they are under the impression that so far as this conference is concerned Newfoundland might as well not be here, that our case is being taken care of by the royal commission. That is not so.
No matter what the royal commission recommends, no matter if they recommend the full amount we have asked for and if you and your colleagues recommend that amount to parliament and parliament passes it, all it will do will be to enable us, to enable the government of Newfoundland to continue the present levels and standards of our public services which are a quarter of a century behind the maritimes. That is all it can do at the most.
That is why I noted so carefully your words yesterday when you did not by any manner or means suggest that Newfoundland had no place in this conference today and yesterday. I thank you and Newfoundland thanks you for that.
Then, on page FF-4 we find the following:
We ask the Canadian government this simple question: Do you really think, does Canada think, does the parliament of Canada really think, does the Prime Minister think that Canada has done its full duty to the new province when it implements the recommendations of the royal commission which will enable it to maintain our present levels and standards?
Is that all? Are we not to be invited to future fiscal conferences? Does that settle Newfoundland's case, just the implementing of the report of the royal commission? Are we not part of this fiscal conference when the Prime Minister said yesterday that he will recommend to parliament some additional and special consideration for the Atlantic provinces? In adopting the new term "the Atlantic provinces" did he not include Newfoundland? I am sure he did. Was that not something separate and apart altogether from the royal commission? Surely the recommendations of the royal commission have nothing to do with this fiscal conference, nothing whatever.
1 was very pleased when the Minister of Finance said today that he agreed with that view expressed by Mr. Smallwood. I can assure the minister-


Donald Methuen Fleming: There never was any question about it.


John Whitney Pickersgill: There are not many occasions when I have agreed with the minister during this session but I can assure him that those words of his will be appreciated in Newfoundland and will be remembered.


Paul Joseph James Martin: It is a good thing that something will be.


John Whitney Pickersgill: I have one further quotation to read from the record and it is from

Dominion-Provincial Relations the Prime Minister's statement in reply to Mr. Smallwood and is found at page FF-7. It reads as follows:


John George Diefenbaker: I will say no more at this time, hut I would point out to the premier of Newfoundland that when I used the expression "the Atlantic provinces" I anticipated what his views would be in regard to the use of that expression.
I have read these extracts into the record for two reasons. The first is, it was quite apparent that there was a misunderstanding on the part of the premiers of Nova Scotia and New Brunswick as to the real purpose of the royal commission which is now considering term 29 of the terms of union, and that misunderstanding has been cleared up. I do feel, sir, that there was some doubt when this conference met that it was intended to include Newfoundland.


Mr. Brooks:: There was never any doubt.


John Whitney Pickersgill: It was the insistence of
the premier of Newfoundland that resolved the doubt when the conference was over.


Donald Methuen Fleming: Oh, no. There never was
any question about it at any time.


John Whitney Pickersgill: I ask the minister to read
very carefully the very ambiguous language used by the Prime Minister at the beginning, which I read from the record.


Jay Waldo Monteith: There is nothing ambiguous about it.


John Whitney Pickersgill: If the minister says that
there never was any doubt about it I accept his word and we need not debate it any further.


George Clyde Nowlan: Will the hon. gentleman read into the record the unambiguous remark of Mr. Smallwood in October or November of 1955 that he was not interested in the conference; that he was depending on the recommendations of the royal commission? Will he read that into the record?


John Whitney Pickersgill: I have read the record of the November conference extremely carefully. I listened to almost every word that was spoken there. I have read over every word since, and I could not find any such statement by Mr. Smallwood. If the hon. gentleman can, he will have an opportunity in this debate to put it on the record.


George Clyde Nowlan: I will put it on the record.


John Whitney Pickersgill: I would be very interested indeed to see it.


George Clyde Nowlan: I said November, but I meant October.


John Whitney Pickersgill: If the hon. gentleman is referring to something that happened at some

other time, then that is different. I was referring to the November conference.


George Clyde Nowlan: No, the one before that.


John Whitney Pickersgill: I know to what the hon. gentleman is referring if he is referring to October 1955. I heard Mr. Smallwood's speech there and I remember very well what it was. He indicated that so far as general fiscal arrangements were concerned he thought the premiers of the other provinces, which had been provinces for years and years, could put up a better case than he could, and that if he got what they got that would be all right so far as the general share was concerned. However, what Newfoundland was primarily interested in was this royal commission on the revision of terms. I recall that very well. I think it was a very reasonable position for Mr. Smallwood to take.
I might remind the Minister of National Revenue that at that conference Nova Scotia was represented by Mr. Hicks, who was then premier. This brings me to the point I had intended to make anyway, that it was Mr. Hicks who, not in October but in April 1955, originated this idea of a special fiscal grant to the Atlantic provinces and to whom credit should go for that idea. If hon. members would look at the proceedings of the preliminary meeting of the federal-provincial conference for 1955 in Ottawa on April 26, 1955, pages 26 and 27-I am not going to read this whole record because it is somewhat lengthy-they would see that Mr. Hicks set out a formula which I might say, as a Liberal I am proud to say, was capable of national application to every province of Canada.
I think every member in this chamber from the Atlantic provinces, no matter to which party he belongs, appreciates the fact that these special grants are being made. I think all of us appreciate the attitude that was taken by the other provincial premiers. I think all of us appreciate the attitude that so far has been taken in the debate in this house, and which I expect will continue to be taken in the debate. I do believe that there is a much healthier attitude amongst all Canadians toward the Atlantic region than there has ever been before since confederation. Hon. members will not agree entirely with this statement and may think I am a little biased in making it, but I do believe that when my right hon. friend was successful in bringing Newfoundland into Canada it did attract a new attention, a new interest and a new pride in Canadians all over the country in that part of Canada. In these last 10 years there has been a much greater interest in and understanding of the Atlantic

region than there has ever been before. Certainly in these last 10 years there has been a great deal more done for that region than ever was done before.


An hon. Member:: In the past seven months?


John Whitney Pickersgill: I shall have a word about the hon. member for Winnipeg South in a moment, but I would remind him that nothing whatever was done in the last seven months except for a continuation of the power policy introduced by the hon. member for Mont-magny-L'Islet before the election, and these grants which were introduced here on Saturday; that is all that has been done. Oh, there has been a lot of talk. The hon. member for Westmorland has asked over and over again when the Prime Minister was going to carry out all those promises he made at Moncton. The Prime Minister said those were frivolous questions. When one was put to the Minister of Finance the other day, he had never heard of it before. The minister will recall that, too.
What I am saying is that Mr. Hicks, the Liberal premier of Nova Scotia, first proposed these Atlantic grants in April 1955.


Donald Methuen Fleming: It fell on deaf ears then at Ottawa.


An hon. Member:: Why didn't you give it to him?


John Whitney Pickersgill: If the hon. gentleman will listen to me long enough, I will explain that. The point I am making now is the point which Mr. Campbell made in his letter, which the hon. member for Winnipeg North Centre made this afternoon as well as the hon. member for Peace River and which I believe will be made over and over again in this debate. Incidentally the hon. member for Winnipeg North Centre said something with which I did not agree when he said these grants were just a hand-out. I do not think that is right. I give the government credit for having a principle here. The reason I do so is that I have had an opportunity of glancing through the letter from the Premier of Nova Scotia which was tabled, and there does seem to be a formula in that letter which is the basis of these grants. I admit that I have not had time to study that formula and see all its implications. I think the committee would like the Minister of Finance to explain it to us at a later stage in the debate.


Donald Methuen Fleming: It is the same formula as Premier Flemming introduced at the previous conference, and which has been under discussion for two years. I revealed that when I spoke earlier.
Dominion-Provincial Relations


John Whitney Pickersgill: The hon. gentleman did mention a formula that the other Mr. Flemming had proposed, but unless I misunderstood him he did not say it was precisely the same formula that was now being used. I think we would like a little more light on that subject. There is one question particularly which the minister might answer when he replies, and it is this. I should like him to tell us whether or not that formula would apply to any other province of Canada at the present time, if it were capable of national application. Would it apply, for example, in Saskatchewan?


Donald Methuen Fleming: The answer is very simple. No other province qualifies under the 85 per cent formula that Premier Flemming put forward. It was the basis out of which the present Atlantic adjustment grants have emerged.


John Whitney Pickersgill: I presume, of course, the minister has now read Mr. Campbell's letter, with which he was not very familiar the other day. Mr. Campbell pointed out in that letter, and I well remember this because I lived in those days when we last had a Tory government-


Stanley Howard Knowles: We
all remember that.


John Whitney Pickersgill: We all remember them, as the hon. member for Winnipeg North Centre says. We in Manitoba, in order that the government of Mr. Bracken could pay relief to the thousands of people on relief, in that province, paid a federal income tax, a provincial income tax and a 2 per cent wage tax on every nickel we earned. This was before we had the principle of equalization or tax sharing which, as I said earlier, is the greatest move towards equality in this country since confederation, the greatest domestic achievement of the Liberal government in the 22 years it was in office. I, like my right hon. friend from Quebec, welcome the fact that this government, after condemning us, after talking about take it or leave it, have come in here and said they have not been able to think of anything better.


Donald Methuen Fleming: That is not what we said at all.


John Whitney Pickersgill: It is what you did. Actions speak a lot louder than words.


Donald Methuen Fleming: Will the hon. member permit a question? Does the hon. member want us to repudiate the agreements that have been entered into in the name of Canada?


John Whitney Pickersgill: I can answer the hon. gentleman very easily. He repudiates his international agreements, but 1 suppose he does

Dominion-Provincial Relations not repudiate his domestic agreements. The hon. member knows quite well to what I am referring.


Stanley Howard Knowles: They repudiated their election promises.


John Whitney Pickersgill: Oh well, they are just promises. I should like to answer directly the minister's question. I do not expect him to repudiate agreements; of course not. He has said they cannot repudiate much in the house; they are in a minority. He admitted it. What he would do if he had a majority-well, Mr. Campbell is frightened. He said so in his message yesterday. They are in a minority now and they cannot repudiate a statute.
They are asking us to add to that statute, and they are asking us to add to it precisely on Walter Harris' formula. We are flattered and Walter Harris has every right to be flattered also. Hon. gentlemen opposite went all up and down the back concessions of Ontario-and they know very well they did this-saying how unfair he had been to Ontario in doing this. Now they are doing precisely the same thing.


Donald Methuen Fleming: Oh, no. We changed your formula substantially.


John Whitney Pickersgill: They are doing precisely the same thing. They gave the impression that they were going to give the premier of Ontario the $100 million he asked for. What do they pay? They pay 20 cents on the dollar.
I do not have to explain to the electors of Ontario. I do not have to explain to the voters of Manitoba. But the hon. member for Winnipeg South who interrupted a while ago will have to explain to his electors. The electors of Manitoba, in my experience, understand fairly well what is involved in these federal-provincial matters. The hon. member will have to explain why these Atlantic grants, which are a good thing for the Atlantic provinces, should not be available on the same principle, if the need ever arises, in Manitoba. That is what Mr. Campbell was asking for and that is all that he was asking for.


The Acting Chairman (Mr. Rea):: Order.


John Whitney Pickersgill: Mr. Campbell was quite happy-


Charles Edward Rea: I must advise the hon. member that his time has expired.


John Whitney Pickersgill: Perhaps I might be allowed to finish my sentence.


Some hon. Members:: No.


Mr. Regier:: As has been indicated by the hon. member for Winnipeg North Centre,

we in this group intend to support the proposals of the government. However, we must express some opinions on the matter. Coming as I do from the province of British Columbia, I must express at once my keen disappointment at finding that the amount of increase that was announced for our province on Saturday last has now been reduced by some 50 per cent.


Donald Methuen Fleming: Will the hon. member permit a question?


Erhart Regier: Yes.


Donald Methuen Fleming: My hon. friend would not expect the province to receive payment twice, would he? The figure I gave on Saturday is the combined figure of British Columbia's share on the basis of standard taxes and equalization. However, it happens that they have already received part of that amount by reason of the operation of the stabilization principle.


Erhart Regier: I fully understand the minister's explanation. However, may I point out to the minister that on the front page of the Vancouver Sun of Saturday January 25, the headline reads "$5.5 million for B.C. in New Tax Grants" and underneath that "More Promised for Hospitals". This afternoon we find out that instead of getting $5,563,000 more under the new legislation that is proposed, we shall be getting only $2,842,000 more. That is a considerable difference, having regard to what we were on Saturday assuming that we would get. The amount of $2,842,000 is only one per cent of the budget of our government in British Columbia, and it is not very much to write home about. Unfortunately for me, however, I had already written home. I had already advised the weekly newspapers at home that the federal government had finally moved and that this year our provincial coffers could expect to be enriched by over $5 million. I shall now be obliged to report to those same newspapers that the impression left by the minister's announcement was an erroneous one.
I realize that hon. members from the Atlantic provinces are not going to look a gift horse in the mouth and that therefore they may not be too severely critical of the method by which this money is going to be given to them. I am referring now to the special grants that were announced for the Atlantic provinces totalling some $25 million. Maybe if I were a member from that area, I also would wait and see.
However, I think we in this group are able to say that while we are in hearty agreement with more money being supplied to the Atlantic provinces, we do not like the

manner in which it is being given. We do not think it ought to be given as a gift. We think it ought not to be a donation because it puts a political weapon in the hands of the government in office in Ottawa in that the people of the province can then be subjected to pressure or can be influenced as to how they will vote according to the degree to which the parties promise to raise, lower or abolish these grants.
We believe that a formula should have been arrived at whereby these people would have received this additional money as of right. We feel that in their contribution to the development of Canada over the years long before our western provinces were formed the people in the Atlantic provinces were exhausting their energies on behalf of the development of the then unsettled parts of Canada. We feel that they have a fair claim and that they should not be regarded as poor relations.
As I look over the resolution and as I think of its effect in terms of the money payments that were announced, I have the feeling that here is a part of the pay-off of the last election. I agree that a fair measure of justice is being done to individual taxpayers in the powerful province of Quebec. All of those individual taxpayers there will receive some of the benefits. To some extent at least the burden of double taxation for them will have been removed. However, when I look at the amount of money that the province of Ontario is to receive, in relation to that received by other provinces, I cannot help but feel that this is part of the compensation that is being offered for the help that the premier of that province gave to the Conservatives in the last federal election.
In the forthcoming appeal to the electorate I mean to commend this government for many things that it has been able to do for the Canadian people. At the same time I also mean to condemn them as roundly as I can for some of the major pledges which they gave but which as yet they have not yet seen fit to implement. The major pledge to which I am now specifically referring is the one to relieve the ever-growing burden on our municipalities. I greatly regret the fact that this new arrangement does nothing to relieve the burden on our municipal governments. I should like to read into the record only a few sentences of what was said on other occasions when the problem of taxation at various levels of government was before the house. The Minister without Portfolio, the hon. member for Greenwood, had this to say as recorded at page 4786 of Hansard of May 17, 1954:
It is no answer to shrug off the municipalities. With all due deference, I think the Minister of 96698-2451
Dominion-Provincial Relations Finance (Mr. Abbott) is inclined to do that. The municipalities are greatly handicapped in obtaining any new revenue. Real estate has to bear practically the whole load. Real estate raises 85 per cent of municipal taxes, and it is a burden which becomes heavier and heavier.
The Minister of Finance, who was then the member for Eglinton, had this to say on the same day as reported on page 4788 of Hansard:
The federal government, with its abundant sources, should be devising ways of helping the municipalities to meet these urgent demands for necessary but costly services which they are financially unable to provide.
And on page 4789, he said:
There must be, in my submission, an opening of the eyes of the federal government to the way in which they are increasing the burdens and the difficulties of the municipalities.
We have been attempting over a number of months now to see whether the eyes of the new Minister of Finance were open to the needs of the municipalities. In the terms of the resolution he has introduced to this house and in the explanations he has given he is as blind to the needs of the municipalities as any former minister of finance has been.


Donald Methuen Fleming: What rot!


Erhart Regier: The minister feels that no commitment was made in the heat of the election campaign, but I would refer him to an item appearing in Moody Advance in the month of May, 1957, in which my Conservative opponent in the last election is reported as follows:
She also contended that property taxes will continue to rise unless the federal government increases grants to municipalities, and advocated the abolition of sales and excise taxes on municipal and school board purchases.
On practically every platform on which the kind lady Alderman Jane Kilmer appeared she appealed to the people to vote Conservative because that would mean more money for the municipalities. She was a fine candidate and indeed I regret that the ruthlessness of party politics in the Conservative party made it necessary for the convention not to do her the honour of renominating her. They felt a man might be more able to gain the riding.
I have here the political education program put out by the Canadian Labour Congress. It talks of the union vote and lists all the promises which the Conservatives made in the last election. Under provincial-federal tax payment arrangements, Item (1) is:
Provide more equitable share of tax yields to the provinces and municipalities.
The resolution introduced by the minister makes no allowance for the needs of municipalities. I also notice in the blue pamphlet upon which the picture of the Prime Minister

Dominion-Provincial Relations appears, and which was so widely used in the last election, the statement is made that out of every dollar of taxes paid by the Canadian people the federal government is collecting 76 per cent, the provincial governments 10 per cent and the municipal governments 14 per cent. One would imagine that once elected to office these people would do something serious about rearranging tax receipts.
We went to some lengths at the opening of this session to impress upon this government the need for municipal representation at the last dominion-provincial conference. I am fully aware of the constitutional complications there. However, a feeling exists- and I think there is some justification for it -that this government has made up its mind that it is going to make a bit more money available to the provincial governments here and there across Canada and it is then going to say, "Well, the municipalities after all are the responsibility of the provincial governments; we have helped the provincial governments and it is now up to them to help the municipal governments."
I am afraid that is not going to be satisfactory. Some of the provincial governments are simply not able, even with more money from the federal treasury, to enable municipalities to meet their obligations. The taxes on our homes are rising year by year and they will continue to rise unless some action is taken. I do not blame local municipal councils for adding to the tax burdens on our homes; it is the only way they can raise the money to pay the ever-increasing expenses which they have to pay. They have no more power to cease and desist from adding to the tax burden on homes than we have to stop the tides of the sea. I have in my hand a letter dated January 14, 1958, written by the new reeve of the municipality of Burnaby, in which he says, among other things:
This would be as good a time as any to inform you that a good deal of concern is being shown on the part of the ratepayers of Burnaby over the matter of local taxation. You will appreciate that those people of limited and fixed income find upward revision of their municipal taxes extremely difficult to bear. Unfortunately, statutes governing the scope of the municipalities prevent them from making suitable tax adjustments in favour of these people.
I have advocated in this house as far back as April 26, 1954 the establishment of a permanent dominion-provincial secretariat. If we had such a secretariat we would find our conferences between the provincial premiers and the government in Ottawa to be much more fruitful. I am pleased to see that the premier of Saskatchewan at the April meeting of 1955 endorsed, at least the principle of the establishment of a secretariat at

which there would be a continuing review of the problems brought about by our federal system of government.
We have had for years as the first item in our British Columbia C.C.F. program the establishment of a dominion-provincial secretariat. The minister emphasized a little while ago "We respect the constitution", but may I say there is not a single one of the four national political parties which could not say the same thing and could not say it with equal emphasis. Any political movement which wants to be national in scope must have a healthy respect for the constitution. I would, however, like at this time to propose a number of methods by which the financial burden of our municipalities might have been eased by this government, if the minister, in his announcement, had seen fit to do so.
First of all I would advocate, along with many other people in Canada who have made representations in this respect, that the federal government immediately cease and desist from collecting sales tax on anything purchased for local, municipal, school or hospital authorities. That, in itself, would go a considerable distance. I recognize at once that the former government amended this legislation, in some degree removing the burden from municipal offices in this respect. However, there still remains a considerable sales tax collected from local government bodies.
I should like also to recommend that this new government now accept the theory that crown property should be taxed for municipal purposes in the same way as is any other property. I know the previous government made some improvements in this respect, but in the field of assessment crown properties still do not pay their fair share of municipal taxation.
Another means by which this government could do considerably more to ease the burden on other levels of government, both provincial and municipal, would be to adopt a more generous policy with regard to its contribution toward highways and all manner of roads. In 1954 I proposed-and I will offer this suggestion again to the new government, hoping it will fall on ears that are not so deaf-that the federal government should assume all responsibility for a major national highway network, and that the provincial government should be left with the responsibility for only secondary highways, with municipal governments responsible only for access roads. That would go much further than the present proposal put forward by the minister in easing the tax burden on lower levels of government.
I welcome the announcement of the Minister of National Health and Welfare the

other day with regard to increased grants for hospital construction. I think the government might have gone further still. After all, even under the new arrangement they are paying only about $2,000 of about $20,000, which is the cost of a bed in the Vancouver general hospital. In other words, this is only about 10 per cent of the cost. The federal government could very well assume a larger share and thus relieve both provincial and municipal governments of a considerable burden.
If the federal government will introduce a national health plan, all inclusive, and including medical care, they would relieve provincial and municipal governments of the heavy cost of paying for health services for welfare cases, and also relieve municipalities of the per diem levy which they have to pay, at least in the province from which I come.
If the federal government wished to show practical sympathy for the needs of the provinces it might consider more than removing the floor with regard to when they begin paying part of the cost of the care of the employable unemployed. The federal government should now implement the proposal contained in the green book of 1945 in which the late Mr. Mackenzie King offered on behalf of the federal government to assume full responsibility for looking after the employable unemployed throughout the nation.
Possibly one of the most useful manners in which this government could extend help to the lower levels of government would be to reactivate the Municipal Improvements Assistance Act. On a number of occasions in the last several months we have asked the minister whether it is the intention of the government to reactivate this measure. The hon. member for Dauphin spoke at length on this, as recorded on pages 95 to 97 of Hansard, and a number of other hon. members have referred to it on various occasions. However, the answer I myself received from the minister was that this, obviously, would be a matter of government policy. And he gave a similar answer to each of us who asked about it.
I realize that this is a matter of government policy, and it is government policy that we are speaking of now. This one move, if it had been made, would have been more welcome among the people back home than the announcement the minister has made. The record of this act has been an excellent one. It operated from 1938 to 1940. I believe 110 loans were made. Money was made available to municipalities at a low rate of interest, and every single cent was repaid; the federal treasury did not lose a penny. The act was a means of providing employment to thousands of Canadians, and it could do the same
Dominion-Provincial Relations today. It enabled many municipalities to build waterworks, sewers and the like, and our municipalities have asked me to ask the government as often as I can to make this act operative again.
The federal government could help the lower levels of government-I should not call them "lower" because in many ways they are the higher levels of government-by amending the National Housing Act. Municipal councils are anxious to make serviced lots available to would-be homeowners, but they have not the necessary money with which to undertake the work.
The federal government could have done much to relieve anxiety throughout Canada by agreeing to sit down with the provinces and explore ways and means of aiding them in the provision of educational facilities. If the federal government would agree to assist the provinces and, through them, the school boards in the building of schools, that alone would mean in my own province far more than does the present offer of the federal government to rearrange the formula under the tax sharing agreement.
I suspect that the Conservative party believes in the reallocation of taxation powers. I think the present economic situation in Canada should lead to a reconsideration of that old approach. We have always opposed the reallocation of the powers of taxation. We think that the federal government must continue to have these powers in order to ensure the economic welfare of the nation, and that it needs the power of taxation in order to carry out this task effectively. However, we believe that the federal government should then, without violating the principles of our constitution, do everything in its power to relieve those who are doing their utmost to make democracy work back home.
I should like at this time to pay tribute to the many thousands of Canadians who are volunteering their services, many of them without any remuneration whatsoever, and who are the bulwark of Canadian democracy. I refer to members of hospital boards, school boards and municipal councils at home. I know that we in our ivory tower here-or is it a granite tower?-come to think of ourselves before much time is passed as the symbols of democracy. We are nothing of the kind; if anything we are sometimes in the public mind symbols of arrogance and symbols of a government far removed from the people it professes to serve. Democracy is built from the bottom up, and if we continue to ignore the needs of the people who are working at home to make our system work and to provide our people with their social needs, we are going to suffer the consequences and

Dominion-Provincial Relations create a feeling of cynicism among our people of which there is already far too much.
Mr. Chairman, I have spoken today because taxes on our homes are increasing and they will continue to go up until we decide to declare a halt to further increases of taxes on the homes of our people.


George Carlyle Marler: Mr. Chairman, in the few minutes that remain this afternoon I should like to go back and consider the position of the Conservative party with respect to fiscal arrangements between the federal government and the provinces.
The Minister of Finance when he spoke earlier this afternoon said that the members of his party had opposed the tax agreements made in 1956 because they were inadequate. I think perhaps that may be a faithful description of the attitude which the hon. member himself took during the debate on the legislation which we were then considering but it certainly does not accurately describes the reasons given by his colleagues in the Conservative party at that time for the stand which they then took both at the resolution stage and on the second reading of the very resolution which it is proposed to amend by the bill to follow this present resolution.
I should like to put on Hansard a few excerpts from the remarks made by hon. members of the Conservative party who did not seem then to have at all the same ideas they must now have in order to bring forward for consideration of this committee the resolution which is now under discussion. The then leader of the opposition Mr. Drew, in 1956, as recorded at page 5993 of Hansard, said-


Donald Methuen Fleming: Date?


George Carlyle Marler: I do not have the date.


Stanley Howard Knowles: July 16, 1956.


George Carlyle Marler: I do not think the date is material but I am sure the Minister of Finance will find that the page number is correct. The then leader of the opposition said:
The subject now before us is whether we really believe in the federal system sufficiently to do our utmost at this time to find real agreement with the provincial governments and with the municipalities which are very real entities indeed as to the allocation of taxes which will make it possible for them to carry out the heavy responsibilities which they cannot ignore and cannot shirk.
In other words, Mr. Chairman, this was the lead for the other members of the party to insist upon a re-allocation of the powers of taxation. The present Minister of National Revenue followed the same line of argument
[Mr. Regier.l

and I should like to quote three phrases from his remarks, the first as recorded at page 6015 of Hansard:
We in this party believe and have said time and again that there should be a re-allocation of responsibilities, that there should be a re-allocation of taxation powers-
That is only part of the phrase but what I have omitted does not change its sense. On the following page of Hansard, page 6016, he is reported as saying:
There certainly is something wrong with the principle suggested by the government in this resolution.
This is the very principle which the Minister of National Revenue is supporting today in the resolution which is now before the committee because if he did not support the resolution which we are now considering it would not be before the committee. On page 6017 he is reported as having said:
But a formula should be worked out that would recognize the capacity to pay of the individual as well as the number of heads in a province.
At least so far as that part of his remarks is concerned it seems now to be translated into something more than mere words which I am afraid is the assessment that one should place upon his other remarks.
The present Solicitor General also took part in the discussion and I am quoting from the translation of his remarks to be found at page 6031 of Hansard:
What is in fact required is a federal-provincial conference in which the federal government and the provinces will consider the steps to be taken for a fair distribution of taxation fields, so that the provinces may play their part in their own sphere.
The present Minister of Trade and Commerce also entered the debate and as recorded at page 6064 said:
But the rest of the matter has not been attacked, and that is the division of responsibility between the dominion government and the provincial jurisdictions.
Apparently he felt it was not enough to say it once for he said it again as recorded at page 6065:
-surely the present approach should be toward an investigation of the division of responsibility as between the dominion and provincial authorities.
Twice was not enough; we had it a third time as recorded at page 6066 when he said:
I suggest, Mr. Chairman, that a dominion-provincial conference be called devoted to the task of solving the division of responsibilities as between the dominion and provincial governments.
The present Minister of Justice entered the debate, too, and as recorded at page 6335 said:
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 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.
The interesting fact is that so many members of the present cabinet were strong advocates of this idea of a re-allocation of taxation powers between the dominion government and the provincial governments and yet at the very first opportunity they had of following up these ideas which they had preached so assiduously in the past when they were sitting in the opposition benches they backed away from the step entirely. I think it has been the general experience of people who have been interested in this field of dominion-provincial relations in the matter of taxes that there has been a large body of criticism emanating from members of the Conservative party both provincial and federal advocating not an extension of the present scheme of tax sharing but a formal redistribution of taxation powers. However, their arguments are of the hit and run type. They enunciate the principle and then back away from spelling out how they would propose to carry it out.
I notice that in the present instance the government convened a conference with the provinces in November and yet nowhere on the record of the public deliberations does one find anything which suggests that this proposal was put forward by the present government as a matter for discussion with the provinces. Surely no one would suggest that there was anything to prevent the government from carrying out the idea which it advocated so extensively in the past.
I would now like to quote some comments made by the Solicitor General as recently as the present session. They are indeed interesting when one realizes what the Minister of Finance is now asking this committee to do, to extend further the principle of the present tax-sharing agreements. Note the words of the Solicitor General in answer to a question put to him as found on page 129 of Hansard of October 18, 1957:
(Translation):
Mr. Speaker, I would like to tell my honourable friend that I am still opposed to subsidies such as were proposed by the former government. As to his question, it seems to be a hypothetical one, but I am ...
At this point there was an interruption; then he went on:
. .. and a political one, yes. I want to tell him that the proposals of the federal government are not yet known, but I am convinced that they will be made on a very different basis than those of the former government.
Dominion-Provincial Relations
(Text):
I cannot resist the temptation to translate this for the benefit of members sitting on the government benches. The Solicitor General said in effect, "I want to tell you that the proposals of the federal government are not yet known. I am convinced they were made on a very different basis from those of the former government." Therefore, we see that although the very proposals which are being implemented in this resolution are very different in the mind of the Solicitor General from those which served as a basis of the present fiscal agreements, here we find the Solicitor General, as a member of the government, supporting the very proposals which he criticized in no uncertain terms on the day that I referred to a moment ago.
Then, Mr. Chairman, I should like to say a word about the conference which was held in November. I could not help feeling some amusement when I read the words of the present Prime Minister as reported at page 6369 of Hansard for 1956, and I do not doubt but hon. gentlemen opposite will take certain amusement also from hearing them. He said:
I wonder often why this government has not taken the provinces into its confidence.
Is that not a strange statement when we consider the action taken by the Prime Minister himself last Friday night in acquainting the provinces for the first time of a purely unilateral decision of this government as to what it was going to do as to the payments of 1958-59? The Prime Minister went on:
Why these short-term meetings:	why these
gatherings of a day or two?


Mr.   Marlin@Essex East: Who is this talking?


George Carlyle Marler: This is the Prime Minister speaking, who complained of the shortness of duration of those conferences in past times. He said:
Why these gatherings of a day or two? Why do we not have a meeting of the federal authorities, the provincial authorities and the municipalities?
Yes, Mr. Chairman, the Prime Minister had in mind that the municipalities should be present but now, unfortunately, he has found that there were constitutional difficulties in the way in the year 1957 that did not seem to be present at all in 1956. I continue:
Call it a constitutional convention, if you like, without the power of amendment of the constitution in respect of those fundamental rights which are inherent in the constitution, but why not have a gathering designed to bring about the reconsideration of a problem which for the last 13 years or so has become increasingly complex?
I quote these words, Mr. Chairman, and everybody will realize how apt they are and the extent to which they apply to the conference which was held in November, and the action which the Prime Minister took last

Dominion-Provincial Relations Friday night in informing the provincial governments of the decision taken by the present government. Listen to what the Solicitor General had to say, as reported at page 6028 of Hansard, and this is a translation, Mr. Chairman:
In fact, the resolution moved by the Honourable Minister of Finance (Mr. Harris) and upon which we are called upon to pass judgment, is not the result of a conference between the federal government and the provinces; not at all.
And yet this very resolution, Mr. Chairman, which we are being asked to pass is not the result of a conference between the federal government and the provinces. Let us make no mistake about that. This is a purely unilateral action on the part of gentlemen on the treasury benches. I continue with the quotation from the Solicitor General:
We are not being asked to ratify an agreement between the dominion government and the provinces, an agreement reached following long negotiations where every party concerned had previously examined the proposals made. On the contrary, once again the federal government acted in a centralizing and unilateral way.
How aptly these words of the Solicitor General apply to the actions of the government of which he is one of the members. He continued:
It called the provinces together, read its proposal and asked them what they thought about it, made a few minor changes here and there and said: "Do as you wish; this is as far as we can go," knowing full well that the provinces are not in a position to do without them, even though they found the amounts altogether inadequate.
In this particular case the government did not even call the provinces together to acquaint them of this decision with regard to these additional payments; they advised them merely by telephone. Mr. Chairman, I hope the Solicitor General will reread the words which he used when he was sitting on this side of the house. But one cannot avoid the reflection that there are merely 20 feet of green carpet which seems to separate those benches from which I speak and the treasury benches. By merely crossing that carpet the hon. gentlemen who are Minister of National Revenue, Minister of Trade and Commerce and the Solicitor General have all undergone extraordinary transformations in their thinking. They no longer think the way they did when they were on this side of the house. They have a new formula which is different from what they had in 1956. By merely crossing this 20 feet of green carpet they have suddenly attained a virtue that they did not have in 1956. The Minister of National Revenue laughs. He occasionally used to do that when he was on this side of the house, therefore in that respect he has not changed by moving across these 20 feet of green carpet.
I see it is six o'clock, Mr. Chairman.
At six o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at eight o'clock.
George Carlyle Marler: Mr. Chairman, the first point with which I should like to deal tonight is the question of the figures showing the increases which will be payable to the provinces under the arrangement which is contemplated by this resolution. Since the minister tabled the statement showing the amount to be received by the provinces under the new arrangement I have had an opportunity of comparing those figures with the figures which he gave to the house on Saturday. I am quite surprised to find that in no case do the figures agree. Not only is there a substantial difference in nearly every case, but there are two notable exceptions in the case of Prince Edward Island which according to the table is to receive some $370,000 less-


Donald Methuen Fleming: Mr. Chairman, I do not know if my hon. friend was in the house this afternoon when that point was mentioned. I thought I made it clear. The figures that were put on the record Saturday morning indicated the aggregates that go to the various provinces out of the $62 million on the basis of the share of the standard taxes and the application of the equalization principle. However, those figures did not take into account the stabilization principle and the difference in the figures is accounted for entirely by the stabilization principle. In a word, Prince Edward Island and British Columbia are already receiving a portion of this amount through the application of the stabilization principle. Therefore, in so far as British Columbia is concerned, a portion of its share and in so far as Prince Edward Island is concerned, the share it would otherwise have received, have gone to make up the difference between their share of the total of the standard taxes, plus equalization, and the floor which was set previously through the application of stabilization.


Stanley Howard Knowles: What about the discrepancies that occur with respect to the other eight provinces?


Donald Methuen Fleming: The other eight provinces
receive benefit from the fact that British Columbia and Prince Edward Island do not now take their full share by reason of the prior application of the stabilization principle.


John Whitney Pickersgill: All the other figures are wrong, too.


Mr. Lesage:: Why is there a difference for Quebec?

Dominion-Provincial Relations


Donald Methuen Fleming: The figures given on Saturday morning have to be read in the light of the stabilization principle, and the figures that were put on the record this afternoon represent the final figures and take account of all the elements in the tax sharing arrangement.


George Carlyle Marler: The explanation which the
Minister of Finance has just given may be quite apt for the two provinces of Prince Edward Island and British Columbia but unfortunately it does not change the hard, cold reality of the figures which he gave on Saturday. I do not want to waste too much time on this point, but he did say on Saturday that the additional payment which British Columbia would receive would be $5,563,000, whereas according to the table put on the record this afternoon the increase for British Columbia will be $2,842,000.
However, leaving aside the provinces of Prince Edward Island and British Columbia, as to which the stabilization factor may explain the mistake in the minister's figures, the fact does remain that all the other figures are out, too. There is no question of stabilization there. In other words, Mr. Chairman, I do not know whether this is homemade arithmetic on the part of the Minister of Finance, but perhaps it is like some of my own figures; they do not always work out when I put them under professional scrutiny. There is a difference of a million more for Quebec and approximately a million more for Ontario.


Donald Methuen Fleming: The other provinces in this division derive benefit from the fact that the shares of British Columbia and Prince Edward Island are not increased by the full amount given on Saturday because they have already received part of that in consequence of their being the beneficiaries under the stabilization principle. The amount of increase for the other provinces is simply the amount by which British Columbia and Prince Edward Island receive less because they had been receiving it in the form of stabilization payments.


George Carlyle Marler: I hope we do not allow any more weekends to go by because they make it quite expensive for these other provinces. Frankly, I think the minister ought to realize, and this is my last word on the subject of the figures, that the figures that were given on Saturday were regarded as being authentic and accurate. I am sure they have gone all across the country, unless I am very much mistaken as to the interest in them on the part of members of the press gallery. I am sure it must be very disappointing for
those who are getting less to find, unfortunately, that reality is not quite as good as Saturday's promise.


Donald Methuen Fleming: Two provinces receive less and eight provinces receive more.


George Carlyle Marler: Perhaps this will be my last word on the subject. It does not often happen that the reality of Conservative promises is greater than the promises themselves.
The next point with which I want to deal is the fact that throughout the election campaign the Prime Minister was making promises of one kind or another. I am only going to touch on two or three. One was to increase old age security and other social allowances; the second was the reduction in taxes, and the third quite positively was an increase in the benefits of tax sharing with the various provincial governments. I am not going into the numerous statements that the Prime Minister made on the subject of the increased revenues to the provinces. All I want to do is stress the fact that as the campaign went on many Canadians began to wonder how all this was going to be accomplished within the limits of the available resources.
When the present Prime Minister reached Saskatoon on May 27 he held a press conference. He was asked specifically how all of these promises fitted in with the available revenues. I am quoting from a Canadian Press report in the Montreal Gazette, May 28, 1957, and I will just quote two paragraphs from it:
He-
That is of course the Prime Minister.
-was asked how his party's policy involving increased expenditures squares with the promise to reduce unnecessary taxation.
Mr. Diefenbaker replied that both could be done without a budget deficit. His estimate had been made on the basis of steadily increasing budget surplus.
He went on to say:
The surplus last year was $500 million and if economic forecast of trade minister Howe was correct the surplus in the current fiscal year would be 50 per cent greater.
The significant phrase, Mr. Chairman, is that all this was to be done on the basis of a balanced budget. We have not had any kind of national accounting that would enable us to determine in complete detail to what extent there has been departure from the so-called balanced budget. We have had some figures that the Minister of Finance himself has given us after some rather limited observations of his own on the subject. From time to time, as various additional measures involving increased expenditures have come before us, we have been told what the overall
3876	HOUSE OF
Dominion-Provincial Relations cost would be. I want, in the few minutes that remain, just to put on Hansard the overall picture that results from what the present government has done since it has been in office, and the effects on next year's revenue of what was done at the earlier session in
1957.	Because of the limitation of time, I shall have to try to put it in very compressed form.
So far as expenditures are concerned, the first item will be an increase in the year 1958-59, the next fiscal year, over the expenditure of 1957-58 for social security payments and veterans' benefits. In respect of the increases made by the Liberal government, the additional cost next year will be $40 million and in respect of those made by the present government, $65.9 million, making a total of $115.9 million.
Then, as the Minister of National Health and Welfare has told us, the increased cost for 1958-59 over the current year of unemployment assistance to the provinces will be $11.9 million. Perhaps I should say that is the inference to be drawn from these figures. Then we shall have next year to pay 12 months of pay and allowances at the present increased level instead of 11 months. That will amount to another $8.3 million.
The Minister of National Health and Welfare has told us that the national hospital plan will come into effect on July 1 of this year for three or four or perhaps even more provinces. I take it that we may infer that, as far as Ontario is concerned, it will come into effect on January 1, 1959. So far as I can make out from the available information, that will add $60 million to the expenditures for next year.
Then the other day-I think it was Saturday-the same minister announced increases in the grants to be made under the national health plan. I find it difficult to estimate the cost but I think it is probably a conservative estimate to say that the additional cost next year would probably be at least $3.5 million. Then this resolution that we are discussing at the moment will add $87.2 million to the expenditures. That makes a total addition to the expenditures of $285.8 million.
At the earlier session of 1957 reductions in taxes were made, the full effect of which will only be felt next year; but it was estimated that the additional cost next year was $73 million. So far as the reductions recommended by the present Minister of Finance are concerned, that is another $152 million. In addition to that, he has referred to the legislation to replace the Dominion Succession Duty Act which will further reduce revenues by $8 million. Hence we have reductions in revenue in prospect for 1958-59


of $233 million. If we add that amount to the additional expenditures to which I referred a moment ago we find that the change in the balance of the budget for next year is $518.8 million.
From that figure we must obviously deduct the amount paid in the current year to the Canada Council, namely $100 million, thus bringing the prospective difference between this year's budget and last year's budget to an amount of $418.8 million. The minister told us that he expected to have a surplus for the current year of $80 million. Let us take that amount into account also and deduct it. Thus we see that with the arrangement which we are discussing at the moment we have a deficit in prospect for next year of $338.8 million. That does not take account of the fact that through the natural increase in number, both of persons drawing old age security and those drawing family allowances, there will be a further addition to the social security bill next year of some $33.8 million.
Assuming that the payments that are provided for in this resolution are made, we therefore see in prospect for next year a deficit of $375 million in round figures whereas the Prime Minister told us and told the electors of Canada all across the country in the spring of 1957 that all of this was to be done on a balanced budget. We have the opportunity today of seeing just how unbalanced the budget is. Of course, to encourage the Minister of Finance, perhaps, we have the statement which his colleague the Minister of Justice made in 1956 in which, as reported at page 6336 of Hansard, he said:
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.
No doubt the Minister of Finance will consult with his colleague the Minister of Justice to discover the secret of where this $500 million can be lopped off the national budget without affecting essential expenditures. But I have an idea that even the idea of the Minister of Justice with respect to those reductions has undergone a transformation since he moved from this side of the house to the other side.
The Minister of Finance himself this afternoon said that no increase in taxes was involved in this operation. If he really believes that, I think he is deluding himself. However, I am sure he is not deluding the taxpayers of Canada because the fact remains that it is impossible to pay out $87.2 million to the provinces, no matter how worthy are the purposes, without affecting the taxpayers' tax bill. I must admit to a feeling of some

disquiet when I see the additions to expenditures and the subtractions from revenue that I just mentioned a moment ago. It seems to me that it puts the government in a rather unhappy position. I take it that next year it will want to increase the volume of capital expenditures. It certainly ought to be thinking in those terms.
The minister himself has led the taxpayers to believe-and he did so after presenting his budget, if it can be so called, earlier in December-that his party was not satisfied that it had given all the tax reductions which it had hoped to give. I hope the taxpayers will not be expecting too much of my hon. friends opposite. With the unbalance that he and his government have brought about already I think he is going to be hard put to do much more in the way of tax reduction than he has already done. I note that the newspapers are already referring to the reduction as insignificant. I am sure that he does not feel that they are insignificant but it will give him an idea of how the taxpayers are already feeling about something he did last December. I feel perfectly sure that, with the beginning of the year-of course nothing would be further from his mind than to make reductions in taxes on the eve of an election, because he criticized that procedure so frequently in the past and I know he would not want to do something now that he criticized in the past-he will have his work cut out for him. I may tell him that I am going to watch with real interest the measures he takes to bring this budget back out of the unbalance which this government has put it into.


Henri Courtemanche: Order. I am sorry to interrupt the hon. member but I must advise him that his time has expired.


Mr. Nicholson:: Mr. Chairman, more than four hours have now passed since my colleague the hon. member for Winnipeg North Centre inquired of the Minister of Finance whether he had received any replies from the premiers. He replied in the negative. My colleague referred to the telegrams which were alleged to have been sent on Friday. I had hoped that the Minister of Finance would have had time in the meantime to check as to whether the telegrams were sent and, if so, whether there had been any other premiers in the position where they have read in the newspapers about the proposal but have had no official word.


Donald Methuen Fleming: Mr. Chairman, my hon. friend has used the expression "telegrams were alleged to have been sent". My hon. friend knows quite well that I informed the house on Saturday morning that the telegrams had
Dominion-Provincial Relations been sent the previous day. If Premier Douglas of Saskatchewan has not received his telegram, that is regrettable. We are trying to see what has happened. We have learned that Premier Douglas was not at his office in Regina at the week-end.


Stanley Howard Knowles: He was there today.


Donald Methuen Fleming: He was not there over the week-end.


George Carlyle Marler: Perhaps he does not work on Sunday.


Donald Methuen Fleming: Whether there has been some mishap or whether they attempted to deliver it to where he was, I do not know. We are trying to find out what happened to the telegram that was sent to Premier Douglas.
However, I do not think it is quite worthy of my hon. friend and it is certainly not in keeping with the rules of this house when it has been said that a telegram was sent, for him to rise and say it was alleged to have been sent.


Alexander Malcolm Nicholson: Surely in four hours the
Minister of Finance with all the facilities of the government should be able to find out why a telegram had not been delivered at noon of today.


Donald Methuen Fleming: Since my hon. friend the
member for Winnipeg North Centre made his statement this afternoon I sent word to the Prime Minister's staff to have a check made and I was informed that they were in contact with the telegraph company to try to find out what was the reason for nondelivery. I have not received a report since.


Stanley Howard Knowles: Meantime has another one been sent?


Some hon. Members:: Oh, oh.


Alexander Malcolm Nicholson: The Minister of Finance,
on July 23, 1956 said, as recorded at page 6296 of Hansard:
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 in attitude, and after that change in attitude they will call a new conference, then fruitful results I am certain could be achieved.
I would think the Minister of Finance should have made some effort to find out from the provincial premiers what their reaction was. We all sympathize with Premier Bennett of British Columbia who read in the papers on Saturday that British Columbia would receive $5.5 million and then he read in today's paper that owing to a mistake of the Minister of Finance or the Prime Minister this amount would be slashed to $2.8
3878	HOUSE OF
Dominion-Provincial Relations million, a loss of $2J million. This is a very serious matter for any province in these very difficult days of financing.
It is now 21 years since this controversial question of dominion-provincial relations received the attention of the lay makers of Canada. I have read the report on dominion-provincial relations, books 1, 2 and 3. The member for Quebec East was associated with this very important commission but world war II interrupted the discussions which would have during the forties ironed out some of these problems. In that report I find some references at which we should look very carefully.
It seems very clear that we appear to be in another depression, which so far as agriculture is concerned is as serious a depression as that of the thirties. On page 150 I read that the disparities in incidence of depression on different regions had the effect of a loss of income which was most severe in western Canada and that the declines ranged from 72 per cent in Saskatchewan to 36 per cent in Nova Scotia. The average per capita income in the various provinces across Canada from 1928 to 1929 and then to 1933 is shown as a reduction in my province of 72 per cent whereas in the province of Nova Scotia we find the percentage decrease is down to 36 per cent. There is another reference in the report to the fact that the people of Saskatchewan had suffered a reduction in income during the previous decade which had probably been unparalleled in peacetime in any other civilized country; net agricultural income averaging some $200 million a year in the late twenties are reported to have fallen to an actual negative amount in 1931 and 1932 and was only about one-tenth of that average in 1937.
There were some very useful recommendations, one of which was that the dominion should assume full responsibility for unemployed employables and in certain eventualities offer to relieve primary industries with certain jurisdictional changes which might be necessary, which should be made to enable the dominion government to fulfil this responsibility. There is also a very interesting section on municipal finances and the report remarks that a great many changes have taken place since confederation. At that time the responsibilities of the municipal authorities could be attended to without large disbursements, but 21 years ago, as now, the municipal authorities in Canada were confronted with responsibilities which they could not meet from their available tax revenues.
The other day in discussing another matter I referred to a municipality which is partly in Mackenzie constituency and partly in the 

Prime Minister's constituency. I know of another municipality in Mackenzie where the reeve is the Conservative candidate who is running in the next election and the candidate who ran in the last election. He is a very able citizen who is doing his very best to manage the affairs of the municipality. Now the arrears in the last five years have gone from $21,000 to $27,000, $39,000, $54,000 and, in 1956, $54,400.
I am sure it is not because the reeve of that municipality is not efficient and it is not because he is a Conservative while the government of Saskatchewan is C.C.F. The reason for these arrears mounting like a snowball is because the taxpayers in the municipality are unable to meet their costs of production and all their expenses. I have in my hand a list of the arrears for one of the school units which is also partly in the Prime Minister's constituency and partly in my own constituency of Mackenzie. I refer to the school unit of Nipawin. The amounts due to this school unit from the municipalities in that area have gone up from $272,000 to $396,000, $497,000 and $545,000 in the last few years.
As I have indicated, we are in the midst of a depression which in many respects is more serious than the depression of the thirties. There was never a time in the history of Canada when a bushel of wheat would buy so little. Farm marketings of wheat have been poor; in fact the problems are not caused by the municipal authorities but by the fact that the farmers are unable to sell their wheat because we are losing our markets. As a result, many of these municipalities have had to go into debt to the banks to such an extent that they do not know how they can continue.
The Wheat Review for December, 1957, published by the authority of the Minister of Trade and Commerce, says that deliveries of wheat by farmers in the three prairie provinces up to December 18 of the current crop year have amounted to 103.7 million bushels, representing a decline of 15 per cent from the total of 122.5 million marketed during the corresponding period of 1956 and sharply below the ten year average marketings for the period of 191.3 million bushels. So when, as a result of federal fiscal and export trade policies, farm marketings are reduced to the extent I have indicated our municipal authorities are in real difficulties.
I am sure that most of the members have read with a good deal of interest the letter written to the Prime Minister on December 18 by the premier of Manitoba in connection with this important subject. Premier Campbell has had an acknowledgment from the

Dominion-Provincial Relations
Prime Minister that the letter was received and I know that the Prime Minister was in Winnipeg over the weekend and probably had a chance to have a verbal discussion but, so far as this House of Commons is concerned, we have no information as to what the Prime Minister has put in a letter to Mr. Campbell. Premier Campbell remarks that it was at the federal insistance that the conference found itself having to deal with two or three specific matters, including the so-called Atlantic provinces adjustment, before the meeting broke up. He says that it would appear to the Manitoba representatives that the Prime Minister and his ministers were unwilling or unable to deal with the broader question of the general financial arrangements between the federal and provincial governments.
As my colleague from Winnipeg North Centre pointed out this afternoon, it is nonsense to suggest that a conference could not have been held while parliament was in session. In view of the statements made by members of the present cabinet two years ago when this matter was before parliament I should have thought that an effort would have been made to work out some formula which would have satisfied the premiers of the provinces.
Mr. Campbell said in his letter:
We also emphasized the point that adverse weather conditions or other unfavourable circumstances might place one or all of the prairie provinces in the same position and consequently that the policy should not be termed an Atlantic adjustment . . .
I have already indicated the extent of the crisis which confronts our farmers in the three prairie provinces. I gave the total wheat marketing figures for the three prairie provinces. Premier Campbell is not saying that there is a crisis in the prairie provinces. I think that if something is not done soon to find some way to compensate our farmers who are, apparently, only going to be able to sell six bushels this year for a price which is less than half the cost of production, all the prairie provinces are going to be in exactly the same position as the maritime provinces.
Mr. Campbell mentioned in his letter that the inclusion of mental and tubercular costs in the federal share of any hospitalization scheme should be considered, and also a new downward extension of any dominion-provincial unemployment assistance agreements. I was interested to find that the Prime Minister, speaking before the election, made it quite clear that if there was a change of government there would also be a change of policy regarding the inclusion of mental and tubercular patients. Hon. members will
recall that when the Conservatives were on this side of the house they joined with us in criticizing the former administration, pointing out that more than half the people who are sick in bed at the present time are not covered by the so-called national hospital program. We thought it most unfortunate that people who are in tuberculosis hospitals and mental hospitals should be placed in a category different from those who are in general hospitals, and the Conservatives, when they were on this side of the house criticized this policy again and again. Speaking in Winnipeg on May 14 as reported in the Winnipeg Tribune, the Prime Minister said that the Conservatives would repair:
... a "serious omission" in the public health plan which does not include tubercular and mental institutions.
And speaking at Saskatoon on May 27 a few days later, as reported in the Toronto Globe and Mail, he said:
The Conservative party still believes that hospital insurance will cover patients in mental and tuberculosis institutions.
Consequently it is not surprising that Premier Campbell finds it very hard to explain why at this stage the government of the day is suggesting that if the cost of caring for tubercular and mental patients is included they should chisel on other payments to the provinces.
Mr. Campbell points out that Manitoba has bitter memories, not yet 20 years old, of her own near insolvency and starved services. He says:
We have seen other western and some eastern provinces in a somewhat similar plight. For these reasons we urge that any special formulas that might be adopted to provide extra assistance to areas where additional aid is needed (applicable now perhaps only to conditions in the Atlantic provinces) should be applicable wherever in Canada a similar need exists-now or in the future. Let us not have narrow, patchwork, regional settlements. Let us have national plans embracing all parts of Canada.
It is very difficult for people working at municipal and provincial levels to meet the legitimate needs of the people of Canada in the fields of health, education and road construction from the very limited tax resources available to them. The federal government on the other hand is able to collect her taxes easily and freely. The cabinet is presently considering a proposition to spend $1 billion on the development and putting into service of the CF-105. If a decision is reached to spend $1 billion on this type of project there will hardly be insuperable obstacles to surmount with regard to the financial arrangements. We have established before in Canada that a country which kept one million of our able-bodied citizens unemployed week after
3880	HOUSE OF COMMONS
Dominion-Provincial Relations
week and month after month was able, when war broke out, to put one million men in uniform and another million into war industries. We were able to build ships and fill those ships with lumber, food, ammunitions and send them across the Atlantic, and as quickly as we could send them Hitler's submarines were sending them to the bottom of the sea. But in the meantime we were establishing the most prosperous period in Canada's history.
Twenty years after a commission was established to see how best the provinces and municipalities might be assisted through these tax agreements we come to a parliament in January 1958 and are saying that this must be rushed through in the course of a few days before there is an election, or else those who hold up this legislation will be held responsible. You can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all the time. There is no good reason why we should be confronted today with the need to make a decision on this matter, having already given unanimous consent to deal with the question without the usual 24-hour delay, in order that changes might be made in figures which were placed before us.
I should like to remind the committee of some of the firm commitments which were made with regard to this question by some of the members of the cabinet, particularly the Prime Minister prior to the June election.
The Toronto Star, reporting a speech made by the Prime Minister at Toronto on April 25, has this to say:
Mr. Diefenbaker acknowledged federal-provincial relations were in a "mess" because provinces and municipalities were being handcuffed by inadequate sources of revenue. This was preventing several provinces from discharging their constitutional responsibilities and promoting development of their natural resources. He did not name the provinces he had in mind but it is certain he does not consider Ontario one of them.
A Conservative government, he pledged, would call for an immediate dominion-provincial conference to settle such problems "not in a spirit of arrogant domination displayed by the Liberal government . . . but in a spirit of unity".
The Prime Minister also appeared in an election telecast with the Secretary of State and the hon. member for York-Humber, and again this matter was discussed. He is reported as saying:
And that's one of the serious situations today- the federal government gobbling up the tax dollar. As a matter of fact, in 1949, the municipalities received 29 per cent. Today, they're receiving 11 per cent.
That was a good point to make. These figures vary from time to time but as some

one mentioned this afternoon the municipalities get 11 cents of the tax dollar, the provinces get 14 cents and the federal government gets 75 cents. Sometimes the federal government receives a little more and sometimes a little less but the division about which the Prime Minister complained in that telecast on May 22, 1957 remains unchanged. He has had plenty of opportunity to call together a conference of federal, provincial, and municipal authorities to try and work out some formula under which the municipalities would receive something more than 11 cents and the provinces something more than 14 cents when, as I said, the federal government is able to collect money so easily. Speaking in Minto, New Brunswick, on June 1, 1957, the Prime Minister is reported as having said:
Mr. Diefenbaker promised too that if he is elected Prime Minister of Canada next Monday, his government will call a conference of federal, provincial and municipal officials to see what can be done to ease "the frightful load" being carried by noncentral governments.
Speaking in Cambridge, Nova Scotia on June 3, 1957 the Prime Minister is reported as having said:
I will never participate in anything nor in any way that will bring about disequality in all parts of this country. I believe in a policy in keeping with the responsibilities of national service that will give to every part of this country in a great development plan a reasonable equality of opportunity, and when that conference meets no province will dictate because agreement can only be arrived at by the consensus of all. No province will dominate. There will be no coercion. One principle of that conference will be-domination never, cooperation ever in all parts of Canada to the benefit of all parts of Canada.
I found it interesting to examine the record of Hansard of two years ago when this matter was before the house. The then leader of the opposition, Mr. Drew, as recorded at page 5999 of Hansard of July 16, 1956, said:
A government that fails to seek a solution of this problem and puts this matter into rigid statutory form before there has been approval is a government that is unfit to govern.
I submit that the Minister of Finance who was a member of this house when Mr. Drew spoke those words should have another thought about forcing a proposition of this sort on the ten provinces without giving them a chance to come to Ottawa to discuss with the federal government whether or not the proposition is reasonable, or whether or not something better could be found. The Minister of Finance himself is reported on July 23, 1956, at page 6287 of Hansard as having said:
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.

In spite of this the Minister of Finance is not able to tell parliament today that the premiers have had an opportunity of approving of the present proposal. I continue reading the words used by the Minister of Finance on July 23, 1956 as found at page 6289:
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.
The hon. member for Bonavista-Twillingate, the then minister of citizenship and immigration, interjected that this was not true and the present Minister of Finance went on to say:
There is not one province that has said this provision is adequate.
He then went on to quote at some length from the opinions expressed by the premiers of the provinces at that time but he will be obliged to admit that the premiers were at least there to hear the government of the day make its statements and I suggest that that was much more courteous treatment than was accorded to the premiers by the present government which sent out telegrams followed by a newspaper dispatch a few days later advising the premiers of Prince Edward Island and British Columbia that a most serious mistake in arithmetic had been made by the Minister of Finance or his officials and that consequently all the figures were going to be revised.
As reported at page 6290 of Hansard of July 23, 1956, the Minister of Finance proceeded to quote the words of Premier Frost of Ontario with regard to the proposal:
-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.
He then quoted the words of Premier Bennett of British Columbia, as follows:
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.
Every province has a variety of problems. All these problems should be discussed at a round table conference that might extend over several days. If the commitments which were made prior to the election last June were made in good faith and if those who made them now feel they should keep their
Dominion-Provincial Relations word I believe it is not too late even now to send telegrams to the premiers of the provinces and suggest that such a conference be held as a result of the confusion created in the past few days due to rushing this resolution along and making a mistake in the amounts. Parliament could continue in session and we would excuse the Minister of Finance and as many members of the cabinet as necessary. We got along quite well the other day when discussing other business with very few cabinet ministers present in the house and in respect of a matter as important as finding a solution for the dominion, provincial and municipal financial problems the government should extend an invitation immediately to all the provinces to come to Ottawa with the least possible delay for a discussion of the question to assure the bringing in of better resolutions in the future.


Paul Joseph James Martin: Mr. Chairman, there are a few points I should like to make about this important matter which as the hon. member for Quebec East said we welcome on this side of the house. It should be noted, of course, that we do not have the constitutional responsibility of recommending expenditures to parliament. What the hon. member for Quebec East has said will have to be borne in mind in connection with the statement made by the hon. member for St. Antoine-Westmount, who referred to the regrettable lack of a complete financial statement by the Minister of Finance that would enable us to make a proper assessment as to whether, in the light of the government's over-all obligations, this really represents the kind of interim measure the government actually should make. It may be that in the light of the government's total responsibilities, as it sees them, this is by no means as generous an interim measure as the government suggests and of course the opposite could be the case. But the point is that in the absence of a full financial statement by the government it is not possible for any hon. member in this house or for anyone in the country to make a proper assessment as to whether or not a particular proposed expenditure is one that properly fits into the overall financial obligations that confront the nation at this time.
The Prime Minister is reported as having said in Winnipeg, among other things, when speaking on this interim measure which had been announced by the Minister of Finance:
I am very proud of this plan because it is just one more step along the way toward fulfilling the promises we made.
The fact is, Mr. Chairman, that this is not in any way a fulfilment of the promises which the Prime Minister made during the
3882	HOUSE OF
Dominion-Provincial Relations course of the election regarding the matter of federal fiscal arrangements with the provinces.
The member who has just spoken quoted from several of the speeches made by the Prime Minister, and I should like to quote from one or two others to indicate what the Prime Minister told the people of Canada he was going to do, not in the month of January, not seven months after the government had taken office, but right away, about this matter of dominion-provincial fiscal relations. He predicated his promises on the accepted recognition that good government in Canada depends on satisfactory relations between the two senior levels of government. Indeed, he said that we cannot have good government in Canada unless there is the fullest understanding arising out of the constitutional responsibilities of the two senior levels of government, unless there is a clear opportunity given to each to discharge its functions under sections 91 and 92 of the British North America Act.
Then, he said in his opening campaign speech in Massey Hall:
We intend to form a government to immediately convene a dominion-provincial conference to bring about a settlement of these problems.
Two days later he is reported by the Winnipeg Free Press as saying that a Conservative government, if elected, would immediately call a federal-provincial conference, not to explore but to use his exact words, "To settle existing fiscal problems between the dominion and the provincial governments." Then he said in Montreal on April 25:
A Conservative organized dominion-provincial conference would settle this problem ''in a spirit of unity, amity and with mutual tolerance and respect".
What are the facts? The facts are that this conference was first called in November, and it is not going to be reconvened at any date that has been indicated to the provinces or to the house. We do not know whether there is going to be a conference after a federal election, assuming a federal election comes soon, or assuming it comes in June or in September. We have no idea whether that conference is going to be before or after a federal election or whether it is going to be called at all. We have not been told by the Minister of Finance whether or not there will be a conference to bring finality to this matter. I am sure that there are many provincial premiers, certainly the premier of Ontario, who, notwithstanding the satisfaction expressed by him in tonight's paper, will not be satisfied with some $22 million which, under this arrangement and according to this version, is to be accorded to the province of Ontario.


Then, the Prime Minister went on in his statement in Winnipeg and said:
The temporary measure resulted-
And I ask hon. members to note these words:
The temporary measure resulted from the fact his minority government lacked freedom of action and could not carry out the long-term planning necessary to the country.
There is not an hon. member in the house who can subscribe to the validity of the statement made by the Prime Minister in Winnipeg on Saturday. There has been no interference by any opposition group in this house with regard to the discharge by the government of the obligation which it solemnly committed itself when it sought a mandate from the people during the course of the last federal election. There is nothing to prevent this government calling the provinces together tomorrow or next week, as they were called together on two other occasions within the last 12 years while parliament was in session. The government of another day carried on one conference that lasted almost five days while parliament was sitting, and to suggest to the house, as the Minister of Finance did today, that the reason that this conference is not being reconvened is that parliament is now meeting is to suggest something which no hon. member will agree to because my hon. friend knows that this is not the case.


Donald Methuen Fleming: It certainly is the case.


Mr.   Marlin@Essex East: My hon. friend and his colleagues have some other reason for not reconvening this conference and it might be worth while examining this reason as we go along. It is true that for this year, at any rate, as the hon. member for Quebec East said, there is the recognition of the principle of equalization; but what happens after this year? Assume there is to be an early election, and while my hon. friends opposite will likely not then have the opportunity of dealing with this matter, it will be interesting to speculate whether or not they would adhere to the principle of equalization if later they did. Why do I say that?
I say that because at the conference itself Premier Campbell, representing one of the provinces that stood to benefit from the principle of equalization, urged the Prime Minister and the Minister of Finance in their original statements to recognize this principle. There was no comment whatsoever, certainly in the public session, by either the Prime Minister or the Minister of Finance, as to whether or not they recognized this principle of equalization. It is all very well to do so for a year, but that was not the basis on which Mr. Harris presented this

particular formula as a way of bringing about a greater measure of equity as between one province and another.
The Minister of Finance said that among the achievements of the conference in November was the decision reversing the policy that six provinces must have schemes in force before payments by the federal treasury could be provided for under the hospital insurance act. What my hon. friend should have said was that because of the failure of this government to make any progress whatsoever in the matter of hospital insurance this particular amendment became necessary in order not to embarrass the province of Ontario which hopes to begin its scheme on January 1, 1959.


Donald Methuen Fleming: A very entertaining speech.


Mr.   Marlin@Essex East: Then, the Minister of Finance said that one of the reasons for this plan is that the government was in this way going to do something about unemployment; it is argued this is a way by which something will be done about unemployment. I recall suggesting to the Prime Minister a week ago tomorrow night the words that he had levelled against the former administration when he called upon that government to convene a dominion-provincial conference to deal with unemployment. I used the Prime Minister's own words and I watched him as I used them. I have the suspicion that one of the reasons for this interim measure was that the Prime Minister and the Minister of Finance, hoped, when confronted with their failure to deal with unemployment, to be able to say, "Oh, but we have done something about this problem; why, we have made an interim arrangement with the provinces; we are going to give Ontario alone $22 million." It is true that on Saturday night Ontario was going to receive only $21 million, and it is true that today Ontario is going to be given another $1 million, while the reported amount for Prince Edward Island on Monday is less than what was reported on Saturday.
Does my hon. friend seriously suggest to the house or to the country that in a province like Ontario, where there are over 150,000 men out of work, the $22 million given to this province is going to take care of the problem of unemployment? I do not deny, as the hon. member for Quebec East said, that the provinces have great additional responsibilities in the matter of road building, in the matter of education and so on. Undoubtedly they are hard pressed for the necessary funds to carry on, but my hon. friend clearly demonstrates that he does not understand the severity of the current unemployment problem when he offers this particular interim measure as a corrective
Dominion-Provincial Relations of unemployment. This money given to Ontario will undoubtedly help that province in the discharge of its many functions under the constitution, but it certainly is going to be only a bagatelle in assisting the municipalities or enabling the province to discharge its responsibilities, along with the federal government, towards the unemployed of this country.
When the Premier of Ontario and the Prime Minister of this country, then leader of the opposition, sat side by side at the opening meeting of the campaign in Massey Hall last April, Premier Frost turned to the Prime Minister and said: There sitting in that chair is the man who is going to give Ontario the moneys that it requires and which it has not received from the present administration to enable it to carry out its responsibilities; there is the man. The amount that Mr. Frost wanted was $100 million. Now, Mr. Frost expresses full satisfaction with this interim measure.


Some hon. Members:: Hear, hear.


Paul Joseph James Martin: There is a vast difference between $22 million and $100 million; as a matter of fact, I believe it was $118 million. It will be recalled that when it was suggested the Prime Minister was making a deal with Ontario at the expense of the poorer provinces, the Prime Minister rushed out to western Canada to indicate that his statements and that of Mr. Frost had been misunderstood. If Premier Frost had insisted on $118 million, and if he is only now getting $22 million, one has a right to conclude that prior to the announcement of this matter in parliament, the premier of Ontario was told, here is what we propose as an interim arrangement and we hope you will be satisfied for the time being with this particular measure. Was that suggestion made to the premier of Ontario before it was made to his house? Were other provincial premiers advised of the decision which the government announced on Saturday last?


Donald Methuen Fleming: Telegrams were sent to them on Friday.


Paul Joseph James Martin: Were certain premiers taken into the confidence of the government, and certain other premiers not? My hon. friend says nothing. I suggest to him that the particular reason Premier Frost is satisfied is that he feels that this will not embarrass the government for the present time; that it will enable them to answer those who complained about not reconvening the dominion-provincial conference. There can be no doubt that when the premiers met here in the month of November they fully

Dominion-Provincial Relations expected they were going to be called back at the beginning of the new year.
We have a statement in Premier Campbell's letter, as recorded at page 3229 of Hansard for January 11, 1958:
If we are able to have this information in advance, Manitoba will be better prepared to discuss the final special Atlantic arrangements which we understand you are planning to put forward for general consideration and acceptance at the next meeting of the adjourned dominion-provincial conference in January of 1958.
The Prime Minister answered that on December 21, and there was no denial by the Prime Minister that there was going to be another conference held at that time. What has happened? Why should the Minister of Finance not be excepted to explain to the provinces and to this house why the dominion-provincial conference is not going to be reconvened at an early date? Why should the Prime Minister and the government not be held accountable for the promises that they made during the election campaign that they would call a conference at once to settle these problems? Why should the Minister of Finance and the government not be asked to explain why they have now gone back on the assurance that the Minister of National Health and Welfare gave in this house and that the Minister of Finance, I think, gave in this house with regard to the inclusion of tuberculosis and mental illness under the hospital insurance act.
Premier Campbell says, as recorded at page 3228 of Hansard for January 11, 1958:
When you promised or implied new financial relief to municipalities and provinces, or when you and your colleagues said that mental and tuberculosis costs should be shared by the federal government in a national health plan, no attempt seems to have been made by you or them to indicate that relief and assistance given on one program would reduce the relief and assistance so badly needed on the other. At no time did you or your colleagues say, for example, that if the provinces wanted mental and tuberculosis costs included in the national health plan, the federal share of such costs would have to come out of the provincial share of any future improvement in tax-sharing arrangements.
Let there be no mistake about this. My hon. friend argued for the inclusion of tuberculosis and mental illness. The Minister of Finance who now sits in discomfort and smiles-


Donald Methuen Fleming: I am quite comfortable; I never was more comfortable in my life.


Paul Joseph James Martin: -was the one who
proposed amending the hospital insurance act-


Donald Methuen Fleming: And you resisted it; you voted it down.


Paul Joseph James Martin: As a result of this interim arrangement, in spite of the promise made by the Prime Minister at the opening of

the conference, the possibility of T.B. and mental illness ever being included is gone.


Donald Methuen Fleming: Have you changed your mind?


Paul Joseph James Martin: Is that last statement right? This action of this government precludes the possibility of these two items ever being included. During the course of the election the hospital insurance act was said to be wholly inadequate. One of the reasons was because these two items were not included. Now, an amount-


Donald Methuen Fleming: You changed your mind.


Paul Joseph James Martin: -of $82 million is being given to the provinces by way of interim arrangements. If any province wants now to include T.B. and mental illness and to have the dominion government share in the cost of that under the hospital insurance plan, it must forgo its share of this $82 million or, in the future, it must forgo its share of any further grants to be made. I say that one of the results of this particular unilateral act is definitely to preclude the possibility of this government carrying out its promise to include mental illness and tuberculosis under the hospital insurance plan. There can be no question of that.
The Prime Minister talked about dominion-provincial co-operation and the fact that the provinces must be called together so that in a spirit of collaboration common problems could be discussed. The provinces were called here for two days. They made their statements in chief and the government did not indicate its policy whatsoever. Then, about six weeks later, suddenly on a Saturday morning, the Minister of Finance, for some reason not yet explained, says we are not going to call the provinces together. We are going to act on our own. We are going to tell them, here you can have this if you want it; if you do not want it, you do not have to take it. Talk about harmony between dominion and provincial governments. My hon. friends, in the short time they have been in office, have done more to discourage dominion-provincial relations-


Some hon. Members:: Oh, oh.


An hon. Member:: There has never been such harmony.


Donald Methuen Fleming: This is a great matinee performance.


Paul Joseph James Martin: If ever there was an example of contempt for the provinces of our country, we have had it from this government.


George Clyde Nowlan: You are a great Shakespearean actor.


Paul Joseph James Martin: The other day
we were told by the Prime Minister, when he was dealing with the remarks of the hon. member for Laurier about centralization that his government was taking steps to bring about harmony with the provinces.


George Clyde Nowlan: Don't smile.


Paul Joseph James Martin: Mr. Chairman,
we have not yet had the motion for closure but we certainly have it now tonight in fact. I say this to the Prime Minister. We have a serious problem in Canada.


Donald Methuen Fleming: Of your creation.


Paul Joseph James Martin: My hon. friend says it is of our creation.


Donald Methuen Fleming: Yes.


Paul Joseph James Martin: The fact is that there are over 800,000 individuals now receiving unemployment insurance. That is a serious problem. One of the ways in which to deal with this problem was suggested by the Prime Minister himself. He said to the former prime minister, "Call the provinces in and discuss this problem. Each of us has responsibilities in connection with this matter of unemployment". Why does the government not do that now? Why has the government brought forward this interim measure? It is brought forward-


Donald Methuen Fleming: Because you go on talking interminably.


Paul Joseph James Martin: -because it is not prepared to assume its responsibility as the government of this country and do something about unemployment. If the provinces were here and if there were an opportunity of discussing with them ways and means of providing for the kind of measures that would provide work, no one could complain about lack of constructive effort. But in the face of the challenge made by the Prime Minister when this matter was discussed two and a half years ago, when he urged the calling of a dominion-provincial conference, his failure to do so now and his bringing in, instead, this interim measure, only indicates that this government at the earliest possible moment wants to see this house prorogue so that it can have a respite to relieve itself of the responsibility which it promised it would assume, namely the responsibility of providing work for the people of this country who instead of laughing as is the Minister of Finance, are without work.


Mr. Robichaud:: The resolution before us at this moment has to do in part with the introduction of a measure to provide for financial assistance to the Atlantic provinces by authorizing certain payments out of the consolidated revenue fund for each of the
Dominion-Provincial Relations four fiscal years commencing on the 1st day of April, 1958. At the outset, Mr. Chairman,
I want to assure the members of this house that I will support this bill and that my remarks at this time will be brief.
The preliminary report of the royal commission on Canada's economic prospects, made public over a year ago, clearly established the fact that the average income in the Atlantic provinces was below the averages for the rest of Canada. People with low incomes are generally found in most rural areas throughout Canada, but such conditions are more widespread in the Atlantic region than in any other section of the country.
We recognize that every dollar of federal revenue comes from Canadian taxpayers and therefore every dollar paid in stabilization or equalization payments is contributed by the same taxpayers. It is therefore in everyone's interest to reduce the differential, if it is at all possible to do so, which now exists between residents of the Atlantic provinces and those in other areas. Since the presentation of the Gordon report the government of Canada-whether we consider the previous administration or the present one-has taken some positive and comprehensive approach to the problems of the Atlantic region. We have, however, serious problems of transportation and communication which have not as yet entirely been taken care of. No one can deny the desirability of granting to the Atlantic provinces some measure of capital assistance which could be used toward the construction of public projects, including transportation facilities. It is generally agreed that the over-all economic position of the Atlantic provinces justifies the special grants which are now being asked for in order to aid the governments of those provinces.
From the implementation of this measure the province of New Brunswick will receive $7| million per year in special grants plus an additional $2 million from the amendment of the Federal-Provincial Tax-Sharing Agreements Act. It may be desirable to relieve the New Brunswick provincial treasury by a special grant of $7J million per year; but unfortunately we also have in New Brunswick a situation which is much more serious than the financial standing of our provincial government.
Here I want to refer briefly to the critical situation which exists in practically all of our municipalities. I am fully aware of the constitutional problems which one may encounter in this particular field. This does not mean, however, that the time has not come for action to be taken without delay to relieve our overtaxed and overburdened municipalities.

Dominion-Provincial Relations
I would dare to say that no other municipality in the whole of Canada has to face today conditions such as those we have in my own municipality of Gloucester. In no other section of the country have the ratepayers to meet municipal and educational taxes which would be nearly as high, percentagewise, as are those which we are being asked to pay in Gloucester county. I believe to a certain extent in the principle of provincial autonomy. I believe in the rights of the provinces and of the individuals with respect to providing and controlling our educational system; but I also believe that there is somewhere a limit to what an individual can pay, notwithstanding his income or sources of revenue.
When, for example, an individual has to pay a municipal and educational tax of $380 per year on a plain, modest $10,000 or $12,000 home, with no sewage or water service or when an ordinary country merchant operating a general store has to pay close to $4,000 a year in municipal taxes, there is something abnormal somewhere, and this situation cannot carry on forever. I know of a country doctor who built a new home in 1955; in fact, he was my first neighbour. Last year his municipal tax bill was $860, and this again with no service such as water, sewage or fire protection. No wonder that a few weeks ago he decided to close his house and has now moved to Ottawa where he is practising.
What about our fishermen? For how long can they keep on, when an individual fisherman, the owner of a fishing dragger, has to pay municipal taxes varying from $700 to $1,000 per year. Here is an individual whose period of earnings is limited to six months a year. During this short period he must earn enough to pay in the vicinity of $1,200 a year for interest on the loan which he received to build his boat; about $400 to $600 a year for insurance protection on his boat; and on top of all this, $700 to $1,000 for municipal taxes.
If these federal grants to the Atlantic provinces are to be of any assistance to the individuals of these provinces, and particularly to the individual taxpayers of the New Brunswick municipalities, at least 50 per cent of such grants should be earmarked as direct grants to the municipalities. This is the only way for all the residents of the Atlantic provinces to benefit from these measures included in the resolution now before us for consideration.
The municipality of Gloucester, with a population of slightly over 60,000 people, has to provide and maintain schools to take care
[Mr. Roblchaud.l

of its 16,000 pupils. Very few municipalities in Canada, in fact I doubt if any other municipalities, have a percentage of children attending school exceeding 25 per cent of its population. Therefore, I would consider that provincial autonomy, indeed freedom of education, would be preserved even if 50 per cent of the special grants for the Atlantic provinces were to be earmarked as direct grants to municipalities. Unless some measure of assistance is provided at once the municipality of Gloucester, as well as other municipalities in New Brunswick, where ratepayers are overburdened with direct and local taxes well beyond their means to pay, will be facing a situation and conditions which could lead to bankruptcy.
How can we improve our economic position when our few industries are bound to meet such heavy taxation? How can we maintain and operate fish processing plants-our main industry-when the only plant located in my own parish of Caraquet has to pay municipal taxes of over $18,000 per year? These conditions cannot carry on much longer and the only possibility of improvement is for the province of New Brunswick to guarantee without further delay and before it is too late that at least 50 per cent of these additional grants will be passed along to the different municipalities of the province, preferably based on the number of children attending public school.
If our present constitution does not justify the federal government in initiating such a proposal, the least the Minister of Finance could do would be to suggest to the Atlantic premiers-or at least to the premier of New Brunswick-that 50 per cent of these special grants be allotted to the different municipalities of the province. If this were done I can assure the minister I would be much more happy in supporting this measure as I would have the assurance that it would benefit every individual man, woman or child, of the province of New Brunswick. My suggestion is, after all, well in line with the Prime Minister's statement made in Winnipeg on last Saturday when he stated that the government expects the larger share of this extra tax revenue to help solve the financial problems of the municipalities.
I sincerely hope this suggestion will be passed along to the premier of New Brunswick with a strong plea to earmark 50 per cent of this amount for the municipalities. I might add that every minister of finance of every province in Canada would welcome this 50 per cent of the extra grants being earmarked to alleviate municipal financial problems if the distribution was left entirely in the hands of the provinces themselves.


Colin Cameron: I would first of all like to pay a really sincere tribute to the Minister of Finance and to the hon. member for Essex East for the quite remarkable manner in which they are able to blot out the past.
I think it is nothing short of remarkable that the Minister of Finance is able to completely divest his memory of the strident remarks of the former member for Eglinton with regard to the actions of the former government in its approach to the provinces and their mutual problems. The hon. member for Essex East similarly seems to have forgotten all about the existence of the former minister of national health and welfare who, as you will recall, used to evade all questions with regard to our national hospitalization plan using, in fact, the very language and the very speeches we hear today from the present Minister of National Health and Welfare.
As I have said previously, I think it is rather a good thing that we cannot copyright our speeches in the House of Commons or there would be a great many interchanges of bills at this particular time for royalties for the use of other people's speeches, and I can only think that if this situation continues and if we have another election which causes another interchange across the floor of this house then some of the leading members in this chamber are going to be suffering from bad cases of schizophrenia before they get through. I am afraid that whether they are sitting on the opposition side or on the government side of the chamber they would have to have their speeches very firmly typed out and clearly marked "opposition speech", "government speech".
I am interested in this move on the part of the government because it does seem to me to be another faltering step in line with the proposal made by this group last week for a redirection of investment. You will remember this was a proposal which caused the great Liberal party to retreat with many shivers of apprehension; not perhaps quite so shivery as they were when they heard the Minister of Finance in his most unsporting way pull another rug from underneath their feet, but nevertheless a faltering step in the direction of re-investment of capital in Canada.
However, I think there are a number of objections which might be raised respecting the way in which the government is going about this business. We, of course, are not in a position to know just what our national bank account is like at the present time, but nevertheless I have the suspicion that we might find ourselves in a rather bad way financially unless these faltering steps which
Dominion-Provincial Relations the government is taking in the way of directing investment into the necessary public fields are balanced by some corresponding action on the other side of the ledger, and I have heard no suggestion from the Minister of Finance that he has any intention of redirecting our economy in that way.
Earlier today I attempted to find out if it might be possible that some of these very large new expenditures are going to be balanced by a curtailment in national defence expenditure but I could not get very much information on that score and still do not know whether in the next fiscal year the Minister of National Defence is going to recommend an expenditure of $1f billion or perhaps $2 billion in that regard or whether the government is going to face realities and make funds available for an even greater redistribution of investment than is proposed in this very modest measure which has now come before us.
What we are really doing now is to attempt to redivide the national pie in a way which will be most pleasing to the largest number of people. In the course of the next few weeks or in the next few months I do not think it is unfair to suggest that if it does not go very much further than that, if it would please a large number of people in the next few months, that is all that can be asked of it.
However, I am going to suggest that we must move much more radically, much more drastically in the field of redirecting the savings of the Canadian people into the places where they are required and that even though the present intention of increasing payments to the provinces may enable the provinces to improve the manner in which they have hitherto carried out their constitutional functions, we will have to go much further in order to deal with the other very serious problems lying ahead of us at the present time. I think this is a place where perhaps some serious basic economic thinking should take place and we should try to understand just why it is we have come full circle again to the condition we were in some 25 years ago. I do not think there is much doubt about it; we are working into that position today, if we have not reached it yet.
As we were informed at great length last week, a trend was in motion more than a year ago which had landed us in this present position and there appears to be no sign that the curve is beginning to go up. I believe that the answer to that can be found in some of the figures published by the dominion bureau of statistics. I was interested the other day to read reports from West Germany, which has always been held before us as a great example of the success of hard work
3888	HOUSE OF
Dominion-Provincial Relations and steady application to business, and now we find that in West Germany, unfortunately, they are suffering from the same ailments that afflict our own economy. They have rising unemployment; they are confronted with a failure of world markets and, in short, they are facing the same problems as we are facing today, and for the same reason, namely that in both West Germany and in Canada we are permitting too large a share of the wealth production to go into the hands of a selective group in our society. I am not dealing now with the ethical or moral aspects of this matter, but purely with the mechanical economic results, and those are the factors which our government is now trying to cope with.
In 1956, the dominion bureau of statistics informs us, corporation profits after deductions amounted to $1,830 million; that of that amount some $765 million was paid out in dividends to the owners of those corporations -the shareholders-leaving a balance of undistributed profits of $1,065 million. In the same year the government permitted depreciation allowances of $1,873 million to go into the treasuries of Canadian corporations, which left on hand for the corporations at the end of 1956 a sum just short of $3 billion, or $3,000 million dollars out of a total wealth production of less than $30 billion. Thus more than 10 per cent of our total wealth production was allowed to accumulate in the form of wealth to be reinvested at the discretion of those who control the corporations of this country.
The picture in 1957 is, so far, only complete for half a year but it shows exactly the same trend. Corporation profits for the first half of 1957 after deductions amounted to $832 million; depreciation allowances amounted to $752 millions. If we make a projection for that year based on the first half of the year we will find that the total sum of money left in the hands of the Canadian corporations to be reinvested at their discretion and in their interest would amount to over $2 billion last year.
I suggest to you, Mr. Chairman, that those figures should be taken in conjunction with the warning that was given us last year by Mr. Coyne of the Bank of Canada as to the cause of inflation-the rash unplanned boom in capital investment which, he warned, must inevitably end in unemployment and depression if it were allowed to continue. That was only made possible because the previous administration and this administration had permitted these vast sums of money to accumulate in the treasuries of Canadian corporations at the expense of badly needed public expenditures for the welfare of the Canadian people.


I suggest to you, Mr. Chairman, that the government will eventually be obliged to redirect some of those savings of the Canadian people; that they will have to take some of them back into the hands of the Canadian people, that is, into the Canadian treasury, so that instead of merely providing a few million dollars for the provinces to enable them to carry out, quite inadequately, their constitutional requirements, our federal government would be able to redirect large portions of the savings of the Canadian people to consciously decided social purposes.
I need hardly outline them. Everyone in this chamber knows what they are. Almost every day we hear in this chamber demands for expenditures for extremely worthy and necessary projects in Canada. We hear complaints from the provinces and municipalities; we hear demands for an adequate educational system. I suggest to the committee that we cannot meet those demands and still permit the same fiscal policies to prevail as have prevailed over the last 20 years. I do hope this government, having begun to take the first few hesitant steps, may summon up the courage to grasp this nettle and deal with it; that it may decide that in this crisis in our economy and in our society it will abandon some of the shibboleths that have been mouthed by squawkers for so many years and will cease pretending that these figures represent the results of the operations of an economy which can be called a free enterprise economy; that the government will cease to pretend that our society is governed other than by a few gigantic corporations who set the standards of living for the Canadian people, decide the size and nature of the savings of the Canadian people and decide where those savings should be reinvested. I suggest that this government will have to abandon its former analysis of our society if it is going to weather the storms that lie ahead.
We have heard again and again of the need for quite massive help for our educational system. I am not referring now to any suggestion of federal aid for education; I am suggesting a massive redirection of the savings of the Canadian people, much of which must go towards expanding our educational system. If we are going to survive, it has got to go far beyond merely developing as many technicians and practical scientists as Russia is developing. It must embrace a much larger field than that, and it must dig much deeper into the well springs of our society.
I have always been interested to note the quite savage and vicious enmity which is displayed towards soviet communism in contrast with the complacent attitude shown toward the equal, if not worse, savageries and

evils of the nazi system. I have tried to figure out the reason for this vicious antagonism on the one hand and, in earlier times, the almost indifferent attitude taken to the appalling obscenities of the nazi regime. Of course, it will be said that the reason for this enmity is fear of a military attack on the part of the Soviet union. But I cannot square that with my memories of a military threat from Germany, because I recall that my very earliest memories as a boy were of the Kaiser rattling his sabre at us.
I remember the rise of the Nazis, too, and the military threat and yet we did not have that hatred. The reason we did not have that hatred, to my mind, is that they did not pose a threat to the minds of the people of our country whereas the Russians do. If our economy begins to fail because we fail to-


Henri Courtemanche: Order. I think that Russia and communism have nothing to do with this proposal and I would ask the hon. member to confine himself to the subject matter of the resolutions before us.


Colin Cameron: Mr. Chairman, I am pointing out that the dangers that lie before us today require a major massive redirection of our economy and not the piddling hesitant steps of this government. I am outlining the dangers that lie before us as I see them and they necessitate a much more massive redirection of investment than is envisaged in this picayune measure of the government.


Donald Methuen Fleming: That does not make your remarks in order.


Colin Cameron: Do you consider that in order?


Henri Courtemanche: No.


Colin Cameron: You do not? Very well then I will leave that subject entirely.


Henri Courtemanche: The resolution concerns fiscal relations between the dominion and provincial governments.


Colin Cameron: I can quite understand, Mr. Chairman, why neither the government nor the Liberals want it discussed. I can readily understand that they wish to have this childish, silly sham battle that has been going on between the Minister of Finance and the hon. member for Essex East to be taken by the Canadian people as a real political conflict in this country instead of, as we know it to be, an absurd sham battle in which the actors are each assuming the roles the other assumed before the last election. I can well understand that neither of the great parties in this house wishes to have this question discussed on a real fundamental basis. They
Dominion-Provincial Relations would rather have the public mind directed to this silly sham battle over inessentials.
I say that because nothing could be of less importance than the picayune measures that are now presented to us representing the feeble attempt on the part of the government to deal with this serious economic problem.


Mr. Deniset:: Mr. Chairman, when I read in Votes and Proceedings the resolution proposed by the Minister of Finance this afternoon it was with mixed feelings that I absorbed line after line of the context. Naturally one is pleased to see that the provinces and particularly the maritimes who need it most are to receive more assistance than previously and in that respect the feeling was one of pleasure. There was a further feeling of pleasure which came from the full realization of the fact that it was because of the constant prodding that took place ever since the beginning of the session in the form of the letters from the premiers of the provinces and particularly letters from the premier of Manitoba; prodding in the form of the stand taken by the provincial governments and in particular by Premier Campbell at the dominion-provincial conference, at which time a most excellent brief was presented; and also prodding by several members of this house including your humble servant that the government is finally coming across with something for the provinces.
You may recall, that it was only a few days ago, on January 17 in fact, that I asked a question of the Minister of Finance as reported at page 3397 of Hansard of that date, in the following words:
I should like to direct a question to the Minister of Finance. In view of the fact that the government of Manitoba is preparing its budget, can the minister state whether or not any changes are contemplated in the fiscal arrangements for the current fiscal year?
The answer of the Minister of Finance, as reported in Hansard, was:
Mr. Speaker, this would involve government policy, and this is not the time to make any announcement.
It is small wonder that my friend the hon. member for Montmagny-L'Islet was spontaneously prompted to comment on that occasion:
You have no policy.
This is an example of what I mean when I speak of prodding from the opposition. I suppose the Prime Minister would call this type of prodding frivolous questioning. He is quite a man with words and we had a brilliant display of his skill with language in this house just last week. Hon. members will recall, for example, that he wanted an election last week and since the Liberals did not want to take the blame for an election,
3890	HOUSE OF
Dominion-Provincial Relations they threw the Prime Minister into a rage. I do not say that it was a genuine rage or even that he felt it was an outrage, although he played the part very well. It was just rage at being outfoxed by the Leader of the Opposition.


Mr. Morris:: Mr. Chairman, will the hon. member permit a question?


Louis Deniset: Surely.


Edmund Leverett Morris: If prodding is so efficacious a weapon as you portray it to be, why was not prodding equally effective when you were on this side of the house in getting more beneficial treatment for the maritimes. Were you prodding at that time or was no one listening?


Louis Deniset: Mr. Chairman, I want to thank my hon. friend for his question. Unfortunately I was not a member of this house prior to June 10 so I cannot answer the hon. gentleman's query.
Mr. Chairman, I was saying to the delight of some hon. members of the government that the Prime Minister actually made an excellent speech the other day and I wish to point this out about that speech. We enjoyed it very much except that it lasted three long hours. He started off with quite a bite but he concluded with just a bark.


Donald Methuen Fleming: Mr. Chairman, on a point of order, are we discussing the resolution or the debate of a week ago? These remarks are completely out of order and are simply made for the purpose of destroying the valuable time of the committee and preventing this resolution being carried tonight so the bill can be introduced this evening. The only reason the hon. member for St. Boniface is on his feet is because the hon. member for Bonavista-Twillingate told him to get up and talk it out tonight.


John Whitney Pickersgill: Mr. Chairman-


George Randolph Pearkes: Sit down; the chairman is on his feet.


John Whitney Pickersgill: Mr. Chairman, the Minister of Finance has raised a point of order and has made an imputation about me which is wholly, completely and utterly false and uncalled for in every respect whatsoever. The hon. member for St. Boniface to my knowledge has been trying all afternoon to catch the chairman's eye but because of the location of his seat in the house it was extremely difficult to do so. With the exception of one or two hon. gentlemen in the C.C.F. he is the only spokesman from the province of Manitoba who ever opens his mouth in debates in this house and he has a right to speak.
[Mr. Denlset.l


Donald Methuen Fleming: Mr. Chairman, all of us on this side of the house saw the hon. member for Bonavista-Twillingate wave the hon. member for St. Boniface to his feet.


Walter Adam Tucker: You had better wave some of your members to their feet.


Mr. Caron:: Mr. Chairman, I rise on a point of order. This first started with the speech made by the Minister of Finance who in his remarks wandered quite far afield from the subject matter of the resolution. He made an accusation and hon. members on this side of the house have a right to answer.


Mr. Harkness:: That is not a point of order.


Alexis Pierre Caron: All right, so I was out of order.


Henri Courtemanche: Order. The hon. member for St. Boniface will understand that he must confine his remarks to the resolution before us.


An hon. Member:: Are you only for the one side?


Louis Deniset: Mr. Chairman, I was trying to stick to the subject but the hon. member for Halifax rose and asked a question and I attempted to answer. When an hon. gentleman asks me a question I am inclined to become enthusiastic and attempt to answer even if his question is irrelevant. I cannot help departing from my subject once I am sidetracked by irrelevant questions from the other side of the house. I suppose the hon. gentleman wants us to forget about the barking we heard from the Prime Minister the other day but I would just like to make one observation about it. We very much enjoy those fine sonorous phrases we hear from the Prime Minister from time to time. As a matter of fact most of us can recall reciting similar phrases with great effect at college.
If I may return to the subject, Mr. Chairman, I think it would be worth while to place on the record the opinions expressed by the premiers of the provinces regarding this resolution.
I should like to quote the remarks made by Premier Campbell of Manitoba, according to the Free Press of today. Premier Campbell is reported as saying:
Although new offers will mean considerable extra revenues for Manitoba, he was disappointed in that it fell so far short of what Manitoba had proposed. He criticized the grants for not meeting the provinces' proposal for adopting a 15-15-50 formula and for not being equalized to the yield in the highest province.
On the other hand he was glad to see the principle of equalization maintained for at least one year.
However, he said this:
But Manitoba had expected something more permanent than a year-to-year basis, both from the point of view of equalization and "to the

permanency of provincial revenues". This means that Manitoba, along with the other less wealthy provinces, must continue to be extremely vigilant in seeing that the principle of equalization is not abandoned.
Premier Campbell added:
He felt that Manitoba deserved some of the credit that equalization had been maintained for a year at least.
He was also "greatly concerned" over the government's method of dealing with this matter.
Apparently Premier Campbell was not consulted at all. He just heard the news. I do not know whether he heard it over the radio or through a telegram; but, anyway, he was not asked, would you like this, or would you like that? He was told, this is it. One can understand the remarks of Premier Campbell when he said further:
The provinces were promised another conference. We counted on that to make additional representation and to have an opportunity of discussing the federal proposals, whatever they might be, rather than this method which seems to be not just a case of take it or leave it, as they called the former government's actions in this field, but the imposition upon us of a unilateral decree.
It seems that all we can get from this government is a decree-government by decree a la Diefenbaker! I think it is fair to state that in this measure the Conservative government is simply trying to catch the imagination of the voting public by bringing in this resolution at this time; but surely they do not think the Canadian people are so gullible as not to be able to see through so transparent a pre-election gift. I know that some members on the other side do not agree with this statement. Let us look at a statement that appeared in a very good newspaper, the Winnipeg Tribune, which, in spite of the fact that it is very much a Tory paper, is still an excellent newspaper. Here is a headline which appeared in the Winnipeg Tribune of Saturday, January 25:
Tories Share the Wealth, Manitoba Gets $3 Million Grant.
One should not forget that Manitoba got over $21 million from the Liberals. I should like to read the first paragraph, Mr. Chairman:
The Conservative government today dropped an $87 million pre-election bombshell into the dominion-provincial issue.
That is what it is. I said earlier that when I read the resolution proposed by the Minister of Finance I read it with a mixed feeling, a feeling of pleasure because of reasons outlined earlier, and also a feeling of disappointment. To be exact, this came out after I asked the Minister of Finance a perfectly legitimate question in this house, at which time the premier of Manitoba had to make an important decision regarding his budget. At that time the minister did not
Dominion-Provincial Relations see fit to give me an answer, although at that time he must have known what the government proposal was.
I had a feeling of disappointment also over the fact that this sudden-it must have been either sudden or the minister knew one week ago-decision of the government can stem from only one desire, the desire to throw some more glitterings, Tory glitter -ings, over the ballot boxes. Just look at the answer of the minister when I asked him about this policy. He said, "this is not the time to make an announcement". No, not 10 days ago, but now that an election is just around the corner this is the time. To think that a Tory responsible government, or one that at least should try to look responsible, should resort to such pre-election bombshells, is a factor that will not escape the attention of the Canadian voters.
A new bait is added to the baits that have been tossed at the Canadian voters throughout the last few months, but it may very well turn out that this will be a turning point in the next election campaign, one which will help turn the side away from the Tories and their bombshells and glitterings to once more a true, sound and responsible Liberal government.
Progress reported.



BUSINESS OF THE HOUSE

Lionel Chevrier: May I ask the acting house leader whether we will go on with this measure tomorrow?


Donald Methuen Fleming: Yes, Mr. Speaker, we shall proceed tomorrow with the business that was announced for today, followed by the second reading of Bill No. 15, to amend the Criminal Code; then the measure that was introduced today, to amend the Indian Act, followed by the remaining business on the order paper.


Lionel Chevrier: May I ask the acting house leader what the business will be on Wednesday? ,


Donald Methuen Fleming: I cannot indicate that definitely at this moment. I had hoped that we might have been able to indicate that the remainder of the business on the order paper would have been greatly reduced from what we find at the moment, but we shall be hopeful.


Lionel Chevrier: My hon. friend will always find great co-operation on this side of the house.


Donald Methuen Fleming: When will it begin?


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


[Stage Direction]
THE PREMIER Halifax
January 15, 1958 Dear Mr. Prime Minister:
This will acknowledge with thanks your letter of January 14th concerning special grants to the Atlantic provinces. We will look forward to word from the Minister of Finance in this connection.
In the meantime, may I say how much we are all looking forward to seeing you on your visit on the 30th of this month.
Yours sincerely,
R. L. Stanfield
The Right Honourable John G. Diefenbaker, P.C., Q.C., LL.D.,
Prime Minister of Canada,
Ottawa, Canada.

[Stage Direction]
Ottawa,
January 14,
1 9 5 8.
My dear Premier:
Thank you for your letter of the 6th in which, on behalf of all the premiers of the Atlantic provinces, you suggested a formula under which the special grants to the Atlantic provinces might be based upon an income deficiency per individual of working age (15-69) from 85 per cent of the national average, multiplied by the revenue ratio of 8.81 per cent, multiplied by the working age group population in the area. I understand that this formula has been discpssed by officials of the four Atlantic provinces with officials from the Department of Finance.
I have also noted the agreement of the four premiers that the total grant to the
area should be divided in the following manner:
Newfoundland	
30	per	centNew Brunswick	
30	per	centNova Scotia	
30	per	centPrince Edward Island ....	10	per	cent
I am informing my colleague the Minister of Finance to this effect and no doubt he and his officials will be in touch shortly
with the responsible officers of the governments of the four Atlantic provinces to work out the final agreement.
I am,
Yours sincerely,
John G. Diefenbaker
The Honourable R. L. Stanfield, Q.C., M.L.A., Premier of Nova Scotia,
Province House,
Halifax, N.S.

[Stage Direction]
Halifax
January 6, 1958.
Dear Mr. Prime Minister:
At the recent dominion-provincial conference special grants to the Atlantic provinces were agreed upon in principle. It was, I believe, understood that the four Atlantic provinces would attempt to reach agreement upon a formula.
Since the conference, officials from the federal Department of Finance visited Halifax, and met with officials from the four Atlantic provinces in order to discuss a formula upon which the special grants to the Atlantic provinces might be based.
It is suggested that the total grants to the Atlantic area be based upon an income deficiency per individual of working age (15-69) from 85 per cent of the national average, multiplied by the revenue ratio of 8.81 per cent, multiplied by the working age group population in the area. This would bring the special grants to the four Atlantic provinces somewhere in the vicinity of $25,000,000, the amount depending upon whether one used a three year or a five year average. The amount, of course, would also be subject to variation as factors might vary through the years. The premiers of the four Atlantic provinces have agreed upon the use of this formula to determine the total grants to the area.
The premiers of the four Atlantic provinces have also agreed that the total grant to the area should be divided among the four Atlantic provinces in the following manner:
Newfoundland	
30	per	centNew Brunswick	
30	per	centNova Scotia	
30	per	centPrince Edward Island ....	10	per	cent
I have been authorized by the premiers of New Brunswick, Newfoundland and Prince

Edward Island to convey to you their agreement upon this formula for the determination of the size of the special grants to the Atlantic area, and this formula for sharing the grant among the Atlantic provinces. We all hope that the formula agreed upon here will seem appropriate to you and your government. These special grants will be of the greatest assistance to the Atlantic provinces.
Dominion-Provincial Relations On behalf of the four Atlantic premiers, I wish to convey to you our appreciation of your leadership in making these special grants available to the Atlantic provinces. Your sincerely,
R. L. Stanfield
The Right Honourable John G. Diefenbaker, P.C., Q.C., LL.D., D.C.L.,
Prime Minister of Canada,
Ottawa, Canada.
96698-246J
[Stage Direction]
Tuesday, January 28, 1958