1958-09-04

[Stage Direction]
Thirteenth report of standing committee on railways, canals and telegraph lines.-Mr. Howe.

Right Hon. J. G. Diefenbaker (Prime Minister):: Mr. Speaker, possibly I can at this time make reference to the fact that in the gallery today there are two representatives of that impressive and powerful legislative body, the United States Senate. I refer to Senator George D. Aiken of Vermont and Senator Homer E. Capehart of Indiana. Both these gentlemen are here in Ottawa to meet with Your Honour and the Speaker of the other place for the purpose of laying the foundation for a joint committee of legislators representative of our two bodies.
I shall say no more than that. We welcome them for the purpose for which they are here. We welcome them as representatives of that great body which has such powerful legislative capacity and ability. We welcome them because they come from our neighbour, the United States of America, whose co-operation and adherence to freedom give hope to all mankind.


Hon. L. B. Pearson (Leader of ihe Opposition):: Mr. Speaker, I would like to join in the welcome the Prime Minister has expressed to the two representatives of the Senate of the United States who are visiting us today, both of whom I had the pleasure of meeting in the happy days when I lived in Washington. They are here on a mission which, if it can be accomplished-and I am sure it can-will make an important contribution to improving, even more, the good relations between our two countries. Their presence here today, Mr. Speaker, also reminds us that the congress of the United States has completed its work.


Mr. Hazen Argue (Assiniboia):: Mr. Speaker, on behalf of the C.C.F. I am very happy to join the Prime Minister and the Leader of the
57071-3-289i
Opposition in welcoming these two distinguished senators from the United States, Senator Aiken of Vermont and Senator Cape-hart of Indiana. I am certain their visit will result in the establishment of the joint Canada-United States committee in such a form as to result in very great benefits to both nations in the years ahead.
I think we all realize that the prosperity of Canada is closely allied to economic conditions in the United States, and we believe that any procedure that will result in increased trade between our nations and a reduction of trade barriers will redound to the benefit of both countries. The Prime Minister has said that our nation, together with the United States, stands solidly for freedom, and we hope this committee will strengthen the processes of freedom in both nations. A few years ago I had the very great honour of being introduced on the floor of the Senate of the United States. Perhaps our procedures are a little more formal, but I know that our sentiments are just as sincere in welcoming wholeheartedly to our gallery these two distinguished senators from our neighbouring nation, the United States of America.


Mr. Speaker:: Perhaps I may be permitted on this occasion to add my own very warm words of welcome, and to assure the house that if by any chance the senators from the United States have not heard the unanimous and warm greetings which have been extended to them, I shall be happy to convey these messages.



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Hon. Lionel Chevrier (Laurier):: I should like to direct a question to the Minister of Labour based upon reports in the press yesterday concerning the dispute between the non-operating employees of Canadian National Railways and the Canadian Pacific Railway Company and the railways themselves. Has the minister a statement to make in connection with the letter he has received from the presidents of the two railways?


Hon. Michael Slarr (Minister of Labour):: Mr. Speaker, on my return to Ottawa this morning I found on my desk a letter jointly

Inquiries of the Ministry signed by the presidents of the Canadian National Railways and the Canadian Pacific Railway relating to the report of the conciliation board set up in the non-operating railway employees' dispute. From the information I have, the latest development is that at a press conference in Montreal yesterday the railways indicated their intention to press for a 20 per cent freight rate increase and at the same time the union representatives indicated that the union is preparing for a strike vote. In the meantime we are watching the situation closely and the house can be assured that we shall remain in close touch with developments concerning this matter. That is all I can report at this time.


Lionel Chevrier: Arising out of the minister's statement, may I ask the Prime Minister a question, and 1 hope he will not reply that it is hypothetical. Having regard to the statement the Minister of Labour has made and the fact that the railways will apply to the board of transport commissioners for an increase in freight rates of approximately 20 per cent, will the Prime Minister indicate whether or not the government will suspend the coming into effect of such increase if it is granted by the board?


John George Diefenbaker: 
Lionel Chevrier: Very practical.


Hazen Robert Argue: May I direct a question on the same subject to the Minister of Transport. Can the minister say whether there was any discussion between himself and the president of the C.N.R. before the president of the C.N.R. associated himself with the president of the C.P.R. in saying that the railways would apply for a gigantic increase of 20 per cent in freight rates? I ask whether such a discussion has taken place, in view of the welcome action by the government last April 28 in disallowing the 3.6 per cent increase then granted.


Hon. George H. Hees (Minisier of Transpori):: The answer is no.



UNEMPLOYMENT


[Stage Direction]
On the orders of the day:
Mr. J. R. Taylor (Vancouver-Burrard):: May
I ask a question of the Minister of Labour. Apparently $150,000 is to be spent by the government in an advertising campaign to assist winter employment. Can the minister


indicate the approximate amount which will be spent in British Columbia? Would the minister indicate also whether or not any encouragement is to be given to local governments to participate in the campaign?


Michael Starr: I regret to inform the hon. member that it is not possible at this time to give a breakdown of these expenditures by provinces, since most of the advertising and publicity material is contracted on a national basis. However, the way it works out is that in the end result the material is presented almost on a per capita proportion of population in each region.
So far as British Columbia is concerned, the campaign will be very active in that province. The officers of my department, I can assure the hon. member, have been in touch with the municipalities and with winter employment committees in most of the major centres of the province. I might add also that a research program involving both federal and provincial cooperation	is now being	evolved in
order to throw light on the basic causes of seasonal unemployment in that province, and to suggest measures for dealing with the situation.




[Stage Direction]
On the orders of the day:
Mr. Maurice Bourget (Levis):: May I direct a question to the Minister of Labour. I understand that he has now deposited with the Clerk of the house a summary of the proceedings of the winter employment conference which took place on July 14 and 15. May I ask the minister whether this summary of proceedings has been tabled in French and English.


Michael Starr: No, Mr. Speaker. It is available only in English.


Maurice Bourget: Then may I ask the minister whether he would be kind enough to have these proceedings translated so that copies in French may be available to the French members.


Michael Starr: I shall be glad to do that.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Mr. J. O. Gour (Russell):: I should like to direct a question to the Minister of National Defence. I have received representations

from the parents at the Rockcliffe air base informing me that their children have not been accepted at Notre Dame separate school, and they have no other recourse but to send the children to the school at the air base.
Would the minister tell the house whether some space could not be made available for these children, or whether the children of separate school supporters could be compelled, because of the decision taken this week, to attend public schools?


Hon. G. R. Pearkes (Minister of National Defence):: There are 28 French speaking children at Rockcliffe whose parents desire that they receive their education in the French language. We are trying to make arrangements with the separate school board of Ottawa to see whether they can be accommodated in some French speaking school in Ottawa.


Joseph-Omer Gour: I should like to ask another question of the minister, but before asking it I should like to inform the minister and all members of this house that this is not a question of politics.


Mr. Speaker:: Order. I must inform the hon. member that this is not a time to impart information. If he has a question he may ask it.


Joseph-Omer Gour: I will ask the minister a question. It would be very easy to have, in that school at the base-


Mr. Speaker:: Order. I think the hon. member is endeavouring to enter into an argument on this matter. If he has a supplementary question would he please ask it.


Joseph-Omer Gour: I will ask the minister to try to take steps to see that the French children can learn in the French language in that school, and that the Catholic people can have their religion taught in that school.



BRIDGES


[Stage Direction]
On the orders of the day:
Mr. H. W. Herridge (Kootenay West):: Strictly in order to receive information I wish to address a question on a matter of regional and local interest and importance in British Columbia to the Minister of Public Works. Will the minister inform the house when the department of public works of British Columbia filed plans with his department for a proposed second bridge across the Columbia at Trail, and would the minister also inform the house of the developments to date with respect to approval of those plans?
Privilege-Press Report


Hon. Howard C. Green (Minisier of Public Works):: The hon. member directed this question to the Minister of Transport, and it only came to my attention within the last few minutes. Under the circumstances I shall have to ask that he give me time to prepare a reply.



PRIVILEGE


Hon. Alvin Hamilion (Minister of Northern Affairs and National Resources):: Just before the house opened, Mr. Speaker, I was given a copy of a report that appeared in the Globe and Mail this morning. On a matter of privilege I should like to correct what I believe to be a very unfair impression given by this story. It is dated September 3, and the opening paragraph states as follows:
Differences between the Ontario and federal government on what constitutes a proper roads to resources program in the province won't be put on public display yet.
I should like to state flatly that this is not the situation at all. The situation is that in Ontario the minister with whom I made the original arrangement is no longer in that position. The new minister has asked to examine the whole program, and a month ago he tried to get myself and various members of my department to examine one or two of the roads that are under discussion but I was unable to go at that time. There is no question at all of differences that have caused this delay.
The other statement to which I should like to take exception appears later on in the story, where it is stated:
Mr. Hamilton indicated in an appearance before the mines, forests and waters committee this session that he did not feel Ontario's proposal was imaginative enough.
I think the correct impression is this, Mr. Speaker-


Some hon. Members:: Order.


Mr. Speaker:: I think the minister should state what privilege is involved in this second matter. It does not seem to me that it raises a question of privilege.


Lionel Chevrier: He would like to make a speech.


Francis Alvin George Hamilton: The fact is that I made it clear in the committee, Mr. Speaker, that Ontario pioneered this concept of mining roads and access roads, and any discussions we have had-


Mr. Pickersgill:: That was in Hepburn's day.

Inquiries of the Ministry


Francis Alvin George Hamilton: -are entirely on questions of the material we have proposed. I should like to say flatly that this statement has completely misreported the whole significance of the efforts we are making to carry out this program.



BUSINESS OF THE HOUSE


[Stage Direction]
On the orders of the day:
Mr. G. J. Mcllraiih (Ottawa West):: Now
that the Minister of Northern Affairs and National Resources has approved the action of the Hepburn government in Ontario, I wonder whether he would be good enough to do something for me. My question has to do with the questions remaining unanswered on the order paper. Question No. 182 was placed on the order paper some four weeks ago. It remains unanswered. I should like very much to get an answer to it today. It is a rather simple question. I should like to have the answer before the estimates are finally concluded. I wonder whether the Minister of Northern Affairs and National Resources could get that answer for me.


Francis Alvin George Hamilton: I shall look into the matter again, Mr. Speaker.


Lionel Chevrier: On the
same subject, Mr. Speaker, may I point out that question No. 96 on the order paper remains unanswered. Recently I asked in French whether I could not get a reply. The request was ineffective and no action was taken. That is why I am rising now and asking the question in English; perhaps it will have more effect. Will the Secretary of State see that I get an answer before the end of the session?


Hon. Henri Courtemanche (Secretary of State):: Mr. Speaker, I have requested the officials of my department to make the necessary inquiries. As soon as I have the answer I shall be glad to give it to my hon. friend.


Lionel Chevrier: That may be next year.



UNEMPLOYMENT ASSISTANCE


[Stage Direction]
On the orders of the day:
Mr. J. P. Deschatelets (Maisonneuve-Rose-moni):: Mr. Speaker, yesterday the Minister of National Health and Welfare answered a question which I had put the previous day to the Minister of Labour, at which time he said that the province of Quebec was the only province which had not signed an agreement


with the federal government in respect of the Unemployment Assistance Act.
I would now like to put a supplementary question to the Minister of National Health and Welfare. Would he state whether during the course of the last fiscal year he at any time communicated in respect of this matter with the authorities in the province of Quebec, either by letter, telephone call or telegram?


Hon. J. W. Monieith (Minister of National Health and Welfare):: Mr. Speaker, yes I did. I am sorry I do not have it with me today, but yesterday I had a copy of a letter which was written to the minister concerned in that province at the time we removed the .45 threshold on unemployment assistance, and I received an acknowledgment of that letter from the minister.


Jean-Paul Deschatelets: Would it be possible for the minister to let us know the contents of that letter, or to table it?


Jay Waldo Monteith: I have no objection. It was merely an announcement.



LEAD AND ZINC-REPORTED RECOMMENDATION TO RAISE UNITED STATES TARIFF

[Stage Direction]
On the orders of the day:
Lester Bowles Pearson: Mr. Speaker, on Monday last
I asked the Minister of Trade and Commerce if he would care to comment on an Associated Press dispatch to the effect that President Eisenhower was now considering a recommendation that the tariff on lead and zinc imports from Canada into the United States should be raised. The minister said he would have the answer available for the next day- that was Tuesday. I wonder if the minister can now give me a reply.


Hon. Gordon Churchill (Minister of Trade and Commerce):: Mr. Speaker, I had the answer ready and I regret that I did not give it to the Leader of the Opposition yesterday. The position in regard to lead and zinc at the present time is as follows. Last April 24 the United States tariff commission recommended that increased tariffs should be imposed on imports of these products into the United States and at that time President Eisenhower deferred his decision on these recommendations pending congressional consideration of legislation that had been proposed to subsidize producers in the United States. On August 21 the United States congress rejected this proposed legislation. In view of this fact the United States administration is now studying what action, if any, it should take with respect to lead and zinc.

As far as the Canadian government's position is concerned, our views have already been expressed to the United States government on several occasions, making it abundantly clear that any increased tariffs or other measures restricting exports of these important products to the United States would be of the most serious concern.


Herbert Wilfred Herridge: Could I ask the minister a supplementary question. Has he made any inquiries or has he received any information with respect to the reported global plan which was mentioned in the United States congress for the allocation of base metal markets among western producers?


Gordon Minto Churchill: Mr. Speaker, that matter is under observation and study. I have nothing to report upon it today.



HARBOURS


[Stage Direction]
On the orders of the day:
Mr. J. R. Tucker (Trinity-Conception):: Mr. Speaker, may I direct a question to the Minister of Public Works. Could the minister please inform the house as to the developments made to date in the harbour development at St. John's, Newfoundland?


Howard Charles Green: Mr. Speaker, this is a question which would be more properly discussed on the estimates. As a matter of fact the consulting engineers are still working on plans for the development.


John Whitney Pickersgill: May I ask a supplementary question. Has no actual work started on the project?


Howard Charles Green: Mr. Speaker, the hon. member knows very well that under this government work cannot commence until plans are completed.


Some hon. Members:: Hear, hear.


John Whitney Pickersgill: Mr. Speaker, has the minister forgotten the tender he called on May 7 of this year, which subsequently had to be cancelled because he had no plans?


Howard Charles Green: I would have thought, Mr. Speaker, that one dose of medicine would have been enough for the hon. member.



CANADIAN PACIFIC STEAMSHIPS


[Stage Direction]
On the orders of the day:
Mr. Frank Howard (Skeena):: I would like to direct a question to the Minister of Labour.
Inquiries of the Ministry May I ask the Minister of Labour if he would kindly inform the house what progress is being made with respect to the negotiations between the C.P.R. and the three unions on the west coast and, second, what progress is being made with respect to the strike of the longshoremen on the west coast?


Michael Starr: Mr. Speaker, in the dispute between the west coast steamships and the seafarers' international union and the other two unions involved, Mr. Eric Taylor has been mediating with the two officer unions and the S.I.U. He has reduced the matters in dispute to four points at the present time. He is still trying to see whether these four points can be amicably settled.
With reference to the longshoremen's strike in British Columbia, I wish to advise the hon. member that I have been in touch with the representatives of both parties to the dispute by telephone. The parties met briefly last Friday in an effort to arrive at some basis for negotiation but were not successful at that time. Since then I have contacted both parties in an effort to have negotiations resumed. I am receiving regular reports from the conciliation officer of the Department of Labour who is on the scene. As the situation now stands, the question of pensions is the major issue in dispute, and it is my hope that this matter may be brought to a point where at least discussion may be resumed in the near future.


Frank Howard: A supplementary question, Mr. Speaker. Could the minister indicate what are the four points remaining unsettled between the west coast steamships and the three unions involved?


Mr. Speaker:: Order. That is not a responsibility of the minister, as I understand his responsibilities. He may answer if he wishes, however.


Frank Howard: Mr. Speaker, I ask this supplementary question only because the minister indicated that with respect to the longshoremen's strike the major issue in dispute is the question of pensions.


Some hon. Members:: Order.


Michael Starr: Mr. Speaker, I have that information in my office. If the hon. member wishes it I will be glad to give it to him if he will contact me.

The house in committee of supply, Mr Rea in the chair.

Supply-Finance
DEPARTMENT OF FINANCE General administration-
112. Departmental administration, $2,369,041.


Lester Bowles Pearson: Supply-Finance
bondholders an investment in the future development of our country. That was his main theme, as the following quotation from the transcript of a recording of his statement will show. These are not excerpts from the press statement issued after the broadcast, which differ in some respects from the transcript of the broadcast itself, as the minister will discover if he compares the transcript of the broadcast with the press release issued on the statement.


Mr. Fleming (Eglinton):: Copies of the actual text were available to all who wished them.


Lester Bowles Pearson: That is right, and I am not attempting to make-


Donald Methuen Fleming: I have not seen the press statement to which my hon. friend refers, but the full text of the speech has been available ever since it was delivered.


Lester Bowles Pearson: That is right. But we went to the trouble of making a transcript of the statement of the Prime Minister as it was actually given over the air. We compared it with the statement that was issued, and there are some differences in the two texts. I am quoting from the transcript we made of the actual words of the Prime Minister, and this is what he said:
Its success will add greatly to the strength of Canada's national economy and all that means to the welfare and security of all our people. It will include the fullest development of our resources. It will mean bigger and better jobs. It will mean a higher standard of living for every Canadian. It will mean the achievement of a great Canada.
And again from the same broadcast:
I ask that all Canadians, and everyone who holds victory bonds, will now reinvest in Canada's future for a further period in order to support a constructive program for the future of Canada, for you and for your children and your children's children.
This is very eloquent but it does not bear much relationship to this particular financial operation. It is a visionary picture to advocate, to justify and, if I may use the expression, to sell to the public what is essentially a refunding operation. The Prime Minister admitted that himself when in his broadcast he also said:
And I should perhaps make it clear that a conversion bond such as this does not involve any new borrowing on the part of the government.
That one short sentence destroys the whole case of the Prime Minister. Since a conversion loan does not involve any new borrowing it does not of itself involve any new investment leading, as the Prime Minister claimed, to the fullest development of our resources, to bigger and better jobs, to a higher standard of living, to the achievement of a great Canada. This conversion operation,

in short, is not even a loan, strictly speaking. It is a refunding of past loans, a conversion of bonds which, in a significant proportion, would not have been maturing for several years, eight years in the case of the longest victory loan, the ninth.
I think, therefore, that the Prime Minister in his broadcast to the nation did not give the real reasons which led the government to undertake this operation at this time. It appears to me that on this occasion at least the Minister of Finance used more sober and sensible words to describe the conversion operation in a statement issued by his department on July 14.


Mr. Benidickson:: He stuck to the text.


Lester Bowles Pearson: He did not indulge in so much high flown eloquence but he had this to say:
The minister explained that the refinancing plan is primarily aimed at reorganizing the national debt with a view to putting it on a long term basis and reducing for the government the amount of refinancing to be done over the next few years.
In this house on the same day, July 14, the minister stated, as found at page 2203 of Hansard:
This conversion offer will perform the major and essential task of clearing the way for an orderly program of debt management over the years ahead. It will not, however, provide us with any new cash.
That makes it clear, of course, that a conversion operation has no direct relation to new development and contradicts the argument presented by the Prime Minister to the public. The minister, however, at that time and since has been very vague about the basic reasons which caused him to announce this operation. What does he mean, for instance, when he says "this conversion offer will perform the major and essential task of clearing the way for an orderly program of debt management over the years ahead"? Does this orderly program of debt management simply mean that the government is now facing a series of heavy deficits during the years ahead, that its new cash requirements will be very great indeed during those years, and that this conversion offer will perform the major and essential task of clearing the way for meeting a rapid increase in the public debt?
That increase is apparent, Mr. Chairman, in the fact that the government's new cash requirements for this fiscal year alone will exceed $1,400 million. Furthermore, the huge budgetary deficit announced by the minister, which may be greater than announced by him, did not have anything to do with any vision of development or with any so-called special works program. It was largely due to the current recession and the consequent

drop in government revenues and increased long term commitments, especially in the field of social security.
We have been warned by a well known financial economist, Mr. Harvey Perry, whom the minister knows as most of us do, that we might have a series of budgetary deficits until 1967, so the government would have to borrow important amounts each year during that period. Is it because the government accepts this view that it decided suddenly, after the budget was introduced in the house, to launch this conversion operation, thereby clearing the way for new and heavy borrowing in the years ahead?
Surely, Mr. Chairman, even at this late date in the session we are entitled to a sober and clear statement by the minister on the real reasons lying behind this major financial operation, especially after the Prime Minister's attempt on radio and television to dress up this so-called conversion operation in the patriotic colours of wartime emergency and grandiose national development. That is why I wish to ask the minister some questions. Perhaps he will be good enough to reply at the end of the discussion of this item of his estimates or at some time during that discussion convenient to him.
First, what is the cost of the operation? There has been a good deal of speculation about this. I know the difficulties in estimating the cost, but surely the government must now have some rough estimates even though precise figures may not be possible. Second, what is the cost of publicity, and what advertising agencies have been involved? I cannot say that I am much impressed by some of the advertising, especially that full page picture of the old lady with a new hat. It all must have cost a great deal of money and it has introduced, I admit, a new element into government financing in this country.
Mr. Bruce Hutchison had an amusing editorial

more than amusing; very shrewd -in the Victoria Daily Times on this aspect of the matter entitled "The Lady and the Hat." Perhaps the minister has read it. It included the following:
A few years back any government advertisement was a cold, depressing statement of the facts and if it was a fiscal advertisement nobody but a bond dealer or an auditor bothered to read it.
Probably in the minister's eyes that justifies this new kind of advertising.
Now we behold a life-size portrait of a quaint, twinkling lady with a funny hat who, we are told, has just bought one of the new bonds and safely arranged the security of her old age.
Instead of boring us with statistics, the government announces, with a chuckle that the funny hat was bought with the premium on the bond. The lady, the reader, the whole nation is happy.
Supply-Finance
The bond campaign becomes a great lark. Even the grim fiscal visage of Mr. Fleming relaxes as Canada goes deeper into debt.
If high finance is such a jolly pastime why didn't we hear of it before? If debt is so profitable, so kindly to old ladies, by all means let us have more of it.
Well, we are likely to have more of it. That is the second question, the cost of publicity. Third, what is the amount of dealer commissions, bond issuing fees, delivery commission to banks and trust companies? Fourth, what is the total amount of premiums to bondholders? I know the minister cannot give us the exact figures.


Donald Methuen Fleming: Premiums?


Lester Bowles Pearson: Total premiums to bondholders; cash bonuses. While the minister may not be able to give us exact figures, surely he can give us same indication of what this is costing the country, especially in the light of reports that have been circulating. I have seen reports in reputable journals, including reputable financial journals, that if this operation is fully successful it will cost as high as $100 million. I have seen reports varying from $70 million to $100 million. Dividing those reports into the categories of costs I have mentioned in my request to the minister, there have been representations that advertising will cost $2 million; that commissions to dealers and agents will cost between $25 million and $50 million. This commission ranges from a quarter of one per cent to one per cent plus a quarter of one per cent bond-issuing fee. I have seen reports that the cash bonuses to holders will be as low as $37 million or as high as $60 million. These bonuses range from 1J per cent to 2i per cent.
Then I want to ask the question, what are the additional interest charges that taxpayers will have to pay, which have been estimated to be as high as $100 million per year for the next 25 years? It depends, of course, on how successful the operation will be, but we learned last Tuesday that $5 billion has been reconverted and most of it, I suppose, into the 25-year bonds. There are only a few days yet to go in this campaign, so the minister should have some reasonably accurate estimates of this.
Then, and this is an important question, perhaps the minister could give us some information on who holds these bonds and who will gain most from the conversion. Dr. Brewis, associate professor of economics at Carleton University, had this to say on this point in an article which I read on July 22:
Only a very small proportion of the victory bonds are held by the man in the street. I do not pretend to know the exact proportion but it could be of the order of 10 or 15 per cent of the whole. The great bulk are known to be held by financial

Sup p ly-Finance
and other institutions and the success of the conversion will depend much more on their actions than on those of the private individual. To the extent moreover that the refunding is successful it will involve a transfer of income in favour of these institutions.
That is a quotation from Dr. Brewis's article. The Bank of Canada made its own breakdown on May 31, so far as the holdings of these bonds are concerned. The figures in that breakdown are as follows: the Bank of Canada, $1,300 million; the unemployment insurance commission, $300 million; the government, $100 million, and the chartered banks, $1,400 million. This gives a total held by the government and the chartered banks of $3,100 million. A leading supporter of the government in the other place raised this figure during a debate there a couple of weeks ago to $3,300 million. This leaves us with something over $3 billion to be accounted for.
What I should like from the minister is how this $3 billion-plus is divided as between institutional holders and private individuals. Again I know he cannot give us exact figures, but surely he must have some estimates of this. Surely he must have had some estimate of this kind of division before deciding on the terms of the loan or the kind of publicity campaign to be waged. Professor Brewis says that only 10 per cent to 15 per cent of this $3 billion is held by individuals.


Donald Methuen Fleming: I do not think he said that.


Lester Bowles Pearson: I am reading from his article.


Donald Methuen Fleming: Just refer back to the article and you will find he correctly said he did not know.


Lester Bowles Pearson: The professor said it could have been of the order of 10 per cent or 15 per cent. He has made his estimate, and perhaps the minister will give us his. I have seen another estimate that perhaps half this amount would be held by institutions and perhaps half by individuals, which would mean that about $1,550 million would be held by each.
Now, there is certainly little need to try to convince the institutions to convert their bonds. Surely they must have been delighted with this windfall dumped into their laps by a government which told them how patriotic they would be if they accepted it. In order to see what can be the magnitude of the gifts-I use that word because I think it is the correct word-involved in certain individual cases, let us use an illustration which may well correspond to a concrete and real situation. Suppose, for instance, that a life insurance company is holding $40

million of the ninth victory loan bonds which it is converting into the new 25-year bonds. This company, in converting, would receive a cash adjustment of $600,000, plus about 12 per cent of $40 million representing the additional and unexpected interest income for the period until September 1, 1966, when its old bonds would have reached maturity. This means that in this case, hypothetical if you like but not very far from reality, the company would receive as a gift out of this conversion operation an amount exceeding $5 million, or over $600,000 a year for the next eight years.
Well, what about the individuals? If we are to assume, and I do not think it is unreasonable to assume, that half this $3 billion or $1.5 billion is held by individuals, it means that this is the only group at which this high pressure, expensive campaign could have been aimed. I ask the minister, therefore, are the results justifying it in terms of the amount of individual holdings being converted, in view of the amount of money and effort spent on it?
I should like to turn now to another aspect of the question, that is the economic effects of this conversion operation in so far as one is able to determine them. In the course of these remarks I want to ask the minister some more questions. Possibly the most immediate effect will be that interest rates to provincial governments, municipalities and private borrowers will go up. This raises a question which the minister should try to answer or at least give us the benefit of his opinion. Will this conversion cause a rise in long term rates? If so, can we also expect later an increase in short term rates? Will we in this country be in the strange and paradoxical position of having at the same time easy money, in terms of supply, and dear money in terms of interest rates, a result brought about not so much by market forces as by government action? What will be the effect of those higher interest rates during a period not of boom but of pause or recession, in terms of economic stability and prosperity? How will this help to meet mounting unemployment? How and to what extent will these rates contribute to effective control over potential inflationary pressures, and there is no more important aspect of the problem than that? The minister dealt with it at some length, and rightly so, in his broadcast on Tuesday.
Then what is going to happen to the real value of the new bonds? Will it be eroded by the cheating process of inflation over the years? There is another aspect of the question with which the minister should deal. When interest rates are higher in Canada

than in the United States, more Canadians tend to borrow there and more people from the United States tend to lend here, and that pushes our exchange rate up and handicaps our exporters and as well increases import competition in the Canadian market.
I therefore ask the minister a final question on this aspect of the matter. Does he not think that the conversion loan will make interest rates higher in Canada than in the United States, thereby increasing the premium on the Canadian dollar? I am aware of the action taken recently in the United States has brought their interest rates down and in the last few weeks our exchange premium, probably because of that development, has gone down. But does he not think that the long term effect of this conversion, basing our interest rates at 4J per cent, may have the possible effect of increasing the premium on the Canadian dollar?
What we want then, Mr. Chairman, is as full a statement as possible of all the reasons for this unprecedented operation; its advantages and disadvantages; its implications, direct and indirect, on our economy. There can be no intelligent appreciation and no intelligent discussion of the operation without a statement of this kind from the minister.
Finally there is one question I want to ask. I think I said "finally" a moment ago, but I assure the minister that this one is final. Why did the minister not announce this operation in his budget speech? At that time he described the government's borrowing program in the following terms, as found at page 1241 of Hansard:
-during this fiscal year we shall need to sell bonds or other securities in a total amount of close to $3,400 million.
Of this amount $1,400 million was to meet the need for new cash to cover a deficit and $1,950 million to cover the marketable funded debt maturing during this year. Then less than a month later the minister announced the refunding loan amounting not to $1,950 million, as he indicated in his budget speech, but to $6,400 million. Why then did he not make that announcement in his budget, so as to permit us to have a full discussion in the course of that debate? Did he decide on June 17 not to take the house into his confidence then, or did he change his mind after June 17? If so, for what reason? I suggest that those are important questions, Mr. Chairman.
Perhaps in this connection I might quote from an editorial published in the Financial Post on July 19, which included this paragraph:
It Is interesting that this whole plan developed so rapidly. Only a little more than a month ago,
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the finance minister was talking about refunding on a bit by bit basis. This drastic big clean-up scheme originally evolved in a Toronto financial house, has brought a basic turn-around in government plans.


Donald Methuen Fleming: That editorial comment-dealing with the statement of fact- has absolutely no truth in it.


Lester Bowles Pearson: The minister is not denying that there was a change in plan?


Donald Methuen Fleming: I am talking about that false statement in that editorial, about it being evolved in a Toronto bond house.


Lester Bowles Pearson: We will leave out that statement because it has been described by the minister as false, and I accept the minister's statement. But the other statement stands, namely that there was a change in government plans between the time the minister made his budget speech and the day he announced this reconversion operation. We would like to know why this change was made and why it was not possible to give the house some indication of this operation in the budget speech. It certainly raises a very serious point.
I am sure the minister will want to clear up that point as well as some of the other points I have mentioned in this statement. For instance, some people would like to know why the minister felt it necessary to refund the eighth victory loan bond issue and the ninth victory loan bond issue at a time when there are still five years and eight years respectively before maturity in the case of these two issues. It has been contended that these bonds had been sold in good faith on terms agreeable to the buyers, to carry interest at 3 per cent to maturity. It has also been alleged that a great proportion of these bonds were held by banks and insurance companies and trust companies, which have agreed to convert them into the new 4-| per cent bonds, thereby receiving a direct bonus plus 1J per cent more in interest per year for eight years in the case of the ninth victory loan bond, which alone represents a total of well over 12 per cent, as I have already stated, at 1J per cent compounded annually for eight years.
We on this side of the house over recent weeks, as I have stated, have done and said nothing to increase any doubts the Canadian public might have as to some features of this conversion loan. In that respect I suggest we have acted responsibly. Even now, with the loan period nearly over, we are not opposing the purposes of this financial operation as an effort in debt management prior to an appeal for more money. Indeed, as I said, we do not have the main pertinent facts which would enable us to take a final position

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on this issue. However, we blame the government and the Minister of Finance for the present state of confusion and of some suspicion because adequate information has not been made available.
We are now requesting from the minister a full statement on the various features and implications of this huge conversion operation which is of such great immediate as well as long term significance to our economy. Perhaps if the minister had previously answered these questions-most of which, if they have not been raised in the house have been raised by the public and in the press- he would find it less difficult now to fully reach his objective. Perhaps it is not yet too late to provide these answers and ensure the successful completion of this operation which, once it has been decided on, all of us feel should be carried through to a successful conclusion.
Our criticism is that we were not given information on these matters in this house at an earlier time and that many questions are left unanswered, including these questions I have asked, even at this late date in the session. Our criticism is that if these questions had been answered previously the doubts and uncertainty that have arisen might have been removed; that this operation would have been carried on in a better atmosphere than has been the case, and some of these blitz tactics which we read about in the press might not have been necessary. Before the estimate is passed I hope the minister will clear up those points.


Frank Howard: I should like to make one or two comments on the subject matter dealt with by the Leader of the Opposition, namely the conversion loan program. I do not think it is necessary at this time for us to go into as much detail as did the Leader of the Opposition, because I and others in the C.C.F. party at a prior time during this session dealt quite extensively with it and laid the groundwork then, by the legitimate complaints we raised, for the comments made by the Leader of the Opposition this morning. Actually all we are doing in the conversion loan program is borrowing money to pay off debts that we incurred by borrowing money in the first place. Incidentally, I may say that borrowing had been done under a Liberal administration.
I listened with a great deal of interest to the comments of the Leader of the Opposition, hoping to hear some new and enlightened approach to the financial problems of this nation but of course my expectations and hopes in that regard were probably not too well founded. After all, we cannot expect much from either the Conservative

party or the Liberal party with respect to a different type of approach to our financial problems and to control of the money system in Canada, because they both endorse the economic system and financial system that operates in this country.
I did hear from the Leader of the Opposition a sort of simulated angered condemnation coupled with what was actually an en-dorsation of that program, but so long as we remain married to our present financial system we will continue to have these problems arise, we will continue to be forced into debt, not only as the government of Canada but we will also drive other public groups into debt, notably the provinces and, what is even more serious, the municipalities.
The opinion of the C.C.F. has been expressed a great number of times in this house and elsewhere in the country about the necessity of maintaining control of our own financial structure in our own hands instead of leaving it in the hands of outside interests who from time to time can do nothing more than assist us to drive ourselves deeper into debt and to raise interest rates for ourselves and the provinces and the municipalities, not to mention the interest rates which individual citizens have to pay when they borrow money for various purposes. There is an old saying which is applicable in this case, by a person who said he did not care who controlled and who made the laws of a nation so long as he controlled and was able to issue the currency, and that is precisely the dilemma in which we are at the present time.
The provincial statistics show over the years a drastic and steady annual increase in the debt of those provinces because they could do nothing else under the circumstances but go into debt in order to finance their various projects. Worse still, there has been a drastic and steady increase in the total debt of the municipalities generally and in the debt of individual municipalities. Not only has there been an increase in the actual total amount of debt; there has also been an increase in the per capita debt and in the interest rates paid, all because our federal government is unable or unwilling to deal in a sensible fashion with the control of the finances of this country.
I have nothing more to say at this time. One could, as I have said, reiterate what we in the C.C.F. have said on many occasions previously in this session, and point out the effect that this conversion loan program will have on the municipalities and on bond rates and what it is doing in so far as tight or loose money is concerned. But that would be merely repetition and probably would not serve too useful a purpose at this time and, so long as this government is in office, it would not

serve too useful a purpose at any time in convincing the government that it is following the wrong road when it comes to the control of our own finances and our financial destiny.


Mr. McMillan:: Mr. Chairman, I want to say a few words on this bond conversion program. I was surprised when I heard that the Prime Minister and the Minister of Finance had gone on the air as bond salesmen, and I really wondered what had come over them. I noted at the time that the early radio, television and press comments on this conversion really hailed the program, and I thought perhaps I had been taught the wrong concepts of mathematics.
I realized that due to the slackening economy our short term interest rate was approaching an all-time low. In fact, about the middle of last month it did reach an all-time low when the Canadian bank rate stood at 1.12 per cent and treasury bills at .87 per cent. I could not get out of my mind, either, that the average interest on the unmatured bond debt or the total debt of Canada stood at something under 3 per cent-2.98 per cent to be exact as of last March-and that when you took into consideration that the new long term 4J per cent bonds would bear interest at something over 1J per cent above our average, you could not help but feel that we in Canada would be spending many additional millions of dollars in taxes to meet this interest alone.
Every old bond issue was eligible for conversion into the long term 4J per cent bond issue on which the commission was the highest, namely 1 per cent. Certainly this was an inducement to channel all possible outstanding bonds into the high interest long term bonds, and the advertising emphasized that the long term, high interest bonds were most desirable. As we look at the advertising even on the application form for a bond we see that the printing respecting the 4J per cent long term bonds is in the larger type and the printing with respect to the other bonds is in progressively smaller type.
There was a statement that there were too many maturing bonds overhanging the market and that there was a need for tidying up the bond market. It is true that the fifth victory bond issue would come due next January and, as we have an election every four years, the eighth bond loan would not come due until after the next election and the ninth victory loan was not likely to come due until the election after that. In my mind it would seem that the minister certainly wanted no overhang. In fact, he trimmed it back so far that by no stretch of the imagination would any of these maturities bother him in the future.
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I witnessed two transactions made in a bank, one for $10,000 of the fifth victory loan issue and the other for $5,000 of the eighth victory loan issue. The bank converted both these victory loan bonds into the 4J per cent long term bonds, and the bank's commission was $150. The client holding the $10,000 3 per cent victory loan bonds got new 4J per cent bonds plus $250, $51 of which was accrued interest and $199 of which was a bonus free of income tax. The cost to the Canadian taxpayers, therefore, to change this one $10,000 bond to the new 4J per cent bond was $350 which, of course, includes the $100 commission plus $250 bonus, including of course the accrued interest of $51. This, of course, does not include the proper apportionment of radio, television and advertising costs to convince this man to change his bonds.
This bank clerk had heard the Prime Minister and the Minister of Finance make a great patriotic appeal to these victory bond holders to change their bonds to the 4| per cent bonds. I think we should all help our country, and I could not help but be impressed with the upsurge of patriotism that must have been in this man's heart as he took $250 as a bonus plus a new bond with the realization that, thanks to the Minister of Finance, henceforth he would get $450 instead of $300 for the use of this part of his money.
I told a financial man that I thought some of these commissions were too high, and he admitted it. We were talking about the 1 per cent and the 4J per cent bonds and he said, to quote his words, "It is a hell of a steal".


Donald Methuen Fleming: Mr. Chairman, it is a rule of this house that a letter may not be referred to in the house without disclosing the name of the writer of the letter. The reference to a letter or the reading of excerpts from a letter can indeed lead to a tabling of the letter. Before any hon. member attempts to quote something said by someone outside the house he should be prepared to divulge the name of the person involved and the source of his quotation. It is not proper to use anonymous quotations. I submit that it is in keeping with the procedure and dignity of this house that we have some knowledge as to just who made statements of this kind so the house may have an opportunity of judging what value is to be attributed to such statements.


Mr. Habel:: Send for the gestapo.


Donald Methuen Fleming: I ask the hon. member that he bear in mind that he cannot make extraordinary anonymous statements of

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this kind without telling us the name of the author and revealing the source of such statements.


William Hector McMillan: Mr. Chairman, I can get such statements from many people in the bond market.
'Mr. Gour: Yes, very many.


William Hector McMillan: Yes. In fact, Mr. Chairman, I have heard many interesting statements made in my own riding.


The Chairman:: It is indeed out of order to read a letter in this house unless the name of the writer is given.


William Hector McMillan: Mr. Chairman, at no time did I say it was a letter. I was simply relating what I was told by a financial man, and I do not think I should divulge his name.


Lester Bowles Pearson: Mr. Chairman, surely in spite of what the minister said it is quite in order for an hon. member to make a statement to the effect that he has received from someone a particular piece of information and for him to give that statement to the house on his own responsibility as a member of the house, without divulging the name of the person who gave it to him. That has been done many times, and I am sure it has been done by the minister himself.


Donald Methuen Fleming: Mr. Chairman, this is not a matter of information. It is a statement of opinion; a pretty irresponsible opinion, too.


Joseph-Alphonse-Anaclet Habel: People still have a right to hold opinions in this country.


William Hector McMillan: Mr. Chairman, I think the profits for the bondholders have been excessive. It is true that there has been a graded scale of commissions on these bonds, but they have been so generous that some of the bondholders in Toronto have been ashamed. I saw an account to that effect in the paper the other day. Some have offered to forgo some of the bond commissions in connection with big sales, and they have also taken on some of their own advertising. There is no cause for wonder in my mind that they agreed to participate so readily in this bond conversion.


William Moore Benidickson: And cancelled their
holidays.


Donald Methuen Fleming: Did you want them to go on holidays?


William Hector McMillan: Mr. Chairman, I have in my hand an advertisement in connection with these bonds in the form of a cartoon. It shows a man looking into a store window which contains a suit and a sign which

states, "A brand new suit plus cash bonus for your old suit". That gives an idea of what some of these bond houses think of the amount of commission they were paid. 1 also have in my hand a full page advertisement inserted by the government of Canada in a leading publication, to which advertisement reference was made by the Leader of the Opposition. It shows a picture of a lady. I do not know whether or not the minister considers this to be a typical lady. Beneath the picture we find these words.
Look who's wearing her "immediate cash adjustment!" Gracious! What next? A body can hardly keep up with things these days. What with dogs spinning around in the sky and all. And now all this excitement about changing over your victory bonds. I was sorry to see mine go. Had it so long you know.
I do not know whether that refers to her old hat or her victory bonds. I continue:
But when the young man at the bank explained that these new bonds paid more interest. Well! I know a good thing when I see it. And besides, he gave me a nice cash adjustment-which I straightaway spent on a new bonnet. Like it?
I suggest that we should refer to this as a "Fleming" hat. It has the Fleming patriotic price tag hanging from one side. The hat is black probably, I suspect, in mourning for the taxpayers. At the top of the hat we find a bird nestled near the crown. The bird has its mouth open and looks hungry. I think it is probably symbolic of the hungry friends of this government, who doubtless are not so hungry now.
I do not know what this conversion will cost. The Leader of the Opposition took up that matter a few moments ago. I have seen all kinds of estimates ranging between $70 million and $100 million, but according to a statement made by the senator from Hanover in the other place the commissions alone will be $25 million.


Donald Methuen Fleming: Mr. Chairman, surely it is within the knowledge of every hon. member of this committee that it is entirely out of order to quote statements made in the other house. The Leader of the Opposition did it this morning and he should know better. One probably cannot blame his followers for following that kind of example.


William Hector McMillan: Mr. Chairman, I probably should not quote what was said in the other place, but I can refer to what has been said outside the other place. The Minister of Finance has refused to give us an estimate of the cost of this bond issue and that seems very peculiar to me because the estimates for each year are brought down and the Department of Finance can have estimates for the

$5 billion expenditure. I believe the minister has been withholding information that should be given to this parliament.
Another and probably the worst feature of these bonds is that they are not callable. This is an undesirable feature from the standpoint of the Canadian taxpayers. I suggest that what I can only label as "Fleming's furtive, fanatic fumbling financing" will keep the nose of the taxpayer on the grindstone for the next 25 years. Probably at the end of that time the government might give the poor old man the grindstone.


Mr. Carter:: But he will not have a nose.


William Hector McMillan: Supply-Finance
that any responsible person in the Department of Finance advised this financing. If they recommended anything more favourable to the taxpayers they could be overruled by the government. In support of the government's right and readiness to do so I can only quote the words of the Minister of Finance: Let there be no question about that.
I know from the publication of the secret report that the Minister of Finance did not follow the competent advice of the Department of Trade and Commerce. In the budget there was a chance that the minister could have been right. In other words the economy could have picked up, but with respect to this loan he had no chance to be right. He has been wrong all the way. According to the press the minister spent a week end at Murray Bay with friends of the government, with the bondholders and financial men, and that was certainly a very expensive week end for Canadians.
The minister makes periodic statements-


Donald Methuen Fleming: Completely untrue.


Lester Bowles Pearson: Were you not down to Murray Bay?


Donald Methuen Fleming: I was not there any week end, as you know.


William Hector McMillan: 
The Deputy Chairman:: Order. I must advise the hon. member that his time has expired.


Donald Methuen Fleming: May I ask that the hon. member be given such additional time as he may require?


Charles Edward Rea: Does the committee give unanimous consent to the hon. member continuing?


Some hon. Members:: Agreed.


William Hector McMillan: I shall try to get over this quickly. The last issue to which I referred is to yield 2.58 per cent, and there was also $356 million redeemed in cash. I quote the same publication for July of this year:
The decision to offer the 31 per cent bonds was taken in the face of much opposition, as it was argued that it would interfere with the federal reserve policy of credit ease by locking up into long term bonds funds needed by other borrowers- industry, state and local governments and home buyers.
The further point was made that additions to the supply of long term issues will prevent interest costs from declining as much as needed to stimulate a revival of long term borrowing and encourage economic recovery. The idea is that the treasury should concentrate on selling short term issues to increase the liquidity of the economy.
How about Canada? A year ago I think our bonds were considered among the best in the world. Today we are racing very fast toward greater debt. The finance minister's insatiable demand for new money is making the financial people a little wary. They are losing confidence in the financial actions of the government. I think our finance minister has made our economy less liquid
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by freezing vast sums for a generation, thereby making us more dependent upon foreign capital in order to develop our resources.
You know, here in Ottawa we seem to get things a little out of focus. Much has been said about the cost of the printing bureau, and I would be the last one to condone any expenditures that were not justified. But the Minister of Finance, in extra interest alone over the rates we have been paying, has committed the Canadian taxpayer to the cost of building over 100 printing bureaus, one every three months, for the next generation, one almost every mile from here to Montreal.


Donald Methuen Fleming: Is that statement the test of the hon. member's sense of responsibility?


William Hector McMillan: After the minister presented his budget last June I was impressed by the article written by Mr. Perry, the director of the Canadian tax foundation and a former senior official of the Department of Finance. Among other things he made the points that he believed the minister had overstated income by $75 million to $100 million, that the federal treasury would likely be worse off next year than this year, that our deficit would be close to $1 billion-we predicted it would go over $1 billion-and that a look at the prospects for the next decade left him not only disappointed but considerably shocked. This was all before the minister came out with his refunding operation.
The extra interest we will pay is enough to build the St. Lawrence seaway, the South Saskatchewan dam and extensions to railways, and then have money left over to pay for similar projects that might come along in future years. I heard a member of the Conservative party say that the government would go down in history. I say it will go down in history. I think Fleming's folly will be felt and will be discussed by taxpayers yet unborn. This government, in matters of finance, will be judged by the people of Canada in the light of the words of the Minister of Finance, words quoted so often in this house, "By their fruits ye shall know them."
I think the Minister of Finance, who has often bragged about this as being a great financial success in Canada, will only be able to brag about its bigness and nothing else. I think certainly the people of Canada will have much to regret before they are finished paying for these loans.
At one o'clock the committee took recess.

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The committee resumed at 2.30 p.m.


Hazen Robert Argue: Mr. Chairman, as has already been said by a number of members of the C.C.F. party during this session, we feel that the government bond conversion policy has been a very serious blunder and that it will add a tremendous burden of interest to be borne by the ordinary people of this country, the municipalities and the provincial governments as well as the federal government. We all heard the strong statements made by the Minister of Finance on previous occasions with regard to the so-called tight money policy of the former administration and the high interest rates that were resulting from that policy, but with all the faults of the former administration never to my knowledge did they at one fell swoop so add to the interest burden of the Canadian people as has now been done by the reconversion loan.


William Moore Benidickson: Over a period of 25 years.


Hazen Robert Argue: The government as well as the Conservative party have said in two election campaigns that it would do everything possible to ease the financial burden of the municipalities and the provinces. How often have we heard in this house from members of the Conservative party that the former government had gobbled up the lion's share of taxation revenue, had starved provincial governments, and that this in turn led to the starvation of municipal budgets. But by this very action the government is adding a huge burden of interest and carrying charges to the budgets of provinces and municipalities, and undoubtedly it will make the provision of essential services throughout the country more difficult in the years ahead.
The Minister of Finance gave no inkling in his budget speech that this was to be done. Because that policy was not set forth in the budget, parliament was denied the right of discussing this policy during the formal budget debate. We have therefore been obliged to wait until the dying days of this session for an opportunity to discuss, in a formal way, the effects of this policy on the Canadian economy. By its financial policy the government is not only adding to the cost of doing business in this country and the cost of financing the Canadian debt, but it is providing a huge windfall to big corporations and to the wealthy of this country. I am afraid that the government by this policy is making it more difficult instead of easier for the economy to recover from the recurrent recession.
During its short term of office the government has erected trade barriers and has increased interest rates, but has failed to deal with the unemployment problem. The great public works projects about which we have heard so much are, with some notable exceptions, almost non-existent. I do not know whether the Minister of Finance would care to comment on the government's public works projects. However, as far as the province of Saskatchewan is concerned I know that the province is prepared to pay 50 per cent of the cost of constructing further east-west highways or north-south highways on the same agreed basis as for the trans-Canada highway if the federal government will participate.
Here is a province in Canada that is prepared to use its financial resources on a joint basis with the federal government in order to help solve unemployment within that province, and the federal government have said no. They talk about a public works program, but when they have a chance to proceed with a substantial public works program, such as that to which I have referred concerning highways, the answer has been no.
When the minister replies I should like to know to what extent the conversion of Canada's bonds has taken place. I should like to know particularly when the savings bond campaign this fall is likely to start. I have in my hand the Winnipeg Tribune of Thursday, August 28, 1958.


Mr. Nasserden:: I wonder whether the hon. member would permit a question.


Hazen Robert Argue: Yes.


Edward Nasserden: How many millions of dollars is the provincial government of Saskatchewan prepared to put into a highway program?


Hazen Robert Argue: I am not the spokesman for the Saskatchewan government, and I do not know the answer to that question. However, I know the federal government have had firm offers from Saskatchewan to participate on an agreed basis-on an approximately 50-50 basis-with the federal government in building a second trans-Canada highway across Saskatchewan and in building main north-south highways connecting with the United States. No one-and not the hon. member for Rosthern above all hon. members-can argue that Saskatchewan has not done well in the construction section of the trans-Canada. Saskatchewan is the first province in Canada to complete its section of the highway.
Because Saskatchewan is the first province to complete its section of the highway we stand in this position. In 1958 we are the

only province which can no longer obtain federal money for such a highway program. Saskatchewan's record is good. Saskatchewan is prepared, on a joint basis, to proceed immediately with a second trans-Canada highway going through Saskatchewan from east to west as well as with north-south roads. That statement may not answer the question asked by the hon. member with regard to dollar value, but I think it gives him a general idea of how much further the province of Saskatchewan is ahead of the hon. member's own government. This government have a works program that is still on the shelf.


Edward Nasserden: If the hon. member would permit an observation-


Hazen Robert Argue: Oh, no.


Charles Edward Rea: Order.


Hazen Robert Argue: When I conclude the hon. member can make a 30-minute observation.
I was about to refer to an article appearing in the Winnipeg Tribune of August 28, coming from the Tribune Ottawa bureau. It talks of a very strong difference of opinion between the Minister of Finance and the governor of the Bank of Canada with regard to the timing of the savings bonds campaign for this fall. I am sure the minister will be quite prepared to comment on this article.


Donald Methuen Fleming: If my hon. friend will permit me, I will reply to it right now and say that it is a scurrilous article, devoid of truth.


Some hon. Members:: Hear, hear.


Hazen Robert Argue: Mr. Chairman, I would not agree that it is a scurrilous article.


Donald Methuen Fleming: Well, it is.


Hazen Robert Argue: I do not think that is a fair comment about the man who has written the article.


Donald Methuen Fleming: It is a very restrained comment.


Hazen Robert Argue: I see that the minister is now getting back into his regular campaign style. The rumour was that we were all going to modify our approach to his estimates so we could finish some time either this week or next. The minister by his statement has now denied the truth of the article, so I do not think there is any point in my referring further to it.
I have made some reference to the problems with which the provinces are faced because of the increased interest rates resulting from the government's financial policy, and I want to refer very briefly to another aspect of that policy as it affects the provincial governments. Following the
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federal-provincial conference of last fall the government moved in this house to increase the amount of money, based on income tax, paid to the provinces, the increase being from 10 per cent to 13 per cent. Because of statements made by the Minister of Finance and because of the very definite promises made during the election campaign of assistance to the provincial governments, those governments believed that they would obtain an additional $62,203,000 as a result of this move. But because the Minister of Finance had in his statement and in his proposal a very definite joker, only the very minimum advantage has been gained from that proposal. There is no floor under the increase; therefore the amount going to the provinces is reduced as our economy slumps along during this period of recession.
Because our gross national product has not continued to increase, because we are in this state of recession, the benefit of this $62 million has not gone to the provinces. I would suggest to the minister that there should be placed in his legislation a floor which would provide a guarantee that at least 95 per cent -as has been provided in another instance- of this so-called increase will in fact go to the provincial governments. The Minister of Finance has not helped the provincial governments by this move as they were led to believe they would be helped; they have not received $62,203,000. Instead of having a further conference, as was very definitely promised, to help solve the difficulties faced by the provinces of this country, the government has made this new move to increase interest rates, which has brought about a very large increase in the financial burden of the provinces of Canada.
I am sure the Minister of Finance will make a very spirited defence of his policy, but the fact is that Canada today is in the greatest depression this country has seen since the thirties.


Some hon. Members:: Oh, oh.


Hazen Robert Argue: The members of the Conservative government can groan as loudly as they like, but if they had been in this house a few years ago they would have been very vocal in condemning the former government at a time when unemployment was a whole lot less than it is today. What a change in their attitude! Last session they all listened very carefully to everything that was said in this house; they were very attentive. They paid attention to every resolution brought in and promises galore were made, conferences were held and nothing was too good for the municipalities, for the provincial governments, for small business and for agriculture.

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What is the government's score in so far as solving the major economic questions faced at this time by the Canadian people? Its score is zero. There is widespread and continuing unemployment and difficulty in the agricultural industry, and the government is now embarking upon a deliberate policy of making it more difficult for the provincial and municipal governments of this country to work out their budgets.


William Moore Benidickson: So far in this debate our discussion for the most part has been-and quite understandably so-on the point of the very big operation which the Minister of Finance announced with respect to the conversion of about 40 per cent of our matured debt.
The case of the opposition and the analyses from the opposition ranks were so well presented by the Leader of the Opposition and the hon. member for Welland, in such comprehensive and masterful ways, that I do not wish to say a great deal more on the subject. I was just wondering, however, if the thought would appeal to the minister that, by consent of course, on item 1 we might confine our debate at this stage to the conversion loan. There are, I am sure, other aspects which hon. members want to raise on item 1, and the Leader of the Opposition raised a number of questions to which I am sure the minister is prepared to reply. The ground work has been so well laid, and I am conscious of the fact that this may be the second last or third last day of this session that, as I say, I have very little to add; but-


Donald Methuen Fleming: If I may say so, I
think the suggestion of the hon. member is a good one. This seems to be the major subject so far as those in the opposition who have spoken thus far are concerned, and it might be well to continue with that particular subject to its conclusion in order to avoid a discursive sort of debate running to other subjects at this time.


William Moore Benidickson: I was thinking of Hansard and the opportunity for the public to get some sort of continuity in the debate on this subject. Of course I have some remarks to make on such matters as tight money, the Bank of Canada and so on, but I would not really want to relate them back, in view of that understanding, to the conversion loan. Therefore any remarks I might make at this point, if it is acceptable to the committee, might, along with the discussion of other hon. members, be confined to the conversion loan.
Although I could not possibly add very much to the extremely informed and inquiring remarks in the debate this morning 
respecting this conversion loan, my particular disturbance at the moment is chiefly the absence of a callable feature in the conversion loan opportunity which the minister has decided to make available to the investing public.
I would remind him that the last time, to my knowledge at any rate, when the wages of money were ever set at this rate was under a previous Conservative administration, I believe in 1934. There was a conversion loan then which was given promotion similar to that which we have had at this time, with advertising, ballyhoo and so on, under the previous Conservative administration, again at the same highest rate of 4| per cent. But when they were converting the victory bonds of world war I on that occasion they did put in a proviso that within 10 years there would be an opportunity to call the bonds. The record shows that within 15 years subsequent administrations found that they could to the advantage of the taxpayers of this country pay off that obligation under the terms of the callable provision, and did so.
It disturbs me very much that we are obligated here for 40 per cent of our existing debt at a base of 4J per cent interest. I thought the hon. member for Welland very clearly gave examples this morning of interest rates that are now being paid in other countries across the world. He mentioned, of course, the United States where rates might be low, but he also mentioned cities such as Hamburg and other places that are able to borrow money at less cost to the ultimate taxpayer than the Minister of Finance has decided to pay without interruption for 25 years. The lack of a callable feature disturbs me.
As I look at the biographical index the Minister of Finance will probably be 78 by the time these bonds come up for payment and redemption. I believe he has unnecessarily imposed a long term obligation on the people of Canada for a permanent 4J per cent rate. I am also very disturbed about that. 1 am wondering what are the reasons for not having the usual feature of an opportunity for redemption after a certain period of time.
We know that a very small percentage of the individual people of Canada hold bonds and are given this opportunity for conversion. I do not wish to exaggerate that. In previous discussions of this subject-and only by question and answer, because the minister was not very informative on any occasion-I must say I rather doubted his assessment that there were two million Canadians holding this type of security. I have learned since, of course, that this is possible

because more than two million Canadians during the war years did subscribe to victory bonds in denominations of $50 or $100. If my hon. friend's calculations are based on that fact I want to ask him to inform the committee what knowledge the Bank of Canada has as to the number of those people who in the last 12 years have gone to banks to cash in these relatively small items.
In the figure of two million I believe the minister included many institutions which by the average Canadian are not looked upon as anything other than financial institutions. I will not attempt to repeat the effective arguments that were made by the Leader of the Opposition and the hon. member for Welland about these facts; we know that is so.
I question whether or not this terrifically expensive advertising campaign-for instance, the lady in the hat and so on, and I have another one about which I wish to remind the minister-is really justified if it applies to the holders of these small $50 and $100 bonds. The Leader of the Opposition asked just who was conducting this campaign. We would like to know something about that in so far as the advertising fraternity is concerned. I believe it is being conducted by the former firms of one of the chief advisers of the Prime Minister.
One of the first advertisements that appeared in connection with this promotion is on my desk before me. I have here the Ottawa Citizen of July 15, 1958. The advertisement is addressed to all holders of victory bonds. On approximately 50 television stations and 152 radio stations this was promoted by the Prime Minister and the Minister of Finance as a patriotic objective.
The Leader of the Opposition explained that very effectively this morning. But I ask hon. members of this committee, if we are considering something in the nature of a patriotic endeavour, whether or not they think such a full page advertisement has been properly designed if such words as "confidence" "stability" and "progress" get much smaller type than the type announcing the fact that Hon. Donald M. Fleming, Minister of Finance, is promoting it? What is more likely to appeal to the holders of these bonds? Is it the big letters used in this full page advertisement for the name of the minister, or would they think the advertising agent was not political and was more likely selling a worth-while product if emphasis had been given to the words that now appear in smaller print, "confidence" "stability" and "progress"? I believe that is worthy of consideration. There has been a great promotion campaign undertaken with respect to this conversion.
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Questions were raised in the debate this morning with respect to cost. The minister challenged the hon. member for Welland to disclose the name of an informant. The hon. member for Welland said he had some verbal information from somebody who was associated with the banking fraternity. May I say that I am familiar with someone who is connected with the communications fraternity. He told me that two days after the launching of this promotion all local banks in this country were sent telegrams, presumably paid for by the taxpayers. The first one ranged in length between 1100 and 1200 words, and my informant told me that the calculated cost of sending it to a very small community in Manitoba would be $22. This was followed by a night letter of over 800 words in length, and my friend did not tell me what the cost of that would be. We all know how many branches of Canadian banks there are across this country. There is a blitz on-


Donald Methuen Fleming: Mr. Chairman, may I ask my hon. friend who appears to have sent the wires of which he speaks?


William Moore Benidickson: Pardon?


Donald Methuen Fleming: Whose wires does he refer to?


William Moore Benidickson: The wires, of course, came from the agent of my hon. friend, the Bank of Canada. The wires were sent to all branches of the banking system as agents. Doubtless they would have been sent to all investment dealers as well. Perhaps my hon. friend had a gross rate with respect to this type of communication. When my hon. friend replies to some of the criticisms with which we are concerned here he could perhaps explain this to us.
After what we heard from the Leader of the Opposition and the hon. member for Welland I believe we all recognize that it did not require this "hard sell" in so far as the institutional owners of these securities were concerned. They had a tremendous opportunity to improve their position.
The minister was on television last night I did not have the opportunity to see him, but I have talked to some others who did and I must say that they thought he was a pretty good salesman, and so on. Each of those hook-ups costs about $20,000, according to my information, and they are not designed to go to those 1,800,000 individual holders of $50 bonds I spoke about and the smaller number of people who hold $100 bonds. I would like the minister to give some indication of how many people we are attempting to approach who perhaps own $1,000 bonds, who are not institutional owners of government securities. Perhaps at this stage of the

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committee discussion the minister would deal with the bond conversion program. As for me, except for interrogation on this particular subject, I will not unduly harass him because of the calendar situation.
The Leader of the Opposition-I still think of him as minister for external affairs- raised several specific questions of the utmost importance to the people of this country. The minister should reply specifically to those questions. Of course I imagine we shall have an opportunity in committee of supply further to interrogate the minister, but I am prepared to defer questions of a more general or of a broader nature until we have disposed of the matter of the conversion loan. There is no item in the estimates with respect to the conversion loan; therefore we must deal with it on the first item in the estimates. There will no doubt be some others who have questions to ask the minister, but probably by consent they will direct their questions to the minister at this point on the conversion loan only. Their rights will then be unlimited with respect to other points of administration in regard to the Department of Finance.


Mr. Cresiohl:: Mr. Chairman, I would like to address myself to another subject that has nothing to do with the conversion loan. I understood the minister to say that if there were no other speakers he might want to deal with that at once, and I shall reserve my privilege to continue with another subject later.


Donald Methuen Fleming: Mr. Chairman, if no other hon. members wish to address the committee on the Canada conversion loan of 1958, I shall now have very much pleasure in replying to some of the biting criticisms which have been heard in this committee today from the opposition benches with respect to this important national undertaking.
This morning the Leader of the Opposition complimented himself on, as he said, having acted responsibly in the days which have intervened since July 14 when the campaign was announced in this house until today. Mr. Chairman, having recognized that the Leader of the Opposition acted responsibly in his remarks in this house on July 14 and since by his silence, until today, one can only express great regret that today the hon. gentleman has chosen the opposite course. While one is ready to attribute to the hon. gentleman full credit for having spoken as he did on July 14 in a spontaneous utterance, one can only regret that apparently in the interval, and very recently, he has been permitting himself to be influenced by others.
I shall have something to say later, Mr. Chairman, about the compound of confusion

and suspicion that characterized some of the utterances in this committee today. 1 say this to you. Although the estimates of the Department of Finance have been called several times or announced several times as about to be called at other stages of the session, in the light of the remarks that have been made here today, which if they are listened to or paid any attention to by the people of this country, could have harmful effects perhaps, it is well that the Canada conversion loan campaign was permitted to reach the present stage in its second last week before those harmful remarks, those mischievous remarks, those irresponsible remarks, were delivered in this house by hon. gentlemen opposite.
Let me review stage by stage the circumstances out of which the Canada conversion loan campaign issued. We as a government inherited from our predecessors the prospect of the maturity in rapid succession of a considerable series of bond obligations of this country. They are not confined to the Canada victory loans; but of the $10 billion in approximate figures that the people of Canada subscribed in response to appeals during the war in the nine victory loan issues, up to the present time four have matured and have been refunded or in part paid off. Five of them remain, and those five aggregate something over $6.4 billion, a tremendous share of the entire national debt.
As I pointed out in the statement made in this house on July 14, the difficulty is that these five series are falling due in rapid succession. One of them falls due at the beginning of 1959.


Lester Bowles Pearson: Eight years.


Donald Methuen Fleming: The next one is in 1960; the next one in 1962; the eighth in 1963; and the ninth in 1966. They are not the only bond maturities that fall due in those years. Indeed, there are numerous others, and we are faced with a situation where these maturities following one another in rapid succession must be met; for here we are dealing with something that is very precious, the credit of Canada. There is nothing that is more important to the wellbeing of the Canadian economy in all its aspects, in all its facets, than the national credit, of this country; for if that national credit is not maintained and safeguarded the credit of other institutions and individuals will correspondingly suffer, Mr. Chairman; for the national credit is basic to all our ideas of credit and all ideas of confidence in our country.


William Moore Benidickson: Still good because of surpluses of your predecessors.


Donald Methuen Fleming: Mr. Chairman, we realize that my hon. friend should not be held too responsible for the things he is saying.


Lester Bowles Pearson: Why does the minister not answer him, then? That is the only reply.


Donald Methuen Fleming: It is out of my
friendship for him that I am not answering.
Now, Mr. Chairman, there is with respect to a rapid succession of maturities virtually no room for manoeuvre on the part of the issuing authority. These are obligations which must be met as they fall due; otherwise serious and sometimes irreparable harm is done to the credit of the issuing authority. It is possible in some cases to anticipate a maturity and make an offer to those who hold bonds that will mature in the future to surrender them in return for some other form of security, normally under present circumstances in terms of a later maturity. But apart from that circumstance, Mr. Chairman, these maturities leave no room whatever for manoeuvring on the part of the national treasury.
We have other obligations which must also be met. As I indicated in the budget speech on June 17, it will be necessary for us to borrow. There is some leeway in the matter of choosing dates of issue of new securities designed to raise new money but, Mr. Chairman, as long as there is overhanging the national treasury a series of debt maturities following one another in rapid succession it will mean that the national credit will be a problem to preserve, and we will be faced as well with difficulty in raising new money as that becomes necessary.
That is the situation to which we fell heir. It is regrettable that these victory loan bonds were falling due in such rapid succession. It is regrettable that their maturities were not spaced out farther apart in the future. I am not going to be critical of those who were responsible for their issuance in time of war. Perhaps they did what they thought was best under the immediate circumstances.


William Moore Benidickson: Don't you think they did?


Donald Methuen Fleming: But we have fallen heir to the problem of meeting these obligations and there, Mr. Chairman, is the problem. You cannot claim to have any effective policy of debt management as long as you are faced with heavy maturities in rapid succession, and at the same time with the necessity of going into the market to borrow new money. Debt management policies mean that you will have some regard for 57071-3-290
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the spacing of maturing obligations, that you will have some breathing space, some room for manoeuvring in putting out your issues in search of new money.
I should like to say a word now concerning the condition of the bond market. The government is a debtor. The government must continue to be a borrower. One C.C.F. member said today that as long as we are going to have the present system you are going to have situations of this kind where the government has to offer obligations to people in return for maturing obligations, or borrow further money from them. He was right. As long as we have a free system in this country that is exactly the situation that any government is going to face. It must go into the market and borrow money there. It cannot go into the market and compel people to hand over money. It can do that when it taxes, but not when it borrows. Borrowing assumes that you find someone with funds who is willing to lend his funds to you, and the government as a borrower must find persons who are willing to lend money.


William Moore Benidickson: Could I ask the minister a question?


Donald Methuen Fleming: I will ask my hon. friend to defer his questions until later, if he does not mind. In our free system that is precisely the situation that will obtain. The alternative is to resort either to compulsion or to the printing press, the former of which would destroy our freedom and the latter of which would destroy the value of our currency and wreak untold damage upon obligations and persons with fixed incomes.


William Moore Benidickson: You recently went tc the printing presses for $400 million.


Donald Methuen Fleming: If my hon. friend will persist in remarks of that kind I will have to make some comment in reply thereto. I hope he will accept that suggestion.
I said I was going to say a word about the condition of the market. Interest rates in this country, after a period of relative stability for some years, began to rise at the end of 1955. During the war years federal government financing did not face the competition that it faces today in the short, medium and long term markets with others who are seeking to borrow in those markets; therefore it was relatively easy for the government during the war to maintain the rate of 3 per cent.
Anybody who knows anything of conditions in the market knows perfectly well that if these five issues of Canadian victory bonds had been permitted to remain outstanding until maturity without any effort being made to reduce the outstanding aggregate the

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federal treasury would have had to pay higher rates of interest in any attempt made then to refund them. So let it not be pretended that the rates in the Canada conversion loan represent something new in the way of an increase in the interest rate. Interest rates in this country began to rise at the end of 1955 and the former government experienced that increased cost in its borrowing starting at the end of 1955 and in 1956 and 1957, until the new government came into office.


William Moore Benidickson: Now we have the highest ever.


Donald Methuen Fleming: Interest rates continued at that higher level until the autumn of 1957. If my hon. friend is talking about interest rates I will remind him, if he wants to take his mind back to the last long term issue of the former government, an issue of $150 million of 41-J-year bonds on September 15, 1956-it was nothing like the amount we are talking about here, $6.4 billion, the largest financial undertaking in Canada's history- that they put out that issue at a coupon rate of 3| per cent but they sold it at a discount, and their true rate was 3.9 per cent. That was their rate on a long term issue.


William Moore Benidickson: A 16-year longer term issue.


Donald Methuen Fleming: And, Mr. Chairman, it did not go nearly as well, even with that limited objective of $150 million, as our conversion loan issue has gone so far. If hon. members opposite want something further I remind them that on December 15, 1956, they put out a one-year issue and the effective rate on that issue-let us not be concerned about the coupon rate but the effective rate, having regard to the discount at which they sold it- was 4.31 per cent. There is the last borrowing of the former government in the open market, 4.31 per cent, and that issue involved $250 million, a mere fraction of the amount we are dealing with here.
Surely, Mr. Chairman, any legislative body in a free society that knows how the laws of supply and demand work, and that they work in the money market the same as they work in any commodity market, knows that the more money you have to raise at any particular time the greater the demand is and the greater the pressure on supply, and as a result you have to pay more. Well, Mr. Chairman, that was the situation which confronted us. Our last borrowing was in April, and we were successful in that borrowing. It will be remembered that we put out a series of four maturities last April and out of those realized the substantial total of $950 million. We paid an interest rate of 2.94 per cent on a one-year and two-month bond. We paid, and I am

speaking here of effective yield, a rate of 3.35 per cent on the second bond, maturing in May, 1961. We paid an effective rate of 3.71 per cent on the bonds maturing in 1970, and on the longest term maturing in 1978, we paid an effective rate of 4.01 per cent to maturity. Those are the rates on the last borrowings by the federal government before we come to the Canada conversion loan three months later.
What had happened in that period? Well, we have seen in the market in recent years, Mr. Chairman, a trend toward the issue of short term maturities. The longer term maturities have not gone as well or as rapidly as the short term maturities. This is something any issuing authority, whether it is the federal, provincial or municipal government or private business, must take into account. There are some factors in the long range aspects of the problem which must be considered and be taken into account by any issuing authority.


William Moore Benidickson: Just for the record, it is
not debatable-


Donald Methuen Fleming: I told my hon. friend that I would take his questions later, if he does not mind.


William Moore Benidickson: The statement of my hon.
friend was really-


Donald Methuen Fleming: I indicated a while ago that I would take his questions later, if he can contain himself.
It was our expectation, as I indicated in the budget speech of June 17, that with the heavy borrowing program we faced this year, the heavy bond marketing program necessitated in addition by the heavy maturities within the period of this fiscal year as well as the necessity for raising substantial new amounts of money in the market to meet our obligations, both those represented by our budget debt and our non-budgetary necessities, we would go forward on a basis of spreading out these offerings to the public.
I stressed in my budget speech, Mr. Chairman, that there must be a relatively flexible approach to this problem on the part of the federal government. At page 1242 of Hansard for June 17, 1958, in the budget speech, this is what I said:
Government policy regarding the management of the public debt cannot follow any rigid formula; it must be adapted to economic conditions and to market requirements. While I do not propose to place an undue burden on the longer term bond market, it is most desirable to keep our maturing debt reasonably spread out over the years. To refinance maturing issues cheaply in the short term market would only build up greater difficulties for ourselves two or three years hence. It will be our aim to offer acceptable volumes of longer term bonds whenever suitable opportunities

occur, and to spread the remainder sensibly between short and mid-term maturities.
While the prospective increase in our debt will be quite substantial during the next year or two, the net burden of the public debt will remain well below what we carried quite easily only a few years ago.
I indicated there, Mr. Chairman, the necessity of preserving a measure of flexibility in our approach to this problem, and not being tied down to any rigid formula. What we have done since has been completely in keeping with that principle.
Now, it was a change in the market condition which was occurring at that time which necessarily had a very direct influence on our thinking and our approach to the problem of borrowing. Beginning on June 16, the day before the budget speech, there set in in the financial markets of the United States a rapid weakening which affected the strength of the bond market immediately, and that communicated itself to Canada as any weakness in the market in the United States does communicate itself to Canada. We had to take account therefore, of this weakening influence in the financial markets in the United States, a situation where yields were rising and the quoted values of securities of even the highest authority, the federal government, were dropping rapidly.
What happened in the United States in the middle of June continued, and has continued since. This situation was described in one of the leading financial periodicals in the United States, the regular letter of the Bankers' Trust Company, in these words:
The financial community has just witnessed a most unusual occurrence: the government bond market has undergone a precipitate drop-
Note these words, Mr. Chairman:
-a precipitate drop at a time when business activity is near its recession low following the sharpest decline since prewar days, and when the federal reserve has been furnishing reserves to the money market in massive amounts.
That is a United States estimate of the weakening that set in in the financial market there, and which had an immediate effect upon the values of government bonds in that country. We felt the result of that weakening and so, taking cognizance of the situation, we decided at that time to postpone any attempt to go to the financial markets of this country to borrow money on a new issue. In order to meet the temporary situation, as I fully explained to the house in my statement on July 14, we arranged temporary financing through the banks and the temporary financing is to continue until December.
In the meantime, Mr. Chairman, we undertook a measure by which we sought to bring, and I have no doubt have succeeded in bringing, abiding strength to the bond market in 57071-3-290;
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Canada, and for the purpose and with the result of strengthening the position of the federal government and other governments in that market. This is our concern, that for whatever causes the federal government may have to go to the market for borrowings, we shall go there on as favourable terms as we can obtain. No minister of finance of this country is ever going to go to the bond market on terms that are any more generous than he has to pay to borrow the money he requires.
Faced with this situation, we turned to the Canada conversion loan as the largest financial undertaking in Canadian history, and designed to bring strength to the whole structure of borrowings in this country.
I do not need to go over the ground I have covered in previous statements in the house. This measure offers us an opportunity to bring about some control over our debt maturities that could not have been accomplished in any other way. The Leader of the Opposition talked glibly this morning about debt management, yet he condemned the one effective way by which debt management policies may be put into effect in this country. What is the use of talking like that? It is action that is required, and this conversion loan will do more to make it possible for the government to have some control over debt maturities and put into effect policies of effective debt management than anything else that could have been done under the circumstances.
I have indicated, Mr. Chairman, how these rates are set. The Minister of Finance, in going into the market, goes there to make his borrowings on the most favourable terms he can obtain. Those from whom the money is to be borrowed naturally are looking for the best rate they can obtain, and it becomes a matter then of arriving, in accordance with the estimate of supply and demand in as fine a scale as human judgment will permit, at those terms which will attract the money that is required to be borrowed on behalf of Canada. That is the way it will always be as long as we have a free economy in Canada.
Of course, if we are asking people in this country, to lend money to us for a longer period, anybody who knows anything about the bond market in recent years knows that we must be prepared to offer inducements, for the longer term market in these recent times has been more elusive by far than has the short term market and the yield rates in the long term market have been substantially higher than those in the short term market.
Wanting as we did to postpone into the future the maturity of as much as possible


Charles Edward Rea: Order. The
minister's time has expired.


William Moore Benidickson: Carry on.


Charles Edward Rea: Will the committee give the Minister of Finance unanimous consent to continue?


Some hon. Members:: Agreed.


Donald Methuen Fleming: I thank the committee, Mr. Chairman.
Those who are responsible for promoting the conversion are not to be blamed because they have sought to focus attention on the 4J per cent coupon on the 25-year bond or

on this cash adjustment payment. Naturally these offerings are put before those who hold these victory loan bonds in their most attractive form. But these are necessary factors in seeking the response. And what a response it has been. I will make this frank statement. Little did I think when this campaign was announced on July 14, facing as we did the period of the summer when a great many people are away from home, that by Labour day we would have reached the figure of $5 billion of conversions. I think that, in the eyes of all Canadians, is an achievement of which to be proud. It points to the confidence which Canadians have in their own country the best security in the world, the one that we want Canadians to look upon as the best security in the world. I refer to Canada's credit, Canada's promise to pay.
The response of the Canadian people has been magnificent. I am thankful, Mr. Chairman, that we obtained the conversion of the $5 billion before hon. gentlemen opposite today opened up their attack on Canada's conversion loan. Certain it is that, if the people of Canada pay any attention to these irresponsible attacks, they are not going to help us in our efforts in this final period, the last ten days of the campaign, to reach just as many as possible of these bond holders who have not yet converted their bonds. Our effort, Mr. Chairman, has been geared to a program in these last ten days to reach everyone that we can possibly reach. That is the reason for the publicity campaign. We want to reach every victory bond holder. Many of these bonds are held in small amounts. Many are in bearer form. They are scattered about in safety deposit boxes and other places of safekeeping. We must bring this message to every small bond holder. It is the small bond holder in particular whom we are trying to reach with the aid of this publicity campaign. Yet hon. gentlemen opposite complain of it.


An hon. Member:: Shame on them.


Donald Methuen Fleming: That is the degree of responsibility with which they have approached their part in this great national effort.


Lester Bowles Pearson: We are to keep quiet?


Donald Methuen Fleming: No.


Lester Bowles Pearson: We are to be gagged?


Donald Methuen Fleming: The hon. member prided himself today on having kept quiet on this subject since July 14. He prided himself on having kept quiet. Does he pride himself today on having unleashed this attack upon Canada's conversion loan?


William Moore Benidickson: It is not on the small investors; it is on the government's position.


Donald Methuen Fleming: This conversion loan, throughout the length and breadth of Canada has exceeded all our expectations. It was hailed everywhere in all parts of this country as a forward step that promised great good for Canada in the future. But there were exceptions.


Lester Bowles Pearson: There certainly were.


Donald Methuen Fleming: There were three newspapers of anti-government persuasion which did not like it. However, I will say this for the newspapers across Canada. With relatively few exceptions they applauded the announcement and urged support. I will refer to only two of these newspapers, Mr. Chairman. Here is the Toronto Daily Star in its issue of July 15. It certainly is no supporter of the government. This is the editorial. I will pass over the parts in which they make a kindly reference to the television program of the previous night in which the Prime Minister and I had taken part and announced the campaign. They stated as follows:
The big, new loan is a bold step. Over the next six years about $6;. billion in wartime victory bonds are coming due. To refund them as they come due would require floating very large new loans about every six months. This would have an unsettling effect on the bond market. Encompassing the whole caboodle in one vast issue-the greatest financial operation in Canada's history-should stabilize the bond market and make it easier for lesser governments, for instance, municipalities, to float what loans they require.


William Moore Benidickson: Mr. Chairman, were they not quoting the minister?


Donald Methuen Fleming: That is the Toronto Star, a leading Liberal newspaper. Let me give one more, Mr. Chairman. I will take time to give only one more. This is from the Montreal Star, a paper which does not pretend to give any measure of consistent support to this government. Here is what they said in their editorial of July 16:
The government's decision to go all out and, in one huge operation, clean up its overhanging debt conversion program deserves to succeed. The timing is good and the plan, so far as can be judged, is an attractive one.
I said there were exceptions; there were three exceptions, and one of them, of course, was the Winnipeg Free Press. It seems now that after a good beginning on the part of the Leader of the Opposition on July 14, the Winnipeg Free Press has called the tune and the official opposition opposite have knuckled down and they are today following the line set by this publication.


Lester Bowles Pearson: That is childish and the minister knows it.
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Donald Methuen Fleming: What the Leader of the Opposition is doing is childish, in following the line of the Winnipeg Free Press and not following the sound, responsible and patriotic line he followed in this house on July 14.
There was mention today of a biblical expression which I have used in this house on a number of occasions, "By their fruits ye shall know them." What then has been the effect of this Canada conversion loan on the condition I have described, which provided the background for our decision in that respect? The effect, if a comparison is required, is measured by the fact that conditions in the United States have continued as I described them earlier. There have been drops in some of the gilt edged federal securities over there of as much as 9 and 10 points on an issue in the period since last spring. What has been the result in Canada? What has been the condition which has followed this conversion loan? Mr. Chairman, I am thankful to say that we have stabilized the Canadian bond market.


Some hon. Members:: Hear, hear.


William Moore Benidickson: The non-victory loan
bonds?


Donald Methuen Fleming: We have achieved a degree of stability in the Canadian bond market which is the envy of the United States.
If I had time I could refer to many expressions of admiration for what has been done here which have been uttered in the United States. The benefits of the stabilization of the market will not only accrue to the federal government, they will also accrue to the provinces, to the municipalities and to private business in respect of the borrowing they must undertake.


William Moore Benidickson: The high interest rates?


Donald Methuen Fleming: The effect has already been reflected in a most impressive drop in the rate we have to pay on short term money, the rate on treasury bills. In fact, the treasury bill rate in recent weeks has reached the lowest point in years in this country.


William Moore Benidickson: Then why is the long term the highest?


Donald Methuen Fleming: Much of the benefit of that condition is attributable to the Canada conversion loan.
It was pretended here today that somehow or other this had had the effect of causing the market to close to other borrowing authorities including the provinces and municipalities. Nothing could be further from the truth. The fact is that in the first eight months of this

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year, to August 31, the amount ol public borrowing in Canada far exceeded that of 1957. Here are figures which were published in the press two days ago:
Total Canadian public bond financing during the first eight months of this year amounted to $2,321,844,865 compared with $1,416,177,420 for the same period last year.


Lester Bowles Pearson: What has that to do with it?


Donald Methuen Fleming: It has this to do with it, that our conversion loan has not had the effect of squeezing other borrowers out of the market.


Lester Bowles Pearson: How much of that is since July 14?


Donald Methuen Fleming: Perhaps not a great deal of it.


William Moore Benidickson: Give us the figures, then.


Donald Methuen Fleming: Because dealers have been devoting their efforts-and I am thankful for this, as I would have hoped the hon. gentlemen opposite would have been thankful-principally to making a great success of the conversion loan as the greatest financial undertaking in Canada's history. With that out of the way there will be every opportunity for other borrowing authorities to go into the market and expect the attention they would like to have.
There have been some criticisms with which I would like to deal fully and frankly. It is not a matter of choice on my part, believe me, that the remarks I am making are as long as they are, but hon. members opposite have evidently attached a great deal of importance to this matter. I think six or seven hon. members-


Lester Bowles Pearson: Three.


Donald Methuen Fleming: My hon. friend does not lead everybody in the opposition. I believe at least five or six hon. members have spoken on this matter today and I think in fairness I should deal with their criticisms.
I have referred to the fact that the Leader of the Opposition made a statement on July 14, which is to be found in Hansard at page 2203, and which I think was a model statement on the part of a responsible Canadian. He welcomed the announcement made that day and he called it an important statement. He said that it was the largest operation of its kind in our history, even in our wartime history, and I will read some of his words on that occasion:
He has emphasized-
Referring to myself.
-quite rightly that for it to be successful it will require the enthusiastic co-operation of everybody concerned, and as I said in my contribution to the budget debate, Mr. Speaker, all Canadians

will hope that he will get that co-operation and all Canadians must hope that this operation will be a success.
That was a responsible statement. And then the Leader of the Opposition pointed to the fact that we in this country were entering upon some very difficult and complicated financing and-
-refinancing moves which the minister has outlined to the house previously, and this is the first and a very important stage in what he himself has called a major financial operation. I repeat that we as Canadians must all hope that this operation will be a success and that, above all, the stability of our currency will be maintained throughout the operation. Of course, while all of us hope that, we cannot but help feel anxious about the effect on monetary policy and on inflationary pressures of the operation which is now beginning. We hope that effect will not be harmful, and we hope these inflationary pressures will be held in check. We will all be following with great interest the progress of this very important refinancing campaign.


Lester Bowles Pearson: We have been.


Donald Methuen Fleming: Why, Mr. Chairman, why has the Leader of the Opposition fallen from the high sense of responsibility reflected in that statement to the low state of irresponsibility reflected in his remarks in this house this morning?
We will have to re-assess in the light of this experience the value and the importance we should attach to statements of the Leader of the Opposition in the future if it is going to be open to him to make such a complete somersault in his position and to abandon responsibility in favour of irresponsibility.
All members of the Liberal party in this house, however, are not quite in that category, and I wish to say, not to score any debating point but in a desire to pay a tribute to them, that there are two hon. Liberal members of this house who are mayors of their own municipalities and who have taken what I think is a patriotic and responsible course in commending this campaign to their people.
Firstly, the hon. member for Outremont-St. Jean wrote to me on July 25 in reply to a letter which had gone out to all municipalities holding those bonds, in which he said the following:
I believe the city of Outremont holds approximately $290,000 of the bonds exchangeable for the new loan and at its next meeting of August 6 a resolution will be presented in order that these bonds may be converted immediately.
These bonds were converted and I thank the hon. member for Outremont-St. Jean for the support he engendered on the part of his municipality.
Then the hon. member for Fort William, who is mayor of that important city, caused to be sent to me through the clerk of the municipality a statement that he had issued

at the time of the announcement of the loan, saying that the mayor had requested this statement to be sent to me. The following is an extract from the monthly radio report of Mayor Hubert Badanai M.P., to the people of Fort William:
In his budget speech of June 17, the Minister of Finance made reference to the government's intention of offering large blocks of bonds to meet the government's commitment and spending for the fiscal year of 1958.
On July 14, Mr. Fleming announced the new conversion loan. The purpose of my reference to it, is to recommend to all present holders of victory bonds to avail themselves of the opportunity of converting the old for the new, which offers a higher and attractive rate of interest.
The support of all Canadians for the new loan has been asked and I feel it is my duty to support the Minister of Finance and the government to the end that this great financial transaction may be a great success from which directly or indirectly every Canadian will benefit.
Mr. Chairman, it is but a few days ago in this house that some C.C.F. members chose on a motion for interim supply to embark upon a very bitter attack upon the government and upon the Minister of Finance in particular for this Canada conversion loan. Things were said by them during the course of that debate which if they were said outside this chamber and without the benefit of the privilege of this chamber would be defamatory. At the very time they were bitterly making these statements I received a letter from the secretary-treasurer of the Canadian Labour Congress, Mr. Donald MacDonald. He wrote me as follows:
Dear Mr. Fleming:
President Jodoin has referred to my attention your letter of July 12, in which you advised of the new Canada conversion loan of 1958 offered by the government of Canada, and recommended the participation of the Canadian Labour Congress in this project.
You will, no doubt, be pleased to learn that the congress has decided as a matter of policy to convert all unmatured 3 per cent victory bonds presently included in its investment portfolio into the new conversion issue.
Trusting that this may prove of interest, I am
Yours sincerely,
Signed Donald MacDonald Secretary-Treasurer
I thank the Canadian Labour Congress for that response to the Canada conversion loan.
And now, Mr. Chairman, I pass on to the criticisms we have heard on other accounts. We are told that this has been of benefit to the big investors and the big holders. I will come down in detail to answers to certain questions asked here today by the Leader of the Opposition and I will have an opportunity of exploding the baseless and misleading statements he made, but let me content myself with saying this.
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Our effort in this campaign, and one reason we have sought to make use of the various media of publicity, is to bring home to every holder of these bonds, even to the man who holds a $50 bond, the advantages that will accrue to him through this conversion and to see that he has the same opportunity of knowing about these advantages and making up his mind in the face of them as any holder of larger amounts of victory bonds.
Something was said about the commissions. I will have something to say specifically about that. I think it would be convenient at this point to turn to the series of questions that were asked today by the Leader of the Opposition. Apparently the brain trust in the Liberal headquarters has been working overtime and, of course, this means that the lamps have been burning brightly in the Winnipeg Free Press.


Lester Bowles Pearson: That is very funny. You have a great sense of humour.


Donald Methuen Fleming: I am glad we can both laugh about it.
Mr. Chairman, the Leader of the Opposition challenged me to talk about the cost of the operation and the cost of the publicity. He gave his estimates of these various elements of cost. I wish to place on the record the figures I have on this and although they are not absolutely final as things stand at the moment they are from responsible sources and I ask that they be compared with the figures the Leader of the Opposition was content to plaster on the record without regard for the mischief that might thereby be created.
The hon. gentleman asked first of all about the cost of publicity and he said his figure was $2 million. The actual budget for publicity is $1,500,000. That is one fortieth of 1 per cent of the total amount we are seeking to convert. Let me say this. If we had let these five issues of victory bonds ride along to maturity we would then have had to face the problem of publicity costs for five new loans to provide the money to meet these maturities on a refunding or other basis. Here we are getting five campaigns rolled into one with all the savings that come in publicity in rolling those five into one.
In the second place I stress the fact that we conceive it to be our duty to carry this information to the man who is a small holder of bonds, the man who may not be very experienced in dealing with bonds and who may hold a bond valued at $50, $100 or $500. If we had not undertaken this publicity campaign we would have been accused by hon. members opposite of being

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interested only in seeking conversions by the large holders of these victory bonds.
The next question dealt with the dealers' commissions. I was told that we had not given adequate information to the house on various aspects of this Canada conversion loan. Mr. Chairman, I put all the information about the commissions on record in this house in reply to questions asked by the hon. member for Kenora-Rainy River and that information is to be found in Hansard of July 30. There I pointed out that the commission paid is graduated according to the maturity. Naturally, when we are urging people to convert their bonds into the most distant maturity the harder selling is there and we wanted to create as much incentive as we could in that quarter. The rates of commission that have been set are entirely reasonable and realistic. They were one quarter of 1 per cent on the 3 per cent bonds, one half of 1 per cent on the 3J per cent bonds, three quarters of 1 per cent on the 4J per cent bonds and 1 per cent on the 4J per cent bonds.
Then, Mr. Chairman, I was quick to add that we took out of the total the large amounts that would have been easier to be had by those who are doing the canvassing. What we did was to allow no commission whatever on conversions by the Bank of Canada. There is nothing to pay, of course, on conversions out of government accounts.


Lester Bowles Pearson: What a concession!


Donald Methuen Fleming: We allow no commission on conversions by chartered banks on their own account. And then, as to the large holdings, and this includes all of the large institutions in Canada, they are to be in a special account and on that special account the commission earnings are dropped. They get the one quarter of 1 per cent on the 3 per cent bonds but they get only one half of 1 per cent on the other three maturities. In that way we have taken steps to hold down the commissions and prevent easy commissions on the conversions of the larger holdings. That is all on record at page 2858 of Hansard of July 30, 1958. I pointed out there that the commission to this group is one quarter of 1 per cent on the 3 per cent bonds and one half of 1 per cent on all other maturities.
I was asked to compare these rates of commission with those on the Canada savings bonds campaigns of 1955, 1956 and 1957. The commission paid in each of those savings bonds issues was three quarters of 1 per cent and the issuing and redemption fee in all cases was one quarter of 1 per cent. I said then and I repeat now it is quite clear that
[Mr. Fleming (Eglinton) .1
the average rate of redemption paid in the total on the conversions on the Canada conversion loan of 1958 will be less than that paid on the Canada savings bond issues in any of those three years with which I was asked to compare them.
But the Leader of the Opposition was not satisfied with this statement. Whether he even looked at it before he made his speech today, I do not know, but his speech did not give any indication that he had. He went on to make his own estimate of the dealers' commissions. He said it would be $25 million to $50 million. Mr. Chairman, according to the best reckoning that can be made today by the responsible officers of the Bank of Canada the commissions-and this figure may be high-that have been incurred to date on the $5 billion of conversions are $14 million. The Leader of the Opposition said $25 million to $50 million. That is the test of his responsibility.
Then, he passed on to what he called the bonus, the premium. He really meant the cash adjustment payment which had to be paid, as I said, to equalize the outstanding issues in terms of market value. He put this premium at $37 million to $60 million. Mr. Chairman, it is evident that arithmetic, good arithmetic, is not one of the qualifications for admission to the Liberal board of strategy. The reckoning by responsible sources, Mr. Chairman, is that the premium will amount to-what he called the premium; what I call the cash adjustment payment-about $35 million. He was prepared to run that up to $60 million.
Then, on the interest charges-and here the Leader of the Opposition showed that undoubtedly in his days as a very competent and popular lecturer at the University of Toronto his field was certainly not mathematics.


Lester Bowles Pearson: You are the last man who should talk about that.


Donald Methuen Fleming: I did not learn any mathematics from the Leader of the Opposition; I will say that.


Lester Bowles Pearson: You did not learn any mathematics, period.


Donald Methuen Fleming: He was very good on English constitutional history of the seventeenth century, and I will always be grateful to him. I regard it as a privilege to have been one of his students, and I say that in all sincerity. But as for mathematics, Mr. Chairman, so far as the Leader of the Opposition is concerned, that is a different story altogether. Here is what he had to say. He calculated the additional interest charges at $100 million. He is evidently stronger on

multiplication than on any other form of mathematics. Mr. Chairman, responsible quarters have calculated today that the additional interest charges as compared with the charges on the present victory bonds-if that is a fair basis of comparison at all-on the $5 billion converted to date is $49 million and not $100 million as the Leader of the Opposition calculated.
Before I leave that subject, Mr. Chairman, may I remind hon. members that in talking about-


Lester Bowles Pearson: May I ask the minister a
question just before he leaves that point? Will he explain how he got that figure of $39 million a year in interest charges?


Donald Methuen Fleming: It is $49 million.


Lester Bowles Pearson: Can he explain how he
got that figure?


Donald Methuen Fleming: Yes. I assure
him I did not make the calculation myself.


Lester Bowles Pearson: Where did you get it?


Donald Methuen Fleming: From responsible
people at the Bank of Canada.


Lester Bowles Pearson: Can the minister explain how that figure is arrived at because it is a very important figure and will apply to the next 25 years.


Donald Methuen Fleming: It is a very important figure and I wish the hon. member had attached importance to the subject before he embarked on his wild treatment of figures this morning.


Lester Bowles Pearson: Why do you not tell us?


Donald Methuen Fleming: Mr. Chairman,
my hon. friend is asking about how it is related to the subscriptions for the four various issues, and I am going to give him a reply to his question on that point.
The next question was this: "Who held those bonds?" That is, held the bonds, let us say, on July 11, which was the last day of business, the Friday prior to the inauguration of this campaign on Monday, July 14. Mr. Chairman, some of his figures on this were not inaccurate. The Bank of Canada held approximately $1J billion; government accounts held approximately $435 million; chartered banks approximately $1.4 billion; and then the large institutions that we heard so much about today held about $1.2 billion; and then there are the other investors. These are your people in the rank and file of Canadians, these are your people who include small investors, very small businesses, everybody outside the class of large institutions, and when I say "outside the class of large institutions" in referring to that exempt names list, there were 1,200 included in it.
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Therefore, you see that all of the mediumsized as well as large institutions were included therein and not in the class of other investors. The figure of holdings on July 11 of those other investors, the small people in Canada, was, in round figures, $2.1 billion. Against that the Leader of the Opposition in this house today undertakes to quote as if it were fact the statement of a professor of Carleton University who said very truthfully that he did not know how much was held by the small investors in Canada. Never did the gentleman utter a truer statement than that.
But he went on from that point, having departed from a factual statement, to embark on an adventure into fancy and he said it might be 10 per cent or 15 per cent. Mr. Chairman, those figures show that not less than one-third of all of the outstanding victory bonds were held by people who can be described properly, in the ordinary sense of the word, as the small investors of Canada. How many of them were there? We have had today the most extraordinary statements made in this house by hon. members opposite about how few Canadians really hold those victory bonds. Mr. Chairman, no one can calculate exactly how many persons hold those outstanding victory bonds. Many of them are in bearer form. Large numbers of them are held by banks in safekeeping for their depositors, and in that case the figures which are shown here are the figures of the bank.
Now, a lot of the money that has been subscribed by the banks in the course of conversion has undoubtedly been the money of small depositors who leave their small victory bonds with the banks but no one knows the exact number. However, by long experience, those who have responsibility in the Bank of Canada and in the Department of Finance are able to make a rather shrewd estimate of the number of holders from the number and amounts of the certificates outstanding. Particularly is this the case in the small certificates. And here, Mr. Chairman, is the substance of statements issued by the Bank of Canada on August 12, that on the last count just before the Canada conversion loan was announced there were about 1,898,000, $100 pieces and 857,000, $50 pieces outstanding. It is on evidence like that that the estimate has been arrived at, that there were in this class of small investors in Canada holding one-third of the outstanding victory bonds approximately 2 million persons. That is, sir, the answer to hon. members opposite who talk about this conversion loan playing into the hands of big business. These shocking, irresponsible and reprehensible statements which

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were made here today about windfalls will remain on the record as a test of the responsibility of certain hon. members opposite.
Then, Mr. Chairman, what about insurance companies? Some of the large holdings were in the hands of insurance companies. The insurance companies acquire the bonds or convert them for the benefit of their hundreds of thousands of policyholders. And what about the trusts which are set up, the university endowments and all manner of trusts of that kind? These are trusts in most cases for persons of limited means, but in these figures they are bulked in together and railed at by hon. members opposite as the holdings of big business. If ever this house has seen misrepresentation of the facts, utter distortion of the facts, Mr. Chairman, it has seen it in the house today.
The next question I was asked by the Leader of the Opposition was, what will be the effect on interest rates, first, on the long term and short term maturities and then on the securities of provinces and municipalities? I cannot prophesy, Mr. Chairman, the course of interest rates over the next few years or, indeed, over the next period of months, but I will say, without fear of contradiction on the part of any responsible source in this country that the effect of the Canada conversion loan has been to stabilize the market and in that way it has contributed not only to preventing a further rise in interest rates but in checking it and turning the tide in that respect. That is the effect of this issue.


William Moore Benidickson: Nuts.


Donald Methuen Fleming: No one can say that the effect of the Canada conversion loan will be isolated in the market. But let us remember that when the Canada conversion loan has stabilized the market in Canada today it has done so in the face of the situation in the United States bond market which has continued right to this time, described in the words of that journal from which I quoted earlier as a precipitate decline. In the face of that the Canada conversion loan has stabilized the Canadian market. As to the provinces and municipalities, in their borrowing operations they will derive the full benefit from these constructive results of the Canada conversion loan.
Next I was asked what will be the value of the new bonds. I think my hon. friend flattered me in inviting me to comment on the value of the bonds in market trading in the days to come, but just to emphasize what I have been endeavouring to say I want to say something about yields and the way in which the rise in yields in Canada compares

with that in the United States in this period. I am going to compare July 11, the last business day before the conversion loan was announced, with yesterday, September 3, and I am now speaking of yields. The treasury bill rate in Canada has dropped by .2 per cent and in the United States the yield on treasury bills has risen in this period by 1.41 per cent.


William Moore Benidickson: Why the big interest rate?


Donald Methuen Fleming: 
William Moore Benidickson: What is it going to be next month?


Donald Methuen Fleming: The Leader of the Opposition's eleventh question was, why did you not announce this program in the budget speech? The simple answer is that we had not at that time undertaken the planning of the Canada conversion loan. We were aware of this large problem of the five victory loan issues aggregating $6.4 billion overhanging the market, acting as a weight on the market, and to that extent hampering the efforts of everyone in borrowing. We were aware of the problem and I referred in my budget speech at that time to the necessity for a flexible approach. It was in terms of a flexible approach that, with the change in conditions which set in the day before the budget speech and moved along rapidly in the days that followed, we undertook this constructive campaign.
His twelfth question was, why did you include the eighth and ninth victory loans in the general conversion offering? There are several reasons. Those who responded in time of war to Canada's necessity and subscribed to victory loan bonds were not divided into rigid categories. They were all persons who responded in that way. I do not think it would have gone very well if we had sought to discriminate now in the Canada conversion 57071-3-2914
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loan offering among the holders of different maturities of victory loan issues. In the second place, if we had to go to this tremendous effort and incur this expense in the course of promoting the campaign, does it not make good sense to include the five in the one operation rather than include only three in the one operation and still leave outstanding, to be faced when they fell due in 1963 and 1966, approximately another $24 billion of maturing victory loan bonds of the eighth and ninth series? These are broadly the reasons.
There is another that I think might be mentioned and that is that these latter series of victory loan bonds have a callable feature. They are callable five years before maturity and from the point of view of the investor that uncertainty has a very unsettling effect. To the extent that this eighth and ninth series represent about $2.5 billion overhanging the market, with all the uncertainty attached to them and the depressing effect that has on values, surely it was good sense and good business to take in now all the outstanding series of victory loans.
I regret, Mr. Chairman, having detained the committee so long. I regret it sincerely. I regret the occasion. I was asked today why I did not reply on an earlier occasion to some of the statements made by members of the C.C.F. when they spoke in this house on August 5 and 6. To be quite frank, I can say to you that at that time I felt that statements of the kind that were made by them on those two days deserved only to be ignored, so far were they from the fact and from simple, decent, Canadian justice as between man and man. It would have suited me very well if it had not been necessary to say anything at all or to answer questions on this matter. It became necessary to deal with these matters fully in reply to the attacks that have been heard in this house today.
Mr. Chairman, let me conclude my remarks. We have had, I submit, such a response from the Canadian people as demonstrates, not only their confidence in Canada but their confidence in Canada as an object for their lending. This kind of confidence, this kind of response, is not confined simply to the kind of people who were the object of some rather haranguing statements made in this house today. Let me tell hon. members that the provinces and municipalities in this country were, themselves, substantial holders of Canada victory bonds, and their response has been what one would expect. Here is Newfoundland with various accounts, the Newfoundland savings bank, the Newfoundland workmen's compensation board, who held something over $3 million of these bonds. Up to August 25, they had converted 90 per

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cent of their holdings. I have no report from the province of Prince Edward Island, but I believe that province had holdings of $100,000 of Canada victory bonds. New Brunswick, with various provincial accounts, holds a total of $6,743,000 of victory bonds, and that grand province of New Brunswick converted all of its holdings of Canada victory bonds into the conversion loan.
Nova Scotia, with various accounts, held on July 14, $21,721,000 of victory bonds and as of August 25, they had converted $21,049,000 of them. Quebec, on July 14, in various provincial accounts, held $856,800, and they went out on the market and bought more victory bonds, and have converted $2,055,000.
The province of Ontario, with various provincial accounts including the provincial treasurer, the public trustee, the hydroelectric power commission, the Ontario veterinary college, the Ontario agricultural college and the workmen's compensation board, held $108,-
900,000	of victory loans and up to August 25 had converted $69,650,000. Manitoba, as of July 14 in various provincial accounts, held $26,824,000, and up to August 25 they had converted $25,591,000. Here is the province of Saskatchewan. I wish I could tell the story of conversion there, but I have a note that that province has requested that no publicity be given to its conversion, and I respect that request.
The total holdings of the government of Alberta were $74,231,000 in victory bonds, and up to August 25 they had converted $69,331,000. I have a similar request from British Columbia that no publicity be given to its figures on conversion and therefore I say nothing about that province.
The conversion activities on the part of other levels of government were not confined to the provinces. I am not going to delay the house now by giving the figures for the various municipalities, but perhaps there are one or two that might be of passing interest to the house. We have an hon. member here from the riding of Kenora-Rainy River who is the financial critic of the opposition. I note that the municipality of the town of Kenora, on July 14, held $175,000 of victory bonds, and bless them, they converted all of them.


William Moore Benidickson: Mr. Chairman, the council of Kenora are very prudent gentlemen who would not want to miss an opportunity to increase by 50 per cent the wages of interest.


Donald Methuen Fleming: My hon. friend has no right to interrupt my speech. I have the floor and I said I would answer his questions later. He will have his opportunity later to make any remarks he wishes to make.

In the province of Saskatchewan, there are a number of municipalities for which I have a return here. I think they might be of interest to some hon. members of the house. Here is the rural municipality of Bratt's Lake which held $55,000 of victory bonds, and they have converted them all. Here is the town of Estevan, Estevan school unit No. 2, which held $266,000, and all this amount was sold during the course of the campaign. They got some benefit therefrom, apparently. Then, there is the city of Moose Jaw which held $538,000 of the bonds and up to August 25 had converted $510,000 of them. Here is the Moose Jaw union hospital which held $36,000 of the bonds and converted them all. Here is the city of Regina, and we have, first of all, the city sinking fund trustees who held $1,701,000 of victory bonds, and they have converted them all. The collegiate institute board of that city held $129,000, and converted them all.
So it goes, Mr. Chairman. This is a record that I say reflects very great credit on these municipal governments. I am not going to say very much about the speech delivered by the hon. member for Welland. It was a compound of gossip, and nothing more.


William Moore Benidickson: Without foundation.


Donald Methuen Fleming: My hon. friend had a friend who said so-and-so, and he had another man who had heard so-and-so, and another man who said so-and-so. I am glad that the hon. member has got some friends but I wonder if his friends will appreciate the responsibility that will be put upon the hon. member in the light of some of the things he said here, based upon these assertions with regard to the cost of this conversion loan that are not even on distant speaking acquaintance with the truth.
Now, Mr. Chairman-


William Moore Benidickson: We cannot get the truth.


Donald Methuen Fleming: -my hon. friend for Welland had something to say about people trafficking in bonds. It was not very clear, I am sure, to anybody-perhaps not even to himself-what he was talking about. But, Mr. Chairman, as I said in the house the other day in reply to his question, we have insisted on rigorous adherence to these terms that were laid down at the outset, terms let me tell this committee of the whole house that were not-contrary to the false statement that was quoted from a certain journal in this house today by the Leader of the Opposition-put together in some Toronto broker's office. These terms, Mr. Chairman, were put together-


Lester Bowles Pearson: At Murray Bay.


Donald Methuen Fleming: Not at Murray Bay either. That statement is no more true than is the false statement which the Leader of the Opposition quoted this morning. These terms were drafted in the place where terms of government bonds are drafted under this government and where they will continue to be drafted, namely on the part of the advisers of the government in the Department of Finance and the Bank of Canada. Let me bury ten fathoms deep the falsehood appearing in that journal which the Leader of the Opposition quoted today with some evident satisfaction, that these terms were put together in some Bay street broker's office. Never was a statement in this house further from the truth than that one.


William Moore Benidickson: Was it St. James street?


Donald Methuen Fleming: I do not know at the moment whether the hon. member is quite straight on his directions about St. James street or any other street. May I tell him for his immediate information that the Bank of Canada and the Department of Finance are not located on St. James street. They are located on Wellington street in Ottawa.


William Moore Benidickson: They have branches down there.


Donald Methuen Fleming: They may have branches in St. James street. My hon. friend evidently knows more about that than I do because I have not been in those offices on St. James street and I have not any correspondence with them.
Coming back to the remarks of the hon. member for Welland, if one can apprehend what he was driving at, I should like to add this on the point. In accepting the terms and conditions of the Canada conversion loan all primary distributors agreed to arrange conversions with clients only on the basis outlined in the official prospectus. This kind of arrangement is a normal feature of any offering of new securities.
Dealers found there were some holders of victory bonds who preferred to sell their bonds rather than convert them and other investors who did not own victory bonds but wanted to buy new conversion bonds for cash. Sales and purchases of victory bonds did not always match off for each dealer each day and price fluctuations occurred which made it sometimes possible for investors to sell victory bonds for cash and buy conversion bonds for cash on more favourable terms than by a straight conversion. Such a situation was increasingly causing delays in conversion as some investors held
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off to see if they could obtain better terms, and it involved discrimination.
On August 7, on the strong recommendation of the national committee formed to promote the conversion loan, fixed prices were stipulated at which distributors might buy victory bonds from customers and sell conversion bonds for cash to customers. The effect of these prices was to put matched cash transactions and straight conversions on the same basis so far as dealer remuneration and investor cost are concerned. I am assured that the effect of this action has been the elimination of discriminatory treatment and a larger total response to the government's conversion offer.
Mr. Chairman, I was asked today by the Leader of the Opposition what the policy of the government is in relation to monetary questions. So far as questions of monetary policy enter into the Canada conversion loan and they do enter into it-let me make it abundantly clear that the policy of this government, as clearly enunciated by the Prime Minister in the broadcast on the night of July 14, is a policy of sound money.
What this government has said it intends to do, and to do in relation to this offering to the Canadian people, is to take such steps as are within the power of the government to maintain the stability and the purchasing power of the Canadian dollar and this campaign is to bring about a situation with reference to this large section of the public debt of Canada where we have some control over maturities, where we can apply policy of debt management. This Canada conversion loan fits into that policy and is going to strengthen our hands in carrying out that beneficent policy for the benefit of Canadians in the years to come.
Mr. Chairman, there has been criticism. I do not mind the personal criticism that has been directed at me. I will close my remarks today with this prophecy. Succeeding ministers of finance whether they be Liberal or whether they be Conservative will have reason to be thankful in these days ahead that the government of 1958 had the vision and the courage and the realism to undertake this, the greatest financial operation in Canada's history.


Lester Bowles Pearson: Mr. Chairman, the Minister of Finance has taken about two hours to deal with the questions we raised this morning.


Donald Methuen Fleming: Exactly one and a half hours.


Lester Bowles Pearson: It is now twenty minutes to five, the clock can speak for itself.

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Donald Methuen Fleming: I started at ten minutes past three.


Lester Bowles Pearson: He has taken that length of time to deal with the questions which we raised this morning and which he said we had no right to raise.


Donald Methuen Fleming: No.


Lester Bowles Pearson: Yes.


Donald Methuen Fleming: No. I objected to the way you went about it and the irresponsible things you said.


Lester Bowles Pearson: You said it was irresponsible on our part to raise the questions we raised in the way we did it.


Donald Methuen Fleming: And to say the
things you said.


Lester Bowles Pearson: I hope the minister has not exhausted himself in this long distance performance because he is just at the beginning of his estimates and he is going to be here a long time dealing with them.


Donald Methuen Fleming: We understand
each other.


Lester Bowles Pearson: The minister will need all the energy he has at his command. I am sorry he has found it necessary to use so much in his first performance on his estimates. During that time, as is customary over the years in this house, he indulged in a good deal of verbal ferocity and included in his remarks a good many jibes, one or two of them extremely cheap ones. As is his custom also, he mistakes, as he has done so often in the past, acid assertions for argument and vehemence for veracity. At this stage in our proceedings, Mr. Chairman, I do not intend to correct-though perhaps as we go through his estimates there will be the chance to correct some of them-the misstatements that he has made this afternoon. He accused us on this side of the house of irresponsibility in the intervention that was made by us of this subject this morning. He accused us of irresponsibility in bringing this matter to the attention of the committee in the way in which we did. But during the weeks since the announcement was made in this house that there was to be this operation of a magnitude and importance never before seen in our country he has given us no information of any kind concerning it; nothing at all. Nothing at all!


Some hon. Members:: Oh, oh.


Lester Bowles Pearson: He has given no information to this house at all concerning this matter and when my hon. friends of the C.C.F. raised the matter in debate he said nothing about it. He has explained this afternoon that the reason why he said nothing about it was that

their arguments were hardly worth-while replying to. He did say something, he intervened with such remarks as "Rubbish" and "Nonsense", but that is the contribution we have had from the Minister of Finance since July 14 until September 4 on this very important matter.
Today, however, he got up for two hours, or nearly two hours, and indulged in the kind of diatribe to which we have listened. What were we to do when his estimates came up? What were we to do during all these weeks- say everything is fine, the loan is going along, it is a wonderful operation and there is nothing in it to criticize? We were to say that we have complete confidence in the government and were to get finished and go home as soon as we got the minister's estimates through. That is what he would have liked us to do, but that is not our responsibility to the nation and that is not how we are going to discharge what we consider to be our responsibility to the nation.
The minister said that on July 14, when the announcement was first made about this loan, when I got up in the house after the announcement I adopted a position of high responsibility but now in speaking for my party that I have descended from what he considered to be those heights of responsibility.
I would remind the minister that when he made that announcement in the house it was without any prior information having been given to the leader of any other party. He did not take anybody into his confidence, even one hour before the announcement was made. He simply got up in this house and made the announcement and even at that time he did not tell the whole story. I am not complaining about that because it could not be done on motions. However, I said at that time-and the same stand was taken by the leader of the C.C.F.-realizing that this was an operation of the magnitude and importance which we now know it to be, that it was important in the national interest as it is today important in the national interest, that this operation should not fail.
In making that statement I said that I would follow this operation with interest. We have been following it with interest, we have been studying it, and as a result of the information we have acquired and of the studies we have made we have put forward our attitude in this regard in the words I used this morning-we have done it less than ten days before the end of the operation- when it has reached its last stages. It was better the debate should be done now, in view of the fact that if it had taken place four or five weeks ago perhaps there might

have been misunderstandings and misleading impressions created by the criticism we were bound as an opposition to make to the way in which this operation was being conducted -not of the objective of the conversion, but to the methods.
If the minister had been fair he would have said when he got up to reply that twice when I spoke today I stated that we approved of the objective of the conversion. We believe that this effort should be successful, but we do not approve of some of the details and some of the ways in which it was being carried out. If that is irresponsibility I would remind the minister of some of the things he said in this house when he talked about financial matters in other days. I suggest to the minister that we have shown him a great deal more consideration in this matter than he ever showed his predecessor, the former minister of finance, when he talked about financial matters.


Some hon. Members:: Hear, hear.


Lester Bowles Pearson: I recall what the minister used to say about tight money when the minister of the previous government made his statements and what he said about tight money during the election-how he pilloried us because of interest rates going up and what they were going to do to the national interest. What did he say this afternoon when he got up? I do not have his exact words, but I took them down as accurately as I could, because he was speaking very fast and very vehemently. He gave us to believe that it was not the minister who decided on these matters and it was not the department who decided on them-they got the best rates they could and the rates were fixed under outside conditions. That is how we get our interest rates in this country. But what did he say about the previous government when that government fixed interest rates in times of boom in order to combat inflation? What did he say about the operations of the government of that time in regard to interest rates?
The minister went on to say today that in these matters-and he quoted himself in his budget speech-they fell back on or they relied on a measure of flexibility. That is why, that is the excuse the minister gave the house this afternoon for telling us one thing in this house on June 17 in his budget speech and for telling us something else on July 14, when he made this announcement. He said there was a deterioration in the bond market in the United States, I believe he said that the day before the budget speech there was a change in conditions and that was why they probably had to change their plans. But
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what did he tell us in the House of Commons on the night he made his budget speech?
-during this fiscal year we shall need to sell bonds or other securities in a total amount of close to $3,400 million.
The sum of $1,400 million of this amount would be required for new cash and $1,950 million was required to cover the marketable funded debt maturing during the year. Was that misleading the House of Commons or was it not?


Donald Methuen Fleming: It was not.


Lester Bowles Pearson: If the minister changed his mind at that time, in view of what was happening in the United States, if the minister had received information from the United States that the bond market there was deteriorating and that they might have to revise their plans, as he said the day before the budget, why did he have to include that statement in the budget speech that there was going to be needed for reconversion during the fiscal year $1,950 million, when four weeks later he asked for $6,400 million?


Some hon. Members:: Hear, hear.


Donald Methuen Fleming: You are off the
track entirely.


Lester Bowles Pearson: I suggest to him that the figures will speak for themselves.
I was amazed this afternoon to hear the minister question the accuracy of some of my figures-he, of all people, after what happened last January, to reflect upon anybody's mathematics. He attacked us because we put on the record a lot of figures which he claimed this afternoon he had been able to disprove. I suggest to him that I was being scrupulously fair and responsible in the way I approached this question. I said that during these weeks since the conversion announcement there had been reports appearing in increasing numbers in the press saying that it might cost this or it might cost that, that the commissions might amount to this or they might amount to that and that the total cost to the country might amount to this or might amount to that. I put the minimum and the maximum figures on the record as coming from reports which I had received and not from the Winnipeg Free Press, a paper which seems to worry my hon. friend so much that every time he gets up he has to talk about it and give it a little free advertising.
If these figures are all wrong, if they are misleading, why has the minister not corrected them before now by giving the right figures and making sure that he prevented this damage to the confidence about which he talks so much from occurring in this

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country with respect to the conversion loan? Why did he wait until September 4 to put these figures on record if he was trying to put this loan across, as he said, because it must be put across as it is a great national effort, and so on? Why did he allow these misleading reports to be circulated in the country? Why did he wait until the last day of the session when he was baited into it by the questions we asked?
In another part of his statement he put on record a lot of figures to show that the municipalities, who are going to pay more for their money, have converted their bonds into the new loan and because some of those municipalities are headed by two members on this side of the house, he paid them a special tribute as being loyal and patriotic Canadians. I ask, why should not any municipality take advantage of this windfall loan, which is the expression used by those who are trying to sell it?
What particular significance is there to be attached to that as a vindication of the policy of the government? The policy of the government in this matter will be determined by the results of this loan after it is finished and the effect it has on the money market and our economic prospects. We on this side are willing to let it stand on that basis. But to think that the Minister of Finance who used to talk so much on this side on every financial occasion and used his undoubted ability to marshal adjectives if not arguments to pillory the government should expect us to sit quiet and say nothing about this operation-because if we ask questions and make criticisms we are then considered irresponsible-is almost beyond belief. The test of irresponsibility in this matter will be the results of the government's operation. That will be a better test than anything that could be said on this side of the house and we are quite willing to let it rest on that basis.


William Hector McMillan: Mr. Chairman, I should like to ask the minister a question and I hope he will answer it in good temper.


An hon. Member:: He might not.


William Hector McMillan: The minister is good natured most of the time


Mr. Ricard:: All of the time.


William Hector McMillan: -but frequently he reminds me of a patient of mine whose husband told me she was very even tempered, just mad all the time.


J.-H.-Théogène Ricard: Are you talking about yourself?


William Hector McMillan: The minister referred to the precipitous drop in bonds that occurred in the United States, I believe he said about June 15 or 16. I have in my hand a report

to the effect that on June 15 and for some weeks afterwards the United States offered bonds at the alluring rate of 2f per cent. I should like to ask the minister if that is correct and also I invite him to comment on the price of foreign bonds in the United States.


Donald Methuen Fleming: Mr. Chairman, I did not hear the last part of my hon. friend's question.


Mr. Batten:: He was not listening.


Donald Methuen Fleming: Would the hon. member mind repeating the last part of his question?


William Hector McMillan: I referred to the fact that after the precipitous drop in bonds in the United States, 6-year 8-months bonds sold for what the treasury board considered the high rate of 2| per cent. Would the minister agree with that? I should also like to hear the minister comment on the fact that the bonds of Brazil, Norway, Sweden and Denmark are selling in New York more favourably than our own Canadian bonds are selling in Canada; that is, 4| per cent bonds.


Donald Methuen Fleming: Mr. Chairman, I do not accept the statement just made by the hon. gentleman.


William Hector McMillan: Here is the New York
Times.


Donald Methuen Fleming: In any event we are discussing here, as I understand it, a comparison of yields on Canadian bonds in the Canadian market and United States government bonds in the United States market and testing the trends in these two countries in the light of what has been done. I do not want to stand here and hold forth on the way in which the values of the United States government issues have declined in the United States bond market. That is a proven fact. Indeed, one of the issues to which the hon. member referred this afternoon is selling today at either nine or ten points less than it was selling at immediately after issue. That is the extent of the decline in the United States in issues of the United States government. We do not take any satisfaction in that fact and I do not wish to enlarge on it. I would prefer to put it on the basis of the yields.
These comprehensive figures I gave on the yields accruing in the two countries on comparable issues show very clearly without repetition that the Canadian market has been stabilized and the United States market has been weakening and United States yields, in terms of the market values of these issues of United States government bonds, have been rising.


William Moore Benidickson: On this subject, Mr. Speaker, I am not going to reply at the moment to the Minister of Finance. Those of us who have sat with him over the years know a great deal about his type of criticism and the sort of governess, sermon-like type of speech he makes, such as that he delivered today, usually fairly long. I cannot compete with him in jaws that seem to have ball bearing hinges. But I will say that we have not had replies to some of the questions we asked earlier this afternoon and in particular the question I asked about why there was no callable feature in the bonds that were issued. I should like to hear from the minister in that respect.


Donald Methuen Fleming: Mr. Chairman, the conversion bonds are by deliberate decision not being given a callable feature because the callable feature does subtract something from the attractiveness of the bonds. I mentioned in my remarks that it creates a certain measure of uncertainty on the part of the investor. One of the elements in any investment is certainty. The investor who is being asked to take these conversion bonds will find them more attractive if there is certainty attached to them. I do not think my hon. friend would want to suggest that in attaching a callable feature to these bonds we should have been prepared to pay a higher rate of interest on them.


William Moore Benidickson: No, a lower rate would satisfy me.


Donald Methuen Fleming: That is part of the picture of compensating for a feature like a callable feature. This was a deliberate decision. We think we will get the best results without a callable feature.


Lester Bowles Pearson: Mr. Chairman, would the minister not agree that it will have the effect of fixing the rate of interest for the 25 years making it not possible to take a lower rate of interest?


Donald Methuen Fleming: Only if you made them callable at an early date. I do not think the Leader of the Opposition would suggest that we make it callable for most of its life.


Lester Bowles Pearson: No.


Donald Methuen Fleming: Perhaps the hon. member has in mind something like the last five years. Concerning the benefit he ascribes to the callable feature in the event that interest rates should be lowered for money of that maturity at that particular time, the opinion that prevailed here is that that would not counterbalance the damage that would be done or the degree to which it would subtract from the attractiveness of the bonds without the callable feature.
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As hon. members will realize we were trying to get the best deal we could weighing all the factors together.


William Moore Benidickson: Mr. Chairman, I do not want to get the minister going again because whenever he gets going we are exposed to a two-hour speech and he behaves like an offended virgin every time he is criticized. However, I do want to ask him a question or two.
I believe I indicated earlier that the last time we as a federal entity had been obliged to pay 4J per cent interest it was again wages for money such as was introduced by a Conservative administration but even then-and I think it was 1934-they had a 10-year provision for a callable privilege. Succeeding Liberal governments with more prudent administration found circumstances under which they were able to pay off that high rate of bond indebtedness. I referred this morning to how old the minister would be 25 years from now. I cannot understand why he would commit the future taxpayers of Canada in the next generation to an unavoidable 4J per cent obligation on debt which I think is not synonymous with thoughtful behaviour. A businessman hesitates twice when thinking in terms of a rate that goes much beyond 5| or 6 per cent when he is asked to pay 6, 7 or 8 per cent for any investment he has in mind, an investment that might create unemployment at the present time. I just cannot understand the undeviating base that is being put on interest rates in this country for another 25 years because of the non-callable feature.


Donald Methuen Fleming: My hon. friend has stated his opinion; I have stated mine. We are not in agreement on the point. If there are any questions I shall be glad to answer them, but I take it we have the facts on the subject before us, and my hon. friend and I have different opinions on the subject.


Joseph-Alphonse-Anaclet Habel: Mr. Chairman, I have a few points that I want to put on the record. The minister tried to emphasize the fact that he felt this conversion was going to stabilize the finances of this country and there would be no great rise in interest rates. I hold in my hand a clipping from the Toronto Star. I know before I mention it that the minister will probably object to anything coming from the Toronto Star. The heading is:
Ottawa Plan May Lift Cost of Borrowing
There is no question about that. If he objects to this one I will give him another one from the Gazette of Montreal which I understand is not considered to be a Liberal paper. The heading is:
High Cost of Living By Conversion.

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The second paragraph reads:
It is an expensive effort, not only for the federal government, but for all other governments and corporations. The federal government is exchanging one set of fixed charges, the interest it must pay on victory bonds outstanding, for another, higher, set.
At the same time, it has established a higher base cost for credit. All other borrowing must now conform to these new rates at a subsequent higher cost to the borrowers.


Donald Methuen Fleming: May I ask my hon. friend the date?


Joseph-Alphonse-Anaclet Habel: July 16.


Donald Methuen Fleming: Is it an editorial?


Joseph-Alphonse-Anaclet Habel: It is; it is by the financial editor.
Then, I have another clipping dated July 16, the title being:
Easy Money Hopes Gone With Conversion
Then I have another one from the Fundy Fisherman, dated August 13, 1958. The heading reads:
Big Bond Conversion Rough on Ordinary Man- Taxes To Rise With Living Costs


Donald Methuen Fleming: This is going to help the ordinary man.


Joseph-Alphonse-Anaclet Habel: I am sure it is going to help him. The minister emphasized the fact that this conversion had patriotic features, and that he had asked all the brokers to use the patriotic angle to get the people to convert their bonds. I have in my hand something that might surprise even the hon. member for St. Hyacinthe-Bagot. I wish the minister to understand that patriotism can be obtained if enough money is paid for it. The Aetna Casualty and Insurance Company, Hartford, Connecticut, converted $11 million plus another conversion of $3,626,000. The minister gave a long list of municipalities and provincial governments which had converted their victory bonds. I have here a list of the different companies which must have accepted the call with pleasure. As I said, the Aetna Casualty and Insurance Company, $11 million, and then another conversion of $3,600,000; the Metropolitan Casualty Insurance Company of New York, $1,200,000; the Milwaukee Insurance Company, $1,281,000; a Hong Kong firm, through its subsidiary in Toronto, $1,270,000; the British Phoenix Assurance Company Limited, $1,301,000; the Indemnity Insurance Company of North America, $1,400,000; the Insurance Company of North America, Philadelphia, $2,235,000; the Federal Mutual Insurance Company and Hardware Insurance Company of Owatanna, Minnesota, $1,835,000; the Wellington Fire Insurance Company, $335,000; the Continental Life Insurance Company, $1,108,000; the Northern Electric Company, $5,200,000. We could go

on in this way for another 15 minutes. This shows that when the minister claims that many little people will profit from this and that municipalities and other bodies have acted in a patriotic way, he forgot about all those companies which are benefiting so much from the conversion. I continue with the list: the Prudential Insurance Company, $42,000,000; Famous Players, $3,800,000; Canada Permanent Mortgage Company, $7,000,000; Federal Insurance Company, $2,800,000. The Manitoba government, of course, was mentioned in the list of those great patriots who had converted their loans.
The minister has claimed that we have been unfair in our criticism. I think the Leader of the Opposition was very fair in his remarks and the hon. member for Welland made a wonderful expose that the country will understand much better than it will understand the speech made by the minister this afternoon. I hold in my hand, a clipping from the Ottawa Journal and the heading is:
Plan "Blitzes" To Pep Up Sale Conversion Bonds
They claim that in at least 80 cities there will be parades, bands and circuses to make sure that the subscribers convert their bonds. I have another clipping from the Globe and Mail of this morning. The heading reads:
Plan Record Bonfire of Cancelled Bonds
The people of this country, Mr. Chairman, will have a long time to remember that some day there might be a bonfire of those victory bonds that are now being converted. They will also recall the amount of money they will pay for the bonfire.
The minister himself admitted this, which appeared in the Toronto Star of July 19. The article states that the program will cost the federal treasury $30 million to $50 million to pay the cash bonuses to bond holders and also another $50 million in annual increased interest rates. Probably that is the bonfire that the Minister of Finance wants to have by calling what he claims to be a patriotic conversion. The firms in the United States as well as firms in Great Britain and the firm in Hong Kong certainly responded to his patriotic appeal. I have in my hand a copy of the August issue of The Rural Scene, and I will simply conclude by reading a paragraph or two. In an article on the conversion loan there is the following:
To urge such people to convert their bonds, which are soon to mature, into long term bonds, at a time when inflation is gathering momentum, is a cruel deception and unworthy of the government of a country.
The last paragraph reads as follows:
The person who cashes his victory bonds when he can do it, and invests the money in improving his own property or in some productive enterprise,

will do more to halt inflation than he could possibly do by lending it to the government to spend on its ventures.


Mr. Bourque:: Mr. Chairman, I understand that earlier in the afternoon the Minister of Finance mentioned that the city of Outremont, of which I have the honour to be the mayor, had converted its bonds for new bonds. We did hold $290,000 in victory bonds and we were getting interest amounting to $8,700 a year. By converting the bonds we will get interest amounting to $13,500 a year or 50 per cent more and we are getting $3,625 in cash. How could I as mayor let such a windfall pass by?
The conversion loan of $6,425 million will cost the government $17 in interest per person per year. The same amount borrowed by the previous Liberal government was costing the country $11.34 per person per year. That means that the government has now increased the interest paid to citizens of Canada, banks and other institutions by $5.66 per person per annum because the government will now be paying $289,125,000 in interest per year. The Liberals borrowed the same amount for $192,750,000 in interest per year. This means that the government is giving as a windfall, as manna from heaven, to citizens of Canada, banking institutions and bankers in the United States and all over the world $97,375,000 by way of increased interest per annum.


Donald Methuen Fleming: Untrue.


Romuald Bourque: If you can count, my dear Mr. Minister, you will come to the same figures. In addition to the increased interest, there is the cost of commissions, advertising and literature. Who is going to pay this $97 million? We cannot give away $97 million without somebody having to pay it back. It is the citizens of Canada who are going to have to pay it through income taxes. The minister has boasted today about the good deal he has made and what he has done for the citizens of Canada. Wait until the citizens of Canada have to pay this money through income taxes and the minister will realize whether or not he has made a good deal for Canada.


Donald Methuen Fleming: Having regard to the speeches my hon. friend has made more than once about federal aid to municipalities, I am sure that on the basis on which he has approached this problem he will be glad to commend the federal government.


An hon. Member:: Is that a threat?
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or he may not but they have said, first, that the rate of interest is too high. It may or may not be too high.


Mr. McDonald (Hamilton South):: Diplomat.


Leon David Crestohl: If the hon. gentleman can improve on that I challenge him to do so. The minister will also realize that the opposition has said that too much money is being spent on advertising. It may or may not be too much. That is purely a matter of opinion. The opposition has said that the cost generally is too high and the cost of advertising is too high. The minister may or may not agree. We have said that the commissions are too high. He may or may not agree. But he finds himself in the position where he must make a defence. In his parliamentary performance this afternoon he has made a good defence from the standpoint of debating. I think it was sharp in spots, unduly critical in other spots and that at other times his remarks were even a little unworthy of the minister. Just the same he made a two-hour defence-


Donald Methuen Fleming: One and a half
hours.


Leon David Crestohl: Well, it seemed longer to us. Nevertheless, at this stage when about 80 per cent of the conversion has been completed, a long defence of the kind he had to resort to this afternoon reminds me of the fact, which the minister as a lawyer will understand, that when you make a long defence it does not necessarily follow that it is a good defence. All I can say is that I am suspicious of long defences. I am astonished at the minister's long defence and the old French proverb, qui s'excuse s'accuse, applies to him perfectly.
The minister takes pride in the fact that 80 or 85 per cent of the sale has been completed. Of course; it is such a bargain, who would not want to buy? Surely the minister realizes, as I do, that if he wanted to sell more and do so faster all he had to do was to fix a five per cent return or perhaps a six per cent return and he would have had results very much faster. But this is my criticism, and this is what members of the opposition have said. The country has been called upon to make this financial effort. Why? I think the government found itself in difficulty. It has to meet its election promises, it has to meet a great deficit and it has launched into this great expense which I think the country will remember for a great many years to come.


Leon David Crestohl: Mr. Chairman, I should like Mr. Pearson: If we have exhausted that to suggest to the minister quietly, dispas- subject and ourselves, perhaps I can ask sionately and coolly that he should analyse the minister if he can give the committee any what the opposition has really said. What has information with respect to the common-been their criticism? He may agree with it wealth economic conference which I believe

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is to open on September 15, indeed, the day of completion of the conversion loan. Has the minister anything to report? During this session we have not so far received any substantial amount of information in connection with a conference which, in the words of the government, is one of very far-reaching importance indeed.


Donald Methuen Fleming: I will be very glad to deal with that subject. I think the Leader of the Opposition has probably overlooked the fact that, as I recall it, there was some discussion of it on the estimates of my colleague, the Minister of Trade and Commerce, but I am happy to deal with it. The conference will open in Montreal on Monday, September 15. It is expected to continue until Friday, September 26. It will thus run, it is expected, for two weeks. All of the commonwealth countries will be represented at the conference by ministers and delegations and the delegation from the United Kingdom, which will consist of five ministers and a number of advisers, will be accompanied also in an advisory capacity by six ministers drawn from various colonies in different parts of the world.
The agenda which the conference is likely to take up will be a very broad one. Trade is one subject, but trade is only one aspect. The agenda is expected to embrace broadly all questions pertaining to the economic relations of the various nations of the commonwealth. The meeting is to proceed in the Queen Elizabeth hotel. The secretary-general of the conference, by agreement of the commonwealth countries, is to be Mr. Sydney Pierce who, as hon. members will recall, has been latterly the deputy high commissioner of this country in the United Kingdom. A good deal of work has been expended by officials in preparation for this conference. The departments of government principally concerned are, of course, finance, trade and commerce and external affairs.
The conference is preceded by several conferences of officials of the commonwealth countries at various stages of preparation during the recent months. I shall be glad to answer any further questions if there are any.


Lester Bowles Pearson: Who are the Canadian
delegates?


Donald Methuen Fleming: They have not finally been chosen yet. The cabinet will be making the selections. I can perhaps say that the ministers who have been associated in the preparations are my colleagues the Minister of Trade and Commerce, the Secretary of State for External Affairs; the Minister without Portfolio, the hon. member for Greenwood, and myself.


Lester Bowles Pearson: Can the minister tell us the agenda of the conference?


Donald Methuen Fleming: I am not in a
position to state it in precise terms, but anything pertaining to economic relations within the commonwealth, I think, will find a place within the discussions that may be held there. The Leader of the Opposition will recall that the conference stems directly from the conference of finance ministers at Mont Trem-blant held last September. At that conference an agenda was agreed upon and it appears in the official communique that was issued at the conclusion of that conference. This list of subjects forms a working basis for the agenda for this conference.


Lester Bowles Pearson: There was an interruption a moment ago to the effect that this discussion was out of order, but I cannot think of anything more in order.


Donald Methuen Fleming: I certainly do not take that position. I think it is entirely in order.


Lester Bowles Pearson: After all, this is a conference on commonwealth economic relationships, to be presided over by the minister. It is a conference which has been put forward by the government as one of the most important to be held within the commonwealth, and one which will have far-reaching results on the economic, financial, and therefore on the political relationships of members inside the commonwealth. I think it is unfortunate that we have not had the kind of discussion about this conference, as important as it is, that has been had in the parliament at Westminster. I think it is unfortunate that even, at this late date we can only be told in general terms what will be the nature of the subjects dealt with and the policy of the Canadian government in respect of these matters.
There is an impression which one gets from the press that, whereas a year ago this conference was being heralded as one of very great importance, primarily in respect of trade relationships between members of the commonwealth-we heard a great deal at that time about the diversion of trade that
might result from a conference of that kind_
latterly, that impression of a year ago seems to have disappeared and there seems to be a contrary impression, at least in the minds of the press, that perhaps the most important subject for discussion will be the financial relationships between the members and India and what certain members of the commonwealth can do in respect of strengthening what is now called international liquidity.
We all know that when the Prime Minister of the United Kingdom came to Washington, and Ottawa a few months ago, he announced.

In press statements in both Ottawa and Washington that it was of vital importance to do something to put the underdeveloped countries of the world in possession of hard currency, thereby giving them a chance to develop. This suggestion has been taken up by other governments, notably by our own Prime Minister who made an announcement about it subsequently in this House of Commons as well as statements about it outside of the house. This seems to be one of the subjects which is going to loom up in the agenda of this conference. Of course, the minister knows that this is a subject which cannot be finally determined on a commonwealth basis. However, the preliminary discussions there might be quite useful, and perhaps more far-reaching results will be achieved at the meeting of the fund and the bank which will be held subsequent to the meeting.
As a matter of fact, as the minister knows, it has become the custom to have a meeting of commonwealth finance ministers before the meeting of the bank.


Donald Methuen Fleming: Right afterwards.


Lester Bowles Pearson: Right afterwards, so presumably that will be discussed in a preliminary way. While the minister has said nothing which would indicate whether or not these reports are accurate, and I am thinking of a report in the Ottawa Journal of a few days ago, there does seem to be a desire now on the part of these newspapers to play down the results of this conference which had been heralded by a fanfare of trumpets a year ago. I have been to a lot of conferences and I know it is quite unwise, but perhaps quite natural, to exaggerate the importance of everything about the conference, prior to the opening of it; but you begin to realize that all the things you put forward in your own interests, the things that are going to be accomplished by your policies are not likely to result and therefore an element of caution is being introduced even at this late date. Perhaps that is realistic and sensible. We know very little in this house what the policy of the government is in respect of these matters. They know a good deal more in Westminster because they have discussed this in the House of Commons.
Indeed, reading the London Times only this morning, which is dated September 2- we get it pretty quickly these days by air- I notice a report from the political correspondent which is obviously officially inspired. It gives a lot more detailed information than we have been able to obtain in this house. It gives the agenda and it gives the British delegation. Then, it goes on to discuss in a very general way British
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policy in respect to some of these matters. The article then purports to give the agenda and it mentions first the question to which I referred, namely international liquidity. This report from the Times, which has all the earmarks of authenticity, goes on to say:
The others items on the agenda will be the special and urgent help needed by India-
That is something that will be of interest to the Canadian government.
- (and it is probable that the terms of the new British loan may not be announced until the conference) : measures to stabilize commodity prices; the direction of economic expansion in the less developed countries, with new ways of providing capital and helping trade; technical assistance for these countries; economic and trading difficulties connected with agricultural and other primary production; the prospects and implications of the European common market and the proposed European free trade area; and arrangements for continuing commonwealth consultations and co-operation on economic matters.
This is a much more detailed agenda than we have received in this committee or than was given out after the meeting at Mont Tremblant last year. I, therefore, express some disappointment that we have not had the kind of discussion before a conference of this importance which I think perhaps we should have had. I know the minister could not fail to agree with me on this because he used to talk a good deal about the failure to have discussion in parliament before we, in our day, went to international conferences. I quote from Hansard of January 13, 1955, pages 153 and 154 when he had this to say about a commonwealth prime ministers' conference-which this conference is not-which was not heralded with all the fanfare of publicity with which this conference has been heralded. The minister had this to say, and I commend it to him as the policy that might now be followed:
If parliamentary institutions enjoyed here in Ottawa the health that they ought to enjoy, no Canadian prime minister-
Or indeed no minister of finance, if I may interpolate that remark.
-would go to an important commonwealth conference without having first invited a discussion in parliament on the position that he was going to take on behalf of his country in the deliberations of that conference. But such is the treatment that this government metes out to our Canadian parliament, such is the conspiracy of silence of this government on important national issues, such apparently is the minimum importance that this government attaches to this commonwealth prime ministers' conference, there is not to be a word said in this house even on the subject of the agenda. A fine demonstration of contempt for the parliament of Canada!
Then he goes on to say this:
We might at least have had a debate on the subject, but apparently we are not going to have, even during the course of this discursive debate on

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the address, any statement of the position the Prime Minister is going to take in London.
Apparently we are not going to have a debate on this subject. But notwithstanding that fact I wish the minister and the government well as they approach what is certainly going to be an important conference, the nature of which is taking a rather different form from that which was visualized a year ago but the results of which will be of importance, I am sure, and I hope of advantage not only to Canada but to the commonwealth as a whole, an association which is still of primary importance in the world, the strengthening of which would be the primary purpose, I am sure of this or any other government, irrespective of party.


Donald Methuen Fleming: I thank the Leader of the Opposition for his closing words. The government will appreciate them very much. I think I should remind the Leader of the Opposition, in view of the fact that he spoke about debate, that I dealt with this subject in the budget speech, as will be found at page 1239 of Hansard of June 17. I reviewed the position and indicated the broad lines that we would be following at the conference in the matter of trade policy. It is all set out there very clearly.
The hon. gentleman also raised the question about emphasis at the conference. This from the beginning was always announced and regarded as a commonwealth trade and economic conference. At no time was there any suggestion that the conference should be confined to trade matters. Indeed, the economic matters on which, as a result of study, we find that commonwealth countries have common or mutual interests have been expanding and all of them are of high importance. Under developing conditions some of them are assuming more and more importance. I do not need to dwell here on questions of development of resources and the strains that have been created by programs of that kind and problems of exchange scarcities on the economic relations of countries of the commonwealth. I stressed in the budget speech that the commonwealth today is a very different commonwealth from that of 1932. Our approach to the problems that will confront us at the conference is very different from that of 1932.
My hon. friend spoke about the problem of liquidity. This is a very acute problem. It touches a good many of the economic factors in the situation and it touches on trade as well. I think it lies at the basis of a good many of the media that are used today which have the effect of restraining a trade, the whole problem of exchange restrictions and discrimination. These are associated and have

been associated over the years, in the case of a number of commonwealth countries, with the exchange problem, the problem of exchange reserves. These problems must all be examined at this conference. Indeed, Mr. Chairman, there is such a multiplicity of problems of an economic nature which cannot be categorized as trade matters that it is small wonder that in the public comment on this conference the emphasis has come increasingly to be laid on the economic problems that will be submitted to the conference for discussion.
As to the agenda, I thought I was elucidating the matter by stressing the fact that the agenda is really so broad that any question of an economic nature of interest to commonwealth countries can be discussed under it. The annual meetings of finance ministers in times past have related to the position of sterling in the world. It has been customary for the chancellor of the exchequer to make a report on that matter. Then in recent years there has naturally been a good deal of interest in the commonwealth countries, particularly those that are shipping food products to the United Kingdom, in Britain's relationship to the developing free trade area in Europe. I touched on that matter in the budget speech. The agenda is a matter of public record. It is in the communique that was issued at the Mont Tremblant conference. I stressed that the study that has been given to the agenda in the interval has all been within the framework of that laid down under the communique issued a year ago.


Lester Bowles Pearson: May I say just a final word. I do not quite recall the details of the agenda as it appeared after the Mont Tremblant conference.


Donald Methuen Fleming: I have sent for it. There were either seven or eight subjects.


Lester Bowles Pearson: I should like to ask the minister this question. I know this has to be general. I also know that at these conferences we soon get away from generalities and into committees. The committees will deal with some very hard practical and significant matters. I wonder whether in these practical subjects, in these subsections of the agenda, special consideration will be given-and I am sure it will be because the minister rather indicated it-to matters which I think perhaps are of importance and that I know will be before the conference.
One is convertibility which he mentioned. Until we can make progress there we are going to have a hard time making progress in trade. As he knows, in recent years, progress has been made. However, it has been wavering progress and there have been difficulties

which impeded it. I would hope now, because conditions are improving in the world, that a real push can be given toward convertibility.
Then related to that matter-and the London Times mentions this as a step further and perhaps it is on the agenda-is the relationship of at least some commonwealth countries to the European free trade area and the common market. I do not know of anything that will be more important in the long run, and maybe not such a long run. An effort has to be made to work out our relationships to this European development. It is primarily perhaps a problem for the United Kingdom because they have been engaged in a search for a solution for some time. But it is almost as important for Canada because if the United Kingdom-and surely this will be discussed at this conference-does not make an arrangement with the European free trade area, we will all be in trouble outside of the United Kingdom and maybe even the United Kingdom itself. At the same time I should hate to see the United Kingdom use the commonwealth association as a reason for not making the kind of arrangement with the European free trade area which I think is essential not only for the development of Europe but for the development of what I consider to be a major body of international economic policy, namely an Atlantic freer trade area.


Donald Methuen Fleming: I assure the hon. gentleman that the two subjects he has mentioned will be very prominent in the discussions at the conference. On our part we have given a good deal of thought, study and preparation to those subjects. There can be no doubt that liquidity is essential to our hopes of closer trade and economic relations and we have been doing all in our power to urge the Canadian point of view in that respect. I can give an unqualified assurance to the hon. gentleman to that effect.
He has said, and I entirely agree with him, that some progress has been made, and my colleague, the Minister of Trade and Commerce, has announced to this house that in the next few weeks several important steps in this direction will be taken by both the United Kingdom and Australia and so far as we are in a position to urge it upon other countries of the commonwealth at that conference we shall certainly be pressing them to take whatever steps they can take to promote liquidity.
As to Canada's interest in the European economic arrangements in the free trade area, there again, there can be no difference among us. I have stated the government's position on this matter. In the budget speech on June 17, at 1238 of Hansard for that date I said that this matter was one which we
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had studied very closely and about which we have been in frequent consultation and communication with the United Kingdom. It was very fully discussed at Mont Tremblant and is a matter of very great interest on political grounds, as stated by the hon. member, and it is also of very great importance on economic grounds. Several of the countries in the commonwealth share with Canada a very direct interest in it because of the possibility of its effect on their exports of agricultural products to the United Kingdom, and I can assure the hon. gentleman that it is regarded by the government as a very important project and that it will certainly have a place of high importance in the deliberations at the conference.


Leon David Crestohl: Under this item I would like to deal with another matter, and in this respect I would like to quote the minister as he was reported in the press to the effect that timing is a very important factor in many things. Having now heard from the minister in rather jubilant terms that the conversion loan is meeting with success and that the government is now in possession of an abundance of funds, and since my subject involves the spending of some of that money, I hope that my timing is appropriate.


Donald Methuen Fleming: Mr. Chairman, before the hon. member gets any further into his topic I think I had better remind him that the conversion loan has not involved the raising of any new money. It is simply an exchange of new obligations for old, and we have not gone into the market for any new money at all. As I was trying to say earlier, that still remains before us.


George James McIlraith: Remind him of the big
deficit we have to finance.


Leon David Crestohl: This matter may increase the deficit a little but I do not think so. The minister may have some doubts as to whether the subject I am raising falls under his jurisdiction because it deals with the moneys held by the custodian of enemy property. I raised the matter in the house some months ago and I was told that I should approach the Secretary of State since the custodian falls under his jurisdiction. I then took up the matter with the Secretary of State-I am glad to see he is now in the chamber-and he said that since it involved the spending of money I should address myself to the Minister of Finance.


Donald Methuen Fleming: That is one of the
penalties for being the last department to be called.


Leon David Crestohl: Perhaps that might prove advantageous to the question I am about to

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raise. The Prime Minister on August 15 said that this matter was receiving the consideration of the Minister of Finance and the Secretary of State, so I hope the minister will hear me on this subject.


Donald Methuen Fleming: I can assure my hon. friend that I am familiar with the matter he is going to raise. I know he has raised it in the house and has corresponded with my department with respect to it. The matter is under consideration and the problem is the difference between the rights of the state and the rights of the individual having regard to the normal effect of seizures of property belonging to enemies in time of war. The case which my hon. friend is pressing involves an individual who, while a national of an enemy state


Leon David Crestohl: Right.


Donald Methuen Fleming: nevertheless contends that he was not a willing supporter of the cause of that enemy state. The problem, furthermore, is not simplified by the fact that other countries to whose example we sometimes look have not followed a uniform course in similar matters, but I can tell the hon. member that the subject is under study and that we hope to come to some conclusion. My hon. friend will realize that the pressures of the session, as long as they last, mean that the amount of time left for personal study by a minister of some of these problems to which bulky files are attached is somewhat limited but if we ever get through with this session I can assure my friend that this is one of the files which is marked for what I hope will be an early decision.


Leon David Crestohl: I want to thank the minister for so fully and completely stating my case. I find I do not have to present any additional facts and I am pleased to hear the minister is giving the matter his active consideration.
It is also true, as the minister has said, that some countries have complied with the appeal which has been made and that other countries to which our country is closely attached have, In some cases, urged these other countries to release such assets. Since Canada has been a party to treaties urging other countries to release assets I am hoping Canada itself will act accordingly.
The matter, as the minister knows, has been outstanding for a great many years, and I am only fearful that perhaps it has been overlooked by the administration, certainly I know not intentionally. I am certain, however, that there is all the goodwill in the world on the part of the government with respect to the disposition of this problem, and if I can do anything to hasten the completion

of the session I will certainly do so in order that the government may be able to attack this problem immediately.


John Whitney Pickersgill: I am going to make an
appeal to the minister on another subject on behalf of the 425,000 people in the province of Newfoundland. The minister, of course, is aware that in the house of assembly of the province of Newfoundland yesterday a resolution was moved by the premier of the province, seconded by the leader of the opposition there, who is a member of the minister's own party and in fact is the leader of that party in the province of Newfoundland.


Mr. Hodgson:: Did that receive any
consideration?


John Whitney Pickersgill: I did not hear the distinguished interruption of the hon. member for Victoria (Ont.). I would like to read the text of the resolution which was adopted in the house of assembly and which was transmitted yesterday evening to the Prime Minister, a copy of which I hold in my hand. I have the whole message to the Prime Minister and I feel I should perhaps put the entire message on the record. It reads as follows:
Right Hon. John G. Diefenbaker, P.C., M.P.,
Prime Minister of Canada,
Ottawa.
In the Newfoundland legislature today I moved and Mr. Hollett the Leader of the Opposition seconded and the house unanimously adopted the following motion-
This is the text of the resolution:
Resolved the House of Assembly cordially welcomes the announcement of the Prime Minister, Right Hon. John G. Diefenbaker made in the House of Commons on August 15, 1958, that the government of Canada would not accept the recommendations of the royal commission on term 29 until they have had opportunity to give the matter more careful study. The Prime Minister's announcement is all the more welcome to this house because of the reason he gave for it namely that there appeared to be dissatisfaction in Newfoundland with the size of the amount recommended. This house declares its warm appreciation of the Prime Minister's stand and expresses the hope that it will result in a substantial increase in the size of the amount ultimately to be paid to the province on a lasting basis. In the meanwhile we urgently request the government of Canada to seek without delay the necessary parliamentary authority to pay to Newfoundland in the present session as an interim measure at least the amount that has been recommended by the royal commission. This would enable the public services and public works of the province to be continued this year without interruption or reduction thereby preventing immediate widespread unemployment and would provide ample time before the next session of parliament for the Prime Minister and his colleagues in the government of Canada to give that further study announced by the Prime Minister.
The message was signed "J. R. Smallwood". I should like to repeat that this resolution was a bi-partisan resolution moved by the

premier and seconded by the leader of the opposition, something not very usual in any of our legislative assemblies or in our parliament except on the most formal occasions. There is also other evidence I could adduce but I do not intend to take up the time of the committee in doing so. This may be taken to represent the substantial unanimity that exists in the province of Newfoundland on this very pressing question.
Lest it be thought this is a very late hour at which the assembly of Newfoundland is raising this question I will say no more than that a formal request was made, as the minister well knows, to the Prime Minister by the premier of Newfoundland in the same general terms as early as August 11, so this is not a last minute request. It is simply further evidence of how extremely urgent this is to the people-not to the government but to the people-of Newfoundland that there should be action to implement the recommendations of the McNair report at this session of parliament.
As we all know that would not be a complicated or difficult matter. All the government would have to do is bring in a message from His Excellency with a further supplementary estimate to deal with this matter before the appropriation bill is before us.
Nowhere in any public statement I have seen or heard of in any part of Canada since the report was published on July 25 is it suggested that the award is too large. There is a great deal of dissatisfaction in Newfoundland which has been supported by criticisms in other places. For example, the Fredericton Gleaner, a newspaper not exactly noted for its support of our party but which has been pretty consistent in its support of hon. gentlemen opposite, has supported the contention of the leader of the house and the leader of the opposition and many others in Newfoundland that the award is inadequate.
But that is not the question I seek to put before the minister or the committee at the present time. I am not seeking to debate the merits of the recommendation nor am I attempting to divert attention from the point. Since it has been suggested nowhere that the award is too large and as it is needed, as I shall seek to show, for absolutely essential services in the province of Newfoundland, we at this session and before it prorogues should meet this solemn obligation of the constitution. I describe it in that language because that is what it is.
This is not a report of an ordinary royal commission as hon. members well know. This royal commission was set up pursuant to the terms of union with Newfoundland and pursuant particularly to term 29 of the terms of union. Even though it may take a little time
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I feel I ought to refresh the memories of hon. members by putting the language of term 29 on the record because the whole of the subsequent argument, the whole case for urgent action, depends upon the legal and constitutional basis, the solemn obligation that our country entered into ten years ago, to carry out this term. Term 29 reads:
In view of the difficulty of predicting with sufficient accuracy the financial consequences to Newfoundland of becoming a province of Canada, the government of Canada will appoint a royal commission within eight years from the date of union to review the financial position of the province of Newfoundland and to recommend the form and scale of additional financial assistance, if any, that may be required by the government of the province of Newfoundland to enable it to continue public services at the levels and standards reached subsequent to the date of union, without resorting to taxation more burdensome, having regard to capacity to pay, than that obtaining generally in the region comprising the maritime provinces of Nova Scotia, New Brunswick, and Prince Edward Island.
Perhaps, Mr. Chairman, you would like me to call it six o'clock.


Donald Methuen Fleming: Mr. Chairman, I wonder if the committee would bear with me for a moment. The Leader of the Opposition asked about the agenda for the commonwealth trade and economic conference and I told him I was sending for the reference to this subject in the Mont Trem-blant communique. May I just put it on the record at this point with the consent of the committee?


John Whitney Pickersgill: Mr. Chairman, if the minister would like to dispense with reading it, in placing it on the record, it would be agreeable to us.


Donald Methuen Fleming: This will only take a moment, Mr. Chairman. The following is an extract from the communique referring to the commonwealth countries:
They considered that the time is most opportune to assess these problems and opportunities jointly with particular reference to:
(a)	the significance for commonwealth countries of changes taking place in world trade:
(b)	measures to expand trade between commonwealth countries;
(c)	progress towards the common objective of freer trade and payments;
(d)	the progress and direction of economic expansion in the less developed countries of the commonwealth and the sources of capital and technical assistance that may aid in their further development;
(e)	economic and trade problems in regard to agriculture and other primary production;
(f)	the prospects and implications, especially for commonwealth countries, of the European Economic Community and the proposed free trade area;
(g)	arrangements for continuing commonwealth consultations on economic matters.
At six o'clock the committee took recess.

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The committee resumed at eight o'clock.


John Whitney Pickersgill: Mr. Chairman, when we rose at six o'clock for the dinner recess I had just put on the record for the benefit of hon. members the text of term 29 of the terms of the union between Canada and Newfoundland, and as briefly as I can I want to point out just precisely what it is that the commissioners were asked to do and what it is that the government of Canada is obligated to do under this solemn undertaking given at the time of union.
The purpose of the commission was to review the financial position of the province of Newfoundland-and this is the important part-and to recommend the form and scale of additional financial assistance, if any, that may be required by the government of Newfoundland for two purposes, first, in order to continue public services at the levels and standards they had reached. Now, I want to emphasize that point to all hon. members. This award, this recommendation, of the McNair commission, is not designed or intended to improve the services in Newfoundland. All that it is intended to do is to continue them at the level they have now reached, or that they had reached at the time the commissioners were taking their evidence. Therefore, this is not something to raise standards in Newfoundland at all. This is simply something that will enable the government in that province to continue the standards attained and to do so without having a provincial tax structure more burdensome than the tax structure on the average of the three maritime provinces.
I want to emphasize the fact that there was no thought in this provision of the terms *of union that any award was to be made to bring the level of Newfoundland up to that of the highest province, or the Canadian average, or even up to the level of the other maritime provinces. All that it was to do under this particular provision was to continue the existing levels and standards of services, and to do that with a burden of taxation no heavier than that in the three maritime provinces. That is all the commission had the right or the power to award; but that is our solemn responsibility in this parliament to carry out one of the articles of the terms of union, to uphold one of the provincial rights of the government and the people of Newfoundland and I submit it is our duty to do so at the earliest possible date.
In order to save time although 1 would like very much to do it, I am not going to read what the commission said on this subject, though it is very brief. The commission found that the levels and standards of services

of the province of Newfoundland were still far below those of the rest of Canada and below those of the maritime provinces. That evidence will be found particularly at pages 8 and 9 of the report, but I repeat, the commission had no power to recommend that anything should be done to improve those levels and standards. All they could recommend was that there should be sufficient financial assistance to continue those levels and standards. The commission found-and this will be found at page 37 of the report, but I do not intend even to read it; I will just allude to it-that the burden of taxation in the province of Newfoundland was approximately equal to the average burden of taxation in the three maritime provinces. I admit this is a very difficult thing to measure and the commission said so; but I do not think there would be very great quarrel anywhere with the conclusion of the commission on that point. That means, of course, that any deficiency in revenue to maintain the existing levels and standards should not be made up by increasing provincial taxation in Newfoundland, since it was already as burdensome as in the maritime provinces, but should be made up by additional financial assistance to which the province, I emphasize, has a constitutional right under the terms of union, under the British North America Act. The commission found the deficiency to be $8 million per annum. That will be found- and it is very briefly stated-on page 40 of the report.
As I said at the beginning, and I repeat so that it will be here at this point, there is a good deal of dissatisfaction in Newfoundland, expressed by the premier, by the leader of the opposition, and by many others, that this recommendation is too low. The provincial commission recommended to the federal commission a sum almost twice as great, but I do not want to enter into that question now because it is one that the Prime Minister has promised us would be carefully considered by the government. I think we, too, like the premier of Newfoundland and the leader of the opposition, are very grateful for that undertaking on the part of the Prime Minister, as the unanimous resolution of the legislature says they are, and that question I think should be debated at another time.
What we are seeking to put forward now is to urge the government to meet this request, this bi-partisan request from Newfoundland, and to make as an interim payment the amount recommended by the commission.
There are those who may think that $8 million a year, in addition to what the province has, is a very large sum of money, but I might point out that under term 28 of the terms of union provision was made during

the first 12 years of union for transitional grants pending the determination of the permanent amount under term 29. For the first three years after confederation that transitional grant was $6,500,000, at a time when Newfoundland had roughly three-quarters of the population it has today. It may surprise some hon. members to realize how very rapid the increase in the population has been. Perhaps four-fifths would be a little more accurate than three-quarters. I have done my arithmetic rather rapidly. Those transitional grants were gradually to decrease until last year the amount was $1,400,000. This year it is $1,050,000, and it will be increasingly less next year.
I should like to point out to hon. members that last year, for various reasons which I am not going to enter into, the government of Newfoundland was not in a position to carry out many of the capital works which were planned for that year. That was not because of inclement weather or because the works did not need to be done, it was because finance was not available, and part of the reason why finance was not available was the steady decline in the amount of those transitional grants.
The award of the McNair commission is dated from April 1, 1957, which is, of course, the right date because that is the end of the eight-year period provided for in the constitution.
Therefore the amount that would be due at the present time is two years' instalment. It is provided in the report that the transitional grant should be deducted from the $8 million during the period of transitional grants so that the net amount that would be coming to the province this year and on which, since the report was published on July 25, the provincial authorities have been counting and have been expecting this parliament to make available to them, is approximately $13,500,000. I say again that this is a solemn obligation on the part of Canada, an obligation entered into at the time of union.
So much importance was attached to this solemn obligation that, as the hon. member for St. John's West will well recall, it was the policy of his party when he was in parliament some time ago to pledge themselves in advance at that time to carry out whatever the recommendations might be of the commission to be appointed, and there was some criticism of the Liberal government that the hon. gentleman will probably recall. I am not seeking to be controversial about this matter because I think the minister was showing a very commendable zeal for and interest in Newfoundland at that time, as he has since and as he did during the 1957 election campaign. I commend him for it. That
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was one of the principal grounds on which he urged the electors to elect him, so that he would be here to see that Newfoundland did get a fair deal in this matter. I would not be surprised if the hon. gentleman had had something to do with influencing the Prime Minister to look over the matter again to see if there could not be a larger award made to Newfoundland. But nobody knows better than the minister how urgently necessary it is that this money should be paid if the works so badly needed in Newfoundland at the present time both to raise the standards of that province to a higher level and to provide employment are to be carried on.
I know it has been argued that because Newfoundland has received $7i million this year under the Atlantic provinces grants, as well as an additional payment similar to that made to all the other provinces because of the additional 3 per cent of the income tax, Newfoundland should have plenty of money to carry on this year. But let me remind hon. members what the situation is. The premier of the province, like the premiers of the other Atlantic provinces, had already announced his plans to use the Atlantic provinces grant in the same way that Nova Scotia, New Brunswick and Prince Edward Island can use them, not just to continue existing services but to improve services to bring them a little nearer to the level they have in Saskatchewan, and that is an entirely different thing. When the legislation covering the Atlantic provinces grants was introduced in the house we were told by the minister that their purpose was to raise levels in the Atlantic provinces.
What is going to happen this year has been explained very clearly in the budget speech delivered on Wednesday of last week, if I remember correctly, in the assembly at St. John's. The budget speech pointed out that if this payment under the McNair award was not made so that the province could use it for the purposes for which they are designed, to continue existing services, the Atlantic provinces grant in Newfoundland would have to be used to continue existing services and therefore could not be used for the purpose for which parliament intended it, namely to improve the situation in that province. Unless we act at this session we are going to be saying to Newfoundland, you have to use the Atlantic provinces grant to continue your existing services; you cannot use it the way the other Atlantic provinces can, to improve your services. And why? Because we in parliament are not carrying out our solemn undertaking, our constitutional obligation under the British North America Act. That is what we will be saying. I cannot believe that any member of this

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parliament having considered the facts, because these are facts, would want to do that.
In view of conditions in Newfoundland, which have been particularly adverse this year because of the failure of the fishery and because of the difficulty of disposing of the pulp and paper products of the only other large Newfoundland industry, there is no question that the economic situation is very serious. Maintenance of existing services is going to be more difficult this year than it has been any year since confederation, particularly during the coming winter. Capital works are very urgently needed indeed. The school population of Newfoundland in proportion to the whole population is higher than it is in any other province of Canada. The shortage of schools is more acute there than anywhere else. The shortage of roads and the condition of the roads are such that there is a more urgent need for new and improved roads there than in any other part of Canada.
I could go on about all the services. No one needs to take my view of them because it is set out in the report of the royal commission. It is set out in the budget speech in Newfoundland the other day and it is a matter of common knowledge to all those who are familiar with the situation in that part of Canada. If the provincial government does not receive this money, which we have an obligation to pay to them and which they have the right to receive under the constitution, it means that the capital works that have been planned for the two purposes of raising standards in the province, not to anything like the level in the rest of Canada but to raise them to some degree, and also of providing employment, which is going to be so badly needed during the coming winter, are going to be denied to the people of Newfoundland.
We all remember-it has been referred to a good many times in the house-the statement made by the Prime Minister in Charlottetown last February a statement he made everywhere else also, that no one was going to be allowed to suffer because of unemployment. If we do not make these payments available to the government and people of Newfoundland in this session of parliament, we in this parliament are going to be creating unemployment in Newfoundland next winter. There is just no escaping that. The facts are there for anyone to see.
It is for that reason that I make no apology for joining with the premier and the leader of the opposition in Newfoundland in making this appeal to the government to act now in conformity with the unanimous request of the house of assembly of Newfoundland, supported by the Liberal majority and the Conservative minority in that assembly who have

joined together because they put the interests of Newfoundland above any partisan consideration. I may say that I am seeking to make this appeal in a completely non-controversial way in the hope that it will be received by the government in the same way and that action will be taken so that a provision may be included in the appropriation act which we will pass at the end of this session to carry out this solemn constitutional obligation to which the people of Canada gave their word on the eleventh of December, 1948, when the terms of union were signed. I think it is true to say that in the history of the modern world there has been no happier union of peoples anywhere than the union between Canada and Newfoundland.
I well remember how moved I was when sitting in the gallery on one of the anniversaries of confederation I heard the hon. member for St. John's West, the minister for Newfoundland, when he was in the first parliament after confederation, use words not dissimilar from those I have now uttered. The minister, we know, was a sincere and genuine opponent of union, but he recognized that it had come to stay. He had come to the conclusion that it was a good thing for both of us. I hold the view, and I have never hesitated to express it, that the biggest gainer as the result of union was the rest of Canada. Nevertheless, I think Canada and Newfoundland have both gained. I do feel, that we do not want any blemish on this harmonious union by any feeling in any quarter that there is any attempt whatever to fail to carry out the agreement for the union or even to delay action in carrying out the agreement.


Chesley William Carter: Mr. Chairman, I should like to say a few words in support of the appeal which the hon. member for Bonavista-Twil-lingate has made to the Minister of Finance, and to the government, to implement the recommendations of the royal commission on the economic position of Newfoundland by making an interim payment at this session. For all mainlanders confederation dates back to 1867; for Newfoundlanders confederation dates back to 1949. When confederation was being considered at that earlier date, Newfoundland decided not to join with the other provinces. There were several reasons for that, but one of the very important reasons was that Newfoundland had very small taxable resources. When consideration was being given to union with Canada in 1948, this same question was in everybody's mind: What would be the effect on provincial' revenue of union with Canada? It was well known that the main sources of revenue would be taken away from Newfoundland and would be transferred to the federal government, while at the same time the province

would be left with the responsibility for the most expensive public services such as roads, schools, hospitals, health measures and so on.
The opponents of confederation, as they did in 1867, painted a very dark picture, a picture in which they said Newfoundland would be stripped of most of its sources of revenue. Confederation would result in a heavier tax burden than prevailed at that time. This was, in essence, the same argument that had been used with great effect in 1867. Subsequently, a delegation came to Canada, after confederation, to study the federal setup and try to discover just what the impact of confederation would be on provincial revenues. They studied this question for three months, not only the members of the Newfoundland delegation, but federal cabinet ministers, departmental officials and financial experts of the Bank of Canada. After studying that question for three months they had to admit that it was impossible to foresee just what effect union with Canada would have on provincial revenues. Since it was impossible to foresee what that impact would be, term 29 was drafted and inserted into the terms of union. This term 29 made provision for a review after eight years of confederation of the financial situation in Newfoundland. It was hoped it might be possible, after looking back over the course of events during the first eight years, to see more clearly what might be needed to enable the provincial government to carry out its responsibilities in the future.
I do not believe anyone had any doubt at that time that confederation would be in the best interests of the people of Newfoundland. It might bring about an increase in prosperity. But I believe that thinking people everywhere Trad some doubts as to whether or not it would be a good thing for the government of Newfoundland. There was some doubt as to whether or not it might place the government of Newfoundland in a position where it would be financially impossible to discharge its obligations. Now, eight years have passed. Some time ago a royal commission was set up to make this review. Recently, the report of that commission was tabled in this house. I am not going to make any remarks concerning the merits of the recommendations or the basis upon which the commission arrived at their conclusions or the adequacy of their recommendations. I merely wish to point out that after reviewing the situation this royal commission did recommend some money was needed to assist the provincial government in carrying out its obligations, and that sum of money should take the form of an annual grant.
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As my colleague the hon. member for Bonavista-Twillingate has pointed out, the purpose of that grant recommended by the royal commission under term 29 was merely to continue the services at the same level as had been reached when the review was made. The provincial government knew that this would happen because term 29 was actually written into the terms of union. In preparation for that review, they put forth superhuman efforts to try to make the greatest possible improvement in our public services. Every province of Canada is striving toward the goal of improved standards of public service and improved standards of living. It is a sort of race with progress. In the early days of confederation the maritime provinces were out in front. But today, after 80 years, they are behind in that race.
Newfoundland entered that race 80 years behind the others and, therefore, we are saddled with that 80-year handicap. However, as I stated, the provincial government put forth a superhuman effort and although they made mistakes as was bound to happen they did achieve a great deal. It might be worth while to inform hon. members about some of the things that have been accomplished as a result of their efforts to extend the services in Newfoundland and compare them with the services in the maritime provinces, not compare them with the high standards of the central provinces but with the standards in the maritime provinces which, as I pointed out a few minutes ago, are still behind in the race for progress.
One of our great needs in Newfoundland is roads. Roads are more expensive to build in Newfoundland than elsewhere. It is probably twice as expensive to build roads in Newfoundland as it is to build them in any other province of Canada.


Mr. McPhillips:: Oh, no; in British Columbia they are three times more expensive.


Chesley William Carter: I will accept the hon. member's statement. I do not know anything about British Columbia. However, I know that they are far more expensive to build in Newfoundland than they are in Canada as a whole, having regard to average costs. In 1949 we had only 1,600 miles of road. After nine years of effort we now have 3,200 miles of road and of that 3,200 miles of road only 120 miles are paved. Let us compare our situation with that of Nova Scotia. Nova Scotia is only about half the size of Newfoundland, with an area of 22,000 square miles compared with an area of 42,200 square miles in Newfoundland. Yet Nova Scotia has
15,000	miles of road compared with 3,200 miles in Newfoundland. New Brunswick has 13,000 miles of road compared with

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3,200 miles in Newfoundland. Even little Prince Edward Island with an area of 2,000 square miles, has 3,500 miles of road of which 400 miles are paved. Yet Newfoundland, with a population of over 400,000 people, still has only 3,200 miles of road.
We have one university compared with seven universities in Nova Scotia and six universities in New Brunswick. Hospital services have been more than doubled in the nine years and yet we are perhaps only within 50 per cent of what we actually need. As a result of that, Newfoundland is at least 25 years behind the rest of the maritime provinces in the standard and requirements of their public services just as the maritime provinces themselves are perhaps 25 years behind the central provinces of Ontario and Quebec.
The money provided by this grant under the terms of union which has been recommended by the royal commission is intended to enable Newfoundland only to continue 25 years behind the maritime provinces and 50 years behind the central provinces of Canada. I mention that matter in order to emphasize the fact so that hon. members will not confuse this grant under the terms of union-I refer to term 29-with the special grant for the Atlantic provinces which, as my colleague the hon. member for Bona-vista-Twillingate has pointed out, was intended and was granted by this parliament to improve the services.
Every province wants to improve its services. But if this money is not forthcoming, Newfoundland will be obliged to divert funds from the special grant from its original purpose intended by this parliament in order to maintain existing services, and the result of that procedure is going to be to retard progress in Newfoundland for at least two or three years. Not only will it retard progress but it will also nullify the plans of the government which were intended to cope with the unemployment situation in Newfoundland which today is double what it has been in the worst year since confederation. This term 29 and the recommendations under this term represented the final act of union. It was, as it were, the consummation of the marriage between Newfoundland and Canada. We all want that marriage to be successful. We all want it to be a happy one. However, it cannot possibly be a happy marriage unless Newfoundland is given the same consideration as that given to the other provinces. If Newfoundland is prevented by any action of this government from using the special grant to improve services, as the other maritime provinces are doing, then we shall fall still further behind the other

maritime provinces in our efforts to strive for better standards of services for our people.
Nothing should be done, Mr. Chairman, by this parliament that is going to impede Newfoundland in its efforts towards progress. The government of Newfoundland, on being made aware that the special grants would be made available, worked out a program of improved services including better schools. Some of that money was also to be spent for hospitals and a great deal of it on roads. One of the roads I hoped would go to my own riding, which would open up a rich area, perhaps the only area of development in my riding in bay D'Espoir and connect it with the trans-Canada highway. These projects would create a large amount of employment and would do a great deal to stabilize the economy of Newfoundland and to minimize the effects of the recession which we are experiencing at this time. If that cannot be done, then everybody in Newfoundland is going to suffer.
I appeal to the government to give urgent consideration to our people not only because we are making the plea but because it is the right thing to do. I believe that is the only good reason for doing anything: we must be sure that it is right. I am sure that the minister and the Prime Minister want to do the right thing by Newfoundland. Withholding this grant at this time will, in my opinion-and I am sure my opinion can be substantiated by consultation with any expert on Newfoundland-strike a blow at the economy of Newfoundland from which it will take years to recover; and even if the grant were doubled next year or in some year in the future, it would still be impossible to undo or to repair the damage which will result if some interim grant is not made at this time.
The provincial government made its plans on the basis of this grant being made available for 1957. We are now into the fiscal year of 1958. It is therefore a year behind. Whatever conclusion the Prime Minister and the cabinet may reach as to the adequacy or inadequacy of these recommendations of the royal commission, I do not think that consideration should prejudice Newfoundland's right to receive interim payments on account for the last fiscal year and for this current fiscal year. I urge the Prime Minister and the Minister of Finance to take our appeal seriously and to accede to the requests which they have received from the premier of Newfoundland and from the leader of the Conservative party in Newfoundland which show that this is a matter which is far above party politics and party division. I am sure there is no better way

in which to ensure the gratitude of Newfoundland than by taking this most needed action at this time.


Herbert Wilfred Herridge: As a member from British Columbia, I wish very briefly to say that I have listened with interest and sympathy to the moving appeal of the hon. member for Bonavista-Twillingate on behalf of the people of Newfoundland. 1 thought his presentation of his case was statesmanlike and non-partisan and that his remarks must evoke from the minister and the members of this house a sympathetic response.
We in western Canada particularly enjoy many advantages not enjoyed by the people of the maritimes, especially in Newfoundland, and as a member representing a constituency in a province which enjoys many advantages to which the people of the maritimes look forward, I want to take this opportunity of asking the minister to give very serious consideration to the representations made by the hon. member for Bonavista-Twillingate who I think did a masterly job in presenting the case of the people of Newfoundland.


Herman Maxwell Batten: I would like to say a few words at this time in support of the appeal made by my colleague, the hon. member for Bonavista-Twillingate and also by my colleague, the hon. member for Burin-Burgeo. There is at this time very little need to recount the proceedings leading up to the joining of Newfoundland with Canada. I suspect the story is well known and those who have read the official record in Hansard will be fully informed of what took place at that time. The Hon. George Drew, who was then leader of the Conservative party, on Monday, February 7, 1949, had the following to say:
As has already been pointed out by the Prime Minister, the union of Newfoundland with Canada will represent the fulfilment of the great and challenging vision of those who met in Charlottetown on September 1, 1864, in the hope of bringing together the whole of British North America as one united nation. It will give reality to the dream Df Sir John A. Macdonald, whose proposals to Newfoundland for confederation were not first made at the time of the Charlottetown conference but in fact were put forward to Newfoundland in 1858. It is well to remember the significance of the fact that these proposals which were put forward to Newfoundland in 1858 brought the first favourable official response to his contention that steps should then be taken to create a federal union.
Further down in his statement Mr. Drew had this to say:
Macdonald, Cartier, and those associated with them, were disappointed that Newfoundland did not become part of Canada in 1867, but they never despaired of ultimate success.
Towards the end of his speech, he had this to say:
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It is essential that the union be one which appeals now, and will appeal in the years ahead, to the people of Newfoundland and to the people of Canada as something which united them in spirit and in friendship even more than it did in statutory form.
It was only two months following the statement of the Hon. Mr. Drew that Newfoundland did become part of Canada and as part of Canada there were naturally terms of union between us. I know that term No. 29 has already been placed on the record, but I want to repeat part of it again as follows:
In view of the difficulty of predicting with sufficient accuracy the financial consequences to Newfoundland of becoming a province of Canada, the government of Canada will appoint a royal commission within eight years from date of union to review the financial position of the province of Newfoundland and to recommend the form and scale of additional financial assistance, if any, that may be required by the government of the province of Newfoundland to enable it to continue public services at the levels and standards-
I repeat that, Mr. Chairman-
-at the levels and standards reached subsequent to the date of union, without resorting to taxation more burdensome, having regard to capacity to pay, than obtaining generally in the region comprising the maritime provinces of Nova Scotia, New Brunswick, and Prince Edward Island.
Obviously at the time these terms of union were signed it was impossible to look ahead to see what the effect of the terms of union would be on the province of Newfoundland and so, included in these terms of union was term 29 by which, after eight years, it would be possible with the help of experience in intervening years to look back on what had been done and to see how these terms of union had affected Newfoundland and what, if any, additional consideration should be given.
We know that in Newfoundland we have standards of public service which are not nearly up to the level of the standards here on the mainland. I could refer to many instances but I will just briefly mention two of them. Take, for example, our educational services, which are not nearly as good as that enjoyed by the people in any other Canadian province. We have a growing population with a great need for school expansion including those modern educational services which are being given in many places to the people of Canada.
I heard my hon. friend from Victoria, B.C., make an interjection when my colleague from Burin-Burgeo was speaking regarding the cost of highways. He may be perfectly correct in that the cost of the trans-Canada highway being built in British Columbia is much higher than it would be in Newfoundland but of course when you start to calculate the cost of that highway in any province I think you

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must consider not only the cost in dollars and cents per mile but the actual cost in dollars and cents per capita.
Earlier in the session I put some figures on the record which I would like to quote again. At page 409 of Hansard for May 23, 1958, I said:
I point out that the project is becoming a very expensive one for my province, not only in the sense that Newfoundland is not an easy province in which to build a highway, but it is expensive also in terms of the amount of road which has to be built by a small population. The total length of the trans-Canada highway is about 4,500 miles. The total length of that highway in Newfoundland is 610 miles, which means that while the population of Newfoundland is only 3.7 per cent of the population of all the provinces which are now under the agreement, yet the proportion of the road which they have to build is 13.3 per cent, roughly three times as much.
We could compare the cost of the trans-Canada highway in Newfoundland with the cost in other provinces, for example in Alberta and in Ontario, where the number of miles per 10,000 of population is 2.8. In Manitoba the number of miles per 10,000 population is 3.7. In Saskatchewan the figure is 4.8 miles, in Nova Scotia 4.8, in British Columbia 5.7, in New Brunswick 7.1, in Prince Edward Island 7.3, while in Newfoundland the number of miles per 10,000 of population is 15.8.
I suggest to my hon. friend that while the actual cost per mile may be greater in British Columbia, the actual cost per capita in Newfoundland is far greater than in any other province of Canada. I could go on to talk about other services in Newfoundland and indicate that we still have a long way to go not only to reach the standards and levels of the maritime provinces but also to reach the standards and levels that obtain in the other provinces of Canada.
I could, of course, engage in a long speech and quote figures at length from the McNair report and also from the various briefs presented to that royal commission dealing with the situation that exists in Newfoundland but I shall not do so.
We live in a country that is known as a democratic country. We live in a country that is recognized for its practice of democracy. Democracy is, after all, an experiment in faith. It is an experiment in the faith that free men are able to retain their identity and maintain the fact that there is such a thing as unity in multiplicity. Perhaps the concept that there can be unity in multiplicity is the very basis of democracy. After all, the confederation of Canada in 1867 is a fact that goes to attest these ideas. It demonstrates that in a large country with many provinces covering a wide expanse those provinces have been able to unite to form one great nation. In 1949 Newfoundland entered that union and in doing so they, too, as an older dominion in their own right believed that there is such a thing as unity

in multiplicity. Those who come from the province of British Columbia are proud that they come from that great province but I suggest to you that they are also proud because they are Canadians. We could go right across the country from Alberta to Prince Edward Island and in every province it will be found that people are proud to belong to their own province but at the same time are proud to be Canadians.
We in Newfoundland never hope to have the industrial development that exists in British Columbia. Newfoundland can never hope to be a Toronto or a Montreal. Yet, we do believe that we can be an integral part of this nation. We believe that with our God-fearing people who are resolute and determined we can make a significant contribution to this nation. We in Newfoundland are proud to be Newfoundlanders and I believe if this government gives to Newfoundland the assistance the people there deserve they in turn will be proud to be Canadians. I urge the Prime Minister, the Minister of Finance, the cabinet and hon. gentlemen of this committee to give serious consideration to the appeal made by the premier of Newfoundland, by the leader of the opposition and by the hon. members from Newfoundland here in the House of Commons on behalf of Newfoundland, for I assure you, gentlemen, that if we can give to Newfoundland the start that it deserves it will become a fine part of this country, and the loyalty to Canada on the part of the people of Newfoundland, if it is excelled in the future, will be excelled only by those who have always had the privilege of calling themselves Canadians.


Hazen Robert Argue: Mr. Chairman, I listened with great interest this evening to the remarks made by hon. members from the province of Newfoundland and those made by my colleague the hon. member for Kootenay West. I am not well acquainted with this question but I know sufficient about it to wonder why the government has failed to act in a way that would remove this important and justifiable complaint of the province of Newfoundland.
If the discussion had nothing to do with the terms of confederation, and that is far from the case, I think hon. members would be justified in asking such consideration from the federal treasury to help them improve their health services, their roads and educational services in that province. But it is clear from the terms of confederation that within eight years from the date of union, in April, 1949, there should be consideration by the government to providing to Newfoundland such revenues as are necessary to maintain the services prevalent at that time

with a tax burden not greater than that borne by the citizens of the neighouring maritime provinces.
We have heard a great deal about national unity in this country. When the Liberal party was in power it heralded itself as the party of national unity and it was the Conservative opposition at that time, according to the Liberal members, who were bent on damaging national unity in this country. Up until this moment during this session we have seen the government take upon itself the cloak of the supporters of national unity and hon. members of the government have accused the opposition of not following policies in the interests of national unity when they were in power.
I believe if we can leave our politics aside hon. gentlemen in all parties would be found to be interested in maintaining and strengthening national unity. I believe that hon. members of this committee have great sympathy for the position being taken by the province of Newfoundland. That position is a very strong one stemming as it does from the unanimous report of the royal commission and the unanimous resolution passed by the Newfoundland house of assembly. This parliament should not allow this problem to go unsolved, should not allow this criticism to gain strength and should not permit to exist a disservice to national unity in Canada.
I have been called a lot of things in this house but I had never before been called a mainlander as I was tonight by the hon. member for Burin-Burgeo. However, I want to assure him that as one mainlander I have every sympathy for the problem put forward by the province of Newfoundland. I believe the province has an excellent and unanswerable case and that the parliament of this nation should fulfil in a generous way beyond question the terms of confederation with Newfoundland to the very letter and spirit of the agreement and if necessary should go beyond the terms of the agreement to make sure that the Canadian citizens living in the province of Newfoundland without exception are proud to be a part of this great nation.


James Roy Tucker: Mr. Chairman, it is not my intention to take up too much time of the committee at this moment but I wish to make it very clear at this stage that Newfoundland cannot afford to wait very long for definite action with respect to term No. 29 of the terms of union if we are to enjoy the full membership in the Canadian family to which we are entitled. Right now the provincial government and the entire legislature in Newfoundland regardless of party are awaiting with general concern the reaction of this government regarding the McNair report.
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I wish to state that this is not a case of a have-not province looking for more money from Ottawa. It is also more than the mere fulfilment of a contractual obligation to be considered in the light of a transaction in the market place. It is rather the completion of a compact which brought two peoples together in an indissoluble union, and the success of that union depends on mutual satisfaction and, in respect of the weaker party to the union, upon their ability to find respect and happiness within the orbit of a great and growing nation.
Let me assure this committee, Mr. Chairman, with all the sincerity I can muster that Newfoundland's future as a province of Canada depends in a large measure on the action taken on this report. For some time we have heard much about this report and I assure you, Mr. Chairman, that Newfoundlanders had hopes that the cabinet would have given serious consideration to the McNair report and would have dealt with it swiftly because of its importance to Newfoundland.
Let me say as well that I had hoped as a Newfoundlander that this question of the revision of the financial term of union would be dealt with on a level that goes beyond party politics, or even the regional or provincial issues and differences that sometimes tend to keep us apart. I believe sincerely that it would be a real tragedy if the future of a great new province were to become the subject of petty haggling or even party politics. I hasten to add that I have not the slightest suggestion that this will be the case. Indeed, I have every reason to believe that the Prime Minister, his associates in the cabinet and indeed all members on both sides of this house have a high regard for Newfoundland. It is apparent that the vast majority of Canadians, both public men and private citizens, wish to see Newfoundlanders take their places as prosperous citizens in a prosperous province, sharing equally in all the undoubted benefits of Canadian citizenship.
It merely remains for me to assure this committee in all sincerity that the feeling is mutual. What Newfoundland seeks from this union is not charity. A people with more than 450 years of history behind them are much too proud for that. What we want is common justice and an opportunity to pull our weight as we have done in all cases in the past. It is not surprising, indeed it is understandable, that hon. members and all Canadians in general have little real knowledge of its people. After all, nine years of confederation is a relatively short period in which to educate a whole nation to the attributes of a neighbour and partner, particularly in view of the fact that the education job has to be done in the face of a previous century or

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more of false impressions and erroneous information. Obviously, in a single speech it is going to be impossible for me to correct all the current misconceptions which even this committee may share.
I do suggest to this committee, however, that as public men it would serve us well if we were to devote some time to a study of our newest province. I believe you will find its history fascinating and its people admirable. You might learn, as I did long ago, that while the problems of Newfoundland may seem gigantic by some yardsticks, our people do not in fact require a great deal more to make them self-sufficient and give them a happy life. Newfoundland today has a desperate, almost hopeless effort to catch up with the rest of Canada. Remember that virtually all of the remainder of the nation had at least 50 years of confederation behind it before Newfoundland entered the union, and thus from that moment on, although the pact was share and share alike, it is difficult to see how Newfoundland could hope to be anything but a half century behind in its basic services.
Let me put it this way. If I entered into a partnership with a member of this house and he had $50,000 at that time while I did not have a cent, and if we accepted the fact that we would share everything equally from that point on, it stands to reason that my so-called partner would always be $50,000 better off than I. That is precisely the position of Newfoundland relative to other provinces. We got the same deal as other provinces on the trans-Canada highway but our existing roads mileage was very low and below that of other areas of this country.
We get the same federal grants, the same rental programs and the same treatment generally, but we have so much farther to come in order to achieve equality that we never can hope to catch up under such an agreement. Newfoundland needs and is to have special aid, and there is a good case to be made for such an agreement. It is a case that needs no appeal to charity or unusual generosity. Rather, it is based on logic and above all justice. It is very true that Canada has given much to Newfoundland in the past nine years and I think that union has been a good thing for the vast majority of Newfoundlanders but it is equally true, although not as widely publicized that Newfoundland has given much to Canada.
Not all of this contribution can be measured in dollars and cents, although from the financial point of view the Newfoundland role has been substantial. However, perhaps

the intangibles have been even more important. Over 400,000 good citizens, a practically debt-free people, assume the responsibility for their share of Canada's debt; the world's greatest fishing grounds, strategic defence bases, airports, water power and a strong hand in dealing with the United States. All this plus much more came to Canada through its union with Newfoundland, making the union truly a two-way street of mutual benefit. Given a fair measure of the nation's wealth, Newfoundland has a bright and promising future.
Newfoundland is not greatly different from other parts of Canada and its people are pretty much like those from other constituencies. We ask nothing more than the right to earn a decent living, through our own efforts, and to enjoy for ourselves and our families that degree of basic security that has come to be regarded as our right in a nation that has not forgotten the worth of the individual.
Therefore it is on this basis that I say and believe Newfoundland should have the support of the house in seeing that a good and just case exists for an upward revision of the terms of union and that, according to the report of the royal commission, Newfoundland finances are raised to a higher level.


Lester Bowles Pearson: Mr. Chairman, I rise not to add to the argument made but merely to join in the appeal that has been made to the government to discharge the obligation undertaken under the pact of union with Newfoundland by implementing the recommendation of the royal commission, an appeal that has now been embodied in a resolution of the house of assembly of Newfoundland moved by the premier, seconded by the leader of the opposition and passed unanimously. This, Mr. Chairman, is not a matter of generosity but a matter of justice, and I refuse to believe that justice will not be done and without delay.


John Whitney Pickersgill: Is the minister not going to say something about this matter?


Donald Methuen Fleming: I was about to, but is the hon. member for Welland going to speak on this subject?


William Hector McMillan: Not on Newfoundland.


Donald Methuen Fleming: Mr. Chairman, I have listened with close interest to the remarks that have been made by hon. members on this subject. Admittedly it is a subject of very high importance and because of its importance, not just for one year but for years to come, it is one that requires the most careful consideration. On August 15 the Prime Minister was questioned in the house

on the subject by the Leader of the Opposition and to the hon. gentleman's question the Prime Minister made the following reply, as found on page 3581 of Hansard:
Mr. Speaker, this royal commission was appointed by the last government, and apparently its recommendations are not acceptable to all. I have read criticisms of various leaders in Newfoundland respecting the amount recommended, and that being so the government must give the fullest consideration to the matter before announcing the course it will follow.
Then followed a supplementary question by the hon. member for Bonavista-Twillingate.
By way of a supplementary question, Mr. Speaker, may I ask if we are to take it the government does not intend to act at this session?
To that question the Prime Minister made the following reply:
Mr. Speaker, I have nothing to add to what I have already said. Certainly this government has a responsibility to look thoroughly into the recommendations made. Those recommendations apparently not having the support of the leaders in Newfoundland, this re-emphasizes the necessity of the fullest consideration being given by the government before taking action.
That statement in the house by the Prime Minister was greeted by the premier of Newfoundland in the telegram dated August 23 that was read this afternoon by the hon. member for Bonavista-Twillingate-


John Whitney Pickersgill: August 23? No, I do not think so.


Donald Methuen Fleming: Oh yes, it was later on.


John Whitney Pickersgill: I read the telegram embodying the resolution and no other.


Donald Methuen Fleming: Perhaps, Mr. Chairman, as the hon. member for Bonavista-Twillingate has read one of these telegrams, it might not be amiss for me to read another that was received from Premier Smallwood by the Prime Minister.


John Whitney Pickersgill: Would the minister permit me to ask him to read the first telegram of August 11 from the premier? If he does not happen to have it with him, I will be glad to supply him with a copy.


Donald Methuen Fleming: I would be quite content if my hon. friend would read it himself.


John Whitney Pickersgill: It is the beginning of the story and I am sure the minister does not want to be unfair.


Donald Methuen Fleming: No.


John Whitney Pickersgill: We have tried to be very fair.


Donald Methuen Fleming: My hon. friend can put it on the record. I have here the telegram sent by Premier Smallwood to the
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Prime Minister on August 23. I do not propose to read all of it, although I will if that is desired. I am relating my remarks to what the Prime Minister had to say in the house and this is the part of the telegram that contains comment on the Prime Minister's statement in the house. The latter part of the telegram reads as follows:
I have already announced publicly that Newfoundland is grateful to you for your decision not to accept the recommendation of the McNair commission without giving it more careful consideration and I now request you to pay us the amount that is recommended while you take time to consider our request for improvement in the amount that will be paid to us on a lasting basis.
Last week the Prime Minister replied to Premier Smallwood by telegram dated August 26 reading as follows:
In reply to your telegram dated August 23. As you know, on behalf of the government of Canada I announced in House of Commons on August 15 the intention to give fullest consideration to report of royal commission on terms of union with Newfoundland and its recommendations before announcing course we will follow with respect thereto. I am glad to learn from your telegram that you approve this decision and have publicly announced that Newfoundland is grateful for it. We expect prorogation of parliament within very few days and it is quite impossible to complete full consideration of the royal commission's report in the meantime. Newfoundland is receiving $7,500,000 per annum as its share of the Atlantic adjustment grant and an additional three per cent of the yield from the personal income tax this year, neither of which would have been received by the province of Newfoundland had this government not come into office. These benefits, which incidentally exceed the amounts recommended by the royal commission, should enable you to meet the fiscal conditions described in your telegram pending final decision on recommendations of royal commission. Kind personal regards.
John G. Diefenbaker
The report of the royal commission on the terms of union with Newfoundland is an important document and the action that may be taken by parliament on that report is something that is going to play a very important role in the financial terms of union in the future and in the fiscal relations between the federal jurisdiction and the province of Newfoundland. It seemed to the government that in relation to so important a matter it was its duty to give the whole subject the fullest and most careful consideration, particularly as the recommendations of the royal commission are not satisfactory to the government of Newfoundland. That has been made very clear.
The amount recommended by way of annual payment by the royal commission is approximately half the amount that the government of Newfoundland asked for in its submission to the royal commission. It having been made perfectly clear that the recommendations of the royal commission are not acceptable to the provincial government of Newfoundland,

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it has seemed more clear to the federal government that we must approach the matter with very great care and concern. I have indicated that this is not a matter for one year but one that is going to be of continuing effect in the years to come. The royal commission has not set any particular period on the time within which the proposed annual payments of $8 million less transitional grants are to run. Accordingly, Mr. Chairman, we are dealing with a very large matter.
But principally because it is something that goes to the root of the terms of union and fiscal relations between the governments of Canada and Newfoundland, it has seemed to us that this is a matter that must have the most searching study. Under the pressures that have existed in the late days of the session it has simply been physically impossible for the government to complete its consideration of this report and the important question involved. The Prime Minister has made it clear that it is the government's intention to continue to give exhaustive consideration to the matter and to the recommendations of the royal commission. That is our intention in those days that lie before us, as soon as the pressures of this session are relieved.


John Whitney Pickersgill: The minister, of course, would not expect me to leave the question there. The minister I am sure, like the rest of us, has heard the old adage that half a loaf is better than no bread. What the minister is saying is that while the government considers whether or not they should increase the amount, because I cannot believe that the government is giving any consideration to decreasing the amount-at least, I hope that is not true. I cannot believe that the hon. member for St. John's West would sit in the government for a day if that were true. This consideration can only be as to whether or not the amount is to be increased. There is, in the minister's reply, no argument whatever to justify withholding from the province this amount recommended by the McNair commission of which one distinguished member was Professor John Deutsch who is perhaps better qualified than any person outside the public service or than most people in the public service to express a judgment on this matter.
Since the commission recognized that at least this amount was required, it does not seem to me there is any logic or any reason in the position taken by the minister. I am not seeking to be controversial. The minister read what I believe was the third message on this subject that was sent to the Prime Minister by the premier of Newfoundland. I have in my hand here a copy of the first message sent by the premier of Newfoundland to the Prime Minister on August

11. I make no apology for reading it because it does set out, in very clear terms it seems to me, the very modest request of this province. This is dated August 11, nearly four weeks ago. It should be remembered that while this report was not tabled until July 25, it was in the hands of the government very early in July.


Donald Methuen Fleming: No.


John Whitney Pickersgill: I have the dates right here.


Donald Methuen Fleming: Let me put my
hon. friend right about that. I do not know whether he is talking about the submission of the manuscript to the queen's printer, but certainly the report was tabled as soon as it was received from the printers. The Prime Minister had said he would do that and that was effectively done.


John Whitney Pickersgill: I am not going to enter into an argument with the minister because the documentation is all here. The Prime Minister told us in the house that the report had been received, I think it was July 10, but it was not tabled until July 25 pending receipt of the printed version of the French translation. For those two weeks the government had, by the Prime Minister's own statement, this report. Since August 11 the government has had before it a solemn request from the premier of the province, made on behalf of the government of that province, for its provincial rights under the constitution. This is the message that was sent by the premier to the Prime Minister on August 11:
Right Hon. John G. Diefenbaker Prime Minister of Canada Ottawa
Your attention has no doubt been drawn to statements by myself and the leader of the opposition in our assembly respecting the inadequate nature of the recommendations of the royal commission on the revision of term 29 of the terms of union of Canada and Newfoundland. While I should like at a later date to make a formal submission to the federal government, I wish to stress the importance to the welfare of Newfoundland of immediate federal action on an interim basis. The commission has clearly shown that at least the amounts recommended are urgently needed to enable the provincial government to continue existing services. We plan to use our share of the Atlantic provinces grant largely for employment creating improvements in our public services. Our assembly was adjourned pending publication of the report and in order to complete our budget we need assurance that action will not be delayed in implementing the report. I appeal to you for action at the present session to discharge, at least on an interim basis, this solemn constitutional obligation of the union.
That was the appeal made by the premier to the Prime Minister on August 11. The premier renewed that appeal, as the minister pointed out, in the telegram he read

dated August 23, and on August 26 the Prime Minister replied in the terms already given. I am not going to take up time by reading them. The refusal was on the ground that this matter required further study. That was stated from the start; that was what the provincial government wanted, further study of the matter. They also urgently needed the amount recommended by the commission, and needed it now for the reasons the premier sets out here, for the welfare of the province, for the maintenance of employment, for the maintenance of essential services. This is what is being denied them and being denied in spite of this unanimous appeal from the assembly, an appeal from the premier and the leader of the opposition, the leader of the Conservative party in the province. They have joined together to ask for something for which they have a right to ask, for their rights under the constitution. That is what it is, and nothing less than that.
I cannot believe that the government has fully appreciated what this means. The Prime Minister, replying on August 26, said that the province ought to be able to get along by using the Atlantic provinces adjustment grant and the extra three per cent under the tax-sharing arrangement. Every other province has the extra three per cent under the tax-sharing arrangement. Newfoundland should not have to use that rather small sum of money to continue existing services. They should be allowed, like the rest of the provinces, to use it to improve services. In so far as the Atlantic provinces grant is concerned, what the Prime Minister was saying in his reply was that, while Prince Edward Island, Nova Scotia and New Brunswick could use the Atlantic provinces grant to improve their services, Newfoundland has to use it to maintain existing services. The statement by the Prime Minister that they would receive more under these two payments than they would under this award is, in fact, not correct. I do not accuse the Prime Minister of any deliberate intent, but in fact so far as this particular year is concerned, that is not correct. The total grant under these two provisions amounts to about $9 million, if the minister's calculation of the three per cent is correct, whereas the grant coming since April 1, 1957 and now due to Newfoundland under this other arrangement up to the same terminal date, March 31, 1959, would be $13.5 million.


Donald Methuen Fleming: The hon. member is counting in the two years, less the transitional payment?


John Whitney Pickersgill: Yes, and from the date of the publication of the report until the Prime Minister's message of August 26, that is what
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the province had every reason to expect would be paid, and paid promptly without any further consideration.
Again I do not want to be controversial, and I do not want to be critical. I have sat on the treasury benches where the minister is now and I know what it is to listen to members of the opposition, more eloquent by far than I am, denouncing the government. I know what it is like at the end of the session, and how many pressures there are on ministers. I want to take a charitable view and I feel that the government has not really had time to consider adequately what it is doing, what this refusal is going to mean. There is no doubt whatever about it, if this money is not forthcoming the road program, or a large part of it, the school-building program, the hospital program of the province of Newfoundland will have to be cancelled this year. All those who would otherwise have found work, because of the failure of the fishery, because of the short work in the woods, will be on the dole. That is what is going to happen if this is not done. It is not as though we were asking for something that was a favour, we are asking for something that is a provincial right under the terms of union, under the British North America Act.
As I say, everyone in Newfoundland wants the government to go on and consider fully the whole implications of this report. However, there is no difficulty about doing that and making this interim payment at this time. As I said in my opening remarks on this subject, all the government needs to do

and I know the process very well-is to get a message from His Excellency and bring in an item in supply which, I feel perfectly confident, if recommended by the government, would pass. I know that I would be so happy to pass it that I would not say a single word about it.


George Harris Hees: Go easy.


John Whitney Pickersgill: I make that suggestion not because it is going to do me any good personally-


Some hon. Members:: Oh, oh.


John Whitney Pickersgill: -but because it is going to mean that the people I represent and the people that my friends from Newfoundland, including the minister, represent in Newfoundland, will have jobs next winter which they would not have if this money is not there and because the people of that province will have services which are still away below those that exist in other provinces, but nevertheless services to which any and every Canadian should be entitled.


William Hector McMillan: The Minister of Finance is very serene now and I want to ask him a

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couple oi questions. This matter was raised previously. The Minister of Finance often seems to base his charges of waste and extravagance against the former government on the numbers of civil servants or the increased numbers of civil servants being employed in the various departments of government. When speaking on the budget I stated that about 70 more civil servants were employed in his department than in the time of his predecessor the previous year. The minister interrupted me to deny this statement. I would now ask the minister whether the number of civil servants is as reported in this blue book of estimates and whether it means what it says, namely that he has some 70 more civil servants. Then I have one other question.


Donald Methuen Fleming: No, Mr. Chairman. The hon. member is wrong as I informed him when he made a similar remark during the course of the budget debate. The fact is that he has overlooked, and the blue book of estimates does not take account of, the number of positions that were increased in 1957-58 in the supplementary estimates of the former government. I want to make it quite clear that there has not been the increase that he has been referring to. As to the number of positions provided for by the estimates, let me tell him that the actual strength in the department at July 31, 1958 was 5,097 persons.


William Hector McMillan: I was not criticizing the minister because there were too many civil servants. I just noted that they added up to this figure, and I did not know whether this blue book meant what it said. I have one other question. It has to do with the bond issue and it is just one simple question. Does the minister know of any time in the marketing of Canadian bonds where a commission such as one per cent was paid on all or any part of a bond issue?


Donald Methuen Fleming: 1 had those figures this afternoon and I gave them to the hon. member. I referred to the fact that the costs of the savings bond issues of the last three years had amounted to one per cent. As a matter of fact, one of them was a fraction over that. Two of them were issued by the previous government. I must remind him that the figure which he is using, if he is talking about the Canada conversion loan on which I thought we had completed our discussion this afternoon, is not simply commissions. The figure includes the one-quarter of one per cent issuing fee. There are many cases of bond issues under the former government where the combination of commission and issuing fee has amounted to one per cent. For instance, I look back and I find this. I

have already mentioned the Canada savings bond series No. 11 which was issued under the former government. That was put out on a commission of three-quarters of one per cent plus an issuing fee of a quarter of one per cent, making an aggregate of one per cent. Here is a previous Canada savings issue, No. 10, where the same rates apply. Here is a previous Canada savings bond series, No. 9, where the same rates apply. Here is Canada savings bond series, No. 8, and the rate there was higher. In that case the commission paid by the government was .87 per cent and the issuing fee was a quarter of one per cent making an aggregate of 1.125 per cent.


Mr. Denis:: What year was that?


Donald Methuen Fleming: That was 1953. It was well within the period of the former government.


Lester Bowles Pearson: Just to clear this matter up, will the minister tell us what is the maximum commission plus issuing fee in this recent conversion? I refer to the commission plus issuing fee.


Donald Methuen Fleming: I thought we were over all that this afternoon.


Lester Bowles Pearson: The minister must know the answer to that.


Donald Methuen Fleming: I put it on the
record this afternoon. It is all there on the record, the commissions-


Lester Bowles Pearson: Plus issuing fee?


Donald Methuen Fleming: Yes. I referred to the issuing fee this afternoon. The issuing fee is one quarter of one per cent.


Lester Bowles Pearson: And the maximum commission?


Donald Methuen Fleming: 
[Stage Direction]
Item agreed to.
116. Administration of the Farm Improvement Loans Act, the Veterans' Business and Professional Loans Act, the Fisheries' Improvement Loans Act and the Prairie Grain Producers' Interim Financing Act, $110,213.
Frank Howard: I believe that under this vote comes the Fisheries Improvement Loans Act. We discussed this matter in not too much detail on the estimates of the Department of Fisheries but I should like to suggest to the minister that the Fisheries Improvement Loans Act needs a bit of revision, especially in so far as the provisions applying to native Indian fishermen who are resident on a reserve. They find a great deal of difficulty in getting loans under the Fisheries Improvement Loans Act from the banks because native Indians are not considered to be able to put up the required collateral. Invariably the Indian fishermen of whom I know who want to buy gill netters or to build a gill net boat and who need money for this purpose find that the only place where they might be able to get financial assistance is the fishing company for whom they may be working. This is a most unfortunate state of affairs, as the minister probably knows, for once a person becomes indebted to a particular company, especially if that person is a fisherman, it is most difficult to get away from the clutches of that company. There are many details of the act which require to be changed but I think one of the most important things in so far as native Indians are concerned is a revision in order that Indians may be able to borrow money under the act, if not from a bank then from a credit union; if not from a private source then through some treasury source.
I hope the minister will take this matter into consideration and will study the act to see whether or not it is possible to amend it so that native Indians will have a better opportunity to themselves finance their purchases and reconstruction of boats.


Donald Methuen Fleming: I can assure the hon. member that his remarks will be noted and that the matter will be considered.


[Stage Direction]
Item agreed to.
122. Cost of telephone services at Ottawa for all departments, $1,287,000.
Lester Bowles Pearson: I would just like to draw something to the attention of the minister. If I am correct this involves an increase of about $48,000 and I cannot help but recall the days when we were in office when the minister used to single out this item as one which should always be cut and he always
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asked, "Why are we spending so much money on telephones?" It is now $48,000 more.


Donald Methuen Fleming: I do not think this was one of my favourites. I recall that it was a favourite of one of my colleagues and I think the Leader of the Opposition is confusing us, but may I remind him that the telephone services of all government departments are charged to this government line and to the Department of Finance. It is a burden which this department has to carry for all other government departments.
The increase is to cover general expansion of telephone facilities, increase in equipment, rental and salary assessment on Bell Telephone services in the Ottawa area. The government consolidated the Bell Telephone system, which now includes the main switchboard in the Bell Telephone building and the automatic switchboards at the experimental farm, Rockcliffe and Uplands airports. The	Uplands	switchboard was
inaugurated late in 1957 with interconnections to each of the other switchboards. Service charges for the 1958-59 fiscal year are reflected in this estimate.


Lester Bowles Pearson: I must apologize to the minister for mistaking him for one of his colleagues. May I say that this is a reasonable expenditure, in my opinion, even though it is $48,000 more.


[Stage Direction]
Item agreed to.
University grants-
127. To authorize payments to the national conference of Canadian universities in accordance with the agreement entered into between the conference and the Minister of Finance on the 26th day of March, 1957, pursuant to vote 541, Appropriation Act No. 1, 1957, $17,100,000.
(Translation):
Mr. Caron:: Mr. Chairman, on this vitally important item, I think that, in view of the stand taken by the province of Quebec, we should pause for a few moments to consider this matter of assistance to education, this assistance to universities.
We know that, in 1951, the Liberal party instituted a policy of assistance to universities by granting an average of 50 cents per capita and that it subsequently increased that grant. As early as 1951, there was unanimous agreement in this house on this subject. Indeed, we can see what the Minister of National Revenue (Mr. Nowlan) said at the time, by referring to page 5021 of Hansard. I quote:
(Text):
I commend the Prime Minister and the government for the speed with which they have dealt with this matter.

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(Translation):
And here is what the hon. member for Greenwood (Mr. Macdonnell) had to say, as found on page 2633 of Hansard for 1951: (Text):
-that the Prime Minister aroused high hopes on the part of Canadian universities.
(Translation):
And now, this is what Mr. Solon Low had to say, as found on page 4279 of Hansard for 1951:
(Text):
I say that we are very happy that the government is taking this step now to provide some form of interim assistance to the universities.
(Translation):
As can be seen from page 4279 for Hansard for 1951, the then member for Saskatoon, Mr. Knight, who had always advocated aid to universities, stated that this was a matter of prime concern to him and hastened to thank the Prime Minister for the good news.
This indicates that, in 1951, there seemed to be general unanimity among the parties represented in this house with regard to increased aid for universities. In 1957 the universities were still in such a position that the government of the day felt it had to do more and to grant a further increase of 50c.
There has been talk of urgency in respect of this matter. Here is what Mr. St. Laurent had to say on the subject. Before introducing this legislation he had stated, in a lecture delivered at the University of Toronto, and this is reproduced in Hansard for 1951, page 2633:
(Text):
I think many of us recognize increasingly that some means must be found to ensure our universities the financial capacity to perform the many services which are required in the interest of the whole nation.
(Translation):
In 1957, I note that the present Prime Minister himself made a rather significant statement which can be found on page 400 of Hansard, volume I. He said at the time:
I mentioned the need of Canadian universities. The need is becoming greater as the days go by. A survey was recently made to ascertain the degree to which universities in other parts of the world are dependent on grants from the state. In Great Britain 73.6 per cent of college income is from government grants. In the United States it is 58.6 per cent, and in Canada it is 42 per cent. More and more young and worthy students are being denied admission to university because they are unable to meet the ever-rising costs of tuition. In Canadian universities, of the total income today, or until the recent increase announced by the Prime Minister in November, 30 per cent comes from student fees. In the United Kingdom it is 10.7 per cent and in the United States it is 21.4 per cent. Unless action is taken to meet that situation it cannot but result in many outstanding and potential

leaders in the sciences, in the arts, and in all the different phases of living, being denied an education; for more and more tuition rates are being raised and worthy students are finding greater and greater difficulty in proceeding to senior education.
At a national conference held in November 1956 in Ottawa on the crisis in the field of higher education in Canada, the representatives of Canadian universities, in a resolution passed unanimously, expressed:
The well-considered opinion that it was their urgent responsibility to warn Canadians that the problem of universities has become a critical issue of national importance which certainly hinders our development and our status as a nation, and that this problem can only be solved by the active and immediate assistance and co-operation of all government levels in Canada, with business, industry and private benefactors.
On May 10, 1951, Mr. Cyril James, vicechancellor and principal of McGill University said, according to a report published in the Globe and Mail:
(Text):
A university education costs Canadian students more than in other countries.
A young Canadian from a family of modest circumstances has less chance of getting a university education today than a youth in any other country with which I am familiar.
He urged government to participate in the cost of education because work of the universities was of vital importance to the community, and government has not lived up to this responsibility in Canada during the last two decades, as far as education of civilians was concerned.
(Translation):
Mr. George Drew said this, which is found on page 4278 of Hansard of 1951:
(Text):
I am sure hon. members generally will welcome any measure of assistance given in this way to the universities of Canada.
(Translation):
The word "generally" referred no doubt to a very limited number of members, such as the then member for Labelle, now Secretary of State (Mr. Courtemanche), who was more interested in politics than in the welfare of students and their families, and of institutions of higher learning.
The present Minister of Agriculture (Mr. Harkness) said, as recorded on page 488 of Hansard of February 19, 1951:
(Text):
I would like to say, however, that last year the resolution seemed to receive support from practically everyone who spoke, on all sides of the house. The same thing appears to be true today, so it would seem to me the time has now come to put an end to talk on the matter and let us have some action toward implementing it.

(Translation):
The Minister of Veterans Affairs (Mr. Brooks) said also, as recorded on pages 484 and 485 of Hansard of February 19, 1951:
(Text):
I feel that some responsibility for education must be borne by the federal government, and I could give many reasons. One of the chief reasons is that the small provinces cannot today afford to give to their people the educational facilities to which they are entitled, or that they should have. ... I am in wholehearted support of the resolution and I hope that for the interest of Canada and for the people as a whole, from one end of the country to the other, some means may be found whereby educational opportunities may equal to all people from the Atlantic to the Pacific.
(Translation) :
I note that the hon. Minister of National Revenue (Mr. Nowlan) said on December 1, 1953, as recorded on pages 506 to 509 of Hansard:
(Text):
What are they going to do about the problems that are facing universities in this country? Something must be done to maintain their strength, to enable them to develop, to enable them to go forward. In these days, owing to indirect action of the government, the high level of taxation and succession duties, universities are deprived of those moneys and private beneficence which at one time they used to get. I say it is the responsibility of the government to come to their assistance, and this is a reasonable proposition that is advanced by the presidents at the conference of universities.
(Translation):
I note on page 254 of Hansard of 1955 the following statement of the same minister:
The problem has increased alarmingly in the last few years. It is a problem, of course, which I am sure the government will have to look at in a far wider field within the next five to ten years, because we are just on the verge of a new problem with respect to universities.
He no doubt referred to the problem resulting from the increasing birth-rate and the large number of immigrants arriving in Canada.
And the same minister is reported as saying on page 5345 of Hansard, 1956:
Practically every university in the maritime provinces with the exception of one, is financed by private charity or by endowment.
For his part, Dr. Blair is reported as saying on page 5079 of Hansard, 1956, in questioning Mr. Gillis:
Is he aware that the universities have had to increase their fees and that some of the universities are running these courses at a loss? They are practically all running them at a loss. The hon. member made the statement they were in business. I cannot agree with that. They are not in business, and they are running these courses at a loss.
Mr. Low is reported as saying, on page 3401 of Hansard, 1956:
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Yes, in another ten or twelve years the universities are going to be in exactly the same position. In fact, they are feeling the impact right now. Certainly we should look forward and make provision ahead of time for these heavy burdens that will have to be carried.
As for the member for Assiniboia (Mr. Argue)-the present house party leader of the C.C.F., reference to page 346 of Hansard, 1955, will show that he complained that the prime minister yielded to the Quebec premier's strait-jacketed nationalism to the extent of denying education to the other provinces.
As you can see, Mr. Chairman, sympathy is manifested on this matter by both sides of the house.
Furthermore, Monseigneur Lussier, rector of the University of Montreal, said that if a final solution was not found to the university problem, the universities would become bankrupt.
Those are the remarks of people of experience, people with a university background who appreciate what is done by the universities.
I state then that the government can be congratulated on having provided a further increase of 50 cents in university grants. This is a matter of prime importance.
To those who seem to feel that we in the province of Quebec who form the largest minority in Canada should stand apart from the others, I will say that in every country where there is a minority it is absolutely essential that that minority be intellectually superior to the majority to become equal to it in other fields. That is why we should consider that matter, not in so far as it concerns our own personal future but in so far as it involves that of generations yet to come.
The constitutional issue has been raised. On this point we all agree that section 93 of the constitution is clear and unequivocal and that it does vest the provinces with exclusive jurisdiction in the field of education.
What is the field of education? Does it mean putting up buildings? Does it mean scholarships awarded for supplementary studies? I believe that the "exclusive right in relation to education" means that the province, alone, shall exercise supervision. That is it: to supervise so that the subjects taught be in accordance with the needs of the province. There, in my mind, lies the problem. And as long as provinces maintain their authority with respect to the working out of school curricula, no constitutional problem can be said to exist. The mere fact of granting sums of money to facilitate the building of schools does not mean encroachment on the field of education and is not contrary to the spirit of section 93 of the British North America Act.
57071-3-293

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And besides, in that field-
Mr. Chairman, every time we say anything to the point, I see that the hon. member tor Roberval (Mr. Tremblay) shakes with laughter, thus displaying the value of his culture.
The Solicitor General (Mr. Balcer) said, page 273 of Hansard for 1952. I apologize, but I have only the English version and could not find the other version.
(Text):
For instance, let us consider education. Education is the exclusive field of the provinces, granted to them by the British North America Act. While every province has always kept a jealous watch over its autonomy in the field of education, we, in the province of Quebec realize that it is the very foundation of our racial and religious survival,-
(Translation),:
And the hon. member for Three Rivers continued:
(Text):
-and the population of the province of Quebec will never give up on that point. No doubt the federal government, with its millions in surpluses, will put forward very tempting offers of direct subsidies. They should know, though, as the leader of the opposition so well put it, that what the provinces need in this connection are not horse traders' gifts, but merely the respect of those ideas which served to inspire the fathers of confederation.
(Translation):
And, at pages 2543 and 2547 of Hansard for 1952-1953, the hon. member for Three Rivers said that education must be left entirely to the provinces; here is what that same member stated on another occasion that same year, at page 762 of Hansard:
(Text) :
Mr. Chairman, like all other hon. members who have spoken on this subject, I am greatly alarmed by the difficult situation which the Canadian universities are in at the present time. Like all other hon. members in this house I have the greatest respect for my own alma mater, namely Laval University. I can easily picture all the problems that face this great institution at the present time, having regard to the increase in the cost of living, the increase in the cost of materials, and various other difficulties which the authorities of this great university must face at the present time. However, I am sorry to be the only voice so far which has been raised against this vote.
(Translation):
Therefore, the hon. member for Three Rivers, when he sat in the opposition, was opposed to the payment of grants to universities on the ground that such grants are unconstitutional and a violation of section 93 of the constitution of Canada. Later on, the hon. member for Three Rivers said-I quote from page 770 of Hansard for 1957:
Mr. Chairman, before recess I was stating my opposition to this item although, like other members of the house, I recognize the difficulties faced by Canadian universities. Quebec universities face

such difficulties as do those of other provinces, and provincial governments have to make great efforts to help them.
However, he stated that he was going to vote but that he could not approve the appropriation for assistance to the universities in the 1957 estimates.
And according to the official record of 1951 -p.p. 905 to 908-the Secretary of State (Mr. Courtemanche), said the following:
(Text):
Better known as the Massey commission, it (the royal commission on national development on the arts, letters and sciences in Canada) could more accurately and more realistically be described as the royal commission for the promotion of centralization in Canada. There is no point in trying to hide the truth: the investigation in itself was a breach of provincial autonomy, as are also the attempts to implement various recommendations inconsistent with our constitution, incompatible with the sovereigny of the provinces.
(Translation):
There again in the same speech, the hon. member for Labelle objected and categorically refused to vote in favour of estimates earmarked for assistance to universities, with the excuse that such action would be unconstitutional, and in this, being in the opposition, he was going against the wishes of his then leader, Mr. Drew.
Yet, on the same constitutional issue, the Secretary of State for External Affairs (Mr. Smith), who was then president of the University of Toronto had this to say:
(Text):
Dr. Sydney Smith, then president of Toronto University, is reported in the Globe and Mail of May 7, 1951, as follows:
He noted that it cost the university $1,000 a year to keep one student in an art course. Yet the student pays a fee of $240.
Answering any argument that education is a provincial matter and therefore the federal government should keep out of it, he produced statistics which showed that 20 per cent of the 100,000 living alumni of the University of Toronto are in other provinces. The university is therefore making a national contribution. The same is true of all other Canadian universities.
(Translation):
Now, I should like to refer to the testimony of Mr. Cyril James, and I quote from page 512 of the 1953-54 session:
On the question of provincial rights, the brief said flatly: "There is no control of education, no infringement of provincial autonomy in the grants."
It said that: "Neither the members of parliament who voted unanimously for the grant, nor the universities of Canada which were equally unanimous in accepting it, entertained the remotest idea that the federal grant carried any implications of control."
The possibility of any future danger to provincial rights is obviated by the presence of a provincial representative on the joint federal-provincial commission which administers the grants, it added.
Then, further on we find this:

Dr. James said the land grant to Manitoba university was cited "because many men who participated in the confederation discussions were still active at that time."
And further:
..."it has never been suggested that in making such gifts the donors were legislating with respect to education"...
Similarly, while the Quebec government cannot legislate with regard to education in France, it nonetheless contributes generously to the Canadian students' house in Paris "and provides equally generous scholarships for students wishing to study in French universities."
And still further:
"It is difficult to see how the legality of such federal grants can be questioned without similarly calling into question a wide variety of governmental practices, provincial as well as federal, which have been part of our accepted tradition for many years."
Mr. Cyril James is an expert in the field of education, a man whose opinions generally carry much weight and I think he spelled out the problem as it should be when he said that no control in matters of curricula was implied. Moreover, he pointed out that the province of Quebec granted scholarships to students for studies in Paris, while at the same time giving assistance to the student house in Paris.
The Quebec government has done all that, and it claims that other governments do not have the right to intervene by offering grants to the provincial government itself, and I remember commending it for grants made to the university of Ottawa, to the St. Boniface college in Manitoba as well as to a college in the maritimes. This was excellent. I do not feel that in doing so he recognized that he was under any obligation to ask the Manitoba government, or the Ontario government or the various provincial governments in the maritime provinces for permission to grant subsidies or grants in aid to education.
Indeed, the present Prime Minister himself said on page 648 of Hansard for 1952 and I will quote only briefly:
(Text):
Simply paraphrasing a slogan of another day, the attitude of this party is: federal assistance ever, federal supervision never. That sums up our attitude on this matter.
(Translation):
That is why I am not in the least surprised to note that the present government has seen fit to increase those grants, in the face of ever increasing difficulties. In fact, the present Minister of Trade and Commerce stated, as will be seen on page 632 of Hansard for 1952:
(Text):
The answer lies in adequate financial support for education, with the federal authority providing the additional assistance that the provinces require- The provinces, unless blessed with unusual natural
57071-3-293J
Supply-Finance
resources, are unable to maintain from their restricted fields of direct taxation the services required. Some people consider that federal support for education means inevitably federal control or interference. Ottawa should not be allowed to grip any part of the provincial educational system. Education is of national concern and merits support from the federal treasury. Education is not just one among many competing welfare services. It is basic to the development of a democratic society. Education is a right which should not be denied any child in Canada. Opportunity for higher education should be the privilege of every Canadian boy and girl.
(Translation):
And the minister concluded with these words:
(Text):
Present interest by the federal authorities can be increased and present federal aid to education can be enlarged without curtailing provincial jurisdiction and responsibility.
(Translation):
And the same minister also said, as will be seen in Hansard for the same year, page 632:
(Text):
The federal government has established a pattern of assistance without control and is showing an interest in education. Education is of national concern and merits support from the federal treasury.
(Translation):
Further, on page 625 of Hansard for 1952, we can read the following remarks made by the present Minister of Transport:
(Text):
Now, I believe that the federal government should make funds available on a sliding scale to help equalize the opportunity for education between the provinces ... It would not be my intention that the federal government should take any part in the policy or administration of education. This field belongs to the provinces alone.
(Translation):
In the same debate the Minister of Veterans Affairs stated:
(Text):
I do not think for one moment that the federal government could or would interfere with laws made by the provinces concerning education. It is my belief, however, that this provision in the British North America Act is concerned chiefly with the curriculum and administration of the schools. We can still give financial aid and in no way interfere with the administration of the laws of the provinces.
(Translation):
Mr. George Drew also said, as can be seen on page 584 of the official record of the house for 1951:
(Text):
I would point out, however, that ways have been found of assisting in different fields, including the field of education, without in any way interfering with the division of constitutional responsibility.

Supply-Finance
(Translation):
I will refrain from giving other quotations because I see that my time is running out. Indeed, I could quote several people who expressed the opinion that the federal government should step in the field of education because provinces cannot alone bear the whole cost of it. All levels of government and business institutions should get together in order to give assistance.
In fact, I note the following remarks made by Mr. Knight, as taken from page 3445 of Hansard for 1956:
I know that education is a matter of provincial jurisdiction. X agree completely with that view so far as administration and curricula are concerned.
And that is the important point because, when the curricula are protected by the provinces, the federal government may intervene, give grants and even increase them, without encroaching on the field of education.
Mr. Maurice Breton, former member for Joliette-L'Assomption-Montcalm, had this to say, as taken from page 394 of Hansard for 1953-54:
Education is what we are interested in. Let us consider the matter. Evidently, under section 93, the federal government could not set up a system of education in the province of Quebec or in any other province: it could neither create boards of education nor establish school curricula. All such things come strictly under provincial jurisdiction.
But does the wording as written mean explicitly that the federal government is not authorized to intervene, even in the interest of public order and good administration of the country, and give, without restrictions and unconditionally, to a public body in need the necessary grants to enable it to attain the purpose for which it was set up?
Mr. Chairman, I see that I have nearly run out of time and I hear some hon. members- (Text):
The Depuiy Chairman: Order. I must inform the hon. member that his time has expired.


Alexis Pierre Caron: Mr. Chairman, this afternoon you permitted the minister to continue for an hour and a half. Should I not be permitted to go a little further?


Charles Edward Rea: Has the hon.
member the unanimous consent of the committee to continue?


Some hon. Members:: Agreed.
(Translation):


Alexis Pierre Caron: Mr. Chairman, I thank the committee for allowing me a few more minutes.


An hon. Member:: Two minutes!


Alexis Pierre Caron: I said a few minutes. I know that the hon. member who has just interrupted me could not deal with that subject for more than two minutes owing to his state of mind but I have a lot more to say.

Mr. Chairman, we know that it is not the first time that the federal government has given assistance in the field of education. In fact, in 1913, the federal government, led by Sir Robert Borden granted a sum of $10 million for agricultural schools. In 1919, under the government of Sir Robert Borden, a sum of $10 million was voted to help technical schools. In 1939, the government led by the Right Hon. Mr. Mackenzie King granted a sum of $4,500,000 to help our youth.
In 1952 the Liberal administration approved a grant of $51 million under the Vocational Training Co-ordination Act.
In 1951 the federal government made $7,500,000 available through a grant in aid to universities.
As you will note, these subsidies are by no means new. This is no recent policy. Indeed, we have seen that this has obtained for a considerable time.
Referring to the people of Quebec the hon. member for Burnaby-Coquitlam (Mr. Regier) made a few remarks which I felt I had to contradict in some respects but which were, in fact, quite true in others. These may be found on page 121 of Hansard for 1955:
The people of Quebec are suffering. They are subjected to double taxation and they are not enjoying the facilities in the field of education which they would like to have, which they ought to have and which they deserve as Canadian citizens.
In support of his arguments, the hon. member for Burnaby-Coquitlam referred to the survey that Mr. Enfield, then Liberal member for York-Scarborough, recorded in Hansard, on January 10, 1957, in connection with the total aid which the various federal departments had given to the provinces in the field of education. A study of that survey indicates that in 1955-56 the province of Ontario received $7,228,000, while the province of Quebec received only $2,952,000, which represents an enormous difference as compared to the other provinces. Actually, Quebec cannot afford to refuse the subsidies, because the population there is in need of education which the province is unable to provide.
I shall now refer to some excerpts of another survey recorded in Hansard by Mr. Knight, which indicates that in the province of Quebec, the cost of elementary and high school amounts to $139.48 per pupil, while in Ontario it amounts to $190.82.
The same survey shows that there were 1643 unqualified teachers because the school boards could not afford to pay higher salaries. That survey also showed that among pupils reaching grade 11, 9.4 per cent only are French-Canadian Catholics, while

41.8 per cent are Protestants, which shows that the situation that prevailed in 1947 has not changed very much.
It must be realized that it costs a man $1,300 a year, if he does not live in a university town, to send his son to the university. If we take the case of a father of five or six children, earning between $4,000 and $5,000 a year, how will he manage to give all his children the education which will permit them to fully develop their ability? He will have to ask certain members of his family to make enormous sacrifices so that the others may carry on their studies. Is it fair to ask a father in the province of Quebec for such a sacrifice when it is not requested of the head of a family in other provinces?
Grants where given to a provincial government should necessarily be subject to certain conditions. If the grants were made by the federal government, let us stop our fruitless fights, because we are losing precious material. Human values are being sacrificed to small party politics.
We must educate our men. They will then know how to defend the real rights of provinces and minorities. Let us eliminate true or false ignorance-and I am addressing myself more particularly to the hon. member for Roberval (Mr. Tremblay)-and the threats of extinction will forever disappear, when we create enough men of good will to ensure mutual understanding. Only at such time will we be able to speak of a Canadian nation united in its diversity.
Mr. Chairman, I will conclude on this note. We are at this time concerned with an item which we are asked to approve by the Minister of Finance. I support that item, knowing as I do that our universities and educational institutions need assistance. They require that increased assistance which the federal government has just introduced. However there are some gentlemen who, during the last general election, in the province of Quebec, were quite content to leave the universities to struggle with their difficulties and preferred to see their own fellow citizens grow in ignorance rather than accept those measures of relief which would allow them to get ahead in the intellectual field. I was just wondering how they were going to vote on this measure.
There is talk of disappearance of race and religion. However, if the race was to have disappeared, it would have happened back in 1760, at a time when there were very, very few of us, a small group of rather uneducated people. At this time, however, we make up more than one fifth of the population of this country and if we refuse these university grants, we will endanger the very life of our
Business of the House
province. Some day we will have to go along with the rest of Canada, as long as the federal government does not interfere with the educational program of our province. I know, Mr. Chairman, that we must reach that point some day and I therefore ask that a vote be taken immediately on that item.
(Text):


Charles Edward Rea: All those in favour of vote No. 127 will please rise? Those opposed will please rise?
Item agreed to: yeas, 105; nays, 0.


Mr. Peters:: It is 10.30, Mr. Chairman.
Loans, investments and increase-
503. Loan to the Ottawa Civil Service Recreational Association, on such terms and conditions as the governor in council may approve, to assist in the construction of the W. Clifford Clark Memorial Recreation Centre, $300,000.


Frank Howard: I point out, Mr. Chairman, that it is well past 10 o'clock.


Donald Methuen Fleming: Would the committee be willing to go forward and clean up the remaining items, Mr. Chairman? There are just about 10 items left altogether, including the supplementaries. I think there is nothing there that is controversial now.


Frank Howard: Are these the further supplementary estimates?


Donald Methuen Fleming: There is an item in loans and investments, and then there are the supplementaries.


Frank Howard: We could precipitate a great deal of extra debate on these matters, and 1 would just as soon leave them over until tomorrow.


Charles Edward Rea: Since there must be unanimous consent to continue, I shall rise and report progress. Tomorrow, we will be starting on vote No. 503.
Resolutions adopted in committee of supply this day reported and concurred in.



BUSINESS OF THE HOUSE

John Whitney Pickersgill: I wonder whether the leader of the house could tell us what the order of business will be for tomorrow. I presume the bill of rights comes first tomorrow. Can he tell us what will be the order of business afterwards?


Howard Charles Green: As I understand it, there will be speeches by the leaders of the three parties on the first reading of the bill of rights. When we get down to the orders of the day we shall commence with item No. 2-


John Whitney Pickersgill: Is it proposed to have those speeches before orders of the day are reached?

Supply-Items Passed


George James McIlraith: There is introduction of bills.


John Whitney Pickersgill: I know. But would the minister consider having orders of the day called first before the speeches?


Howard Charles Green: I am not in a position to say that tonight. I do not know that it makes very much difference. But according to the order paper these speeches would be made on the first reading. Then we shall take item No. 2, second reading of a bill to amend the Customs Act; item No. 3, a bill to amend the Canadian Citizenship Act; and then the completion of the estimates.
At 10.34 p.m. the house adjourned, without question put, pursuant to standing order.
[The following items were passed in committee of supply]:



PRIVY COUMCH.

[Stage Direction]
Federal District Commission-
672. To provide for interest charges on outstanding loans that were made for the purpose of acquiring property in the national capital district, $120,000.

[Stage Direction]
Privy Council-
Federal District Commission-
694. To provide for loans to the federal district commission (hereinafter called "the commisson"), for the purpose of acquiring property in the national capital district that is not immediately required for the purposes of the commission; the loans to be made in such amounts and on such terms and conditions as the governor in council prescribes, except that when a property so acquired has been commenced to be used for a purpose of the commission, an amount equal to the cost of acquisition of the property shall be repaid from the national capital fund or other fund or account from which expenditures may be made for the purposes of the commission-further amount required, $4,500,000.

[Stage Direction]
General administration-
112.	Departmental administration, $2,369,041.
113.	Comptroller of the treasury-central office and branch offices administration, $18,157,142.
Administration of various acts and costs of special functions-*
114.	Superannuation and Retirement Acts, administration, $669,734.
115.	The Bank Act-salaries and expenses of the inspector general of banks' office, $31,628.
116.	Administration of the Farm Improvement Loans Act, the Veterans' Business and Professional Loans Act, the Fisheries Improvement Loans Act and the Prairie Grain Producers' Interim Financing Act, $110,213.
Tariff board-
117.	Administration, $146,993.
Expenses of the Royal Canadian Mint-
118.	Administration, operation and maintenance, $1,175,770.
119.	Construction or acquisition of equipment, $63,270.
Payments to municipalities-
120.	Grants to municipalities in accordance with the Municipal Grants Act and regulations made thereunder, $22,650,000.
Contingencies and miscellaneous-
121.	To provide, subject to the approval of the treasury board, for miscellaneous minor or unforeseen eecpenses including authority to re-use any sums repaid to this appropriation from other appropriations and special compensation or other rewards for inventions or practical suggestions for improvements, $1,500,000.
122.	Cost of telephone service at Ottawa for all departments, $1,287,000.
123.	Amount required to cover losses incurred on foreign exchange tendered in payment of accounts receivable, $500.
124.	Government contributions to pension plans for employees engaged locally outside Canada, $100,000.
125.	To provide, subject to the approval of the treasury board, for supplementing other votes for the payment of salaries, wages and other paylist cnarges, $1,500,000.
126.	To provide for the government's contribution, as an employer, to the unemployment insurance fund in respect of government employees paid through the central pay office, $900,000.
University grants-
127.	To authorize payments to the national conference of Canadian universities in accordance with the agreement entered into between the conference and the Minister of Finance on the 26th day of March, 1957, pursuant to vote 541, Appropriation Act No. 1, 1957, $17,100,000.
Miscellaneous grants-
128.	Canadian association of consumers, $10,000.
129.	Institute of public administration of Canada,

[Stage Direction]
Friday, Sepiember 5, 1958

[Stage Direction]
Thirteenth report of standing committee on railways, canals and telegraph lines.-Mr. Howe.