1959-04-09

Hon. Donald M. Fleming (Minister of Finance):: Mr. Speaker, yesterday I informed the house that the deficit for the 1958-59 fiscal year was $617 million. In some of the reports which have appeared in the press since, one finds the statement that this deficit figure excludes the $184 million deficit in the old age pension fund. Mr. Speaker, this is completely erroneous. Every cent of the $184 million deficit in the old age pension fund for the year 1958-59 is included in the figure of $617 million which I gave as the deficit for the fiscal year 1958-59. It will be recalled that the house voted this sum in March in the final appropriation bill for the fiscal year 1958-59 to liquidate that deficit in the old age pension fund.


Hon. L. B. Pearson (Leader of the Opposition):: Mr. Speaker, perhaps the minister is right in the statement he has made on -hat particular matter, but he might have lone on to explain to the house that the leficit of $617 million did not take into account the use of the defence equipment fund, vhich, if it had been taken into account, would have raised the deficit figure to about >830 million.


Donald Methuen Fleming: Mr. Speaker, the ion. gentleman has misled himself in this [DOT]espect. The budget speech last year made rery clear what was the proposal with ref-:rence to the use of the defence equipment iccount. That account, as was made very dear at that time, had been drawn upon by ny predecessor from time to time. We did lot approve the continuance of such an iccount because it was not in keeping with he control parliament should exercise over :xpenditure. Therefore we proposed last rear that an additional sum be drawn out, ind that was clearly made the basis of the istimate in regard to deficit and in regard o expenditure.



INQUIRY AS TO DEFENCE EQUIPMENT FUND

[Stage Direction]
On the orders of the day:
Mr. W. H. McMillan (Welland):: Mr. Speaker, I should like to direct a question 66968-9-1504
to the Minister of Finance concerning the defence equipment fund which has nothing in it, or at least nothing in cash to back it. In his budget speech last June the minister said that he intended to take about $165 million, the last of that account, into the budget. Where did the other $46.7 million come from? What defence equipment did we supply last year?


Donald Methuen Fleming: Mr. Speaker, the defence equipment account was set up by the former government and was drawn upon by that government during several years for the purpose of charging against that account certain purchases for the Department of National Defence. When purchases were charged against that account they did not come into the normal appropriations, nor into the government's accounting in respect of receipts, expenditures and deficit. As I carefully explained last year, we had taken exception to this practice when we were in opposition because we felt it denied to parliament the full opportunity that parliament in all circumstances ought to have in order to be in a position to control and supervise public expenditure in the fullest degree. Therefore in very plain terms I stated last year in the budget speech that we proposed to draw on that account not simply the amount that had been drawn against it the previous year but to go further and take out the additional $185 million in order that the account would be liquidated and this question would not arise in the future. That was done. The matter is fully disclosed and commented upon in the white paper which I tabled yesterday, and which with great respect I commend to the reading of my hon. friend.


Lester Bowles Pearson: Why don't you answer the question now?



CIVIL DEFENCE


Right Hon. J. G. Diefenbaker (Prime Minister):: Mr. Speaker, yesterday the hon. member for Essex East (Mr. Martin) asked for the tabling of letters addressed to the premiers of the several provinces concerning civil defence. I wish now to table two copies in French and in English of these communications.

Inquiries of the Ministry EXTERNAL AFFAIRS



REPORTED PROPOSAL FOR NEW


[Stage Direction]
On the orders of the day:
Mr. Hazen Argue (Assiniboia):: Mr. Speaker, I would like to direct a question to the Prime Minister. Has the Prime Minister's attention been drawn to an article in this morning's Montreal Gazette which says that the United States has circulated far-reaching plans amongst its allies for a new east-west security system in Europe? Would the Prime Minister be prepared to say whether Canada's advice has been sought, and what progress is being made in these negotiations?


John George Diefenbaker: Mr. Speaker, this particular article was drawn to my attention by the hon. gentleman himself. I have no information as to the foundation for the newspaper report to which he refers, but I should like to add this; that at this stage, when the western powers are engaged in co-ordinating their negotiating position for the meeting of the foreign ministers at Geneva in May, it would not be too helpful to comment on unofficial reports of this nature.


Hazen Robert Argue: Can the Prime Minister say whether, in these negotiations, Canada is being kept informed and is being consulted?


John George Diefenbaker: Generally speaking there is the widest possible exchange of information between the various capitals on this and analogous matters at all times.



DEFENCE PRODUCTION


[Stage Direction]
On the orders of the day:
Mr. G. J. Mcllrailh (Ottawa West):: I should like to direct a question to the Minister of National Defence. In view of the apparent difference of understanding between Canada and the United States with regard to defence production sharing between the two countries as evidenced by a press report in the Windsor Daily Star of April 4 to the effect that the United States defence secretary had told congress

and I quote-that "this is simply an understanding on the part of the Canadian government that we will encourage some of the major suppliers of defence goods which are bought by Canada for Canadian deployment to place some orders there", while the Minister of National Defence has stated-and I quote again-that "Canada would not be satisfied with purely sharing of production for facilities that are to be

used in Canada". I wonder whether the minister would care to make a statement to the house in an effort to clarify the situation.


Hon. G. R. Pearkes (Minister of National Defence):: During my visit to Washington I had an opportunity of meeting some members of the press, and when discussing the question of the sharing of the production of defence requirements I did use the words that Canada would not be satisfied with purely sharing in the production of the facilities that are to be used in Canada. I also had an opportunity to meet Mr. McElroy, and Mr. McElroy fully understands the Canadian position.
If at some later date he is asked to do so, I am quite certain that the Minister of Defence Production will be able to give the house full details of the progress which has been made in this field.


Mr. Chevrier:: Does it follow from this that the effect of these arrangements is that Canada will be getting subcontracts rather than main contracts?


George Randolph Pearkes: I hope Canada will be getting not only subcontracts but many main contracts as well.



IMMIGRATION


[Stage Direction]
On the orders of the day:
Mr. Erhart Regier (Burnaby-Coquitlam):: should like to direct a question to the Minister of Citizenship and Immigration. I wonder whether the minister is able to explain in a little more detail than was attempted on Monday by the Prime Minister what is the intent of the amendment to the immigration regulations which was announced over the Easter recess.


Hon. Ellen L. Fairclough (Minister of Citizenship and Immigration):: I am in the
course of preparing a statement on this matter. It is not ready yet, because I should like to incorporate into it some statistical information which I think should be interesting. I hope to have this statement ready shortly.


Erhart Regier: Is it a fact that henceforth immigrants sponsored by Canadian employers will be given preference over immigrants sponsored by relatives living in Canada?


Ellen Louks Fairclough: Mr. Speaker, that is rather a broad question. The answer in general would be no, but I shall try and cover the hon. member's points in the statement I will make later.



HIGHWAYS


[Stage Direction]
On the orders of the day:
Lionel Chevrier: Mr. Speaker, may I direct a question to the Minister of Transport. I did not give him notice of this because it has just now come to my attention, and he may reply tomorrow if the information is not available. La Presse of yesterday afternoon carries a story to the effect that the main highway running along the waterfront at Montreal adjacent to the port and within the jurisdiction of the national harbours board is to be closed. There may be good reasons for this; that I do not know. I wondered if the minister would be good enough to make inquiries and advise the house why the road is being closed.


Hon. George H. Hees (Minister of Transport):: Mr. Speaker, I shall be glad to make inquiries.



FEDERAL-MUNICIPAL CONFERENCE PROPOSED MEETING ON FEDERAL ASSISTANCE TO MUNICIPAL CAPITAL WORKS

[Stage Direction]
On the orders of the day:
Mr. Guy Rouleau (Dollard):: Mr. Speaker, I should like to direct a question to the Prime Minister. Has the government received representations from the Canadian Federation of Mayors and Municipalities asking the government to convene a federal-provincial-municipal conference with a view to developing more federal assistance for major capital works in the municipalities? If so, is the government considering convening such a conference in the near future, as promised on several occasions by the leader of the Conservative party during the last two election campaigns?


John George Diefenbaker: Mr. Speaker, a number of representations were made today in the presentation made by the association in question, all of which will receive consideration.



POST OFFICE DEPARTMENT


[Stage Direction]
On the orders of the day:
Mr. Azellus Denis (St. Denis):: Mr. Speaker, may I direct a question to the Postmaster General. Is the Postmaster General aware that two days ago, a theft involving $11,000 took place at Repentigny and, if so, would he tell the house if a burglar alarm was installed in that post office? Second, will he realize his ambition of having the Royal Canadian Mounted Police look into this matter?
Inquiries of the Ministry


Hon. W. M. Hamilton (Postmaster General):: Mr. Speaker, I am aware of the theft. I will attempt to ascertain the facts concerning the other points about which the hon. member has asked.



POLYMER CORPORATION


[Stage Direction]
On the orders of the day:
Hazen Robert Argue: Mr. Speaker, I should like to direct a question to the Minister of Labour regarding the dispute at the Polymer Corporation. Has the minister's attention been drawn to the reported statement of Mr. C. G. Palmer, international representative of the oil, chemical and atomic workers' union, indicating that the union is prepared to compromise on monetary aspects of the dispute? Can the minister say whether the company has as yet replied to his offer to provide mediation services of the department in connection with the dispute, and can he tell us in general what progress is being made toward settlement?


Hon. Michael Starr (Minister of Labour):: Mr. Speaker, I wish to thank the hon. member for giving me notice of his intention to ask this question. On Tuesday last the hon. member for Lambton West asked about the progress being made in respect to that dispute. I advised him at the time that we had received a telegram from the union to the effect that they were amenable to mediation and that I expected in a few days to receive some communication from the Polymer Corporation. That is where the matter still stands. I continue to expect that we will receive a communication from the corporation.



OLD AGE SECURITY


[Stage Direction]
On the orders of the day:
Hon. Paul Martin (Essex East):: Mr. Speaker, may I ask the Minister of National Health and Welfare if he has yet had an opportunity to read the Clark report on the old age security system in the United States? If so, has the government determined its policy with regard to this matter, a policy that was promised to the people of Canada during the course of the last federal election campaign?


Hon. J. W. Monleith (Minisfer of National Health and Welfare):: Yes, Mr. Speaker, I have had an opportunity of reading the report, and when the government decides upon a policy it will be announced in the house.


Hazen Robert Argue: May I ask a
supplementary question. Has any consideration been given to referring the subject matter

Provision for Parliamentary Secretaries of this report to a committee of this house for study, as was done on a former occasion?


Jay Waldo Monteith: Whatever action is decided upon will be announced in the house.



THE MINISTRY


John George Diefenbaker: the third reading of Bill No. C-37, to provide for the appointment of parliamentary secretaries to ministers.


Paul Joseph James Martin: I would like to ask the Prime Minister a question. Can he tell the house whether the expenses incurred by parliamentary secretaries will be reported in the same manner as are expenses of ministers of the government, or will there be an itemized statement? Will each parliamentary assistant be required to indicate, after the expenditure is made, the purpose for which it has been made, or will it be done in the same manner as ministers who just account in a lump sum at the end of the fiscal year?


Mr. D. M. Fisher (Port Arthur):: The remark I want to make is this. Several times the Prime Minister has told us that one of the reasons he wanted this to go through was in order to allay our curiosity and our worry on this side of the house. We would like him to know that we are going to be looking forward just as much as those fine faces we see behind him to the concrete results that are going to flow from this legislation. We hope we will not have to ask any more questions in the house about when people are going to be appointed. We also hope that he can now give us some indication of the great day.


Mr. Speaker:: Is the house ready for the question?


Paul Joseph James Martin: No. I expect that the Prime Minister intends to reply.


Mr. Speaker:: May I inform the house that if the Prime Minister speaks now he will close the debate.


Mr. Pickersgill:: On a point of order, sir, I have no desire to prevent the Prime Minister from speaking but does he not require unanimous consent?


John George Diefenbaker: You had better get the picture over there.


Mr. Speaker:: Unanimous consent might have been required yesterday, but the order is properly called today.


Paul Joseph James Martin: This is one occasion when we want the Prime Minister to speak.


John George Diefenbaker: Mr. Speaker, the hon. member for Bonavista-Twillingate, the authority on the subject of rules and other things, has been proven wrong again, thus adding to the record he has established over a long period of time. The hon. member for Essex East asked whether expenses should be lumped together or given in detailed form. I have no feelings one way or the other on that, and I can see no reason why detailed expense accounts should not be submitted. So far as his other question is concerned, the hon. gentleman need not ask any questions at all. Indeed, questions would be inappropriate at this time, because the legislation has not been passed and will not be passed until it receives the approval of the Senate and finally the signification of the crown.
Motion agreed to and bill read the third time and passed.



FREIGHT RATES


[Stage Direction]
The house resumed, from Wednesday, April 8, consideration of the motion of Mr. Hees for the second reading of Bill C-38, to make provision for the reduction of certain class and commodity rates on freight traffic.
Lionel Chevrier: Mr. Speaker, yesterday when the house adjourned I was discussing four aspects of the bill, and I should like to go on now and deal with a matter dealt with by the Prime Minister on an earlier occasion. I was considering clause 3 of the bill, which I said was contentious. I said that I thought the statement made by the Minister of Transport in the earlier part of his remarks was a direction to the board of transport commissioners not to deal with further applications made to it.
I see that the Prime Minister is leaving. I intend to deal with some of the things he said earlier in the debate, and particularly with his attitude concerning horizontal increases when he was on this side of the house.


John George Diefenbaker: Mr. Speaker, I will take it as read. I am sorry I have to leave. It is no discourtesy to the hon. gentleman. I always listen to him with the greatest of interest, but I have an appointment that takes me out of the house. I shall read every word.


Lionel Chevrier: I thank the Prime Minister for his generous comment. I know he has many things to attend to, and I am sure I will be the last to be offended if he is not present when I discuss his earlier remarks.
Sir, I posed a question as to whether the effect of the subsidy would apply to those

rates which have not been increased by 17 per cent. I see that the minister nods his head. Hence any rate that has been increased by, say, 10 per cent or less will not get the benefit of this subsidy. There is also the question which I pose now, namely the effect of this subsidy on coal and coke. It was said earlier that the subsidy would apply to all the rates under the board's order of November, 1958. As the house knows, the rate on coal and coke was increased by 22 cents a ton. Of course the question that comes to mind is this. Will the reduction of 7 per cent be applied to coal and coke? I see that the minister nods his head.
I now come to another part of my remarks, Mr. Speaker, in order to do that for which I really rose in the first place yesterday, namely to deal with certain statements made by the Prime Minister earlier, in which he made sweeping announcements and statements in so far as the conduct of his government is concerned. I refer to the statements he made. They can be found at page 63 of Hansard and read as follows:	.
In 1948 the former government instructed the board of transport commissioners to proceed with an investigation into discriminatory freight rates to the end that equalization should be brought about so that those in the western provinces and maritime provinces should in no way unnecessarily be discriminated against; that is ten years ago. They also set up a royal commission, the Turgeon commission. It met and in 1951 it made recommendations, but with the exception of one small change, as I recollect it, the $7 million subsidy in respect of the bridge in the lake Superior area, no action was taken thereon.


Mr. Speaker:: Order. I wonder whether hon. members would accord a little more attention to the hon. member who has the floor, or would at least moderate the tone of their voices. There is a good deal of noise in the chamber at the moment.


Lionel Chevrier: Thank you, Mr. Speaker. At this juncture I rose to protest the statement made by the Prime Minister. I said that statement was not only inaccurate but was not in accordance with the fact. The Prime Minister replied that I would have an opportunity to say so at a future date if I felt like doing so. That is exactly what I intend to do now. The Prime Minister, however, went on and said this, as reported at page 64 of Hansard:
I am saying they did not do anything effective during those years. They did one thing. They talked about inflation. They cried over it. During the period between 1945 and 1957, freight rates increased by 120 per cent.
Then later, as found on the same page, he said:
We find ourselves, by horizontal increases, placed in an ever more difficult position. The Leader of the Opposition says "Why do they not act?" For 12 years the increases went on and the government of which he was a member did nothing.
Freight Rates
Sir, that is not so. That statement is not only inaccurate but is unfounded in fact, as I intend to prove. Let me pause here for a moment to say this. When the Prime Minister came in the house, as he did the other evening, and invited the house to give suggestions with reference to the establishment of a royal commission and the scope of that commission and spoke calmly and coolly, let me say to him that I prefer that attitude on his part rather than the political attitude which was adopted not only in this statement which he made but when he and others say "Oh, you have been here for 22 years but you have done absolutely nothing". In so far as freight rates are concerned I say that the former government has an excellent record of which it can boast.
But the Prime Minister was not alone in making that statement. The Ottawa Journal which is a fairly close follower of the Prime Minister and his friends, published an editorial following the statement made by the Prime Minister on December 1, 1958. I should like to read part of this editorial into the record. It is entitled "Mr. Pearson and Railways" and it reads in part as follows:
Mr. Pearson opposes a freight increase for the railways, says they should have been given a subsidy instead, charges that the government allowed the railway problem to "drift".
What did the government of which Mr. Pearson was a member allow the railway problem to do?
In 1948, ten years ago, the government announced with a blare of trumpets that it had asked the board of railway commissioners to look into the whole railway rate structure, to look especially into geographical rate inequities.
It has been a long look; and during that whole decade of looking Canada experienced one crippling railway strike, plus almost continuous dispute over railway rates and wages. It is not on record that Mr. Pearson or any of his colleagues ever did anything to hurry along the job they had given to the board of railway commissioners or did anything else whatever about railway rate inequities.
That editorial is as inaccurate, unfounded and unwarranted as is the statement which the Prime Minister has made.
Let us now look at the facts, Mr. Speaker, and let us consider the applications that were made to the board of transport commissioners over the years. The first general increase in freight rates came in 1917, and I need not remind the house what government was in office at that time. That increase amounted to 15 per cent. The second increase came in 1918, one year later, and it amounted to 25 per cent. I need not tell the house who was in office then, because the house knows. But do you know how it was done, Mr. Speaker? It was done not by way of application to the board of transport commissioners but by an order from the cabinet to the board of transport commissioners to increase the freight

Freight Rates
rates by 25 per cent. That was the way in which a Conservative administration proceeded to deal with freight rates in those years. Then in 1920, still under a Conservative administration, there was an increase of 40 per cent, following an application at this time by the Railway Association of Canada to the board.
Then in 1921, when a Liberal administration took office, the 40 per cent increase was reduced, first by 5 per cent in 1921, then by 10 per cent in the same year and that reduction was followed by a further reduction in August of 1922, leaving the effect of the 40 per cent increase as follows: 17J per cent in eastern Canada and 12J per cent in western Canada.
So much for what was done under a Conservative administration with reference to freight rates. I insist on putting this on the record for the simple purpose of telling those of our friends who sit on the other side of the house that we on this side are getting tired, as I am sure the people of Canada are, of the government's practice, every time something happens in this country, by which they delight in telling us, "Oh, this is what you did when you were in office". It is about time the government stood on its own feet and made decisions without always saying "Oh, this is what you did when you were in office". We have been having that practice followed for some time. We had it followed by the Minister of Finance this afternoon. We had it followed by the Prime Minister with reference to the immigration order when it was before the house yesterday. Can we not have decisions, announcements and statements by the government without always having a reference made to the fact that this was done by the former administration, and that the government either was carrying on those policies or even making them better? Surely the time has come now that they have been in office for 20 months, almost two years, when they should be able to make decisions of their own and give the reasons for them.
It has been intimated by the statements and the editorial in the Journal that when we on this side of the house were the Liberal administration we had done nothing with reference to the question of rates. Listen to this. In 1897-


Some hon. Members:: Oh, oh.


Lionel Chevrier: Very well, I will come right down to 1957 if my hon. friends will bear with me; but do not forget that the statement was broad, just as all these statements are from the other side of the house. It is said, either through the Prime Minister or through this editorial, that we were in office for 22 years

and did nothing, so may I be allowed to say what we did. I say that the lowest freight rates ever put into effect in this country were the Crowsnest rates which were established under the Laurier regime in 1897. Then in 1903 the Liberal government enacted the Railway Act which authorized the establishment of the board of transport commissioners, the board which deals with these matters. That is the very board, Mr. Speaker, which our friends on the other side of the house want to destroy and see disappear, and I will be able to prove in an instant that a motion was made to that effect by hon. members opposite when they sat on this side of the house.
Then in 1924 the Liberal government inaugurated an investigation to determine whether it was possible to equalize freight rates in Canada, and it was found that it was possible. In 1927 the Liberal government introduced the Maritime Freight Rates Act, giving the benefit of a 20 per cent reduction in freight rates to the select maritime area. From 1948 to 1950 it reduced and then removed the mountain differential. It reduced the mountain differential first from l j miles on the prairies equalling 1 mile on the Pacific coast, to 1J miles, and then reduced the 1J miles to 1 mile, removing the mountain differential entirely in 1950. The mountain differential was a matter of great contention over the years, and I submit that is something which well might be given consideration.
But the greater part of the criticism levelled at the Liberal administration was with reference to P.C. 1487. That was an order in council under which the board of transport commissioners were authorized to make a thorough study of the rate structure of the railway companies with a view to the establishment of a fair and reasonable rate structure which would, under substantially the same conditions and circumstances, be equal in its application to all persons and localities, so as to permit the freest possible interchange of commodities between the various provinces and the extension of Canadian trade, both foreign and domestic, having due regard to the needs of agricultural and other basic commodities.
The Prime Minister, sir, ridiculed that investigation. I have in my hand the three reports which the board of transport commissioners handed down under this investigation, and I would like to refer briefly to them. The first report was made on March 25, 1955, and the effect of this first report was to substantially reduce class rates in western Canada to equalize these class rates, a matter which the provinces had been asking for over the years. I wonder if the Prime Minister

or his followers have read or studied this interim report on the equalization of freight rates, because it is well worth reading.
The second report under the investigation I have referred to was brought down on September 23, 1957, and I would just like to read one short paragraph from it. It states that-
-the first phase of equalization throughout Canada, namely, of class rates accompanied by a new freight rate classification, had been accomplished and made effective on March 1st, 1955.
Later, on page 4, it is stated:
The equalized class rates have now been in effect for two and one-half years and have cured the complaints that existed for so many years concerning the higher class rates in western Canada compared with eastern Canada.


Mr. Broome:: Nonsense.


Lionel Chevrier: What was that?


Ernest James Broome: I said nonsense.


Lionel Chevrier: 
Mr. Browne (Vancouver-Kingsway):: Would the hon. member permit a question?


Lionel Chevrier: Yes.


John Ferguson Browne: How
could that principle possibly have been established when at the same time the railways were allowed to set competitive rates? I am not saying that they should not have been allowed to do that; obviously they had to. But where there was competition in one area and not in another, how could the freight rates possibly have become equalized?


Lionel Chevrier: Mr. Speaker, I think my hon. friend must make a distinction between class and commodity rates and competitive rates. This judgment does not deal, as my hon. friend knows, with competitive rates, because the competitive rates have always been excluded by the railways in their applications to the board of transport commissioners, and the reference to the board dealt with exactly the same subject matter that is being dealt with now by the minister in the subsidy of $20 million. I did not deal with competitive rates, because competitive rates are determined by other forms of transportation such as motor vehicles or water carriers. I think that is why this equalization dealt only with other than the exceptions mentioned in the order in council.
The Prime Minister complained about the tremendous length of time it took for the board to deal with this equalization under P.C. 1487. Well, the judgment of the board as recorded on page 4-the final judgment dated December 22, 1958-states that it was not possible to proceed with the equalization of these rates until January, 1952, and gives the reason therefor. It then goes on-and this will be of interest, I am sure, to the hon. member who interrupted me-to give the number of judgments which the board had handed down in order to equalize freight rates, and there are 13 of these judgments, beginning on January 10, 1952 and ending on January 19, 1958. Hon. members will find on page 5 a detailed statement concerning many of the class and commodity rates which have been equalized.
Thus I say this, in so far as the report, the investigation and the study under P.C. 1487 are concerned; that the board did a commendable job and the Prime Minister, instead of criticizing the board, should be commending it. The Prime Minister said it took a long time. Well, in the United States it took 12 years to enable freight rates to be equalized, so even if it has taken Canada seven years-and the job is still not done-I do not think we should be too surprised.

Freight Rates
Now I come to 1948, when the government of the day established a royal commission on transportation, the Turgeon commission. That commission produced the most exhaustive study ever made in this country of the problem we are now discussing. The Prime Minister, when he was on this side of the house, welcomed the announcement of the royal commission and spoke approvingly of it. The work of this commission was expeditiously handled; but let me point out to the minister that notwithstanding the fact that the commission was appointed on December 28, 1948 it did not issue its report until February 9, 1951, more than two years later.
So I say to him with deference that if the royal commission which he and the government intend to set up is going to do the kind of job the government expects it will do, it should be encouraged to carry out a thorough investigation, and it should not be limited with regard to time in such a way it has been limited both by the Prime Minister's statement and by the minister's own announcement.
Finally, in 1951 the then government of Canada accepted the recommendations of the royal commission on transportation. It accepted all the recommendations having to do with freight rates and many other recommendations incidental thereto, and these were brought into this house, implemented by way of legislation and put into effect. It was stated at that time in this house that this was the most important and forward looking piece of legislation having to do with freight rates ever introduced in Canada. Notwithstanding that statement there are still accusations from the other side that nothing was done.
Let me go into detail with reference to What was done by the previous administration by way of implementing the recommendations of the Turgeon commission. First of all we brought in legislation which provided for the payment of a subsidy of $7 million for the maintenance of the trackage through northern Ontario which serves as a link or bridge between certain points in that part of the province of Ontario. That is the matter which the Prime Minister said was the only thing done of any consequence.
Let us see what other things done were of consequence. Legislation next provided for the establishment of a national freight rate policy as enacted in section 336 of the Railway Act. This was an over-all direction to the board by a section which stated that every railway company shall so far as reasonably possible in respect of all freight traffic of the same description and carried on or upon a like kind of car, passing over all lines or routes of the company in Canada,

charge tolls to all persons at the same rate whether by weight, mileage or otherwise, with the exceptions mentioned in subsection 4 of section 336. This is what the board of transport commissioners tried to do. Using P.C.1487, as I have said, in conjunction with this amendment, section 336 of the Railway Act, the board tried, and succeeded in large measure, to equalize freight rates.
This section was, I submit, of tremendous benefit to western Canada. It provided for the equalization of rates between east and west. Prior to this, rates in the west were higher than those in the east. Rates have now been equalized under this section between east and west except for the unfinished business mentioned in the reports of the board which were tabled in the house and which anyone can see.
Then again, the legislation brought into effect the one and one-third rule which, as the committee knows, is of particular interest to the province of Alberta. The one and one-third rule is contained in section 337 of the Railway Act and it was, for so long as it was in operation, of great assistance to those who live in the intermediate territory. The one and one-third rule states that whenever any railway establishes a rate to Vancouver, say, it shall not charge more than one and one-third of that rate to intermediate points.
This, as I have said, was of great benefit to intermediate points until the judgment of the board of transport commissioners on agreed charges in the cast iron pipe case, interpreting section 32 of the Transport Act. This judgment nullified the benefits of the section inasmuch as the railways can contract themselves out of it by means of agreed charges. This is why the other evening I suggested to the house that consideration should be given to the effect of that section of the Railway Act, read in conjunction with section 32 of the Transport Act, to ascertain if it is not possible by some means or other to give the effect and benefit of the one and one-third rule to intermediate territory.
Another piece of legislation which was brought down was the provision for the uniform classification of systems of accounting for the railways. The house knows that for a long period there was tremendous difficulty between railways in Canada and in the United States because there was no uniform system of accounting, and the railways repeatedly asked parliament to institute a change and make accounting uniform. This was done by means of a section in the Railway Act. The interstate commerce commission of the United States had had such a unified system for many years. This was a good piece of legislation to be enacted, and it was one which

the provinces welcomed and which the provinces had been anxious to obtain.
Now I come to a point which will interest the hon. member for Vancouver-Kingsway (Mr. Browne), dealing with competitive tariffs. At that time there was a great deal of complaint about the fact that the railways could simply file a competitive tariff. Well, the Railway Act was amended so that a competitive tariff filed with the board was subject to the same investigation and study as any other tariff. The board was enabled, because of that legislation, to go into that rate and ascertain whether or not it was compensatory to the railway. I believe, too, that it was of benefit to those who have to ship goods from one end of the country to the other.
Then there was a piece of legislation having to to with the recapitalization of the Canadian National Railways. As the house knows, the Canadian National Railways Capital Revision Act was introduced in this house. It changed 50 per cent of the company's interest bearing debt to preferred stock, on which after settling income taxes a dividend of 4 per cent would be paid from earnings. For a term of ten years, because of that legislation, until 1961, the railway is not required to pay interest on $100 million of its long term debt. The C.N.R. asked for this legislation and welcomed it, and I have no doubt that it assisted the railway a great deal.
We then brought in a bill to amend the Transport Act which provided for agreed charges for the Canadian National Railways and other lines. It, too, was of assistance to the railways.
In a word I repeat what I said earlier. All the recommendations made by the royal commission having to do with freight rates were implemented by the previous administration. The Prime Minister said the rates had gone up by 120 per cent. He did not say to what extent they had gone up in other countries, and neither did he include in the increase he mentioned that which has been made by the board of transport commissioners since the present government took office. There has been an additional 17 per cent increase, which brings the increase to 157 per cent rather than 120 per cent. The Prime Minister very carefully shied away from the 17 per cent increase which was put into effect by the board of transport commissioners under the regime of my hon. friends. If a comparison is made of increases in freight rates over the years from the time increases started after world war II, in 1948 let us say, up to the time the Prime Minister made his statement, it will be found that increases were greater 66968-9-151J
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in the United States and as substantial, if not greater, in the United Kingdom.
There, sir, is the record in so far as the previous administration is concerned. There is a statement of what was done by the previous Liberal administration, what was done by the Leader of the Opposition and his colleagues when they sat on the other side of the house to alleviate the burden of freight rates.
Let us see what was done by our hon. friends when they sat on this side of the chamber. This is important. Let us see how their conduct then compares with what it is today. Hon. gentlemen opposite when they sat on this side of the house sought to do away with the board of transport commissioners. They said the board was incompetent. They accused the board of being responsible for the increases in freight rates and for the state of confusion and chaos in which the country found itself in reference to the unfair application of freight rates. "It is not functioning as it should," said the opposition of that day. "The government," the opposition said, "should take over".
Do you know what they did then? They moved to reduce the estimates of the board of transport commissioners to $1. When I brought in my estimates on June 2, 1950 this was suggested by the then opposition. There will be found at page 3113 of Hansard of that date a record of the discussion wherein I made a lengthy statement about the position of freight rates as they were at that time. At the end of my speech the then leader of the opposition intervened in the debate, and at the conclusion of his remarks he moved that item No. 524, which provided for the salaries of the board of transport commissioners and the administration, maintenance and operation of the board in the amount of $624,800, be reduced to $1. That was the extent of the contribution of our hon. friends opposite when they sat on this side of the house. They would have put the board of transport commissioners out of operation.
Let us examine what they do now. Now that they are in office they renew and extend the terms of office of certain members of the board. I do not know how many have been extended, but I know the tenure of office of one or two has been extended. These are gentlemen for whom I have great regard and who have excellent records on the board. Now that hon. gentlemen opposite have the responsibility of office they renew and extend the terms of office of some men whom we appointed. But now here is the great joker of those who sit on the other side of the house. Do you know what they did in those days? They were against the establishment

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of a royal commission. They said it would be a complete waste of time and would accomplish nothing. I am sorry the Prime Minister is not here because-


Paul Joseph James Martin: He may be
listening.


Lionel Chevrier: Yes, he may be. I regret that he is not here because I am sure he would enjoy my reading back to him some of the statements which were made during that debate. I remember the debate very well- oh, not the debate; the debates, because there were so many of them-and what was said particularly by hon. gentlemen opposite. Now we have the Prime Minister coming forth and saying he is going to establish a royal commission to deal with the transportation policy, the very thing hon. gentlemen opposite said would be utterly useless.
The then leader of the opposition made an interesting statement dealing with the appointment of a royal commission.


Mr. Browne (St. John's West):: What date was that?


Lionel Chevrier: January 14, 1949. It was quoted in the Montreal Star. The statement was made by the then leader of the opposition as he got off the train at Regina, and well do I remember it because I raised it in the house. This statement followed the announcement which had been made in the house by the former government to the effect that a royal commission would be established to deal with transportation policy and other matters. The press release reads:
The royal commission to investigate Canada's freight rate structure was tagged tonight (in Regina) by Hon. George Drew, Progressive Conservative leader, as a "waste of time." In a brief press conference on the second stop on his western tour, Mr. Drew said all essential data seemed to have been assembled and that the most important thing now was "determining the principle on which adjustment must be made of rates."
The then leader of the opposition thought a royal commission was a waste of time. Do you know what happened after that? The Conservative party held a convention here in Ottawa and passed a resolution stating that a royal commission would be a good thing. The resolution was to the effect that a royal commission should be established without delay to consider the whole transportation policy. They were running in both directions, their leader saying a royal commission was a waste of time and the party in convention saying they wanted a royal commission, just as they do now that they sit on the other side of the house. They run in two directions and sometimes in three, now that they sit where they do. We have had demonstrations of that

sort of thing on a number of occasions, as the house knows, and I hope hon. gentlemen opposite will not ask me to cite examples.


Mr. Fraser:: The two royal commissions were for the purpose of determining different questions.


Lionel Chevrier: That is a very helpful
remark.


Gordon Knapman Fraser: It is true.


Lionel Chevrier: The other inconsistent attitude of our friends on the other side of the house had to do with horizontal rate increases. The house knows that once an increase in freight rates is granted, unfortunately, the effect is uniform. It is horizontal rate increase and it affects all parts of Canada detrimentally, but more particularly those parts in the east and in the west. According to our Conservative friends when they sat on this side of the house, the former government had done absolutely nothing to alleviate the burden of those uniform and horizontal freight rate increases and the former government should be condemned, the Prime Minister said. In fact in his statement in the house which I read earlier-and I shall repeat one sentence-he said, as reported at page 64 of Hansard:
We find ourselves, by horizontal increases, placed in an ever more difficult position.
Then again, during the election campaign the Prime Minister made some very pertinent statements about horizontal rate increases. Here is what he is reported to have said, according to a Canadian Press report published in the Windsor Daily Star of February 14, 1958:
On freight rates, Mr. Diefenbaker spelled out for the first time his government's apparent intention on the increase granted in January by the board of transport commissioners.
Listen to this:
"We said before we were in power that freight rates were unjustifiably high when raised horizontally.
Did we act? When the board allowed an increase, we held it up because it could not be justifiably brought into existence on the basis the increase was provided."
This statement was made on February 13, 1958. The effect of it is to say that horizontal increases are unjustifiably high and should not be allowed to go into effect. Well, what did the judgment of the board of transport commissioners say just a few months later? The board of transport commissioners, at page 14 of its judgment dated November 17, 1958, said this about horizontal rates:
There are many critics who point up the undesirability of horizontal increases, particularly stressing the amounts in cents per one hundred pounds by which such "spreads" increase, but it has not been shown in what way this feature can be avoided without either placing a higher rate

burden on short haul traffic or reducing the earning power of the carriers by granting them rate levels too low to produce the revenue they should be entitled to seek for the service they provide.
This is a complete answer to the Prime Minister.


Mr. Brooks:: That is owing to competition, of course.


Lionel Chevrier: It does not matter what it is owing to. The point is that the Prime Minister and those who sat on this side of the house said they were going to remedy the impact and the effect of horizontal rates.


Alfred Johnson Brooks: I think the point is that horizontal rates were increased over the years when the Liberals were in power, and that the amount of freight on which it was imposed was on a base of about 34 per cent. There was the difficulty over the horizontal rates, as my hon. friend knows; it was the application of the horizontal rates on such a narrow base.


Lionel Chevrier: I thank the minister for that intervention, and my reply to him is this. He has been in office now for 20 months. Here is the judgment of the board of transport commissioners which has increased freight rates by 17 per cent. The effect of that rate increase is uniform and horizontal; it applies all across Canada; it applies to the maritimes as it does to western Canada. It has done nothing to alleviate horizontal increases.


Alfred Johnson Brooks: May I say to my hon. friend that the increase was 17 per cent. We have reduced it 7 per cent. Your party was in power for 23 years. Increases amounted to some 130 per cent, and your party did not reduce them 1 per cent.


Hazen Robert Argue: The minister's party has increased it by 10 per cent. It went up 17 per cent and down 7 per cent.


Alfred Johnson Brooks: Ten per cent.


Lionel Chevrier: I have no objection to my hon. friend interrupting my speech. As he knows, he has no right to interrupt or to inject a political note. But let me say this to him. The 17 per cent judgment is unjustified in so far as the attitude of our friends on the other side of the house is concerned because of the fact that the increase in the horizontal rates is definitely affected by the 17 per cent.


Alfred Johnson Brooks: Will the hon. member permit-


Lionel Chevrier: No, I will not allow the minister to interrupt me.


The Acting Speaker (Mr. Rea):: Order. I am afraid the Chair cannot allow the house to anticipate the committee stage.
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Lionel Chevrier: I have no objection to an interruption by the minister, but at least he should wait until I have replied to his statement. What I was saying is there has been a reduction of 7 per cent but there is still an increase of 10 per cent, and the effect on the horizontal and uniform rate increases is nonetheless 10 per cent in the maritime provinces, in the select territory where my hon. friend lives.


Alfred Johnson Brooks: Put on by the board of transport commissioners.


Lionel Chevrier: I see; put on by the board of transport commissioners. But when my hon. friends were on this side of the house they said the board of transport commissioners were inadequate, were useless and were not doing the kind of job that should be done, and they made a motion to reduce the estimate to $1. I know my hon. friend does not like this; nonetheless I am trying to say that it is one thing to go out on the hustings and make a political speech and it is another thing to come into the house and give the facts as they should be given.


Alfred Johnson Brooks: You are making a political speech in the house and not on the hustings.


Lionel Chevrier: Then my hon. friend can answer it. If I am making a political speech here my hon. friend can answer it, and I hope he will rise in his place and answer this. The statement I make now is that freight rates are far too important a matter to be dealt with politically.


Alfred Johnson Brooks: Hear, hear.


Lionel Chevrier: They should be dealt with by the board of transport commissioners. This is the board which has been maintained by parliament over the years to deal with this highly technical matter, and no political note should be injected in it. If my hon. friend believes that I am making a political speech now may I say that I would not have made it had the Prime Minister not made the statement the other day that while we were in office we had done absolutely nothing. I submit that we have done a great deal, and if my hon. friend who interrupts me now will consider the facts he will agree. He knows full well that the Maritime Freight Rates Act, which is of assistance to his part of the country, was passed by a Liberal administration. The increase of 10 per cent, from 20 per cent to 30 per cent, in traffic that moves, I believe, outside the select territory was also brought into effect by a Liberal administration. I am sure he will not deny that.
I have perhaps taken up too much time, sir. I did not intend to speak at this length, and I would not have risen in my place had

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those statements not been made by responsible members of the house here and outside the house on a matter which when I sat on the other side of the house I considered was a technical one to be dealt with by the board of transport commissioners, an expert body whose business, experience, duties and responsibilities are to fix, determine and enforce rates pursuant to section 328 of the Railway Act, as changing conditions from time to time require.
To sum up, I say that those who sit on the other side of the house, when they sat here, would do away with the board of transport commissioners, would call royal commissions useless and would remove the effect of horizontal freight rate increases. Now you are in office. Go ahead and remedy the impact of horizontal freight rate increases. Go ahead and do what the Turgeon royal commission, which conducted one of the best and most exhaustive studies ever made in this country, said could not be done with reference to horizontal increases except by the railways. In dealing with horizontal freight rate increases the commission had this to say:
The remedy does not lie in the prohibition, statutory or other, of horizontal increases, but is in the hands of the railways themselves. The railways should make studies of traffic conditions in all their bearings and should present to the board . . . proposals showing not only their maximum percentage increase requirement, but also, among other particulars, varying percentage increases on different commodities, flat, instead of percentage increases when these are more suitable, and maxima in appropriate cases in cents per 10O pounds or other unit.
The recommendation by the board of transport commissioners with reference to horizontal increases was that no legislative amendment was required, that the Railway Act in its present form was sufficient and authorized the railways and the board to deal with this problem satisfactorily. But you on the other side of the house have said, "Oh no, wait a minute; we shall deal with this and wiR remedy the impact when we get into office". I have referred to two statements made by the Prime Minister (Mr. Diefen-baker), one made in Saskatoon and the other made in the house. If he can do it I will be the first to commend him because I know the people of Canada will welcome anything that will have the effect of alleviating the burden of horizontal increases in the freight rate structure.


Alfred Johnson Brooks: May I ask the hon. member a question?


Lionel Chevrier: Yes.


Alfred Johnson Brooks: Does the hon. member say that the freight rate situation is satisfactory?


Lionel Chevrier: I certainly have not said that.


Alfred Johnson Brooks: He says that nothing can be done, according to the Turgeon report.


Lionel Chevrier: I said no such thing.


Alfred Johnson Brooks: You implied that.


Lionel Chevrier: If I implied that, then I beg my hon. friend's pardon. I was dealing with horizontal increases when I made the statement I did and I was not dealing with the whole freight rate structure. Of course the freight rate structure can be bettered. That is the object of P.C.1487, to equalize freight rates all across Canada.


Alfred Johnson Brooks: That is the object of this government to better the freight rate structure.


Lionel Chevrier: I hope the government will be successful. What I was dealing with when my hon. friend interrupted me was only a small fraction of the structure, namely horizontal and uniform rate increases, and the board in its last judgment says it has not been shown in what way this can be done; that the railways are the ones to alleviate horizontal increases. When I was dealing with horizontal increases I was simply replying to statements that had been made earlier by those on the other side of the house.
So that there may be no doubt in the minds of hon. members let me say that of course there remains a great deal to do. There are still inequities, there is still discrimination, there is still equalization that needs to be brought about with reference to the freight rate structure, there is still need of a national transportation policy for Canada. I presume that will be the object of the royal commission. I presume that will be one of the terms of reference of the commission. I do not pretend that the situation is fine in the finest of worlds. What I am saying is that we have done a great deal to alleviate the effect and burden of discrimination, inequalities and inequities in the freight rate structure, and I think I have put enough evidence on the recoid to indicate to our friends on the other side that while we were in office we did not simply do nothing as our hon. friends try to indicate.
I have been much too long, Mr. Speaker, and I simply want to conclude by saying that with respect to any measures the government brings before us, either through this subsidy which we will support and try to strengthen when the bill goes to the committee or through the scope, broad as it may be, of a royal commission, we will support the government because having in mind the tremendous distances over which freight has to move to the extremities of our country it becomes more and more important to remove these inequities. The former administration

removed a large portion of them and should be given credit instead of criticism.


Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, I wish to speak for a few minutes on the bill which, from the point of view of members of this group, is a measure of expediency to meet a long term and continuing problem that is of concern to large sections of the Canadian people. It simply reduces from 17 per cent to 10 per cent the increase in freight rates which the people have to pay at the present time. I might say, Mr. Speaker, that during the exchange between the Minister of Veterans Affairs (Mr. Brooks) and the former minister of transport with respect to what the present government had done in 20 months compared with what the former government had done in 22 years I made a quick calculation, and if my calculation is correct the average rate of freight rate increase per year during the former government's term of office was slightly under five per cent while, allowing for the $20 million subsidy, the average rate of increase in freight rates during the last 20 months has been something slightly over six per cent. There is not a great deal of difference with respect-


Alfred Johnson Brooks: Hardly a logical conclusion.


Herbert Wilfred Herridge: -to whether one government or the other was in power. I wish to present the representations of this group regarding this very serious and complicated question. I might say it is not a subject on which I enjoy speaking because I admit quite frankly I can no more explain the idiosyncrasies of the freight rate structure than fly but we do have certain opinions with respect to how freight charges are arrived at, the effect that increases in freight rates have and the attitude of the Canadian people.
The representations of our group are based on a knowledge of the seriousness of this continuing situation as indicated by the repeated protests year after year made against increases in freight rates by provincial governments, farmers' organizations, the British Columbia fruit growers' association and organizations representing lumber manufacturers, mining and other industries. The representations of the farmers' organizations have been placed before the house a number of times by other members of this group and I am not going to deal with them further. But I do want to say a few words with respect to the tree fruit industry, the lumber industry and the mining industry.
The tree fruit industry of British Columbia, with which I am particularly well acquainted, has made submissions to hearings of the board of transport commissioners on
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several occasions vigorously opposing increases in freight tariffs. They have done so because they have done everything possible to lower costs by improving packaging and extending markets with an aggressive sales policy. In other words, they have done all they can to help themselves. Regardless of every effort in this respect the industry is having a very difficult time indeed. Even at present the growers are receiving little more and in many cases less than the cost of production. 1 am sure a good number of members recall that in 1955 the cost of production of apples in British Columbia was approximately $2.50 a box and the average return to the fruit growers of British Columbia for all grades was about 72 cents a box. That gives one some idea of why they are so concerned about the cost of transportation for their commodity.
Again, what about the lumber industry? I am very well acquainted with a wide section of the lumber industry and it too has suffered very seriously in the last 12 or 18 months from lack of markets and low prices. As a matter of fact, Mr. Speaker, in the last 15 months a good number of small saw mills in British Columbia have been obliged to close down because they could not continue to operate or could not continue to make a profit that made it possible for them to operate. Others have continued to operate under great difficulties and in most cases up until quite recently on an extremely narrow margin. The industry in British Columbia has made repeated representations to the board of transport commissioners and to the cabinet committee on freight rates because of the seriousness of the cost of transportation to this industry. I am sure the minister realizes what it means to these smaller mills, particularly in the mountainous sections of British Columbia, to have even this ten per cent increase in freight rates at this time.
Then I am sure all of us know the difficulties that have been experienced by quite wide sections of the mining industry which have suffered a decline in the price of base metals in the last two years particularly. Here again in this connection may I say that in my constituency and in surrounding constituencies a number of small properties have been obliged to close down, to a large extent because of the cost of transportation of their product to the markets concerned. These transportation costs are a most important factor particularly with respect to the smaller segments of the lumber industry and the mining industry and in connection with farming and fruit farming in general.
For a few moments I want to deal with our two arguments-we have stated them before

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but on this motion for second reading we wish to repeat them-against the position taken by the Canadian Pacific Railway Company when seeking increased freight rates. I might say that my reading of the record in years past would indicate that the whole pattern of freight rates in Canada seems to be established by the attitude of the Canadian Pacific Railway Company. We in this group believe that the Canadian Pacific Railway Company suffers from two diseases, namely economic schizophrenia and income tax anaemia. That is our approach to the position of the C.P.R. We believe both of these diseases can be cured by a shot of government action and we believe it is about time that something was done in that respect.
We think the Canadian Pacific Railway Company has what we would term a split personality. The company has for years assiduously developed the legend that its corporate assets are arbitrarily divisible as between the rail and non-rail operations. The company's entire case, as far as we can see, rests on the assumption that its railway operations can be divorced from the other lucrative enterprises which account for such a large part of its income. In our opinion, this is a completely unsound and unethical position. For instance, when a shareholder purchases stock in the Canadian Pacific Railway Company he does not buy shares reflecting the assets of the railway as distinct from the non-operating assets but purchases shares that reflect the earnings of the total assets of the company. Why should not the company's rates, taxes and charges be assumed to be on the same basis?
I want to quote briefly from an editorial which appeared in the Winnipeg Free Press of November 19, 1957. It was written by a gentleman who is designated as "S.M.". I think this editorial clearly states the case and I am going to quote it in full because I think it is worthy of being on the record. It states the case much better than I could do it of my own volition and it presents our argument in this respect. The editorial is headed "C.P.R.'s Claim Challenged". This was one of a series of articles dealing with proposed freight rate increases. It reads as follows:
Ottawa: The Canadian Pacific Railway Company for years has assiduously developed a legend that its corporate assets are arbitrarily divisible as between rail and non-rail operations.
Every application for higher freight rates depends upon this supposition, and none more than the case currently being considered by the transport board. The C.P.R. has asked the board to accept as a rate base the sum of $1,146 millions, which the company says is its net investment in railway property.
The C.P.R.'s entire case rests on the assumption that its railway operations can be arbitrarily divorced from those other lucrative enterprises which account for such a large part of its income.

The validity of this argument has been directly challenged by a paper prepared for the board by Prof. Vernon Fowke of the University of Saskatchewan. Prof. Fowke's study clearly demonstrates that neither parliament nor the original officers of the company intended that these ancillary operations should be anything but part of the company's general transportation system.
The Canadian Pacific Railway Act of 1881 defines the purposes of the company: To construct a rail link to the Pacific coast, to buy or build a line to the Atlantic, to acquire such other facilities as would contribute to a well-rounded transportation system, and to operate the whole in perpetuity.
The charter was amended in 1902 to broaden this scope by including such non-rail operations as mining and smelting,-
I may say that includes an extremely profitable mining and smelting company which last year declared a profit of over $14 million.
-irrigation, generation of electricity and iron, steel and lumber manufacturing.
The 1902 amendments specified that these powers were to be exercised "for the purposes of the company," and this phrase or its equivalent is contained in each amending clause. Its inclusion, as Prof. Fowke observes, is no mere legal verbiage, for parliament in 1881 had clearly defined these purposes as the operation of the railway.
Any recent annual report of the C.P.R. will illustrate how far the company has departed from these purposes. Its "other income" in 1951 was nearly $30 millions, not a penny of which was credited to rail operations.
"The wording of the various sections of the (1902) statute makes it abundantly clear," Prof. Fowke states, "that the parliament of Canada had no intention that the beneficiary of the statute, the C.P.R., might henceforth or at any time exercise its additional powers as ends in themselves or for purposes divorced in any way from the purposes for which the company was originally formed."
Parliament clearly had not contemplated a company which would pour its railway profits into vast non-rail operations, at the same time charging the public with the entire cost, including corporate income taxes, of running the railway alone.
Nor had parliament ever intended that the 25 million acres in land and $25 millions in subsidies which it granted the C.P.R. would be used, not for the benefit of its customers, but for the greater reward of its shareholders.
The 1902 powers, the subsidies and the land grants were given, Prof. Fowke says, to assist the C.P.R. in the fulfilment of its purposes as an instrument of national policy, the central object of which remained that of operating a railway.
I quoted that editorial in full, Mr. Speaker, because I think it is an excellent exposition of the facts of the situation as we see it with respect to the C.P.R.'s continued insistence on divorcing its railway operations from its other much more profitable operations.
I now come to the question of what I term the income tax anaemia; that is, the method by which the company under the income tax provisions of legislation makes annual additions to the so-called tax equalization reserve, whereby they make provision

for modernization, dieselization, improvement in track and so on. It is an extremely complicated question indeed. For the sake of exactitude I just want to quote briefly from one or two briefs that were presented to the board of transport commissioners by various transport officials who make a specialty of this subject. In that connection I will quote first of all from page 2 of a report by the national association of railroad and utilities commissioners, 1955, report of committee on depreciation. I quote this one paragraph because it illustrates what is happening at the present time under the present income tax policy pursued by the Canadian Pacific Railway Company. At page 2 of the report we find this:
Heretofore, public utilities generally have employed the straight line method of computing depreciation expense for income tax purposes. For many years, prior to about 15 years ago, electric and gas utilities computed depreciation expense for income tax purposes according to the straight line method but employed other methods for corporate accounting purposes. To a limited extent this is still true. In general, those utilities claimed and were allowed more depreciation expense in their tax returns than they recorded in their corporate books of account. A study by the securities and exchange commission for the ten-year period, 1930-39, disclosed that 168 electric and gas utilities charged 53.64 per cent more depreciation for tax purposes than they recorded in their corporate accounts. The higher allowances for depreciation expense resulted in consequential tax savings as compared to the taxes which would have been terrible had the allowance for depreciation been equal to that recorded on the books.
That is exactly the same principle which has been given effect at the present time by the Canadian Pacific Railway Company and to which we object.
Then there were further representations made before the committee. I think they were presented by the gentlemen representing the province of British Columbia in this particular case. I would like to read from appendix A of the report from the committee on accounts and statistics, which is a report dealing with the accounting treatment of tax reduction occasioned by depreciation provisions of the internal revenue code of 1954. They used this to illustrate this practice which has been transferred from the United States to Canada in recent years. This is what is said on page 12 of this appendix:
It should be clear from the foregoing evidence that the new methods of accelerated depreciation authorized in the internal revenue code of 1954, and particularly the years-digits method, offer management the opportunity to make considerably increased annual depreciation charges for an indefinite period and, consequently, very great tax savings. Moreover, contrary to erroneous general belief, these tax savings will be permanent-at least as long as the law remains in effect. In no legitimate sense may they be considered tax deferrals.
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Then on page 13 I read the following with respect to this problem:
The committee is convinced that the use of the liberalized depreciation procedures permitted by the 1954 revenue act results in tax reduction, not tax deferral, and that it would be contrary to sound accounting principles and to the provisions of the uniform systems of accounts to record such tax reduction in a deferred credit account.
The real regulatory problem in connection with tax reduction arising through liberalized depreciation is how to treat the tax reduction in fixing rates for service. This of course is not an accounting matter; however, the committee does have some thoughts on this question and believes the following suggestions are worthy of consideration.
Mr. Speaker, I have just dealt briefly with two aspects of the policy of the Canadian Pacific Railway Company, the first of insisting on separating its railway assets from its other much more profitable assets when considering the cost of operating the railway, and the need according to the company for increased freight rates and, second, the annual addition to the so-called tax equalization reserve fund.
We in this group believe that a national transportation policy that co-ordinates air, land and water transportation in Canada is urgently required. We think we require a policy in which consideration will be given to the needs of every section of Canada as to how this country can most economically and effectively be given the service, both freight and passenger, to meet its requirements. We believe this national transportation policy should make provision for an efficient service to all portions of Canada, and should make provision for the equalization of freight rates and the necessary standards of passenger service to all parts of the country. In our opinion the terms of reference of the royal commission should provide for a thorough study of all aspects of the transportation problem as a basis for the planning of a national transportation policy by this House of Commons and this government. Until we approach this problem in an over-all way we are simply going to continue this "bits and bobs" policy year after year, with the companies asking for an increase in freight rates, farmers' organizations, mining and lumbering industries appealing against the increases, and then some temporary expedient being brought before this house to meet the situation and soft soap over it temporarily, just as we are doing in this bill, thus getting no further toward a real solution of the question. Under present circumstances agricultural, lumbering, mining and other industries suffer from an inequitable freight rate structure. Also many Canadians suffer from the discontinuance of branch line passenger services,

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which in some cases should not and would not be discontinued if this government governed Canada in these cases rather than let the wishes of the C.P.R. prevail.
Mr. Speaker, once again I cannot resist bringing to the attention of the house one situation just to illustrate the effect of this "bits and bobs" policy and the fact that what Mr. Crump says goes, rather than what the Minister of Transport (Mr. Hees) says, with respect to meeting the needs of various sections of Canada. Just imagine, Mr. Speaker, that under present circumstances our Minister of Transport in effect has to go cap in hand almost on bended knee to ask Mr. Crump if he would do something to correct an injustice which exists with respect to transportation services provided in some parts of Canada. That is what is actually happening at the present time, and in the opinion of the members of this group it is an outrageous situation which we are going to continue to protest against until we get some remedy. I cannot believe that this government is going to allow this situation to continue. As I said before, I cannot resist bringing to the attention of the house again the fact that in southeastern British Columbia, where 135,000 people produce between $200 million and $250 million worth of mineral, forest and agricultural products, they have to suffer a Budd car service from Vancouver to Lethbridge where the young and the aged, the decrepit, lame, invalid and sick are required to sit up for 24 hours and subsist on dry sandwiches and cool coffee. There is a direct illustration of what happens with respect to this "bits and bobs" policy. This is the passenger service which is being provided by the Canadian Pacific Railway Company for the southeastern portion of British Columbia, and regardless of how much the Minister of Transport tries to help us, and I know he has done his very best, still Mr. Crump says nothing doing. He says what is going to be done or not done.
We submit that that situation should be remedied, and we will continue to squawk until it is, even though I find that because of my continued reference to this injustice some of my lady friends around the building are now referring to me as "The Kettle Valley Kid". It is about time the government of Canada demonstrated that it meant to govern with respect to a national transportation policy for this country. Members of this group trust that this is the last time that this house will be required to deal with this problem on a temporary, piecemeal, titbits basis, and hope that a national transportation policy will result from the royal commission's recommendations, which we trust will be within a year, and that consequent action will be taken

on the part of this government, which has promised so much and to date done so little to meet this problem.


Ernest James Broome: Mr. Speaker, the hon. member for Kootenay West (Mr. Herridge) has just made an admirable speech except that his last words should have been "promised so much and have done so much". Coming from British Columbia, I would not expect the hon. member to have anything but the highest praise for this government, which is the first government to have recognized the peculiar problems existing in the extremities of the country.
I was very interested to hear the remarks made by the hon. member for Laurier (Mr. Chevrier) who spent 90 per cent of his time castigating the government and the last 10 per cent telling us what a fine bill this was, what a lot it would do for the country and what a lot there was still to do in the way of equalizing freight rates.
With regard to British Columbia, I should like to quote from a brief prepared by the British Columbia lumber manufacturers association which stated that since April, 1948 seven freight rate increases had been approved by the board of transport commissioners and that the total cumulative increase had been 125 per cent up to the beginning of 1958. This included the 3J per cent which this government disallowed in its first term of office, and all hon. members from British Columbia know how widely and heartily the government was praised in the press of the province for this decision. In circumstances with which all hon. members are familiar, the government was faced with a 17 per cent increase in freight rates, an increase which had to come about if we were to keep our railways in a position to serve this country and provide the essential transport facilities which a modern society needs. So what has the government done? It has brought in, not bits and pieces of legislation, but an idea in legislation which is new. I wish the hon. member for Laurier would listen to this: for 22 years during which his party governed this country there was nothing new in the way this legislation is new, because this legislation recognizes the needs and extremities of transport users in this country.
The effect of succeeding increases in freight rates had been to increase the cost of shipping a thousand board feet of lumber from Vancouver to Winnipeg from $14.70 prior to April 8, 1948 to $34.60 by January 1, 1957. On the same basis, shipments to Toronto increased in cost from $22 to $40.30. Because of these increases there set in a progressive decline in shipments of coast lumber to the eastern Canadian markets, a decline of some

47 per cent from almost 10,000 carloads in 1948 to 5,290 carloads in 1957. As every hon. member from British Columbia knows, or ought to know, our prosperity is dependent entirely on the prosperity of the woods industry, because at least 25 per cent of our payroll comes from forest industries, and as forest industries go, so goes British Columbia.
I have just finished checking with the board, as far as I can, with regard to the latest increase-the increase of 17 per cent- and I think it would be of interest to hon. members to know that rates on traffic originating in British Columbia on the coast and in the interior would have had to bear that 17 per cent increase almost in its entirety and, in consequence those shippers and those producers who are dependent upon the movement of the products they have produced will gain the greatest benefit from the present legislation since, as I have said, this measure has been tailored to help the maritimes and the far west. Further, as I also said, this is the first time anything has been done in this house to help, particularly, the province from which I come.
The hon. member for Laurier mentioned the Turgeon royal commission and the bridge subsidy on traffic across the northern shores of lake Superior, and mentioned what important aid this provided in marrying the two sections of Canada. The bridge subsidy is a very fine thing, but there are other non-productive areas in Canada; one might call the trackage through the mountains a non-productive area. But what has been the effect of the bridge subsidy? It has certainly been good, but it was not tailored to suit our needs, because the effect of the subsidy, having regard to the location of the bridge, has been to increase our cost of shipping into our legitimate markets, that is, the prairie provinces, in relation to the cost of eastern manufacturers shipping to the same region. This has come about because of the location of that bridge.
The fact that an artificially low rate is in existence across this trackage creates a subsidy which helps in shipping west, and which does help the west to ship to the east when shipments are being made east of the bridge but not when they are being made to points west of the bridge. So although this has helped us to a limited degree it will not do so to anything like the same extent as this measure will do.
To give hon. members some idea of the difference in the application of these rates I should like to point out that the 161 per cent freight rate increase granted in 1953 resulted in an increase in gross railway revenue of only 2.8 per cent. Why was
Freight Rates
this? It was because much of the traffic, particularly in Ontario and Quebec, would have been diverted to other means of transportation had the rates been so increased. The rates were, therefore, held down to the competitive rates in those areas, but where the traffic would bear the increase, that is where the increase was placed and this was, of course, in those areas where a widely-flung trucking system does not exist and where there are no facilities for water travel such as exist in Ontario and Quebec. Incidentally this substantial increase of 161 per cent was not mentioned by the hon. member for Laurier. With regard to this increase, his government simply said: there it is, let us put it through.
This measure which we are debating today is one which will provide us with immediate help. We are not being asked to wait for the length of time it would take to receive a report from a royal commission. This is something which will be of help right away, immediate assistance such as has been noticed in field after field of government endeavour.
The hon. member for Laurier made great play with the mountain differential and the fact that the one and a half rule as against the 50 per cent premium for transportation through the mountains was cut to one and a quarter and then to one. They recognize he said, that there was no real justice in this differential, and I suggest that that was about the only thing they ever did to help the province of British Columbia. This legislation is legislation tailored to help us in the west and to help our brothers in the maritimes in the most practical and common-sense fashion.
I think when the time comes for the proposed commission to investigate the entire freight rate structure, close attention should be given to the simplification of that structure, because it needs amendment and needs to be drawn in such a way that rates are truly equalized-so that when a manufacturer in British Columbia is shipping, say, to Brandon he will pay the same rate per ton per mile as a manufacturer in Montreal would have to pay. When such a situation as this comes about we shall, indeed, have equality of competition and we in the west will be able to share equally with the eastern manufacturers in access to Canadian markets.
I do not wish to take up the time of the house any longer, but I would say, in conclusion, that this is one of the most progressive steps as far as the west is concerned, and one of the best steps as far as British Columbia is concerned, that this government has taken to date, and I commend the Minister of Transport (Mr. Hees) for having

Freight Rates
introduced this bill and suggest it should be made law as quickly as possible.


Douglas Mason Fisher: Mr. Speaker, I hope the minister is listening to what is being said by those who are speaking in support of this bill. A few moments ago I thought he was showing a degree of discourtesy in not listening with bated breath to the fine speech that was being made.
The thing that concerns me in relation to this bill being sent to the committee on railways, canals and telegraph lines is this. What is going to happen in the committee? What information are we going to get with which to operate in terms of an explanation as to how this act is to work? I have just been looking at the bill again and clause 7 continues to confuse me. I think the minister has not given us a sufficiently lucid explanation of what is meant by that provision and perhaps he will do so later.
The hon. member for Fort William (Mr. Badanai) gave some specific instances of how our particular region in northwestern Ontario suffers with respect to inequalities as far as freight rates are concerned and I commend his remarks to the minister's attention. An hon. gentleman from the west coast who spoke earlier this afternoon remarked on the bridge territory on which there is a $7 million subsidy. There are some points I wish to reinforce and underscore in this regard. In many ways the bridge is the greatest weakness in the whole freight rate structure in Canada. Every argument put forward by the western provinces commences with a reference to the bridge and the fact that it is not economical because not enough traffic originates from the bridge.
One reason why the people in northwestern Ontario are sceptical about the vision, and you cannot blame them for it, is because they live in a part of the country in which they would like to see displayed much more evidence of vision so far as providing industry and revenue are concerned. In no area would this be more effective than in the field of railway development. If we could get more internal traffic development, especially on the Canadian National Railways, such as we have at Steep Rock and Manitouwadge, perhaps the basic problem of the railway structure will ultimately be cleared up.
When this bill is before the Committee I hope we will have some explanation of the bridge subsidy. It was set at $7 million, approximately seven years ago I believe. In view of the upward trends in cost that we have experienced why has not the bridge subsidy gone up? When the bill goes before the

committee we should get an interrelated picture of all aspects of the freight rate situation. I remarked the other day that we members of parliament are amateurs, duds and boobs with respect to this field which is one of the most difficult to understand and appreciate. When the minister appears before that committee I suggest he have with him departmental experts and advisers from the board of transport commissioners. They should be there throughout the time the committee is sitting so they would be on call to guide us as we move through consideration of the bill. It is important that we understand this legislation even though it is an interim measure because after a year there will be the report of the royal commission to consider.
The bridge territory in which my constituency lies is one of the fundamental regions at which we must look. We have been told by experts that the highest freight rates in Canada obtain in the area. That is an important internal concern. As a national problem, if we do not get more traffic originating in the bridge area, the discrepancies and the problem of equalization will continue to exist and may exist for a long time.
These remarks lead us into a reference of the vision, of course. Northwestern Ontario is a vast area approximately 600 or 700 miles in breadth and depth. The whole area of the maritimes and part of British Columbia could be tucked into this portion of the country, it is that large. I would suggest to the Department of Northern Affairs and National Resources that it concentrate on a development policy for this area which would do a lot for the freight rate situation.
I hope the minister will give us a nice, slow, amiable run-down on where he stands in relation to the bill, that the bill will be sent to the committee and that the committee will do a good job.


Mr. Robert Simpson (Churchill):: Mr. Speaker, I do not intend to take up too much time of the house on this subject because no doubt there are many other hon. members who wish to participate in the discussion. I do believe, however, it is my duty to bring to the attention of the house some facts about the situation in regard to freight rates as they apply in the northern part of Manitoba. It is my belief that the people in that area suffer very greatly under some of the highest freight rates that exist in this country.
I wish to refer briefly to an article which appeared in the November 11, 1958, issue of The Rural Co-Operator published by the Ontario Federation of Agriculture in Toronto.

In an article entitled, "Competition Myth Costs Money", the following appears:
What Canada has, in effect, is a giant railway monopoly half owned by the public (C.N.R.) and half owned by private business (C.P.R.). We pay for the duplication of overhead but receive none of the advantages of competition.
Now, Mr. Speaker, in many areas of Canada that would be a ridiculous statement, as you no doubt realize that many areas benefit to a marked degree from competitive rates. If people in those areas were to compare the rates of which they may take advantage with those that exist in the area I represent they would see the situation in its true light.
We have only one railway in northern Manitoba and at many points no highway parallels this railway. The rates are high on most goods and materials that come into the area and of course the working man is the one who pays the shot.
There is one aspect of this problem which is difficult to understand. In places like Lynn Lake and other points along the Hudson bay line where there are no highways, families who wish to go out on an annual holiday are required to ship their automobiles to the nearest highway by rail. There is a loading charge for putting the automobile in the box car, a high transportation cost for bringing it out to the highway and an unloading charge and on the return trip the same charges are applicable. Those charges although high are probably justified but one thing that should be examined is this. When two families are bringing out their cars there is no reduction in price and both pay the rates applicable to the shipment of a single vehicle.
There are many other examples that could be cited of situations of this kind existing in the area of northern Manitoba. Additional freight rates apply on goods going north of The Pas on the Hudson bay line. I suppose this is also a result of lack of competition, but these things should be inquired into.
I might refer also to the situation which I believe points up the necessity of a very full investigation into this matter. I would like to refer to the Arthur D. Little Incorporated report, which was an economic survey of northern Manitoba. In this report, which has just recently been released, transportation is mentioned. The report says:
Transportation is of considerable importance in pulp and paper operations, both for the supply of raw materials and for the delivery of finished products. For raw material supply, northern Manitoba offers facilities comparable with areas in which pulp and paper mills have been successfully established:	for the delivery of finished
products, however, it suffers from a serious competitive freight rate disadvantage.
The report goes on to deal with transportation to markets and it says:
Freight Rates
Rates that have been quoted by the Canadian National Railways for newsprint from a point (Pit Siding) near the Kelsey power plant would have the effect of virtually excluding shipments to Canadian markets. Rates to United States destinations, however, are by no means unsatisfactory.
These remarks are made in relation to a survey which was made by Arthur D. Little Incorporated in respect to the possibilities of opening up a pulp and paper mill in this area where, I might say, an industry of this kind is very badly needed.
I should like to give a comparison of those rates further to bring out the point that a full investigation into this matter should be undertaken soon. The freight rates which were quoted to ship newsprint from this area were from Pit Siding to Saskatoon, a distance of 560 miles. The rate per ton quoted was $28.4. To Winnipeg, a distance of 724 miles, the comparative rate was $34 per ton. To Fort William, a distance of 1,157 miles, the rate per ton was $48.6.
I should like to give a further comparison to show why I think an investigation of our freight rate set up is very necessary. To ship the same newsprint from Pit Siding to Minneapolis, a distance of 1,141 miles, would cost $17.80 per ton; to ship it to Milwaukee, a distance of 1,456 miles, would cost $22 per ton; and to ship it to Chicago, a distance of 1,535 miles, the rate is $22 per ton. Apparently we are permitted to ship newsprint from Pit Siding to Chicago, a distance of 1,535 miles, for $22 a ton and yet to ship it within Canada to Fort William, 1,157 miles, almost 400 miles fewer than to Chicago, the rate is $48.6 a ton, more than double. I realize Mr. Speaker, that I am certainly by no means an authority on freight rates, especially rates of this nature. In fact, I have a very limited knowledge of them. No doubt in those comparisons of shipping within Canada and to the United States there is something which comes under our export regulations. However, I do think that since the northern areas are so badly in need of industry, these things should be investigated as quickly as possible.
I notice that the explanatory note of the bill we are discussing reads:
The purpose of this bill is to provide for the revision of certain class and commodity freight rates and to compensate the companies to the extent of $20 million.
I sincerely hope that some of this $20 million will be used to lessen the burden on the people of those outlying areas who are paying tremendous freight rates at the present time.


George Harris Hees: Mr. Speaker,-

Freight Rates


The Acting Speaker (Mr. Rea):: If the minister speaks now he will close the debate.


George Harris Hees: Mr. Speaker, I think it has been a good and constructive debate and I should like to answer a couple of questions which have been asked.
The hon. member for Laurier (Mr. Chevrier) asked whether this measure provided assistance to coal and coke. The board of transport commissioners advise me that the increases on coal and coke have been only about one-half of the general percentage increase of 17 per cent. Assistance to coal and coke is given in the form of subventions, and to show how those subventions have been increased, for instance, during the past two years, I will give the comparative figures for the years 1956 and 1958. In 1956 the average subvention paid per ton was $2.67. In the year 1958, the average subvention per ton was $3.15. This shows that there has been an increase of 48 cents per ton during those two years, or an increase of 18 per cent.
Subventions paid during the calendar year 1958, by regions were as follows:	In the
maritime regions, that is in the provinces of Nova Scotia and New Brunswick, the amount was $8,546,041. In the western region, that is the province of Alberta and the Crowsnest area of British Columbia, the amount was $667,000.
On March 17 last the Prime Minister announced in the house that the federal government would pay an additional $500,000 in the form of subsidies to maritime coal this year. The government also recently announced the payment of an additional 50 cents per ton on 100,000 tons of Alberta coal which was being shipped to Japan, and this additional subvention was paid to make possible the sale of that quantity of coal.
The hon. member for Port Arthur (Mr. Fisher) asked when the committee on railways, canals and telegraph lines would meet next week. I might tell hon. members the chairman advises me it is planned to have the committee meet at 9.30 a.m. next Tuesday. There will be present members of the board of transport commissioners who will be there to answer all questions that will be put to them by those who are in attendance. No attempt will be made to brush off questions or to hurry up proceedings. There will be ample time for anybody who is a member of that committee to ask all the questions he wishes and I feel sure hon. members will receive the answers they are looking for.


Lionel Chevrier: May I ask one question? The minister shook his head in answer to a question which I asked earlier with reference to those increases under the board orders which

were not as high as 17 per cent. Does that mean that the subsidy will not apply to those increases?


George Harris Hees: Yes, Mr. Speaker, that is correct. It is our intention to use the $20 million in what we considered would be the most effective way, that is, to give the most effective relief to those who need it the most. So we adopted the plan, as I said earlier, of applying the $20 million only to the horizontal, non-competitive, class and commodity rate increase of 17 per cent.


Lionel Chevrier: May I ask another question? Did the minister receive any demand for representations from western Canada to the effect that Tuesday would perhaps be too early for them to come here to make representations?


George Harris Hees: No, I have received no such representations.


[Stage Direction]
Motion agreed to, bill read the second time and referred to the standing committee on railways, canals and telegraph lines.
[Stage Direction]
The house in committee of supply, Mr. Rea in the chair.
DEPARTMENT OF AGRICULTURE Administration branch-
1. Departmental administration, including advisory committee on agricultural services, $747,531.
(Translation):
Mr. Dorion:: Mr. Chairman, when we
adjourned the other day, I was endorsing some remarks made by the hon. member for Charlevoix (Mr. Asselin) about the difficulties and the plight of small producers of pulpwood in eastern Canada. To the suggestions he made may I add another one which, if carried out, might provide these people with some measure of relief, and help them contend with the arrogance and brutal selfishness of corporations that refuse to buy their products and forget that the natural resources of this country must be developed not only to allow companies to pile up profits and pay out dividends, but also, and mainly, to ensure the welfare of all classes of citizens.
We have, in Quebec, an embargo making it mandatory for anyone to process our wood within the limits of the province when that wood has been cut on crown property or on lots under lease. However, there is nothing to prevent a man who cuts wood on his own lot to market and export his wood. Since those corporations obstinately persist in their ways, would it not be possible to seek markets elsewhere?

It would therefore be necessary that Canadian farmers be made aware of potential markets. Would it not be possible for the Minister of Agriculture (Mr. Harkness) and the Minister of Trade and Commerce (Mr. Churchill) to get together and nave trade and commerce officials investigate this matter and supply our farmers, through their unions, like the C.F.U., for instance, with all the information they could find on such marketing facilities. Action along those lines would only be fair and would teach those corporations that general welfare should take precedence over their own petty and individual interests. This might be another instance where fear would be the beginning of wisdom.
The dairy industry, Mr. Chairman, seems to be on the verge of a depression which should be avoided at all costs. Everybody realizes the importance of that industry in the eastern provinces, especially in Ontario and Quebec. A few statistics will illustrate its extent.
That industry, comprising the production, processing and sale of fluid milk and its products, is one of the mainstays of this country.
The fact is that in 1955, the sale of milk brought our farmers a revenue of $1,438 million, and the value of milk consumed on the farm was valued at $62 million. Quebec ranked first with 35 per cent of our total dairy production, while Ontario was second with 32 per cent.
In 1957, milk production in the province of Quebec accounted for 37.8 per cent of the total farm production and the sale of its milk
products was	$215 million, distributed as
follows:
Butter	$71,490,000
Cheese	$10,085,000
Fresh cream	$86,349,000
Other products, including
ice cream and milk ...$47,530,000
In the provincial constituency of Bellechasse, in particular, considering its population, milk production is uncommonly remarkable. In 1957, we had, in fact, 11 butter factories and two cheese factories, one of which, in La Durantaye, also produces milk powder.
Those factories were supplied by 2,075 producers having a total of 21,400 cows, while the number of owner farmers was 2,200. Butter production rose to 2,993,599 pounds with an estimated value of $1,763,559. Cheese production, amounting to 443,856 pounds represented a value of $154,902. The value of
Supply-A griculture
other products, such as milk powder, fresh cream and fresh milk, amounted to $116,349.
In other words, it can be said that in 1957 Bellechasse producers received for their dairy production, a total of $1,733,885 apart from what they got from St. Henri, Lower Berthier, St. Francois and St. Luc parishes, for which I have no figures.
Furthermore, about a hundred producers supply milk to Quebec city. Their daily deliveries total about 40,000 pounds of milk, sold for consumption as such at $4.78 a hundred pounds, which represents an annual value of about one million dollars. Those figures show the importance of that industry in the country's economy, especially in Ontario and Quebec, more especially in the constituency I have the honour to represent.
Now, that industry is at present labouring under serious difficulties. While our production far exceeds domestic requirements, there is a steady decline in our exports.
Dealing with this problem at the opening of the federal-provincial conference on agriculture, on November 12 last, the hon. Minister of Agriculture pointed out, in particular, that the United Kingdom, the largest importing country, had substantially increased its dairy production from 1955 to 1957. Butter production, he noted, had increased from 53 million to 101 million pounds; cheese production, from 141 million to 256 million pounds, and skim milk powder production, from 50 million to 85 million pounds.
The other day, the hon. Minister of Agriculture stated in the house that, on January 31, 1959, the Price Stabilization Board had on hand, among others, the following products:
Butter	 69,682,444 pounds
Cheese	 1,205,883	"
Skim milk powder 65,126,608
Last year's figures, for that date are not available, but it can be stated that there is, at the moment, a substantial increase. Obviously, large quantities of those products will find their way into the domestic market during periods of production letup, but there is danger of a surplus, that the government will have to deal with.
The international market has undeniably become difficult as an outlet for our dairy products. The hon. Minister of Agriculture pointed this out only recently, on March 3, before the Ontario Concentrated Milk Producers' Association; while in the last quarter of 1958, we were selling butter at 63 cents a pound, the United States were offering it at 59 cents, Denmark at 36 cents and New Zealand at 31 cents.

Supply-Agriculture
As far as cheese is concerned, our exports to England which, about 15 years ago, had gone up to 253 million pounds, have steadily declined since, although on the other hand their quality has consistently improved.
In this field, however, the increase in dried skim milk production still raises the greatest problem. Born out of a need existing at the time, that is eight or ten years ago, this product met with considerable success. Many plants were built, and large investments were made, unfortunately without due account being taken of the law of supply and demand. Milk producers reaped sizeable profits, because for every 100 pounds of milk used for the production of butter, they receive 50 cents for the skim milk. But at the same time, part of their production was diverted towards an industry with far from assured markets.
In 1957, without considering market conditions, the Liberal government stepped in and set a support price of 17 cents, without such support having even been requested by leading farm organizations, at least in Quebec.
The net result is that not only has production reached tremendous proportions, but due to the price factor, we are gradually losing out on the world markets. We are now faced with frightful overproduction and with ever-increasing inventories, even though last year, the support price was lowered to 15 cents. What it will be this year, I cannot say. In my view, however, the support should not be removed completely unless an alternate policy is provided without delay. Such a policy should be aimed at helping the producers themselves, and should enable them to seek and to find new markets. That, incidentally, was the position clearly taken three weeks ago by farm delegations from Quebec and Ontario. While, in the field of manufacturing, there always remains the possibility of closing down plants, there can obviously be no question of stopping production in a dairy herd.
It must be remembered that you cannot change the course of agricultural production at will. Though it has been possible in some cases, through the use of price supports, to direct the course of Canada's agricultural production towards goals of doubtful wisdom -and this is possibly what happened in the case of powdered milk

and to get a quick response from the producers, we must now proceed carefully and gradually in bringing about the changes that are needed. You cannot, overnight, substitute one type of agri-

cultural production for another type, and such a substitution is even slower and more difficult when it has to be done by farmers of limited means.
In my view, the government should, under present circumstances, concern itself mainly with seeking means of insuring the disposal of our unsold milk products, particularly powdered milk, in view of the present overproduction. I am no expert in this field, far from it, but I have collected a number of suggestions from authorized persons, and I submit them for the minister to consider and to ponder.
In the first place, would it not be possible to include a larger proportion of dried milk in the composition of animal feeds? It has been established that available supplies of soybeans and fish meal used for such purposes are clearly inadequate. Well, since we have an excess of milk powder, would it not be better to market it in this way? Of course, it would not be a profitable market in terms of revenue but it would be better than unproductive stockpiling and, at the same time, it would help another section of our farm population.
Larger grants of milk powder to underdeveloped countries would be another relatively convenient outlet. I understand that for this purpose we would have to reduce the size of the containers now being used, because of the practically complete absence of refrigeration facilities in those countries. Since again this year we will be called upon to vote considerable financial assistance to those countries, there is no reason why we should not supply them with a larger share than usual in this particular form.
In a speech he made last November, and to which I referred earlier, the Minister of Agriculture pointed out how much the competition of margarine had increased the difficulties of the dairy products markets all over the world.
"In recent years, he said, margarine consumption has equalled or exceeded that of butter in the United Kingdom, in the United States and in Western Germany".
Since the end of World War I up to 1951, the production and sale of margarine were prohibited in Canada. In 1951, the Privy Council, confirming a Supreme Court decision, stated that, if, on the one hand, the international trade of this product has been a responsibility of the federal government, on the other hand, the production, possession and

marketing of margarine were a provincial responsibility. Following that judgment, the province of Quebec, alone, exercising its rights, passed legislation and adopted a policy of total prohibition. But since the other provinces failed to adopt the same policy, in 1958 alone, production of both edible and inedible margarine increased to the fantastic figure of 145,598,000 pounds, to the serious detriment of our milk products business.
I know that at the present time experiments are going on in order that rapeseed might eventually be used in the making of this product. But so far vegetable oils used in it come mainly from abroad. Would it not be advisable to curb their import through higher tariffs?
In 1955, Professor Patrick Allen, of the documentation centre of the School of Higher Commercial Studies of Montreal, dealing with this butter-margarine problem, in a particularly thorough study, disproved the arguments put forward to justify the competition arising from these two products. You are following a dangerous course, he said, when under the pretext of safeguarding the consumer's "democratic" freedom or because it is cheaper, you advocate free consumption of margarine. Such an argument could be put forward in favour of all foreign products and would justify the repeal of all enactments designed to protect our Canadian industries. But then what would become of security in employment and of the standard of living of our industrial workers? Since those are factors which must be taken into account in our foreign trade, why should they be discarded with regard to butter producers for whom, however, it is appropriate to provide adequate income which would not only bear a comparison with the earnings of city workers but would at least be on a par with the earnings of industrialists whose capital investment is equivalent?
Another way of marketing our dairy products would be to promote the production and sale of cheese.
I mentioned earlier the particularly high level our cheese exports had reached in the past. Our Cheddar cheese had come to enjoy a particularly remarkable reputation.
In my opinion, there is no oversupply of cheese. There would be no danger in increasing our production of cheese by 15 million pounds and in diverting to that effect 15 million pounds of skim milk which is today processed into powdered milk. Doctors say that cheese made from skim milk is as rich in proteins as cheese made from whole milk, and is often recommended by modern dietitians.
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In view of that, it would be advisable to promote increased domestic consumption by means of proper advertising. Cheese consumption is remarkably low in Canada. While the annual per capita consumption in some European countries is as high as 30 pounds per year, here in Canada it is only about 5 or 6 pounds. Yet, besides Cheddar, we manufacture other cheeses of very high quality, of which I shall name only two: those made by the Reverend Trappist Fathers at Oka, and the cheese manufactured by the Reverend Benedictine Fathers of St. Benoit du Lac, to mention only Quebec products. Unfortunately, the number of our domestic varieties is too limited, which leads us to buy foreign brands.
The officials of our Department of Agriculture would do well, I think, to study our facilities for the production, sale and consumption of that important dairy product. Canadian producers spend $350,000 a year on advertising alone. Should we not help them? The federal consumers' service has already done excellent publicity to increase domestic consumption of powdered milk. Henceforth that service might show more interest in cheese and promote its sale through plenty of good publicity throughout this country.
And as a final suggestion: could we not introduce a general policy of milk distribution in our schools? In some urban centres, the practice has been established without any government assistance and is giving excellent results. The federal government, together with the provinces, school boards and parents, should, I believe, try to generalize that practice. It has been estimated that it means a daily consumption of 7 ounces i.e. two fifths of a pound of milk, per pupil, which would help raise domestic consumption by about $20 million a year. In other words, this plan would absorb practically all the surpluses on markets supplied by fresh milk producers. I need not of course refer to the priceless benefits it would mean for the health and welfare of whole generations of school children.
Those are, Mr. Chairman, some of the means which could be considered and implemented to sell our dairy products' surpluses, which are now going through a crisis of an obviously temporary nature. In its brief submitted to us the other day, the Ontario Producers' Association pointed out the following:
The amounts spent on agricultural support prices are a mere pittance compared to the billion dollars Canadians pay annually for tariff price supports. People who live in price supported glass houses should be the last to throw stones.

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Agriculture
We do not hesitate-and rightly so-to increasingly support other sectors of agricultural production. For the same reasons, and still rightly so, we must maintain the policy providing for the support of the dairy industry, which now provides the livelihood of thousands and thousands of our fellow-citizens who are either isolated or grouped in modest co-operative associations, in the less favoured areas, as far as marketing is concerned, and consequently who are less able to defend themeslves.
Farmers are not asking for subsidies which would more or less lead to routine and inefficiency. In fact, the Catholic Farmers' Union, in its latest brief to the Quebec government, asked the latter not to issue any more permits for the building of new powdered milk plants. They are therefore prepared, if need be, to diversify their dairy production. But then, they need time. They also need advice, help and encouragement.
That crisis which is threatening our dairy products, as I said, is, in any case, of a temporary nature. In fact, according to the Gordon report, it is expected that, taking as a basis the annual average given by the figures for 1951 to 1955, domestic consumption will have increased by 29 per cent in 1965 and 68 per cent in 1980. Account must also be taken of developments which, at any time, may come about in Europe or elsewhere in the world, the possibility of which suggested to the right hon. Prime Minister that brilliant idea of a world food bank.
There is a last consideration which I should like to outline in closing my remarks.
Agriculture, in our country, is not merely an economic activity; it is, above all, a way of life, characterized by the close union existing between family and profession. It is the only profession in which all members of that social cell, which is the family, are interested in the work of the father, who is, at the same time, the head of the undertaking in which the community contributes to the welfare of everyone, to his education, his progress, his establishment in life and to the raising of his standard of living.
With agriculture, we have a whole sector of our population, composed of independent owners who, precisely because they own their enterprise, will naturally resist totalitarian tendencies of our contemporary world, and thereby contribute more than any other group to the social stability and the maintenance of those institutions which make for the strength and greatness of our country. That is why agriculture must remain a foremost consideration in our minds. That is why legislators must work unceasingly to maintain intact its economy, structure and means of survival.


Mr. Deschaielets:: Mr. Chairman, following the hon. member for Bellechasse (Mr. Dorion), I wish to take this opportunity, while the house is considering the estimates of the Department of Agriculture, to make a few general comments on the agricultural situation now prevailing in Canada, and then deal briefly with the matter of agricultural research.
May I begin my remarks by calling attention to an idea put forth by the hon. member for Bellechasse at the beginning of his speech, when as reported on page 1949 of Hansard, he made the following statement:
The other day, following a question I had directed to the Minister of Justice (Mr. Fulton), we learned that 17 of these companies have been prosecuted for infringement of the Combines Investigation Act while shamefully, deliberately and systematically exploiting-I have to use this word -the isolated small producers in our rural areas. Those punitive measures will not of course settle the problem. However, in taking this action according to law and within its constitutional responsibilities, the present government has shown a fairness and a sense of justice which deserve commendation.
Mr. Chairman, we all know of the sense of fairness of the hon. member for Bellechasse, and I think he will not be offended if I complete his thought and state that the investigation that formed he basis of the proceedings against those firms had been called for as early as January 1955 by the hon. member for Gatineau (Mr. Leduc). The investigation had been authorized by the Liberal government at the time, and the report was published on April 29, 1958. I know the hon. member for Bellechasse will want to thank me for making this correction, so as to render unto Caesar what belongs to Caesar. While I am on the subject, I must say that my hon. colleague from Gatineau has, in the past few years, made himself a champion of the small pulp-wood producers. In fact, he spoke in their favour several times in the House. I should like at this stage to quote from a speech he made on May 22, 1958, as reported on page 389 of Hansard:
The main responsibility for having tolerated the exploitation of settlers and farmers by a number of lumbering companies for many years rests with the government of the province of Quebec, but I realize that the Union Nationale electoral fund took advantage of that, and as Mr. Duplessis said: "In Quebec, you do not win elections with prayers only". I had proof of that in the last election.
Now, Mr. Speaker, that the record has been set straight-


Mr. Pigeon:: Mr. Chairman, I rise on a question of privilege. I ask the hon. member whether he can prove his statement.


Jean-Paul Deschatelets: If the hon. member for Joliette-L'Assomption-Montcalm (Mr. Pigeon) had carefully listened to my remarks, he would have realized that I was reading part of a speech that the hon. member for Gatineau has already made on this matter of pulpwood. And if the hon. member wants more information on the matter, he can apply to the hon. member for Gatineau who has a thorough knowledge of the problem.
I would now like to make a few remarks about the way in which the prairie farmers' delegation, which came to Ottawa on March 10 last, was received. I will not refer to deficiency payments, although I might say, in this regard that so large and representative a delegation certainly deserved a less arrogant answer and a more sympathetic reception than the brush-off they received from the government. In my opinion, the delegation showed, in its human, true and honest statement, the exact living conditions of people on the prairies today. Never had the government been given a more authentic description of the depressed conditions, the worries and difficulties which exist today in the prairie provinces.
Those facts which the western farmers have stated were never contradicted nor refuted, because they are exact. It is the responsibility of this government to solve the difficulties that western producers are now facing. In the light of that situation, we cannot fail to notice the reversal of things, the change of the situation, that has happened in two years. After two years of administration, during which confusion has been added to incohesion, the situation has kept deteriorating and the government has now come to the pathetic result where farmers representing a whole area of this country had to come to Ottawa to state the difficulties and hardships they were suffering because of the present government's lack of foresight.
And no doubt the majority of the delegates had voted for the present government. What a disillusion! What a let down! They now face the future with anxiety.
In his speech made in the early stages of discussion with regard to these estimates, the Minister of Agriculture as can be seen on page 1681 of the official record, made the following statement:
From some points of view, 1958 was the best year agriculture has ever had.
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I therefore thought we might refer to some evidence to see who was right. The Minister of Agriculture maintains that, from some points of view, the situation of agriculture in this country is better than it has ever been. Considering the facts brought before us-
(Text):


Mr. Harkness:: On a question of privilege, I know the hon. member does not wish to misrepresent what I said. If he will look in Hansard he will see that I said 1958 was the best year agriculture had since 1953, not the best year we have ever had. (Translation):


Jean-Paul Deschatelets: Mr. Chairman, this does not change anything that I have said. I of course accept the honourable minister's explanation. Without referring to the official record, I must accept his word. He says that, in some respects, ever since 1953, this has been the best year in so far as agriculture is concerned. However, I do question the minister's opinion, precisely because it is only an opinion; I question the opinion expressed by the minister in his speech, and I shall try to prove, with the help of witnesses, that his opinion is not in agreement with the facts. This is not surprising in the least since the minister's opinion comes from his ivory tower. So I am going to appeal to the testimony of the farmers themselves, who have to put up with present conditions. Mr. Chairman, I think the time has come to call for my first witness. I draw his testimony from statements made to the prime minister and to members of the cabinet by a visiting delegation of prairie farmers.
The first witness I shall call upon to prove conditions now prevailing in the prairies is the Reverend George Walliser, from Dilke, Saskatchewan. Here is a man who is in daily contact with the people of the prairies, and here is what he has to say in regard to the present situation.
(Text):
We are also alarmed by the general feeling of discouragement that is creeping over the people who are still left on the farm. Many young people have no hope of ever taking up farming. They have no choice but to leave home at an early age and crowd into the cities, adding to the problem of unemployment, and the consequent moral evils.
This general discouragement of the people, this lack of hope in the future, this confusion about the present, is creating in our people a spiritual unrest that hinders the effectiveness of their work for church and country.

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(Translation):
I now come to my second witness, Mrs. Beatrice Trew, of Lemsford, Saskatchewan. Here is what she had to say about the present situation in the prairie provinces.
(Text):
Conditions in far too many farm homes are not conducive to healthful living nor even to what might be termed an adequate standard. We love farming and life in the country but we do not believe we should have to live in substandard homes nor should our children's health be endangered by crowded quarters, inadequately heated and lighted as many are.
(Translation):
My third witness is Mr. Gordon Wilkinson, of Regina, Saskatchewan.
(Text):
Those of us who live in the western part of Canada know from first hand experience that many of Canada's 700,000 farmers are on the brink of ruin unless their buying ability is brought up to a higher level.
We recognize that the two most important economic problems in Canada today are,
(1)	Depressed farm prices and high operating costs,
(2)	Unemployment and low urban buying power. It must be recognized that any depreciation of
buying power on the part of any segment of the population of Canada has a detrimental effect on the other segments. Low rural farm purchasing ability means lack of production in urban industries.
(Translation ):
My fourth witness is Mr. Chas. W. Gib-bings, of Rosetown, Saskatchewan, vice president of the Saskatchewan wheat pool. (Text):
The economy of Canada is more vulnerable to farm income fluctuations than ever before. The present unemployment situation is undoubtedly partially a reflection of the declining farm purchasing power. When a farmer buys a tractor he puts people to work in the mines, the smelters, the steel plants, the rubber factories, the transportation industry, as well as those in the factories where the tractor and its components are made. Conversely, he puts them out of work when he fails to buy.
(Translation):
Here is another witness, Mr. Martin Arndt, of Springside, Saskatchewan.
(Text):
If the cost price squeeze is allowed to continue, it will bring about first, the loss of the family farm, and with it, small business and community life.
(Translation):
I have a further witness, Mr. J. W. Clarke, of Kindersley, Saskatchewan, who said: (Text):
Mr. Chairman there is no doubt in my mind that the grain farmers position is exceedingly grave. The large grain producer, as well as the small farmer, is facing disaster. The only differ-
ence seems to be the rate at which they approach it. It is evident that if society wishes to retain the family farm as a unit of production it must act soon.
(Translation):
Still another witness, Mr. Rudy Usick, from Erickson, Manitoba, said this:
(Text):
Unless action is forthcoming soon to increase grain prices, livestock surpluses will increase with correspondingly lower prices.
This would mean that a national agricultural crisis woud result out of a temporary crisis in prairie agriculture.
(Translation ):
Another witness, Mr. Alex McCalla, of Bremner, Alberta, made the following statement:
(Text) :
Young people in agriculture who are either establishing or continuing a farming enterprise, are confronted with low income, instability and lack of security.
(Translation):
Mr. Chairman, I might quote further evidence from people who today are living on the prairies but obviously not in an ivory tower, like the Minister of Agriculture.
Therefore, when comparing the views of the Minister of Agriculture and the situation actually prevailing in the prairies, we rather tend to accept the specific and true statements of people who live there now and who tell us that the position of farmers has never been so difficult as now.
In fact, much more could be said, because if we could call upon the testimony of farmers from central and eastern Canada, they would voice the same complaints and raise the same grievances. Western farmers, like those of central and eastern Canada, are now caught in a squeeze. They are caught in the cost-price squeeze, on the one hand, and on the other hand, they are caught in the downward trend of commodity prices.
Mr. Chairman, I wonder why such a state of affairs exists. Why has there been such a considerable deterioration during the past two years at a time when my hon. friends have been managing the affairs of this country? The answer is a very simple one-[DOT]


Mr. Graffiey:: That is not true.


Jean-Paul Deschatelets: Mr. Chairman, the
answer is very simple, and I shall give it right now. If my hon. friend who just made an interjection wants to, he may try to refute it when I have finished my remarks.
That state of affairs and that deterioration happened because the present government never had and is still without a real farm policy. If we look closely into what has been done for our farming industry in the

past two years by the present government, we shall find that there has been a policy of mere expediency and that no preconceived plan embracing every aspect of agricultural life has ever been submitted to this house to meet our present needs of a permanent character. To my mind, as long as we have no farm policy of a permanent nature corresponding to these needs, there will be no hope of increasing our farm production per lot or per acre or of seeing a rise in farm income. My hon. friend, who is so fond of interrupting, will perhaps ask us if we had an agricultural policy when we were running this country. I will answer him at once.
When the Liberal party came into power in 1935-and at this stage, it is needless to emphasize the situation which prevailed at that time, because everybody knows the terrible state of affairs which existed, not only in the prairies, but on farms all over central and eastern Canada-the government, headed by the Liberal party of 1935, was then faced with an unprecedented challenge. The government, at the time, developed an agricultural policy. Western farmers, as well as those of other parts of Canada, had to be provided with better production facilities. The problem was then one of production.
At this stage of my remarks, Mr. Chairman, I must say in all frankness that, in my opinion, there should never be a debate on agriculture in this house without the name of the former minister of agriculture, Mr. Gardiner, being mentioned.
Mr. Chairman, when the Liberal party was swept out of office in 1957, western farmers were in the situation that had been planned for them, that is to say they were the greatest wheat producers in the world. In fact, from 1935 to 1957, we provided them with production facilities comparable to those of any other country in the world. That was the result of a well-planned agricultural policy, which we had put forward in 1935.
Mr. Chairman, I want to be fair. I do not say that this government has failed to do anything, but I do say that what has been done for agriculture, these last two years, was done only according to a bits and bobs policy. I repeat what I said earlier, that this government has never submitted to the house an overall preconceived plan that would meet the needs of Canadian farmers.
And now, Mr. Chairman, may I say a few words about agricultural research. A study of the main estimates shows that votes numbers 5, 6 and 7 call for an estimate of a little over $2.5 million, due to the new direction given to our research services. In that
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connection, I must say that last year, at the time of the discussion of the estimates of the Department of Agriculture, I dealt with this matter of research and here is what I said, on July 31, 1958, at page 2933 of Hansard:
(Text):
I wish to bring to the attention of the Minister of Agriculture (Mr. Harkness) a very important point. X feel that if we are to improve the efficiency of agriculture in this country, in the west as well as in the eastern and central parts of this country, we should at once adjust our research procedure. Let us set up a new co-ordination of existing services and give a new, bold and forward looking impulse to these research services, so as to develop ways to increase the income of the farmer who is now caught in the cost-price squeeze.
(Translation):
This year, Mr. Chairman, I find that a step has been made in the right direction with regard to reorganizing research, which is so important for agriculture. I have read several studies made by experts in this field, and they claim that the reason why Canadian industry has made such great strides in the last 15 or 20 years is that it was based on industrial research. If a small fraction of the money being spent by the government or by private Canadians on industrial research were devoted to agricultural research, I feel we could meet a number of the needs now existing in the field of agriculture.
In other words, I think we should try to pattern our agricultural research on what has been done in industry.
Mr. Chairman, I stated last year, and I repeat, that in the field of research, we are lagging behind many small countries in northern Europe. We are obviously lagging behind our powerful neighbours who, I understand, spent slightly over $50 million in 1957 *-I am referring here to the American government-and such an amount was considered by observers as definitely small and inadequate to meet the needs of research.
Mr. Chairman, as far as we Canadians are concerned, we have many problems to face in the agricultural field, including the disposal of farm surpluses. In my view, by building up our research agencies and giving our experts more scope than they now enjoy, we could hope some day, from an industrial point of view, to find markets for certain products, for certain goods that we produce in much larger quantities than we can consume.
Mr. Chairman, I hope this is only a beginning, and that the amount we shall be vot-

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ing this year-which is larger than the amount provided in other years-for the purpose of reorganizing research services, will be but a first step. May we at long last give those services an entirely new and bold direction, in order that our experts may work under conditions enabling them to produce better results.
Last year, when we discussed his departmental estimates, I made a few suggestions to the hon. Minister of Agriculture and I think I should repeat them this year.
I believe that we should allow our best experts to visit the countries where research is much more advanced than in Canada, that we should send them there to study for periods of six months, or one or two years, if necessary. We could, in this way-


Mr.   Chairman@: I am sorry to interrupt the hon. member but his time is up.
(Text):


Mr. Peters:: I had expected that probably some of the western members would wish to speak on this item and I would be interested in hearing what they had to say, particularly since the Easter recess permitted a great number of the western members to return to their constituencies and to talk to the people who supported the great number of people who came to Ottawa in the delegation. I am not sure what the members told their constituents when they went home, but I understand there is to be another delegation come to Ottawa, a follow-up delegation, to receive the answer which they expect will be the final answer from the government. That delegation, I understand, will be coming somewhere around the 25th of this month. I had hoped that this was an indication that the members from the west had given some consideration to the impetus which caused the delegation to come to Ottawa in the first place and that they might now have a change of heart and might agree with some of the people who came in that delegation and some of the conclusions which it reached. However, this may not be the case, or it may be that the members from the west are not saying anything at all because they do not want to embarrass the minister who had already made up his mind before the delegation came to Ottawa.
I was very impressed with the delegation itself and with the brief that it presented to the government.


William Heward Grafftey: I can tell you that the delegation was not impressed with the C.C.F.


Hazen Robert Argue: Oh!


William Arnold Peters: Frankly, Mr. Chairman, I wonder how a member from the province of Quebec, and particularly from an urban riding in Montreal, would know what the delegation felt about the C.C.F.


William Heward Grafftey: I am from a rural riding in the eastern townships.


William Arnold Peters: I wonder how the hon. member would know anything about the situation as it affects any one political party.


The Chairman:: Order. It would be appreciated if the committee would permit the hon. member to continue his remarks.


William Arnold Peters: Mr. Chairman, this is just another country heard from. My remarks might also apply to a rural riding as it does to an urban riding.
We have some indication from some of the meetings that have been held that there has been unanimous support for the position that the C.C.F. took in regard to the brief presented by the delegation, and I am quite sure there will be an opportunity for us to see some of the results and whether we were right or some of the other parties were right in our analysis of the needs of the western farmers.
I think the follow-up delegation could produce more favourable results if the members who visited a number of their constituents when they were home ascertained whether the mass delegation that came down here, supported and financed by a very large percentage of their constituents, was speaking for those constituents. If this delegation was not speaking for those constituents, then I think 1,000 people certainly put a lot over the people who sent them here. If they did not do this, then there are quite a number of members from western Canada who are trying to put a lot over the western people.


An hon. Member:: Nonsense.


William Arnold Peters: It may be nonsense but it has to be one way or the other. Either the delegation was right in representing the farmers of the west or the western members are right. They both cannot be right, because they do not represent the same things. One of the sides must be right, not both. When I sit down I shall be very happy to have some of the western members rise in their places and tell us which side they now think is right.
I was interested in the remarks made by the previous speaker. He indicated-and I presume he spoke for his party-that they were interested in supporting the idea of deficiency payments as presented by the delegation.


Mr. Henderson:: He comes from the city of Montreal.


William Arnold Peters: Frankly, I do not care where he comes from. He is a member of this house and he has decided he is going to support deficiency payments. I suggest that this might also-


William Heward Grafftey: Did he say that?


William Arnold Peters: -be adopted by his political party. This is much more than the western members are doing because they are not supporting deficiency payments or the minister would be introducing a bill very shortly. I am quite sure that if he intended to he would indicate to the house that he was going to do so. I hope, as I say, that this was an indication of the view of his party. It will mean that the opposition is united in supporting such a measure at this time. A number of documents were introduced when the brief was presented by the delegation and they interested me a great deal because they were from people representative of specific groups.
A great deal has been made by such rags as the Rural Scene and others of the fact that there were more signatures on the petition than there were farmers in the particular provinces. I think this is a good thing. In my opinion it indicates that not only the farmers were concerned but also a number of other people.
He read from some of the supplementary briefs accompanying the main brief and it is interesting to look at some of them. One is from a clergyman and he did not speak only for himself. He represented a number of people. He points out how falling farm prices and a lower standard of farm income in western Canada are having an effect on all the people of Canada, not just the grain producers. He says in part:
We are also alarmed by the general feeling of discouragement that is creeping over the people who are still left on the farm. Many young people have no hope of ever taking up farming.


William Heward Grafftey: It is the same letter.


William Arnold Peters: It is not a letter. If the hon. member would listen he would know that I am referring to supplementary briefs from people not directly concerned with deficiency payments as they are not affected by them. It is of no concern whether or not this has been read before. I am interested in this particular paragraph and I continue:
They have no choice but to leave home at an early age and crowd into the cities, adding to the problem of unemployment and the consequent moral evils.
The clergy were concerned and presented a brief. Housewives were also represented and presented a brief.


An hon. Member:: Read that one too.
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William Arnold Peters: Pardon?


Mr. Habel:: He does not know what he is saying.


William Arnold Peters: I am quite concerned with the fact that a good number of members do not seem to understand what it is all about. As they represent ridings that are concerned about deficiency payments, I think it is about time they got hold of some of these briefs and read them if they do not have the sense to listen. I was interested enough that I asked for a copy of these briefs and the delegation supplied me with them. If the hon. member did not get one I am quite sure he can get one from some of his friends if he will ask them or he can have mine if he wishes. The housewives were very concerned, as they should be, and they have specific problems that are not necessarily those of the farmers themselves. Labour was concerned. Mr. Gordon Wilkinson of the Canadian Labour Congress endorsed the main brief.


An hon. Member:: I wonder why.


William Arnold Peters: You wonder why. I will read you why he says he endorses it.


An hon. Member:: How is the new party coming?


William Arnold Peters: I suggest, Mr. Chairman, that some of these backward representatives from western Canada are doing more for the new party than some of the rest of us can possibly do.


Mr. Drysdale:: We heard it all at the meeting. Did you attend?


William Arnold Peters: Mr. Chairman, this seems to be the only time that some of these members ever say anything.


An hon. Member:: We heard it the first time.


William Arnold Peters: For the benefit of those who did not read this brief I quote:
We recognize that the two most important economic problems in Canada today are (1) depressed farm prices and high operating costs; (2) unemployment and low urban buying power.
It must be recognized that any depreciation of buying power on the part of any segment of the population of Canada has detrimental effect on the other segments. Low rural farm purchasing ability means lack of production in urban industries.
Later he goes on to say:
Labour in Canada, representing the purchasing power of three million individuals by its one million members, believes the farm delegation has a good case and urge your government to give favourable consideration to their brief as quickly as possible.
He was not interested because he was going to get deficiency payments.


An hon. Member:: That is where most of the money would end up.
2404	HOUSE OF
The Budget-Hon. D. M. Fleming


William Arnold Peters: The reason he was interested was that if the farmers receive a fair and reasonable net income they will be able to buy the things that the workers in the factories produce. He was interested in such things as the mechanization of agriculture and he added his brief to the other supplementary briefs. Then there was a brief from a merchant. Possibly some members do not understand why a merchant would be interested in the problems of the farmers. In his brief there is this passage:
The farmer makes up 12 per cent of the total population of Canada but at the present time receives only six per cent of the national income. Under these circumstances we cannot maintain the family farm or small business.
He is interested in the matter from his point of view and he wants the farmer to have a fair and reasonable income so that he can sell to the farmer the things he has in his store. This should be elementary enough even for western members to understand. There are a number of other briefs representing other points of view. According to the government, diversification is the cure-all but one of these briefs points out that diversification has been tried in some areas and refers to the difficulties that have arisen not only in relation to wheat production but with respect to the diversified industry. He points out that if a farmer goes out of grain production in western Canada he probably goes into beef production and that brings about a lowering in the standard of farm income across the country because a surplus is created of that product. May I call it six o'clock?


William Heward Grafftey: You sure can.
Progress reported.
At six o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at 8 p.m.


[Stage Direction]
Hon. Donald M. Fleming (Minister of
Finance) moved:
That Mr. Speaker do now leave the chair for the house to go into committee of ways and means.
He said: Mr. Speaker, ten months have passed since I presented my first budget to this twenty-fourth parliament of Canada. Tonight it is my privilege to present the Canadian budget for the year 1959. I am deeply conscious of the honour and responsibility which once again fall to my lot.
[Stage Direction]

(Translation):
Mr. Speaker, the task of preparing the budget this year has indeed been a challenge. The concurrent existence of higher than normal unemployment and a disturbing inflationary potential have puzzled and confused economic observers not only in Canada but in many other countries. It has been necessary to analyse, weigh and assess the strength and drive of these opposing forces and to endeavour to prescribe courses of fiscal policy which will assist Canada to steer a wise course through them.
In the past year, public attention has been focused to an unusual degree on economic and financial issues. In the house, in the press and in public discussion, questions of inflation and unemployment, fiscal and monetary policy, recovery and the public and private functions in promoting sustained growth have been keenly debated. This is all to the good, for the functioning of our system of government depends upon an informed public opinion.
1958 ECONOMIC CONDITIONS
A year ago we were faced with the carryover of the effects of a slowing down in economic activity. The two major factors in the recession which began early in 1957 were the decline in business capital investment and the liquidation of inventories, which resulted in serious unemployment. There is still considerable unemployment, but looking back over the past year it is clear that we are now in a period of economic recovery, a period in which the forces of economic growth and expansion have reasserted themselves. In the fourth quarter of 1958 the volume of production rose by two per cent above the preceding quarter and was two per cent above the level of the year as a whole. Taking account of normal seasonal influences there was a marked improvement in the trend of employment and earnings, in the volume of retail sales, in the level of corporate profits, and in the accumulation of inventories.
The budget white paper, tabled yesterday, reviews the economic developments of 1958 in some detail. I should like now to draw attention to some of the more significant aspects of these developments since they provide the background against which my budget proposals are presented.
The most important forces stemming the decline in business activity during 1958 were to be found in the fiscal policy and position of the federal government-lower tax rates

and revenues, higher expenditures and increased cash disbursements particularly in housing loans. The additional spending power provided in this way helped to arrest the decline and underpinned both consumption and investment to a substantial degree until the major retarding influences had spent themselves. The tax reductions announced in December, 1957, helped to maintain the purchasing power in the hands of the public. Personal taxes paid in the calendar year 1958 were $142 million lower than in 1957, despite an increase of $1.4 bilhon in personal incomes. In addition, there were increases in social security payments, such as old age pensions, veterans' benefits, and unemployment insurance payments, and these also had the effect of maintaining personal incomes and consumer expenditure. Almost one-third of the total increase in personal incomes consisted of increased federal payments of this type, which rose in 1958 from $1.5 to $1.9 billion. There was also increased direct government expenditure on goods and services and this too injected new demand and tended to offset declines elsewhere in the economy. Increased federal transfers to the provinces were equal to about one-third of the total increase in provincial and municipal expenditures. The increase in provincial and municipal expenditures on goods and services in 1958 also provided substantial support.
Perhaps as important as changes in taxes and expenditures was government action to offset directly the decline in business capital investment by making funds available for housing. The result was that housing investment attained an all-time high in 1958. Housing starts rose to 165,000 units compared with 122,000 units in 1957 and a previous record of 138,000 units in 1955. In terms of value, investment in residential construction rose by $353 million or 25 per cent.
Federal fiscal policy played a major role in arresting the decline and in sustaining the economy until the balance of economic forces again turned in the direction of the recovery which is now well under way. The result was that cash requirements on budgetary account and for loans and advances were greatly in excess of cash receipts, and there was a very large cash deficit of $1,263 million in the 1958-59 fiscal year.
Hon. members are aware that in our accounting system there is no separation between current and capital expenditure except as regards loans and advances. In other words, the budgetary deficit reflects not only normal current expenditures but expenditures on capital works as well. It should be pointed out therefore that the deficit on budgetary account referred to 66968-9-152
The Budget-Hon. D. M. Fleming above was to a large extent the result of expenditures on development of resources and construction, which in private business would be charged to capital account. In the calendar year 1958 these federal capital works included in current budgetary expense amounted to about $400 million. In addition, there were capital grants to the provinces, the most important of which was an expenditure of more than $50 million for the trans-Canada highway. Thus it will be seen on analysis that three-quarters of the 1958-59 budgetary deficit is in fact due to expenditure of a capital nature, rather than expenditure on current account.
The moderate but steady advance in consumer spending during the first nine months of 1958 was also a continuing source of strength. In the fourth quarter of the year the advance quickened and consumer expenditure rose by three per cent, the largest quarterly increase since 1952. This advance was an important facet of recovery and carried consumer expenditure to a level six per cent above the same period in 1957. The fourth quarter increase was particularly noticeable in expenditure on durable consumer goods which rose by eight per cent.
Consumer expenditure is much the largest and most stable element of demand in our economy. The steady rise in consumer spending during 1958 was supported by a growth in all the main components of personal income. For 1958 as a whole total wage and salary payments were two per cent above the 1957 aggregate but the trend throughout the year is more significant. There had been some decline in labour income between the summer of 1957 and the spring of 1958. This trend was reversed in February, 1958 and by December last the level of labour income was five per cent above the low point reached eleven months earlier.
The aggregate income of Canadian farmers improved substantially in 1958. Net farm income rose by 24 per cent. This was largely the result of higher returns from livestock and animal products. Farm cash income was only two per cent below the alltime high reached in 1952 and on a per capita basis for all those employed in agriculture cash income was the highest ever recorded. Government action in aid of agriculture and agricultural exports contributed directly to this improvement.
Among the forces contributing to expansion in our economy is the rapid increase in our population. During 1958 our population increased by 381,000, and by mid-summer of this year our population will pass the 17J million mark.
All this indicates something of the strength imparted to the economy by the growth in
[Stage Direction]
The Budget-Hon. D. M. Fleming incomes. As I mentioned earlier, this was reinforced by a reduction in tax rates and by a very considerable increase in social security payments so that personal income available for spending was markedly higher than in 1957. In fact, the increase in personal income after taxes was seven per cent in 1958 compared with an increase of five per cent in 1957. About two-thirds of this large increase in personal income after taxes was used for the purchase of additional consumer goods and services; and the remaining third, an unusually high proportion, was saved. A return to more normal levels of saving together with the anticipated expansion in personal incomes can be expected to impart still greater strength to consumer spending in the months ahead.
Corporate profits are a sensitive indicator of business conditions. For the year 1958 as a whole corporate profits were five per cent lower than in 1957. But here again the yearly aggregate is not indicative of what happened during the course of the year. The downward trend in corporate profits which persisted through 1957 and early 1958 came to an end in the summer of 1958. Corporate profits began to rise in the third quarter of 1958 and increased by a further eight per cent in the fourth quarter. This recovery in profits can be expected to impart strength to increased business capital investment.
A further factor of importance in the recovery now taking place is the changing role of inventories. Movements in inventories tend to be of a short-run character, often intensifying demand in periods of expansion and inducing further declines in periods of lessening activity. In the 195556 investment boom the strongly inflationary conditions associated with a high level of capital investment contributed to a rapid rate of inventory accumulation. As the mood of optimism was replaced by one of caution, inventories were allowed to run down and to this extent current needs were met from existing stocks rather than new production. Between the first quarter of 1957 and the first quarter of 1958 investment in inventories declined by $1.1 billion at annual rates-from accumulation at a rate of $500 million to liquidation at a rate of $600 million. Throughout the latter half of 1957 and the first half of 1958 investment in inventories was declining and therefore exerting a depressing effect on production. By the third quarter of 1958, however, this movement had run its course and inventory investment had resumed a positive role.
I have referred to the fact that declining business capital investment was a major factor in the slow-down which emerged

during 1957. This decline was particularly noticeable in the export-based resource industries where expansion had been fed by world demand. As the world commodity markets moved into a position of over-supply in late 1956 and early 1957, capital investment in these industries slowed down and this trend spread to other areas of investment as well. The decline was particularly marked in investment in machinery and equipment which fell by almost 20 per cent between the first and the fourth quarters of 1957.
For 1958 as a whole business capital investment, excluding housing, fell by $789 million or 13 per cent from the 1957 level. While business capital investment was lower than in the peak year 1957, it was high by any other standard and remained an important source of demand in the economy. Moreover, it should be observed that a considerable part of the impact of the decline in capital investment and inventories did not fall on Canadian producers but was reflected instead in a decline in imports which had been swollen by the demands of the previous boom.
The decline in business capital investment was largely offset by expansion in social capital, including housing. In 1958 outlays of this kind increased by $513 million or 17 per cent and offset almost two-thirds of the decline in business investment. Investment in housing and community facilities such as roads, schools and hospitals, amounted to more than two-fifths of our total capital spending.
A large number of Canadian workers and important segments of the business community find their prosperity directly related to the demand for our exports. Despite the recession in the United States market in 1958, our exports of merchandise were maintained at the record level of 1957. There were substantial gains in exports of a number of commodities, among them uranium, aircraft, beef cattle, wheat and farm implements. There were declines in other products, notably petroleum, iron ore, copper, nickel, primary and semi-finished steel, as well as pulp and newsprint. There was during 1958 a pronounced economic recovery in our major external market, the United States. While our expectations of continuing improvement in the economic situation at home do not depend on any large increase in exports, the continuing strength of recovery in the United States cannot fail to affect the position of some of our most important exports and has already contributed to a return of confidence.
While exports were maintained in 1958, merchandise imports fell by eight per cent and our deficit on commodity trade declined by

more than $400 million,-from $579 million in 1957 to $174 million in 1958. These reductions in purchases from abroad were associated with the lower level of business investment in Canada and affected in particular our imports from the United States. The reduction in our deficit on merchandise trade was offset to some extent by a further rise in our deficit on non-merchandise account, and our overall current account deficit declined by $288 million,-from $1,400 million in 1957 to $1,112 million in 1958. While the merchandise deficit was sharply reduced in the first three quarters of 1958, imports since then have been rising more rapidly than exports, a reflection of our progressing economic recovery.
The exchange value of the Canadian dollar in terms of United States dollars increased during the course of 1958, although the increase was confined to the first half of the year. The premium of the Canadian dollar over the United States dollar was a little more than 3J cents in December, 1958, compared with about li cents at the beginning of the year.
In our trade with the United States exports were well maintained while imports, particularly of capital goods and equipment, fell off quite sharply. On the other hand, our imports from the United Kingdom showed some increase. I am glad to say our trade and payments position with both the United Kingdom and the United States moved into better balance. With respect to the United Kingdom the gap in our current account has narrowed for the third consecutive year, with increases in both our imports and exports. The United Kingdom current account deficit with Canada in 1958 was $130 million,-the lowest in any year in the post-war period except 1950.
The achievement of better balance in our trading relationships was one of the objectives which prompted the government to call for a commonwealth trade and economic conference. All the other members of the commonwealth, accepting our invitation, met with us in Montreal last September. It proved to be one of the most significant meetings in the history of the commonwealth, and owed much to the initiative of our Prime Minister (Mr. Diefenbaker). I have no hesitation in saying that, in the field of trade and economic development, the decisions reached at the conference will result in great benefits not only to the commonwealth but to the whole of the free world. The results of the conference fully justified its opening theme- "An expanding commonwealth in an expanding world."
66968-9-152J
The Budget-Hon. D. M. Fleming
Two subsequent decisions of great importance were foreshadowed at our conference. First, there was the approval at New Delhi in October of the proposal to enlarge the resources of the International Bank and the International Monetary Fund. In their different spheres these two institutions promote world prosperity and world stability. I shall very soon be inviting the house to approve legislation enlarging Canada's subscriptions to the resources of both these institutions. Without going into details at this time I should, however, remind hon. members that these increases in our subscriptions do not involve new cash requirements.
Second, there was the decision of the government of the United Kingdom in December to make sterling convertible-a decision which, I am happy to say, was taken concurrently by a number of leading European governments. We may be confident that, over the months and years ahead, convertibility will be a potent force reducing discriminatory trade barriers against our products and enlarging opportunities for our exporters.
One must admit, however, that trading arrangements and commercial policies on the other side of the Atlantic are in a state of some uncertainty. The European economic community-the European customs union as it was originally called-has come into being, and as an evidence of western European solidarity it is indeed welcome. Also to be welcomed is the fact that many of the first tariff reductions of the community, which came into effect last January, were made available to all members of GATT and were not confined to the members of the community. On the other hand, there seem to be strong pressures within the community to increase discrimination against the outside world in the field of trade quotas. This, together with the possibility of higher European tariffs at a later date, is seriously disturbing to other members of the North Atlantic community and could exercise a divisive influence within the alliance. In seeking wider trade opportunities wherever we can we shall continue to employ all available facilities including those of GATT, the one organization which brings together the important trading countries and the chief trading groups.
Despite these difficulties and uncertainties in the commercial policies of the common market countries, world trade and payments have been moving into better balance. The fear of "dollar shortage", which hung over these countries in the post-war years, now seems to be dissipated. The United Kingdom and western European countries have added
[Stage Direction]
The Budget-Hon. D. M. Fleming over $3 billion to their gold and dollar reserves last year and this trend is expected to continue. For this reason alone we are entitled to expect that trading opportunities in that direction should continue to improve.
Much of the increase in European reserves came from the United States where gold reserves have fallen by $2.3 billion during the past year. This implies that, broadly speaking, the United States is continuing to act as a "good creditor". By gifts and loans, bilaterally and through international institutions, it is providing other countries with more than enough dollars to pay for the excess of its exports over its imports. But it is to be hoped that the people and the government of the United States will become less timid regarding imports, particularly imports from a country like Canada, which buys from them far more than it sells, and is linked with them by bonds of common continental defence. In particular the actions of the United States in imposing during the past year new import restrictions on lead and zinc and mandatory controls on petroleum have aroused strong resentment in this country. We shall continue to press for the removal of these and other unjustifiable impediments to our export trade.
No review of the economic situation would be complete without some comment on price movements. In the fourth quarter of 1958 consumer prices were 2.4 per cent higher than a year earlier. The wholesale price index rose 1.3 per cent in the same period. This tendency toward rising prices, particularly in a period of recession, is a matter for concern. Advancing technology might have been expected to reduce the cost and selling price of many products to consumers. It is evident, however, that developments in corporation pricing policies, in labour organization and even in our political democracy are producing increased rigidities which inhibit the free play of competitive forces and thereby promote inflation and price increases.
I feel constrained at this point to renew the warning I gave in my previous budget regarding the danger to our longer term economic prospects of a persistent trend toward higher costs of production. World markets are becoming increasingly competitive, and unless we can keep our costs of production in line with those in other important trading countries we shall find it increasingly difficult to sell our goods abroad and meet the competition of imports at home. Indeed this is happening now.
Rising costs and continuing price increases spell inflation. They weaken our competitive position at home and abroad and thereby reduce the possibilities of useful and productive employment. They divert effort from

productive pursuits to the wasteful processes of speculation, from which in turn flow economic maladjustment and decline. More than this they impose severe burdens on those with fixed incomes and those normally least able to protect themselves. They lead to an unequal sharing of the fruits of progress and frustrate the just expectations of toil. I believe that the long-run growth in production and the fairness with which it is distributed are not unrelated and that both depend upon reasonably stable prices.
There has been much discussion about inflation during the past year, both here and in the United States. Some of it, in my view, has been of an exaggerated and overdramatized nature. I have always welcomed public discussion of this question. Only good can come from a better public understanding of the varied causes of inflation, of its different aspects, of its risks, of the dangers and injustices it breeds, and of the serious economic distortions it produces. I reject the doctrine of either the desirability or the inevitability of creeping inflation. As the London Economist put it:
The proposition that inflation is inevitable is not an acknowledgment of economic determinism, but a political judgment that the will to control it has disappeared.
To argue that inflation is inevitable is a reflection upon, indeed an insult to the intelligence and the moral fibre of free peoples.
I do not see any present evidence of overt inflation in the coming year; in fact the consumer price index has declined for the past four consecutive months. We must, however, continue on guard against potential inflationary pressures. I believe that it is well within the power of Canadians to achieve reasonable price stability without sacrificing either immediate recovery or balanced growth.
I have tried to draw together the main strands in the economic developments of 1958. I have pointed to the evidence of recovery at home and abroad. Throughout 1958 there was serious unemployment despite very substantial positive action by the government. The improvements in economic conditions to which I have referred had not been in effect long enough to bring about a substantial improvement in employment before the end of 1958. It has been an unusually severe winter in most parts of Canada, and this has contributed to some delay in the recovery of employment. The most recent statistics available show a reduction in the numbers of unemployed persons as compared with a year ago and a rise of 152,000 in the number of persons working. These are very encouraging figures, and I am confident that

we can now look forward to a rapid growth in employment opportunities as the season advances.
It remains to assess the strength of this recovery and to estimate the levels to which it will carry incomes in the coming year. I estimate that a mere continuation of the level of gross national product reached in the first quarter of this year would of itself produce a 1959 gross national product about four per cent above 1958. But recovery is still in process, and we can therefore confidently expect the gain in 1959 production to go well beyond this figure. Assuming normal crops, stable prices and no untoward external events I shall be basing my budgetary policy and my revenue forecasts on a gross national product of about $34| billion which is about seven per cent above the average level achieved in 1958.

[Stage Direction]
I should like now to review briefly the government's accounts for the fiscal year that ended on March 31. Hon. members will find these set forth in some detail in the white paper tabled yesterday. It will be two or three months before our books of account for the fiscal year can be closed and audited, and the figures in the white paper and those I use tonight are approximate and subject to revision.
In my budget speech last June I budgeted for revenues of $4,652 million, expenditures of $5,300 million and a deficit of $648 million. In August, as a result of further sales tax exemptions provided in the amendments to the Excise Tax Act, I estimated the deficit at $650 million, and shortly before the house adjourned in September, following approval by parliament of the special wheat acreage payments and certain other expenditures, I revised my forecast of expenditure to $5,350 million and of the deficit to $700 million. It now appears that our revenues were $4,770 million, our expenditures including the deficit in the old age security fund were $5,387 million and the total budgetary deficit was $617 million.
The increase of $120 million in revenues is 2J per cent over the budget forecast and reflects the fact that economic conditions during the year were somewhat better than those on which my budget estimate was based. Approximately $52 million of this increase was in tax revenues and $68 million in non-tax revenues, the latter reflecting mainly higher interest earnings and increased Bank of Canada profits. Expenditures at $5,387 million were $37 million, or two-thirds of one per cent higher than my revised budget forecast.
The Budget-Hon. D. M. Fleming
In addition to the expenditures for government services that are charged to the budgetary accounts we have made many very substantial loans and advances and disbursed large sums for a variety of other authorized and essential purposes. During the fiscal year these outlays amounted to $1,760 million and included loans and advances of $336 million to Central Mortgage and Housing Corporation, $207 million to the Canadian National Railways, $99 million to the St. Lawrence Seaway Authority and $42 million to the Northern Ontario Pipe Line Crown Corporation, as well as $212 million representing disbursements from the national defence equipment account. To meet these outlays substantial sums amounting in all to $1,114 million were available from the repayment of loans, net annuity insurance and pension receipts and from other non-budgetary sources.
The budgetary deficit of $617 million and the net non-budgetary requirements of $646 million have been financed by an increase of $1,429 million in the government's outstanding unmatured debt, resulting in an increase of $166 million in our cash balances.
During the fiscal year, in addition to the refunding of treasury bills which matured weekly, outstanding securities amounting to the very large sum of $7,973 million were redeemed or converted. New bonds in the amount of $9,286 million were issued in exchange or for cash. After taking into account the net reduction of $116 million in bonds held in our securities investment and sinking fund accounts the unmatured debt held outside these government accounts increased by $1,429 million during the fiscal year.
The average interest rate on the government's unmatured debt at March 31, 1959 was 3.60 per cent compared with 3.05 per cent at the end of the previous fiscal year. This increase was mainly due to the substantial lengthening in the average term of the debt achieved during the year.

[Stage Direction]
The subject of dominion-provincial relations has already been debated on two occasions in the present session. Accordingly I do not propose to enter on that subject this evening. However, the house might find it interesting to have on record the financial contributions the federal government is already making available to the provincial governments and to provincial institutions.
Under the Federal-Provincial Tax-Sharing Arrangements Act we are making unconditional payments to the provincial governments or unconditional tax abatements amounting to $684 million in the current year, of which $167 million is in the form of fiscal aid
[Stage Direction]
The Budget-Hon. D. M. Fleming through equalization and stabilization payments. Other direct unconditional payments from statutory subsidies and the share of the power corporation income tax total $30 million. As additional grants to the Atlantic provinces we are paying $2J million a year to the government of Prince Edward Island and $7J million a year each to the governments of Nova Scotia, New Brunswick and Newfoundland.
In addition to these very large sums we are paying or stand committed to make available to the provincial governments or to provincial institutions very large amounts of money in the form of conditional, matching or specific grants-in-aid. These cover such projects as hospital insurance, health and hospital grants, old age and disability assistance, unemployment assistance, trans-Canada highway and roads to resources programs, grants in aid of vocational training, university grants, grants to municipalities in lieu of taxes and in aid of winter work programs,
and many others. The actual disbursements under these arrangements are expected to add up to more than $460 million in 1959-60.
I should like at this point, Mr. Speaker, to place on Hansard a table showing the cost to the federal treasury of all our subsidies, tax rentals, tax abatements, and conditional and unconditional grants to provincial governments and provincial institutions, including municipalities and universities, for the past three fiscal years and for 1959-60.
There will be a number of tables that by leave of the house I will propose to place on the record of Hansard tonight, if the house were prepared to give its consent to that now I might save interrupting later.
Mr. Speaker:: Has the minister leave to have printed in Hansard this table and subsequent tables as they appear in the address?


Some hon. Members:: Agreed.


Donald Methuen Fleming: Thank you. The table follows:



TABLE 1

[Stage Direction]
Federal Contributions to the Provinces (in millions of dollars)
A.	Unconditional Grants-*
1.	Statutory Subsidies	
2.	Tax Rental and Abatements	
3.	Equalization	
4.	Stabilization	
5.	50% share of Income Tax on Power Utilities....
6.	Atlantic Provinces Adjustment Grants	
7.	Term 29 Award (Nfld.)	
Sub-total	
B.	Conditional Payments-
1.	Agriculture	
2.	Health	
3.	Hospital Insurance	
4.	Welfare	
5.	Vocational Training	
6.	Highways and Transportation	
7.	Resource Development	
8.	Subsidized Rentals and Slum Clearance	
9.	Other	
Sub-total	
C.	Payments for the benefit of provincial institutions-
1.	University Grants	
2.	Grants to Municipalities in lieu of Taxes on federal
government property	
Sub-total	
TOTAL	
It will be seen from this table that the total cost to our treasury in 1956-57 was $689 million; in the year just ended it was $1,065 million; and in the year we are now entering it is estimated that it will be $1,212 million. Thus in this new fiscal year our payments to or for the benefit of the provinces will be almost double those of three years ago.

1956-57	1957-58	1958-59 (preliminary)	1959-60 (estimated)22.7	22.0	21.6	21.4493.6	514.3	517.0523.3	136.0	147.5	163.43.4	5.7	3.36.6	7.3	8.7	9.0-	-	25.0	25.0-	13.6	7.3552.6	662.3	736.4	746.40.8	0.9	1.6	1.636.4	34.7	46.5	63.0-	-	57.8	160.038.4	54.3	72.8	76.24.1	4.5	8.5	10.026.9	55.9	65.3	70.32.8	4.8	16.8	23.80.1	1.0	2.2	4.01.2	1.0	9.2	8.5110.7	157.1	280.7	417.416.0	16.5	25.5	26.29.7	17.8	22.3	22.525.7	34.3	47.8	48.7$689.0	$853.7	$1,064.9	$1,212.5
Finally, hon. members should note that through the federal schemes of unemployment insurance, old age pensions and family allowance payments we disbursed in 1958-59 a total of $1,510 million. These disbursements not only had important income sustaining effects on the entire Canadian economy, but also had a major impact on provincial and
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municipal finances in relieving them of a great part of the burden of relief payments which in earlier decades would have fallen very heavily upon them.

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I reported to the house in my budget speech last June 17 that the matter of debt management, including the financing of about $1,400 million of new cash requirements, would be one of the major financial problems of the year. I said at that time that debt management cannot follow any rigid formula, but needs to be adapted to shifting economic conditions and market sentiment. I emphasized, however, the importance of taking advantage of every appropriate opportunity to sell longer term bonds in order to keep our debt maturities spread out over a reasonable period of years. Since the end of the war the average term of our debt had been steadily shortening. At the end of 1949 it was about 8i years; by the end of 1954 it was just over 7 years; and early in 1958 it was down to 6 years.
Our problem of debt management in mid-1958 had several aspects. One was a significant change in the attitude of the investing public toward government bonds, both in Canada and in the United States. After some signs of strength in the earlier months of 1958 the New York bond market broke sharply in mid-June, and continued a pronounced downward trend to the end of the year. The Canadian market, with some variations, followed this general trend.
In both countries investors were showing little interest in increasing their holdings of longer term government bonds. These circumstances led us, in planning our financing, to look to the relatively short term market; but here we encountered the problem of the shortness in the average term of our existing debt. The major factor in this situation was the impending maturities of nearly $6£ billion of wartime victory bonds that had ultimate maturity dates between January 1, 1959, and September 1, 1966. But in so far as the market and the investor were concerned, this $6£ billion was not spread over eight years, because the first four of the issues were callable in 1959 or earlier and the 1966 issue was callable at any time after September 1, 1961. From the investors' point of view, therefore, this $6J billion had to be considered as being spread over, not eight years, but approximately three years.
It was to clear away this heavy over-hang of bonds of short term and uncertain term, and to provide a substantial lengthening out of the average term of our debt that the great conversion loan of last summer was undertaken. I shall not repeat the detailed merits
9,	1959
The Budget-Hon. D. M. Fleming of this the largest financial operation in Canada's history. It achieved an unprecedented success. More than 90 per cent of the outstanding Victory Loan bonds were converted by their holders into longer maturities. It has proved to be a major anti-inflationary step; it removed a source of heavy pressure on the bond market; and by nearly doubling the average length of our debt it has made it possible to develop and carry forward a sound debt management policy.
Monetary policy and debt management are closely related. During the first nine months of 1958 the Bank of Canada progressively increased the total money supply very substantially. This increase in the money supply, which began in the third quarter of 1957, was in part a normal central banking operation to counter the recession in business activity and to ensure that recovery was not impeded by any shortage in credit. It was also a necessary concomitant of the conversion loan operation which was the foundation for a sound debt management policy.
Debt management and the problems of financing the undertakings of government are too often regarded as matters remote from the interest of the average citizen. The complexities of public finance and the intricacies of the bond market may seem to be removed from his experience. The fact is, however, that the national debt and the way it is managed touch the lives of all Canadians.
The volume of government borowing, the rates, distribution and length of the national debt, affect the whole pattern of individual, corporate, municipal and provincial financing. Good debt management is essential to the maintenance of the purchasing power of the Canadian dollar and the achievement of sustained national development. It is at the very heart of national thrift and is vital to the realization of the economic goals of a free and competitive society.
An important and healthy development of recent months has been the sharp reversal of a long continuing trend of dis-investment in Government of Canada bonds by the general public. This decline in the holdings of Canada bonds by the general public-that is, holdings outside the banking system and government accounts-had been going on more or less steadily since the end of the war, but was considerably accelerated during the first part of 1958. Ten years ago the general public's holdings were close to $10 billion; five years ago they were down to $9 billion; at the end of 1957 they were about $8.7 billion; and they reached a low point of just under $8 billion in September, 1958. In the past six months there has been a sharp turn around. Since last September the general public's holdings of Canada bonds have
[Stage Direction]
The Budget-Hon. D. M. Fleming increased week by week and are now $1,560 million higher than on September 30. Today the general public's investment in Dominion of Canada bonds is at a higher level than at any time in the past eight years.
If I may have consent, Mr. Speaker, I should like to insert at this point three factual tables relating to the size, the distribution, the average term, and the total interest cost of our public debt over the past ten years.
TABLE 2A Gross and Net Debt
Net Debt
As per cent
Funded Debt Total Debt Net Debt Per capita of G.N.P.
	($ billion)	($ billion)	(S billion)	8	
March 31					
1950	
15.2	16.8	11.6	847	71.21951	
15.0	16.9	11.4	814	63.31952	
14.7	17.5	11.2	772	52.91953	
14.8	17.9	11.2	757	46.71954	
14.6	17.9	11.1	725	44.41955	
14.5	18.0	11.3	720	45.41956	
15.4	19.1	11.3	702	41.71957	
14.4	18.3	11.0	663	36.41958	
14.2	18.4	11.0	647	35.01959	
15.6	20.2	11.7	676	36.3TABLE 2B Interest Cost op Gross and Net Debt	Year ending March 31	Interest paid on total debt	Revenues from Investments	Net Interest Cost	Net Interest as p.c. of net debt(millions)	(millions)	(millions)	1950	. $440	$ 92	$348	3.001951	. 425	90	335	2.941952	. 432	118	314	2.801953	. 451	117	334	2.981954	. 476	152	324	2.921955	. 478	134	344	3.041956	. 493	149	344	3.041957	. 520	207	313	2.851958	. 539	169	370	3.361959	. 604	225	379	3.24

[Stage Direction]
Maturity and Distribution op Funded Debt
December 31	Average Term of Debt* Years	Amount of Funded Debt Held ($ millions) Banks Govt. Accts.	General Public	P.C. held by Gen. Public1949	.... 8.3	5,178	796	9,845	62.21950	.... 8.1	5,093	847	9,952	62.61951	.... 7.5	5,052	1,009	9,273	60.51952	.... 6.8	5,176	1,102	8,909	58.71953	.... 6.2	5,184	1,314	9,139	58.41954	.... 7.2	5,633	1,204	8,629	55.81955	.... 6.3	5,540	1,491	8,969	56.11956	.... 6.6	4,950	1,518	8,766	57.51957	.... 6.0	5,104	1,367	8,693	57.31958	.... 10.3	6,190	1,258	8,968	54.61959 (Apr. 1)	.... 10.0	6,104	944	9,512	57.4
Excluding Canada Savings Bonds and Perpetuals.
[Stage Direction]
These tables show that since 1949 our gross funded debt has increased by about five per cent, and our net debt is almost unchanged. Our net debt per capita was $847 ten years ago, $725 five years ago and is reduced to $676 now. Our net debt as a percentage of gross national product in the same years was 71.2, 44.4 and now 36.3.
While the gross interest on our public debt rose from $440 million in 1949-50 to $604 million in 1958-59, our interest and dividend returns from our public investments have risen in the same years from $92 million to $225 million. The net interest cost of the public debt was thus $348 million ten years ago and was $379 million in the year just ended.

[Stage Direction]
I come now to the budgetary outlook for the current fiscal year. Early in February I tabled the main estimates for 1959-60 totalling $5,596 million. In addition, I must assume that there will be some payments under the Agricultural Stabilization Act and that we will have to make provision for a reduced Canadian National Railways deficit for 1959. The deficit in the old age security fund will be about $185 million this fiscal year. There will also be some additional statutory expenditures as well as the usual supplementary and further supplementary estimates but offsetting these we can expect some lapsings in appropriations.
The total amount of lapsings at the end of the year is likely to be much smaller than in past years, as a result of the arduous labours of the treasury board in revising and screening the departmental estimates for the current year. As I said on tabling the main estimates, we have done our utmost to promote efficiency and economy in government administration, and notwithstanding our growth in population and the essential services that must accompany such growth, we have been able to hold both staff and administrative costs remarkably close to the levels of the previous year.
After careful study and consideration, and taking into account our continuing efforts to achieve further economies in administration and greater efficiency in the public service, I have concluded that our budgetary expenditures for the fiscal year ending March 31, 1960, will be approximately $5,660 million, excluding the old age security fund deficit, or $5,845 million including that deficit.
This is $458 million higher than our budgetary expenditures last year. While this would appear to be a very substantial increase I should remind hon. members that $235 million, or more than half of the total, is in our defence expenditure, and reflects, for 66968-9-153
The Budget-Hon. D. M. Fleming the most part, the decision taken last year to liquidate the national defence equipment account in 1958-59. Actually, our total cash outlay this year for defence will be approximately the same as last year, but because of this change in bookkeeping treatment, equipment purchases which in previous years were charged to the defence equipment account will now be charged to budgetary expenditures. As I explained last year, this change was made in the interests of good accounting and for the maintenance of proper parliamentary control of expenditures.
The other half of the increase is in nondefence expenditures. More than $100 million is due to the higher cost of our contributions under the Hospital Insurance and Diagnostic Services Act. Part is due to increased debt charges reflecting the increase in our outstanding debt and higher interest rates; part to the normal growth in our existing social security and welfare payments; and part to government policies designed to foster national development and to provide increased employment opportunities,-expenditures which will in this and future years increase the efficiency and productive capacity of our economy and thereby add to our future national wealth and income.
Forecasting revenue is always difficult, much more difficult than estimating expenditures. On the basis I indicated earlier of a gross national product of $34£ billion for 1959 and taking into account all available information, I should expect if there were no change in tax rates that our total revenues would be $5,165 million in 1959-60. This is $395 million, or about eight per cent, more than our revenues in the year just ended.
If I may have unanimous consent, Mr. Speaker, I should like at this point to insert in Hansard a table showing my estimate of the revenues for the year just ended and what we may expect to receive in the coming year under our existing tax laws.
Table 3
Revenue forecast-Before tax changes (in millions of dollars)
Personal income tax 	 Corporation income tax 	 Non-resident tax 	 Estates tax 		1958-59 $1,371 1,029 60 . 73 486 694 561	1959-60 $1,550 1,065 75 75 525 755 610
Customs duties 	 Sales tax 			
Other duties and taxes 			
Total taxes 	 Non-tax revenue 		$4,274 , 496	$4,655 510
		
Total revenue 	 With projected revenues	$4,770 of $5,165	$5,165 million
and expenditures of $5,845 million I should expect a deficit of $680 million for the current year if there were no change in our present tax structure.
[Stage Direction]
The Budget-Hon. D. M. Fleming
Apart from and outside the budget we shall continue to require large amounts of cash and before I come to discuss the appropriate tax policy for our present and prospective circumstances I should like to draw these requirements to the attention of the house.
As hon. members know, every year the government lends or advances substantial sums for a wide variety of public purposes. These are not treated in our accounts as budgetary expenditures, as in most cases they are interest-earning or revenue-producing and the principal amount is eventually repaid.
On the other hand, each year we collect or receive large amounts of cash which are not treated as budgetary revenues. These consist mainly of moneys paid for the purchase of government annuities, insurance or superannuation benefits or from the repayment of loans made in previous years.
During 1959-60 we shall probably be called upon to advance about $300 million to Central Mortgage and Housing Corporation for housing loans; about $200 million for the capital investment and refunding programs of the Canadian National Railways and close to $150 million to the St. Lawrence Seaway Authority, the National Harbours Board, the Canadian Farm Loan Board and other crown corporations and for other non-budgetary purposes.
On the other hand, we shall have about $250 million available from the repayment of loans and from the excess of current contributions over current benefit payments in our various annuity, pension and insurance accounts.
Our net requirements for these nonbudgetary accounts, excluding possible exchange fund requirements which cannot be forecast, will be of the order of $400 million which we must borrow. This together with the prospective budget deficit would result in net cash requirements of between $1,050 and $1,100 million for the year.

[Stage Direction]
As I have said, Mr. Speaker, on the basis of our present expenditure program and our present tax structure we shall be facing a deficit of about $680 million in the fiscal year ending next March 31. This is about $63 million greater than the deficit recorded for the year just ended, notwithstanding the fact that I expect our present tax structure to yield nearly $400 million more revenue in 1959-60 than in 1958-59. As I have already said, this is due to two principal factors. The first is that having liquidated the former defence equipment account during the past year, the defence expenditures to be charged against the current budget in 1959-60 will be $235 million greater than last year, although the

actual cash expenditures will be about the same. The second factor is that we shall now be meeting a full year's cost of the hospital insurance program, and this will add more than $100 million to our expenditures.
Government policies relating to taxation and expenditures should be kept flexible. In an earlier generation when government revenues and expenditures were only a very small fraction of the gross national product the broad economic effects of government finance were not of great significance. But in this modern age where the government expenditures constitute 18 to 20 per cent of the gross national product-and in many countries the percentage is much higher than in Canada-the financial policies of the government-the amount spent, how it is spent, how the revenues are raised, and the balance between revenue and expenditure-all exert a very direct influence on the health of the private sector of the economy.
As economic conditions change, the government's budget policy needs to change also. It must be flexible; it should be adapted to the shifting economic climate. There are times when a substantial deficit is clearly the right policy; there are times when the budget should be in balance; there are times when some provision should be made for the orderly retirement of debt; and within these ranges there is always the question of degree. The problem of timing the adjustments in budgetary policy is not an easy one, and yet good timing is often of crucial importance.
Government financial policy can never be as flexible as policy in private business. Changes in taxes have important, sometimes vital, effects on business operations. Government expenditures are in large measure analogous to the overhead expenses of private business; they cannot be greatly changed on short notice. Budgetary changes cannot be lightly undertaken or introduced without the most careful consideration. Moreover, it would be very upsetting and confusing to business if changes in taxation were made too frequently or at unusual times.
The deficits we ran last year, both on budgetary account and on over-all cash account, were very large; but looking back over the past year and considering all the circumstances I do not think that they were excessive. Undoubtedly they were a major factor in moderating the 1957-1958 recession, with respect to both its depth and its duration. I think nearly all informed observers have agreed that our policy last year was right in its direction and about right in its degree. We are now, however, well on the road to recovery, and we can look forward to a steady expansion of economic activity, employment and incomes.

I believe all hon. members recognize that we must look forward to a time when conditions of prosperity and employment will allow a balanced budget and when we can also make proper provision for an orderly retirement of debt.
We have not yet, however, reached that stage. Recovery is gathering momentum, but it would be unwise at this juncture to change our course so abruptly as to hamper the forces of expansion. I believe, however, that there should be some narrowing of the budgetary gap. If, under the greatly improved prospects of today, we were to continue to run deficits on the same scale as last year, we would, in my judgment, run serious risk of building up an inflationary potential which could prove most difficult to keep under control a year or so hence.
Appropriate steps in the direction of balancing the budget are also desirable in order to reduce the heavy pressure of new federal borrowings on the bond market. I have already noted that our federal debt in relation to our growing population and in relation to our expanding gross national product is not excessive; indeed its relative burden is less than in almost every year since the end of the war. But the fact remains that the Canadian bond market has not been accustomed to absorbing as large a volume of new government of Canada bonds as we have had to offer during the past year. The impact of our borrowings, which over the year as a whole have been achieved largely in a non-inflationary manner, has exerted an upward pressure on interest rates. It is desirable, therefore, under present circumstances to move in the direction of reduced federal borrowing, in order to reduce pressure on the interest rate structure and to leave more room for essential provincial and municipal financing.
The two principal elements of a continuing nature in our increased expenditures in 1958 and in 1959 are the increased old age pensions and the new program of hospital insurance. These are universal benefits available, in so far as the federal government is concerned, in the same degree to all Canadians, from coast to coast, and without regard to individual means. It seems to me that, in principle, such universally available benefits should be met from a broadly based system of tax contributions.
Our tax policy for 1959-60 will therefore be based on two principles:
(a)	To provide a broadly based source of revenues to meet the new and additional forms of universally available social welfare benefits, and
(b)	To reduce the budgetary gap in a degree that will not interfere with the desired rate of recovery, but will hold out the prospect of a balanced budget at the appropriate time.
66968-9-153J
The Budget-Hon. D. M. Fleming
I have already referred to the important results achieved by the government in providing increased social security, including old age security and hospital insurance. These programs have been well received. They cost money and must be paid for. We have also, as I have previously indicated, spent large sums to meet the problem of unemployment.
As far as I can judge, our Canadian public has been well informed about the underlying facts of the situation. Evidently most people have been expecting some tax increases this year. Many may be not unpleasantly surprised that the increases I shall be proposing are as moderate as they are.
In formulating my proposals I have made every effort to spread the increased burden in a pattern which is fair and equitable and will not weigh too heavily on any one section of the community. Several different taxes and various tax rates will therefore be affected, each of them in moderate degree. The measures which I propose are designed to safeguard the credit of the country, the soundness of our currency, the development of our resources, and the security of our economic future.

[Stage Direction]
The Old Age Security Act provides a pension without a means test to every eligible person 70 years of age or over. The pension was $40 a month from 1952 until July 1, 1957, when it was increased to $46 a month. To meet our people's needs it was increased substantially to $55 a month by the present government on November 1, 1957.
Before the old age security legislation was first introduced the entire subject was carefully studied by a joint committee of the Senate and the House of Commons. After considering various methods of financing, this committee recommended that the contributory principle be applied, and that the required funds be raised annually on a pay-as-you-go basis. From the outset the contributions to the fund have been two per cent on personal incomes with a maximum contribution of $60, two per cent on corporate incomes, and a two per cent sales tax. This 2-2-2 formula is now far from adequate to provide the funds required to pay the increased pension. In the past fiscal year the contributions fell short of the required total by $184 million. If we are to continue to
[Stage Direction]
The Budget-Hon. D. M. Fleming maintain the contributory principle and an ear-marked fund it is necessary to increase the contributions to the fund.
I propose that we continue to support the pension out of the same three sources of contributions in the same proportion as in the past. This system is well established and fully accepted by the public. I am, therefore, proposing the following rates of contribution; three per cent on personal incomes with a maximum contribution of $90, to take effect on July 1, 1959; three per cent on corporate incomes, to take effect from January 1, 1959; and a three per cent sales tax, to take effect tomorrow.
Under the 2-2-2 formula the two per cent levy on personal incomes reached its maximum of $60 at a level of taxable income of $3,000 a year. The new three per cent levy on personal incomes will reach its maximum of $90 at the same level of taxable income.
For the convenience of hon. members may I insert in Hansard a table showing total contributions and total pension payments under the Old Age Security Act since its inception.
Table 4
Old Age Security Fund
		Total
	Total	pension
Fiscal year	contributions	payments
	(millions of dollars)	
1951-52 (3 mos. only)	$ 26.4	$ 76.11952-53 	223.6	323.11953-54 	293.1	338.91954-55 	290.0	353.31955-56 	316.2	366.21956-57 	371.6	379.11957-58 	371.5	473.91958-59 	(est.) 376.0	(est.) 560.0Total 	$2,268.4	$2,870.6
The rates of contribution that I am proposing will yield about $143 million in this fiscal year and about $196 million in a full year. This means that the fund will show a deficit of about $42 million at the end of the current year; but since we shall have provided for the necessary revenues to bring the fund into balance over the next two or three years, I do not propose to treat the deficit in the old age security fund as a budgetary charge in the current year, but to carry it forward into 1960-61.
May I insert here a table showing the effect of these changes on the Old Age Security Fund for 1959-60 and for a full year.
Table 5
Old Age Security Fund (in millions of dollars)
Revenue from present rates	
Revenue added by new rates in 1959-60	
Total revenue in 1959-60	
Total revenue in a full year at new rates __....
Total pensions payable in 1959-60	
Total pensions payable in 1960-61

[Stage Direction]
I also propose some increases in the rates on personal and corporate incomes as part of the general program of reducing the deficit.
Aside from the increased contributions for old age security I do not recommend any increases in taxes on personal incomes below the level of $3,000 of taxable income.
I am proposing, however, to add two percentage points of personal income tax to each rate in the rate schedule above $3,000 per year, to take effect on July 1, 1959. The effect will be that taxpayers will pay an additional two per cent on all of their taxable income in excess of $3,000. The increased old age security contributions, to which I have already referred, will involve these same taxpayers in an additional $30 on their first $3,000 of taxable income. It is expected
fMr. Fleming (Eglinton).]
Income	Tax		
Personal	Corporate	Sales Tax	Total$150	$56	$187	$39341	20	82	143191	76	269	536225	84	280	589578597
that this increased rate on taxable incomes in excess of $3,000 will yield $25 million this year and $45 million in a full year. It will have no application to approximately 3,800,000 of Canada's 4,600,000 personal income tax payers.
For 1959 the rates will reflect the fact that the increases are not to take effect until July 1. Therefore the increase in income tax rates for this taxation year will be one percentage point on taxable income in excess of $3,000 and the additional old age security contribution will not exceed $15. For example, a married taxpayer with two young children who has a total annual income of $5,600 will pay no additional income tax, but will pay an additional $2.50 a month for old age security commencing next July.
It will be remembered that this government reduced income tax rates and increased exemptions in 1957. On the first $1,000 of
[Stage Direction]
taxable income we reduced the rate of tax by two percentage points. On the second $1,000 of taxable income we reduced the rate of tax by one percentage point. At the same time we increased the exemption for each dependent child by $100.
Taxpayers in the lower and middle income brackets will find that their tax increases this year will cost them less than the relief granted to them by the reductions of 1957. The best way to illustrate the effect on the individual is to compare the taxes which will be payable in a full year after this year's changes with the taxes payable in 1957 prior to the reductions we introduced in that year. For purposes of comparison, let us consider the position of a typical married man who is the father of two children of family allowance age.
At an income level of $3,000 a year, under the new rates, this man will pay a total of income tax and social security contribution of $56, an increase of $4 from the 1958 level. He will, however, be paying $34 less than he paid before the reductions we introduced in 1957.
9. 1959	2417
The Budget-Hon. D. M. Fleming
At an income level of $4,000 a year, under the new rates, he will pay a total of $208, an increase of $14 from the 1958 level but $44 less than before the reductions we introduced in 1957.
At an income level of $5,000 a year, he will pay a total of $390, an increase of $24 from the 1958 level but $44 less than before the reductions we introduced in 1957.
At an income level of $7,500 a year, he will pay a total of $898, an increase of $68 from the 1958 level but still $2 less than before the reductions we introduced in 1957.
It is clear from these examples that even after the increases now being proposed the vast majority of taxpayers will be paying less in income tax and old age security contributions than they paid prior to the reductions we introduced in 1957.
At the same time they are receiving the protection of a social security system which has been greatly improved and extended.
For the convenience of hon. members may I insert in Hansard at this point five tables indicating the effect of the proposed changes in personal income taxes, along with the increased contribution to old age security.
TABLE 6a
Effect of Proposed Personal Income Tax Changes Single Taxpayer with No Dependants
In 1958	In 1959	In a Full Year	In a Full YearIncome	Income Tax	OAS Contribution	Income Tax	OAS Contribution	Income Tax	OAS Contribution	Income Tax	OAS Contribution$	$	$	$	$	$	$	$	$1,300	22	4	22	5	22	6	21,500	44	8	44	10	44	12	42,000	99	18	99	23	99	27	92,500	166	28	166	35	166	42	143,000	236	38	236	48	236	57	-	193,500	318	48	318	60	318	72	244,000	403	58	403	73	403	87	295,000	573	60	582	75	591	90	18	307,500	1,086	60	1,120	75	1,154	90	68	3010,000	1,722	60	1,781	75	1,840	90	118	3015,000	3,412	60	3,521	75	3,630	90	218	3020,000	5,507	60	5,666	75	5,825	90	318	3030,000	10,002	60	10,261	75	10,520	90	518	3050,000	20,747	60	21,206	75	21,665	90	918	3075,000	35,692	60	36,401	75	37,110	90	1,418	30100,000	51,637	60	52,596	75	53,555	90	1 ^ 918	30200,000	122,332	60	124,291	75	126,250	90	3,918	30
Notes: 1. In calculating the above taxes it has been assumed that everyone takes the optional standard deduction of $100 in lieu of claiming deductions for charitable donations, unusual medical expenses and union dues.
2. In calculating the above taxes it has also been assumed that where incomes are in excess of $30,000 that part of income which is in excess of $30,000 is subject to the 4 per cent investment surtax.
[Stage Direction]
The Budget-Hon. D. M. Fleming
TABLE 6b
Effect of Proposed Personal Income Tax Changes
Married Taxpayer with No Dependants
							Increase	
In 1958	In 1959	In a Full Year	in a Full Year	OAS Con-	Income	OAS Con-	Income	OAS Con-	Income	OAS Con-Income	Tax	tribution	Tax	tribution	Tax	tribution	Tax	tributioni	$	t	$	*	$	$	8	$2,300	22	4	22	5	22	6	-	22,400	33	6	33	8	33	9	-	32,500	44	8	44	10	44	12	-	43,000	99	18	99	23	99	27	-	93,500	166	28	166	35	166	42	144,000	236	38	236	48	236	57	-	195,000	403	58	403	73	403	87	-	297,500	870	60	894	75	918	90	48	3010,000	1,446	60	1,495	75	1,544	90	98	3015,000	3,032	60	3,131	75	3,230	90	198	3020,000	5,077	60	5,226	75	5,375	90	298	3030,000	9,522	60	9,771	75	10,020	90	498	3050,000	20,217	60	20,666	75	21,115	90	898	3075,000	35,112	60	35,811	75	36,510	90	1,398	30100,000	51,007	60	51,956	75	52,905	90	1,898	30200,000	121,652	60	123,601	75	125,550	90	3,898	30Note: See Notes for Table 6a.	TABLE 6c	Effect of Proposed Personal Income Tax Changes	
Married Taxpayer with Two Children Eligible for Family Allowances
In 1958	In 1959	In a Full	Year	Increase in a Full Year	Income	Income OAS Con-Tax tribution	Income OAS Con-Tax tribution	Income OAS Con-Tax tribution	Income OAS Con-Tax tribution	$	$	$	$	$	$	$	8	$2,800	22	4	22	5	22	6	-	22,900	33	6	33	8	33	9	-	33,000	44	8	44	10	44	12	-	43,500	99	18	99	23	99	27	-	94,000	166	28	166	35	166	42	145,000	318	48	318	60	318	72	-	247,500	770	60	789	75	808	90	38	3010,000	1,326	60	1,370	75	1,414	90	88	3015,000	2,842	60	2,936	75	3,030	90	188	3020,000	4,862	60	5,006	75	5,150	90	288	3030,000	9,282	60	9,526	75	9,770	90	488	3050,000	19,948	60	20,392	75	20,836	90	888	3075,000	34,818	60	35,512	75	36,206	90	1,388	30100,000	50,688	60	51,632	75	52,576	90	1,888	30200,000	121,308	60	123,252	75	125,196	90	3,888	30
Note: See Notes for Table 6a.
﻿APRIL 9. 1959	2419
The Budget-Hon. D. M. Fleming
TABLE 6d
Effect of Proposed Personal Income Tax Changes Married Taxpayer with Four Children Eligible for Family Allowances
Increase
In 1958	In 1959	In a Full year	in a Full YearIncome	Income Tax	OAS Contribution	Income Tax	OAS Contribution	Income Tax	OAS Contribution	Income Tax	OAS Contribution$	$	$	$	$	$	$	$	$3,300	22	4	22	5	22	6	23,500	44	8	44	10	44	12	-	44,000	99	18	99	23	99	27	-	95,000	236	38	236	48	236	57	-	197,500	670	60	684	75	698	90	28	3010,000	1,206	60	1,245	75	1,284	90	78	3015,000	2,657	60	2,746	75	2,835	90	178	3020,000	4,647	60	4,786	75	4,925	90	278	3030,000	9,042	60	9,281	75	9,520	90	478	3050,000	19,663	60	20,102	75	20,541	90	878	3075,000	34,508	60	35,197	75	35,886	90	1,378	30100,000	50,353	60	51,292	75	52,231	90	1,878	30200,000	120,948	60	122,887	75	124,826	90	3,878	30
Note:-See Notes for Table 6a.
TABLE 6e
Effect of Proposed Personal Income-Tax Changes Married Taxpayer with Two Children Eligible for Family Allowances and Two Other Dependants
In 1958	In 1959	In a Full Year	in a Full YearIncome	Income Tax	OAS Contribution	Income Tax	OAS Contribution	Income Tax	OAS Contribution	Income tax	OAS Contribution$	$	$	$	$	$	$	$	$3,800	22	4	22	5	22	6	23,900	33	6	33	8	33	9	34,000	44	8	44	10	44	12	-	44,500	99	18	99	23	99	27	95,000	166	28	166	35	166	42	-	146,000	318	48	318	60	318	72	247,500	573	60	582	75	591	90	18	3010,000	1,086	60	1,120	75	1,154	90	68	3015,000	2,492	60	2,576	75	2,660	90	168	3020,000	4,432	60	4,566	75	4,700	90	268	3030,000	8,802	60	9,036	75	9,270	90	468	3050,000	19,378	60	19,812	75	20,246	90	868	3075,000	34,198	60	34,882	75	35,566	90	1,368	30100,000	50,018	60	50,952	75	51,886	90	1,868	30200,000	120,588	60	122,522	75	124,456	90	3,868	30
Note:-See Notes for Table 6a.
I am also proposing to add 2 percentage points to the rate of tax on corporate income in excess of $25,000, to take effect from January 1, 1959. This increase will have no application to approximately 42,000 of Canada's 50,000 corporate income taxpayers. It is estimated that this additional tax will increase revenues $56 million on a full year's basis and $32 million this fiscal year. The applicable rate will now be 47 per cent. Together with the old age security contribution, the levy on corporate profits up to $25,000
will be 21 per cent, and on the excess over $25,000 will be 50 per cent.
Although it is only fair and equitable that all corporations should pay the old age security contributions in full, my proposal that corporate incomes up to $25,000 should be exempt from the additional two per cent levy is in line with the government's policy of giving special encouragement to the expansion of smaller business firms.
May I insert here, Mr. Speaker, a table showing the effect of this tax increase at various levels of corporate profits?
[Stage Direction]
The Budget-Hon. D. M. Fleming

[Stage Direction]
Effect of Proposed Corporation Income Tax Changes
Income of Corporation	In 1958	In 1959	Increase	Income Tax	OAS Contribution	Total	Income Tax	OAS Contribution	Total	$	$	$	$	$	$	$	$	%5,000	900	100	1,000	900	150	1,050	50	5.010,000	1,800	200	2,000	1,800	300	2,100	100	5.015,000	2,700	300	3,000	2,700	450	3,150	150	5.020,000	3,600	400	4,000	3,600	600	4,200	200	5.025,000	4,500	500	5,000	4,500	750	5,250	250	5.030,000	6,750	600	7,350	6,850	900	7,750	400	5.435,000	9,000	700	9,700	9,200	1.050	10,250	550	5.740,000	11,250	800	12,050	11,550	1,200	12,750	700	5.850,000	15,750	1,000	16,750	16,250	1,500	17,750	1,000	6.075,000	27,000	1,500	28,500	28,000	2,250	30,250	1,750	6.1100,000	38,250	2,000	40,250	39,750	3,000	42,750	2,500	6.2200,000	83,250	4,000	87,250	86,750	6,000	92,750	5,500	6.3300,000	128,250	6,000	134,250	133,750	9,000	142,750	8,500	6.3500,000	218,250	10,000	228,250	227,750	15,000	242,750	14,500	6.41,000,000	443,250	20,000	463,250	482,750	30,000	492,750	29,500	6.42,000,000	893,250	40,000	933,250	932,750	60,000	992,750	59,500	6.45,000,000	2,243,250	100,000	2,343,250	2,342,750	150,000	2,492,750	149,500	6.4
In connection with personal income taxes, I have reviewed the whole subject of income tax deductions for medical expenses. It became necessary to do this because of the greatly increased federal contributions to health costs under the hospital plans financed jointly with the provinces. After studying various solutions to the problems at issue, I have come to the conclusion that a change should be made.
My proposal is to exclude from medical expenses, as now defined in the Income Tax Act, all such expenses from which the taxpayer is relieved to the extent that they are paid with the assistance of the federal government under the Hospital Insurance and Diagnostic Services Act. This amendment will take effect as from January 1, 1959, to coincide with the taxation year for individuals.
The exemptions granted under the Income Tax Act for medical expenses are clearly intended to relieve the individual taxpayer who has a burden of unusual medical expenses. It would be quite anomalous to allow income tax deductions to individuals for hospital care received at government expense now that the federal government is financing a very substantial proportion of hospital costs. The federal treasury should not be in the position of paying twice, once in terms of expenditure and again in terms of taxes forgone.
A further reason for making this change arises out of the differences in form amongst the provincial schemes. Because of these differences it is becoming increasingly difficult to give equal income tax treatment to the residents of the various provinces which have instituted hospital insurance plans. Under some of these it appears that the taxpayer

incurs expenses which he has, in effect, prepaid by insurance premiums. Under others he does not incur expenses but merely receives free care paid for out of general taxation.
Under this proposal a taxpayer will still be able to claim expenses which he himself has paid, including any co-insurance or deterrent charges paid under a provincial hospital insurance plan, or which an insurance company or health insurance association has paid for him. Consequently, there will be no change in the present incentive for taxpayers to insure against the costs of health care. Implementation of this proposal will have no effect on a taxpayer in any province that is not receiving federal funds in support of a hospital insurance plan.
This change in the definition of medical expenses will reduce the total of medical expenses deductible on income tax returns, and it is estimated that it will increase our tax revenues by $3 million this year, and $9 million in a full year.
Before I leave the subject of medical expenses in relation to personal income tax, may I say that I have carefully reviewed a number of requests for additions to the list of items that may be included as medical expenses for income tax purposes. I am proposing to add a few more items to the list including iliostomy and colostomy pads, crutches, trusses, and rocking beds for polio patients.
In addition to these tax changes I have just outlined, Mr. Speaker, the bill to amend the Income Tax Act will contain a number of amendments of a more technical nature. Some of these are designed to alleviate hardship,

others to improve the efficiency of the tax system and keep it up to date. It is not expected that these changes will have any significant effect on revenues.
One of these amendments will provide for more generous tax treatment of payments made by an employer to the widow or dependent children of a deceased employee by providing that such death benefits shall be free of tax up to an amount equal to 12 months' salary of the employee or $10,000 whichever is the lesser.
There has been an increasing use of group life insurance plans as a means whereby corporations provide substantial remuneration to some of their senior officers in a tax-free form. This is unfair to other taxpayers. Accordingly an amendment will be proposed to subject to tax a portion of the benefit which an employee derives through the payment of group life insurance premiums on his behalf by his employer. It is not intended to disturb the present tax treatment of the many plans where the benefit provided by the employer does not exceed $25,000 of insurance for an individual employee.
Another proposed amendment that will be of some general interest will provide for tax relief on lump sum withdrawals from employee pension plans where the amount withdrawn is transferred to another pension plan or used as a premium under a registered retirement savings plan. It is believed that this step will help an individual who is moving from one job to another or from the status of employee to that of self-employed person to do so without seriously disturbing his provision for a retirement income.

[Stage Direction]
The Estate Tax Act has been in force since January 1, 1959, a period of about three months, and has received general public approval. I am not proposing any amendments to this act this year. In my view, it would be wise to allow for another year of testing, study and experience.
SALES AI^D EXCISE TAXES
In a budget of this kind, where it is necessary to find increased revenues, no one will be surprised that I am including some changes affecting cigars, cigarettes and spirits. Taking effect tomorrow, the excise duty on spirits will be increased by $1 per proof gallon, from $12 to $13 per proof gallon.	This
change is equivalent to about 12 cents on a 25-ounce bottle of whisky. Also taking effect tomorrow, the excise tax on cigarettes will be increased by $1 per thousand.	This
latter is equivalent to two cents per package of 20 cigarettes. Also taking effect tomorrow,
The Budget-Hon. D. M. Fleming the excise duty on cigars which is now $1 per thousand will be increased to $2 per thousand.
These three tax increases will yield about $42 million in this fiscal year and $46 million in a full year, including the parallel increases in customs duties and the consequential increases in the sales tax.
I am proposing some technical amendments which will affect the application of the Excise Tax Act to toilet goods and pharmaceuticals. These amendments will go some way toward implementing one of the recommendations contained in the report of the sales tax committee of 1956.
Briefly, they will extend the definition of manufacturing to the packaging of toilet preparations and pharmaceuticals except where this is done in a retail store for sale directly to consumers and will also extend the definition of manufacturer to any person who markets private brand toilet preparations and pharmaceuticals except a retailer who sells directly and exclusively to consumers.
This amendment will apply to both the sales tax and the special 10 per cent excise tax.
After careful consideration, I am convinced that a serious degree of inequity exists at present in the application of the Excise Tax to toilet goods and pharmaceuticals. This is why I am proposing these amendments. In some instances, one domestic manufacturer is being treated unfairly in comparison with another, merely because of the way his business is organized. In other important instances products of domestic manufacture are being taxed more stringently than comparable imported products. The amendments I am bringing forwards are designed to rectify these situations.
These present recommendations may be regarded as portions of the continuing program of reviewing the operation of the Excise Tax Act and of implementing, where appropriate, certain parts of the report of the sales tax committee of 1956.
I have received a number of requests for the exemption of particular products from sales or excise taxes. Because of the need for revenues I find myself unable to comply with any of these requests this year, apart from minor technical exceptions.
The bill to amend the Excise Tax Act will also contain a number of amendments providing technical and administrative changes. None of these latter amendments is expected to have any significant effect on revenue.

[Stage Direction]
I now turn to the Customs Tariff. I have a substantial number of changes to propose to the house tonight. The main group relates
[Stage Direction]
The Budget-Hon. D. M. Fleming to fruits and vegetables. For the convenience of honourable members, I have consolidated these changes, affecting eighty-one tariff items and sub-items, into a single resolution. Another resolution contains the nine changes that we are making as a result of renegotiating the most-favoured-nation rates on woollens and worsteds. Another resolution clarifies the interpretation to be given to the word "machinery" throughout the tariff. And still another embraces all changes of a miscellaneous character.
It might be of interest to note that 142 tariff items and sub-items are affected by the resolutions. In the case of 32 items the rates of duty are being increased. In the case of 40 items rates are being reduced. In the case of nine items, all involving fruits and vegetables, rates are being both increased and decreased depending on the season. Finally, there are 61 items for which rates of duty are left unchanged and for which the changes proposed are, for the most part, purely formal.
In every case where an increase is proposed in a rate that was bound in one way or another under our trade agreements, the appropriate negotiations or consultations have been undertaken and are either concluded or virtually concluded.
The house will recall that, on November 17, 1957, I tabled an extensive report by the tariff board on fruits and vegtables. Broadly speaking, the changes in the tariff items on fruits and vegetables that I am submitting tonight flow from that report.
The government undertook to negotiate the tariff changes proposed by the board, under the terms of our trade agreements, with the countries concerned-that is to say, chiefly with the United States, but also with other countries supplying us with small quantities of fruits or vegetables. We recognized that, as in all such negotiations, we would either have to "compensate" for the increase in some tariff rates by reductions in others, or else face retaliatory tariff increases against our fruits, vegetables or other products entering the United States and other countries. Accordingly, before negotiations began, we consulted the Canadian horticultural council about possible supplementary changes in our tariffs on fruits and vegetables which might be used by way of compensation.
In the end, the negotiations ranged over almost the whole of our tariff schedule on fruits and vegetables. While the negotiations have been friendly, they have not been easy. The results, however, can be regarded as satisfactory. Details are to be found in the resolution on the fruit and vegetable tariff schedule that I am tabling tonight. For the convenience of hon. members I have
[Mr. Fleming (Eglinton).l
[Stage Direction]
divided this resolution into three sections: one sets out changes of substance, both increases and decreases in rates; another contains other changes of a purely formal nature, such as the renumbering of tariff items; a third was required to make a minor change in our trade agreement with New Zealand.
Three of the most important changes are as follows: The duty on potatoes, table and seed, new and old, will hereafter, as recommended by the tariff board, be 37J cents per cwt. throughout the year. Thus, at last, we regain substantial reciprocity with the rates applied to our potatoes by the United States-that is to say, reciprocity with the rates applied to the bulk of our shipments to that country. Our seasonal duty applying to imported peaches remains at li cents a pound, but it will hereafter be in force for 14 instead of 9 weeks each year. In respect of apples we are moving to complete reciprocity with the United States; the duty on imported apples will hereafter be \ cent a pound all the year round, instead of free for 10 weeks and § cent a pound for the rest of the year.
The list of products is lengthy. I can summarize the changes broadly, indicating first what is happening to the "in-season" duties and second what is happening to the "out-of-season" duties. As for the "in-season" situation, the special seasonal duties will be increased or the seasonal period improved, or both, for the following products: asparagus, Brussels sprouts, cabbage, carrots, cauliflower, celery, com-on-the-cob, cucumbers, lettuce, onions, peppers, parsnips, apricots, sour cherries, pears and prunes. Further, an additional duty of 5 per cent will be charged on green beans, Brussels sprouts, carrots, beets, cauliflower, lettuce, peas, parsnips and corn-on-the-cob when imported in season in consumer-type packages.
Turning to the out-of-season situation, for most products the duty continues to be 10 per cent as at present; but for a number of important products a period of free-entry will now be permitted during part or all of the "offseason". These off-season arrangements, which will benefit Canadian consumers without, we believe, damaging Canadian producers, will apply to the following products: beans, cabbage, carrots, cauliflower, celery, lettuce, peppers, tomatoes, cantaloups, pears, plums and strawberries.
Turning to the canned and frozen products there are modest increases of duty consequential upon the increased protection received by the fresh products. These increases apply to asparagus, Brussels sprouts, apricots, cherries, peaches and prunes. Certain commonwealth countries send us some canned fruits and, following discussions with them,

we are adjusting preferential rates on these products so as to maintain existing preferential margins.
I now turn to textiles. In September 1957 I referred to the tariff board the whole of the textile schedule, including yarns, fabrics and made-up goods, and at that time I invited the board's recommendations. The board has, up to the present, submitted reports on woollen and worsted fabrics, on woollen yarns, on cotton yarns and fabrics, and on textile wastes. It has also held hearings on synthetic fibres and fabrics, and I expect to receive that report shortly. Thus, most of the more important items have now been considered. The board has yet to hold hearings, however, on a substantial number of items, many of them of no wide significance but some of considerable importance to the groups directly affected.
It would have been unfair and undesirable to delay action on any of these numerous textile items until the board had reported on all of them. I am sure the house would wish the government to take or to initiate action on individual groups of items as soon as practicable after receiving the board's recommendations, and this is the policy that the government is following. However, we are bound to act within the framework of our trade agreements; these may involve preparatory procedures in addition to the negotiations themselves which usually occupy many months. Moreover, since some groups of textile tariff items are closely linked to others, it may be contrary to our commercial interests to try to negotiate one group before we are in a position also to negotiate another.
In my last budget I took the first step towards our general revision of the textile schedule by introducing modest increases in the British preferential rates on woollens and worsteds under tariff item 554b.
At the same time I announced the government's intention to renegotiate the mostfavoured-nation rates on that item with a view to restoring the margin of British preference. Accordingly, tonight I am announcing new most-favoured-nation rates under that item as follows: for fabrics weighing 12 ounces or more per square yard a rate of 27 \ per cent plus 33 cents per pound; for fabrics weighing less than 12 ounces a rate of 27 J per cent plus 38 cents; and for fabrics weighing not more than 9 ounces a maximum duty of $1.10 per pound. The increases in these rates correspond with the modest increases in the preferential rates introduced last year, so that the margin of preference previously in effect is now being restored.
Our negotiations regarding increases in our M.F.N. duties on woollens and worsteds have
The Budget-Hon. D. M. Fleming been conducted with Italy and France. By way of compensation we are granting reduced rates on a special type of wool fabric-fabrics for neckties and scarves-and also on perfumes, aperitif wines, ports, sherries and manufactures of marble.
We have taken steps under our trade agreements to initiate negotiations on other textile items, including cotton yarns and fabrics. The house may be assured that we shall move forward as quickly as may be practicable.
A brief reference should, perhaps, be made to other reports of the tariff board that have been received and tabled since my last budget: Those relating to rubber footwear and to fluorspar. In neither case did the board recommend any change in the tariff structure, and no change is proposed.
This concludes what needs to be said about the disposition of reports from the tariff board. However, the resolutions I am tabling for the amendment of the Customs Tariff cover other matters as well. For the most part the changes that are put forward are of miscellaneous character, of considerable interest to those directly concerned but of no very general interest. There is, however, one group of changes to which I should call attention.
I have been giving thought to various representations that have been made to the government regarding a very important concept which runs through our Customs Tariff: the concept that the protection afforded to goods which are ruled by the Department of National Revenue or the courts to be of a "class or kind" made in Canada should receive greater protection than similar goods of a "class or kind" not made in Canada. This differentiation, based on "class or kind", is to be found in many individual tariff items and also in our anti-dumping and countervailing duties.
Some of the representations have suggested legislation which would define or re-define the words "class or kind" in such a way as to enlarge the range of goods that are now deemed to be made in this country and thus given the greater protection. It is questionable, however, whether an over-riding measure, involving a departure from present practices and present interpretations, is in the national interest. I am not prepared, at this stage, to propose a general measure to broaden the range of goods that receive protection on a made-in-Canada basis. On the other hand, I am prepared to propose particular measures to prevent this range of goods from becoming narrower. In this connection important representations have been received from Canadian manufacturers of machinery, and I am proposing two steps tonight that will be of interest to them.
2424	HOUSE OF
The Budget-Hon. D. M. Fleming
One of the problems to be met is this. Most machines now enter Canada, not under tariff items naming particular types of machine, but under items providing for machinery in general. These items provide for relatively high rates of duty on machines of a class or kind made in Canada and relatively low rates on those of a class or kind not made here. Experience has shown that, with the increasing complexity and variety of modern machines, these "class or kind" provisions create uncertainties. Much time and expense are involved in trying to clarify "class or kind" questions before the courts.
I propose to resolve these issues in six important fields by introducing six new tariff items tonight. Each of these items will specifically name one class or kind of machine, which has been ruled to be made in Canada, and will apply the tariffs rate that is now applicable to it. Thus, there will be no change whatever in the immediate situation. But all concerned, and particularly the Canadian manufacturers and users of these machines, will be able to make plans and contracts on a firm basis and without fear of protracted and costly litigation. The six are: fork-lift trucks, paper-mill machines, power cranes, power shovels, machines for generating electricity, and vending machines.
The second problem to be met stems from modern automation. Machines are becoming not only more complex but also more closely interwoven and intertwined-linked together, in many cases, under complicated control systems. This has raised a question: What is the difference, if any, between "machinery" and "a machine"? Let me illustrate the problem. The word "machinery" might be interpreted to cover a series of machines, interlinked with each other and under a common control system. If so, and if one or more of this series of interlinked machines was not made in Canada, then our customs department and our courts might feel bound to rule that the machinery, the assembly taken as a whole, was of a class or kind not made here. As such, the whole assembly would be entitled to low rates of duty even though some of the individual machines were of a class or kind made in this country and would thus have been entitled to substantially higher protection.
To avert this risk of loss of protection I am tonight inviting the house to insert a new definition or interpretation in the Customs Tariff. Under this, wherever the word "machinery" appears in the tariff it will be defined to have the same meaning as the word "machines". Here, again, there will be no change whatever in any rates of duty that are being applied at present; but I hope
[Stage Direction]

we shall be avoiding serious difficulties and uncertainties that might have arisen in the future.
In concluding my proposals regarding changes in the Customs Tariff, I should say a word about their effect on the revenues. Hon. members will have observed that, while some of the changes in rates are upwards, others are downwards. Only one of the changes affects a tariff item which yields us substantial revenue-an increase of $1 per gallon on imported spirits bringing this rate into line with the higher domestic excise duty to which I have already referred. Apart from this change, it is reasonable to assume that the tariff changes I am proposing tonight will not appreciably influence the balance of ways and means in the coming year.

[Stage Direction]
That, Mr. Speaker, concludes my budgetary proposals for the year upon which we are just entering. In summary may I remind you that our budgetary expenditures, which exclude the old age security fund, are expected to be $5,660 million; our budgetary revenues after giving effect to the tax changes I have proposed are estimated at $5,267 million; and the indicated deficit for 1959-60 is $393 million.
In reviewing our cash requirements earlier this evening I estimated our extra-budgetary cash needs at about $400 million. To this sum I must now add the expected deficit of $42 million in the old age security fund which is not being charged against the current budget. In round figures, therefore, our net cash requirements outside the budget will be about $450 million, and this added to the budgetary deficit, means that our net borrowing requirements this year will be of the order of $850 million, or some $400 million less than in the year just ended. With a good response to our Canada savings bond campaign this year, our net market borrowings in 1959-60 should be less than one half of the $1,220 million borrowed in the market in 1958-59. Since our flow of revenues will be at a rising rate throughout the year, partly because of expanding prosperity and partly because some of the increased taxes do not come into full effect until later in the year, our new borrowing needs are likely to fall more heavily in the first half of the fiscal year than in the second half.
May I now insert here, Mr. Speaker, my final table which shows the effect of the proposed tax increases on the budgetary levies, on the old age security fund contributions, and the combined increases.

Table 8
Revenue forecasts-After tax changes (in millions of dollars)
Total
	Revenue added		revenue
	Full year In 1959-60		in 1959-60
(a) Budgetary Levies			
Personal income			
tax 		$ 54	$ 28	$1,578
Corporation income			
tax 		56	32	1,097
Non-resident tax ..			75
Estates tax 				75
Customs duties 	3	3	528Sales tax 	1	1	756Other duties and	taxes 	42	38	648Total taxes 	156	102	4,757Non-tax revenue ..	510Total revenue 	$156	$102	$5,267(b) Old age security fund	contributions	Personal income ..	$ 75	$ 41	$191Corporation income	28	20	76Sales tax 	93	82	269Total 	$196	$143	$536(c) Combined increases	Personal income	tax 	$129	$ 69	Corporation income	tax 	84	52	Sales tax 	93	82	Cigars, cigarettes	and spirits 	46	42	Total 	$352	$245	
It will be seen that the total tax increases proposed amount to $352 million in a full year and $245 million in this fiscal year. This increase will, in a full year, balance the increased cost of old age pensions and the enlarged social security program. (Translation):
Mr. Speaker, Canada has its share of problems, some arising out of international disagreements and tensions, and others resulting from the process of growth of our nation. With courage and firmness, none of those difficulties are insuperable. So long as our problems are only in the nature of growing pains, we can look to the future with confidence and assurance.
We have withstood the disturbing calm of recession, and the winds of prosperity again fill our sails, as the basic strength and firmness of the Canadian economy again assert themselves. With a united, determined and confident population, Canada marches on unflinchingly towards its bright destiny.
(Text):
Just as last year's budget was designed to meet 1958 economic conditions and needs, so this year's budget is designed to meet the changed conditions and needs of 1959. In a period when economic conditions are undergoing rapid change, our approach to
The Budget-Resolutions our fiscal problems must be flexible and adaptable.
This budget has been designed to foster and promote recovery. Our aim is to maintain a sustainable rate of growth in terms of employment, development of resources and a sound dollar, so that Canadians everywhere may find full expression for their enterprise, industry and aspirations as free men and women.
Canada has no reason for fear. Blessed as she has been by a benign Providence above all other lands, she can face her shining future with utmost confidence.

[Stage Direction]
Resolved that it is expedient to introduce a measure to amend the Income Tax Act and to provide among other things:
1.	That for the 1960 and subsequent taxation years each of the graduated rates of tax at present applicable to individuals on taxable income in excess of $3,000 be increased by two percentage points and that for the 1959 taxation year each of the graduated rates of tax applicable to individuals or taxable income in excess of $3,000 be increased by one percentage point.
2.	That with respect to income of corporations earned on and after January 1, 1959 the 45 per cent rate of tax on taxable income in excess of $25,000 be increased to 47 per cent and the 43 per cent rate of tax on taxable income in excess of $25,000 applicable to corporations deriving more than half their gross revenue from the sale for delivery in Canada of electrical energy, gas or steam be increased to 45 per cent.
3.	That commencing January 1, 1959 the definition of medical expenses exclude those amounts which the taxpayer is not required to pay because they are paid with the assistance of the government of Canada under the Hospital Insurance and Diagnostic Services Act.
4.	That amounts paid on or after January 1, 1959 for iliostomy and colostomy pads, crutches, trusses for hernia and rocking beds for poliomyelitis patients be included in the medical expenses that are deductible in computing taxable income.
5.	That for the 1959 and subsequent taxation years an individual be allowed to deduct in computing income, in addition to the amounts now permitted by the Act, any amount received by him out of a pension fund or plan upon withdrawal or retirement from employment or upon the winding up of the fund, not exceeding the portion thereof that is paid in the year, or within 60 days after the end of the year, as a contribution to a registered pension fund or plan or as a premium under a registered retirement savings plan.
[Stage Direction]
The Budget-Resolutions
6.	That with respect to deaths occurring after April 9, 1959 the exemption for a portion of a death benefit paid by an employer upon or after the death of an officer or employee in recognition of his service be changed from an amount equal to the employee's remuneration for the last 90 days in the office or employment to an exemption for an amount equal to the remuneration of the employee for the last 12 months in the office or employment or the amount of $10,000 whichever is the lesser.
7.	That for 1960 and subsequent taxation years there shall be included as income from an office or employment the amount of the benefit which an employee derives by virtue of the payment by his employer of a premium under a group life insurance plan to provide the employee with life insurance coverage to the extent that it is in excess of $25,000.
8.	That the time within which a notice of objection to an assessment issued after February 8, 1959 must be served be increased from 60 to 90 days from the day of mailing of the notice of assessment.
9.	That the privilege of qualifying as a foreign business corporation be withdrawn except for those corporations that were so qualified for the 1958 taxation year.

[Stage Direction]
Resolved that it is expedient to introduce a measure to amend the Excise Act to provide:
1.	That the duty of excise on spirits distilled in Canada be increased from $12 to $13 per proof gallon.
2.	That the duty of excise on Canadian brandy be increased from $10 to $11 per proof gallon.
3.	That the duty of excise on cigars be increased from $1 per 1000 to $2 per 1000.
4.	That any enactment founded upon this resolution be deemed to have come into force on the 10th day of April, 1959.

[Stage Direction]
Resolved that it is expedient to introduce a measure to amend the Excise Tax Act to provide:
1.	That the excise tax on each five cigarettes or fraction of five cigarettes contained in any package be increased from 2 cents to 2i cents;
2.	That the wording of the exemption from sales tax for "stock conditioners, condiments and feed supplements for addition to poultry, cattle and other stock feeds" in Schedule III be changed to read:
"Feed supplements for addition to poultry, cattle and other stock feeds and materials to be used exclusively in the manufacture thereof";

3.	That the exemption from sales tax for tanks for collecting milk be extended to include complete parts therefor including materials to be used exclusively in the manufacture of such tanks and parts;
4.	That the definition of "producer or manufacturer" be extended to include any person who packages toilet articles, preparations, cosmetics or pharmaceuticals for sale except where they are packaged by a retailer in his retail premises for sale therefrom directly to consumers or users;
5.	That the definition of "manufacturer or producer" be extended to include any person who markets, except by sale at retail directly to consumers or users, toilet articles, preparations, cosmetics or pharmaceuticals manufactured under his own brand;
6.	That the sales tax be imposed, levied and collected on goods purchased or imported by a licensed wholesaler and retained for his own use or for rental to others;
7.	That any enactment founded upon this resolution be deemed to have come into force on the 10th day of April, 1959;
and to provide further for certain changes in connection with the administration of the act.

[Stage Direction]
1. Resolved,
(a)	that it is expedient to amend the English version of the Customs Tariff by adding to section two thereof the following subsection:
(3) The word "machinery" wherever it appears in this Act shall be read and construed as "machines";
(b)	that it is expedient to amend the Customs Tariff by striking out section 13 and substituting the following therefor:
13. (1) The Minister may order that, in lieu of the ad valorem rate of duty or the free rate of duty, the specific duty provided in tariff items 87, 92, 94, 95 and 95a shall apply to goods described in the order imported through ports in a region or part of Canada during such period or periods as may be fixed by the Minister.
(2) If, before the coming into operation of an order under subsection (1), a person purchased goods for importation through a port in a region or part of Canada specified in the order, in the expectation in good faith that the ad valorem rate of duty or the free rate of duty would apply to the goods, and at the time of the coming into operation of the order the goods were in transit to the purchaser in Canada, the ad valorem rate of duty or the free rate of duty shall apply to the goods, notwithstanding the order.
2. Resolved,
(o) that Schedule A to The New Zealand Trade Agreement Act, 1932 be amended by striking out tariff item 106 and the enumeration of goods ana the rates of duty set opposite that item, and by inserting therein the following item, enumeration of goods and rates of duty:
Rates in Effect Prior
Tariff	Tariff Rates on Goods the Produce	to Rates Proposed inItem	or Manufacture of New Zealand	This Budget106	Fruits, prepared, in air-tight cans or other air-tight containers, the weight of
the containers to be included in the weight for duty:
(/) Apricots	
11 cts. per pound	1 ct.	per	pound(g) Cherries	
11 cts. per pound	1 ct.	per	pound(5)	Peaches	
11 cts. per pound	1 ct.	per	pound(-0 Pears	
1 ct. per pound	1 ct.	per	pound(6)	Prunes	
lj cts. per pound	1 ct.	per	pound(8) N.o.p	
1 ct. per pound	1 ct.	per	pound
(6) that Schedule A to the Customs Tariff be amended by striking out tariff items 836, 84, 85, 87, 89, 90e, 92, 93, 95, 99d, 105i, 106 and 505c, and the enumerations of goods and the rates of duty set opposite each of those items, and by inserting therein the following items, enumerations of goods and rates of duty:
*-4
r
[Stage Direction]

cn
co
to
[Stage Direction]
to
[Stage Direction]
The Budget-Customs Tariff
to
[Stage Direction]
Rates in Effect Prior to Rates Proposed in this Budget
Most-
Tariff Item
British Favoured-	British	Most-Preferential	Nation	General	Preferential	Favoured-Nation	GeneralTariff	Tariff	Tariff	Tariff	Tariff	Tariff
85 Mushrooms, fresh, the weight of the packages to be
included in the weight for duty	per pound 1 ct.
87 Vegetables, fresh, in their natural state, the weight of the packages to be included in the weight for duty:
(8) Asparagus	per pound Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 14 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(3) Beans, green	per pound Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 14 weeks which may be divided into two separate periods, and the Free rate shall apply whenever the specific duty is not in effect.
(5) Brussels sprouts	per pound Free
In any 12 month period ending March SI, the specific duty shall not be maintained in force in excess of 16 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(6) Cabbage	per pound Free
The Free rate shall apply during the months of March and April.
During the remaining months in any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of SO weeks which may be divided into two separate periods, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
4| cts.	5 cts.	Free31 cts. or	31 cts. or	Free10 p.c.	10 p.c.11 cts. or	11 cts. or	FreeFree	Free3 cts. or	3 cts. or	Free10 p.c.	10 p.c.Free or	Free or	Free9/10 ct. or	9/10 ct.	or10 p.c.	10 p.c.31 cts. or	31 cts. or10 p.c.	10 p.c.3J cts. or	31 cts. or10 p.c.	10 p.c.11 cts. or	1J cts. or10 p.c.	10 p.c.10 p.c.	30 p.c.
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9/10 ct. or	9/10 ct. or
10 p.c.	10 p.c.
The Budget-Customs Tariff
(7) Carrots	per pound Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 40 weeks which may be divided into two separate periods, and the Free rate shall apply whenever the specific duty is not in effect.
(8) Cauliflower	per pound Free
The Free rate shall apply during the months of January, February, March and April.
During the remaining months in any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of SO weeks which may be divided into two separate periods, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(9) Celery	per pound Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 24 weeks, and the Free rate shall apply whenever the specific duty is not in effect.
(tO) Corn on the cob	per pound Free
In any IS month period ending March St, the specific duty shall not be maintained in force in excess of 8 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(It) Cucumbers when imported by manufacturers for use
in the manufacture of pickles or preserves.... Free
(IS) Cucumbers, n.o.p.	per pound Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of SS weeks which may be divided into two separate periods, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(IS) Eggplant	 10 p.c.
(15) Lettuce	per pound Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 26 weeks which may be divided into two separate periods and the Free rate shall apply whenever the specific duty is not in effect.
1 ct. or Free
Free or | ct. or 10 p.c.
2 cts. or Free
1} cts. or 10 p.c.
10 p.c.
21 cts. or 10 p.c.
10 p.c.
.85 ct. or Free
1 ct. or Free
Free
1 ct. or 10 p.c.
1 ct. or 10 p.c.
Free or } ct. or 10 p.c.
Free
1 ct. or 10 p.c.
1 ct. or 10 p.c.
2 cts. or Free
1} eta. or 10 p.c.
Free
Free
1 ct. or 10 p.c.
10 p.c.
1 ct. or 10 p.c.
30 p.c.
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r
20 p.c.	Free	2} cts. per lb. or	21 cts. per lb. or	The Budget2} cts. or	Free	10 p.c. 2} cts. or	10 p.c. 21 cts. or	10 p.c.	10 p.c.	10 p.c.	|30 p.c.	Free	Free	30 p.c.	O s CO c-b o 3 CO [DOT]s. 85 ct. or	Free	. 85 ct. or	1 ct. or	QFree	10 p.c.	10 p.c.	<5
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Rates in Effect Prior to Rates Proposed in this Budget
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Most-	
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British Favoured-	British	Most-Tariff	Preferential	Nation	General	Preferential	Favoured-Nation	GeneralItem	Tariff	Tariff	Tariff	Tariff	Tariff	Tariff87	(17) Onions, n.o.p	per pound Free
(con.)
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of H weeks which may be divided, into two separate periods, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(19) Parsnips	per pound Free
In any IS month period ending March SI, the specific duty shall not be maintained in force in excess of 36 weeks which may be divided into two separate periods, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(.SI) Peppers	per pound Free
In any IS month period ending March SI, the specific duty shall not be maintained in force in excess of 8 weeks, and the Free rate shall apply whenever the specific duty is not in effect.
(SS) Spinach	 Free
(S4) Tomatoes	per pound Free
The Free rate shall apply during the months of January, February and March.
During the remaining months in any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 32 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(S6) Whitloof or endive	 10 p.c.
When the beans (preen), beets, Brussels sprouts, carrots, cauliflower, corn on the cob, lettuce, parsnips or peas specified in this item are subject to the specific rates of duty and are imported in packages weighing five pounds or less, each, they shall be subject to an additional duty of Free
li cts. or	1| cts. or Free
10 p.c.	10 p.c.
1 ct. or	1 ct. or	Free
10 p.c.	10 p.c.
1 ct. or	1 ct. or	Free
Free	Free
Free	30	p.c.	FreeFree or	Free or	Free1£ cts. or	If	cts.	or10 p.c.	10	p.c.10 p.c.	30 p.c.	Free5 p.e.	10 p.c.
1 ct. or 10 p.c.
10 p.c.
10 p.c.
10 p.c.
If cts. or 10 p.c.
1 ct. or 10 p.c.
30 p.c.
30 p.c.
30 p.c.
If cts. or 10 p.c.
Free
30 p.c.
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The Budget-Customs Tariff
89 Vegetables, prepared, in air-tight cans or other air-tight containers, the weight of the containers to be included in the weight for duty:
(f) Asparagus	 7} p.c.
90 Vetetables, frozen:
(1) Asparagus	 15 p.c.
(£) Brussels sprouts	 15 p.c.
92 Fruits, fresh, in their natural state, the weight of the packages to be included in the weight for duty:
(1) Apricots	per pound Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 10 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(£) Cherries, sour	per pound Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 10 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(4)	Cranberries	per pound	Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 12 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(5)	Peaches	per pound	Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 14 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(8) Pears	per pound	Free
22} p.c.
22} p.c. 22} p.c.
1} cts. or 10 p.c.
3 cts. or 10 p.c.
2 cts. or 10 p.c.
1} cts. or 10 p.c.
Free or 1 ct. or 10 p.c.
30 p.c.
Free
15 p.c.
30 p.c.
30 p.c. 30 p.c.
1} cts. or 10 p.c.
3 cts. or 10 p.c.
2 cts. or 10 p.c.
1$ cts. or 10 p.c.
Free or 1 ct. or 10 p.c.
10 p.c.	17} p.c.	30 p.c.10 p.c.	17} p.c.	30 p.c.Free	1 ct. or
10 p.c.
1 ct. or 10 p.c.
Free
2 cts. or	2 cts. or
10 p.c.	10 p.c.
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Free
1 ct. or	1 ct. or
10 p.c.	10 p.c.
Free
1} cts. or	1} cts. or
10 p.c.	10 p.c.
Free	1 ct. or
10 p.c.
1 ct. or 10 p.c.
The Budget-Customs Tariff
Rates in Effect Prior to
Rates Proposed in this Budget
Tariff
Item
Most-
British Favoured-	British	Most-Preferential	Nation	General	Preferential	Favoured-NationTariff	Tariff	Tariff	Tariff	Tariff
General
Tariff
92	The Free rate shall apply during the months of March,
(con.) April, May and June.
During the remaining months in any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 22 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(7) Plums	per pound Free
The Free rate shall apply during the months of May and June.
During the remaining months in any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 10 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(8) Prunes	per pound Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 12 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(11) Strawberries	per pound Free
The Free rate shall apply during the months of September, October, November, December, January, February and March.
During the remaining months in any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 6 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
93 Apples, fresh, in their natural state, the weight of the packages to be included in the weight for duty	per pound Free
Free or	Free or	Free
1 ct. or	1 ct. or
10 p.c.	10 p.c
H cts. or 1§ cts. or Free 10 p.c.	10 p.c
Free or	Free or	Free
lfcts. or If cts. or 10 p.c.	10 p.c.
1/4 ct.
1 ct. or 10 p.c.
1 ct. or 10 p.c.
1 ct. or 10 p.c.
1 ct. or 10 p.c.
If cts. or	If cts. or
10 p.c.	10 p.c.
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20 p.c.
Free
Free or
20 p.c.
The Budget-Customs Tariff
95 Cantaloupes, the weight of the packages to be included
in the weight for duty	per pound Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 8 Weeks, and the Free rate shall apply whenever the specific duty is not in effect.
99d (1) Dates, unpitted, in bulk	per pound Free
(2) Dates, unpitted, n.o.p	per pound Free
When in packages weighing two pounds each, or less, the weight of such packages to be included in the weight for duty.
106 Fruits, prepared, in air-tight cans or other air-tight containers, the weight of the containers to be included in the weight for duty:
1} cts. or	1} cts. or Free
Free	Free
Free	2/3 ct.	FreeFree	2} cts.	1/2 ct.
11 cts. or 10 p.c.
1/2 ct. 1/2 ct.
11 cts. or 10 p.c.
2/3 ct. 2J cts.
(f) Apricots	per pound	2£ cts.	21 cts.	5 cts.	2 cts.	2 cts.	5 cts.(2) Cherries	. per pound	11 cts.	11 cts.	5 cts.	1 ct.	1 ct.	5 cts.(S) Peaches	per pound	11 cts.	2} cts.	5 cts.	1^ cts.	2 cts.	5 cts.(8) Prunes	. per pound	11 cts.	1 1/3 cts.	5 cts.	1 ct.	1 ct.	5 cts.107	Fruits, frozen:	(2) Cherries	, per pound	2J cts.	3 cts.	3 cts.	11 cts.	2 cts.	3 cts.(S) Peaches	. per pound	2 cts.	21 cts.	3 cts.	1£ cts.	2 cts.	3 cts.187d	Sensitized photographic rolls consisting of a photosensitive layer and a positive receiving layer, for use in cameras for making positives	Free	15 p.c.	30 p.c.	Free	20 p.c.	30 p.c.505c	Flooring of beech, birch, maple or oak, tongued and grooved, or jointed; floor tiles made of individual strips of beech, birch, maple or oak, joined together	121 p.c.	121 P-c.	25 p.c.	12£ p.c. 17$ p.c.	12$ p.c. 20 p.c.	25 p.c. 25 p.c.(c) that Schedule A to the Customs Tariff be amended by striking out tariff items 95a, 956 and 107, and the enumerations of goods and the rates opposite each of those items, and by inserting therein the following items, enumerations of goods and rates of duty:	84	Onion sets and shallots, in their natural state	Free	15 p.c.	30 p.c.	Free	15 p.c.	30 p.c.85a	Mushrooms, dried or otherwise preserved.	Free	121 p.c.	30 p.c.	Free	12$ p.c.	30 p.c.855	Truffles, fresh, dried or otherwise preserved.	Free	10 p.c.	30 p.c.	Free	10 p.c.	30 p.c.
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The Budget-Customs Tariff
Tariff	British Preferential	Most-Fa voured-NationItem	Tariff	Tariff
87 Vegetables, fresh, in their natural state, the weight of the packages to be included in the weight for duty:
(1) Artichokes	 Free
(4)	Beets	per pound Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 26 weeks which may be divided into two separate periods, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(14) Horseradish	 Free
(16) Okra	 Free
(18) Parsley	 Free
87 (SO) Peas, green	per pound Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 12 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(SS) Rhubarb,
per pound Free
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 10 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(SS) Watercress	 Free
(27) N.o.p	 Free
89 Vegetables, prepared, in air-tight cans or other airtight containers, the weight of the containers to be included in the weight for duty:
(S)	Beans, baked or otherwise prepared... .per pound Free
Free
1 ct. or 10 p.c.
Free Free 10 p.c.
2 cts. or 10 p.c.
$ ct or. 10 p.c.
10 p.c. 10 p.c.
1 ct.
[Stage Direction]
Rates in Effect Prior to Rates Proposed in this Budget
General Tariff	British Preferential Tariff	Most- Favoured-Nation Tariff	General Tariff30 p.c.	Free	Free	30 p.c.1 ct. or 10 p.c.	Free	1 ct. or 10 p.c.	1 ct. or 10 p.c.30 p.c.	Free	Free	30 p.c.30 p.c.	Free	Free	30 p.c.30 p.c.	Free	10 p.c.	30 p.e.2 cts. or 10 p.c.	Free	2 cts. or 10 p.c.	2 cts. or 10 p.c.i ct. or 10 p.c.	Free	i ct. or 10 p.c.	J ct. or 10 p.e.30 p.c.	Free	10 p.c.	30 p.c.30 p.c.	Free	10 p.c.	30 p.c.3 cts.	Free	1 ct.	3 cts.
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The Budget-Customs Tariff
(5) Corn...
(4)	Peas...
(5)	Tomatoes,
(6)	N.o.p..
.per pound .per pound ,per pound
90 Vegetables, frozen:
(S) N.o.p	
92 Fruits, fresh, in their natural state, the weight of the packages to be included in the weight for duty:
(5) Cherries, sweet.,	per pound
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 7 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(9)	Quinces and nectarines	
(10)	Raspberries and loganberries	per pound
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 6 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
(IS) Berries, edible, n.o.p	
99a Muskmelons, the weight of the packages to be included in the weight for duty	per pound
In any 12 month period ending March 31, the specific duty shall not be maintained in force in excess of 8 weeks, and the 10 per cent duty shall apply whenever the specific duty is not in effect.
96b Melons, n.o.p	each
95c Passion fruit (passiflora edulis)	
105i Preserved ginger	
Free	1J cts.
Free	1j cts.
Free	2 cts.
Free	15 p.c.
10 p.c.	17$ p.c.
Free	2 cts. or 10 p.c.
Free	10 p.c.
Free	2 cts. or
	10 p.c.
Free	10 p.c.
Free	1$ cts. or
	10 p.c.
Free	Free
Free	15 p.c.
25 p.c.	35 p.c,
3 cts.	Free	11 cts.	3 cts.3 cts.	Free	11 cts.	3 cts.3 cts.	Free	2 cts.	3 cts.30 p.c.	Free	15 p.c.	30 p.c.30 p.c.	10 p.c.	17J p.c.	30 p.c.2 cts. or 10 p.c.	Free	2 cts. or 10 p.c.	2 cts. or 10 p.c.20 p.c.	Free	10 p.c.	20 p.c.2 cts. or 10 p.c.	Free	2 cts. or 10 p.c.	2 cts. or 10 p.c.20 p.c.	Free	10 p.c.	20 p.c.li cts. or 10 p.c.	Free	li cts. or 10 p.c.	li cts. or 10 p.c.
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3 eta.	Free	Free20 p.c.	Free	15 p.c.
35 p.c.
3 cts. 20 p.c.
35 p.C:
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35 p.c.
25 p.c.
The Budget-Customs Tariff
Rates in Effect Prior to
			Most- Favoured- Nation Tariff			Rates Proposed in this Budget	
Tariff Item	-	British Preferential Tariff		General Tariff	British Most-Preferential Favoured-Nation Tariff Tariff		General Tariff
106	Fruits, prepared, in air-tight cans or other air-tight containers, the weight of the containers to be included in the weight for duty:						
(4) Pears	per pound	2 cts.	2 cts.	5 cts.	2 cts.	2 cts.	5 cts.(5) Pineapples	per pound	1 ct.	2 cts.	5 cts.	1 ct.	2 cts.	5 cts.(7)	Mixtures containing peaches, pears or apricots per pound (8)	N.o.p	per pound	2 cts. 1 ct.	2 cts. 1 ct.	5 cts. 5 cts.	2 cts. 1 ct.	2 cts. 1 ct.	5 cts. 5 cts.107	Fruits, frozen:	(1) Blueberries	per pound	11 cts.	If cts.	3 cts.	11 cts.	If cts.	3 cts.(4) N.o.p	per pound	11 cts.	2 cts.	3 cts.	11 cts.	2 cts.	3 cts.3. Resolved, that Schedule A to the Customs Tariff be amended by striking out tariff items 160, 162(6), 163(3), 307a and 5546, and the enumerations of goods and the rates of duty set opposite each of those items, and by inserting therein the following items, enumerations of goods and rates of duty:	160	Alcoholic perfumes:	(a) When in bottles or flasks containing not more than four ounces each	221 p.c.	221 P-c.	90 p.c.	25 p.c.	25 p.c.	90 p.c.(b) When in bottles, flasks or other packages, containing more than four ounces each	per gallon and	$4.00	$4.00 221 p.c.	$5.00 40 p.c.	$4.00	$4.00 25 p.c.	$5.00 40 p.c.162	(6) Vermouth, aperitif and cordial wines, containing more than thirty-two per cent of proof spirit and not more than forty per cent of proof spirit	60 p.c.	50 p.c.	80 p.c.	80 p.c.	80 p.c.	80 p.c.And in addition thereto, under all tariffs 42J cents per gallon	163	(3) Wines of all kinds, n.o.p., including orange, lemon, strawberry, raspberry, elder and currant wines, containing more than twenty-four per cent but not more than twenty-six per cent of proof spirit, whether imported in wood or in bottles	per gallon and	60 cts.	50 cts.	55 cts. 30 p.c.	55 cts.	55 cts.	55 cts. 30 p.c.
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The Budget-Customs Tariff
66968-9-154
307a
SS4g
And in addition thereto, for each degree of strength in excess of twenty-six per cent of proof spirit until the
strength reaches forty per cent of proof spirit	 And in addition thereto, under all tariffs	3 cts.	3 cts.	3 cts.	3 cts.	3 cts.	3 cts.
42} cents per gallon						
Manufactures of marble, n.o.p	
(1) Woven fabrics composed wholly or in part of yarns	20 p.c.	22j p.c.	40 p.c.	20 p.c.	25 p.c.	40 p.c.of wool or hair, n.o.p	.20 p.c.	27} p.c.	40 p.c.	20 p.c.	27} p.c.	40 p.c.and, per pound	20 cts.	38 cts.	40 cts.	20 cts.	30 cts.	35 cts.The total duty leviable shall not be in excess	60 cts.	(2) Woven fabrics composed wholly or in part	of yarns of wool or hair and weighing not less than twelve ounces to the square yard	20 p.c.	27| p.c.	40 p.c.	20 p.c.	27} p.c.	40 p.c.and, per pound	15 cts.	33 cts.	40 cts.	15 cts.	30 cts.	35 cts.The total duty leviable shall not be in excess of per pound (3) Woven fabrics composed wholly or in chief part by	55 cts.	weight of yarns of wool or hair and weighing not more than nine ounces to the square yard, n.o.p	20 p.c.	27} p.c.	40 p.c.	20 p.c.	27} p.c.	40 p.c.and, per pound	20 cts.	38 cts.	40 cts.	20 cts.	30 cts.	35 cts.The total duty leviable shall not be in excess of... per pound Woven fabrics composed wholly or in part of yarns of wool,	60 cts.	$1.10	$1.00	imported in the web in lengths of not less than five yards each, for use exlusively in the manufacture of neckties, scarves or mufflers	Free	15 p.c.	40 p.c.	20 p.c.	27} p.c.	40 p.c.and, per 'pound	40 cts.	20 cts.	30 cts.	35 cts.In the case of such fabrics weighing not more than nine	ounces to the square yard, the total duty leviable shall not be in excess of	per pound.	.. $1.10	.. 60 cts.	$1.00	
4. Resolved, that Schedule A to the Customs Tariff be amended by striking out tariff items 28, 72a, 82/, 134, 135, 143, 156, 180a, 296g, 351 c, 399a, 409/, 414a, 427, 4385, 438c, 438d, 438e, 438m, 440c, 4401:, 4425, 442c, 446e, 462d, 462i, 502, 502c, 504a, 505a, 682, 691(1) and 696a, and the enumerations of goods and the rates of duty set opposite each of those items, and by inserting therein the following items, enumerations of goods and rates of duty:
*7	Coffee, green, n.o.p	per pound	Free	2 cts.	5 cts.	Free	2 cts.	5 cts.27a	Coffee, green, for use in the manufacture of coffee extract per pound	Free	Free	5 cts.	Free	Free	5 cts.72a	Aromatic seeds, not advanced in value or condition by grinding or refining or by any other process of manufacture, namely: Anise, anise star, caraway, cardamon, coriander, cumin, fennel and fenugreek	Free	Free	Free	Free	Free	Free
The Budget-Customs Tariff
Most-
British Favoured-
Tariff	

 Preferential	Nation
Item	Tariff	Tariff
7Sb Multiflora rosebushes	 12§ p.c.
79i Rosebushes, n.o.p	each 1| cts.
8%i Hiqhbush blueberry plants, roots and cuttings, for propagation or growing purposes	 Free
134 All sugar above number sixteen Dutch standard in colour, and all refined sugars of whatever kinds, grades or standards, not covered by tariff item No.
135, when not exceeding eighty-eight degrees of polarization	per one hundred pounds 83 cts.
When exceeding eighty-eight degrees but not exceeding eighty-nine degrees	per one hundred pounds 85 cts.
When exceeding eighty-nine degrees but not exceeding ninety degrees	per one hundred pounds 87 cts.
12J p.c. 3 ots.
Free
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When exceeding ninety degrees but not exceeding ninety-one degrees	per one hundred pounds 89 cts.
When exceeding ninety-one degrees but not exceeding
ninety-two degrees	per one hundred pounds 91 cts.
When exceeding ninety-two degrees but not exceeding
ninety-three degrees	per one hundred pounds 93 cts.
When exceeding ninety-three degrees but not exceeding
ninety-four degrees	per one hundred pounds 95 cts.
When exceeding ninety-four degrees but not exceeding
ninety-five degrees	per one hundred pounds 97 cts.
When exceeding ninety-five degrees but not exceeding
ninety-six degrees	per one hundred pounds 99 cts.
When exceeding ninety-six degrees but not exceeding
ninety-seven degrees	per one hundred pounds $1.01
When exceeding ninety-seven degrees but not exceeding
ninety-eight degrees	per one hundred pounds $1.03
When exceeding ninety-eight degrees but not exceeding
ninety-nine degrees	per one hundred pounds $1.09
When exceeding ninety-nine degrees	
	per one hundred pounds $1.09
[Stage Direction]
Rates in Effect Prior to
Rates Proposed in this Budget
General Tariff	British Preferential Tariff	Most- Fa voured- Nation Tariff	General Tariff30 p.c.	1$ cts. each	3 cts. each	7 cts. each.7 cts.	1* cts.	3 cts.	7 cts.30 p.c.	12* p.c.	12* p.c.	30 p.c.SI. 50	83 cts.	$1.50	SI.50SI. 53	85 ots.	SI. 53	SI.53SI. 55	87 cts.	$1.55	$1.55$1.58	89 cts.	SI. 58	$1.58$1.62	91 cts.	$1.62	$1.62SI. 65	93 cts.	$1.65	$1.65SI. 68	95 cts.	SI.68	$1.68SI. 70	97 cts.	$1.70	$1.70SI. 74	99 cts.	SI. 74	$1.74SI. 77	SI. 01	$1.77	$1.77SI. 80	$1.03	SI. 80	$1.80SI. 89	SI. 09	SI. 89	$1.89SI. 89	SI. 09	$1.89	$1.89
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The Budget-Customs Tariff

[Stage Direction]
Refined sugar is entitled to entry under the British Preferential Tariff upon evidence satisfactory to the Minister, that such refined sugar has been manufactured wholly from raw sugar produced in the British colonies and possessions, and not otherwise.
13/,a Sugar, for use in the manufacture of wine
per one hundred pounds
135 Sugar above number sixteen Dutch standard in colour when imported or purchased in bond in Canada by a recognized sugar refiner, for refining purposes only, under regulations by the Minister, and sugar, n.o.p., not above number sixteen Dutch standard in colour,
When not exceeding seventy-six degrees of polarization per one hundred pounds When exceeding seventy-six degrees but not exceeding
seventy-seven degrees	per one hundred pounds
When exceeding seventy-seven degrees but not exceeding
seventy-eight degrees	per one hundred pounds
When exceeding seventy-eight degrees but not exceeding
seventy-nine degrees	per one hundred pounds
When exceeding seventy-nine degrees but not exceeding
eighty degrees	per one hundred pounds
When exceeding eighty degrees but not exceeding
eighty-one degrees	per one hundred pounds
When exceeding eighty-one degrees but not exceeding
eighty-two degrees	per one hundred pounds
When exceeding eighty-two degrees but not exceeding
eighty-three degrees	per one hundred pounds
When exceeding eighty-three degrees but not exceeding
eighty-four degrees	per one hundred pounds
When exceeding eighty-four degrees but not exceeding eighty-five degrees	per one hundred pounds
When exceeding eighty-five degrees but not exceeding
eighty-six degrees	per one hundred pounds
When exceeding eighty-six degrees but not exceeding
eighty-seven degrees	per one hundred pounds
When exceeding eighty-seven degrees but not exceeding
eighty-eight degrees	per one hundred pounds
When exceeding eighty-eight degrees but not exceeding
eighty-nine degrees	per one hundred pounds
When exceeding eighty-nine degrees but not exceeding
ninety degrees	per one hundred pounds
When exceeding ninety degrees but not exceeding ninety-one degrees	per one hundred pounds
[Stage Direction]
20.627 cts.
20.647 cts. 20.667 cts. 20.687 cts. 20.707 cts. 20.727 cts. 20.747 cts. 20.767 cts. 20.857 cts. 20.947 cts.
21.036 cts. 21.126 cts. 21.512 cts. 21.897 cts. 22.872 cts. 23.848 cts.
$.0189	$1.89	$.0109	$.0189	70.851 cts.	70.851 cts.	20.627 cts.	70.851 cts.	70.851 cts.73.213 cts.	73.213 cts.	20.647 cts.	73.213 cts.	73.213 cts.75.574 cts.	75.574 cts.	20.667 cts.	75.574 cts.	75.574 cts.77.936 cts.	77.936 cts.	20.687 cts.	77.936 cts.	77.936 cts.80.298 cts.	80.298 cts.	20.707 cts.	80.298 cts.	80.298 cts.82.659 cts.	82.659 cts.	20.727 cts.	82.659 cts.	82.659 cts.85.021 cts.	85.021 cts.	20.747 cts.	85.021 cts.	85.021 ots.87.383 cts.	87.383 cts.	20.767 cts.	87.383 cts.	87.383 cts.90.040 cts.	90.040 cts.	20.857 cts.	90.040 cts.	90.040 cts.92.697 cts.	92.697 cts.	20.947 cts.	92,697 cts.	92.697 cts.95.353 cts.	95.353 cts.	21.036 cts.	95.353 cts.	95.353 cts.98.010 cts.	98.010 cts.	21.126 cts.	98.010 cts.	98.010 cts.$1.00963	$1.00963	21.512 cts.	$1.00963	$1.00963$1.03915	$1.03915	21.897 cts.	$1.03915	$1.03915$1.07457	$1.07457	22.872 cts.	$1.07457	$1.07457$1.11000	$1.11000	23.848 cts.	$1.11000	$1.11000
The Budget-Customs Tariff
Tariff
Item
135 When exceeding ninety-one degrees but not exceeding
(con.) ninety-two degrees	per one hundred pounds
When exceeding ninety-two degrees but not exceeding
ninety-three degrees	per one hundred pounds
When exceeding ninety-three degrees but not exceeding
ninety-four degrees	per one hundred pounds
When exceeding ninety-four degrees but not exceeding
ninety-five degrees	per one hundred pounds
When exceeding ninety-five degrees but not exceeding
ninety-six degrees	per one hundred pounds
When exceeding ninety-six degrees but not exceeding
ninety-seven degrees	per one hundred pounds
When exceeding ninety-seven degrees but not exceeding ninety-eight degrees	per one hundred pounds
When exceeding ninety-eight degrees but not exceeding
ninety-nine degrees	per one hundred pounds
When exceeding ninety-nine degrees	
	per one hundred pounds
143	(1) Cigars, the weight of the bands and ribbons to be
included in the weight for duty	per pound
and
and in addition thereto, under all tariffs,
$1.00 per thousand
(2) Cigars, valued for duty at more than $6.00 per pound, the weight of the bands and ribbons to be included in the
weight for duty	per pound
and
and in addition thereto, under all tariffs,
$1.00 per thousand
152j Dehydrated citrus fruit juices with or without stabilizers or sugar	
156	(a) Whiskey	per gallon of the strength of proof
and in addition thereto, under all tariffs, $9.00 per gallon of the strength of proof
Rates in Effect Prior to Rates Proposed in this Budget
British Preferential Tariff	Most-Fa voured-Nation Tariff	General Tariff	British Preferential Tariff	Most- F avoured-N ation Tariff	General Tariff24.823 cts.	$1.14542	$1.14542	24.823 cts.	$1.14542	$1.1454225.799 cts.	$1.18085	$1.18085	25.799 cts.	$1.18085	$1.1808526.762 cts.	$1.21627	$1.21627	26.762 cts.	$1.21627	$1.2162727.737 ets.	$1.25170	$1.25170	27.737 cts.	$1.25170	$1.2517028.712 ets.	$1.28712	$1.28712	28.712 cts.	$1.28712	$1.2871229.688 cts.	$1.32255	$1.32255	29.688 cts.	$1.32255	$1.3225530.664 cts.	$1.35798	$1.35798	30.664 cts.	$1.35798	$1.3579831.64 cts.	$1.47606	$1.47606	31.64 cts.	$1.47606	$1.4760635.606 cts.	$1.47606	$1.47606	35.606 cts.	$1.47606	$1.47606$1.75	$1.75	$3.50	$1.75	$1.75	$3.5015 p.c.	15 p.c.	25 p.c.	15 p.c.	15 p.c.	25 p.c.$1.50	$1.50	$3.50	$1.50	$1.50	$3.5010 p.c.	10 p.c.	25 p.c.	10 p.c.	10 p.c.	25 p.c,2i p.c.	7j p.c.	25 p.c.	15 p.c.	20 p.c.	25 p.c.$4.50	$5.00	$10.00	$4.50	$5.00	$10.00
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The Budget-Customs Tariff
[Stage Direction]
(b)	Gin, n.o.p	per gallon of the strength of proof $4.50
and in addition thereto, under all tariffs, $9.00 per
gallon of the strength of proof
(c)	Rum, n.o.p	per gallon of the strength of proof $4.50
and in addition thereto, under all tariffs $9.00 per gallon
of the strength of proof
(d)	Brandy	per gallon of the strength of proof $4.00
and in addition thereto, under all tariffs $9.00 per gallon
of the strength of proof
(e)	Liqueurs	per gallon of the strength of proof $4.50
and in addition thereto, under all tariffs, $9.00 per gallon
of the strength of proof
(/) Ethyl alcohol, or the substance commonly known as alcohol, hydrated oxide of ethyl or spirits of wine, n.o.p.; spirituous or alcoholic liquors, n.o.p.; absinthe, arrack or palm spirit, artificial brandy and imitations of brandy, n.o.p.; cordials of all kinds, n.o.p.; mescal, pulque, rum shrub, schiedam and other schnapps; tafia, and alcoholic bitters or beverages, n.o.p.; and wines, n.o.p., containing more than forty per cent of
proof spirit	per gallon of the strength of proof $5.00
and in addition thereto, under all tariffs, $9.00 per gallon of the strength of proof
When the goods specified in item 156 are of greater or less strength than the strength of proof, the measurement thereof and the amount of duty payable thereon shall be increased or decreased in proportion for any greater or less strength than the strength of proof.
Bottles and flasks and packages of gin, rum, whiskey and brandy of all kinds, and imitations thereof, shall be held to contain the following quantities (subject to the provisions for addition or deduction in respect of the degree of strength), namely:
Bottles, flasks and packages, containing not more than one-eighth of a gallon per dozen as one-eighth of a gallon per dozen;
Bottles, flasks and packages, containing more than one-eighth of a gallon but not more than one-sixth of a gallon per dozen, as one-sixth of a gallon per dozen;
Bottles, flasks and packages, containing more than one-sixth of a gallon but not more than one-fourth of a gallon per dozen, as one-fourth of a gallon per dozen;
Bottles, flasks and packages, containing more than one-fourth of a gallon but not more than one-half of a gallon per dozen, as one-half of a gallon per dozen;
[Stage Direction]
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[DOT]a
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The Budget-Customs Tariff
		Most-
	British	Favoured-
Tariff -	- Preferential	NationItem	Tariff	Tariff156	Bottles, flasks and packages, containing more than
(con.) one-half of a gallon but not more than three-fourths of a gallon per dozen, as three-fourths of a gallon per dozen;
Bottles, flasks and packages, containing more than three-fourths of a gallon but not more than one gallon per dozen, as one gallon per dozen;
Bottles, flasks and packages, containing more than one gallon but not more than one and one-half gallons per dozen, as one and one-half gallons per dozen;
Bottles, flasks and packages, containing more than one and one-half gallons but not more than two gallons per dozen, as two gallons per dozen;
Bottles, flasks and packages, containing more than two gallons but not more than two and four-fifths gallons per dozen, as two and four-fifths gallons per dozen;
Bottles, flasks and packages, containing more than two and four-fifths gallons but not more than three gallons per dozen, as three gallons per dozen;
Bottles, flasks and packages, containing more than three gallons but not more than three and one-fifth gallons per dozen, as three and one-fifth gallons per dozen.
Bottles or phials of liquors for special purposes, such as samples not for sale to the trade, may be entered for duty according to actual measurement, under regulations prescribed by the Minister.
180a
296fl
351c
Photographs, negatives and exposed film, for use only as news illustrations, under such regulations as the Minister may prescribe	
Sodium calcium borate ore for use as a fire retardant..
on and after July 1, 1961
Brass wire for the manufacture of fourdrinier wire or of paper-machine wire cloth	
Free	Free
Free	Free
15 p.c.	20 p.c.
Free	15 p.c.
Rates in Effect Prior to
Rates Proposed in this Budget
British	Most-
General	Preferential	Favoured-Nation	GeneralTariff	Tariff	Tariff	Tariff
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Free	Free	Free	Free15 p.c.	20 p.c.	30 p.c.25p.c. 25 p.c.	Free	Free	25 p.c.35 p.c.	Free	15 p.c.	35 p.c.10 p.c.	20 p.c.	35 p.c.
The Budget-Customs Tariff
399a Pipes or tubes of iron or steel, commonly known as "oil-country goods", being casing or tubing and fittings or couplings therefor; sucker rods, pony rods, polished rods and couplings therefor; all of the foregoing for use in connection with natural gas or oil wells___________ 5 p.c.
409/ Animal clippers;
Automatic stock watering devices;
Barn hay forks, carriage, pulleys and track;
Barn litter carriers and track;
Combination excavating and transporting scraper units;
Egg cooling cabinets;
Elevators (other than storage elevators);
Grain crushers;
Grain or hay dryers;
Grain or hay grinders;
Grain loaders;
Gravity discharge farm wagon boxes;
Hitches and couplings;
Hydraulic hoists for unloading vehicles;
Land levellers;
Machines and tools for use on tractors, including blades, loaders, rippers, rakes and related operating and controlling gear;
Milk coolers;
Sodium metabisulphite;
Sprinkler irrigation systems;
Steel stanchions for confining livestock either in pens or individually, and complete equipment for milking parlors;
All the foregoing for use on the farm for farm purposes only;
Brooders;
Ensilage cutters;
Fodder or feed cutters;
Hay loaders;
Hay tedders;
Post hole diggers;
Potato diggers;
Potato planters;
Snaths;
Stumping machines;
All other agricultural implements or agricultural machinery, n.o.p.;
Parts of all the foregoing	 Free
414a Parts of typewriters	 Free
iSSa Chiropodichairs and parts thereof	 Free
10 p.c.
Free 15 p.c. Free
20 p.c.
5 p.c, Free
10 p.c. Free
20 p.c Free
>
[DOT]a
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[Stage Direction]
a
Free	Free	Free	FreeFree	7} p.c.	12} p.c.25 p.c.	Free	15 p.c.	25 p.c.Various	Various	Various35 p.c.	10 p.c.	22} p.c.	35 p.c.
The Budget-Customs Tariff
Rates in Effect Prior to
Rates Proposed in this Budget
Tariff
Item
Most-
British	Favoured-
Preferential	Nation
Tariff	Tariff
British
General	Preferential
Tariff	Tariff
Most-
F avoured-Nation Tariff
General
Tariff
(1) All machinery composed wholly or in part of iron or steel, n.o.p.; parts of the foregoing	10 p.c.	22} p.c.	35 p.c.	10 p.c.	22} p.c.	35 p.c.(2) Seed and grain cleaning machines of screen and air blast type with a capacity not exceeding 100 bushels per hour; parts of the foregoing	10 p.c.	15 p.c.	35 p.c.	10 p.c.	15 p.c.	35 p.c.(8) Industrial trucks, n.o.p., gas or gasoline powered, commonly known as "fork-lift" or "lift" trucks, for the movement of goods, having maximum lifting capacities, when equipped with forks, from four thousand pounds to sixteen thousand pounds, inclusive, at a load centre of twenty-four inches from the face of the forks; accessories and attachments therefor; parts of the foregoing	10 p.c.	22} p.c.	35 p.c.	10 p.c.	22} p.c.	35 p.c.(4) Power shovels and cranes, convertible, with nominal dipper capacities, as shovels, from three-eighth to two and one-half cubic yards, inclusive, n.o.p.; parts of the foregoing 	10 p.c.	22} p.c.	35 p.c.	10 p.c.	22} p.c.	35 p.c.(5) Power cranes, truck or wagon type, with rated lifting capacities of ten to forty tons, inclusive, computed on the basis of twelve foot radius with fifty foot boom, n.o.p.; parts of the foregoing	10 p.c.	22} p.c.	35 p.c.	10 p.c.	22} p.c.	35 p.c.(6) Paper machines; machines for calendering (not including super-calenders), slitting, reeling, winding and re-winding paper, n.o.p.; driving mechanisms therefor; parts of the foregoing	10 p.c.	22} p.c.	35 p.c.	10 p.c.	22} p.c.	35 p.c.(7) Electricity generating sets, consisting essentially of an internal combustion engine and one or more generators mounted on a common base, n.o.p.; parts of the foregoing	10 p.c.	22} p.c.	35 p.c.	10 p.c.	22} p.c.	35 p.c.(8) Vending machines for dispensing soft drinks, coin-operated, incorporating mechanical refrigeration; parts of the foregoing	10 p.c.	22} p.c.	35 p.e.	10 p.c.	22} p.c.	35 p.c.Motor rail cars or units and chassis for same for use on railways for the carriage of passenger, baggage, mail or express traffic, and parts thereof	Free	Free	35 p.c.	Free	20 p.c.	35 p.c.
-H
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The Budget-Customs Tariff
66968-9-155
4386 Bearings, ball or roller;
Bearings, clutch release, with or without collar attached;
Bearings, graphite;
Bearings, steel or bronze backed, with non-ferrous metal lining, parts and materials therefor;
Bearings, steering knuckle thrust;
Bushings or sleeve bearings of bronze or powdered metal;
Bushings, graphited or oil impregnated;
Ceramic insulator spark plug cores not further manufactured than burned and glazed, printed or decorated or not, without fittings;
Collars, crankshaft thrust;
Compressors and parts thereof, air;
Commutator copper segments; commutator insulating end rings;
Tapered discs of hot-rolled steel, with or without centre hole, for disc wheels;
Diaphragms for fuel and vacuum pumps;
Distributor rotors and cam assemblies;
Door bumper shoes;
Electric wiring terminals, sockets, fittings and connectors and parts and combinations thereof, including brackets and fittings permanently attached thereto, but not to include battery terminals;
Gaskets of any material except cork or felt, composite or not, parts and materials therefor;
Ignition contact points;
Keys for shafting;
Auxiliary driving control kits, designed for attachment to motor vehicles to facilitate their operation by physically disabled persons, and parts thereof;
Laminated composition plastic timing gear blanks;
Lenses of glass for motor vehicle lamps and for light reflectors;
Lock washers;
Magnetic plugs;
Metal frames for convertible soft tops;
Permanent mould pistons for brake master cylinders;
Piston ring castings in the rough, with or without gates and fins removed;
Propeller shaft tubes of steel bonded by rubber;
Rails of lock seam section, corners, locks and catches, unplated ventilators and parts thereof, the foregoing being of metal other than aluminum, for the manufacture of window sashes for bus bodies;
Shift control, electric, for two speed rear axles;
Steel bolts, studs, plugs, rivets or nuts, capped with stainless steel, and parts thereof;
Switches, relays, circuit breakers and solenoids and combinations and parts thereof, including starter switch assemblies;
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The Budget-Customs Tariff
Tariff
Item
(con.)
438c
British
Preferential
Tariff
Synchronizing cones or blocking rings for transmissions; Vacuum, hydraulic or air control assemblies and parts thereof;
Vulcanized fibre in sheets, rods, strips and tubings; Parts of all the foregoing;
All of the foregoing for use in the manufacture or repair of goods enumerated in tariff items 410a (Hi), 411a, 424 and 438a, or for use in the manufacture of
parts therefor:
1. When of a class or kind not made in Canada.... Free
2. When of a class or kind made in Canada	 Free
Ammeters;
Arm rests and wheel housing lining of indurated fibre, pressed to shape;
Axle housings, one piece welded, machined or not, including parts welded thereto;
Carburetors;
Chassis frames and steel shapes for the manufacture thereof;
Cigar and cigarette lighters, whether in combination with a cigarette holder or not, including base;
Composite frame and floor structure of metal in the rough:
Control ventilator gear box;
Cylinder lock barrels, with or without sleeves and keys thereof;
Dash heat indicators;
Engine speed governor units;
External ornaments unplated, including name plates, letters and numerals, but not including finish or decorative mouldings;
Fluid couplings with or without drive plate assemblies;
Gauges, gasoline, oil or air;
Grilles not plated, polished or not before assembly, and parts thereof not plated or polished after final forming, casting or piercing, not including added finish or decorative mouldings;
Hinges, finished or not, for bodies;
Horns;
Most-Fa voured-Nation Tariff
Free 17J p.c.
Rates in Effect Prior to
Rates Proposed in this Budget
General
Tariff
30 p.c. 30 p.c.
British	Most-
Preferential	Favoured-Nation	GeneralTariff	Tariff	TariffFree	Free	30 p.c.Free	17J p.c.	30 p.c.Various	Various	Various
in
[Stage Direction]
The Budget-Customs Tariff
feet-6-89699
Instrument bezel assemblies; instrument board lamps; instrument panel, glove compartment, luggage compartment, hood compartment and door step lamps and wire assemblies;
Instrument board panels of moulded or laminated glass fibres and plastic;
Locks, electric ignition, steering gear, transmission, or combinations of such locks:
Mouldings of metal, with nails or prongs set in position, lead filled or not;
Oil filter parts, namely: perforated filter refill oil board bodies, refill end discs, and roll-seam perforated tubes;
Ornaments and identification plates of metal, unplated, not including finished or decorative mouldings:
Pipe lines of tubing, rigid, covered or not, with or without fittings, and tubing therefor;
Purifiers for gasoline, including brackets and fittings therefor;
Radiator shutter assemblies, automatic;
Radiator water gauges;
Radiator shells not plated nor metal finished in any degree;
Shackles, bearing spring;
Speedometers;
Spring covers of metal and closing strips or shapes therefor;
Stampings, body, cowl, fender, front end, hood, instrument board, shields and baffles, of plain or coated metal, in the rough, trimmed or not, whether or not welded in any manner before final forming or piercing, but not metal finished in any degree, including such stampings incorporating pierce or clinch nuts;
Steering wheels, rims and spiders therefor;
Sun visor blanks of gypsum weatherboard;
Tachometers, with or without tachographs, both electrio and gear driven;
Thermostatic controls;
Throttle, spark, choke, and hood lock release assemblies, including buttons therefor;
Torque convertors;
Auxiliary transmission overdrive units and controls therefor;
Universal joint ball assemblies;
Windshield and window wipers;
Parts of all the foregoing, including brackets, fittings and connections therefor;
All of the foregoing when for use in the manufacture or repair of the goods enumerated in tariff items 410a(i«), 411a, 424 and 438a, or for use in the manufacture of arts therefor	
Free
17J p.c
30 p.c.
Free
Various
17} p.c. Various
30 p.c.
Various
>
*
The Budget-Customs Tariff
Tariff
Item
British
Preferential
Tariff
438c	(1) If the above articles, when of a class or kind not
(cont.) made in Canada, are for use as original equipment by a manufacturer of passenger automobiles (having a seating capacity for not more than ten persons each) enumerated in tariff item 438a, whose total factory output, during the year in which importation is sought, does not exceed ten thousand such complete passenger automobiles, and if not less than forty per cent of the factory cost of production of such automobiles, not including duties and taxes, is incurred in the British Commonwealth, the rates of duty under this item shall be	
(2) If the above articles, when of a class or kind not made in Canada, are for use as original equipment by a manufacturer of passenger automobiles (having a seating capacity for not more than ten persons each) enumerated in tariff item 438a, whose total factory output, during the year in which importation is sought, exceeds ten thousand, but does not exceed twenty thousand such complete passenger automobiles, and if not less than fifty per cent of the factory cost of production of such automobiles, not including duties and taxes, is incurred in the British Commonwealth, the rates of duty under this item shall be.
(3) If the above articles, when of a class or kind not made in Canada, are for use as original equipment by a manufacturer of passenger automobiles (having a seating capacity for not more than ten persons each) enumerated in tariff item 438a, whose total factory output, during the year in which importation is sought, exceeds twenty thousand such complete passenger automobiles, and if not less than sixty per cent of the factory cost of production of such automobiles, not including duties and taxes, is incurred in the British Commonwealth, the rates of duty under this item shall be	
Free
Free
Free
[DOT][DOT] 11'	

~	It.
[Stage Direction]
Rates in Effect Prior to
Rates Proposed in this Budget
Most-	
[Stage Direction]
Favoured-	British	Most-Nation	General	Preferential	Favoured-Nation	GeneralTariff	Tariff	Tariff	Tariff	TariffFree	25 p.c.	Free	Free	25 p.c.Various	Various	Various
o
2
o
w
Free	25 p.c.	Free
Various
Free
Various
25 p.c. Various
Free
25 p.c.
Free
Various
Free
Various
25 p.c.
Various
The Budget-Customs Tariff
(4) If the above articles, when of a class or kind not made in Canada, are for use as original equipment by a manufacturer of motor trucks, motor buses, electric trackless trolley buses, fire fighting vehicles, motor ambulances, and hearses, or chassis for same, as enumerated in tariff items 410a(m), 411a, 424 and 438a, whose total factory output of such vehicles during the year in which importation is sought, does not exceed ten thousand such vehicles, and if not less than forty per cent of the factory cost of production of such vehicles, not including duties and taxes, is incurred in the British Commonwealth, the rates of duty under this item shall be	
(5) If the above articles, when of a class or kind not made in Canada, are for use as original equipment by a manufacturer of motor trucks, motor buses, electric trackless trolley buses, fire fighting vehicles, motor ambulances and hearses, or chassis for same, as enumerated in tariff items 410a (m), 41	424 and 438a,
whose total factory output of such vehicles during the year in which importation is sought, exceeds ten thousand units, and if not less than fifty per cent of the factory cost of production of such vehicles, not including duties and taxes, is incurred in the British Commonwealth, the rates of duty under this item shall be	
(6) If the above articles are of a class or kind not made in Canada, and are for use in the repair of the goods enumerated in tariff items 410a(iu), ^fia, 424 and 438a, or are for use in the manufacture of repair parts therefor, the rates of duty under this item shall be	
The Governor in Council may make such regulations, if any, as are deemed necessary for carrying out the provisions of this item.
438d Axles, front and rear;
Bell or clutch housings for vehicles having a gross vehicle weight rating of over 19,500 pounds;
Brakes;
Brake drums;
Clutches;
Drive shafts;
Fuel pumps;
Hubs;
Hydraulic or fluid couplings;
Internal combustion engines of 349 cubic inches and over in displacement;
Free
Free
Free
Free	25 p.c.	Free	Free	25 p.c.Various	Various	VariousFree	25 p.c.	Free Various	Free Various	25 p.c. VariousFree	25 p.c.	Free Various	Free Various	25 p.c. Various
The Budget-Customs Tariff
Rates in Effect Prior to
Rates Proposed in this Budget
cn
Tariff
Item
Most-
British Favoured-	British	Most-Preferential	Nation	General	Preferential	Favoured-NationTariff	Tariff	Tariff	Tariff	Tariff
General
Tariff
438d Linkages and controls for use with clutches, transmission (cont.) assemblies, power dividers or transfer cases, when the main assemblies are of a class or kind not made in Canada;
Magnetos;
Power dividers or transfer cases;
Rims for pneumatic tires;
Spring shrouds, spring seats, and spring anchor plates of metal for vehicles having a gross vehicle weight rating of over 19,500 pounds;
Steel road wheels;
Steering drag links for vehicles having a gross vehicle weight rating of 20,000 pounds or over;
Steering gears;
Tandem axle suspensions, not to include springs;
Transmission assemblies;
Universal joint;
Parts of the foregoing;
All of the foregoing when of a class or kind not made in Canada, and
(1)	For the manufacture of motor trucks, motor buses, electric trackless trolley buses, fire fighting vehicles, ambulances, hearses, and the chassis for
same	 Free	17} p.c.	27} p.c.	Free	17} p.c.	27} p.c.
(2)	For use as original equipment for motor trucks, motor buses, electric trackless trolley buses, fire fighting vehicles, ambulances, hearses, or for chassis for same, by a manufacturer of the goods enumerated in tariff items 410a(m), flla, 424 and 438a, and during the year in which importation is sought, not less than forty per cent of the factory cost of production of such vehicles and chassis therefor, not including duties and taxes, is incurred in the British Commonwealth, the
rates of duty under this item shall be	
Free	Free	27} p.c.	Free	Free	27} p.c.Various	Various	Various(3)	For use in the repair of motor trucks, motor buses, fire fighting vehicles ambulances, hearses and electric trackless trolley buses, or for chassis for same or for use in the manufacture of repair partstherefor, the rates of duty under this item shall	be...	Free	Free	273 p.c.	Free	Free	27} p.c.Various	Various	Various
w
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*4
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o
g
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o
5S
w
The Budget-Customs Tariff
The Governor in Council may make such regulations, if any, as are deemed necessary for carrying out the provisions of this item.
438e Internal combustion engines of 348 cubic inches and under in displacement;
Parts of the foregoing;
All of the foregoing when of a class or kind not made in Canada, and
(1)	For the manufacture of motor trucks, motor
buses, electric trackless trolley buses, fire fighting vehicles, ambulances, hearses, and the chassis for same	 Free
(2)	For use as original equipment for motor trucks,
motor buses, electric trackless trolley buses, fire fighting vehicles, ambulances, hearses, or for chassis for same, by a manufacturer of the goods enumerated in tariff items 410a(i«), 411a, 424 and 438a, and during the year in which importation is sought, not less than forty per cent of the factory cost of production of such vehicles and chassis therefor, not including duties and taxes, is incurred in the British Commonwealth, the rates of duty under this item shall be	 Free
(3)	For use in the repair of motor trucks, motor buses, fire fighting vehicles, ambulances, hearses and electric trackless trolley buses, or for chassis for same or for use in the manufacture of repair parts therefor, the rates of duty under this item shall be.. Free
The Governor in Council may make such regulations, if any, as are deemed necessary for carrying out the provisions of this item.
440c Racing shells or oars therefor, when imported by amateur rowing clubs for use exclusively by such clubs	 Free
4401: (1) Engines and parts thereof, n.o.p., for use in boats used exclusively in commercial fishing operations
under such regulations as the Minister may prescribe. Free
(2) Materials and articles for the manufacture or repair of the engines provided for in item 440k (1)	 Free
446c Steel shapes, including steel balls not larger than threeeighths inch in diameter, for burnishing	 Free
17$ p.c. 27$ p.c. Free
17$ p.c.	27$ p.c.
7$ p.c.	27i p.c.	Free	7\ p.c.	27$ p.c.Various	Various	Various7$ p.c.	27$ p.c. Free
Various
7$ p.c. Various
27$ p.c. Various
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cn
co
20 p.c.	25 p.c.	Free	25 p.c.	25 p.c.Free	15 p.c.	Free	Free	15 p.c.15 p.c.	20 p.c.	30 p.c.Free	15 p.c.	Free	Free	15 p.c.Various	Various	Various7i p.c.	10 p.c.	Free	7J p.c.	10 p.c.10 p.c.	22 J p.c.	35 p.c.
The Budget-Customs Tariff
Rates in Effect Prior to
Rates Proposed in this Budget
Tariff
Item
Most-
British Favoured-	British	Most-Preferential	Nation	General	Preferential	Favoured-NationTariff	Tariff	Tariff	Tariff	Tariff
General
Tariff
462d Cinematograph and motion picture cameras for use by professional motion picture producers having studios in Canada equipped for motion picture production;
parts of the foregoing	 Free
On and after July 1, 1961 Free
4G2i Optical sound equipment;
Dollies, or other mobile mounting units for motion picture cameras;
Booms, without wiring, for use with microphones;
Motion picture editing equipment, namely: film editing machines, film splicers, film synchronizers, film viewers, rewinds;
Parts of the foregoing;
All the foregoing when for use in the production of motion pictures by professional producers having studios in Canada equipped for motion picture production	 Free
(Expires July 1, 1961.)
479 Orthopedic highchairs and parts thereof	 Free
602 Felloes of hickory or oak, not further manufactured than rough sawn or bent to shape;
Hub, wagon, oar and gun blocks, and all like blocks or sticks, rough hewn or sawn only;
Last blocks, not further manufactured than sawn, rough hewn or rough turned;
Mexican saddle trees and stirrups of wood;
Scale board for cheese;
Shingles of wood;
Spokes of hickory or oak, not further manufactured than rough turned, and not tenoned, mitred or sized;
Staves of oak, sawn, split or cut, not further manufactured than listed or jointed;
Treenails	 Free
502c Wooden handles or stems for handles, not further manufactured than turned, for use in the manufacture of the goods enumerated in tariff item 431	 Free
Free	15 p.c.	Free	Free	15 p.c,
9 p.c.	15 p.c.
Free	15 p.c.	Free	Free	15 p.c.Free	Free	15 p.c.	25 p.c.	45 p.c.Free	Free	Free	Free	Free17* P.c.	20 p.c.	25 p.c.Free	Free	Free	Free	Free
n
o
*xi
n
o
2
o
a
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The Budget-Customs Tariff
505a Ponderosa pine lumber (pinus ponderosa), California sugarpine lumber (pinus Lambertiana) and California redwood lumber (sequoia semper virens), not further manufactured than the product of a planing machine
with various profile attachments	 Free
611a (4) Conductive shoes for use in hospitals	 Free
On and after July 1, 1961 20 p.c.
682 Fish hooks, for deep-sea or lake fishing, not smaller in size than number 2.0;
Fishing nets and nettings of all kinds;
Lures, jiggers and artificial baits,'
Metal panel devices for use in keeping nets open;
Metal swivels, of a class or kind not made in Canada;
Net and line floats of any material except wood;
Specially designed needles of a class or kind not made in Canada for use in repairing fish nets;
Threads, twines, marlines, fishing lines, rope and cordage, not exceeding one and one-half inches in circumference;
All the foregoing for use in commercial fishing, under such regulations as the Minister may prescribe;
Carapace measures of any material	 Free
691	(1) Communion sets; oil stocks; crosiers; benitiers;
sprinklers; incensers; incense boats; baptismal shells or fonts; scapulars; chapelets; rosaries; religious statues, statuettes, medals and crosses; religious figures and plagues, mounted or not; Scroll sets; Chanuka candlesticks; Kiddush sets; Mezuzah boxes; Havdalah sets; Seder plates; parts of the foregoing	 Free
696a Moving picture films, sound or silent, separate sound film track, slides and slide films, positive or negative, and sound recordings for use therewith;
Sound recordings for use by educational, scientific or cultural institutions or societies;
Sound recordings other than for sale or rental;
Models, static and moving;
Wall charts, maps and posters;
All the foregoing when certified by the Government or by a recognized representative authority of the Government of the country of production or by an appropriate representative of the United Nations Educational, Scientific and Cultural Organization as being of an international educational, scientific or cultural character;
Under such regulations as the Minister may prescribe.. Free
Free
25 p.c,
Free 27* p.c.
40 p.c. 40 p.c.
Free 5 p.c. 10 p.c.
20 p.c.
Free 5 p.c.
10 p.c.
27* p.c.
Free 25 p.c. 25 p.c.
40 p.c.
Free	Free	Free	>
aFree	20 p.c.	30 p.c.	F15 p.c.	22£ p.c.	30 p.c.	CO1959Free	Free	Free	FreeVarious	Various
Free
Various
Free
30 p.c.
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*b.
Cn
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Free
Free
Free 15 p.c,
Free 20 p.c.
The Budget-Customs Tariff1
,	,-5;, t^e„S,?I^f^,<.,thattany ™.ac,t™ent founded upon the foregoing resolutions shall be deemed to have come into force on the 10th day of April, 1959, and to have
imported* for whkh^o'entry'for w^!^tiM1wasImade<bi^OTe th^t^ay*.* warehouse ^or ^"sumption on or after that day, and to have applied to goods previously

[Stage Direction]
Resolved that it is expedient to introduce a measure to amend The Old Age Security Act to provide:
Rom	Wifhl™bsequent tta«nl°n,yearS *¥ of °ldAge Se™"t>'ta*Levery indlvidual shaU be required to pay on his taxable income be increased
of $752 P * th	of $ to 3 per cent Wlth a maximum of $90 and that for the 1959 taxation year the rate shall be 2.5 per cent with a maximum
2.
3.
to mcome of corporations, other than non-resident-owned investment corporations, earned on and after January 1, 1959 the rate of Old Age security i ax be increased from 2 per cent to 3 per cent of taxable income.
ho?!™™!?*6 h °ld Age ®e<?ur,itytax °?,th?„siile,price.0{soods be increased from 2 per cent to 3 per cent and that any enactment founded upon this paragraph
be deemed to have come into force on the 10th day of April, 1959.	"
(See also Budget Papers, pages 2461 to 2557)
2454	HOUSE OF COMMONS
The Budget-Resolutions
Mr. W. M. Benidickson (Kenora-Rainy River):: Mr. Speaker, with all members of the house I think that we would want to pay the traditional compliments to the zeal of the Minister of Finance (Mr. Fleming) in the important task he has in presenting a budget of this kind. We are all familiar with the dimensions of the problems he has had to face in recent times. I want to assure him that those of us on this side, where we do see constructive measures, will at all times want to support them and certainly any evidence of recovery that he is able to present to us will be as much a delight to the opposition as to people all across the country. But unfortunately, as we so often find in these presentations of the Minister of Finance, there is an exceeding amount of passion in presenting his case but often not very much consistency and, I suggest, too often accompanied by soothing forecasts as I think we will find to be the case in this debate.
The thing that I think is most striking to all of us is the difference that has taken place in the Minister of Finance in the short period of two years. I think it was Oscar Wilde who was not able to recognize a former acquaintance and then said, "I beg your pardon, I did not recognize you, I have changed a lot." I thing that is the position of the Minister of Finance when we look upon him in this debate.
The striking contrast, of course, is that the highlights of everything that he enunciated tonight seem to be directly opposite to the things that we knew him to stand for in recent times. He has presented to us on two occasions the largest programs of expenditure, even in wartime, in the history of the country notwithstanding his desire in the past to be the exponent of government economy and reduction in expenditure. We saw to our surprise some new recognition on his part that apparently some of the things he used to deride now have his approval although he did not make his confession too clearly. I am thinking in terms of what he had to say tonight about the possibility that under certain conditions there might even be some merit in such a thing as a surplus.


Donald Methuen Fleming: I did not say that.


William Moore Benidickson: He called it flexibility and debt reduction but it is the same thing. He always used to deride any suggestion of a deficit and say that we should have a balanced budget. He used to say that if we had deficits we were living beyond our means. But tonight for the second time in succession we have a really whopping deficit and, in addition, above all else the Minister of Finance is known across Canada as one who has been advocating reductions in taxation. The sum
The Budget-Mr. Benidickson of $500 million was supposed to be a reasonably attainable reduction in government expenditures without any reduction in services. Indeed, the suggestion was that a number of items could be increased and improved notwithstanding such a reduction. I say, what a contrast.
It appears that a while ago the electorate voted for cake but they are finding that the cake seemingly has to be paid for. The tax reduction that we heard about so frequently and with such emphasis during the election campaign actually only totalled $204 million-


An hon. Member:: Only.


William Moore Benidickson: -compared with the
staggering, whopping increase in taxation proposed in this budget, an increase of $352 million. This is the minister who so frequently said that taxes in Canada already are too high. It was the Prime Minister (Mr. Diefen-baker) who said repeatedly that there was no great difficulty to be encountered in bringing about reductions in taxes and also having increases in pensions. But, with no election imminent, we find that these pensions seemingly have to be paid for. In other words, whether the money goes into the social security fund or general revenue, we are now getting an increase in taxation, and I think the ordinary people of the country will recognize that if $352 million extra is to be taken from them for government purposes it is a tax, no matter what it is called. I want to point out that except during wartime and at the time of the war in Korea in 1950 and 1951 there has not been an increase in direct taxes in this country since the Bennett regime.


Some hon. Members:: Hear, hear.


Paul Joseph James Martin: The same kind of government.


William Moore Benidickson: We have, of course, the same kind of government and we are getting the same kind of results. It was the Minister of Finance and those associated with him who over the years warned about tax increases. They pointed out that business that is hurt is not likely to pay taxes. They pointed out the effect that increased taxes have not only on the spending of individuals but on the capital investment of corporations, which is one of the depressing statistics not mentioned by the Minister of Finance tonight but to which we must all give attention in the course of this debate.
I	rather suspect that the timing of these taxes is just the utmost in political cynicism based on a realization that increases now may be compensated for at a more appropriate time two years hence by tax reductions. In any event, $352 million is being taken out of the spending stream as a result of these proposals.

The Budget-Mr. Benidickson
I question whether the minister would agree that we are out of danger and whether he is not nipping recovery in the bud. As I indicated, we usually can get from the minister arithmetic that requires a little further analysis. Certainly last session we found that there was a rabbit in the hat and that there was some slick bookkeeping there with respect to the defence expenditure fund. Again tonight we find throughout these statistical tables, as quickly as we are able to peruse them, some extremely deceptive sentences. For instance, on income tax, this is something that I think is striking in its deception:
Aside from the increased contributions for old age security, I do not recommend any increases in taxes on personal income below the level of $3,000 on taxable income.
But the exception is there. I suggest, Mr. Speaker, that it will be obvious when these proposals are analysed that even the individual in the low income bracket is going to be short $2.50 per month in taxes compared with what the situation is. We have that difference of $2.50. By whatever name it is called, it is a reduction in the take-home and available pay of the taxpayer.
We received some gloomy news as to the increase in our debt but that news was coupled with a brag that the public and not the banking fraternity had within recent times increased their holdings of government securities. Why would there not be an increase in the holdings of government securities if the total increase in the amount of debt is $1,429 million in the course of a single year?
Those, I think, are all matters that will get proper attention as the debate proceeds. But, Mr. Speaker, I do not want to allow the house to accept too readily some of the soothing statements and statistics that were provided by the minister. There were a great number to which he made no reference. As will be recalled, his colleague the Minister of Trade and Commerce (Mr. Churchill) not long ago presented to this house statistics of a key indicator with respect to possible prosperity in this country when he pointed out that capital investment in this country was going down. I want to point out to the house that this is in contrast to the trend in the United States.
The minister made these encouraging statements about our trade deficit. I know that figures in this respect were just as available to him as they are to all other hon. members of the house. He did not choose to give us the latest figures in this respect. I point out to the house that the January trade gap was the highest for this month in any of the past ten years. I point out that our exports for the last two months, made available in


statistics that came our way yesterday, indicate a drop in the first two months of $40 million in domestic trade. The minister expressed some satisfaction about a levelling off in the rise in the retail price index. He did not point out to us that, on the contrary, the wholesale price indices have been moving out of their recent lows; indeed the increase in wholesale prices between October and November of last year was the biggest since 1950. These, of course, are a foretaste of what might happen with respect to the prices that we pay eventually at the retail level. He did not tell us that carloadings in the United States, compared with last year, are up almost six per cent but in this country our carloadings are down. The Financial Post of March 28 pointed out that United States industrial production will likely get back to its boom-time peak within a matter of days but by contrast Canadian output is only one-half up to its low in recovery. These are some of the things that I think in a less passionate outline of our financial position might have been given by our national treasurer.
Something was said about unemployment but it was so little that I think that the country, when it examines the statement tomorrow, will really be shocked. Very little change has taken place in that respect. I am afraid that this was an attempt to put the public to sleep, just as the minister did a year ago in his budget statement at that time when he referred to a mild recession. I do not think the continuing half million or more who are unable to find jobs regard the situation either now or then as being in the nature of a mild recession. What we really need is not a presentation of happy statistics. We want all the statistics. What is needed is not slogans but jobs; and that is something we have not been getting from this administration. We know the reason for that. We know that for a year at least they were not impressed with matters of this kind and gave everybody the impression that we had nothing to worry about. I could give innumerable quotations from the Prime Minister, the Minister of Finance and the Minister of Labour (Mr. Starr) in the first years of office when they indicated that not only did we not have an emergent situation, as they described it, but that at all times we were on the verge of the elimination of the difficulty. Of course, that has not proved to be the case.
I am not going to deal tonight with the conversion loan. The Minister of Finance has an unusual faculty of describing a flop as a success; and almost anything that he talks about with respect to fiscal and monetary policy he is tempted to describe in recent

months as anti-inflationary. We will deal with that matter. I simply want to say to him that there is no clearer sign of the long descending spiral of confidence in the government than the drop in bond prices with which we are all so familiar. Apparently we have in the minister someone who has no fear either of the height of interest or of the height of spending under his proposals. The rate last week is four times the rate that a short time ago he boasted about as being the all-time low. We can never get from the minister any indication that he personally is endeavouring to affect that rate, although we hear from governments and from corporations that this is exceedingly detrimental to their investments and to the creation of jobs and work in our country. This matter I think has had inadequate attention from the minister in every debate. I hope that in this debate we shall finally get some indication of what his intentions are in this respect, particularly with the hope that, on a regional basis at least, where there is an admitted depression in certain sections of our country, some special effort will be made by the administration to relieve the chronic unemployment which is at alarming levels.
With that, Mr. Speaker, I simply want to say that this is the biggest somersault that I can ever recall, with its complete negation of everything that the party in power indicated
Business of the House
to the electorate they stood for, and I think that on Monday afternoon, when the debate resumes, the fullest explanation should be given, and I hope that instead of evading, as the minister sometimes does, the direct question, we will get from him some further detail about the things which were avoided tonight. We have taxes of a great variety proposed to us. It is interesting to find that in one, particularly the increase in the excise taxes on tobaccos, the increase is 25 per cent, because the resolution, as I read it, says that the tax on five cigarettes contained in any package will be increased from 2 cents to 2J cents. That is why I call that 25 per cent. I remind the minister that he was so prominent in the past in warning about the opportunity of diminishing returns with respect to taxes of this nature.
On motion of Mr. Benidickson the debate was adjourned.



BUSINESS OF THE HOUSE

Lionel Chevrier: May I ask what the government intends to do tomorrow?


Mr. Green:: Tomorrow, Mr. Speaker, we shall take the agricultural estimates.


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

[Stage Direction]
The following answers, deposited with the Clerk of the house, are printed in the official report of debates pursuant to standing order 39:

Mr. Bourgel: 1.	During the last five years, has the Department of Transport leased one or more spaces to the government of the province of Quebec, or to one or more of the departments thereof, for the purpose of housing aeroplanes in one or more of its hangars at the Ancienne Lorette airport?
2.	If so, for each year and in each case, what was (a) the area of the space under lease: (b) the number of aeroplanes housed in hangars: (c) the type of each such aeroplane: (d) the terms of the lease and the rental?
Answer by: Hon. George H. Hees (Minister
of Transport):
1.	By lease dated March 1, 1957, the Department of Transport has leased to the department of colonization of the province of Quebec, 18,000 sq. ft. of space in the east half of hangar No. 2 at the Quebec (Ancienne Lorette) airport. The lease runs from year to year and the rental payable to the Department of Transport is $9,360 per annum.
2.	(a) Answered in 1 above, (b) Seven, (c) One Beechcraft (type D-18-E), two Beavers, one Cessna (type T-50), one Cessna (type 180), one Mallard (type G-171), and one Royal Gull, (d) Answered in 1 above.


ARMOURIES RENTAL, DRUMMONDVILLE, QUE.
[Stage Direction]
Question No. 281:-Mr. Boulanger:
1.	Was the armouries at Drummondville rented to any organization on February 7, 1959?
2.	If so. what was the total rental paid by the said organization including any supplemental charges for insurance, etc.?
Answer by: Hon. G. R. Pearkes (Minister of
National Defence):
1. The armoury at Drummondville was rented to L'Association de la Jeunesse de
l'Union Nationale de Drummondville on February 7, 1959.
2. The total rental paid including supplemental charges was $200.38. This amount includes the following:
Rental	 $ 29.88
Insurance coverage	 131.50
Caretakers	 14.00
Cleaners	 10.00
Use of public address system 15.00
Total	 $200.38

Mr. Bourgei: 1.	Did the Department of Transport receive, during the fiscal year 1957-58, an amount of $13,198.64 from the department of colonization of the province of Quebec?
2.	If so, on what account?
Answer by: Hon. George H. Hees (Minister of Transport):
1.	Yes.
2.	Quebec (Ancienne Lorette) airport, as
follows:
Hangar rental	 $10,140.00
Warehousing	 892.14
Rental of office space____	1,752.00
Aircraft handling	 339.50
Sundry services	 75.00

Note: The amount $10,140 shown as hangar rental represents 13 months' rental at the rate of $9,360 per annum.


FRUIT AND VEGETABLE INSPECTORS
Mr. Rouleau: How many fruit and vegetable inspectors are there in the Department of Agriculture for Canada, and how many for each Canadian province?
Answer by: Hon. D. S. Harkness (Minister of Agriculture):
Supervising	Senior
Fruit and Vegetable Fruit and Vegetable Fruit and Vegetable Fruit and Vegetable Inspector	Inspector	Inspector 2	Inspector 1Present	Present	Present	Present	Present Present	Present	Present	Total TotalEst.	Strength Est.	Strength Est.	Strength Est.	Strength	Est.	StrengthPrince Edward Island	
1	1	1	l	6	6	30	28	38	36Nova Scotia	
3	3	3	3	5	5	24	17	35	28New Brunswick	
1	1	3	2	5	5	27	27	36	35Province of Quebec	
3	3	2	2	8	8	7	6	20	19Eastern Ontario	
1	1	2	2	3	3	5	411	10Western Ontario	
7	7	5	5	14	12	46	44	72	68Prairie Provinces	
2	2	1	0	5	5	6	5	14	12British Columbia	
5	5	8	8	7	7	64	54	84	74Total	
310	282
Questions


BUDGET PAPERS
[Stage Direction]
presented by
the Honourable Donald M. Fleming, M.P., for the information of Parliament in connection with the Budget of 1959-60

The Budget-Appendix

[Stage Direction]
The purpose of these Papers is twofold:
1.	to present a general economic review of 1958, bringing together in one
place and in convenient form some of the more comprehensive indicators of economic conditions prepared by the Dominion Bureau of Statistics, the Bank of Canada and other Government Agencies, together with brief comments;
2.	to present a preliminary review of the Government accounts for the
fiscal year ended March 31, 1959.
[Stage Direction]
The Budget-Appendix

[Stage Direction]
Page
1.	National Accounts-
National Income and Product	 59
National Expenditure	  62
Personal Income and its Disposition	 65
Source and Disposition of Saving	 67
Investment and Capital Expenditure	 69
Revenue and Expenditure of All Governments	 72
2.	Balance of International Payments	
773.	Employment and Earnings	
814.	Monetary and Credit Developments	
835.	Price Trends	
87
The tables in this Budget Paper are based upon estimates provided by the Dominion Bureau of Statistics, the Bank of Canada and other Government Agencies. Some of the figures appear for the first time; others have been published elsewhere. All 1958 estimates are preliminary and subject to revision.

The Budget-Appendix THE NATIONAL ACCOUNTS
National Income and Product
In 1958 Canadian gross national production rose by $778 million or by 2| per cent and reached a level of $32.2 billion. Price increases accounted for about four-fifths of this advance in the value of production; the volume of total output was slightly higher than in 1957.
In 1958 for the second year in succession the growth in aggregate physical production fell short of the full growth potential of the economy in terms of the annual increment in the labour force and a further improvement in productivity. However, there was a significant difference between the economic trends of the two years. In 1957 the cessation of the strongly expansionary forces which characterized the preceding period, exerted a depressing influence on overall activity and brought about a downward adjustment in both business expectations and business operations over a wide area of production. During 1958 the volume of output stayed above the low point reached during the winter of 1957-58 and there was mounting evidence in the course of the year that recovery was under way. Although conditions of excess capacity continued to prevail in a considerable number of industries, selective increases in demand occurred and affected a growing number of products. The service industries which had expanded without interruption throughout the period of recession played an important part in providing additional support to the strengthening in economic trends. As a result of these developments and in marked contrast to the same period twelve months earlier, economic activity in the fourth quarter of 1958 rose substantially and the volume of non-farm output at seasonally adjusted annual rates expanded by approximately 2 per cent.
GROSS NATIONAL EXPENDITURE IN CURRENT AND CONSTANT {I 9491D0LLARS
1949 - 1958
BILLIONS OF DOLLARS	BILLIONS OF DOLLARS
[Stage Direction]
The Budget-Appendix
The modest increase for 1958 in total real output did not apply in all sectors of the economy. In the non-agricultural sector, approximate stability prevailed with some decline in commodity production almost balanced by a further increase in the output of services. In agriculture, on the other hand, the expansion was quite pronounced and this accounted for the advance in aggregate real output.
In the goods producing industries output in 1958 continued to rise in construction and the public utilities. The increase in construction was due to record-breaking activity in the residential building field, but the advance was fairly moderate. The gain in output for public utilities was more substantial reflecting the continued growth in population and the rapid rate of resource development in previous years. Mining production was maintained at about the same level as in 1957 and this came about mainly because of sharply rising uranium shipments. The declines in production were concentrated in the forestry industry and in manufacturing. Notwithstanding the improvement in sales of lumber and the upturn in the pulp and paper industry during the latter part of the year, there was a sharp curtailment in logging operations in 1958. In manufacturing both durable and non-durable goods production fell below the 1957 level. The decline in the durable goods sector was quite pronounced, affecting among other commodities transportation equipment as well as iron and steel products. In non-durable goods manufacturing the downward movement was more moderate and in the second half of 1958 a marked recovery in production occurred. The steady upward trend in the service sector has been maintained in recent years despite fluctuations in overall business activity. In 1958 output increased in all service industries except transportation, storage and communication. The advance ranged from a moderate improvement in the retail and wholesale trades to a sizeable expansion in financial and related services.
Non-agricultural employment rose fractionally in 1958 but this was slightly more than offset by the drop in the number of agricultural jobs, and overall employment declined from the level which prevailed in 1957. There was a

[Stage Direction]
-	1955	1956	1957	Prelim. 19581. Wages, salaries, and supplementary labour income.	13,215	(Millions 14,719	of dollars) 15,825	16,1802. Military pay and allowances	394	424	476	4913. Corporation profits before taxes	2,489	2,802	2,505	2,3694. Rent, interest, and miscellaneous investment income	1,748	1,964	2,179	2,3745. Accrued net income of farm operators from farm production1	1,261	1,468	968	1,2026. Net income of non-farm unincorporated business..	1,793	1,937	1,941	2,0797. Inventory valuation adjustment2	-217	-260	-60	-348. National Income (1+2+3+4+5+6+7)	20,683	23,051	23,834	24,6619. Indirect taxes less subsidies	3,238	3,601	3,802	3,82510. Capital consumption allowances and miscellaneous valuation adjustments	3,163	3,515	3,722	3,72511. Residual error of estimate	-14	12	48	-2712. Gross National Product at Market Prices (8+9+10+11)	27,070	30,182	31,406	32,18413. Index of G.N.P. in Constant Dollars	100.0	107.4	107.1	107.9
1 Includes accrued earnings arising out of the operations of the Canadian Wheat Board. * See footnote 2, Table 2.

The Budget-Appendix
further rise in the labour force although the growth of 2.1 per cent in 1958 was much less than in the previous year when the unusually heavy flow of immigrants added a large number of persons to the working force. These trends in the labour market during 1958 were reflected in a higher level of unemployment. The number of persons without jobs and looking for work averaged 6.6 per cent of the labour force in 1958 compared with 4.3 per cent in 1957.
The shifts in production and employment in 1958 were associated with a further rise in earned incomes. The expansion of over 3 per cent in national income was approximately the same as the advance in 1957. Except for corporate profits there was a gain in all the major income groups and the improvement was particularly marked for unincorporated business, both in the farm and non-farm sectors. In 1957 labour income was up by 7\ per cent or considerably in excess of the rate of increase in national income, whereas in 1958 the rise in salaries and wages was less than the expansion in national income and amounted to about 2 per cent. The advance in labour income failed to keep pace with the rise in consumer prices and there was consequently a small decline in real income per capita. After some hesitation in the winter of 1957-58, aggregate wages and salaries rose slowly but steadily in each succeeding quarter and at the end of 1958 labour income was $544 million or 3 per cent above the level twelve months previously. An improvement in rates of pay as well as some increase in the number of paid workers during 1958 contributed to this effect. There was a decline from 1957 in the average number of hours worked per week.
In 1958 corporation profits fell by $136 million or by 5 per cent to a level of $2,369 million. The year-over-year decline, although less than the drop of 11 per cent in 1957, provides no indication of the recovery which occurred in the course of 1958. The downward trend in corporate profits which prevailed throughout 1957 came to a halt in the summer of 1958. Corporate profits gained moderately in the succeeding quarter and expanded by 8 per cent in the fourth quarter of 1958. This reflects a significant change in underlying business conditions brought about by a more favourable cost structure and by an improvement in sales affecting a growing number of industries.
Corporate profits are a sensitive indicator of the changing tempo of economic activity whereas other investment income, such as income from rentals and interest payments, follows a more stable pattern and tends to reflect more accurately the growth in the value of Canadian assets. As a result of the steady expansion over the years, income from these latter sources in 1958 reached a level of $2,374 million and exceeded corporate profits for the first time since 1934. Higher shelter costs and rising interest rates contributed to the gain of $195 million or 9 per cent in 1958.
Accrued net farm income, after a sharp decline in 1957, recovered substantially in 1958 and rose by $234 million or 24 per cent. The size of the wheat harvest was not substantially different from 1957 and the slight increase in crop production was mainly due to the expansion in coarse grains. The major part of the improvement in agricultural income was a result of higher returns from livestock and animal products. Output and prices for some products, particularly for cattle, were significantly higher than in 1957. Farm cash income which had declined moderately in the previous year rose by 8 per cent in 1958 to a level of $2,808 million. The total for 1958 was less than 2 per cent below the all-time high reached in 1952. In the years since 1952, the agricultural labour force has declined by almost one-fifth and, as a consequence, farm cash income on a per capita basis was at a record level in 1958.
Net income of non-farm unincorporated business which remained practically stable in 1957 showed a fairly substantial advance in 1958. The increase of 7 per cent was about double the rate of expansion for national income and earnings in this sector reached a level of $2,079 million. Although corporation
[Stage Direction]
The Budget-Appendix profits were $290 million higher than income of non-farm unincorporated business, this difference was markedly smaller than in most years since 1946. Most of the advance in unincorporated business income during 1958 was a result of the pronounced improvement in earnings from construction. There were further modest gains in the service and trade sectors.
National Expenditure
In 1957 there was a lessening in the tempo of activity abroad but the impact of this on the Canadian economy was eased during 1958 by the strong recovery in the United States and by the expansionary measures taken in a number of countries, including European countries which had experienced a notable improvement in their foreign exchange reserves. The level of Canadian exports was well maintained and consumption expenditures continued to rise steadily. Larger government outlays, particularly in the form of higher transfer payments, compensated to an important extent for the fall-off in purchasing power elsewhere. Record expenditures on residential housing tended to offset a large part of the decline in business capital investment. These developments were accompanied by further adjustments, some of which began in 1957 in response to less favourable economic conditions. Efforts were made to bring costs more closely in line with current levels of plant operations. Commodity imports declined sharply in late
1957	and early 1958 and a larger proportion of Canadian requirements was supplied from domestic sources. The liquidation of business inventories had largely run its course by the end of 1958 and a better balance prevailed in stock-sales ratios. Upward price movements were somewhat less pronounced than in 1957 and selective declines took place over a wide area in 1958.
Personal expenditures on consumer goods and services rose by 5 per cent in
1958	compared with 6 per cent in 1957 and 7 per cent in 1956. Although the upward movement in expenditures slowed down over the last three years, consumer outlays played a progressively more important role in stabilizing overall activity and the demand from this source accounted for a rising proportion of total final purchases. In 1956 and 1957 consumer demand absorbed one-third and one-half respectively of the increase in total final purchases. In 1958 the expansion in consumer outlays was equal to $945 million whereas the rise in aggregate final demand was less than this mainly because of the decline in capital investment.
Consumer expenditures advanced without interruption throughout 1958. Although the expansion was quite modest during the first nine months of the year, this was followed at the end of 1958 by an increase of 3 per cent, the largest since the second quarter of 1952. Consumer expenditures in the fourth quarter of 1958 rose, seasonally adjusted at annual rates, by $660 million to a level of $21.3 billion or about 6 per cent above the level in the same period of 1957. Prices for consumer goods and services advanced by 2| per cent in 1958 or less than in 1957 when the increase amounted to about 3| per cent. The expansion of 2 per cent in the volume of consumption was slightly less than the rate of growth in population and there was for the second year in succession a small decline in real per capita consumption.
In both years, 1957 as well as 1958, government expenditures on goods and services rose by about 7 per cent. The increase of $382 million in 1958 brought outlays for all three levels of government to almost $6 billion. The expansion in this component of gross national expenditure tended to offset a substantial part of the decline in total final demand which took place in other sectors of the economy. Civilian expenditures by governments increased somewhat faster than total outlays because there was a further decline in defence costs. The expansion in capital investment for all levels of government combined was particularly pronounced and the rise of 10 per cent differed sharply from the downward trend in business capital formation.

The Budget-Appendix
Business capital expenditures (including housing) after reaching a record level of $7.3 billion in 1957 declined by $436 million or 6 per cent in 1958. The drop in the volume of capital investment was somewhat more pronounced since prices continued to rise although the advance of 2 per cent was less than the increase in 1957. Notwithstanding the downward shift in the year-over-year comparison there was some improvement in the trend of capital outlays during 1958. In the previous year investment expenditures reached a peak in the first quarter and subsequently decreased without interruption to a low point in the first quarter of 1958. However, capital outlays remained approximately stable during the last three quarters of 1958.
In 1958 the movement in the various components of capital investment was different from the pattern established in the previous year. In 1957 investment in non-residential construction as well as in machinery and equipment expanded on a year-over-year comparison, whereas residential construction declined. In 1958 there was an increase in housing construction and the extremely rapid growth tended to offset almost one-half of the decline in the other two components of capital investment.
Following the decline of 8 per cent in 1957, expenditures on residential construction in 1958 rose by $353 million or 25 per cent and reached a level of $1.8 billion. Taking into account the rise in prices, house building, in real terms, expanded by 22 per cent in 1958. Governmental action, particularly the large-scale provision of loan funds, played an important role in bringing about the strong

[Stage Direction]
-	1955	1956	1957	Prelim. 19581. Personal expenditure on consumer goods and services	17,464	(Millions 18,697	of dollars) 19,768	20,7132. Government expenditure on goods and services..	4,780	5,266	5,612	5,994current expenditure	3,746	4,006	4,230	4,476gross fixed capital formation	1,034	1,260	1,382	1,5183. Business gross fixed capital formation1	5,210	6,774	7,335	6,899new residential construction	1,378	1,526	1,409	1,762new non-residential construction	1,848	2,589	3,103	2^813new machinery and equipment	1,984	2,659	2,823	2,3244. Value of physical change in inventories-total2	281	815	142	-386non-farm business inventories	102	545	243	-216farm inventories	199	242	-152	-138grain in commercial channels	-20	28	51	-325. Exports of goods and services3	5,764	6,339	6,394	6,2986. Imports of goods and services3	-6,443	-7,697	-7,796	-7,3617. Residual error of estimate	14	-12	-49	278. Gross National Expenditure at market Prices (1+2+3+4+5+6+7)	27,079	30,182	31,406	32,1849. Index of G.N.E. in Constant Dollars	100.0	107.4	107.1	107.9
1 Includes private businesses and institutions, and publicly owned public utilities.
«4 *Th«boek val.ue °* inventories is deflated to remove the effect of price changes and the derived physical change is then valued at average prices of the current period to obtain the value of physical change. The difference between this value of physical change and the change in book value is called the inventory valuation adjustment (see line 7, Table 1).
! Minor adjustments have been made to the figures of current receipts and payments shown in Table 10 and in "The Canadian Balance of International Payments, 1955 to 1958", Dominion Bureau of Statistics, to achieve consistency with the other component series.
66968-9-156
[Stage Direction]
The Budget-Appendix revival in house building. Shortly after the introduction of these measures in 1957, housing starts rose notably and in the fourth quarter reached a new high of over 145,500 units, at annual rates and seasonally adjusted. Throughout 1958 government funds continued to be made available for house building and in addition easier conditions prevailed in the private mortgage market. These developments on the supply side and the strong demand for housing, supported by the uninterrupted rise in personal incomes, led to a record-breaking rate of activity in construction. Housing starts in 1958 amounted to 164,632 units compared to 122,340 units in 1957 and the previous high of 138,276 units in 1955. Housing completions in 1958 amounted to 146,686 units compared to 117,283 units in 1957 and the previous record of 135,700 units in 1956.
The extraordinary capital investment boom in recent years brought about a large-scale expansion in non-residential construction and expenditures in this field rose by 40 per cent in 1956 and by 20 per cent in 1957. This development reached its peak in the third quarter of 1957. In the succeeding five quarters there was a fairly continuous decline in outlays from the record level of $3.1 billion and the drop over this period amounted to $472 million. For 1958 as a whole nonresidential construction declined by 9 per cent below the level in the previous year but outlays remained the highest on record except for 1957. Prices in this sector rose by one per cent in 1958 compared to the increase of 3 per cent in the previous year.
Investment in machinery and equipment rose to a peak of $3.1 billion in the first quarter of 1957 and followed a sharply declining trend during the succeeding four quarters. Relatively more stability prevailed during the remainder of 1958 and the year ended on a somewhat stronger note with expenditures rising by 2 per cent in the fourth quarter. For 1958 as a whole this component of business capital investment declined by $499 million or 18 per cent below the average level in 1957. Since prices rose by about 3 per cent in 1958, the drop in the volume of investment in machinery and equipment was somewhat larger and amounted to about 20 per cent. A large part of the fall in requirements was reflected in lower imports.
In contrast to the increase in inventories of $142 million in 1957 there was a reduction in stocks held both in the farm and non-farm sectors in 1958 and total inventories declined by $386 million. Farm inventories, including grain in commercial channels, fell by $170 million or substantially more than in 1957. In both years the disposal of wheat was in excess of below average crops and effectively reduced the high stocks accumulated during the previous period when a series of bumper harvests went together with some weakening in overseas markets. Moreover, the market for cattle, particularly in the United States, began to expand rapidly in the second half of 1957 and the high level of demand for Canadian supplies, which continued during 1958, was met in part from sales out of inventories. The movement in non-farm business inventories was different over the two-year period and the accumulation in stocks of $243 million in 1957 was followed by a decline of $216 million in 1958. The swing from heavy inventory accumulation in the first half of 1957 to substantial liquidation in the first half of 1958 was particularly pronounced. The turnabout of $920 million at annual rates during this period acted as an offset to overall demand equal to almost 3 per cent of gross national expenditure. During the second half of 1958, however, there was a reversal of the trend in business inventories and stocks rose by $32 million, at annual rates, in contrast to the reduction of $464 million for the first six months of the year. These developments during the course of 1958 indicate that stocks moved closely in line with current levels of economic activity and as a result there was a cessation of the downward effect exerted by the rapid adjustment in business inventories earlier in the year. In 1958 price increases for some components of business inventories were largely

The Budget-Appendix
offset by declines elsewhere. It is estimated that in physical terms business inventories declined by about 2 per cent in 1958.
Inventory changes can occur quickly and these movements can bring about large additions or large offsets to total final demand. While fluctuations in this component are an important factor in determining the level of economic activity, the changes are of a short-run nature and tend to hide the more fundamental trend underlying the current situation. Excluding inventory changes, aggregate demand affecting both domestic production and foreign production rose by about three-quarters of a billion dollars or by 2 per cent in 1958. Since imports declined by $435 million, the increase in total final demand for 1958 which was met from Canadian production actually amounted to about $1.2 billion or close to 4 per cent. This indicates the extent to which the burden of the adjustment in the Canadian economy during 1958 was shifted to foreign sources of supply.
In 1958 exports of goods and services were 1§ per cent below the level in the previous year. Since prices declined somewhat there was actually an expansion of one per cent in the volume of exports in 1958. With only a small increase in prices, imports of goods and services in 1958 fell both in volume and value terms by about 6 per cent. As a result of these trends Canada's deficit on current account was substantially lower than in 1957.
Personal Income and its Disposition
Personal income differs from national income in a number of ways although the components of these two totals are for the most part similar or identical. While national income is the total of the annual earnings of Canadian residents from the production of goods and services, personal income is the sum of the current receipts of income regardless of whether these receipts are earnings from production. For example, personal income includes only that part of corporation profits which is actually received by Canadian persons as dividends. On the other hand, transfer payments, such as family allowances, old age pensions, veterans' benefits and charitable contributions of corporations, are part of personal income although they are not payments for services and, therefore, do not form part of national income.

[Stage Direction]
1955	1956	1957	Prelim. 1958
		(Millions of Dollars)		
1. Wages, salaries and supplementary labour income..	13,215	14,719	15,825	16,180
Deduct: Employer and employee contributions				
to social insurance and government pension				
funds	-449	-490	-547	-5682. Military pay and allowances	394	424	476	4913. Net income received by farm operators from farm	production1	1,197	1,44S	974	1,2064. Net income of non-farm unincorporated business...	1,793	1,937	1,941	2,0795. Interest, dividends and net rental income of persons2	1,911	2,125	2,358	2,5386. Transfer payments to persons	(a) from government (excluding interest)	1,731	1,765	2,083	2,628(b) charitable contributions made by corpora-	tions	28	30	32	327. Personal Income (1+2+3+4+5+6)	19,820	21,958	23,142	24,5861	Excludes accrued earnings arising out of the operations of the Canadian Wheat Board,2	Includes all government debt interest paid to persons.
66968-9-156£
[Stage Direction]
The Budget-Appendix
In 1958 all components of personal income expanded and the total rose by 6 per cent or somewhat faster than in 1957 to a level of $24.6 billion. The growth of $1,444 million in 1958 was $617 million in excess of the advance in national income and this was the second year in succession when greater buoyancy prevailed in personal income. The difference in the upward movement came about mainly as a result of disbursements made by governments. Transfer payments, which are not part of national income, rose very rapidly in 1958 and this increase contributed about 38 per cent to the expansion in personal income. Larger unemployment insurance and welfare payments as well as increased disbursements to farmers were instrumental in bringing about the advance of $545 million or 26 per cent in government transfer payments. This component accounted for about 11 per cent of personal income in 1958 and exceeded investment income which had previously ranked second in importance next to wages and salaries.
Compared to the previous year Canadians in 1958 saved more but spent less out of each dollar of income on consumer goods and services and similarly paid out less in direct taxes. The yield from succession duties and miscellaneous direct taxes remained practically unchanged from the level in the previous year and the decline in total personal direct taxes in 1958 was due to lower receipts from the personal income tax. Revenues from this latter source fell by $136 million or 8 per cent in contrast to the advance of $195 million or 13 per cent in 1957. The decline in yield came about despite the further rise in incomes and was a result of the reduction in tax rates which went into effect in 1957 and 1958.

[Stage Direction]
In 1958 personal disposable income, or income after payment of taxes, rose by 7 per cent compared with an increase of 5 per cent in 1957. The expansion of $1,574 million in disposable income in 1958 was about half as large again as the rise of $997 million in the previous year. About two-thirds of this increase in disposable income was used for the purchase of additional consumer goods and services, while the remainder took the form of higher personal saving. The level of personal saving is related directly to changes in assets and liabilities

The Budget-Appendix
such as variations in inventories, in holdings of liquid assets, in contractual payments for life insurance and in outstanding consumer debt, mortgage debt as well as loans from banks and other financial institutions. For example, in recent years the increase in personal assets has been offset to a considerable extent by increased consumer credit. In 1958 there was a further expansion in consumer credit but the increase was quite small. In 1958 saving out of current income rose by $629 million or from $1,467 million to $2,096 million. The increase in personal saving exclusive of the change in farm inventories was about twice as large as in the previous year. Personal saving exclusive of saving in the form of farm inventories amounted to 9.8 per cent of disposable income in 1958 compared with 7.6 per cent in 1957 and 6.4 per cent in 1956.

[Stage Direction]
1955	1956	1957	Prelim. 1958Personal direct taxes- (a) income taxes	1,297 127 67	(Millions 1,495 146 79	>f Dollars) 1,690 127 90	1,554 124 99(b) succession duties	(c) miscellaneous taxes	Total direct taxes	1,491	1,720	1,907	1,777Personal expenditure on consumer goods and services- Goods- (a) non-durable	8,879 2,284 6,301	9,552 2,406 6,739	10,021 2,414 7,333	10,462 2,490 7,761(b) durable	Services	
17,464	18,697	19,768	20,713
Personal saving- (a) personal saving excluding farm inventories.				
	666 199	1,299 242	1,619 -152	2,234 -138
				
	865	1,541	1,467	2,096
Personal Income (1+2+3)					
	19,820	21,958	23,142	24,586
				
All main categories of consumer expenditures expanded in 1958. Consumer expenditures for durable goods rose more than in the previous year while outlays for non-durable goods and for services increased somewhat less than in 1957. The growth of $441 million or 4 per cent in purchases of non-durable goods affected a large number of products including foodstuffs, tobacco and clothing. Expenditures for durable goods, which had remained largely stable in 1957, increased bv $76 million or 3 per cent in 1958. The expansion was particularly pronounced in the fourth quarter of 1958 when an advance of 8 per cent brought total outlays to a level $248 million higher than in the same period twelve months earlier. The major factor was the sharp rise in sales of new motor cars. Outlays on services in 1958 rose by $428 million or 6 per cent compared with the advance of $594 million or 9 per cent in 1957.
Source and Disposition op Saving
Saving may be divided into three parts. In addition to personal saving, which is discussed in the preceding section, there are business saving and government saving.
[Stage Direction]
The Budget-Appendix
In 1958 business saving declined slightly more than in the previous year and there was a large deficit instead of a surplus on government account. As a result of this and notwithstanding higher saving in the personal sector, the nation's total saving fell by $549 million or 9 per cent in 1958 compared with a drop of $193 million or 3 per cent in 1957.

[Stage Direction]
-	1955	1956	1957	Prelim. 1958
		(Millions of dollars)		
Personal saving	865	1,541	1,467	2,096Business gross saving-total	4,106	4,547	4,519	4,488(a) Undistributed corporation profits	879	1,012	803	767(b) Depreciation allowances	3,163	3,615	3,722	3,725(c) Adjustment on grain transactions1	64	20	-6	Inventory valuation adjustment	-217	-260	-60	-34Adjusted government surplus (+) or deficit (-)2	86	379	52	-1,046Residual error of estimate8	-14	12	48	-27Total	4,826	6,219	6,026	5,4771	Accrued earnings arising out of operations of the Canadian Wheat Board.2	See Table 9.3	See Tables 1 and 2.
Government saving is represented by the surplus of revenues over expenditures for all three levels of government combined. In 1957 saving by governments amounted to $52 million but in 1958 there was a deficit and expenditures exceeded revenues by $1,046 million. These figures are calculated in accordance with National Accounts practice and reflect the adjustment of federal receipts to place corporate tax revenue on an accrual basis. Excluding the effect of this adjustment, which has no significance from a cash standpoint, government saving in 1957 actually amounted to $292 million while the deficit in 1958 amounted to $926 million. The change in government accounts from a surplus to a deficit over the two-year period represented an offset to the nation's total saving equal to about twice the increase in personal saving in 1958. Almost all of this change took place in the federal accounts. As in the previous year, there was an excess of expenditures over revenues on the provincial and municipal levels taken together but the deficit was substantially unchanged from the level in 1957.

[Stage Direction]
-	1955	1956	1957	Prelim. 1958Business gross fixed capital formation	5,210	(Millions 6,774	}f dollars) 7,335	6,899Value of physical change in inventories	281	815	142	-386Surplus (+) or deficit (-) on current account with non-residents1	-679	-1,358	-1,402	-1,063Residual error2	14	-12	-49	27Total	4,826	6,219	6,026	5,4771	Minor adjustments have been made to the figures appearing in Table 10.2	See Tables 1 and 2.
The Budget-Appendix
The largest part of the nation's saving arises in the form of funds set aside bybusiness enterprises for future expansion or re-equipment. In 1958 business saving declined by $31 million to a level of $4,488 million. Depreciation allowances, the largest item in this total, remained stable in 1958, but there was a further drop in undistributed corporate profits. This component of business saving declined by $36 million in 1958 compared to a decrease of $209 million in 1957. In both years the reduction in retained earnings showed the effects of a lower level of corporate profits. The moderation in the decline of undistributed corporate profits in 1958 was mainly related to changes in the amount of dividends paid out which rose by $82 million in 1957 but fell by $58 million in the following year.
In 1958 the deficit on Canada's international current account amounted to $1,063 million, a decline of about 24 per cent from the record deficit in 1957. The imbalance on current account was more than matched by the inflow of capital from abroad and there was a sizeable increase in Canada's reserves of foreign exchange. The net inflow of capital in the form of direct investment and as a result of security transactions was smaller than in 1957 but remained at a relatively high level. As in the preceding two years, proceeds from security transactions were the most important source of external capital. These transactions are treated more fully in the section on the International Balance of Payments.

[Stage Direction]
-	1955	1956	1957	Prelim. 1958
		(Millions of Dollars)		
Corporation profits before taxes including dividends				
paid to non-residents1	2,884	3,240	3,009	2,820Deduct: corporation income tax liabilities	-1,280	-1,430	-1,320	-1,225Excess of tax liabilities over collections	170	58	-240	-120Tax collections	1,110	1,372	1,560	1,345Corporation profits after taxes	1,604	1,816	1,689	1,595Deduct dividends paid out2	-725	-804	-886	-828Undistributed corporation profits3	879	1,012	803	7671	Includes depletion charges and is adjusted for losses, and for conversion to a calendar year basis.2	Includes charitable contributions made by corporations (See Table 3).3	See Table 5.
Investment and Capital Expenditures
The rapid growth of capital investment during the postwar period was interrupted in 1954 and again in 1958. Although total private and public capital expenditures declined by $300 million or more than 3 per cent in 1958, outlays were higher than in any other year except 1957. The total amounted to $8,417 million, a level more than one-third larger than in 1955 when the extraordinary investment boom of recent years got under way. Between 1955 and 1956 total capital expenditures as a proportion of gross national expenditure rose from 23.1 per cent to 26.6 per cent, a significant increase in the importance of investment activities in the Canadian economy. In 1958 capital outlays undertaken in all sectors constituted 26.2 per cent of gross national expenditure and, measured by this ratio, investment expenditures continued to underpin overall demand with much the same strength as in 1956.
[Stage Direction]
The Budget-Appendix

[Stage Direction]
1957	1958
1955

[Stage Direction]
The decline from 1957, when spending on capital facilities accounted for 27.8 per cent of total expenditures, was a result of diverse trends in the major components of capital investment. Business capital outlays fell by $813 million or 14 per cent in 1958 in contrast to the advance of $650 million or 13 per cent in the previous year. This downward movement reflects in part the completion of some of the large resource development projects undertaken in recent years. To some extent business investment intentions have also been affected by the existence of excess capacity, particularly in the forestry and mineral products industries, and by the slower growth in economic activity both at home and abroad. On the other hand, expenditures on social investment facilities including housing rose in 1958 by $513 million or 17 per cent, a significant increase over 1957 when outlays in these sectors expanded by $31 million or one per cent. The renewed strength in housing, which began to exert a pronounced effect on investment activity in the latter part of 1957, accounted in 1958 for about two-thirds of the growth in investment in these fields. In 1958 combined capital investment in housing and social facilities was equal to about 43 per cent of total capital spending compared with 35 per cent in 1957.
For the economy as a whole the changed pattern of capital outlays involved a further expansion in construction and a sharp fall in requirements for machinery and equipment. Expenditures on construction were $171 million or 3 per cent higher than in 1957 while purchases of machinery and equipment were $471 million or 16 per cent below the level in the previous year.
Except for agriculture and the service group, all major components of business capital investment were affected by the decline in outlays in 1958. In the primary sector, capital expenditures, which had remained approximately stable in 1957, fell by $224 million or 21 per cent in 1958. Although the decline in forestry was somewhat more than offset by the expansion in agriculture, investment in this sector was substantially lower than in 1957 because of sharply

The Budget-Appendix
reduced spending on mining, oil and gas well exploration and development. The total for this group, which almost doubled between 1955 and 1957, dropped by $244 million or 40 per cent in 1958.
The largest decline occurred in outlays for manufacturing and this accounted for almost one-half of the fall in total business capital investment in 1958. The decline was spread over a large number of industries but was particularly pronounced in the paper products industry as well as the metal and mineral groups. Notwithstanding some moderate increases in the food and tobacco industries and in the petroleum products group, total investment in manufacturing dropped by $397 million or 27 per cent in 1958 in contrast to the advance of $85 million or 6 per cent in 1957.
In 1957 the growth of $546 million in investment outlays by utilities accounted for the major part of the expansion in total business capital investment. In 1958 expenditures in this field fell by $173 million or 8 per cent to a level of $2,135 million. Heavy declines occurred in outlays for the generation of electricity and for railway transportation. Extension of the telephone and gas distribution networks continued in 1958 and there were higher outlays for water transportation but the increase in expenditures for these purposes was relatively moderate.

[Stage Direction]
-	1955	1956	1957	Prelim. 1958
		(Millions	of dollars)	
Agriculture and fishing	426	488	434	469Forestry	63	76	48	33Mining, quarrying and oil wells	336	542	606	362Manufacturing	947	1,394	1,479	1,082Electric power, gas and water works	
Transportation, storage and communications	515	769	947	861621	993	1,361	1,274Construction industry	174	200	158	133Trade, finance and commercial services	561	611	690	693Institutions	408	402	454	490Housing	1,397	1,547	1,430	1,781Government departments	796	1,012	1,110	1,239Total Capital Expenditure1	6,244	8,034	8,717	8,417Total Capital Expenditure as a percentage of Gross National Expenditure	
Index of total Capital Expenditure in Constant Dollars	23.1	26.6	27.8	26.2100.0	122.0	126.8	120.2
1 For reconciliation with Business Gross Fixed Capital Formation in housing, plant and equipment in Table 2, see below.
1955	1956	1957	Prelim. 1958Private and Public Capital Expenditure-Table 8	
Deduct: Provincial hospitals and schools, and municipal schools Government housing excl. C.M.H.C. rental housing... Direct government department outlays	
Other	6,244 213 19 796 6	(Millions of dollars) 8,034 8,717 222 246 21 21 1,012 1,110 5 5	8,417 255 19 1,239 5Business Gross Fixed Capital Formation in Housing, Plant and Equipment-Table 2	5,210	6,774	7,335	6,899
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In the service sector, total capital expenditures in 1958 remained at approximately the same level as in the previous year. Stability came about as a result of offsetting trends, with higher outlays for the financial and related groups on the one hand and lower capital spending by the wholesale and retail trades as well as commercial institutions on the other hand.
In 1958 the largest expansion in capital spending took place in housing and the increase in outlays amounted to $351 million or 25 per cent. Investment in social capital facilities rose by $162 million or 10 per cent in 1958, an increase comparable to the advance in 1957. The major part of this expansion in 1958 came about as a result of the growth of $129 million in capital expenditures by government departments. Investment in this field increased faster than in 1957, whereas capital outlays by institutions, which rose by $36 million in 1958, advanced at a somewhat slower pace than in the previous year. There were further and substantial additions to university facilities together with a fairly pronounced increase in investment expenditures for hospitals and moderately higher outlays for schools as well as churches.
Revenue and Expenditure op All Governments
This section includes only those government transactions which have relevance for the National Accounts, and consequently the surpluses or deficits shown here differ from those shown in the various public accounts. In particular, corporate taxes have been adjusted to an accrual basis. In the calendar year 1957 the adjustment was large and reduced revenues by $240 million. In 1958 the adjustment was much smaller and reduced revenues by $120 million. Exclusive of this adjustment which has no relevance from a cash standpoint, the surplus for all levels of government in 1957 actually amounted to $292 million while the deficit in 1958 amounted to $926 million. This shift from a substantial surplus to a large deficit, which began during 1957 and reached a peak in the second quarter of 1958, had a sharp impact on the economy and was a significant factor in support of economic recovery. The deficit in 1958 was equal to the addition of about 3 per cent to overall demand.
The greater part of the deficit arose in the federal accounts. In the calendar year 1958 federal expenditures increased by $739 million or 14 per cent while federal receipts, exclusive of the adjustment for the accrual of corporation taxes mentioned above, declined by $473 million or 8 per cent. As a result there was a deficit of $745 million in contrast to the surplus of $467 million in 1957. On the combined provincial and municipal levels, expenditures rose by $401 million or 11 per cent while revenues increased by $395 million or 11 per cent and the deficit amounted to $181 million in 1958 compared with $175 million in 1957.
The economic effects of fiscal operations are not determined solely by revenues and expenditures. The expansionary or restrictive influence of governmental operations depends in part on changes in loans and investments. In this sector the federal accounts in 1958 also exerted a substantial and positive impact on the economy since payments in respect of loans and investments exceeded receipts by a large margin.
Approximately 60 per cent of total expenditure at all three levels of government was made for purchases of goods and services in 1958. The expansion in total outlays on goods and services was about the same as in 1957 and amounted to $382 million or 7 per cent. The increase in federal expenditures accounted for about 29 per cent of the overall growth. The fairly moderate advance in the federal share came about because of different trends in defence and non-defence outlays. Defence expenditures fell in 1958 by $109 million or 6 per cent and this decline offset one-half of the substantial rise in federal civilian outlays. In the two years since 1956 defence expenditures have declined by 8 per cent and reached a level of $1,659 million, the lowest since 1951, while total expenditures on all levels of government have risen by about 22 per cent to a high of $10,199 million.

The Budget-Appendix
As a result defence costs played a progressively less important role in the budgetary structure and in 1958 absorbed 16 per cent of combined government expenditures comparec} with 22 per cent in 1956. Federal civilian outlays on goods and services rose rapidly in 1958 and the expansion of $218 million or 23 per cent was more than double the growth in 1957. The total amounted to $1,172 million in 1958 and accounted for about one-fifth of overall expenditures on goods and services by all governments. In 1958 the increase in outlays on goods and services by provincial and municipal governments was only slightly less than in the previous year and amounted to $273 million or 9 per cent. The total accounted for about 53 per cent of overall expenditures on goods and services by all governments in 1958. At the federal level as well as the provincial and municipal levels, there was a marked growth in investment outlays in 1958 and this reflects the continuing backlog of demand for social capital facilities.

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PERCENT	PERCENT
1949	1950	1951	1952	1953	1954	1955	1956	1957	1958
In the years since 1945 total expenditures for all governments combined rose by 96 per cent while transfer payments more than tripled during the same period. The expansion in this category of governmental outlays was particularly rapid in 1958 and the total advanced by $596 million or 21 per cent compared with the increase of $336 million or 14 per cent in 1957. The growth in federal transfer payments accounted for about three-quarters of the overall expansion in 1958. Federal outlays which began to rise significantly in 1957 expanded approximately twice as fast in 1958 and reached a level of $2,440 million, about 24 per cent higher than in 1957. The legislative changes introduced in 1957 to bring about more generous social security benefits, including higher family allowances and larger old age pensions, were in effect for only part of that year but resulted in substantially increased payments for the full twelve months of 1958. The growth in the number of persons receiving the bulk of social security payments also contributed to the rise in total disbursements. In addition, a special acreage payment to Western grain farmers was made in 1958. However, higher unemployment was, as in the previous year, the most important factor in the expansion of federal transfer payments and led to significantly larger disbursements from the unemployment insurance fund.
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[Stage Direction]
-	1955	1956	1957	Prelim. 1958
		(Millions	)f Dollars)	
Government Revenue-				
Direct Taxes-Persons		1,491	1,720	1,907	1,777
Income-				
Federal	1,269	1,461	1,652	1,509Provincial and Municipal	28	34	38	45Succession Duties-	Federal	55	88	69	70Provincial	72	58	58	54Miscellaneous-	Federal	1	1	1	1Provincial and Municipal	66	78	89	98Direct Taxes-Corporations	1,280	1,430	1,320	1,225Income-	Federal	1,218	1,353	1,106	980Provincial	62	77	214	245Other Direct Taxes-	Withholding taxes-Federal	67	68	83	48Indirect Taxes	3,317	3,722	3,910	3,957Federal	1,744	1,972	1,990	1,912Provincial and Municipal	1,573	1,750	1,920	2,045Investment Income	742	819	824	920Federal	267	315	268	294Provincial and Municipal	475	504	556	626Employer and Employee Contributions to Social	Insurance and Government Pension Funds	449	490	547	568Federal	310	347	376	378Provincial and Municipal	139	143	171	190Transfers from Other Governments-	Provincial and Municipal	450	481	520	658Total Revenue	7,796	8,730	9,111	9,153Federal	4,931	5,605	5,545	5,192Provincial and Municipal	2,865	3,125	3,566	3,961
The Budget-Appendix
TABLE 9-Concluded

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1956
Prelim.
Government Expenditure-
(Millions of dollars)
Goods and Services	4,780	5,266	5,612	5,994Federal- Defence	1,756	1,800	1,768	1,659Non-defence	742	871	954	1,172Provincial and Municipal	2,282	2,595	2,890	3,163Transfer Payments	2,401	2,483	2,819	3,415Federal	1,720	1,740	1,970	2,440P/ovineial and Municipal	681	743	849	975Subsidies	79	121	108	132Federal	75	118	106	128Provincial and Municipal	4	3	2	4Transfers to Other Governments- Federal	450	481	520	658Total Expenditure	7,710	8,351	9,059	10,199Federal	4,743	5,010	5,318	6,057Provincial and Municipal	2,967	3,341	3,741	4,142Surplus (+) or Deficit (-)	86	379	52	-1,046Federal1	188	595	227	-865Provincial and Municipal	-102	-216	-175	-181Total Expenditure plus surplus (or minus deficit).	7,796	8,739	9,111	9,153Federal	4,931	5,605	5,545	5,192Provincial and Municipal	2,865	3,125	3,566	3,961
1 Reconciliation with Public Accounts Surplus or Deficit shown below.
1955	1956
Prelim.
Federal Government calendar year surplus for national accounts purposes	
Adjustments:
Difference between calendar and fiscal year	
Difference between corporation tax accruals and
government receipts	
Revenue items omitted	
Reserves, write-offs and similar items omitted from
expenditure	
Shipment of military equipment to NATO countries
less replacement	
Extrabudgetary funds for pensions and social insurance
(net)	
Adjustment to place debt interest on a "due date" basis Other adjustments	
Federal surplus for fiscal year as per public accounts.
(Millions of dollars)
+188	+595	+227	-865-11	-305	+73	+409-170	-58	+240	+120+21	+37	+68	+22-110	-137	-249	-223+2	+22	+32	+188-30	-151	-69	+267+7	+8	-12	-24-49	-44	-52	+68-152	-33	+258	-38(1954-55)	(1955-56)	(1956-57)	(1957-58)
The Budget-Appendix In 1958 federal transfer payments accounted for about 40 per cent of total federal government expenditures compared with 37 per cent in 1957. At the provincial and municipal levels transfer expenditures are relatively less important and accounted for about 23 per cent of total outlays in each of the years 1957 and 1958. Disbursements by provinces and municipalities were $126 million or 15 per cent higher than in 1957 and reached a level of $975 million. Larger grants to private non-commercial institutions absorbed about one-half of the expansion in 1958.
The increase in federal subsidies in 1958 came about mainly because of the higher cost of the agricultural stabilization programme. Federal transfers to other governments rose sharply in 1958 and reached a level of $658 million. The advance of 27 per cent compares with increases of 8 per cent in 1957 and 7 per cent in 1956. Several factors contributed to the rapid growth in 1958. There was a substantial increase in tax rental payments to the provinces. Moreover, the Atlantic Provinces' Adjustment Grant was instituted by the federal government in 1958. In addition, federal participation in provincial hospital insurance schemes began in 1958 and the federal share in the cost of this programme led to a sizeable expansion in payments to the provinces.
On the revenue side, taking into consideration all levels of government, the yield from direct taxes declined in 1958 and this was partially offset by the slight rise in receipts from indirect taxes, the continued expansion in investment income and the further growth in contributions to social funds. The drop in direct personal tax revenue was mainly due to lower payments under the federal personal income tax. Yields from this revenue source declined by $143 million or 9 per cent in 1958 in contrast to the increase of $191 million or 13 per cent in 1957. The difference in the trends for the two years was largely due to reductions in tax rates and came about notwithstanding the rise in personal incomes.
Federal cash receipts from corporation income taxes rose moderately in 1957 and reached a level of $1,346 million. In 1958 federal revenues dropped sharply to a level of $1,100 million. In both years there was a pronounced decline in corporate earnings but in 1957 revenues continued to expand and advanced by $51 million whereas in 1958 federal receipts fell by $246 million. The major factor underlying the diverse movements in the two years was the lag between corporate earnings on the one hand and corporate tax payments on the other hand. Thus, the drop in corporate earnings from the high level of 1956 was only gradually reflected in tax revenues received during the intervening period. In 1958 there was a rise of $31 million or 15 per cent in revenues from the corporate income tax levied by Ontario and Quebec. The Ontario tax applied only for part of the calendar year 1957 but was in effect throughout 1958 and this was the main factor bringing about the growth in provincial revenues from this source in 1958.
Revenue from indirect taxes collected at all levels of government rose by $47 million or one per cent in 1958 compared with the increase of $188 million or 5 per cent in 1957. In both years combined provincial and municipal revenues were more buoyant than federal receipts from indirect taxes. The yield from these tax sources in the federal field remained relatively stable in 1957 and declined in 1958 by $78 million or 4 per cent to a level of $1,912 million. This came about mainly because receipts from customs duties and from excise taxes were lower in 1958 than in the previous year. The downward movement in collections from these major revenue sources was partly a reflection of prevailing economic conditions which led to a reduction in imports and was partly a result of further exemptions from sales tax introduced in 1957 and 1958. Provincial and municipal revenues from indirect taxes, although advancing at a slower rate than in recent years, continued to expand in 1958 and reached a level of $2,045 million. About two-thirds of the growth of $125 million in receipts was

The Budget-Appendix
due to the increased yield from the municipal real estate tax. Provincial collections from the gasoline tax, the retail sales tax and other miscellaneous taxes rose moderately in 1958.
Investment income of provincial and municipal governments rose by $70 million or 13 per cent in 1958 compared with an increase of $52 million or 10 per cent in the previous year. On the federal level, income from investment, following the decline of $47 million or 15 per cent in 1957, recovered somewhat and expanded by $26 million or 10 per cent in 1958. There were offsetting gains and declines in most of the individual components andtotalincome advanced in 1958 mainly because the United Kingdom resumed payments on the loan made by Canada under the 1946 Canada-United Kingdom Financial Agreement.

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For the year 1958 as a whole our sales and purchases abroad conformed to the pattern which began in 1957 when the change in the economic climate, both at home and in the world at large, had a pronounced effect on Canada's international transactions. Merchandise exports, which previously provided a strong stimulus to economic growth, rose only moderately in 1957 and remained approximately stable in 1958. Merchandise imports, following a period of striking expansion, declined in 1957 as a result of diminishing pressure on supplies. A further drop of 8 per cent took place in 1958. The average level of prices for commodity exports as well as for commodity imports remained substantially unchanged in 1958 so that there was little difference from the previous year in the terms of trade, that is, the ratio of export prices to import prices.
The marked decline in merchandise imports was instrumental in bringing about a reduction of roughly two-thirds in the commodity trade deficit in 1958. The deficit amounted to $174 million compared with $579 million in 1957 and a record level of $728 million in 1956. However, the imbalance on non-merchandise transactions continued to grow in 1958 and this tended to offset, to some extent, the decrease in the trade deficit. As a result the current account deficit of 1958 was $288 million below the level of 1957 and amounted to $1,112 million.


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2.0
4.0
6.0
8.0
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INTERNATIONAL PAYMENTS: CURRENT ACCOUNT
-	1955	1956	1957	Prelim. 1958
		(Millions	of dollars)	
Current Receipts-				
Merchandise exports (adjusted)1	4,332	4,837	4,909	4,890Gold available for export	155	150	147	160Travel expenditures	328	337	363	352Interest and dividends	160	142	149	161Freight and shipping	398	457	431	389Inheritances and immigrants' funds	86	99	124	91Other current receipts	391	442	395	337Total Current Receipts	5,850	6,464	6,518	6,380Current Payments-	Merchandise imports (adjusted)	4,543	5,565	5,488	5,064Travel expenditures	449	498	525	544Interest and dividends	483	523	593	594Freight and shipping	415	502	506	447Inheritances and emigrants' funds	105	115	122	131Other current payments	553	627	684	712Total Current Payments	6,548	7,830	7,918	7,492Balance on Merchandise Trade	-211	-728	-579	-174Balance on other Transactions	-487	-638	-821	-938Current Account Balance	-698	-1,366	-1,400	-1,112
1 Aid to NATO countries under Defence Appropriation Act has been excluded.
Estimated Geographical Distribution op the Net Balance on Current Account
-	1955	1956	1957	Prelim. 1958' . . [DOT] [DOT] i Between Canada and- United States	
United Kingdom	
Rest of the Sterling Area	
Other OEEC Countries	
Other Countries	
All Countries	-1,035 330 60 24 -77	(Millions -1,639 252 48 17 -44	of dollars) -1,551 142 9 29 -29	-1,204 130 66 50 -154-698	-1,366	-1,400	-1,112
It is interesting to note that for the first three-quarters of 1958 the trade deficit actually amounted on the average to $104 million, seasonally adjusted at annual rates. In the fourth quarter of 1958, commodity exports rose by about 5 per cent but commodity imports increased at a significantly faster rate and expanded by 9 per cent. These developments in the latter part of the year led to a widening of the imbalance on trading account. As a result the merchandise deficit in the fourth quarter of 1958 amounted to $384 million, at seasonally adjusted annual rates.
The value of merchandise exports in 1958 amounted to $4,890 million compared with $4,909 million in 1957. There were widespread declines in Canadian sales abroad for some commodities as well as substantial gains for others. The drop in exports was particularly pronounced for products such as

The Budget-Appendix
petroleum, iron-ore, copper, nickel, primary and semi-finished steel as well as for pulp and newsprint. Offsetting movements took place in a number of other commodities and large increases occurred in shipments of uranium, aircraft, wheat, beef cattle, farm implements and natural gas.
The value of merchandise imports fell from $5,488 million in 1957 to $5,064 million in 1958, a drop of $424 million. The downward movement in purchases from abroad was associated with the lower level of business investment in Canada and this was particularly felt in reduced imports of machinery and equipment as well as iron and steel products. There was also a notable decline in imports of petroleum and other fuels. However, the further growth in consumption in 1958 was reflected in a somewhat higher level of imports of consumer goods.
The excess of payments over receipts on non-merchandise transactions rose from $821 million in 1957 to $938 million in 1958. The increase of $117 million in the deficit was almost entirely the result of a 7 per cent decline in nonmerchandise receipts since total payments scarcely differed from the level in the previous year. A number of factors contributed to the lower level of Canadian earnings from invisibles. There was a substantial drop in receipts from freight and shipping partly due to the decrease in exports of bulk commodities and partly because of a fall in shipping rates. The sharp drop in immigration in 1958 was accompanied by a reduction in funds brought in by immigrants. United States expenditures in Canada on defence installations were also lower than in 1957. The relative stability in total non-merchandise payments was a reflection of offsetting movements in the individual components. There was a sharp decline in the cost of freight and shipping mainly as a result of lower imports and this was balanced by higher expenditures on all other major accounts.
The trend in our commodity trade with the United States was the most significant factor in the reduction of Canada's overall current account deficit in 1958. Although merchandise exports to the United States fell by one per cent, merchandise imports declined much more drastically and the drop actually amounted to 12 per cent. As a result the imbalance in our commodity trade was substantially reduced and the deficit fell by $413 million to a level of $534 million in 1958. Although the deficit with the United States on non-merchandise transactions rose by $66 million, most of the shift on commodity trade was reflected in the overall current account balance and the total deficit declined from $1,551 million in 1957 to $1,204 million in 1958.
Both exports to and imports from the United Kingdom rose by $19 million in 1958 and the balance on trade remained unchanged. However, there was some increase in our deficit on non-merchandise transactions. As a result the current account surplus with the United Kingdom was somewhat smaller than in the previous year.
Exports to other Commonwealth countries increased by about 22 per cent in 1958 mainly because of a pronounced expansion in shipments to India. Imports however declined by 12 per cent. These developments brought about a substantial increase in the current account surplus with other Commonwealth countries.
The moderate increase in Canadian sales to Europe was more than offset by a lower level of shipments to Latin America as well as to Japan and exports to all other countries fell by 7 per cent in 1958. At the same time imports rose by about 2 per cent and these changes, together with an increase in the deficit on non-merchandise transactions, led to a sizeable current account deficit in 1958. This was markedly different from 1957 when an approximate balance prevailed in our transactions with all other countries.
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INTERNATIONAL PAYMENTS: CAPITAL MOVEMENTS
-	1955	1956	1957	Prelim. 1958
		(Million	s of dollars)	
Direct investment in Canada	417	583	520	400Direct investment abroad	-74	-104	-65	-15Canadian securities-	Trade in outstanding issues	-27	199	94	89New issues	166	667	790	666Retirements	-184	-141	-137	-104Foreign securities	-6	2	19	29-34Repayments	69	69	50	64Canadian dollar holdings of foreigners	89	-24	-34	105Official holdings of gold and foreign exchange (increase,	-)	44	-33	105	-109Other capital movements	204	148	58	21Net capital movement financing current account	balance	698	1,366	1,460	1,112
In 1958 special loans and grants were made to a number of Commonwealth Colombo Plan countries. As a result, there was a substantial increase in exports financed from aid funds and the major part of this increase consisted of wheat shipments.
In 1958 the net inflow of capital into Canada was smaller than in 1957 but the total remained at a high level. Direct investment from abroad declined by $120 million but at the same time Canadian direct investment in other countries fell by $50 million. The net capital import through international security transactions amounted to $680 million in 1958 or $86 million less than in the previous year. Sales of new Canadian issues to non-residents were lower by $124 million but, as in the two preceding years, remained the most important single source of external capital. Net sales abroad of outstanding Canadian issues declined by $5 million while the net inflow of capital from transactions in foreign securities rose by $10 million. At the same time, redemptions of foreign-held Canadian securities were $33 million lower than in 1957. There was also a decline in 1958 in the net inflow of funds on account of all other capital movements. None the less, total net capital imports were sufficient to finance our deficit on current account and Canada's foreign exchange reserves rose in 1958. At December 31,1958, our reserves amounted to $1,939 million, expressed in U.S. funds, compared with $1,828 million at the same date in 1957.

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-	1955	1956	1957	1958Exchange Fund Account and Bank of Canada- Gold	1,133.9 692.0 74.9	(Millions of ' 1,103.3 798.0 34.9	J.S. Dollars) 1,100.3 691.5 36.5	1,078.1 794.1 66.9
Total Gold and U.S. Dollars					
	1,900.8	1,936.2	1,828.3	1,939.1
				

The Budget-Appendix
Apart from some interruption in the late summer of 1958, the exchange value of the Canadian dollar rose during the year. For December, 1958, the average rate of exchange for the United States dollar was 96.46 compared with 97.74 for December, 1957. The upward trend was reversed in early 1959 and there was some decline in the exchange value of the Canadian dollar.

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In the absence of any marked change in output, total employment in 1958 remained relatively stable. The average number of persons with jobs in 1958 amounted to 5,722,000 or 24,000 persons below the level reached in the previous year. This decline of less than one-half per cent, although quite moderate, contrasted with the expansion in employment of 2.6 per cent in 1957 and 4.2 per cent in 1956. The labour force participation rate in 1958 was substantially the same as in the previous year but the pronounced drop in immigration was more than offset by population growth in the active age groups and as a result there was a further expansion in the labour force. It is estimated that
124,000	persons entered the labour market in 1958, a rise of 2.1 per cent compared with the expansion of 3.8 per cent in 1957 and 3.1 per cent in 1956. This increase in the labour force accompanied by the lack of additional employment opportunities resulted in a substantial growth in unemployment. However, apart from seasonal movements, unemployment ceased to rise after mid-1958 and began to decline in January, 1959.
In 1958 agricultural employment fell by 4 per cent, a reduction of 32,000 in the number of persons with jobs in this industry. The major part of the decline was a reflection of the movement from rural to urban occupations which has been evident throughout the postwar period. It is estimated that in 1958 some 26,000 persons left the agricultural labour force compared with 30,000 persons in 1957 and 44,000 persons in 1956.

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THOUSANDS OF PERSONS	THOUSANDS OF PERSONS
In 1958 there was a further rise in the number of persons with jobs in nonagricultural occupations but the increase was quite small and averaged 8,000 persons. The fractional growth of less than one-half per cent in non-agricultural
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employment compares with a gain of 176,000 persons oi 3.6 per cent in the previous year. On a seasonally adjusted basis, non-agricultural employment reached a peak in September, 1957, and subsequently declined by 1.4 per cent to a low point in February, 1958. This was followed by irregular gains and in December, 1958, non-agricultural employment was only slightly below the high point reached 15 months earlier.
The pattern of employment for the main industrial groups reflected, on the one hand, a declining trend in the goods producing sector, and on the other hand, a continued upward movement in the service industries. A sharp fall in employment occurred in the forestry industry. There were also declines in mining, manufacturing and construction. Except for transportation, storage and communication, gains in employment continued in all the service industries although the expansion was smaller than in 1957.
For the year 1958 there were on the average 405,000 persons without jobs and seeking work compared with 257,000 persons in 1957 and 180,000 persons in 1956. Unemployment in 1958 as a proportion of the labour force was higher than in any other postwar year and amounted to 6.6 per cent compared with 4.3 per cent in 1957 and 3.1 per cent in 1956. At the seasonal peak of unemployment in 1958 the increase over the previous year amounted to 252,000 persons without jobs and seeking work. At the seasonal low point the increase over 1957 numbered 107,000 unemployed persons. At the end of 1958 the gap had narrowed to 48,000 persons. In contrast to 1957 when unemployment at the end of the year was larger than at the start of the year, there was a slackening in the growth of unemployment during 1958, and the number of persons without jobs in December was lower than at the beginning of the year. In February, 1959, the number of persons without jobs and seeking work was virtually unchanged from the previous month and on a year-over-year comparison there was a decline in unemployment.
Table 13
THE CIVILIAN LABOUR FORCE Annual Averages
-	1955	1956	1957	Prelim. 1958
		(Thousands	of persons)	
Civilian Labour Force	5,610	5,782	6,003	6,127Male	4,341	4,436	4,570	4,634Female	1,269	1,346	1,433	1,493Non-Agricultural	4,785	5,001	5,252	5,402Agricultural	825	781	751	725Persons without jobs seeking work	232	180	257	405Persons with jobs	5,378	5,602	5,746	5,722In Non-Agricultural Industries	4,560	4,826	5,002	5,010Paid Workers	4,041	4,303	4,460	4,481Employers, own account workers and	unpaid family workers	519	523	542	529In Agriculture	819	776	744	712Paid Workers	106	102	96	97Employers, own account workers and	unpaid family workers	713	674	648	615
After a long period of steady growth, labour income, on a seasonally adjusted basis, began to fall in September, 1957, but the decline was moderate and the expansion in wage and salary payments was resumed in February, 1958. Labour

The Budget-Appendix
income rose with few interruptions and stood at a new high in December, 1958, about 5 per cent above the low point reached 11 months earlier. For 1958 as a whole total wage and salary payments rose by 2 per cent compared with increases of 7§ per cent in 1957 and 11 per cent in 1956. As in previous years, the higher level of labour income was shared by a larger number of paid workers. In 1958 there was a rise of 22,000 in the number of paid workers and average annual earnings on a per capita basis amounted to $3,534, a gain of $61 or 1.8 per cent compared to the increase of $132 or 4 per cent in 1957. Higher rates of pay were instrumental in bringing about the improvement in per capita earnings in 1958 since there was some decline from the previous year in the average number of hours worked per week. In manufacturing average hourly earnings rose by 3.6 per cent compared with 5.6 per cent in 1957 and this trend is indicative of the slow-up in pay rate increases over a wide area of the economy. The advance in per capita earnings in 1958 failed to keep pace with the rise in consumer prices and there was a slight decline in real income.
In 1958 higher earnings in the form of salary and wage payments were concentrated in the service industries. In this sector of the economy labour income rose by about 6 per cent compared with the advance of 10 per cent in 1957. The growth in labour income for public utilities, governments, finance and related groups was somewhat more buoyant than for the service sector as a whole. There was a decline in wages and salaries paid out in the major goods producing industries, except in agriculture. Labour income in the forestry industry was about one-fifth lower than in 1957. Earnings in construction fell by 5 per cent whereas the drop in labour income for manufacturing and mining was less pronounced and ranged between one and 2 per cent.

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In Canada as well as in the United States, the change from economic recession to recovery during 1958, and the excess of government expenditures over government revenues, had important effects on monetary and credit conditions. The attitude of the investing public in both countries underwent a significant change towards the middle of the year and there was a fall in bond prices in North American capital markets notwithstanding the substantial increase in the money supply which took place. The course of events in Canada was influenced, to a large extent, by developments in the United States.
The Canada Conversion Loan 1958 was an important event in Canadian financial developments during the year. The sale of longer-term bonds to the public in exchange for their holdings of shorter-term Victory Loan issues was the largest financial operation ever undertaken in Canada and brought about the conversion of over 90 per cent of the $6,416 million of eligible issues. The Conversion Loan, which was announced in July and concluded in September, had the effect of lengthening the term to maturity of outstanding Government of Canada issues from just over six years to somewhat more than ten years. This reorganization of the government debt structure was designed to provide an improved base for future government financing operations and to assist in the orderly development of the Canadian money market.
Following the decline from the levels reached in the summer of 1957, interest rates in Canada increased again in the second half of 1958. The upward trend in yields for three-month treasury bills was particularly pronounced and rates rose from a low of less than one per cent in July to 3.56 per cent in December, 1958. During the succeeding two months, yields remained relatively stable but rose again in the latter half of February, 1959. The change in rates for medium-term Government of Canada bonds followed a similar pattern. The yield on the 2f per cent issue of June, 1967-68 stood at 4.48 per cent in
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The Budget-Appendix

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-	Government Securities Selected Issues	3 Month Treasury Bills3	Bank Rate	Canada U.S. Spread1	Canada U.S.	Spread2	Canada U.S. Spread	Canada U.S.	1955-	March	3.14	2.84	.30	2.84	2.65	.19	1.20	1.29 -	.09	1.50	1.50June	3.14	2.83	.31	2.87	2.75	.12	1.34	1.51 -	.17	1.50	1.75September	3.27	2.99	.28	3.08	2.90	.18	1.78	2.10 -	.32	2.00	2.25December	3.44	2.94	.50	3.42	2.86	.56	2.60	2.59	.01	2.75	2.501956-	March	3.37	2.94	.43	3.30	2.88	.42	2.62	2.37	.25	2.75	2.50June	3.38	2.94	.44	3.40	2.90	.50	2.67	2.58	.09	3.00	2.75September	3.76	3.28	.48	3.81	3.33	.48	3.05	2.77	.28	3.25	3.00December	3.88	3.34	.54	4.00	3.39	.61	3.59	3.27	.32	3.84	3.001957-	March	3.92	3.27	.65	4.06	3.35	.71	3.73	3.24	.49	3.98	3.00June	4.16	3.52	.64	4.49	3.70	.79	3.79	3.26	.53	4.04	3.00September	4.33	3.67	.66	4.71	3.82	.89	3.93	3.63	.30	4.18	3.50December	3.79	3.27	.52	3.66	3.04	.62	3.64	3.14	.50	3.89	3.001958-	March	3.83	3.28	.55	3.56	2.87	.69	2.42	1.53	.89	2.67	2.25June	3.81	3.22	.59	3.39	2.81	.58	1.78	0.95	.83	2.03	1.75September	4.09	3.79	.30	3.67	3.62	.05	2.17	2.61 -	.44	2.42	2.00December	4.42	3.81	.61	4.48	3.83	.65	3.56	2.90	.66	3.81	2.50
*Canada 31%, Oct. 1/79. U.S. 3J% June 15/78-83. Wednesday nearest 15th of month. *Canada 2i% June 15/67-68. U.S. 2J% Dec. 15/63-68. Wednesday nearest 15th of month. 'Average tender nearest 15th of month.
December, 1958, compared with 3.39 per cent in June, 1958. There were further increases in 1959 and in early March the yield rose to 4.79 per cent. Relatively more stability prevailed in the market for long-term government bonds and the yield of the 31 per cent issue of October, 1979, had reached in December, 1958, a level somewhat above the previous peak reached in 1957. The yield rose further in 1959. The Bank of Canada discount rate, which is set on the basis of one-quarter per cent above the average tender rate for treasury bills, increased to 3.81 per cent in December, 1958. At the beginning of April, 1959, the Bank of Canada discount rate stood at 4.58 per cent.
Interest rates for provincial, municipal and industrial bonds, following the decline from the levels reached in the third quarter of 1957, also increased during the latter part of 1958 and early 1959. In February, 1958, the prime commercial rate charged by the chartered banks was lowered to 5j per cent and remained at this level until March, 1959.
The decline from the peak in 1957 was more pronounced for Canadian medium- and long-term interest rates than for comparable United States rates so that spreads between Canadian and United States rates narrowed somewhat. The upturn of interest rates after mid-1958 was at first much sharper in the United States and the differential was substantially reduced. The situation was reversed in the fourth quarter of 1958 and in general the spreads in December were wider than at the same time in 1957. Some further widening in spreads occurred in February, 1959.
The amount of funds obtained by provinces and municipalities from net new bond issues at home and abroad increased by $163 million in 1958 but this was more than offset by the reduction in corporate borrowing. As a result total

The Budget-Appendix
net bond issues of provinces, municipalities and corporations declined by $168 million to a level of $1,602 million compared with $1,770 million in 1957 and $1,570 million in 1956. Net issues of corporate stocks, which reached a peak of $688 million in 1956, continued to decline for the second successive year and amounted to $290 million in 1958. Corporate bond issues were concentrated in the first half of 1958, whereas equity funds played a larger role in corporate financing during the latter part of the year and about one-half of total new stock issues were placed in the fourth quarter.
For all levels of government, the amount of new bond issues sold abroad rose above the 1957 level. As in the previous year, the proportion of funds raised in foreign markets was particularly large in the case of municipal borrowing. On the other hand, new corporate bond issues sold to non-residents declined sharply in 1958 and accounted for about one-third of corporate net bond issues compared to one-half of corporate net borrowing in 1957. As a result of these trends, total net new bond issues sold abroad declined in 1958 by $77 million. Total net new bond issues sold to non-residents amounted to $538 million and less than one-third of total sales took place in the second half of 1958.
Action by the Bank of Canada led to a substantial increase in the cash reserves of the chartered banks in 1958. The increase in cash reserves of the banks was reflected in the expansion of $1,277 million in total bank assets and over two-thirds of this increase took the form of additional purchases of government securities. The total of other liquid assets rose only moderately since the increase in some categories was partly offset by lower holdings of day-to-day loans, call loans and net foreign assets. About one-fourth of the growth in

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CHARTERED BANK ASSETS (month-end figures)
-	As at Dec. 31 1958	Changes1			
		Calendar Years			
		1955	1956	1957	1958
		(Millions of dollars)			
Bank of Canada notes and deposits	1,001	49	42	-16	135Day-to-day loans	123	13	-7	136	-87Treasury bills	950	67	313	65	145Sub-total	2,074	129	348	185	193Government bonds	2,562	-321	-957	44	727Call loans	116	36	-20	35	-75Net foreign assets2	88	-41	6	41	-55Total of foregoing assets	4,840	-197	-623	305	790Canadian loans (other than day-to-day and call	loans)	5,296	759	532	114	82Insured mortgages	790	220	199	93	204Non-Government securities	1,164	228	-58	-8	202Total of above assets	12,089	1,009	50	504	1,277
*To make the statistics for the different periods in this table comparable certain approximate adjustments have been made in calculating changes in loans and investments. The 1956 figures have been adjusted for the reclassification of foreign currency loans from Canadian loans to net foreign assets which was made in the returns of the banks to the Department of Finance, and the 1957 figures for the change in the allocation of inner reserves consequent upon the change in the method of valuing Government and provincial securities required in the returns of the banks to the Department of Finance.
2Total foreign currency assets less total foreign currency liabilities. Excludes foreign currency securities issued by Canadian borrowers.
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The Budget-Appendix total bank assets was accounted for by increased investment in insured mortgages and in non-government securities.
For the year 1958 as a whole, the demand for loans rose only moderately and bank loans other than day-to-day and call loans increased by $82 million compared with the expansion of $114 million in 1957 and the growth of $532 million and $759 million in 1956 and 1955 respectively. There was approximate stability in combined lending to provincial and municipal governments but loans to grain dealers declined by $61 million. Instalment finance companies increased their bank indebtedness but this was more than offset by a decline in the outstanding amount of commercial paper issued by these institutions. In the latter part of 1958, general loans rose above the level in the previous year and in December, 1958, the total amounted to $4,138 million or $75 million higher than at the same date in 1957. Personal loans expanded throughout 1958 and for the year as a whole the increase amounted to $173 million. Loans to farmers and to financial as well as social institutions also rose whereas bank advances to industry, to merchandizers and to some of the service industries declined in 1958.

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-	1955	1956	1957	1958
		(Millions of dollars)		
Currency-notes and coin		1,550	1,605	1,667	1,781
Bank deposits-				
Deposits other than personal savings deposits2	3,697	3,580	3,725	4,303Personal savings deposits2	5,633	6,007	6,108	6,844Total bank deposits	9,330	9,587	9,833	11,147Government Securities-	Market securities	6,536	6,225	6,045	6,073Non-market securities	2,433	2,541	2,649	2,895Total government securities	8,969	8,766	8,693	8,968Total liquid assets	19,849	19,958	20,193	21,895
1 Includes all holdings other than those of the banking system and the federal government and government accounts.
"The deposit balances of religious, educational and welfare institutions and personal accounts used mainly for business purposes were reclassified from "personal savings deposits" to "other notice deposits" as at September 30, 1957 in the returns of the banks to the Department of Finance. The figures prior to September 30, 1957 are thus not comparable with those since that date. The amount of deposits reclassified was approximately $140 million.
Holdings by the public of currency, bank deposits and Government of Canada securities expanded in 1958 by $1,702 million compared with the advance of $235 million in 1957. Holdings for all the main classes of liquid assets rose in 1958. The growth of $1,314 million in bank deposits accounted for the major part of the overall increase. Holdings of government securities at the end of 1958 were $274 million higher than at the same date in the previous year. Substantially larger holdings of Canada Savings Bonds were mainly responsible for the upward movement in the amount of government securities held by the public. However, the relatively moderate advance of $28 million in holdings of market issues hides substantial fluctuations which occurred during the course of 1958. There was a decline of $482 million for the first nine months of 1958 and this was followed in the fourth quarter by the addition of $509 million to the holdings of market securities by the public.

The Budget-Appendix
The total amount of Federal Government direct and guaranteed securities outstanding increased by $1,251 million in 1958. Comparing holdings at the end of 1958 with holdings at the same date in the previous year, there was an increase of $1,086 million in the amount of this debt held by the banking system and an expansion of $274 million in the amount held by the general public. This was partly offset by a decrease of $109 million in government accounts.

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The upward movement in the consumer price index which began in mid-1956 continued with few interruptions in 1958. In the fourth quarter of 1958 consumer prices were 2.4 per cent higher than in the same period a year earlier. This compares with an advance of 2.6 per cent for the twelve-month period ending in the fourth quarter of 1957. For the year 1958 as a whole the average level of consumer prices increased by 2.6 per cent or less than in 1957 when a rise of 3.2 per cent occurred. The upswing in retail prices during 1958 was accompanied by a more or less stable trend in wholesale prices for the first nine months of the year. This was followed by some rise in the wholesale index beginning in the fourth quarter of 1958 and in February, 1959, wholesale prices were 1.4 per cent higher than a year earlier, 7.7 per cent above the low point of recent years reached in October, 1954, but were 5.3 per cent below the high point of the post-war years reached in mid-1951. In both years, 1958 as well as 1957, there was only a fractional increase in the average annual level of wholesale prices.

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CONSUMER PRICE INDEXES 1949 = 100
-	Total	Food1955	116.4	112.11956	118.1	113.41957	121.9	118.61958	125.1	122.1123.4	119.4123.7	119.9124.3	121.3125.2	123.4125.1	122.7125.1	122.7July	124.7	121.4125.2	122.6125.6	122.9126.0	123.4126.3	123.2126.2	122.2126.1	122.3125.7	121.2125.5	120.0
The consumer price index rose during the first four months of 1958 from 123.4 in January to 125.2 in April. There was a decline in the succeeding three months and the index stood at 124.7 in July. The upward movement was resumed in August and consumer prices reached a high of 126.3 in November. Slight declines occurred in the next four months to 125.5 in March, 1959, which left the index at a level one per cent higher than in the same period a year earlier. For 1958 all major components of the index followed an upward trend.
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The largest increase occurred in the cost of services where prices rose by close to 4 per cent. The average level of food prices in 1958 was up 3 per cent compared to the advance of 4.6 per cent in 1957. However, in March, 1959, food prices were 1.1 per cent lower than a year earlier. Canadians had to pay more for shelter in 1958 and the index rose by 2.6 per cent. More moderate increases took place in the other two components, clothing and household operations.

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WHOLESALE PRICE INDEXES (1935-39 = 100)
-	General Wholesale Prices	Fully and Chiefly Manufactured Goods	Canadian Farm Products1955	218.9	224.5	212.61956	225.6	231.5	214.21957	227.4	237.9	210.81958	227.6	238.3	216.5226.8	237.7	208.4227.7	238.4	214.0228.1	238.3	220.6227.9	238.5	222.7228.1	238.4	223.1227.4	238.0	221.1227.0	237.8	219.4226.8	238.0	215.9227.1	238.3	211.1226.9	238.0	211.8228.5	238.6	212.1229.1	239.4 240.6	217.6229.7	217.7230.8	241.3	215.4
Note: 1958 indexes are preliminary. The Canadian Farm Products index is fully revised only up to July 1957 and does not reflect final payments on all grains for subsequent months.

The Budget-Appendix
The United States consumer price index also reflected the continued upward trend in prices. The index registered an average increase of 2.7 per cent for the year 1958, an advance comparable to the movement in Canadian consumer prices. Food prices in the United States levelled out in the second half of 1958 but for the year as a whole the index was 4.2 per cent above 1957.
During the twelve-month period to December, 1958, wholesale prices rose by 1.3 per cent whereas for the year 1958 as a whole the general index remained practically unchanged from the level in 1957. This difference came about mainly because of the strengthening in wholesale prices which occurred in the fourth quarter of 1958 in contrast to the decline in the same period of 1957. A pattern similar to the trend in the general index prevailed in the broad industrial categories of wholesale prices. In a year-over-year comparison prices fell in 1958 except for manufactured products. The decline was particularly pronounced for industrial materials and metals. However, in the latter part of 1958, the indexes for all the major industrial classifications stood at a higher level than a year earlier. The sharpest recovery occurred in prices for nonferrous metals and raw materials. In 1958 there was also a substantial advance in prices for Canadian farm products.

The Budget-Appendix
Part II

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Table of Contents
Page
1.	Introduction	 93
2.	Highlights of governmental financial operations during 1958-59. 93
3.	Budgetary accounts	
95A.	Revenues	
97B.	Expenditures	
1044.	Summary of assets and liabilities at March 31, 1959	
123
A. Changes in principal liability classifications during 1958-59. 123
B. Changes in principal asset classifications during 1958-59	 129
C.	Increase in net debt	
1355.	The cash position	
1366.	The public debt	
1397.	Supplementary detailed tables	
145
The Budget-Appendix
Part II

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1.	INTRODUCTION
The figures presented in this Part for the fiscal year 1958-59 are preliminary and subject to revision. The fiscal year of the Government ended on March 31 but the books must remain open for some time after that date to record various adjusting entries and to take into account all payments up to and including April 30 made on account of expenditures originating in and properly chargeable to the fiscal year 1958-59. The final figures when they become available next August may vary to some extent from those given in the following pages.
2.	HIGHLIGHTS OF GOVERNMENTAL FINANCIAL OPERATIONS

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The following table summarizes the financial operations of the government for the fiscal year and indicates how the budgetary and non-budgetary transactions, together with changes in the unmatured debt, affected the government's cash balances. In the sections entitled "The Budgetary Accounts" and "The Cash Position" a more detailed explanation of these transactions is given.

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(in millions of dollars)
Summary op Budgetary and Non-Budgetaby Transactions and Changes in Cash Position	Fiscal year ended March 31	
	1959 (estimated)	1958
Budgetary transactions-		
Revenues-		
	4,274	4,623
	496	426
	4,770	5,049
Expenditures-		
	-1,437	- 1,687
Non-defence		-3 j 950	-3,400
	-5,387	-5,087
	-617	-38
Non-budgetary transactions-		
Receipts and credits (excluding unmatured debt transactions)-		
Repayments of loans, investments and working capital advances	103	119Net government annuities account receipts	58	58Net insurance and pension account receipts	523	221Net sales of investments of unemployment insurance fund	238	135Other non-budgetary receipts	192	331,114	566Disbursements and charges (excluding unmatured debt trans-	actions)-	Loans, investments and working capital advances	-882	-351Net payments from the unemployment insurance fund	-242	-131Net payments from special defence accounts	-218	- 8Other non-budgetary disbursements	-418	-203-1,760	-693Net amount required for (-) non-budgetary transactions	-646	-127Overall cash requirements (-) to be financed by an increase in debt or	decrease in cash balances	-1,263	-165Net increase in unmatured debt outstanding in the hands of the public..	1,429	(1)Net increase or decrease (-) in Receiver General bank balances	166	-165
W Less than $500,000.

The Budget-Appendix
Budgetary transactions
Revenues of the government for the fiscal year ended March 31, 1959 amounted to $4,770 million. This was $120 million or about 3 per cent more than last year's budget forecast as revised on August 13, 1958 to $4,650 million and $278 million or 6 per cent less than the total of $5,048 million collected in 1957-58.
Expenditures amounted to $5,387 million and were $37 million or less than 1 per cent more than the budget forecast as revised on September 6, 1958 to $5,350 million to take into account the special wheat acreage payments and other commitments arising out of the further supplementary estimates, and $300 million or 6 per cent more than the total spent in 1957-58.
On the basis of these figures the deficit for the fiscal year was $617 million compared with the Minister's revised forecast on September 6, 1958 of a deficit of $700 million and a deficit of $38 million for 1957-58.
On the revenue side of the government's budgetary operations collections have shown a decline from the previous year. This was due partly to the fact that the general level of activity and production in the economy was somewhat less than in 1957-58 and partly to the tax reductions announced in December, 1957 and June, 1958. Although receipts from excise and succession duties and non-tax revenues exceeded those of the previous year, these increases were more than offset by reductions in the receipts from personal, corporation and non-resident income taxes, excise taxes and customs import duties.
On the expenditure side defence was again the most significant feature in the government's programme. In 1958-59 defence expenditures amounted to $1,437 million, a decrease of $250 million or 15 per cent from the preceding year and represented 27 per cent of the government's total budgetary outlay. For the most part this decrease is due to the policy announced in the budget speech of June 17, 1958 of liquidating the balance in the national defence equipment account during the fiscal year. Equipment purchases totalling $212 million were charged to the account during 1958-59 compared with $24 million in the previous year. In 1957-58 defence expenditures amounted to $1,687 million and constituted 33 per cent of the total.
Non-budgetary transactions
Although the budgetary deficit for 1958-59 was $617 million, the government's bank balances at the end of the fiscal year were $166 million greater than a year ago. This increase in cash balances was the net result of budgetary requirements of $617 million, requirements of $882 million for loans, investments and working capital advances and of $878 million for other non-budgetary disbursements offset by non-budgetary receipts and credits of $1,114 million from repayments of loans and investments, annuity, insurance and pension accounts receipts and other non-budgetary sources and an increase of $1,429 million in outstanding unmatured debt.
Old age security fund
Pension payments from the old age security fund amounted to $560 million and tax receipts credited to the fund totalled $376 million, and the deficit of
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The Budget-Appendix $184 million for the fiscal year was covered by a temporary loan by the Minister of Finance to the fund. During 1957-58 pension payments amounted to $474 million and tax receipts credited to the fund to $372 million resulting in an excess of pension payments over tax receipts of $102 million which together with the remainder of the 1956-57 deficit of $2 million was charged to expenditures in 1957-58 under the authority of a vote of parliament. Parliament has authorized the writing-off to expenditure in 1958-59 temporary loans of $184 million outstanding at March 31, 1959.
Debt transactions
During 1958-59, the government issued securities amounting to $9,286 million (excluding the refunding of treasury bills which mature periodically) and redeemed or converted issues in the amount of $7,973 million, resulting in an increase of $1,313 million in unmatured debt. As other liabilities increased by $488 million the government's gross public debt increased by $1,801 million to $20,220 million at March 31, 1959. During the fiscal year the government's net assets increased by $1,161 million to $8,534 million. As a result the government's net debt at March 31, 1959 was $11,686 million, the increase of $640 million reflecting the budgetary deficit for the fiscal year of $617 million plus an adjustment of $23 million in respect of prior years transactions.
Cash position
Receiver General bank balances increased $166 million during the fiscal year as net budgetary and non-budgetary requirements totalled $1,263 million and outstanding unmatured debt (after taking into account transactions in the securities investment and sinking fund accounts) increased by $1,429 million.
3.	THE BUDGETARY ACCOUNTS
Total revenues, amounting to $4,770 million for 1958-59, were $278 million less than the total for the previous year. Total expenditures were $5,387 million, an increase of $300 million over the total for 1957-58. The deficit for the fiscal year was $617 million compared with $38 million for the previous year.

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Budgetary Revenues, Expenditures and Surplus or Deficit
(in millions of dollars)
Fiscal year ended March 31	Budgetary revenues	Budgetary expenditures	Surplus or deficit (-)1955	4.123.5 4,400.0 5.106.5 5.048.8 4.770.8	4.275.3 4,433.1 4,849.0 5.087.4	- 151.81956	- 33.11957	257.51958	- 38.651387.4	-616.6
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Estimated

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A. Revenues
Budgetary revenues were $4,770 million in the fiscal year 1958-59. This was $278 million or 6 per cent less than in the previous year. Of the total revenues for the year, $4,274 million, or 90 per cent, was derived from taxes and $496 million or 10 per cent from non-tax revenues.

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Budgetary Revenues by Major Sources (in millions of dollars)
	Fiscal year ended March 31				Increase or decrease (-)	
Source	1959 (estimated)	1958	Amount	Per cent	Amount	Per cent	Amount	Per centTax revenues- Income tax-	29.7	-128.8	- 8.61,371.0	28.8	1,499.8	Corporation (1)	
On dividends, interest, etc., going	1,029.0	21.G	1,234.8	24.5	-205.8	-16.7abroad	
Excise taxes-	60.0	1.3	64.3	1.3	- 4.3	- 6.7694.0	14.5	703.2	14.0	- 9.2	- 1.3242.4	5.1	249.4	4.9	- 7.0	- 2.8Customs import duties	486.0	10.2	498.1	9.9	- 12.1	- 2.4Excise duties	317.6	6.6	300.1	5.9	17.5	5.8Succession duties	73.0 1.2	1.5	71.6 1.5	1.4	1.4 - 0.3	2.0 -20.0Non-tax revenues-	4,274.2	89.6	4,622.8	91.6	-848.6	- 7.6Return on investments	224.6	4.7	169.4	3.4	55.2	32.6Post office	156.0	3.3	152.9	3.0	3.1	2.0Other non-tax revenues	116.0	2.4	103.7	2.0	12.3	11.9496.6	10.4	426.0	8.4	70.6	16.6Total revenues	4,770.8	100.0	5,048.8	100.0	-278.0	- 5.5
<x>
Excluding tax credited to the old age security fund-
2% personal income tax	
2% corporation income tax	
2% sales tax	
1958-59	1957-58
(estimated)	
148.0	135.0
55.0	60.7
173.0	175.8
376.0	371.5
(1)	TAX REVENUES
Tax on personal incomes
The personal income tax was again in 1958-59 the largest source of government revenue, the yield (excluding the old age security tax) being $1,371 million. The decrease of $129 million or 9 per cent from the previous year was more than accounted for by the reduction in rates and the increase in exemptions for dependents which became effective in 1958.
In addition the 2 per cent tax on personal incomes levied under the Old Age Security Act yielded $148 million. The maximum tax is $60 per person. This revenue was credited to the old age security fund.

The Budget-Appendix

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flncludes excess profits tcx for the year 1952, [DOT]Estimated
Corporation income tax
The corporation income tax (excluding the old age security tax) yielded $1,029 million in 1958-59 and was the second largest revenue producer. The decrease of $206 million or 17 per cent from the previous year was largely due to lower corporate profits in 1958. It is estimated that $12 million of the decrease resulted from the tax change announced in December, 1957 which increased the first bracket subject to the lower rate of tax from $20 thousand to $25 thousand.
In addition the 2 per cent tax on incomes of corporations under the Old Age Security Act yielded $55 million which was credited to the old age security fund.
Taxes on interest, dividends, rents and royalties going abroad
Revenue under this heading is derived from taxes withheld on payments of interest, dividends, rents, royalties, alimony and income from estates and trusts made to non-residents. The decrease of $4 million from the previous year reflected lower corporate profits in 1958 and because some large refunds were made to adjust overpayments of tax in previous years.
Excise taxes
Included under this heading are the revenues from the general sales tax and the special excise taxes levied on a wide range of manufactured products.
The most important tax levied under the Excise Tax Act from a revenue standpoint is the sales tax. The decrease of $9 million or 1 per cent in receipts (excluding the 2 per cent old age security tax) from the previous year reflected the new exemptions announced in the 1958 Budget which it is estimated reduced revenue by $7 million.
The 2 per cent tax on sales levied under the Old Age Security Act and credited to the old age security fund yielded $173 million compared to $176 million in the previous year.
66968-9-158J
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Excise taxes other than the general sales tax were $7 million or 3 per cent less than in the previous year.
The reduction in the tax on automobiles from 10 per cent to 7J per cent on December 6, 1957 and reduced sales of automobiles during the year resulted in revenue from this source declining $12 million. In addition refunds increased by $3 million over the previous year largely as a result of refunds made to automobile dealers on account of automobiles on hand at the time of the tax reduction in December 1957.
These declines in revenue were partly offset by increases of $7 million from the taxes on tobacco products and $2 million from the taxes on television sets, radios, tubes and phonographs.
Customs import duties
The decrease of $12 million or 2 per cent in customs import duties reflects the decrease in the volume and value of imports during the year.
Excise duties
Excise duties are levied only on alcoholic beverages and tobacco products. (Additional taxes on tobacco products are levied under the Excise Tax Act referred to above.) The collections from the taxes on alcoholic beverages, before deducting refunds, were $181 million, an increase of $9 million over the previous year. The gross receipts from the taxes on tobacco products amounted to $141 million, an increase of $9 million.
Succession duties
The revenue from this source for the year amounted to $73 million and as for the previous year was affected by collections from two unusually large estates.
Other taxes
Most of the revenue under this heading was received from the special taxes on the export of electrical energy from Canada, but a small amount was also received from the tax on the export of furs from the Northwest Territories.

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*	The Budget-Appendix
(2)	NON-TAX REVENUES
Non-tax revenues for 1958-59 were $497 million, $71 million or 17 per cent more than the 1957-58 total of $426 million.

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(in millions of dollars)
Non-Tax Revenues	Fiscal year ended March 31	Increase or decrease (-)	1959 (estimated)	1958	Amount	Per cent224.6	169.4	55.2	32.6156.0	152.9	3.1	2.032.9	28.1	4.8	17.125.7	22.6	3.1	13.721.1	22.3	-1.2	-5.426.1	19.3	6.8	26.14.6	5.0	-0.4	-8.02.0	1.3	0.7	53.83.6	5.1	-1.5	-29.4
496.6	426.0	70.6	16.6
Return on investments
Payments from Crown corporations were $38 million more than in the preceding year due largely to an increase of $20 million in the profits of the Bank of Canada for 1958 transferred to the Receiver General over those for 1957 and an increase of $12 million in interest payments received from Central Mortgage and Housing Corporation.

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(in millions of dollars)
Return on Investments	Fiscal year ended March 31		Increase or decrease (-)
	1959 (estimated)	1958	
Loans to, and investments in, Crown corporations- Bank of Canada-profits	88.6	68.7	19.9Canadian Farm Loan Board	1.8	1.6	0.2Canadian National Railways	16.4	12.5	3.9Central Mortgage and Housing Corporation	30.1	18.2	11.93.5	3.5	National Harbours Board	3.2	3.4	-0.2Northern Ontario Pipe Line Crown Corporation	3.0	0.6	2.44.0	4.0	2.0	2.0	IBS. 6	m.B	S8.1Other loans and investments- United Kingdom	22.8	0.4	22.4Other national governments	10.1	9.7	0.4Provincial governments	0.8	0.9	-0.1Soldier and general land settlement loans and veterans	5.0	5.0	Exchange fund account	18.6	22.9	-4.3Securities investment account	1.5	1.4	0.1Sinking fund and other investments held for retirement of unmatured debt	5.5	5.9	-0.4Interest-bearing deposits with chartered banks	4.5	5.3	-0.8Miscellaneous	3.2	3.4	-0.212.0	Bi.9	17.1224.6	109.4	55.2
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The main receipts from other loans and investments were $23 million in interest received on the 1946 loan to the United Kingdom and $19 million representing exchange fund profits. The former included annual interest of $22 million (the interest payment due December 31, 1957 was deferred) and $1 million in interest on deferred principal and interest payments.
Post office
Gross post office receipts totalled $182 million but authorized disbursements from revenues for salaries and rent allowances at semi-staff and revenue offices, commissions at sub offices, transit charges on Canadian mail forwarded through or delivered in foreign countries, etc., amounting to $26 million, brought the net revenue to $156 million. Last year gross receipts amounted to $178 million and authorized disbursements totalled $25 million.
As costs of operating the post office during 1958-59 (excluding the $26 million charged to revenue) were $158 million, net expenditure exceeded net revenue by $2 million. However, in making this comparison, it is to be noted that the total shown for post office revenue does not reflect any payment for the franking privilege covering parliamentary and departmental mail or for certain miscellaneous services provided for other government departments and agencies, nor does the total shown for operating expenses reflect any charges for premises occupied by the Post Office Department or for certain accounting and miscellaneous services provided by other departments.
Refunds of previous years' expenditures
Refunds in the current fiscal year of expenditures made in prior years totalled $33 million, $5 million more than in 1957-58. These refunds included $20 million received by the Department of National Defence, of which $9 million was on contracts with the United States Government for the supply of engines, aircraft and other defence equipment under an arrangement that when Canada places contracts with the Government of the United States, payments of the estimated costs are made to the United States Treasury and if these estimated costs are revised, or if there are reductions in the contracts, the United States Government refunds the overpayments. In addition $5 million was received by the Department of Finance (of which $4 million was a repayment by the Province of Ontario in connection with succession duty payments under the tax-rental agreements), $2 million by the Department of Veterans Affairs and $6 million by other departments.
Services and service fees
Sums totalling $25 million were collected during 1958-59 by various government departments for services and service fees, $3 million more than the total collected in the previous year.

The Budget-Appendix
Revenue from this source included $6 million received by the Department of Trade and Commerce, mainly for services in connection with the inspection, weighing, storage and elevation of grain and for electricity, gas and weights and measures inspection services; $9 million received by the Royal Canadian Mounted Police, mainly for police services to provinces and municipalities; and $4 million received by the Department of Transport, chiefly for wharfage and other canal and marine service fees, steamship inspection, air-ground radio at airports, and government telegraph and telephone services.
Proceeds from sales
Receipts from proceeds from sales were $19 million for 1958-59, $3 million less than the total received in 1957-58.
Receipts under this category included $7 million from Crown Assets Disposal Corporation representing amounts realized from the disposal of surplus Crown assets (after deducting certain agency fees and transfers), $3 million under agreements of sale and $6 million from Central Mortgage and Housing Corporation representing the proceeds from the sale of wartime housing properties and including amounts available as the result of the reversal of the provision for depreciation set aside by the corporation in previous years on properties that have now been sold.
Privileges, licences and -permits
Revenues of $26 million were received during the fiscal year on account of privileges, licences and permits compared with $19 million received last year.
Included in these revenues is an amount of $9 million collected by the Department of Transport, mainly on account of aircraft landing fees, rentals of hangar accommodation, and other miscellaneous rental charges, and $6 million by the Department of Northern Affairs and National Resources for oil leases in the Northwest Territories.
Bullion and coinage
Revenue under this heading arose out of the operations of the Royal Canadian Mint and included assaying, refining and handling charges and the net gain on coinage and refining operations.
Premium, discount and exchange
Under this heading is recorded the premiums and discounts incurred in the purchase of foreign currencies. Transactions in the current fiscal year resulted in a net credit of $2 million to revenues compared with $1 million in the previous year.
Other non-tax revenues
Revenues from this source amounted to $4 million, compared with $5 million in 1957-58.
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The Budget-Appendix
(3)	COMPARISON OF ACTUAL REVENUES WITH FORECAST
The Budget Speech on June 17, 1958 forecast that budgetary revenues for the fiscal year 1958-59 would be $4,652 million. On August 13, 1958 the Minister of Finance stated that as a result of further sales tax exemptions provided in the amendments to the Excise Tax Act the revenue forecast for the year would be changed to $4,650 million.
It is now estimated that budgetary revenues for the fiscal year will be $4,770 million or $120 million more than forecast. This increase of about 3 per cent over the budget forecast reflects the fact that economic conditions for the year, as measured by the G.N.P., were slightly better than those on which the forecast of revenues was based.
The following table shows the extent to which actual revenues for 1958-59, as now estimated, differ from the budget forecast.

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Comparison of Forecast with Actual Revenues for Fiscal Year Ended March 31, 1959
(in millions of dollars)
Source of Revenues	Budget forecast of revenues^1*	Revenues (estimated)	Increase or decrease (-) compared with budget forecast	
			Amount	Per cent
Personal income tax	1,369	1,371	2	0.1Non-resident income tax	70	60	-10	-14.3Corporation income tax	1,019	1,029	10	1.0Succession duties	65	73	8	12.3Customs import duties	450	486	36	7.4 - 0.6Sales tax (net)	
Excise duties and excise taxes other than	698	694	- 4	sales tax	549	560	11	2.0Miscellaneous taxes	2	1	- 1	-50.0Total tax revenues	4,222	4,274	52	1.2Non-tax revenues	428	496	68	13.9Total budgetary revenues	4,650	4,770	120	2.5
<*) As amended August 13, 1958.
As the above table shows, the actual revenue from a number of sources is expected to be very close to the amount forecast. The revenue sources which showed a significant difference from the amount forecast are the non-resident income tax, succession duties, customs import duties and non-tax revenues.
The revenue from the tax on income going to non-residents fell below the forecast because dividend payments going abroad were not as high as expected and because some large refunds were made to adjust overpayments of tax in previous years.
The revenue from succession duties has been substantially influenced in the last four years by duties payable on two exceptionally large estates and actual revenues in each year have varied from forecasts because of the difficulty of foreseeing exactly when the duties on these estates would be paid.
The revenue from customs duties exceeded the forecast reflecting the fact that imports in the year did not decline as much as expected.
Non-tax revenues were $68 million above the forecast, due to larger than expected profits from the Bank of Canada and the Central Mortgage and Housing Corporation, and other returns on investments.

The Budget-Appendix
B. Expenditures
Budgetary expenditures for 1958-59 amounted to $5,387 million, an increase of $300 million over the 1957-58 total of $5,087 million.

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Statement of Budgetary Expenditures by Departments and Major Classifications
(in millions of dollars)
-	Fiscal year ended March 31				Increase or decrease (-)	
	1959 (estimated)		1958			
	Amount	Per cent	Amount	Per cent	Amount	Per cent
Defence expenditures-						
National Defence	1,418.0	26.3	1,668.4	32.8	-250.4	-15.0Defence Production	14.4	0.3	15.0	0.3	- 0.6	- 4.0Civil defence	4.8	0.1	4.0	0.1	0.8	20.01,437.2	26.7	1,687.4	33.2	-250.2	-14.8Non-defence expenditures-	Public debt charges	644.4	12.0	567.4	11.2	77.0	13.6Provincial subsidies and tax-sharing	payments (including transitional and	additional grants to Newfoundland)	467.2	8.7	382.6	7.5	84.6	22.1Family allowances	474.9	8.8	437.9	8.6	37.0	8.4100.0	2.0	-100.0	-100.0Reduction in the amount of temporary	loans to the old age security fund...	184.0	3.4	103.9	2.0	80.1	77.1Unemployment Insurance Act-admin-	istration and government's contribu-	tion	73.3	1.4	70.3	1.4	3.0	4.3Government contribution with respect	to the superannuation account	37.6	0.7	78.1	1.5	-40.5	-51.9Government contributions under the	Hospital and Diagnostic Services	Act	57.8	1.1	57 8	Agriculture	166.5	3.1	94.7	1.9	71.8	75.8Atomic Energy	26.1	0.5	21.6	0.4	4.5	20.8Canadian Broadcasting Corporation..	62.1	1.1	43.0	0.9	19.1	44.4Citizenship and Immigration	54.0	1.0	52.4	1.0	1.6	3.1External Affairs	76.1	1.4	60.2	1.2	15.9	26.4Finance	76.2	1.4	59.2	1.1	17.0	28.7Mines and Technical Surveys	45.7	0.8	36.1	0.7	9.6	26.6National Health and Welfare	155.9	2.9	117.0	2.3	38.9	33.2National Research Council	25.5	0.5	21.6	0.4	3.9	18.1National Revenue	69.5	1.3	67.7	1.3	1.8	2.7Northern Affairs and National Re-	sources	75.0	1.4	49.1	1.0	25.9	52.7Post Office	157.9	2.9	153.3	3.0	4.6	3.0Public Works	211.9	3.9	206.0	4.1	5.9	2.9Royal Canadian Mounted Police	52.8	1.0	47.4	0.9	5.4	11.4Trade and Commerce	64.9	1.2	56.9	1.1	8.0	14.1Transport	300.0	5.6	206.7	4.1	93.3	45.1Veterans Affairs	290.8	5.4	277.2	5.4	13.6	4.9Other departments	100.1	1.8	89.7	1.8	10.4	11.6S,950.2	73.3	3,400.0	66.8	550.2	16.2Total budgetary expenditures...	5,387.4	100.0	5,087.4	100.0	300.0	5.9
Defence expenditures
Defence expenditures which consist of expenditures of the Departments of National Defence and Defence Production and outlays for the civil defence programme were again the largest category of government budgetary expenditures. The total of $1,437 million for 1958-59 was approximately 27 per cent of the aggregate budgetary expenditures of the government and was $250 million, or about 15 per cent, less than the total of $1,687 million for 1957-58 when defence expenditures were 33 per cent of aggregate budgetary expenditures.
Expenditures of the Department of National Defence were $1,418 million, those of the Department of Defence Production were $14 million and outlays for the civil defence programme were $5 million. In 1957-58, expenditures were $1,668 million, $15 million and $4 million respectively.
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1952	53	54	55	56	57	58	59*
i The unshaded areas of the columns in the chart for health, welfare and social security represent pension payments out of the old age security fund not charged to budgetary expenditures in the year in which they were paid.
* Does not include those payments to provincial and municipal governments for specific purposes.
Estimated

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(in millions of dollars)
Defence Expenditure	Fiscal year ended March 31	Increase or1959 (estimated)	1958	decrease (-)Department of National Defence-	370.1	378.7	- 8.6Army services	Naval services	208.8	262.6	- 53.8Air services	593.3	760.1	-166.81,172.2	1,4014	-229.2Defence research and development	
Mutual aid to NATO countries including contributions	78.0	78.7	- 0.7towards military costs of NATO	
Government contribution to the permanent services	97.0	118.4	- 21.4pension account	49.5	49.7	- 0.2Administration and general	21.3	20.2	1.11,418.0	1,668.4	-250.4Department of Defence Production-	2.1	- 2.7Capital assistance	4.8	Administration and general	12.3	10.2	2.1U4	15.0	- 0.8Civil defence programme	4.8	4.0	0.81,437.2	1,687.4	-250.2
Expenditures for army, naval and air services totalled $1,172 million, $229 million less than the 1957-58 total. The outlay for army services decreased by $8 million, for naval services by $54 million and for air services by $167 million from the previous year's totals. This decrease of $229 million in budgetary

The Budget-Appendix
expenditures was due mainly to the policy followed this year of liquidating the balance in the national defence equipment account by charging defence equiment purchases to that account.
Mutual aid to NATO countries and contributions towards the military costs of NATO were $21 million less than in the previous year. Under the provisions of section 3 of the Defence Appropriation Act the Governor in Council may authorize the transfer of defence equipment or supplies and the provision of services or facilities for defence purposes to other parties to the North Atlantic Treaty. The expenditures of $97 million for 1958-59 included $75 million for the transfer of equipment and supplies, $10 million for costs incurred in acquiring and supplying military equipment for, and in the training in Canada of aircrews from countries which are parties to the North Atlantic Treaty and $12 million for Canada's share of the NATO military budgets and infrastructure costs.
Outlays for defence research and development were $78 million compared with $79 million in 1957-58.
The government's contribution to the permanent services pension account of an amount equal to If times the contributions by permanent services personnel was $50 million, the same as in 1957-58.
Administration and general costs increased by $1 million in 1958-59 over the 1957-58 total.
The total expenditure of $14 million for the Department of Defence Production was $1 million less than in 1957-58. A decrease of $3 million in respect of the programme under which capital assistance is given to private contractors, Crown plants operated on a management-fee basis and Crown corporations undertaking contracts essential to the defence programme was partly offset by an increase of $2 million in administration and general costs.
Civil defence expenditures of $5 million were $1 million higher than comparable costs in 1957-58.
In addition to these budgetary expenditures for defence, there were certain other cash outlays which must be considered in assessing the full effect of the defence programme on the economy of Canada.
For several years the estimated replacement value of equipment and supplies acquired by the Department of National Defence prior to March 31, 1950, and later transferred as mutual aid to NATO countries, was credited to the national defence equipment account, to be used subsequently for the purchase of equipment or supplies for the army, naval or air services thereby involving cash outlays which were not reflected as budgetary expenditures. Since 1956 no credits have been made to this account, instead the Defence Services Vote provides that where any equipment or supplies are transferred as mutual aid, the estimated present value thereof shall be credited to that vote. In accordance with the policy outlined in the budget speech of June 17, 1958, the balance remaining in the national defence equipment account has been liquidated in 1958-59. Total charges of $212 million were made to the account in 1958-59 compared with $24 million in 1957-58.
Under section 11 of the National Defence Act there is provision for the sale of materiel, not immediately required for the use of the Canadian defence forces or the Defence Research Board, to such countries and upon such terms as the Governor in Council may determine. The proceeds of such sales are credited to a special account to be used for the procurement of materiel. Net cash outlays from this account during 1958-59 were $6 million leaving a balance of $12 million at March 31, 1959.
66968-9-1591
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The Department of Defence Production also makes cash disbursements, for the procurement of materials for use in the manufacture of defence equipment, which are not recorded as budgetary expenditures. For purposes of accounting and control, these amounts are charged to the defence production revolving fund and are treated as assets on the books of the government until they are billed to the Department of National Defence or sold to defence contractors for use in the manufacture of defence equipment. As a result of the transactions during 1958-59 the assets of the fund were reduced by $21 million leaving a balance of $34 million in the account at March 31, 1959.
The following table summarizes the cash outlays for defence for the past two fiscal years:

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(in millions of dollars)
Cash Outlays for Defence	Fiscal year ended March 31		Increase or decrease (-)
	1959 (estimated)	1958	
Budgetary expenditures-	1,418.0 14.4 4.8	1,668.4 15.0 4.0	-250.4 - 0.6 0.8
			
			
Disbursements from-			
	1,437.2 211.8 6.2 -20.5 197.5	1,687.4 24.3 -16.6 - 1.8 5.9	-250.2 187.5 22.8 - 18.7 191.6
Replacement of materiel account-sec. 11, National			
			
			
	1,634.7	1,693.3	- 58.6
			
0>
Gross disbursements less refunds of expenditures charged to account in previous years.
Public debt charges
In 1958-59 public debt charges were again the second largest item of budgetary expenditures. These charges, which consist of interest on public debt, the annual amortization of bond discounts and commissions, the cost of issuing new loans and other costs incurred in servicing the public debt amounted to $644 million in 1958-59 or 12 per cent of all budgetary expenditures compared with $567 million or 11 per cent in 1957-58.
Interest on public debt was $604 million in 1958-59 an increase of $65 million over the 1957-58 total of $539 million. Interest of $483 million on unmatured debt was $45 million higher due to an increase in unmatured debt and the general rise in interest rates; interest of $121 million on other liabilities was $20 million higher mainly due to increases of $14 million in respect of the permanent services pension account, $4 million in respect of the superannuation account and $2 million in respect of the government annuities account. The increase in respect of the permanent services pension account was mainly due to the fact that the account balance was adjusted upwards by $326 million on April 1, 1958 to reflect an actuarial revaluation of the liability.
The increase of $12 million in other public debt charges was due to new loans issued during the fiscal year.
The Budget-Appendix

TABLE 10 (in millions of dollars)
Interest and Other Public Debt Charges	Fiscal year ended March 31	Increase or1959 (estimated)	1958	decrease (-)Interest on public debt- Unmatured debt and treasury bills- Payable in Canada	473.8	428.0	45.8Payable in London	1.6	1.5	0.1Payable in New York	7.9	8.6	-0.7483.3	438.1	45.2Other liabilities-	Deposit and trust accounts	3.6	3.4	0.2Annuity, insurance and pension accounts	117.5	97.7	19.8121.1	101.1	20.0Total interest on public debt	604.4	539.2	65.2Other public debt charges-	Annual amortization of bond discounts and commissions	35.6	26.4	9.2Cost of issuing new loans	3.7	1.2	2.5Servicing of public debt	0.7	0.6	0.140.0	28.2	11.8644.4	567.4	77.0
When considering the magnitude of these public debt charges and the burden they place upon the public treasury, it must be borne in mind that a substantial portion of the debt is attributable to, or is invested in, productive or earning assets. Therefore, in calculating the net burden of the government's annual interest charges, the income derived from loans, investments and other productive assets must be taken into account. For 1958-59 this income was $225 million as shown in the preceding section on revenue. This amount deducted from the gross total of $604 million for interest as shown in the above table leaves a net annual interest charge of $379 million compared with a net of $370 million in 1957-58.
Subsidies and tax-sharing payments to provinces
Payments to the provinces during 1958-59 for statutory subsidies, rentals under the tax-sharing arrangements act, the transitional and additional grants to Newfoundland, and the transfer of a portion of income tax receipts from certain public utility companies amounted to $467 million compared with $383 million in 1957-58.
Charges to budgetary expenditures in 1958-59 under the Federal-Provincial tax-sharing arrangements, including adjustments made on account of the previous year, were $70 million more than in 1957-58. The increase occurred despite a decrease in individual income tax collections and corporation taxable income from the preceding year. The increase was occasioned by the introduction of Atlantic Provinces Adjustment Grants of $25 million of which $7| million was paid to each of the Provinces of Nova Scotia, New Brunswick and Newfoundland and $2§ million to Prince Edward Island, and the increase of the standard tax rate for individual income from 10% to 13%. An adjustment was required by the tax-sharing arrangements act to compensate for the 1958 reduction in the federal individual income tax rate.
Payments to the provinces under the Federal-Provincial tax-sharing arrangements in 1958-59 were adjusted by deducting a total of $1 million from the tax-
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The Budget-Appendix sharing entitlement of the provinces of Newfoundland, Prince Edward Island, New Brunswick, Manitoba and Saskatchewan. This deduction represented recovery of one-fifth of the overpayment made to those provinces under the 1952 tax-rental agreements on account of an over-estimation of their population as revealed by the 1956 census. By memoranda of agreement with the provinces concerned, the 1952 tax-rental agreements were amended to authorize the recovery of the overpayment in equal monthly deductions from the tax-sharing payments of those provinces over the five-year life of the new agreements.
TABLE 11 (in millions of dollars)
Subsidies and Tax-Sharing Payments to Provinces	Fiscal year ended March 31		Increase or decrease (-)
	1959 (estimated)	1958	
Payments under Federal-Provincial Tax-Sharing Arrange-			
ments Act, c. 29, Statutes of 1956, as amended, c. 29,			
Statutes of 1957-58		423.2	353.3	69.9
	20.6	20.6	
Transitional grant to Newfoundland		i.i	1.4	-0.3
	13.6		13.6
Transfer of certain public utility tax receipts Sec. 6, c. 49,			
Statutes of 1952	8.7	7.4	1.3467.2	382.7	84.5
Under the proposed Newfoundland Additional Grants Act, pursuant to the report of the Royal Commission on Newfoundland Finances appointed under clause 29 of the Terms of Union, Newfoundland is to receive additional grants for the fiscal years 1957-58 to 1961-62 inclusive. The additional grants for the first two fiscal years, which are payable in 1958-59, amount to $13§ million.
Statutory subsidies at $21 million in 1958-59 were unchanged from the previous year.
A summary of payments, by provinces, during 1958-59 is given in the following table:

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(in millions of dollars)
Fiscal year ended March 31, 1959 (estimated)
Subsidies and Tax-Sharing Payments to Provinces
Newfoundland	
Prince Edward Island
Nova Scotia	
New Brunswcik	
Quebec	
Ontario	
Manitoba	
Saskatchewan	
Alberta	
British Columbia...
Statutory subsidies	Payments under tax-sharing arrangements	Transitional and additional grants	Transfer of certain public utility tax receipts1.6 0.7	24.4 6.8	14.7	0.32.0	34.9	0.51.7	29.8	0.23.3	55.6	2.33.6	93.3	1.62.0	33.6	2.1	34.3	0.12.3	46.3	2.21.3	64.8	1.5
20.6	423.2	14.7	8.7
Total
41.0
7.5
37.4
31.7 60.6
98.5
35.6
36.5
50.8
67.6
467.2

The Budget-Appendix
The amount of public utility tax receipts transferred to the provinces in 1958-59 amounted to $9 million or $1 million more than in the previous year. Section 6 of the Tax Rental Agreements Act, 1952, authorized the payment to the provinces, whether participating in an agreement or not, of a portion of the income tax collected from corporations whose main business was the distribution to, or the generation for distribution to, the public of electrical energy, gas or steam. The 1958-59 payment represents the transferrable portion of the income tax from the above corporations for the taxation year 1956. This payment is the last transfer authorized under the 1952 Tax Rental Agreements Act.
Family allowances
Family allowances are payable in respect of all children under sixteen resident in Canada, with minor exceptions such as in the case of children of immigrants who must reside in Canada a year before an allowance is payable. The monthly allowance is $6 if the child is under 10 years and $8 in the age group 10 to 15. Children of immigrants receive family assistance of $5 per month during their first year of residence in Canada from the Department of Citizenship and Immigration if during that period they are under sixteen years of age.
Family allowance payments of $475 million represented 9 per cent of total expenditures. The increase of $37 million over the previous year reflected the increase in the number of children in the eligible age groups and the increase in the monthly allowances effective September 1,1957.

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(in millions of dollars)
Family Allowance Payments By Provinces	Fiscal year ended March 31		Increase
	1959 (estimated)	1958	
15.2	14.1	1.120.6	19.4	1.23.0	2.8	0.218.2	17.1	1.1146.3	136.1	10.2150.2	136.7	13.523.1	21.5	1.624.8	23.3	1.534.1	31.0	3.138.4	35.0	3.41.0	0.9	0.1
474.9	437.9	37.0
Reduction in the amount of temporary loans to the old age security fund
In 1958-59 payments of $560 million out of the fund exceeded receipts of $376 million by $184 million. Parliament has authorized the charging of this amount to budgetary expenditures in 1958-59 leaving a nil balance in the fund at March 31, 1959.
Unemployment Insurance Act administration and government's contribution
Expenditures in 1958-59 relating to the Act (excluding the goverment's payment as an employer) amounted to $73 million compared with $70 million in 1957-58.
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Unemployment insurance benefit payments are not charged directly to budgetary expenditures but are paid from the unemployment insurance fund which is financed by equal contributions from employees and employers, by interest earned on investments, and by the government's contribution of an amount equal to one-fifth of combined employee-employer contributions.
The government's contribution to the fund for 1958-59 was $38 million and administration costs were $35 million; the corresponding amounts for 1957-58 were $38 million and $32 million.
Government contribution with respect to the superannuation account
In 1958-59 the government contributed $38 million to the superannuation account compared with $78 million in 1957-58. The decrease was due to the fact that there was no charge in 1958-59 comparable to the $44 million in 1957-58 covering the additional liability created by the general salary increase of May 1, 1957.
Hospital insurance and diagnostic services
The Hospital Insurance and Diagnostic Services Act, Statutes of 1957, authorizes contributions by Canada in respect of programmes administered by the provinces, providing hospital insurance and laboratory and other services in aid of diagnosis. Payments of $58 million were made in 1958-59.
As may be noted in the following table seven provinces had entered into agreements during the year. The effective date of each agreement is as follows July 1, 1958 for Newfoundland, Manitoba, Saskatchewan, Alberta and British Columbia and January 1, 1959 for Nova Scotia and Ontario.
TABLE 14 (in millions of dollars)
Hospital Insurance and Diagnostic Services	Fiscal year ended March 31 1959 (estimated)
Newfoundland		2.8
	2.0
	15.6
	7.3
	8.5
	9.3
British Columbia		12.3
	57.8
Agriculture
Expenditures of the Department of Agriculture totalled $167 million for 1958-59 compared with $95 million in 1957-58.
The principal changes in the expenditures of this department were in the payments to western grain producers, the operating losses of the agricultural stabilization board and the deficit in the prairie farm emergency fund.
The Western Grain Producers Acreage Payment Regulations were set up by Order-in-Council, P.C. 1958-1442 dated October 16, 1958, whereby payment of $1 was authorized for each acre of cultivated acreage as set forth in the permit book, issued by the Canadian Wheat Board to each wheat grower, recording the seeded acreage of his lands. The maximum payment to each permit holder was not to exceed $200. The Canadian Wheat Board was authorized to act as the agent of the Minister of Agriculture under these regulations and made payments aggregating $41 million.

The Budget-Appendix
With the authority of parliament the $15 million operating losses of the Agricultural Stabilization Board for 1958-59 that had been credited to the agricultural commodities stabilization account were charged to budgetary expenditures in 1958-59.
Advances of $15 million made by the Minister of Finance to the prairie farm emergency fund to cover the year's deficit were charged to expenditure in the accounts for the fiscal year.
TABLE 15 (in millions of dollars)
Agriculture	Fiscal year ended March 31	Increase or1959 (estimated)	1958	decrease (-)15.5	13.8	1.720.0	17.5	2.58.0	7.3	0.715.0	6.0	9.041.3	41.315.0	5.9	9.16.8	5.5	1.317.0	14.3	2.714.7	12.5	2.211.7	10.6	1.11.5	1.3	0.2
166.5	94.7	71.8
Atomic Energy
Expenditures of the Atomic Energy Control Board and payments to Atomic Energy of Canada Limited totalled $26 million compared with $22 million in 1957-58 an increase of $4 million.
Administration expenses of the Atomic Energy Control Board and grants for research and investigations with respect to atomic energy were $0.5 million, the same as the 1957-58 expenditure.
During the fiscal year $25 million was paid to Atomic Energy of Canada Limited for its research programme, $4 million more than in the previous year. Of the total, $18 million was for current operations and maintenance and $7 million for the construction and acquisition of buildings, land, works and equipment.
In addition, advances of $3 million were made to Atomic Energy of Canada Limited during the year, for the construction or acquisition of buildings and equipment at Chalk River and Deep River and for the commercial products division at Ottawa. This brought the total of advances covered, or to be covered, by obligations or shares of the company to $59 million at March 31, 1959.
Canadian Broadcasting Corporation
Expenditures of $62 million were made by the government on account of the Canadian Broadcasting Corporation during 1958-59 compared with $43 million in 1957-58. The increase of $19 million was the result of an increase of $26 million in grants for radio and television services offset in part by a decrease of $7 million in the payments to the corporation of amounts equal to the collection of the 15 per cent special tax imposed on radio and television sets and equipment. These latter payments were discontinued under the provisions of the
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The Budget-Appendix Broadcasting Act which came into force on November 10, 1958. The corporation received, however, under the authority of Vote 701, $2 million to make up the deficiency between the estimated amount that would have been received from the tax during the fiscal year and the amount actually received to the date the new Act was proclaimed.
TABLE 16 (in millions of dollars)
Fiscal year ended March 31
Canadian Broadcasting Corporation	1955	1956	1957	1958	1959 (estimated)Grants to the Canadian Broadcasting Corporation by the Government of Canada- Amounts equal to tax collected under the Excise Tax Act in respect of radio and television sets and equipment	20.8	23.1	19.3	16.8	9.8Radio broadcasting and television services..	6.3	6.3	18.3	24.4	50.4International shortwave broadcasting service	2.1	1.8	1.7	1.8	1.929.2	31.2	39.3	43.0	62.1
The Broadcasting Act which came into force on November 10, 1958, stipulated that the corporation shall pay to the Receiver General such part of the working capital of the corporation as in the opinion of the Minister of Finance was in excess of $6 million, to be applied in the reduction of its indebtedness to the government. The remainder of the loans outstanding when the new Act came into force were to be cancelled and an equivalent amount credited to a proprietor's equity account. The excess of working capital amounting to $4 million was repaid by the corporation and an amount of 823 million representing the balance of the loans outstanding was cancelled and transferred to net debt.
Citizenship and Immigration
Expenditures of the Department of Citizenship and Immigration were $54 million in 1958-59 an increase of $2 million over the total for 1957-58.
The principal changes in the expenditures of this department were a reduction of $7 million in immigration expenditures due to lower immigration, a reduction in the expenditures in connection with movements of Hungarian refugees and an increase of $9 million in Indian affairs including an increase of $5 million for Indian education and $3 million for Indian welfare.
TABLE 17 (in millions of dollars)
Citizenship and Immigration	Fiscal year ended March 31		Increase or decrease (-)
	1959 (estimated)	1958	
Citizenship and citizenship registration	1.4	1.3	0.1Immigration	15.5	22.0	-6.5Indian affairs	36.4	27.9	8.5Administration and general	0.7	0.6	0.154.0	51.8	2.2
The Budget-Appendix
External Affairs
Expenditures of the Department of External Affairs totalled $76 million in 1958-59, an increase of $16 million over the previous year.
The increase of $13 million in assistance to other countries was due to increases of $11 million for the purchase of wheat and flour to be given to India, Pakistan and Ceylon to relieve food shortages and $2 million for the purchase of flour to be given to the United Nations Relief and Works Agency for Palestine Refugees in the Near East.
TABLE 18 (in millions of dollars)
External Affairs	Fiscal year ended March 31		Increase or decrease (-)
	1959 (estimated)	1958	
Assistance to other countries	14.5	2.0	12.5Canada's assessment for membership in international or commonwealth organizations	4.1	3.4	0.7Contributions to international organizations	4.8	4.6	0.2Grant to Colombo plan fund	35.0	34.4	0.6Representation abroad	9.7	9.3	0.4Administration and general	8.0	6.5	1.576.1	60.2	15.9
Finance
The major items of expenditure for the Department of Finance have been dealt with in previous paragraphs under the headings of "Public debt charges", "Subsidies and tax-sharing payments to provinces" and "Government contribution with respect to the superannuation account".
Other expenditures totalled $76 million for 1958-59, an increase of $17 million over the expenditures for 1957-58.
The increase in other expenditures was mainly due to increased payments to the National Conference of Canadian Universities for the purpose of making grants to institutions of higher learning and to higher grants to municipalities in lieu of taxes on federal property.
TABLE 19 (in millions of dollars)
Finance	Fiscal year ended March 31	Increase or1959 (estimated)	1958	decrease (-)Grants to municipalities in lieu of taxes on federal property	22.1	17.5	4.6Grants to universities	25.6	16.6	9.0Government contribution as an employer to the unemployment insurance fund	0.9	0.8	0.1Office of the Comptroller of the Treasury-administration expenses	18.0	17.5	0.5Administration and general	9.6	6.8	2.876.2	59.2	17.0
The Budget-Appendix Mines and Technical Surveys
Expenditures of the Department of Mines and Technical Surveys totalled $46 million for 1958-59, an increase of $10 million over the total for 1957-58.
The increase of $10 million was mainly due to an increase of $3 million in emergency gold mining assistance, $2 million by the Dominion Coal Board for coal subventions under the Atlantic Provinces Power Development Act and $2 million for aerial photography.
TABLE 20 (in millions of dollars)
Mines and Technical Surveys	Fiscal year ended March 31	Increase or1959 (estimated)	1958	decrease (-)11.6	8.6	3.011.1	8.9	2.213.4	10.5	2.93.5	3.3	0.23.2	2.7	0.52.9	2.1	0.8
45.7	36.1	9.6
National Health and Welfare
Family allowance payments amounting to $475 million, the reduction in the amount of temporary loans to the old age security fund amounting to $184 million and contributions under the Hospital Insurance and Diagnostic Services Act amounting to $58 million constituted the main items of expenditure for this department and have been dealt with under separate headings in preceding paragraphs. Civil defence expenditures, amounting to $5 million, have been dealt with under the heading "Defence expenditures".
Other expenditures of the department in 1958-59 totalled $156 million, an increase of $39 million over the previous year.
The following table presents a distribution of these payments to provinces for 1958-59:
TABLE 21 (in millions of dollars)
National Health and Welfare	Fiscal year ended March 31	Increase or1959 (estimated)	1958	decrease (-)Blind persons allowances	4.2	3.6	0.6Disabled persons allowances	15.6	11.1	4.5General health grants	46.0	34.6	11.419.9	19.8	0.1Old age assistance	30.6	25.1	5.512.4	10.0	2.422.3	8.2	14.14.9	4.6	0.3
155.9	117.0	38.9

The Budget-Appendix
General health grants to the provinces for assistance in hospital construction, general health services and the control of diseases increased by $11 million over the previous year.
Under the Unemployment Assistance Act the federal government contributes up to 50 per cent of the cost of unemployment assistance paid by the provinces, subject to certain deductions as set out in the Act. To date nine provinces have signed agreements with the federal government. There was an increase of $14 million in these contributions over those for the previous year.
Under the Old Age Assistance Act, the federal government reimburses the provinces by paying 50 per cent of the lesser of $55 monthly or the amount of assistance given by the provinces in the form of monthly pensions to eligible persons in need who are in the age group 65 to 69. (Under the Old Age Security Act, all persons 70 years and over who satisfy the residence requirements of the Act may receive a pension of $55 per month from the federal goverment out of the old age security fund.) Similarly, the federal government reimburses the provinces under the Blind Persons Act for allowances of not more than $55 per month to blind persons in need over the age of 18 by paying 75 per cent of the total payments, and under the Disabled Persons Act by paying 50 per cent of not more than $55 per month for allowances to disabled persons in need over the age of 18 years. In 1958-59 increases in payments to the old age assistance were $6 million, to blind persons $1 million and to disabled persons $5 million.
TABLE 22 (in millions of dollars)
General Health Grants and Federal Share or Old Age Assistance, Disabled Persons Allowances, Blind Persons Allowances and Unemployment Assistance	Fiscal year ended March 31, 1959 (estimated)				
General health grants	Old age assistance	Disabled persons allowances	Blind persons allowances	Unem- ployment assistanceNewfoundland	1.7	1.7	0.3	0.2	3.1Nova Scotia	2.9	1.6	0.7	0.4	0.4Prince Edward Island	0.6	0.2	0.2	(1)	0.1New Brunswick	2.1	1.8	0.6	0.4	0.212.3	10.7	8.5	1.5	Ontario	12.4	6.9	3.5	0.9	9.2Manitoba	2.7	1.6	0.4	0.2	1.6Saskatchewan	3.3	1.8	0.4	0.2	1.4Alberta	3.5	1.9	0.5	0.2	1.7British Columbia	4.4	2.3	0.5	0.2	4.6Northwest and Yukon Territories	0.1	0.1	(1)	(1)	46.0	30.6	15.6	4.2	22.3
Less than $50,000.
National Research Council
Expenditures amounted to $26 million, $4 million higher than for 1957-58. Salaries and other expenses amounting to $23 million accounted for the increase. The costs of construction or acquisition of buildings, works, land and new equipment totalling $3 million were approximately the same as in the previous year.
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The Budget-Appendix National Revenue
Expenditures of the Department of National Revenue were $70 million in 1958-59 compared with $68 million in 1957-58, an increase of $2 million.
The increase in the customs and excise division was due principally to increased expenditures in the operation and maintenance of ports and in the taxation division mainly to increased expenditures in the district offices.
TABLE 23 (in millions of dollars)
National Revenue	Fiscal year ended March 31		Increase or decrease (-)
	1959 (estimated)	1958	
37.4	36.5	0.931.9	31.0	0.90.2	0.2	
69.5	67.7	1.8
Northern Affairs and National Resources
Expenditures of the Department of Northern Affairs and National Resources in the fiscal year were $75 million, an increase of $26 million over the total for 1957-58.
The main increases in expenditures of this department were in the national parks and northern administration and lands branches. The increase of $7 million in the national parks branch was due to $6 million for construction and $1 million for administration. The increase of $15 million in the northern administration and lands branch was due mainly to $7 million for construction and $2 million for operation and maintenance in the Northwest Territories, $2 million for construction in the Yukon Territory and $3 million for access roads leading to resources.
TABLE 24 (in millions of dollars)
Northern Affairs and National Resources	Fiscal year ended March 31		Increase or decrease (-)
	1959 (estimated)	1958	
25.1	17.8	7.32.5	1.9	0.633.2	18.6	14.68.0	7.2	0.82.2	1.9	0.34.0	1.7	2.3
75.0	49.1	25.9

The Budget

Appendix
Post Office
Gross expenditures of the Post Office Department for 1958-59 were $184 million, an increase of $6 million over the 1957-58 outlay of $178 million.
Remuneration of postmasters and staffs at revenue and semi-staff offices, commissions at sub-offices and certain other authorized disbursements are paid from revenue. These payments, included in the total of $184 million, amounted to $26 million, compared with $25 million in 1957-58.

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(in millions of dollars)
Post Office	Fiscal year ended March 31		Increase or decrease (-)
	1959 (estimated)	1958	
Charged to budgetary expenditure- Operations-salaries and other expenses of staff post offices, district offices and railway mail services; and supplies and equipment and other items for revenue post offices	98.2	94.7	3.5Transportation-movement of mail by land, air and water....	55.2	54.1	1.1Financial services	2.7	2.6	0.1Administration and general	1.8	1.9	-0.1157.9	153.3	4.6Charged to revenue- Operations-salaries of postmasters and staffs at revenue and semi-staff offices, commissions paid at sub-offices and other disbursements	25.8	24.6	1.2183.7	177.9	5.8
Public Works
Expenditures of the Department of Public Works for 1958-59 amounted to $212 million, compared with $206 million for 1957-58, an increase of $6 million.
The increase of $1 million in the public buildings construction and services branch was due to an increase of $3 million for the acquisition, construction and improvements of public buildings in Ottawa offset by a decrease of $2 million for the acquisition, construction and improvements of public buildings other than in Ottawa. The increase of $4 million in the harbours and rivers engineering services was due mainly to the acquisition, construction and improvements of harbour and river works in Ontario. The decrease of $2 million in the development engineering services branch was due to lower costs in connection with the trans-Canada highway through national parks.
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The Budget-Appendix

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(in millions of dollars)
Public Works	Fiscal year ended March 31		Increase or decrease (-)
	1959 (estimated)	1958	
Public buildings-construction and services- Acquisition, construction and improvements of public buildings-	19.8	16.9	2.934.1	36.3	-2.20.1	-0.141.0	41.4	-0.42.0	2.3	-0.34.0	3.4	0.6100.9	100.4	0.6Harbours and rivers engineering services- Acquisition, construction and improvements of harbour and	27.3	24.1	3.23.3	3.8	-0.55.2	4.3	0.935.8	SS.S	3.6Development engineering services- Trans-Canada highway division- Contributions to the provinces under the terms of the Trans-	50.0	49.4	0.610.0	12.6	-2.61.9	1.4	0.561.9	63.4	-1.65.0	2.7	2.38.3	7.3	1.0
211.9	206.0	5.9
Royal Canadian Mounted Police
Expenditures for the Royal Canadian Mounted Police amounted to $53 million for 1958-59, $5 million more than the total spent in 1957-58.
Payments as shown in the table represent gross expenditures; payments received from the provinces and municipalities for police services amounting to $9 million were credited to revenue.
The increase of $5 million in the land and air services was due to increases of $2 million in operation and maintenance and $3 million in construction or acquisition of buildings, works, land and equipment.
TABLE 27 (in millions of dollars)
Royal Canadian Mounted Police	Fiscal year ended March 31	Increase or1959 (estimated)	1958	decrease (-)Land and air services	36.8	31.4	5.4Marine services	
Government contribution to the Royal Canadian Mounted	2.8	3.2	-0.4Police pension account	1.6	1.5	0.1Pensions and other benefits	2.7	2.5	0.2Headquarters administration and general	8.9	8.8	0.152.8	47.4	5.4
The Budget-Appendix
Trade and Commerce
Expenditures for the Department of Trade and Commerce totalled $65 million for 1958-59, an increase of $8 million over the previous year.
The main items in the net increase of $8 million in the expenditures of this department were $5 million on payment of carrying costs of temporary wheat reserves and $2 million due to the Canadian Wheat Board loss on oats for the crop year 1956-57.
TABLE 28 (in millions of dollars)
Trade and Commerce	Fiscal year ended March 31	Increase or1959 (estimated)	1958	decrease (-)38.4	33.3	5.16.2	6.2	2.1	2.18.3	7.5	0.82.3	2.2	0.13.5	3.3	0.24.1	4.4	-0.3
64.9	56.9	8.0
Transport
Expenditures of the Department of Transport for 1958-59 amounted to $300 million, an increase of $93 million over the total of $207 million in 1957-58.
Of the $37 million increase in expenditures for air services, $31 million was for the civil aviation division of which $26 million was for the construction and acquisition of buildings, works, lands and new equipment including construction work on municipal airports and $4 million was for operation and maintenance of airways and airports.
The increase of $19 million in expenditures for marine services included $11 million for the construction or acquisition of steamers, $5 million for the operation and maintenance of steamers and $1 million for construction or acquisition of buildings, works, lands and equipment for aids to navigation.
The increase in the outlays of the Board of Transport Commissioners was due entirely to a special contribution of $10 million to the railway grade crossing fund.
During 1958-59, $61 million was paid to cover the net operating deficits of certain Crown corporations compared with $31 million in 1957-58. The increase of $30 million was due mainly to the reimbursement to the Canadian National Railways on account of its 1958 deficit, which was $52 million compared with the 1957 deficit of $22 million.
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The Budget-Appendix

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(in millions of dollars)
Transport	Fiscal year ended March 31	Increase or1959 (estimated)	1958	decrease (-)Air services- Civil aviation division	83.9	53.2	30.7Meteorological division	12.3	10.7	1.6Telecommunications division	27.3	24.0	3.3Administration	3.3	2.4	0.9126.8	90.3	36.5Canal services	9.3	8.6	0.7Marine services	51.3	32.8	18.5Railway and steamship services- Maritime Freight Rates Act- Difference between tariff and normal tolls	13.5	12.6	0.9Strait of Canso causeway	(1)	0.1	-0.1Construction and acquisition of auto-ferries	0.3	1.5	-1.21.7	4.1	-2.415.5	18.3	-2.8Board of Transport Commissioners-	7.0	7.0	Railway grade crossing fund	15.0	5.0	10.01.1	1.1	2S.1	13.1	10.0Canadian Maritime Commission	6.0	5.3	0.7Crown Corporations- Net income deficits- Canadian National Railways	51.6	22.1	29.58.9	8.9	Non-active advances-National Harbours Board	4.5	4.8	-0.365.0	35.8	29.2Administration and general	3.0	2.5	0.5300.0	206.7	93.3
WLess than $50,000.
Veterans Affairs
Expenditures of the Department of Veterans Affairs were $291 million in 1958-59 compared with expenditures of $277 million in 1957-58.
The net increase of $14 million in the outlays of this department included increases of $6 million for pensions for disability or death and $8 million in war veterans allowances due to legislation authorizing increases in monthly payments of pensions and allowances effective July 1 and November 1, 1957.

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(in millions of dollars)
Veterans Affairs	Fiscal year ended March 31		Increase or decrease (-)
	1959 (estimated)	1958	
Pensions for disability or death	151.1	145.6	5.5Treatment and welfare services	60.8	59.7	1.1War veterans allowances and other benefits	60.7	53.2	7.5War service gratuities and re-establishment credits	2.0	1.8	0.2Soldier Settlement and Veterans Land Acts- Administration and general	5.6	5.5	0.1Provision for reserve for conditional benefits, Veterans Land Act	4.3	5.2	-0.9Departmental, district and pensions administration and miscellaneous payments	6.3	6.2	0.1290.8	277.2	13.6
The Budget-Appendix
All other departments
Expenditures of the departments not dealt with in preceding sections amounted to $100 million for 1958-59, an increase of $10 million over the total for 1957-58.
The main changes were a decrease of $10 million in the expenses of the Chief Electoral Officer, due to the previous year's expenditures having included the costs of the June 1957 and March 1958 federal elections; an increase of $9 million in expenditures of the Department of Labour due to payments of $5 million under the winter works programme for which there was no comparable expenditure last year, and an increase of $4 million in payments to provinces to provide financial assistance to vocational schools and training under youth training programmes; and $4 million in the expenditures of the Office of the Commissioner of Penitentiaries of which $3 million was for the construction, improving and equipping of penitentiaries.
TABLE 31 (in millions of dollars)
All Otheb Departments	Fiscal year ended March 31		Increase or decrease (-)
	1959 (estimated)	1958	
	0.8	0.8	
	0.1		0.1
3.2	13.6	-10.43.5	3.2	0.318.4	16.4	2.00.4	0.4	1.2	1.2	7.7	7.2	0.5Office of the Commissioner of Penitentiaries	16.6 20.6	12.7 11.4	3.9 9.27.7	6.9	0.84.3	4.0	0.30.7	0.6	0.16.0	3.9	2.10.8	0.7	0.13.6	3.3	0.34.5	4.0	0.5
100.1	90.3	9.8
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rT'T~>
o Ri/r7 npf_Atitipy} Hi't*
4.	SUMMARY OF ASSETS AND LIABILITIES OF CANADA AT MARCH 31, 1959
The balances of the asset and liability accounts at March 31, 1959, the comparable balances at March 31, 1958, and the changes in each category during 1958-59 are shown in the following table:

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Summary op Assets and Liabilities op Canada (in millions of dollars)
Balance at March 31
Increase or
(estimated)
decrease (-)
Liabilities
Current and demand liabilities	
Deposit and trust accounts	
Annuity, insurance and pension accounts	
Undisbursed balances of appropriations to special accounts,
Deferred credits	
Suspense accounts	
Unmatured debt	
Total liabilities	
Assets
Current assets	
Advances to exchange fund account	
Sinking fund and other investments held for retirement of unmatured debt	
Loans to, and investments in, Crown corporations	
Loans to national governments	
Other loans and investments	
Securities held in trust	
Deferred charges	
Unamortized portion of actuarial deficiencies-
Permanent services pension account	
Superannuation account	
Suspense accounts	
Capital assets	
Inactive loans and investments	
Total assets	
Less reserve for losses on realization of assets	
Net assets	
Net debt (excess of liabilities over net assets)	
958.4	874.9	83.5228.7	187.0	41.73,289.4	2,712.8	576.677.9	285.4	-207.581.9	76.9	5.025.5	36.4	-10.915,557.7	14,245.1	1,312.620,219.5	18,418.5	1,801.0855.7	696.8	158.91,995.0	1,975.0	20.082.7	211.7	-129.03,289.0	2,554.3	734.71,449.3	1,488.0	-38.7681.7	662.8	18.919.6	22.6	-3.0149.6	77.5	72.1326.3	326.3139.0	139.0	(1)	(1)	(2)	(2)	92.2	90.9	1.39,080.1	7,918.6	1,161.5-546.4	-546.4	8,533.7	7,372.2	1,161.511,685.8	11,046.3	(3) 639.5
Less than $50,000.
Shown at nominal value of $1.
<3>
Reflecting the budgetary deficit of 616.6 million plus an adjustment of $22.9 million in respect of prior years transactions.
A. Changes In Phincipal Liability Classifications During 1958-59
The gross liabilities of the government increased by $1,801 million during the fiscal year. The main changes were increases of $1,313 million in unmatured debt and $577 million in annuity, insurance and pension accounts and a decrease of $207 million in undisbursed balances of appropriations to special accounts.

The Budget-Appendix


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20000
10000
25000
15000
5000
1959*
fAlso includes treasury notes for the fiscal years ending 1952-1956 inclusive. 'Estimated
Current and demand liabilities
This category consists of obligations of the government payable currently or on demand. The principal changes were an increase of $53 million in accounts payable (which records the net liability of the government for accounts paid in April which are applicable and charged to the previous fiscal year) and $32 million in outstanding treasury cheques.

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(in millions of dollars)
	Balance at March 31		Increase or decrease (-)
Current and Demand Liabilities	1959 (estimated)	1958	Outstanding treasury cheques	265.2	232.9	32.3Accounts payable	
Non-interest bearing notes payable to the international monetary fund and the international bank for reconstruction and	254.3	201.4	52.9development	201.8	203.8	-2.0Matured debt outstanding	29.5	23.5	6.057.1	57.1	Interest accrued	121.0	129.1	-8.1Post Office (net liability for money orders, etc.)	29.0	26.7	2.3Other current liabilities	0.5	0.4	0.1958.4	874.9	83.5
Deposit and trust accounts
In these accounts are recorded sundry funds deposited with the Receiver General of Canada or held in trust for various purposes. The net increase of $42 million was due to an increase of $43 million in the account "United States-
S.A.C. bases", which records funds received from the United States Government for the purpose of facilitating the placing of contracts by the R.C.A.F. on behalf of the U.S.A.F. in respect of Strategic Air Command bases, offset in part by decreases in other accounts.
[Stage Direction]
The Budget-Appendix

[Stage Direction]
(in millions of dollars)
	Balance at March 31		Increase or decrease (-)
Deposit and Trust Accounts	1959 (estimated)	1958	7.2	7.5	-0.39.1	8.2	0.917.1	16.2	0.9Contractors securities-sundry departments-	18.7	18.7	11.3	11.5	-0.21.3	1.2	0.1Sl.S	SI. 4	-0.19.5	9.6	-0.12.1	1.7	0.428.6	29.0	-0.47.4	8.1	-0.75.7	5.3	0.434.2	34.9	-0.7Soldier settlement and veterans land act trust account-general..	3.1 43.5	2.7 0.5	0.4 43.05.0	8.2	-3.224.9	23.7	1.2
228.7	187.0	41.7
Annuity, insurance and pension accounts
This category records the amounts to the credit of the various annuity, insurance and pension accounts.
TABLE 35 (in millions of dollars)
Annuity, Insurance and Pension Accounts	Balance at March 31		Increase or decrease (-)
	1959 (estimated)	1958	
	512.6 -501.6	754.8 -739.8	-242.2 238.2
			
			
	11.0 1,105.3 1,134.6 942.1 96.4	15.0 1,047.6 1,045.8 513.9 90.5	-4.0 57.7 88.8 428.2 5.9
			
			
			
			
	3,289.4	2,712.8	576.6
The decrease of $242 million in the unemployment insurance fund represents the amount by which benefit payments totalling $483 million exceeded contributions by employers and employees of $182 million, contributions by the government of $38 million, income of investments of $20 million and other miscellaneous revenue credited to the fund. Benefit payments were $98 million higher than the $385 million paid out in 1957-58.

The Budget-Appendix
The government annuities account increased by $58 million reflecting the amount by which premium receipts of $62 million, interest credited to the account by the government of $40 million and the amount of $1 million required to maintain the reserve exceed payments of $46 million to annuitants and beneficiaries.
The increase of $89 million in the superannuation account was due mainly to the government's contribution of $37 million equal to the estimated current and prior service payments of individuals in 1957-58 and $44 million interest credited to the account. The remainder of the increase was due to the excess of employees' current and prior service contributions of $41 million and miscellaneous receipts of $1 million over benefit payments of $34 million.
The permanent services pension account increased by $428 million. The major part of the increase was due to a credit of $326 million to record in the account the full actuarial liability as at March 31, 1958 as calculated by the Department of Insurance. The balance of the increase reflected the government's contribution of $50 million which is made at the rate of one and two-thirds times the current and prior service contributions, interest on the account of $32 million, and contributions of $30 million by permanent services personnel for current and prior years service less payments of $10 million from the account.
Old age security fund
Under the Old Age Security Act pensions of $55 per month are paid, without a means test, from the old age security fund to all eligible persons seventy years of age and over. Payments from the fund during the fiscal year were $560 million while credits to the fund from the 2 per cent tax on personal incomes (maximum tax $60), the 2 per cent tax on corporation profits and the 2 per cent sales tax totalled $376 million. Temporary loans amounting to $184 million were required to cover the deficit resulting from these transactions during 1958-59. Parliament has authorized the writing-off to expenditure in 1958-59 the deficit of $184 million.
TABLE 36 (in millions of dollars)
Fiscal year ended March 31
Old Age Security Fund	1955	1956	1957	1958	1959 (estimated)Tax receipts- 2 per cent sales tax	143.1 100.9 46.0	160.4 102.5 53.3	179.3 125.0 67.3	175.8 135.0 60.7	173.0 148.0 55.0
Total tax receipts						
	290.0 -353.3	316.2 -366.2	371.6 -379.1	371.5 -473.9	376.0 -560.0
Pension payments						
Excess of payments over receipts						
	-63.3 -45.8 45.8	-50.0 -63.3 63.3	-7.5 -50.0 56.0	-102.4 -1.5 103.9	-184 0
Previous deficit brought forward						
Appropriation by Parliament-					184.0
Deficit in fund covered by temporary loan from the Minister of Finance						
	-63.3	-50.0	-1.5		
					
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(in millions of dollars)
Old Age Security Payments by Provinces	Fiscal year ended March 31		Increase or decrease (-)
	1959 (estimated)	1958	
11.0	9.5	1.526.8	23.0	3.84.8	4.1	0.719.6	16.8	2.8117.1	99.5	17.6203.7	172.8	30.934.1	28.6	5.535.1	29.4	5.736.6	30.5	6.170.8	59.4	11.40.4	0.3	0.1
560.0	473.9	86.1
Undisbursed balances of appropriations to special accounts
This category records the undisbursed balances of appropriations to special accounts for which moneys have been appropriated by parliament and from which disbursements may be made for authorized purposes in periods subsequent to that in which the appropriation was made.
TABLE 38 (in millions of dollars)
Undisbursed Balances of Appropriations to Special Accounts	Balance at March 31		Increase or decrease (-)
	1959 (estimated)	1958	
National defence equipment account (section 3, Defence	211.8	-211.855.4	60.4	-5.00.4	0.5	-0.122.0	12.6	9.40.1	0.1	
77.9	285.4	-207.5
The national defence equipment account was established under Section 3 of the Defence Appropriation Act, 1950, and continued by subsequent votes of parliament. Under the terms of the Act, the value of defence materials and supplies acquired prior to March 31, 1950, and transferred to members of the North Atlantic Treaty Organization, could be credited to the account and these credits could be used in subsequent years to purchase equipment or supplies for the naval, army or air services of the Canadian forces. This account which totalled $212 million at the beginning of the year was liquidated during 1958-59 in accordance with the announcement by the Minister of Finance in his budget speech of June 17, 1958.
The decrease of $5 million in the Colombo plan fund represented the amount by which disbursements from the fund of $40 million exceeded the $35 millipn credited to the fund out of moneys voted by parliament for assistance to countries in south and south-east Asia.

The Budget-Appendix
The increase of $9 million in the railway grade crossing fund represented the amount by which the $15 million credited to this account and charged to expenditure exceeded disbursements of $6 million.
Deferred credits
This is a new category set up to record the amounts of deferred interest on loans and advances to certain Crown corporations and national governments and other deferred payments due the government. These are contra accounts to corresponding items under "Loans to, and investments in, Crown corporations," "Loans to national governments" and "Other loans and investments." Further explanations are given under these categories.
TABLE 39 (in millions of dollars)
Deferred Credits	Balance at March 31		Increase or decrease (-)
	1959 (estimated)	1958	
Agreements of sale of Crown assets	16.3	19.0	-2.7Crown Assets Disposal Corporation	6.0	5.8	0.2Deferred interest-	The St. Lawrence Seaway Authority	12.8	4.7	8.1United Kingdom Financial Agreement Act, 1946	44.2	44.2	Other	2 fi	a 9.	81.9	76.9	5.0
Suspense accounts
These accounts consist of balances where some uncertainty as to disposition exists

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(in millions of dollars)
Suspense Accounts
International monetary fund-revaluation of Canadian dollar
balance	
Paylist deductions	
Replacement of materiel, sec. 11, National Defence Act...
Unclaimed cheques	
Other	
Balance at March 31		Increase or decrease (-)
1959 (estimated)	1958	
0.1	5.1	-5.06.4	6.3	0.112.0	18.2	-6.24.0	4.0	3.0	2.8	0.225.5	36.4	-10.9
The decrease of $5 million in the "International monetary fund-revaluation of Canadian dollar balance" account represents adjustments occasioned by the increased value in terms of Canadian dollars of Canada's subscription to the fund.
"Paylist deductions" are for Canada savings bonds, income tax, etc., and are credited to this account pending transmittal to the Department of Finance or to the department concerned.
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The "Replacement of materiel" account established by section 11 of the National Defence Act is credited with amounts realized from the sale of materiel that has not been declared surplus to requirements but has been authorized by the Governor in Council to be sold to other countries. The account is debited with disbursements representing amounts paid for the procurement of replacement materiel. During 1958-59 disbursements exceeded credits to the account by $6 million.
Unmatured debt
The unmatured debt of Canada at the close of 1958-59 amounted to $15,558 million compared with $14,245 million at the close of the previous fiscal year. Debt payable in Canada increased by $1,463 million partly offset by a decrease of $150 million in debt payable in New York. There was no change in debt payable in London.
In the year under review, unmatured debt obligations payable in foreign currencies have been stated in Canadian dollars converted at the rate of $2.80 for the pound sterling and par for the U.S. dollar.
B. Changes In Principal Asset Classifications During 1958-59
The total of assets increased during 1958-59 by $1,161 million. The principal changes were increases of $735 million in loans to Crown corporations, $326 million in the unamortized portion of the actuarial deficiency in the permanent services pension account, $159 million in current assets, $72 million in deferred charges, $19 million in other loans and investments and $20 million in advances to the exchange fund, and decreases of $129 million in sinking fund and other investments held for retirement of unmatured debt and $39 million in loans to national goverments.

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Estimated

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Current assets
There was an increase of $159 million in this category during the fiscal year, mainly due to increases of $121 million in the cash accounts, $24 million in working capital advances and $13 million in the securities investment account.

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(in millions of dollars)
Current Assets	Balance at March 31		Increase or decrease (-)
	1959 (estimated)	1958	
473.0	307.5	165.5120.0	160.5	-40.5Departmental working capital advances and revolving funds-	68.8	26.5	42.334.1	54.6	-20.5Miscellaneous departmental imprest and advance accounts...	22.0 29.8	21.2 27.8	0.8 2.0154.7 93.0	1S0.1 79.8	24.6 13.2Other current assets-moneys received after March 31 but applic-	15.0	18.9	-3.9
855.7	696.8	158.9
Cash in current and special deposits increased by $166 million but this increase was partly offset by decreases of $41 million in cash in hands of collectors and $4 million in moneys received after March 31, 1959.
The increase of $24 million in working capital advances was due to increases of $42 million in the agricultural commodities stabilization account and $3 million in other accounts offset by a decrease of $21 million in the defence production revolving fund.
Advances to the exchange fund
Advances during the year to the exchang fund account to finance the purchase of gold and foreign exchange amounted to $225 million and repayments were $205 million, increasing outstanding advances to $1,995 million at March 31, 1959.
Sinking fund and other investments held for retirement of unmatured debt
There was a decrease of $129 million in this category during the fiscal year due to a reduction in the government's investment in its own New York bond issues. On February 1, 1959 the government called for redemption the 1948-56/63, 3% New York issue of which it held $129 million in this account.
Loans to, and investments in, Crown corporations
These loans and investments increased by $735 million during 1958-59 bringing the balance in this category to $3,289 million at March 31, 1959.
Advances to Atomic Energy of Canada Limited, to be covered by obligations or shares of the company, amounted to $3 million during the year. These advances were for the construction or acquisition of buildings and equipment at Chalk River and Deep River and for the commercial products division at Ottawa.
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(in millions of dollars)
Loans to, and Investments in, Crown Corporations	Balance at March 31		Increase or decrease (-)
	1959 (estimated)	1958	
	59.0	56.0	3.0
	5.9	5.9	
	7.5	7.5	
		27.0	-27.0
	4.0	4.0	
87.6	65.2	22.41,473.4 0.2	1,266.1 3.1	207.3-2.914.1	12.6	1.51,003.9 8.2	668.0	335.98.2	10.0	10.0	7.1	2.1	5.0146.2	125.4	20.834.1	14.4	19.7112.8	70.8	42.030.0	30.0	271.0	172.0	99.012.8	4.7	8.11.2	1.3	-0.1
3,289.0	2,554.3	734.7
Under the provisions of the Broadcasting Act which came into force on November 10, 1958, the Canadian Broadcasting Corporation repaid $4 million, (that portion of the working capital of the corporation in excess of $6 million). The remainder of its indebtedness of $23 million to the government was cancelled and this amount, plus the capital surplus of the corporation at the coming into force of the Act, was credited to a proprietor's equity account and transferred to net debt.
Loans to the Canadian Farm Loan Board amounted to $22 million during the year while repayments by the board were $253 thousand bringing the total advances to $88 million at March 31, 1959.
Loans to Central Mortgage and Housing during the year amounted to $373 million, of which $350 million was for direct loans by the corporation, $22 million for federal-provincial housing projects and $1 million for advances for house construction. Repayments totalled $37 million of which $33 million was for direct loans, $1 million was for loans for federal-provincial housing projects and $3 million for loans for house construction. The net increase for the year of $336 million brought the total loans to the corporation to $1,004 million at March 31, 1959.
Loans to the Northern Ontario Pipe Line Crown Corporation in connection with the construction of the Northern Ontario section of the all-Canadian natural gas pipe line totalled $42 million in 1958-59. There were no repayments during the year.
Advances to The St. Lawrence Seaway Authority amounted to $99 million bringing the total loans to $271 million. In addition deferred interest on these loans was increased by $8 million being the amount of interest due on December 31, 1958. A contra item for this amount is included in the liability category 'Deferred credits".

The Budget-Appendix
In the fiscal year ended March 31, 1959, the government made advances of $205 million to the Canadian National Railway Company for capital purposes and retirement of debt in the hands of the public. Repayment of current and prior years' advances during the year ended March 31, 1959 was $11 million.
In addition, to assist the company to finance further capital expenditures in the year ended March 31, 1959, the government purchased an amount of $21 million of four per cent preferred stock of the Canadian National Railway Company. This stock is issued under the authority of the Canadian National Railways Capital Revision Act, 1952, in an amount equal to three per cent of the gross revenue of the company.
Further, in the year ended March 31, 1959, the government provided the company with temporary loans of $34 million to cover, in part, the 1958 income deficit and $14 million to cover, in part, the 1959 income deficit. Since in the year ended March 31, 1958, the government made temporary loans of $22 million to cover, in part, the 1958 deficit, the total loans on the 1958 deficit were $56 million. However, an amount of $4 million was repaid prior to the end of the current fiscal year and the outstanding balance of $52 million was charged to expenditure.
In summary, the total amount which was made available to the company during the year was $274 million, repayments and write-off amounted to $67 million, resulting in a net increase of $207 million in the amount outstanding at the end of the fiscal year.
Other changes in loans and investments included increases of $21 million to the National Harbours Board, $20 million to the Northern Canada Power Commission, $2 million to the Canadian Overseas Telecommunication Corporation and a decrease of $3 million in loans to the Canadian National (West Indies) Steamships Limited.
Loans to national governments
These loans totalled $1,449 million at March 31, 1959, a decrease of $39 million during the fiscal year.
TABLE 43 (in millions of dollars)
Loans to National Governments	Balance at March 31		Increase or decrease (-)
	1959 (estimated)	1958	
Loans to United Kingdom- The War Appropriation (United Kingdom Financing) Act, 1942	22.5	-22.5The United Kingdom Financial Agreement Act, 1946	1,080.5	1,096.6	-16.144.2	44.2	1,124.7	1,168.S	-S8.6Loans under the Export Credits Insurance Act, Part II-	Belgium	41.5	43.8	-2.3159.0	167.4	-8.4 -4.6Netherlands	82.6	87.2	Norway	2.6	5.3	-2.7285.7	SOS. 7	-18.0Miscellaneous loans and advances-	1.6	1.6	Special loans to finance the purchase of wheat and flour from Canada	35.0	16.2	18.8Netherlands-military relief and currency credits settlement.	1.7	2.3	-0.6Miscellaneous	0.6	0.9	-0.3S8.9	21.0	17.91,449.3	1,488.0	-38.7
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During the fiscal year the United Kingdom government repaid all of the outstanding balance of $23 million of the $700 million interest-free loan granted under the provisions of the War Appropriation (United Kingdom Financing) Act, 1942. In addition a $16 million repayment was made on the $1,185 million loan made under the $1,250 million credit authorized by the United Kingdom Financial Agreement Act, 1946, reducing the principal outstanding at March 31, 1959 to $1,081 million.
Repayments of advances under Part II of the Export Credits Insurance Act to certain foreign countries to assist them in purchasing goods and services in Canada amounted to $18 million during the year reducing the balance at March 31, 1959 to $286 million.
Miscellaneous loans and advances to foreign governments increased by $18 million due to an increase of $19 million in special loans to finance the purchase of wheat and flour from Canada. These special loans amounted to $35 million at March 31, 1959, of which $33 million was made to India and $2 million to Ceylon.
Other loans and investments
There was an increase of $19 million in this category during the year bringing the balance to $6S2 million at March 31, 1959.
Canada's subscription to the capital of the international monetary fund was reduced by $3 million during the year. The accounts of the fund are maintained in terms of United States dollars therefore in order to keep Canada's subscription at the required amount, that portion represented by Canadian dollar balances is revalued quarterly and any settlement required is made annually as at April 30, the end of the fund's fiscal year. The decrease of $3 million reflected the settlement at April 30, 1958 and subsequent adjustments due to the quarterly revaluations.
Loans to provincial governments increased by $27 million due to a loan of $30 million to the Province of New Brunswick in respect of the Beechwood Power Project partly offset by regular annual payments of $3 million in respect of loans to other provinces.
Overpayments to certain provinces arising out of 1952 tax-rental agreements were reduced by $1 million during the year.
Advances under the Veterans Land Act decreased by $9 million, however as the reserve for conditional benefits under the Act was reduced by $6 million, the net decrease was $3 million.
Miscellaneous loans and investments decreased by $1 million during the year. Increases of $6 million being more than offset by decreases of $7 million.

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(in millions of dollars)
Othek Loans and Investments	Balance at March 31		Increase or decrease (-)
	1959 (estimated)	1958	
Subscriptions to capital of, working capital advances and loans to, international organizations- Canada's subscription to capital of- International monetary fund	292.9	295.9	-3.0International bank for reconstruction and development..	70.9	70.9	3.5	3.5	Working capital advances and loans to international organizations	2.2	2.3	-0.1S69.5	379.6	-S.lLoans to provincial governments- Alberta	8.8	9.2	-0.4British Columbia	17.1	17.9	-0.8Manitoba	14.4	15.0	-0.629.5	29.50.1	0.1	0.1	0.1	Saskatchewan	23.3	24.4	-1.193. S	66.7	36.6Overpayments to provinces arising out of 1952 tax-rental agreements- Manitoba	0.6	0.9	-0.3New Brunswick	0.6	0.7	-0.1Newfoundland	0.3	0.4	-0.1Prince Edward Island	0.7	0.9	-0.2Saskatchewan	0.9	1.2	-0.33.1	h-i	-1.0Veterans Land Act advances	193.0	201.7	-8.7Less reserve for conditional benefits-Veterans Land Act, 1942	-42.1	-47.7	5.6ISO.9	154.0	-S.lMiscellaneous- Acquisition of land to control properties in the vicinity of main terminal airports	4.5	6.7	-2.2Assisted passage scheme (section 69, Immigration Act, R.S. 1952)	5.2	7.1	-1.9Balances receivable under agreements of sale of Crown assets.	19.1	22.0	-2.9Construction of dock and rail facilities for Steep Rock Iron Mines Limited	2.1	2.2	-0.1Crown Assets Disposal Corporation-government equity in agency account	6.0	5.8	0.2Dominion Coal Company Limited	5.7	5.2	0.5Municipal Improvements Assistance Act, 1938	2.1	2.4	-0.32.4	2.4	Town of Oromocto, N.B	4.5	1.5	3.013.3	10.1	3.264.9	65. 4	-0.5681.7	662.8	18.9
Securities held in trust
This category records the security holdings of various liability accounts. There was a decrease in this account of S3 million, the balance at March 31, 1959 being $20 million.
Deferred charges
This category consists of the residual balance of discounts and commissions, redemption bonuses and conversion premiums on loan flotations that have not been amortized or written off to expenditures.
The balance in the account at March 31, 1959 of $150 million reflects an increase of $72 million during the fiscal year. Costs of new loans issued in 1958-59 and charged to the account were $108 million, of which $67 million was in respect of the 1958 conversion loan and $6 million in respect of treasury bill discounts which will be charged to interest on public debt in 1959-60. Credited
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The Budget-Appendix to the account was $36 million of which $31 million was charged to annual amortization costs and $5 million representing discount on treasury bills sold in 1957-58 was charged to interest on public debt in the 1958-59 budgetary expenditure accounts.
Unamortized portion of actuarial deficiencies
In 1958-59 $326 million was credited to the permanent services pension account to bring that account into line with an actuarial evaluation as at March 31, 1958 and an equivalent amount was set up as the unamortized portion of the actuarial deficiency.
There was no change in the unamortized portion of the actuarial deficiency in the superannuation account. The balance remained at $139 million.
Suspense accounts
There was no change in the balance in this category during the fiscal year. Capital assets
Capital assets, which consist of assets of the government such as land, buildings, works and equipment, etc., that are charged to budgetary expenditures at the time of acquisition or construction, are shown on the statement of assets and liabilities at a nominal value of $1.
Inactive loans and advances
This category records loans and advances which are not currently revenue-producing or realizable. Included are the loan of $49 million to China under the Export Credits Insurance Act, loans of $24 million and $7 million made to Roumania and Greece in 1919-20 and 1920-21 and advances of $12 million in respect of the implementation of guarantees (Ming Sung Industrial Company Limited), an increase of $1 million over 1958-59.
Reserve for losses on realization of assets
There was no change in this reserve during the year. The balance at March 31, 1959 remained at $546 million.
C. Increase in Net Debt
The budgetary deficit of $617 million for the fiscal year 1958-59 plus an adjustment of $23 million in respect of prior years transactions resulted in an increase of $640 million in the net debt of Canada from $11,046 million at March 31, 1958 to $11,686 million at March 31, 1959.

The Budget-Appendix
5. THE CASH POSITION
The government's cash position is affected not only by the budgetary transactions explained in some detail in preceding sections but also by nonbudgetary transactions and changes in the government's outstanding unmatured debt. Although there was an estimated budgetary deficit of $617 million in 1958-59, the government's bank balances increased by $166 million during the same period. This increase was the net result of the budgetary deficit of $617 million, a cash requirement of $646 million for non-budgetary transactions and an increase of $1,429 miliion in outstanding unmatured debt (after taking into account transactions in the securities investment and sinking fund accounts).
Non-budgetary receipts and credits relate to transactions which result in increases or decreases in the government's assets and liabilities and do not appear in what might be called the government's income account for the fiscal year nor do they enter into the calculation of the annual budgetary surplus or deficit. However, in considering the full scope of the government's financial operations and in measuring their effect on the government's cash position and their impact on the economy, non-budgetaiy as well as budgetary transactions must be taken into account.
The increases or decreases in the government's assets and liabilities have been described in detail in the section entitled "Statement of Assets and Liabilities of Canada". On the assets side the non-budgetary transactions consist, for the most part, of loans and advances to, and repayments by, Crown corporations and other government agencies and funds (including the old age security fund), national, provincial and municipal governments, international organizations, veterans and other borrowers. On the liabilities side they relate mainly to receipts and payments in connection with the many deposit and trust accounts, and annuity, insurance and pension funds held or administered by the government.
The following statement summarizes the non-budgetary transactions for 1958-59 and indicates how they, together with the budgetary transactions and changes in the unmatured debt position, affected the government's cash position. For purposes of comparison, the corresponding figures for 1957-58 are also shown.
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TABLE 45 (in millions of dollars)
	Fiscal year ended March 31	
Changes in Cash Position	1959 (estimated)	1958Non-budgetary receipts and credits (excluding unmatured debt transactions)- Repayment of loans, investments and working capital advances (net)-	4 1	0.320.5	1.822.5	30.016 1	18.0	19.93.1	3.218.3	7.2102.6	62.4Net government annuities account receipts-	16.1	18.71.0	1.240.6	38.4Net insurance and pension account receipts-	67.7 30.3	68.S 32.089.4	129.8326.3	76.9	59.3522.9 238.2	221.1 135.383.5	-128.043.0	9.4	3.140.5	-28.5Net receipts in sundry other accounts	15.8	38.71,113.6	362.4Non-budgetary disbursements and charges (excluding unmatured debt transactions)- Loans, investments and working capital advances (net)-	42.3	5.83.0	3.222.4	14 3. 207.3	-10.7335.9	107.520.0	-46.018.8	16.220.8	11119.7	6 742.0	70.599.0	94.525.6	1.025.3	26.1882.1 242.2	800.2 130.9218.0	7.772.1	13.65.0	5.5Unamortized portion of actuarial deficiency in permanent services	326.3	Net disbursements from sundry other accounts	14.2	30.81,759.9	488.7-646.3	-126.3-616.0	-38.6Overall cash requirements to be financed by increase in debt or decrease	-1,262.9	-1G4.9Net increase in unmatured debt outstanding in the hands of the public-	1,312.6	-123.3Securities investment account	-13.2 129.0	124.4 -0.91,428.4	0.2165.5	-164.7
As the table shows, non-budgetary receipts and credits for 1958-59 (excluding unmatured debt transactions) totalled $1,114 million while non-budgetary disbursements and charges (also excluding unmatured debt transactions) amounted to $1,760 million, resulting in a net amount of $646 million required for nonbudgetary transaclions. As there was a budgetary deficit of $617 million, $1,263

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million had to be financed by an increase in unmatured debt or a decrease in cash balances. In 1957-58 there was a requirement of 1127 million for non-budgetary transactions and this together with the budgetary deficit of $38 million resulted in $165 million having to be financed by an increase in unmatured debt or a decrease in cash balances.
Non-budgetary receipts and credits, as already indicated, totalled $1,114 million in 1958-59. Repayments of loans, investments and working capital advances were $103 million and included $4 million from the Canadian Broadcasting Corporation, $39 million from the United Kingdom Government on account of the War Appropriation Act, 1942 and the Financial Agreement Act, 1946 and $18 million from other national governments on loans under Part II of the Export Credits Insurance Act. Net government annuities account receipts were $58 million and net insurance and pension account receipts were $523 million including $326 million representing the actuarial deficiency in the permanent services pension account as at March 31, 1958 which was credited to the account during the fiscal year. The net proceeds of the sale of investments of the unemployment insurance fund to finance payments out of the fund amounted to $238 million, and net receipts and credits in various other accounts amounted to $192 million including $84 million for the net increase in current and demand liabilities (such as outstanding cheques), $43 million on account of Strategic Air Command bases (in trust) and $41 million representing the net decrease in cash in the hands of collectors and in transit (which cash represents moneys received by public officers on or before March 31, 1959 but not deposited to the credit of the Receiver General until after that date).
Non-budgetary disbursements and charges amounted to $1,760 million. Loans, investments and working capital advances were $882 million and included net advances of $42 million to the agricultural commodities stabilization account in connection with the purchase and sale of commodities after allowing for a charge of $15 million to budgetary expenditures in respect of losses in operations during 1958-59, $22 million to the Canadian Farm Loan Board for the purpose of making loans to farmers, $207 million to the Canadian National Railways for additions and betterments, the acquisition of rolling stock and equipment and the retirement of maturing debt after allowing for a charge of $52 million to expenditures in respect of the company's operating deficit for 1958, $336 million to Central Mortgage and Housing Corporation for the purpose of making housing loans, $19 million to the Governments of India and Ceylon for the purchase of Canadian wheat, $21 million to National Harbours Board for reconstruction and capital expenditures, $20 million to Northern Canada Power Commission for power plant construction in Northern Canada and assistance under the Atlantic Provinces Power Development Act, $42 million to the Northern Ontario Pipe Line Crown Corporation for financing the Northern Ontario section of the natural gas pipe line, $99 million to The St. Lawrence Seaway Authority for dredging and construction of the seaway, and net payments of $26 million to provincial governments ($30 million having been advanced to the Province of New Brunswick in respect of the Beechwood Power Project). Net payments from the unemployment insurance fund were $242 million (sales of investments amounted to $238 million). Net disbursements from the special defence accounts were $218 million reflecting the decision to liquidate the national defence equipment account. Other non budgetary disbursements and charges amounted to $417 million and included $72 million in respect of loan flotation costs not yet amortized and $326 million in respect of the unamortized portion of the actuarial deficiency in the permanent services pension account.
In summary, as budgetary and non-budgetary transactions during 1958-59 required financing in the amount of $1,263 million, and unmatured debt outstanding in the hands of the public (after taking into account transactions in the securities investment and sinking fund accounts) increased by $1,429 million, more than sufficient to meet the requirement, cash balances on deposit with the banks increased by $166 million.
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6.	THE PUBLIC DEBT
Gross and net debt
During the fiscal year ended March 31, 1959, the gross public debt increased by $1,801 million to $20,220 million. This increase was made up of increases of $1,313 million in unmatured debt and $488 million in other liabilities. During the year the government's recorded net assets increased by $1,161 million. The net debt thus increased by $640 million to $11,686 million.
GROSS AND NET DEBT	NET DEBT AS AT MARCH 31
Estimated

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Statement of Public Debt, Unmatured Debt, Recorded Net Assets and Net Debt of Canada
(in millions of dollars)
As at March 31	Gross public debt	Less recorded net assets	Net debt	Increase or decrease (-) in net debt during fiscal yearUnmatured debt	Other liabilities	Total	1955	14.496.5 15.407.6 14,368.4 14,245.1 15.557.7	3,455.0 3,716.6	17,951.5	6,688.4	11,263.1	147.21956	19,124.2	7,843.8	11,280.4	17.31957	3.967.3 4.173.4	18,335.7	7,328.0	11,007.7	-272.71958	18,418.5	7,372.2	11,046.3	38.61959	4,661.8	20,219.5	8,533.7	11,685.8	639.5
Unmatured debt
The total unmatured debt of Canada at March 31, 1959 was $15,55S million. This was $1,313 million more than the total at the end of the previous fiscal year. During the fiscal year the government's holdings of its own securities in the sinking fund decreased by $129 million and in the securities investment account increased by $13 million. The net increase in the amount of outstanding unmatured debt in the hands of the public was $1,429 million.
Summary of securities issued and redemptions during the year
During the year ended March 31, 1959, the government issued securities payable in Canadian dollars in the principal amount of $9,286 million (exclud-

The Budget-Appendix
ing the refunding of treasury bills which mature periodically but including the increase in the issue of treasury bills in the amount of $70 million) and redeemed or converted issues in the amount of $7,973 million. Of the amount redeemed or converted $150 million was payable in U.S. dollars; the balance was payable in Canadian dollars.
Redemptions were financed as follows:
(in millions of dollars)
By proceeds of new issues:
Canada savings bonds 1958 series (net)....	860
Other new bond issues	 1,550
Increase in treasury bills	 70
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	2,480
By refunding or conversion	 6,806
9,286
Increase in unmatured debt	 -1,313
Applied towards redemptions	 7,973
At March 31, 1959, the outstanding unmatured debt payable in U.S. dollars was $150 million compared with $300 million on March 31, 1958 due to the call of the 1948-58/63 loan on February 1, 1959. The amount payable in sterling was $52 million, unchanged from the previous year.
In July the government announced the conversion loan campaign which was the largest debt operation ever carried out in Canada. In order to lengthen out the term of the debt, by selling to the public longer term bonds in exchange for the shorter term victory loan bonds, it offered to convert all unmatured 3 per cent victory loan bonds into new 4| per cent bonds due September 1, 1983, 4J per cent bonds due September 1, 1972, 3f per cent bonds due September 1, 1965 or 3 per cent bonds due December 1, 1961, providing the term of the new bonds was not less than that of the victory loan bonds converted. In all, $6,416 million of the victory loans was outstanding and of this total $5,806 million, or approximately 90 per cent, was converted into the new issues.
Net sales of Canada savings bonds, 1958 series, as at March 31, 1959, amounted to $860 million and redemptions of Canada savings bonds series 3 to 12 (of which series 3 matured on November 1, 1958) were $575 million. The net increase during the year for all series was $285 million and the amount outstanding at March 31, 1959 was $2,832 million.
The issue of treasury bills was increased by $70 million during the fiscal year and the amount outstanding at March 31, 1959 was $1,595 million.

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Redemption of Debt During Year Ended March 31, 1959
Maturity	Interest rate	Where payable	AmountMay 1, 1958	per cent 3	Canada Canada Canada Canada Canada Canada Canada Canada Canada U.S. Canada	$May 1, 1958	2	October 1, 1958	3	400,000,000December 1, 1958	2* 3	January 1, 1959(I>	June 1, I960®	3	1,118,711,700 1,262,166,050 1,072,799,150 1,446,594,500 150,000,000 575,292,350February 1, 1962®	3	October 1, 1963®	3	September 1, 1966®	3	August 1, 1963	3	Canada savings bonds series 3 to 12	various	
7,972,888,500
O $905,248,450 converted to Canada Conversion Loan 1958; balance matured January 1, 1959. (a) Converted to Canada Conversion Loan 1958 in amount shown.
66968-9-162
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The Budget-Appendix

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New Securities Issued During Year Ended March 31, 1959
Description	Price to govern- ment	Yield at price to government	Total amount issued	Renewals or conversions included in amount issued	Amount issued for cash$	$	$Issued to general public-	Bonds 2J% May 1/58-July 1/59	
Bonds 3% May 1/58-May 1/61	
Bonds 3i% May 1/58-May 1/70....	99.35 98.75	3.07 3.44	200,000,000) 400,000,000(	600,000,000	350,000,00097.50	3.76	200,000,0001	Bonds 3f% May 1/58-Jan. 15/78	
Bonds 3% Sept. 1/58-Dec. 1/61	
Bonds 3i% Sept 1/58-Sept. 1/65... Bonds 4i% Sept. 1/58-Sept. 1/72... Bonds 4J% Sept. 1/58-Sept. 1/83... Bonds 2}% Oct. 1/58-July 1/59	95.75 (1) (2) (3) (4) 99.68	4.07 2.93	150.000.	000j 1,020,514,000 1,266,723,100 1,366,733,800 2,151,548,950 300.000.	0001	1,020,514,000 1,266,723,100 1,366,733,800 2,151,548,950 400,000,000	200,000,000Bonds 2f% Oct. 1/58-April 1/60....	99.50	3.09	300,000,000/	Bonds 3% Dec. 15/58-Dec. 15/59...	99.15	3.87	300,000,000	300,000,000Bonds 4% Jan. 1/59-Jan. 1/63	
Bonds 2J% March 1/59-April 1/60..	98.50 97.80	4.41 4.86	100,000,000 85,000,000	100,000,000 85,000,000Bonds 3% March 1/59-Dec. 15/60. .	96.50	5.06	115,000,000	115,000,000Canada savings bonds, 1958 series	3|% to 4i% Nov. 1/58-Nov. 1/73	99.00	4.28	860,000,000	860,000,000various	70,000,000	70,000,000Issued to chartered banks-	Bonds 2*% July 15/58- Dec. 15/58...	100.00	2.50	360,000,000	360,000,000Issued to Bank of Canada-	Bonds 2)% July 15/58-Dec. 15/58...	100.00	2.50	40,000,000	40,000,0009,285,519,850	6,805,519,850	2,480,000,000
(i) Issued at par in conversion of 5th and 6th victory loan bonds. Cash adjustments of $15.00 and $12.50 respectively (inclusive of accrued interest to Sept. 1, 1958) per $1,000 were paid on conversion.
(*>
Issued at par in conversion of 5th, 6th and 7th victory loan bonds. Cash adjustments of $25.00, $22.50 and $12.50 respectively (inclusive of accrued interest to Sept. 1, 1958) per $1,000 were paid on conversion.
«>
Issued at par in conversion of 5th, 6th, 7th, 8th and 9th victory loan bonds. Cash adjustments of $25.00, $22.50, $12.50, $17.50 and $15.00 respectively (inclusive of accrued interest to Sept. 1,1958) per $1,000 were paid on conversion,
(« Issued at par' in conversion of 5th, 6th, 7th, 8th and 9th victory loan bonds. Cash adjustments paid as in (3) above.
Interest rates
During the first four months of the year interest rates generally continued the downward trend from their peak reached in August, 1957. Subsequently rates reversed their trend and continued to rise gradually. The average interest rate on the government's unmatured debt at March 31, 1959 was 3.60 per cent compared with 3.05 per cent at the end of the previous fiscal year and 2.74 per cent at March 31, 1955.
Treasury bill yields reflected a trend similar to that of general interest rates. The yield on three-month bills on April 3, 1958 was 1.83 per cent. On August 1, 1958, the yield dropped to a low for the year of 0.87 per cent and was 4.30 per cent on the last issue of the fiscal year.

The Budget-Appendix

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The following table shows the high and low yields together with the yield on the last issue of three-month bills for the fiscal years ended March 31, 1955 to 1959 inclusive.

[Stage Direction]
Treasury Bill Yields
Fiscal year ended March 31	Three-month bills		
High	Low	Last issue1955	per cent 1.62 2.64 3.81 4.08 4.30	per cent 0.78 1.08 2.40 2.27 0.87	per cent 1.13 2.64 3.70 2.27 4.301956	1957	1958	1959	
Indirect debt or contingent liabilities
In addition to the direct debt set out in the statement of assets and liabilities the government has assumed certain indirect or contingent obligations. These consist of securities of the Canadian National Railways, guaranteed as to principal and interest, or as to interest only, and a number of miscellaneous guarantees, the chief of which are the guarantee of insured loans made by chartered banks and other approved lending institutions under the National Housing Act, 1954, deposits maintained by the chartered banks in the Bank of Canada, bank advances to the Canadian Wheat Board, advances under the Export Credits Insurance Act and bank loans under the Farm Improvement Loans Act.
The government's liability under its guarantee of insured loans under the National Housing Act, 1954 was $2,059 million at December 31, 1958, compared with $1,398 million at December 31, 1957.
66968-9-162J
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The Budget-Appendix

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Bonds and Debenture Stocks Guaranteed bt the Government as at March 31, 1959
Date of maturity	Issue	Interest rate	Estimated amount outstandingMnv 4 IQfifl	per cent 3h	% 316,856Mqv 1Q 1Qfi1	3J	2,069,8053	26,465,1304	7,999,0742}	250,000,0003	35,000,0002}	50,000,00021	70,000,00021	40,000,00031	200,000,000.Tnnt* 1S 1Q7R	21	6,000,0004	300,000,0005	51,1904	5,054987,907,109APRIL 9, 1959 The Budget TABLE 51	2549 -AppendixOther Outstanding Guarantees and Contingent Liabilities At March 31, 1959	Amount outstanding (estimated)$Deposits maintained by the chartered banks in the Bank of Canada	629,024,600Loans maintained by approved lending institutions under National Housing Acts prior to 1954 Act. ..	IndeterminateLoans made by lenders under Part IV of the National Housing Act, 1954, for home extensions and improvements	4,980,094Insured loans made by approved lenders under the National Housing Act, 1954	2,054,319,234Guarantees to owners of returns from moderate rental housing projects	IndeterminateGuarantees under the Export Credits Insurance Act Part I	42,000,000Guarantees under the Exports Credits Insurance Act Part II	2,550,000Loans made by chartered banks under the Farm Improvement Loans Act	33,600,000Loans made by chartered banks under The Veterans' Business and Professional Loans Act	500,000Loans made by chartered banks under the Prairie Grain Producers' Interim Financing Act, 1956	100,000Loans made by chartered banks and credit unions under the Fisheries Improvement Loans Act	84,000Loans made by chartered banks to Canadian Wheat Board	107,000,000Loans made by chartered banks under the Prairie Grain Advance Payment Act	17,300,000
The Budget-Appendix
7. SUPPLEMENTARY DETAILED TABLES Revenues Expenditures
Annual Changes in Loans and Investments Unmatured Debt
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The Budget-Appendix
STATEMENT OF REVENUES FOR LAST FIVE FISCAL YEARS (in millions of dollars)
Tax Revenues-
Income tax-
Personal (1>
Corporation <*>
On dividends, interest, etc. going abroad.
Excise taxes-
Sales tax <*>


Other excise taxes-
Automobiles	
Beverages (soft drinks)	
Candy and chewing gum	
Cigarettes, cigars and tobacco	
Electrical appliances	
Furs	
Jewellery, watches, ornaments, etc. Matches and lighters	
graphs	
Tires and tubes	
Toilet preparations	
Trunks, bags, luggage, etc	
Wines	
Sundry commodities	
Licences, interest and miscellaneous. Less refunds	
Customs duties	
Excise duties-
Spirits, malt and beer	
Cigarettes, cigars and tobacco. Less refunds	
Succession duties	
Tax on insurance premiums. Miscellaneous tax revenue...
Total tax revenues.
Non-Tax Revenues-
Post office-net postal revenue.
Return on investments	
Other	
Total non-tax revenues. Total Revenues	
1954-55	1955-56	1956-57	1957-58	Estimated 1958-59$	$	$	$	$1,183.4	1,185.6	1,400.5	1,499.8	1,371.01,020.6	1,027.7	1,268.3	1,234.8	1,029.061.3	66.2	76.4	64.3	60.02,265.3	2,279.5	2,745.2	2,798.9	2,460.0572.2	641.5	717.1	703.2	694.073.2	76.2	79.7	72.3	60.48.2	8.7	9.0	0.6	9.9	9.2	9.8	0.7	114.5	126.9	132.3	142.4	150.00 4	0 1	4.8	5.0	6.1	5.3	5.60.9	0.9	0.8	0.9	0.921.5	22.8	19.0	16.9	17.58 6	0.8	5.2	5.6	6.1	6.3	6.70.4	2.4	2.5	2.6	2.7	3.12.3	2.1	2.3	1.4	1.20.4	0.4	0.5	0.6	0.5-0.8	-0.4	-1.1	-0.7	-3.5252.0	260.7	267.1	249.4	242.4397.2	481.2	549.1	498.1	486.0130.1	141.9	153.4	171.9	180.8100.8	110.4	121.1	131.7	141.0-4.4	-2.9	-3.1	-3.5	-4.2226.5	2494	271.4	300.1	317.644.8	66.6	79.7	71.6	73.014 *	15 5	16.7	1.0	1.3	1.6	1.5	1.23,773.5	3,995.7	4,647.9	4,622.8	4,274.2131.3	137.4	145.8	152.9	156.0134.0	149.3	206.6	169.4	224.684.7	117.6	106.2	103.7	116.0350.0	404.3	458.6	426.0	496.64,123.5	4,400.0	5,106.5	5,048.8	4,770.8
h>
Excluding tax credited to the old age security fund-
Estimated
1954-55	1955-56	1956-57	1957-58
2% personal income tax... 2% corporation income tax 2% sales tax	
100.9
46.0
143.1
102.5
53.3
160.4
125.0
67.3
179.3
135.0
60.7
175.8
148.0
55.0
173.0
<*>
Net after deduction of refunds and drawbacks as well as transfers to the old age security fund.

The Budget-Appendix

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(in millions of dollars)
1955-56
1957-58
Estimated
Agriculture-
Administration and general	
Agricultural commodities stabilization account-net operating loss	
Experimental farms service	
Freight assistance on western feed grains...
Marketing service	
Payments to western grain producers	
Prairie farm emergency fund-deficit	
Premium on hog carcasses suitable for export
to United Kingdom	
Production service	
Rehabilitation and reclamation projects	
Science service	
1.5
3.1
9.6 19.0 10.3
5.1
12.1
12.6
8.5
81.8
1.0	1.3
5.8	5.0
10.6	11.9
16.0	17.5
7.8	6.6
8.4	
5.9	5.7
12.2	13.2
11.9	13.6
8.6	9.8
88.2	84.6
1.3
6.0
13.8
17.5
7.3
5.9
5.5
14.3
12.5
10.6 91,. 7
1.5
15.0 15.5
20.0 8.0
41.3
15.0
6.8
17.0
14.7
11.7
166.5
Atomic Energy
Auditor General's Office
0.7	0.7	0.7	0.8
0.8
Board of Broadcast Governors
0.1
Canadian Broadcasting Corporation-
Grant towards the anticipated operating deficit and capital expenditures of the radio broadcasting and television services	
International service	
Payment from the consolidated revenue fund of amounts equal to taxes collected under the Excise Tax Act in respect of radio and television sets and equipment	
6.3	6.3
2.1	1.8
20.8	23.1
29.2	51.2
18.3
1.7
19.3 59. S
24.4
1.8
16.8
45.0
50.4
1.9
9.8
62.1
Office of the Chief Electoral Officer
0.3	0.4	0.2	13.6
3.2
Citizenship and Immigration- Administration and general...
Immigration branch	
Indian affairs branch	
1.3
8.3 18.0 27.6
1.5
8.0
21.5
51.0
1.8
18.6
23.7

[Stage Direction]
Civil Service Commission
2.3	2.4	2.7	3.2
3.5
Defence Production-
Administration and general	
Capital assistance to defence industry	
External Affairs	
Assistance to other countries and international
organizations	
Membership in commonwealth and international organizations	
Finance-
Administration and general	
Office of the Comptroller of the Treasury	
Commodity Prices Stabilization Corporation
Limited	
Grants to Canada Council	
Grants to municipalities in lieu of taxes on
federal property	
Grants to universities	
Government contributions with respect to the superannuation account-
General	
Special	
Implementation of guarantees (Ming Sung Industrial Co. Ltd.)	I
9.2
9.7
18.9
11.7 29.0
3.1
45.8
9.6
6.5
16.1
13.0
28.8
3.1
10.5
10.0
20.5
14.4
40.0
5.8
60.2
10.2
4.8
16.0
15.8
40.1
4.3
60.2
12.3
2.1
17.0
54.6
4.5
7 6.1
6.2
14.9
6.7
14.9
8.0
16.0
7.6
17.5
10.5
18.0
0.1
3.1	7.0	9.55.4	5.5	16.0
100.0
17.5
10.6
22.1
25.6
37.4
1.5
31.5
31.6
40.8
33.8
44.3
37.6
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The Budget-Appendix

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FOR THE LAST FIVE FISCAL YEARS-Continued
(in millions ol dollars)
-	1954-55	1955-56	1956-57	1957-58	Estimated 1958-59$	$	$	$	$Finance-concluded	Payments to provinces-	Subsidies	20.4	20.3	20.6	20.6	20.6Tax-rental agreements, 1952 act	327.4	319.6	365.9	Tax-sharing arrangements, 1956 act	353.3	423.2Transfer of certain public utility tax receipts	under tax-rental agreements	7.3	7.9	6.6	7.4	8.7Transitional grant to Newfoundland	3.9	3.1	2.3	1.4	1.1Additional grants to Newfoundland	13.6Premium, discount and exchange	3.8	1.4	Provision for reserve for losses on realization of	assets	50.0	Public debt charges-	Interest on public debt	477.9	492.6	520.2	539.2	604.4Cost of issuing new loans and annual amorti-	zation of bond discounts and commissions.	23.0	21.1	13.4	27.7	39.3Servicing of public debt	0.8	0.6	0.5	0.5	0.7Reduction in actuarial deficiency in the super-	50.0	0.3	0.4	934.0	931.2	1,152.8	1,187.4	1,226.4Fisheries	11.2	12.4	13.8	16.4	18.4Governor General and Lieutenant-	Governors	0.4	0.4	0.4	0.4	0.4Insurance	0.5	0.5	0.5	1.2	1.2Justice	5.9	6.6	7.0	7.2	7.7Office of the Commissioner of Penitentiaries..	10.5	10.7	12.0	12.7	16.616.4	17.3	19.0	19.9	24.3Labour	9.4	9.0	9.5	10.2	19.6Government annuities-amount required to	0.4	1.2	1.0Unemployment Insurance Act, 1940-	Administration and general	28.3	26.6	29.0	32.5	35.8Government contribution	31.7	33.9	37.4	37.8	37.569.8	69.6	75.9	81.7	93.9Legislation-	House of Commons	5.0	5.1	5.4	5.0	5.6Library of Parliament	0.3	0.3	0.3	0.3	0.4Senate	1.4	1.4	1.5	1.5	1.76.7	6.8	7.2	6.8	7.7Mines and Technical Surveys	16.4	17.6	17.5	18.7	23.0Dominion Coal Board	11.8	11.3	9.7	8.8	11.1Emergency gold mining assistance	15.5	9.3	8.7	8.6	11.643.7	38.2	35.9	36.1	45.7National Defence-	Defence forces, Army, Navy and Air services.	1,313.8	1,464.9	1,504.1	1,415.0	1,186.1Defence research and development	50.0	64.3	69.3	78.7	78.0Government contributions with respect to	permanent services pension account	36.7	40.1	46.3	49.7	49.5Mutual aid to NATO countries	260.0	175.0	133.6	118.5	97.0Pensions-payments under defence services	pension act	5.2	5.3	5.6	5.8	6.0Other	0.3	0.4	0.5	0.8	1.41,666.0	1,750.0	1,759.4	1,668.6	1,418.0National Film Board	3.4	4.1	5.0	4.0	4.3National Gallery	0.4	1.3	0.4	0.6	0.7National Health and Welfare	28.6	29.1	33.5	38.4	42.0Contributions under the Hospital Insurance and	Diagnostic Services Act	57.8Family allowances	366.5	382.5	397.5	437.9	474.9General health grants	31.6	33.5	36.3	34.6	46.0
The Budget-Appendix

[Stage Direction]
FOR THE LAST FIVE FISCAL YEARS-Concluded
(in millions of dollars)
-	1954-55	1955-56	1956-57	1957-58	Estimated 1958-59$	%	$	%	%National Health and Welfare-concluded	Old age assistance, blind persons and disabled	persons allowances	24.2	29.5	30.5	39.7	50.4Old age security fund-deficit	45.8	63.3	56.0	103.9	184.07.9	8.2	22.3496.7	357.9	661.7	662.7	877.4National Research Council	15.7	16.1	19.0	21.6	25.5National Revenue	55.0	56.1	61.8	67.7	69.5Northern Affairs and National Resources. .	20.2	24.7	37.0	49.1	75.0Post Office	123.6	127.4	140.0	153.3	157.9Privy Council including Prime Minister's Office	3.8	3.9	3.9	3.9	6.0Public Archives and National Library	0.4	0.5	0.6	0.7	0.8Public Printing and Stationery	2.1	2.2	3.2	3.3	3.6Public Works	112.7	126.0	140.5	156.6	161.9Trans-Canada highway contributions	18.1	16.1	24.8	49.4	50.0ISO.8	142.1	165.S	206.0	211.9Royal Canadian Mounted Police	35.5	36.6	43.4	47.4	52.8Secretary of State	2.7	3.0	3.5	4.0	4.5Trade and Commerce	17.5	17.6	23.6	23.6	26.518.9	31.8	33.3	38.417.6	S6.5	65.4	56.9	64-9Transport-	Administration and general	3.6	3.1	3.3	3.7	4.1Air services	44.7	57.3	70.5	90.3	126.8Canadian Maritime Commission	4.2	4.3	5.0	5.2	6.0Canal services	7.8	8.3	8.2	8.6	9.3Marine services	21.3	20.6	26.9	32.8	51.3Non-active assets-	National Harbours Board	3.9	3.0	4.1	4.8	4.5Railway and steamship services	26.7	15.3	15.2	12.7	9.0Deficits-	28.8	22.1	51.6Canadian National (West Indies) Steam-	0.6	0.1	0.6	1.0North Sydney-Port-aux-Basques ferry and	terminals	2.2	2.4	5.4	6.0	5.8Prince Edward Island car ferry and ter-	minals	1.5	1.6	1.8	2.0	1.90.3	0.3	0.2Maritime freight rates act	10.5	11.0	12.5	12.6	13.5Railway grade crossing fund	3.4	5.0	5.0	5.0	15.0159.2	1S2.0	158.2	206.7	SOO.OVeterans Affairs-	Administration and general	5.0	4.9	5.4	6.2	6.4Hospital accommodation, additions, alterations	and improvements	3.9	3.5	4.6	3.3	3.4Pensions	128.8	130.7	130.3	145.6	151.1Soldier settlement and veterans land acts	5.4	5.4	5.4	5.6	5.6Provision for reserve for conditional benefits.	8.9	8.8	6.8	5.2	4.3Treatment and welfare services	47.9	47.6	50.8	56.4	57.3Veterans allowances, treatment allowances and	other benefits	34.2	44.0	45.8	53.1	60.7War service gratuities and re-establishment	credits	6.0	3.6	2.4	1.8	2.0240.1	248.6	251.5	277.2	290.8Total Expenditures	4,275.4	4,433.1	4,849.0	5,087.4	5,387.4
The Budget-Appendix

[Stage Direction]
(in millions of dollars)
-	1954-55	1955-56	1956-57	1957-58	Estimated 1958-59$	$	$	%	%Loans to, and investments in, Crown corpora-	tions-	Atomic Energy of Canada Limited	16.0	11.7	9.1	3.2	3.0Canadian Broadcasting Corporation	3.0	8.4	-0.1	-0.3	-27.0-4.0	-2.0	Canadian Farm Loan Board	4.4	4.7	9.3	14.3	22.4Canadian National Railways	-93.4	170.7	172.1	-10.7	207.3Canadian National (West Indies) Steamships	Limited	3.6	-0.2	-0.3	-0.2	-2.9Canadian Overseas Telecommunication Corpo-	ration	0.3	4.0	4.3	0.3	1.5Central Mortgage and Housing Corporation...	43.7	-10.4	-4.1	107.5	335.9National Capital Commission	2.1	5.0National Harbours Board	1.0	-0.1	7.2	u.i	20.8Northern Canada Power Commission	-0.4	-0.4	0.3	6.7	19.70.3	70.5	42.0-4.0	The St. Lawrence Seaway Authority	1.3	20.2	56.0	0)99.2	0)107.1Other	0.4	0.4	-0.1	0.1	-0.1-n.t	SO5.0	S5S.0	303.3	734.7Loans to national governments-	United Kingdom-	The War Appropriation (U.K. Financing)	Act, 1942	-30.0	-30.0	-30.0	-30.0	-22.5The United Kingdom linancial Agreement	Act. 1946	-14.8	-15.2	-15.5	(*44.2	-16.1Export Credits Insurance Act	-23.6	-22.4	-21.9	-19.9	-18.0Special loans to Colombo Plan countries to	finance the purchase of wheat and flour from	16.2	18.8Other	-2.9	-3.4	-3.8	-i.i	-0.9-71.3	-71.0	-71.2	9.4	-38.7Other loans and investments-	Subscriptions to capital of, working capital ad-	vances and loans to, international organi-	zations-	Canada's subscription to capital of-	International monetary fund	-29.1	6.3	-8.8	5.0	-3.03.5	Working capital advances and loans to inter-	1.7	0.8	-0.2	-0 1Loans to provincial governments	-3.4	-3.6	-3.4	(«l.o	25.6Balances receivable under agreements of sale of	Crown assets	-8.0	11.8	7.8	-4.4	-2.9Veterans land act advances	0.9	-0.6	-3.8	-3.2	-3.1Other	3.6	2.2	2.8	9.4	2.4-34. s	16.1	-1.1	7.6	18.9Sinking fund and other investments held for	retirement of unmatured debt	89.0	20.0	0.9	-129.0Net total of changes in loans and investments..	-40.7	170.1	179.7	321.7	585.9
0>
Includes deferred interest.
W Deferred interest.
<* $4 million in overpayments to provinces arising out of 1952 tax-rental agreements oSset in part by repayments of J3 million.

The Budget-Appendix

[Stage Direction]
Date of maturity	Description	Rate per cent	Where payable1959, July	i...	Loan of 1958	T.30	21	CanadaJuly	i...	Loan of 1958	T.22	21	CanadaOct.	i...	Loan of 1957	T.19	3	CanadaOct.	i...	Loan of 1957	T.20	3	Nov.	i...	Canada savings bonds 1949.	S.4	2}	CanadaDec.	15...	Loan of 1958	T.32	3	1960, Apr.	1...	Loan of 1958 and 1959	T.31	2f	June	1...	Sixth victory loan	L. 9	3	CanadaNov.	1...	Canada savings bonds 1950.	S. 5	2f	Dec.	15...	Loan of 1957 and 1959	T.21	3	Canada1961, May	1...	Loan of 1958	T.23	3	Dec.	1.. .	Conversion loan of 1958	T.26	3	Canada1962, Feb.	1.. .	Seventh victory loan	P. 3	3	CanadaAug.	1...	Canada savings bonds 1951..	S. 6	31	1963, Jan.	1...	Loan of 1959	T.33	4	July	1...	Loan of 1933/43	3	LondonJuly	1...	Loan of 1938	31	LondonAug.	1...	Canada savings bonds 1952..	S. 7	31	Oct.	1...	Eighth victory loan	P. 5	3	Canada1965, Sept.	1.. .	Conversion loan of 1958	T.27	31	Nov.	1...	Canada savings bonds 1953..	S. 8	31	1966, Sept.	1...	Ninth victory loan	P. 7	3	Nov.	1...	Canada savings bonds 1954..	S. 9	31	1967, Nov.	1...	Canada savings bonds 1955..	S.10	31	Canada1968, June	15...	Refunding loan of 1950	P. 9	21	Canada1969, May	i...	Canada savings bonds 1956..	S.ll	31	Canada1970, May	i...	Loan of 1958	,	T.24	31	CanadaNov.	i...	Canada savings bonds 1957..	S.12	31	Canada1972, Sept.	i...	Conversion loan of 1958	T.28	41	1973, Nov.	i...	Canada savings bonds 1958..	31	1974, Sept.	i...	Loan of 1949	21	New York1975, Sept. 15...	Loan of 1950	21	New York1976, June	i...	Loan of 1954	T.ll	31	Canada1978, Jan.	15...	Loan of 1953	T. 5	31	CanadaJan.	15...	Loan of 1958	T. 5	31	Canada1979, Oct.	1...	Loan of 1954	T.13	31	1983, Sept.	1...	Conversion loan of 1958	T.29	41	Canada1998, Mar.	15...	Conversion loan of 1956	T.15	31	Pemetual.	P. 1	3	various	CanadaPayable in Canada	Payable in London	Payable in New York	
Amount
of
loan
[Stage Direction]
300.000.	000
200.000.	000
300.000.	000
250.000.	000 <'>16,378,000
300.000.	000
385.000.	000 46,588,650
<'>15,043,000
515.000.	000
400.000.	000 1,020,514,000
53,473,150
<'>59,846,000
100.000.	000 <'>49,833,091
<'>1,978,362
<'>72,534,000
223.020.200 1,266,723,100 <'>284,448,000
245.202.200 <'>136,768,000 <'>141,448,000
350.000.	000 <*>264,305,000
200.000.	000 <'>981,353,000 1,366,733,800 <'>860,000,000 <'>100,000,000
">50,000,000
300.000.	000
100.000.	000
150.000.	000
400.000.	000 2,151,548,950
250.000.	000 55,000,000
1,595,000,000
15,557,738,503
15,355,927,050
51,811,453
150,000,000
15,557,738,503
Annual
interest
charges
[Stage Direction]
7.500.000
5.000.	000
9.000.	000
7.500.000 450,395
9.000.	000 10,587,500
1,397,660
413,683
15.450.000 12,000,000 30,615,420
1,604,195
2,094,610
4.000.	000 1,494,993
64,297 2,720,025 6,690,606 47,502,116 10,666,800 7,356,066 4,444,960 4,597,060
9.625.000 9,250,675
7.000.	000 31,893,973 58,086,187
30.100.000
2.750.000
1.375.000
9.750.000
3.750.000
5.625.000 13,000,000 96,819,703
9.375.000
1.650.000 ">68,585,000
560,785,924
555,101,634
1,559,290
4,125,000
560,785,924
<'>
Estimated.
<'>
Conversion rate $2.80=£1.
<5>
Conversion rate $1 Can. = $1. U.S.
">
Calculated on basis of 4-30 per cent being rate of discount on bills sold March 26, 1959.


[Stage Direction]
Friday, February 20, 1959