1961-07-11

COMMONWEALTH RELATIONS


Hon. Howard C. Green (Secretary of State for External Affairs):: Mr. Speaker, I have a short statement to make concerning Canada's special commonwealth African aid program.
The house will be interested to know that agreement has been reached for an aerial mapping project to be undertaken in Nigeria as a part of our assistance program. This project, which is the first Canadian capital project in Nigeria since that country attained independence, will include an aerial survey and topographical mapping of approximately 28,000 square miles. It is expected that the maps which will result from this project will greatly facilitate the economic development of Nigeria. The cost of the entire project is estimated at $1,350,000. It will be undertaken by a Canadian company over a period of two or three years, subject to the appropriation of the necessary funds by parliament.


Hon. Paul Marlin (Essex East):: Mr. Speaker, I simply want to say that when the minister of labour of Nigeria was here the other day we expressed our warm admiration for his country, and indication then was given of our interest in trying to assist that country in ways now covered by the announcement made by the minister.


Mr. Hazen Argue (Assiniboia):: Mr. Speaker, this is the kind of announcement that receives the wholehearted support of the Canadian people. In particular, I think any assistance by Canada to the developing nations in Africa is most welcome, is most desirable and is in our mutual interest. Our only criticism in the past has been that Canada should raise its sights and do more in this regard.



FINANCE


[Stage Direction]
On the orders of the day:
Hon. L. B. Pearson (Leader of the Opposition):: Mr. Speaker, I should like to ask the Minister of Finance whether he will tell the house why he chose to keep the House of Commons in ignorance until June of this year concerning a change in policy affecting
the use of the exchange fund to affect the value of the Canadian dollar, which he secretly put into effect last December.


Hon. Donald M. Fleming (Minister of Finance):: Mr. Speaker, I do not think there were any questions asked about this matter in the meantime. There was a modification of the policy, not an extensive or far reaching modification but a modification. I think if anyone had chosen to ask a question and the opposition had been on its toes, for instance, this information would have been forthcoming in reply to any questions. The position of the exchange control fund is published as at the end of each month. There is no secrecy attending that.
In addition, Mr. Speaker, I say this information now comes to light not by reason of any questions asked in the house but by another breach of confidence by the man who is the governor of the agent of the government in these matters. This is a shocking breach of confidence by a man who pretends to stand on principle and to be defending principle.


Lester Bowles Pearson: Mr. Speaker, is the minister not aware that when this matter was brought up in the house he gave the house an assurance that the exchange fund was being used to level off fluctuations in the rate of exchange but not to affect the rate itself?


Donald Methuen Fleming: That was the policy that was observed, Mr. Speaker, as I have indicated to the house in reply to any question there has been on this subject. I would not wish the house to be misled by what has been said elsewhere into thinking that there was some far reaching or extensive departure from the policy that had been followed. It was a very modest modification of the formula that had been observed up until that time. I emphasize that fact-a very modest modification, not the impression that has been created elsewhere on the subject.


Lester Bowles Pearson: Would the minister tell the house whether there is any relation between the use of the fund in this way and his description of the reduction of the dollar by a significant discount?


Donald Methuen Fleming: Mr. Speaker, I should like to answer the hon. gentleman's question clearly if I fully apprehend it. What he has asked me about is, I take it, something that occurred after December 20 and

Inquiries of the Ministry prior to June 20. I have been asked questions and I have answered questions as to what is in our minds in relation to a significant discount at any particular time depending upon Canada's total economic circumstances. That has been made very clear, Mr. Speaker. If I have not fully apprehended the hon. gentleman's question, I will be glad to enlarge further.


Mr. Erhari Regier (Burnaby-Coquitlam):: Mr. Speaker, I should like to ask the minister another supplementary question. The minister mentioned a breach of confidence. Does the minister consider it a breach of confidence that he revealed to the house that in-


Mr. Speaker:: Order. I think the hon. member is now presenting an argument in the form of a question. There have been two sup-plementaries on a matter which has been debated at great length in the house, and I would think it should not be allowed to go on to the point where it becomes another debate.



INTERNATIONAL MONETARY FUND


[Stage Direction]
On the orders of the day:
Erhart Regier: Mr. Speaker, I should like to ask the Minister of Finance whether he is in a position to give a denial or otherwise to an allegation found in a Canadian Press dispatch in this morning's Globe and Mail to the effect that Canada is guilty of having violated our agreement under the international monetary fund, in that we did not hold prior consultation with the executives of the fund before the bringing down of the budget.


Donald Methuen Fleming: Mr. Speaker, Canada is quite prepared to defend her action in the light of the articles of the international monetary fund. I made that matter very clear previously. Allegations emanating from another source suggesting that this action on Canada's part was in violation of the articles of the international monetary fund we reject as unfounded and improper.



TRANS-CANADA AIR LINES REQUEST FOR INVESTIGATION INTO LABOUR DISPUTE

[Stage Direction]
On the orders of the day:
Hazen Robert Argue: I have a question for the Minister of Labour, Mr. Speaker. Has the minister received a telegram from Mr. E. P. O'Neal, secretary treasurer of the British Columbia federation

of labour, requesting a full and thorough investigation by the federal government into all aspects of T.C.A.'s conduct relative to the current contract dispute, in which he states that T.C.A.'s actions are a direct violation of the principles of the Industrial Relations and Disputes Investigation Act? Has the minister undertaken the investigation which has been requested?


Hon. Michael Siarr (Minister of Labour):: Mr. Speaker, I can best answer that question by reading the telegram which I sent in reply to Mr. O'Neal. It reads:
Retel seventh concerning dispute affecting flight attendants employed by T.C.A. Every effort being made to obtain settlement of dispute before strike deadline set for July 21. Complaint concerning company actions made by representative C.A.L.F.A.A. on May 28 and at my request statement in that regard subsequently made by T.C.A. which also issued statement to employees in attempt to clarify any misunderstanding that might have arisen. To date have had no further complaint from C.A.L.F.A.A. in this regard and would assume that it is considered more constructive action to direct efforts toward settlement of dispute relating to wages and working conditions.



BRIDGES


[Stage Direction]
On the orders of the day:
Mr. Hubert Badanai (Fort William):: Mr. Speaker, I have a question for the Minister of Public Works. My question arises out of a resolution passed by the Fort William city council urging the government to give consideration to the construction of a bridge across the Kaministikwia river as an extension of Eighth avenue to the city road to provide access to highway No. 61. Has the minister received this request from the city of Fort William, and, if so, is he in a position to say that consideration will be given to this project?
Hon. D. J. Walker (Minisier of Public
Works): Mr. Speaker, I wish to thank the hon. member for giving me notice of his intention to ask this question. I have received the resolution referred to, and I have the answer.
The letter containing the resolution of the city of Fort William concerning a bridge over the Kaministikwia river was received only today. I have not had much opportunity to study the resolution as such. However, I have in the past examined the request for a bridge over this river, which would appear to be a link in the road system of the city and province. I stress those latter words. As such, it did not appear to be a responsibility of the federal Department of Public Works.
The hon. member raised a question on this matter during discussion of the estimates

of my department on June 15, as reported at page 6392 of Hansard of that date. He suggested that a future extension of the terminal might require such a bridge. Our present plan for the lakehead is extensive, as the hon. member mentioned, and can be enlarged two or three times if necessary without affecting the proposed bridge. Our traffic connections to the seaway terminal will be quite adequate in view of the large overpass now under construction which will connect the terminal directly to the main highway arteries. The answer, therefore, is no; we do not intend to build a bridge.



FISHERIES


[Stage Direction]
On the orders of the day:
Mr. Robert Muir (Cape Breton North and Victoria):: Mr. Speaker, I should like to direct a question to the Minister of Fisheries.
I refer the minister to my question of July
8.	Is the minister now in a position to give any information in reply to requests for an extension of the lobster season in district 6B?


Mr. R. S. MacLellan (Inverness-Richmond):: Mr. Speaker, before the minister replies to that question may I ask him at the same time to report on the request for an extension of the season in district 6A?


Hon. J. A. MacLean (Minister of Fisheries):: Mr. Speaker, on Saturday last I said I hoped to be in a position to make a report today. I am now able to say that up to July 6 the catch in lobster district 6B was about 90 per cent of the average for the last three years. At that date there were still nine days of fishing remaining and catches were heavy. It is expected that by July 15 at least an average catch will have been harvested. In lobster district 6A the catch up to and including July 6 was about 86 per cent of the average for the last two years. With nine days remaining from that date and with catches heavy, it is anticipated that this district also will have at least an average catch. Under the circumstances no extension of the season in these two districts can be justified. I might add that requests for extensions which were received some time ago were based on the assumption that the catches in these districts would be much below normal.



INDUSTRY


[Stage Direction]
On the orders of the day:
Mr. Alan Macnaughlon (Mount Royal):: Mr. Speaker, I should like to address a question 90205-6-495
Inquiries of the Ministry to the Minister of Finance. Has the attention of the minister been directed to the announcement by Imperial Oil Limited and Texaco Canada Limited, appearing on the front page of the Montreal Gazette today, to the effect that they have boosted the price of gasoline by 1 cent per gallon throughout greater Montreal, the Hull area and western Quebec? Has the minister any comment to make thereon?


Donald Methuen Fleming: Mr. Speaker, I have not seen the article or advertisement or whatever it may be in question.


Alan Aylesworth Macnaughton: It was an announcement on the front page of the Montreal Gazette today.


Donald Methuen Fleming: Mr. Speaker, the hon. member for Mount Royal has sent over to me the article in this morning's Gazette which was the basis of his earlier question. I have now had an opportunity to read it. I draw attention to the fact that this article indicates that two companies have announced an increase of 1 cent per gallon in the price of gasoline in local areas, greater Montreal, Hull and western Quebec, and that there had been a similar increase announced in Ontario.
Attention is drawn in this article to the fact that this is an outcome of the price wars that have prevailed hitherto, and it is described in the report as a correction of a situation arising out of price wars. I do not think it has any significance as far as parliament is concerned. I do not know whether it has any significance with regard to the policies in the province of Quebec.


Mr. Chevrier:: It is related to the budget.


Donald Methuen Fleming: Now we have the missing link; the hon. member for Laurier has said it is related to the budget. It is quite obvious that no person who takes this article at its face value and applies an honest judgment to it could by any stretch of the imagination think it had anything to do with the budget, because it says itself:
An Imperial Oil spokesman said price wars in Quebec and Ontario the last three years had driven down the price to what the company felt was an "unsatisfactory level" and that the increase was aimed at correcting the situation.
So it is quite obvious, Mr. Speaker, that anyone who tries to connect this with the budget is not only drawing a long bow but is resorting to his distorted imagination.


Lionel Chevrier: Mr. Speaker, may I ask a supplementary question of the minister and ask him how it is, then, that the

Inquiries of the Ministry price of certain commodities in Canada has already increased; for instance, the price of bread-


Some hon. Members:: Oh, oh.


Lionel Chevrier: -which it has been stated is directly related to the budget, as this item is directly related to the budget.


Mr. Speaker:: Order. I think the hon. member should not attempt to renew the budget debate on orders of the day.


Donald Methuen Fleming: With respect, the hon. member has not contented himself with asking a question; he has put a statement on the record. With respect, Mr. Speaker, I think I should be entitled to say this briefly about the situation-


Mr. Speaker:: If the minister wishes to comment briefly upon the price of a loaf of bread I will allow him to do so.


Mr. Pickersgill:: Let them eat cake.


Donald Methuen Fleming: Mr. Speaker, the hon. member has said there has been an increase. What there was in fact was a suggestion that there might be an increase. I have already drawn attention to the fact that the increase in the world price of wheat, from which Canadian wheat producers do derive some benefit after all, would not account for more than one eighth or one ninth of a cent per 24-ounce loaf of bread. That is the molehill out of which the hon. member for Laurier is trying to construct a mountain in his own imagination.


Mr. G. J. Mclliailh (Otiawa West):: Mr. Speaker, might I ask the Minister of Finance if he is aware that the increase in the price of flour since the budget was delivered is greater, on the quantity of flour used by each of the major bakeries, than the total-


Mr. Speaker:: Order. If the hon. member completes his question the minister will wish to reply. I heard all this discussion in the budget debate, and it does not seem to me there is any urgency about anything that is now being said.


Lionel Chevrier: Where there no price increases in the budget?


George James McIlraith: You will have observed, Mr. Speaker, that my question was seeking information, and it did not contain argument.


Mr. Speaker:: I did observe that, but I was afraid the debate would be continued by hon. members.


George James McIlraith: Mr. Speaker, the question is in order. The answer may be out of order. 1 think the time to rule it out of order is when the answer is given.


Donald Methuen Fleming: Mr. Speaker, I would love to answer that question. I would just like to say that if the price of bread or flour has been increased in the manner indicated by hon. members opposite, it could not be attributed to the budget. I think the western wheat producer will be very glad to see an increase in the world price of wheat.


George James McIlraith: Mr. Speaker, in view of the answer, or the statement permitted which was not related to my question, I should like to put my question. It is this. Is the minister aware of the fact that the profits of the major bread companies in Canada last year in each case were less than the amount of the increase in the price of flour they buy?


Donald Methuen Fleming: No. Mr. Speaker, I have no knowledge of what the hon. gentleman refers to as a fact. I would wish to examine that very carefully before I regarded this statement on his part as any justification for associating any reputed increase in the price of this product with the budget, because it is quite clear that hon. members opposite are simply trying to make a whipping boy out of the budget for something for which the budget is in no way responsible.


Mr. Speaker:: Order.


Lionel Chevrier: We rely on the facts.


Donald Methuen Fleming: I will not come to you for instruction on facts.


Lionel Chevrier: You have been doing pretty badly.


Mr. Frank Howard (Skeena):: Mr. Speaker, I should like to direct a supplementary question to the Minister of Justice. I wonder whether the minister can tell the house whether the combines investigation branch will investigate the announcement of the Imperial Oil Company increasing the retail price of gasoline, and consider whether such an increase would be a contravention of the resale price maintenance provisions of the combines act.


Hon. E. D. Fulton (Minister of Justice):: Mr. Speaker, the director of the combines restrictive trade practices commission is aware of this announcement, and will take any necessary action.



CANADIAN NATIONAL RAILWAYS


[Stage Direction]
On the orders of the day:
Lionel Chevrier: Mr. Speaker, may I direct a question to the Prime Minister and ask him whether the vacancies

on the board of directors of the C.N.R. have been filled, and whether the chairman of the board has been appointed.


Right Hon. J. G. Diefenbaker (Prime Minister):: Mr. Speaker, the answer is no.
(Translation):



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Mr. J. P. Deschatelets (Maisonneuve-Rose-mont):: Mr. Speaker, I should like to put a question to the Minister of Transport. Is the minister aware that several hundred employees will be laid off at Dorval as a result of the granting of a lubrication service contract to an American firm?
Could the minister give us some explanation on this matter?


Hon. Leon Balcer (Minister of Transport):: That is the first time I have heard of it, Mr. Speaker. I will have inquiries made by my departmental officials.



PUBLIC SERVICE


[Stage Direction]
On the orders of the day:
Hon. Noel Dorion (Secretary of State):: Mr. Speaker, I should like to supply some information in reply to the questions which were directed to me recently concerning the advisability of granting leave with pay to part time employees. Generally speaking, the government-and this includes the civil service commission-has followed the policy of granting regular leave only to full time civil servants. A thorough review of that policy is now being made. The new policy we are now considering would be aimed at granting leave to all employees on the basis of their period of employment. When the civil service commission has completed its study of the matter, the house will be informed of the way in which this principle would apply.
(Text):



ARTS, LETTERS AND SCIENCES &quot;LADY CHATTERLEY'S LOVER&quot;  REPORTED WITH- DRAWAL FROM SALE

[Stage Direction]
On the orders of the day:
Mr. D. M. Fisher (Port Arthur):: Mr. Speaker, I should like to ask the Minister of Justice a question with regard to statements that the book "Lady Chatterley's Lover" has been 90205-6-495J
Inquiries of the Ministry withdrawn from sale by publishers. I should like to ask the minister whether his department has given any advice to Canadian publishers to the effect that this book should be removed from sale, or any advice to the customs department that no more copies should be allowed into Canada.


Edmund Davie Fulton: Mr. Speaker, I cannot speak from personal knowledge because I have not asked my officials, but I feel quite certain that my department has given no such advice.



INQUIRY AS TO POLICY ON DELIVERIES TO FEED MILLS

[Stage Direction]
On the orders of the day:
['Next sitting of the house.']
Hazen Robert Argue: Mr. Speaker, I should like to direct a question to the right hon. Prime Minister. In view of the fact that the new crop year is just a few weeks away, and the government has stated there would be a review of the policy of the wheat board in relation to the delivery of grain to feed mills, has any consideration been given to this policy, and can the Prime Minister say whether grain deliveries to feed mills within the designated areas will begin the first of this crop year and will be brought under delivery quotas?


John George Diefenbaker: Mr. Speaker, naturally I wish to look into the implications of that question and get the relative information.



[Stage Direction]
On the orders of the day:
Frank Howard: Mr. Speaker,
before orders of the day are called I should like to remind the Secretary of State for External Affairs that on July 5, 1961 the hon. member for Trinity-Conception directed the following question to the Minister of Fisheries:
Can the minister say whether active negotiations are being carried on at the present time with the nations which are fishing off the east coast of Canada to extend the fishery limit to twelve miles?
At that time the Minister of Fisheries said he would bring the matter to the attention of his colleague. I wonder whether the Secretary of State for External Affairs is now in a position to answer that question?


Howard Charles Green: Mr. Speaker, as members of the house will recall, Canada made intensive efforts both before and during the 1960 conference on the law of the sea to bring about international agreement on the breadth of the territorial sea and contiguous

Income Tax Act
zone. The failure of the conference has not, however, meant the abandonment of our interest or our efforts in this field. Canada has continued, along with other like minded countries, to seek an answer to these questions which will afford adequate protection to our fishing interests and at the same time contribute toward an international solution of this problem.
Because of the confidential nature of these developments I am not at liberty to disclose the solution which Canada is pursuing. I can assure the members of the house, however, that no efforts are being spared in our attempt to bring about a resolution of this problem. With respect to the particular question asked, the proposal we have in mind would apply equally to both Canada's east and west coasts.


Frank Howard: Mr. Speaker, I should like to ask a supplementary question. I wonder whether the government would give consideration to the adoption of Bill No. C-96, which stands in my name on the order paper, to provide a solution in this regard?


Hazen Robert Argue: Hear, hear.


Howard Charles Green: Mr. Speaker, I realize that the hon. member for Skeena is an authority on divorce, but I doubt very much whether he is an authority on the law of the sea, and I should have to take a very clear look at the bill before I decide to adopt it.


Hazen Robert Argue: That is a pretty cheap answer.


Some hon. Members:: Oh, oh.


Frank Howard: Mr. Speaker, as a fellow British Columbian I am sure the minister wil agree that each of us has an interest in all sorts of fields.


Lester Bowles Pearson: Mr. Speaker, may I ask whether the government is considering initiating negotiations for an international agreement to cover those countries which support the twelve mile zone?


Howard Charles Green: Mr. Speaker, I am afraid I cannot go any further than the statement I have already made. It would not be helpful if I were to make a disclosure along the lines of the question asked by the Leader of the Opposition.


[Stage Direction]
The house resumed from Monday, July 10, consideration in committee of Bill No. C-120, to amend the Income Tax Act-Mr. Fleming (Eglinton)-Mr. Flynn in the chair.

On clause 27.
The Chairman:: When the committee rose last night we were considering the subclauses listed on page 23 of the bill. Has the consideration of this portion been completed?
On subclause 3.


John Whitney Pickersgill: Mr. Chairman, I wonder whether you could perhaps suggest to hon. members that we should be allowed to hear ourselves think.
Subclause 3 agreed to.
On subclause 4.


John Whitney Pickersgill: There does not appear to be anything in subclause 3 that would call for any particular explanation beyond what has already been given to my friend the hon. member for Drummond-Arthabaska last evening. I wonder whether the minister could tell us what point is involved in subclause 4.


Donald Methuen Fleming: Mr. Chairman, the tax advantages accorded to such a plan depend upon registration. Therefore they run from the date of registration, and that is why this subclause has been included.


John Whitney Pickersgill: Mr. Chairman, that answer is not very illuminating, if I may say so. The language of the subclause says:
Where a profit sharing plan is accepted by the minister for registration as a deferred profit sharing plan, the plan shall be deemed to have become registered as a deferred profit sharing plan
(a)	on the date the application for registration of the plan was made, or
(b)	where in the application for registration a later date is specified as the date upon which the plan is to commence as a deferred profit sharing plan, on that date.
Does that mean that if an application is not considered for a considerable period of time, as might very well be the case while an investigation was being carried on, it would in fact be considered to be in force from the very date on which the application was received by the Minister of National Revenue?


Donald Methuen Fleming: Yes, Mr. Chairman, unless the application indicated that the plan was to come into effect at some date later than the date of application.
Subclause 4 agreed to.
On subclause 5.


John Whitney Pickersgill: Mr. Chairman, the explanation to subclause 5 does not leap to the eye. No doubt the minister can explain it very simply.


Donald Methuen Fleming: Mr. Chairman, I should have thought this was plain. This clause states that for a period during which

a plan is a deferred profit sharing plan, the plan shall be deemed, for the purposes of the act, not to be an employees' profit sharing plan. There is a difference between an employees' profit sharing plan and a deferred profit sharing plan. The definitions of this clause under consideration are included in subclause 1.
Subclause 5 agreed to.
On subclause 6.


John Whitney Pickersgill: Mr. Chairman, perhaps the minister ought to give us some explanation in respect to paragraph (b) of subclause 6.


Donald Methuen Fleming: Perhaps I should add to my last observation that employees' profit sharing plans are defined in section 79, subsection 1 of the act.


John Whitney Pickersgill: I see; that is not in this bill.


Donald Methuen Fleming: There is a definition in this bill of profit sharing plans as well as a definition of deferred profit sharing plan, but there is a definition in the act now in respect to employees' profit sharing plans.


John Whitney Pickersgill: Mr. Chairman, I must confess that this did puzzle me a little bit and, of course, it is for the reason the minister gave to the committee last night, that I do not have that familiarity with the act that he has. It did seem to me that they were both employees' profit sharing plans but one was deferred. I was a little puzzled by the language. I can see that one is an immediate profit sharing plan while the other is a deferred one, if I might put it that way. Perhaps "immediate" would not be the right word to use. Perhaps it is an annual disbursement profit sharing plan or something of that sort; is that correct?


Donald Methuen Fleming: No, not necessarily. If the hon. member will have regard to the section of the act he will readily see the difference. Here we are dealing with the principle that to derive the tax advantages that this clause accords to deferred profit sharing plans there must be proof to the minister that the plan comes within the definition of a deferred profit sharing plan.


Mr. Benidickson:: Subclause (7)(b) contains a reference, I take it, to a pension plan, and the maximum that can be deducted by an employer would be the amount of the pension and the deferred profit sharing. How long has the maximum been set at $1,500?


Donald Methuen Fleming: I am told since 1954.


John Whitney Pickersgill: My hon. friend from
Kenora-Rainy River got up before I had
Income Tax Act
completed the question I wanted to ask about this deferred profit sharing plan and the employees' profit sharing plan. In his answer the minister rather gave the impression, and the language in subclause 5 does give the impression, that a deferred profit sharing plan is not an employees' profit sharing plan; that is, my understanding is that a deferred profit sharing plan is a plan for profit sharing by employees only. Is that not correct?


Donald Methuen Fleming: Yes, employees in the broad sense of the word. It might of course include officers of the company.


John Whitney Pickersgill: I think the minister will see where my difficulty lies, in that I had not read the definition in the act itself. I think the language is not very fortunate, because here we are told a deferred profit sharing plan shall be deemed not to be an employees' profit sharing plan, but a profit sharing plan is an employees' profit sharing plan. It does seem to me there ought to be a little more clarity in the definition to draw a distinction between a deferred profit sharing plan and an employees' profit sharing plan. It seems to me that you need another word that is the antithesis of "deferred" in there, because both plans relate only to employees. Does the minister not think there might be defective draftsmanship there?


Donald Methuen Fleming: No, sir.


John Whitney Pickersgill: Would the minister give consideration to the possibility that there might be, and there might be an occasion for misunderstanding, and perhaps have it reviewed further?


Donald Methuen Fleming: Mr. Chairman, I do not find any lack of clarity in this provision that the hon. gentleman sees.


[Stage Direction]
Subclause agreed to.
On subclause 8.
John Whitney Pickersgill: I have asked the minister whether he would say something about the 90 per cent figure in paragraph 6.


Donald Methuen Fleming: Well, Mr. Chairman, I did refer to that last evening in reviewing the clause and pointing out the exemption that exists. I drew attention particularly to the difference between the terms of this measure and the terms of Bill C-84 which was introduced last year. I said the present bill adds a requirement that the trust for a deferred profit sharing plan must receive 90 per cent of its income from sources in Canada. I also pointed out this is in conformity with the proposals that were advanced in the budget speech of December 20 and became law following that date.

Income Tax Act


John Whitney Pickersgill: This is, of course, one of the measures that is calculated by the government, I suppose-perhaps not to direct; that is far too strong a word-but to suggest to Canadians who have savings plans of one kind or another that it would be desirable for them to invest those savings in Canada. That is a position that I do not quarrel with, a position that Mr. Coyne, of course, has been taking for a long time, and that the government appeared to accept from him in the baby budget.


Donald Methuen Fleming: The government did not accept it from Mr. Coyne in the supplementary budget or anywhere else.


John Whitney Pickersgill: I know the minister hates to admit that Mr. Coyne was ever of any assistance to him, but we have observed, sir, that with respect to practically every idea that the minister has produced in the last seven or eight months, we have now found their source.


Donald Methuen Fleming: It was not Mr. Coyne.


John Whitney Pickersgill: We will let the public judge that and they are making a judgment, I might add; but that perhaps, sir, is slightly irrelevant to the discussion here. I may say that personally I think it is desirable, notwithstanding the fact that this government proclaims that it is a great free enterprise government, that where these tax incentives and tax advantages are given they should be used in order to encourage, to provide incentives for people to invest in their own country. The clause certainly commends itself to me as I would imagine it does to most other members of the house; but it did seem to me, sir, that perhaps the government was hiding its light under a bushel, and hiding the source of its light under a bushel.


William Moore Benidickson: Mr. Chairman, in the submission of the Canadian chamber of commerce to the minister in April, 1961 they reported to him that they had examined last year's Bill C-84, and the executive council went on record as endorsing the postponement of tax on members of deferred profit sharing plans until such times as payments were actually received. In the submission reference is made to the three year average formula provided in section 36 of the Income Tax Act as an appropriate means of determining the amount of tax. Now, is that commendation provided for in this legislation to set up the new section 79 (c) for deferred profit sharing plans? Is there in this bill the equivalent of what the chamber of commerce commended when they referred to section 36 and the three year average formula?


Donald Methuen Fleming: Mr. Chairman, if the hon. member will look back at clause 16 of this bill I think he will find the answer to his question. There cannot be an unqualified answer to the question he posed. If the payments are derived from the fund at the time of retirement in accordance with terms of a registered deferred profit sharing plan, then they will qualify under section 36 of the act; but if they should be withdrawn before that time for any reason, then they would not qualify under section 36 of the act. I am speaking of withdrawals before retirement.


John Whitney Pickersgill: Can the minister give us just a word of explanation on subclause 8?


Donald Methuen Fleming: The gist of it, Mr. Chairman, is completely set forth in the explanatory note. Where you have two or more taxpayers who are not dealing at arm's length-for instance, they are associated companies and they have had arrangements between them in relation to deferred profit sharing plans-and you may have the same person being an officer of the two associated companies, this provision is to make it quite clear that only one of the taxpayers, only one of those employers, is entitled to claim the deduction on account of the contribution made in respect of that particular person.


William Moore Benidickson: Does this clause apply only to employers?


Donald Methuen Fleming: Yes, sir.


[Stage Direction]
Subclause agreed to.
On subclause 9.
John Whitney Pickersgill: The minister might give us an explanation of this subclause.


Donald Methuen Fleming: Mr. Chairman, I will be glad to give an explanation, but in this case you have a short clause and the whole pith and substance of the clause has been stated in the explanatory note. I can read the note to you, but I do not think I can improve on the note.


[Stage Direction]
Subclause agreed to.
On subclause 10.
John Whitney Pickersgill: I think paragraph 10 is an amplification of paragraph 9, and for the benefit of some of us who are not quite as good at arithmetic as the minister perhaps he might give a brief explanation of it.


Donald Methuen Fleming: This clause will take account of the change that will probably be brought about in various plans following the adoption of this measure. It is quite obvious that various plans will now seek to qualify as deferred profit sharing plans under the act in order to obtain the tax advantages

provided under this legislation. This clause is designed to look at what may happen in relation to some existing plans which must undergo certain changes in order to qualify as deferred profit sharing plans for registration under the act. That is the background against which this provision is written, and this applies to the beneficiary, the employee who may have been contributing under a plan himself. What is to become now of the contributions he has made into a plan if he is to withdraw them? What is to be the position of the withdrawals?


William Moore Benidickson: Upon which under the law in the past he has paid tax.


Donald Methuen Fleming: Yes. This clause deals with that situation and, as indicated, the beneficiary, the employee, will be allowed to receive tax free an amount equal to the aggregate of the amounts that he was required to include in computing income in previous years by virtue of an allocation made to him under the employee profit sharing plan but which he has not actually received previously. In the second place, he will also be allowed to receive tax free the return of all his own contributions which he did not previously receive and the net capital gains made by the trust and allocated to him when the plan was an employees' profit sharing plan.


Mr. McMillan:: I take it, then, that there is no tax paid on capital gains in respect of any of these funds?


Donald Methuen Fleming: Only on the capital gains made after the plan has qualified.


William Hector McMillan: And no credit is given for capital loss.


John Whitney Pickersgill: I think the minister perhaps used a word inadvertently. He referred to contributions made by an employee prior to the coming into force. I presume he meant contributions made by the employer in respect of an employee; because these profit sharing plans, the minister told us last night, do not have any employee contributions.


Donald Methuen Fleming: On such a plan you might have contributions by employees also. A deferred profit sharing plan under the new provisions does not take account of contributions by an employee but among existing plans that have not qualified for tax benefit you might have had plans where the employee made a contribution and, of course, received no tax deduction.


John Whitney Pickersgill: I am afraid I may be very obtuse but I do not see how that could happen.
Income Tax Act
How could the employee contribute to a profit sharing plan? Surely the profits are made by the employer.


Donald Methuen Fleming: You could have plans that were a combination of profit sharing plans and pension plans. There are all kinds of varieties of these plans up to the present time, but this will not qualify the definition being written into the bill.


John Whitney Pickersgill: In other words, this relates not merely to profit sharing plans but also to a kind of mixed arrangement where there might be a combination of a pension plan and a profit sharing plan?


Donald Methuen Fleming: It would more likely be a savings plan than a pension plan so far as the employee is concerned.


John Whitney Pickersgill: But once one of these is converted into a deferred profit sharing plan there could be no more employee contribution to it in order to qualify under this law.


Donald Methuen Fleming: There could be a plan where the employee is making contributions, but there would be no tax advantage to him in consequence of doing so.


John Whitney Pickersgill: The minister has raised a point there, or perhaps I raised it and the minister has enlarged on it a little. Would the Minister of National Revenue accept for registration a mixed plan that was partly a deferred profit sharing plan and partly a savings plan? It would not appear to come within the categories that we considered on page 22 at a length to which the minister rather took exception last night. It seems to me that if you had such a mixed plan the attribution of capital gains, for example, and perhaps even the attribution of the shares of the various participants would be made very much more difficult. In other words, I think we ought to know whether these plans have to be strictly deferred profit sharing plans or if they can also have a savings element and other elements added to them without being disqualified under the legislation.


Donald Methuen Fleming: The hon. member will find the answer to his question in subclause 1(b) of this clause, the definition of a profit sharing plan. The concluding words beginning in line 15 are "whether or not payments are also made to the trustee by the employees".


John Whitney Pickersgill: Perhaps the minister could translate that into layman's language.


Donald Methuen Fleming: I will be glad to translate the whole bill, but it is surely not too much to ask hon. members to contemplate the use of these words and their meaning.

Income Tax Act
Surely this means very clearly that a plan that qualifies as a profit sharing plan in positive terms because it has all the ingredients that the statute prescribes for the deferred profit sharing plan does not cease thereby to be a profit sharing plan because it also includes other provisions, such as contributions by the employees; but there is no tax advantage accruing to anyone in respect of the contributions made by the employees.


[Stage Direction]
Subclause agreed to.
Subclause 11 agreed to.
On subclause 12.
William Moore Benidickson: Just what is envisaged here? What type of appropriation by the employer is being forbidden here from the point of view of tax benefit? Has it reference to use of the funds for the business itself?


Donald Methuen Fleming: It is to stop abuse of the fund by the employer.


William Moore Benidickson: The fund has to be quite separate from the operations of the business?


Donald Methuen Fleming: That is the intention, that the fund shall not be permitted to be abused by the employer or used as a cloak for his own operations.


William Hector McMillan: Is there any control over any securities that might be held in such a fund? For instance, could the fund be made up of common stock in a company? In the case of some of these funds in the United States I believe that common stock of the company is held as security.


Donald Methuen Fleming: We had that last night, Mr. Chairman. If the hon. member will look back at subclause 2(c) he will find that the plan must not provide that any part of the funds in the trust governed by the plan may be invested in notes, bonds, debentures, or similar obligations of (1) an employer by whom payments are made in trust to a trustee under the plan for the benefit of beneficiaries thereunder, or (2) a corporation with whom that employer does not deal at arm's length.


John Whitney Pickersgill: In other words it is perfectly clear that under no circumstances will one of these plans be recognized if any part of the funds in it is used in any fashion as capital or as a loan to the company that has made the profits. Perhaps the minister could explain that. That is what it seems to me to be.


Donald Methuen Fleming: He can invest in shares of the company.


John Whitney Pickersgill: Could the whole amount be invested in shares of the company?


Donald Methuen Fleming: Yes, Mr. Chairman. There is no limit on the shareholdings of the company.


John Whitney Pickersgill: I wish to pursue that a little further. I understood from what the minister said that these funds could not be invested in any way in the company.


Donald Methuen Fleming: The reference is to notes, bonds, debentures or similar obligations. Capital stock is not an obligation.


John Whitney Pickersgill: I quite appreciate that, but that raises this question. Why should there be this distinct prohibition on fixed interest obligations and things of that sort? Why should it be competent to invest in something that may or may not produce a profit?


Donald Methuen Fleming: A great many of these plans are designed to encourage the employees to acquire a share of the stock ownership of the company that is the employer.


John Whitney Pickersgill: What fear is there of having them invest in the other obligations of the company? Is this a treasury provision? What does the treasury fear may happen?


Donald Methuen Fleming: We were on this subject last night, Mr. Chairman. It is in kind with various other provisions of the act. If such provisions were not written into the act here and elsewhere it would be possible for a taxpayer who has obtained a tax advantage under given circumstances to get his money back by the appearance of a loan. We dealt with this subject last evening. It is the same situation, and the same reason applies.


John Whitney Pickersgill: It would appear to me to be equally easy, if the company had an authorized capital which had not all been subscribed, for the fund to subscribe to the additional stock and the company thereby to get back the money just as effectively and indeed more effectively, because there would be no obligation to pay any interest on it. That would appear to me to be as easy or easier than would be the case with a loan or bonds or debentures. To my simple mind there does not appear to be much valid reason in what the minister said about getting back the money. There may be some other reason, as indeed I am sure there must be. I am sure this was not included simply to make the bill more complicated.
What precisely is the concern? When all is said and done I assume that the company,

unless it went broke and defaulted, would have to pay back this amount and would have to pay interest in the meantime. There does not seem to be any possible loss to the treasury because of this provision. It would appear to me that it must be included in order, in some way, to protect the funds. If it is included to avoid a loss to the treasury I wish the minister would explain how a loss to the treasury could occur.


Donald Methuen Fleming: I have endeavoured to do that, Mr. Chairman. I think the hon. member does not appreciate the difference between the acquisition of stock in a company which carries with it a share of ownership in the company and the distribution or recovery by the company of money through the issuance of what would appear to be debentures, notes or bonds thus recovering the benefit of money that has been contributed to the fund by the employer and for which he has received a tax deduction. This is fully understood by the business community.


John Whitney Pickersgill: Well, Mr. Chairman, no doubt it is understood by the business community but I am a member of parliament, just like everyone else in this chamber.


Mr. Drysdale:: Not quite like anyone else in this chamber.


John Whitney Pickersgill: The mere fact that it is understood by the business community does not justify the failure of the minister to give a comprehensive reason. I put this question to the minister. Let us suppose that company A which has one of these deferred profit sharing plans borrows $10,000 from the Bank of Montreal at the same rate of interest as company B, which borrows a similar sum from the trustee of the profit sharing plan. Is not the relationship of both those loans to the treasury precisely the same? What tax advantage would company B receive through borrowing from the trustee over what company A would receive as a result of borrowing from the Bank of Montreal at the same rate of interest? If that were explained to me I think I would see the point, but at the moment I fail to see that the source of funds makes any difference as far as the treasury is concerned.


Donald Methuen Fleming: It makes a great deal of difference if you are opening the door to all kinds of transactions under which the employer is simply recovering his money and handing over what may be no more than a piece of paper, a note. This would open the door to all kinds of devices that could defeat the purposes of the legislation.
90205-6-496
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John Whitney Pickersgill: As far as I can make out, what the minister is now saying is that this has nothing at all to do with revenue and nothing to do with the treasury. This represents an attempt to protect these funds from abuse, to protect the participants in the funds from unscrupulous employers who might borrow the money, pay no interest on it and never pay it back. Surely that would be a felony. It does not seem to me that if the employer borrows some money and pays the same rate of interest he would pay through the Bank of Montreal, there can be any possible difference between the two transactions except that you might say the employer is himself both the lender and the borrower, which is perhaps not a desirable situation to have from the point of view of the solvency of the fund. But from the point of view of the treasury, which the minister implied was the reason for this, I cannot get through my head what conceivable difference there would be in the two sets of circumstances. It seems to me we have not received an adequate explanation.


[Stage Direction]
Subclause agreed to.
On subclause 13.
John Whitney Pickersgill: Mr. Chairman, before this subclause passes I feel the minister should give us-


Donald Methuen Fleming: Mr. Chairman, it is perfectly obvious to any hon. member who will read this subclause that it deals with the circumstances under which the minister may revoke the registration of a deferred profit sharing plan. It sets out the circumstances under which he may do so.


John Whitney Pickersgill: Now that the minister has anticipated what he thought would be my question, Mr. Chairman, I shall put to him the question I wished to have him answer. Even I can read the word "revocation" and even I know what it means. This subclause raises the question which as yet has not been answered, as to how the minister is going to find out when revocation should take place. This is a great vacuum, if I may express it in that way, in this whole scheme.
Provisions are laid down for the registration of these schemes and provision is made for revoking them if the conditions are not fulfilled, but no evidence has been given to us relating to policing and no provision appears to have been made for any form of policing of the schemes. That seems to me to be a serious lack and imperfection in the whole scheme when we are embarking on a savings plan of this kind. It is true, as the minister has said, that these are not employee savings, but this represents a scheme whereby the

Income Tax Act
government in future is going to permit profit sharing, which is now a current annual thing, to be deferred to create a property and estate which the employee may enjoy in his old age. If that is to be done under conditions laid down by this parliament, because many people are not able to protect themselves very well in these matters we should know precisely how these schemes are going to be policed and how effective that policing will be.


Donald Methuen Fleming: The statute does not put any limitations in the way in which information may come to the minister on which he may see fit to act to revoke the registration of a plan. As to what is to be involved in the detailed administration, there is really nothing I can usefully add to what I said last night. We spent considerable time on this matter last evening, and I discussed this subclause in relation to other subclauses bearing on the same subject.


John Whitney Pickersgill: I recognize at once, Mr. Chairman, that what the minister says is quite true. However, I had hoped that after reflecting on this overnight the minister would come to the conclusion that the information he gave us last night was inadequate because the bill itself was inadequate, and that steps ought to be taken to improve the bill so as to provide for this supervision. We spend a good deal of the taxpayers' money with regard to insurance companies; or perhaps it is not the taxpayers' money because possibly a levy is made on the insurance companies for the purpose. However, we make a real effort to see that insurance companies in this country are well run.
The minister in his budget told us that he is now going to try to see that pension funds are better run. Here we are starting a new savings scheme on which a great many simple people will depend for their old age. Surely at the very start it would be prudent, wise and foresighted to make adequate provision for the administration and policing of the scheme. It seems to me that is something to which further consideration should be given.


Mr. Macdonnell:: May I ask the hon. member a question?


John Whitney Pickersgill: Yes.


James MacKerras Macdonnell: I have listened with great interest to this discussion. It seems to me that the situation is clear. This is something as to which in its early stage the companies concerned are in touch with the taxation department. Their statements come every year. They pay taxes every year. Surely the officials who are presently engaged in this administration

have the most intimate knowledge of the companies financing in all their details. Certainly if the minister had come along and had announced a great new department being set up, with dozens of people in it, I think we would all have been a little bit critical. I think we would have said "Why are you doing that? You have many competent people. Why do you not build this thing up as it comes?" I do not think anyone would deny that the taxation department takes an interest in the affairs of various companies. I have never heard that questioned. I can see no reason to believe that this situation, as it develops, will not come automatically and inevitably to the attention of the present competent officials and those who will be added as necessity demands.


John Whitney Pickersgill: 
Donald Methuen Fleming: That is very true.


John Whitney Pickersgill: What I am coming back to is this. If this could be done by a very modest improvement in the establishment of the Department of National Revenue; or if the department feels this is not its proper function, as it might, if some arrangement could be made with the superintendent of insurance, who really has much more of this kind of function, to keep an eye on these things, it seems to me that we might avoid a situation which would be regrettable in the future. I make no apology for insisting upon this point.


Jacques Flynn: Shall paragraph 12 carry?


William Moore Benidickson: In connection with this matter of registration may I say this. I recall that some years ago there was some considerable anxiety among officials and ministers as to what responsibility, if any, rested upon the administration simply by the registration of a pension plan. Here we are asking for registration of another form of employees' benefits. If the trustee mismanages that fund we fear registration might involve the government in the same manner as we feared registration might involve the government in some responsibility with the pension plan. What has the minister to say as to the justification for an employee saying, if the fund is mismanaged and the assets are not there when he retires and he complains, "I thought this was a fine fund; it was registered with the government" and who feels that the government is to blame for not having had adequate supervision? I know we discussed this matter with respect to pension plans, the blue book and so on. I am wondering what the minister has to say as to future liability merely by registration without perhaps more supervision.


Donald Methuen Fleming: I think the hon. member was parliamentary assistant to the minister of finance at the time the statute was amended to strike out the word "approved" as applied to those pension plans and substitute the word "registered". The change emphasized the fact that the government was not to be deemed to be giving approval to the plan or the operations under 90205-6-4961
Income Tax Act
it. This present clause contemplates registration on the conditions described in the subclause. I do not think I can add anything useful to that. The employee who has important rights at stake here will have to take some responsibility on his own shoulders also for seeing that the fund in which he is interested is properly administered, and to that end assuring that there will be a competent trustee.


Jacques Flynn: Shall clause 13 carry?


[Stage Direction]
Subclause agreed to.
On subclause 14.
William Moore Benidickson: Will the minister explain the effect of clause 14 (b)?


Donald Methuen Fleming: Putting it briefly, Mr. Chairman, this means that where the registration is revoked the tax advantages die with the revocation and remain in that condition as long as the registration is revoked.


John Whitney Pickersgill: When one of these plans is revoked is there an attempt made immediately to recover the tax over the years on all the funds that have been put into the plan?


Donald Methuen Fleming: No. The tax advantage that the clause contemplates continues during the period of registration. It begins with the registration; it ends with the revocation of registration. But remember that if the funds are paid out on any other basis than the provisions of the plan, which will contemplate on retirement of the employee, of course the payment out becomes taxable in the hands of the recipient.


John Whitney Pickersgill: Could the minister explain very briefly just what would happen after a plan had been revoked? As far as what had happened between the date of registration and the date of revocation was concerned, would the plan still operate, in so far as the treasury was concerned, as though it had not been revoked? In other words would the revocation merely apply to the future and not in any way to the past?


Donald Methuen Fleming: The revocation will take effect from its own date. I dealt with this question, Mr. Chairman. I have pointed out that if one of the grounds, or if a ground, upon which the minister proceeded to withdraw or revoke the registration was payment out in breach of the conditions of the plan upon which it had been admitted to registration, then certainly tax would be collected on the payment out in the hands of the recipients.
Subclause 14 agreed to.

Income Tax Act
On subclause 15.


William Moore Benidickson: Mr. Chairman, I do not understand the explanatory note, where there is reference to a percentage. The explanatory note says:
-even although it is not expressed as a percentage of profits-
What does the minister have in mind with respect to "percentage of profits"?


Donald Methuen Fleming: Mr. Chairman, this is a relieving provision. It is designed to make clear that the plan does not have to stipulate in advance for a fixed percentage of the profits of the employer being paid over at the end of the year.


William Moore Benidickson: A fixed percentage is really what is involved?


Donald Methuen Fleming: Yes.
Subclause 15 agreed to.
On subclause 16.


John Whitney Pickersgill: What precisely is the purpose of this subclause?


Donald Methuen Fleming: Throughout clause 27-as renumbered now, 26-in various places there is the expression "the employee or other beneficiary". This subclause 16 defines the expression "other beneficiary". It says:
-"other beneficiary" shall be construed as meaning any person, other than the employee, to whom any amount is or may become payable by a trustee under the plan-


John Whitney Pickersgill: How can that be done?


Donald Methuen Fleming: It might be his widow on his death.


John Whitney Pickersgill: I understand that. But there are of course strict provisions, if I remember rightly, against any assignment or any hypothec, or anything of that sort, of any of these funds. So the beneficiary here would only be a beneficiary within the terms of the plan itself; that is to say, at the end of the period of deferment. There could be no beneficiary in the interval, I take it?


Donald Methuen Fleming: It would have to be a beneficiary defined by the plan, and the terms of the plan must all conform to the terms of the clause before us.


John Whitney Pickersgill: May I put a hypothetical case to the minister. Is it envisaged that these plans would provide that in the case of the death of an employee, whoever his legal heir was would be a beneficiary and would be able to draw upon the fund once the will had been probated or the estate wound up?


Donald Methuen Fleming: I cannot imagine any plan under which the rights of the employee in the fund would terminate on his

death if the payments out to him had not been exhausted as of that date.


John Whitney Pickersgill: The minister does not know of any such plan?


Donald Methuen Fleming: I cannot imagine any plan under which the employee's rights under the fund would terminate on death, if the payments out to him had not then exhausted his interest in the fund.


John Whitney Pickersgill: There are such plans.
Subclause 16 agreed to.


Jacques Flynn: Shall paragraph 2, clause 27, carry?


John Whitney Pickersgill: This is clause 28.


William Moore Benidickson: This is what was amended, is it? This is consequential to the long amendment?


Donald Methuen Fleming: No. I think the hon. member did not hear the chairman. The chairman is putting to us, now that we have adopted subclause 2, clause 27 as amended, renumbered clause 26.


[Stage Direction]
Clause agreed to.
On clause 28.
Donald Methuen Fleming: Mr. Chairman, on clause 28 there is an amendment which hon. members have. I would ask my colleague the Solicitor General to move that amendment to clause 28.


Mr. Browne (Si. John's Wesi):: I beg to
move, Mr. Chairman.


Jacques Flynn: Mr. Browne (St. John's West) moves:
That clause 28 be amended by striking out subclauses 1 and 2 of clause 28 and renumbering subclause 3 of clause 28 as clause 27.
Shall the amendment carry?


[Stage Direction]
Amendment agreed to.
Jacques Flynn: Shall clause 27 carry?
On renumbered clause 27.


William Moore Benidickson: Mr. Chairman, this undistributed income of a corporation is always a complicated matter. I wonder whether for the record the minister would give us a full explanation of the effect of this amendment.


Donald Methuen Fleming: Subclause 3 concerns tax-paid undistributed income. The act provides that corporations meeting certain conditions may elect to pay a 15 per cent tax on undistributed income which they hold on hand. The undistributed income on which this tax is paid becomes tax-paid undistributed income and may be capitalized or made available to shareholders by means of redeemable preferred shares free of personal income tax.

This present amendment, which is admittedly quite technical, provides that the tax-paid undistributed income of a corporation that is wound up may pass to another corporation and continue to be classed as tax-paid undistributed income.


Jacques Flynn: Shall clause 27 as amended carry?


Some hon. Members:: Carried.


John Whitney Pickersgill: I take it that subclause 3 is struck out?


Donald Methuen Fleming: Yes.


John Whitney Pickersgill: That was included in the amendment?


Donald Methuen Fleming: Yes, it is included in the amendment.


Jacques Flynn: Subclause 3 becomes clause 27.


[Stage Direction]
Clause agreed to.
Donald Methuen Fleming: Mr. Chairman, if we have now passed 28, which was renumbered 27, there is an amendment to the succeeding clauses of the bill simply dealing with the numbering. It is that clauses 29 to 39 be renumbered as clauses 28 to 38 respectively. I would ask my colleague the Solicitor General so to move.


John Ferguson Browne: I so move, Mr. Chairman.


Jacques Flynn: Mr. Browne (St. John's West) moves:
That the bill be amended by renumbering clauses 29 to 39 as clauses 28 to 38 respectively.
Shall the amendment carry?


[Stage Direction]
Amendment agreed to.
Jacques Flynn: We will now proceed to new clause 28.
On new clause 28-Deductions from income from businesses of associations, etc.


John Whitney Pickersgill: Mr. Chairman, I hope the minister is going to give us some explanation of this clause.


Donald Methuen Fleming: This is clause 29, renumbered 28. This amendment deals with a deduction for drilling and exploration expenses incurred in searching for oil or natural gas. The act at present permits an association, partnership or syndicate formed for the purpose of drilling or exploring for petroleum or natural gas to deduct its drilling and exploration expenses. However, a member of such an association may not deduct his share of these expenses from his income from other sources. This amendment will extend the present concession and permit a taxpayer to apply his share of the expenses from one
Income Tax Act
association or partnership against his income from another association or partnership.
Subclause 2 involves an amendment which deals with bonus payments made to a government for a lease to extract petroleum or natural gas, or for the right to explore for these products. The act at the present time permits-


John Whitney Pickersgill: Mr. Chairman, I wonder whether I could make a suggestion to the minister. Would it be more convenient, since the subclauses do not seem to be too clearly related, if we could clear up each one separately and then go on to the next? This might save a lot of time. I should like to ask one question in respect to the first provision. Does this involve a relaxation or a tightening up of the law? I must say this is an aspect of the law-


Donald Methuen Fleming: It is a relieving provision.


John Whitney Pickersgill: That is to say it is another concession or tax benefit?


Donald Methuen Fleming: Yes.


John Whitney Pickersgill: What is the reason for extending this tax benefit?


Donald Methuen Fleming: I think it is fairness and equity, Mr. Chairman, having regard to the purposes which I have indicated.


John Whitney Pickersgill: Well, the minister is suggesting-


Donald Methuen Fleming: We are proposing to extend the concession by permitting an individual taxpayer to apply his share of the expenses in one association or partnership against his income from another association or partnership. So in this respect it is a matter of equity, extending to individuals the kind of treatment that has hitherto been accorded to associations, partnerships or syndicates.


John Whitney Pickersgill: Mr. Chairman, what the minister is saying in other words is that the present law is not equitable. Could the minister say when the government discovered that the present law was inequitable, how it discovered that, how this amendment came about, and whether representations have been made?


Donald Methuen Fleming: Mr. Chairman, I should not attempt to pinpoint that for a moment. We receive representations all the time, and these matters are under study at all times.


John Whitney Pickersgill: Is this something in respect of which the government received representations a year ago and did not accept them? Was the inequity maintained all last year?

Income Tax Act


Donald Methuen Fleming: Mr. Chairman, this is a matter that has been discussed from time to time over some period.


John Whitney Pickersgill: Mr. Chairman, I have been rather interested in this regard because to a simple mind, what is equitable in 1961 should also have been equitable in 1960. The minister is defending this amendment on the basis of fairness and equity, yet he says he has been receiving representations for several years. I think the minister ought to tell us when it dawned upon him that this was inequitable.


Donald Methuen Fleming: Mr. Chairman, the observations about what was equity in 1960 will equally apply to 1956 or the early part of 1957. These matters are under study and there are representations received from time to time. They are subjected to very careful study, and we are satisfied now that this amendment should be made, and we so recommend to the committee.


John Whitney Pickersgill: Will this amendment, apart from being equitable, which is, of course, the first concern of the government-that is, justice as between one taxpayer and another -be productive of any advantage to the national interest? Will it result in any greater investment or any greater expansion, shall we say, or is it merely a matter of being equitable as between taxpayers?


Donald Methuen Fleming: Mr. Chairman, I should expect it to be of particular assistance to individuals who may be interested in drilling and exploration for oil or natural gas. This is a provision which is going to be of assistance to individuals, people of small interests.


William Moore Benidickson: Mr. Chairman, when we have dealt with the amendments to section 83 we shall have legislation in two parts, one with respect to drilling for petroleum or natural gas, and then in the same area of the tax statute we have a comparable concession to those engaged in metal mining. What is the situation at the present time in respect to an individual who enters upon exploration activities in so far as metal mining is concerned?


Donald Methuen Fleming: I am informed that this form of syndicate or association has prevailed in the gas and oil exploration field but has not been used in relation to metal mining. Certainly we have had no representations from anyone interested in metal mining in this regard.


John Whitney Pickersgill: Mr. Chairman, we were just dealing with the first subclause. The minister had started to explain the second

one, and if no one else has anything to say I should like him to continue his explanation in that regard.


Donald Methuen Fleming: In the second subclause you will see that this amendment deals with bonus payments made to a government for a lease to extract petroleum or natural gas, or the right to explore for these products. The act at present permits a corporation to deduct such expenditures if the property leased is subsequently abandoned as unproductive. This amendment will extend this right of deduction to a successor corporation which has acquired the property of the corporation which originally made the bonus payment.


John Whitney Pickersgill: What inspired this particular amendment?


Donald Methuen Fleming: Representations and study.


John Whitney Pickersgill: Is this an amendment for the purpose of making the tax more equitable, or is this an incentive to expansion?


Donald Methuen Fleming: This again is a relieving provision which should aid in the development of resources.


John Whitney Pickersgill: That is not exactly an answer to my question. I will put each question separately so the minister can explain them separately. Is it felt that this is required because there is some inequity or unfairness in the existing tax structure?


Donald Methuen Fleming: This is recommended to the house, Mr. Chairman, because it is considered fair and because the government has an interest in encouraging people to concern themselves with exploration. It is thought that this will provide an encouragement to that end.


John Whitney Pickersgill: In what way will it
provide an encouragement? Can the minister explain just what the incentive feature of it is?


Donald Methuen Fleming: Mr. Chairman, I think if the hon. member has attempted to follow what I said he will see that it is quite clear. I will go over it again. I have said that the amendment deals with bonus payments made to a government for a lease to extract petroleum or natural gas or for the right to explore for these products. The act at present permits a corporation to deduct such expenditures if the property leased is subsequently abandoned as unproductive. This amendment will extend this right of deduction to a successor corporation which has acquired the property of the corporation which originally made the bonus payment. There are transactions going on

between corporations in this field, those that originally have undertaken the exploration which proved unproductive, and there are naturally tax implications in every one of these transactions. In this case it is thought it will facilitate exploration if the tax benefit that arises in the case where the outlay has proven to be unproductive is available to the successor corporation.


John Whitney Pickersgill: I take it that these bonus payments are payments made to governments other than the federal government, because otherwise there would not seem to be much sense in collecting the bonus payments and then treating them as an expense of doing business.


Donald Methuen Fleming: It depends where it is, whether it is in a province or the territories.


John Whitney Pickersgill: Perhaps the minister would explain to me what advantage it would be for the federal government to exact one of these bonus payments if it is going to be given back to the taxpayer, either because he incurred a loss or because he made a gain. In what circumstances could the federal treasury ever get anything out of this?


Donald Methuen Fleming: This is in a competitive area of competitive business. The hon. member talks about the bonus going back if the venture proves unproductive and treats that as the same situation where an area or property proves productive. He is misleading himself there, Mr. Chairman.


John Whitney Pickersgill: I am not seeking to-


Donald Methuen Fleming: In the interests-of equity there are these government charges. I think you will find them imposed by all provinces in the case of exploration carried on within their provincial boundaries. This is the way in which effort is made not only to raise revenues but also to proceed with some regard for equity in relation to the rights that are given by government to persons interested in exploration. This is dealing with the matter at a later stage; this is dealing with the matter after there has been an outlay and after the bonus has been paid to the government for the lease. Later on, if the property leased has been abandoned as unproductive, there is an advantage today taxwise on the part of the lessee, the lessee being a corporation; it is a very considerable advantage to that lessee to be able to convey that position to a successor corporation. It has the opportunity of conveying its interests to another corporation.


William Moore Benidickson: Have we not always been very loath to permit corporations to merge, one corporation to buy another corporation
Income Tax Act
largely for a tax reason, such as perhaps a tax loss of considerable substance that one company had on its books? Is not this equivalent to encouraging the buying of one company by another company simply because one company is carrying some losses? Is this not the kind of thing that we do not encourage in a normal way, and indeed discourage as between one corporation and another, one corporation with a substantial profit and another with rather heavy losses? One company is merged with the other simply for tax gain. Is this not doing about the same thing?


Donald Methuen Fleming: No, I do not think it is doing the same thing, because this is limited in its application. This applies to the payment made to the government in respect of the lease. I do not think this can be regarded as an inroad on the basic principle of section 83A of the act in that sense.


John Whitney Pickersgill: Mr. Chairman, the minister gave what seemed to me to be a very lucid explanation of this provision as it applied to payments made to some other government. I can see quite clearly that the government, say, of the province of Alberta would get the bonus and the taxpayer would be allowed to treat this bonus, I would think quite properly, as one of the expenses of his operation. But what I cannot get through my head is, if the bonus is paid to the federal government and if the taxpayer is going to be allowed to treat that bonus as an expense of doing business, what conceivable purpose there would be in having the bonus in the first place.


Donald Methuen Fleming: Mr. Chairman, when these blocks are put up for tender no one knows whether the property is going to be productive or unproductive, and you may have various competing bids for the opportunity to obtain a lease. This is the bonus payment. Surely nobody is going to suggest there should not be a charge made for that right by way of this so-called bonus payment.


John Whitney Pickersgill: Let me put it this way, sir. I can see that where you go to Alberta and bid and Alberta gets some benefit from it, but what conceivable purpose there can be, if the taxpayer knows he is going to be able to treat this as an expense, in having this bonus in relation to the federal government leases I just cannot see, and the minister has not yet made it clear to me.


William Moore Benidickson: He gets the benefit only on the tax, does he not?


Jacques Flynn: Shall subclause 2 carry?


[Stage Direction]
Subclause agreed to.
Jacques Flynn: Shall subclause 3 carry?

Income Tax Act


John Whitney Pickersgill: I think we should have an explanation of this, too.


Donald Methuen Fleming: I would have
thought the explanatory note was very clear in providing whatever elucidation is required of this short clause. However, I might say that the amendment in subclause 3 also deals with the deduction for exploration and drilling expenses. The act permits a company engaged in the oil, gas or mining business to deduct exploration and drilling expenses incurred in searching for oil, gas or minerals. The act also permits a company which acquires the property of another company under certain conditions to deduct the drilling and exploration expenses incurred by the former company. However, these provisions do not at present cover the situation where a company acquires a property of its former subsidiary. This amendment is intended to correct this omission.


William Moore Benidickson: This would have exactly the same effect. Suppose we had a mining company that was a failure and on its books it had a very substantial loss. To all intents and purposes, unless there was encouragement from the point of view of tax advantage, we would hear no more about that company; it would disappear and probably surrender its charter. Does not something of this kind simply encourage one profitable mining company to look around for the charter of another company that has to all intents and purposes folded? It takes it over for purposes of tax advantage.


Donald Methuen Fleming: No, Mr. Chairman. I think the hon. member is overlooking what the act now allows. We are simply dealing here with one omission from the general rule that the act provides in this regard now. This is to cover the situation where the company acquires the property of its former subsidiary. That is all it does.


William Moore Benidickson: It may acquire the
property, but the property is just a piece of rock and has proven to be a failure.


Donald Methuen Fleming: The hon. member is overlooking the fact, I think, that the act at present permits a company which is engaged in the oil, gas or mining business to deduct exploration or drilling expenses for oil, gas or minerals, and that it also permits a company which acquires the property of another company under certain conditions to deduct the drilling and exploration expenses incurred by the former company. This simply fills a gap or corrects an omission in dealing
[The Chairman.]
specifically with the situation where a company acquires the property of its former subsidiary, which has always been a subsidiary.


[Stage Direction]
Subclause agreed to.
Jacques Flynn: Shall subclause 4 carry?


John Whitney Pickersgill: I am sure the minister will give us an explanation here.


Donald Methuen Fleming: I think this is very plain. It was set out in the budget resolutions and I referred to it in the budget speech. This amendment extends the right to deduct exploration and drilling expenses to metal fabricating companies.


John Andrew W. Drysdale: Mr. Chairman, I should like to raise a point of order at this time. On two or three occasions today the hon. member for Bonavista-Twillingate has qualified himself by saying "I am a very simple minded individual" or "I have a very simple mind". He has said that he is unable to understand the technical provisions of this very technical statute; yet he is the person who is asking a great majority of the questions and presumably he is representing the Liberal party. It seems to me that we should get some protection from this type of questioning. Surely there is somebody in the Liberal party who would be qualified to ask these necessary technical questions. Of course he has been delegated to keep things going while they are straightening out things in the other house.


Mr. Habel:: As the whip of the Liberal party I object very strenuously to the hon. member's remarks and I say he has no right to speak, as he did, from the seat of a Liberal member.


John Andrew W. Drysdale: Mr. Chairman, we are in committee of the whole. It was the hon. member for Bonavista-Twillingate who said "I have a very simple mind". Nobody took issue with that point. I am sure he is in the best position to qualify himself, which he did under those circumstances. I was saying that I hoped there was somebody else in the Liberal party who could perhaps ask some relevant questions on this very technical subject rather than tedious and repetitious questions which are forbidden under our rules.


John Whitney Pickersgill: Mr. Chairman, it would appear that I have a question of privilege as a result of this phony and specious point of order or alleged point of order raised by the hon. member for Burnaby-Richmond, who I see has retreated from the advanced post in a progressive and forward looking party which he occupied when he made his intervention.


John Andrew W. Drysdale: You mean the Conservative party.


John Whitney Pickersgill: I am not surprised, sir, to find the hon. member for Burnaby-Richmond getting closer and closer to the Liberal party.


John Andrew W. Drysdale: Not clear to your thinking;
I can assure you of that.


John Whitney Pickersgill: It is obvious even to the simple minded that in doing so he is simply following the public trend as reflected in the Gallup polls and in a great many other indications of the transformation of opinion that is taking place at the present time in the country. I may say that with a little mild Liberal indoctrination I think perhaps the hon. member for Burnaby-Richmond would be admitted on payment of the appropriate membership fee.


Mr. Winch:: Now I know he is simple minded.


John Whitney Pickersgill: That might give him some faint hope of coming back here again and adding his simple contribution to those of the other simple minded people in this house who represent the ordinary voters of this country, who are entitled to understand our proceedings without having to go through a great deal of technical jargon.


Harold Edward Winch: Is this not the wrong institution for simple minded persons?


John Whitney Pickersgill: The hon. member for Vancouver East has embarrassed me on one of the rare occasions when I have really been embarrassed in this house. I used "simple" in the old fashioned sense-


Mr. McCleave:: So did he.


John Whitney Pickersgill: -of meaning just the plain and ordinary people who use plain and ordinary horse sense. It does seem to me that if more effort were made to translate our statutes into simple language that simple minded people could understand, it would be a great improvement. I have merely regarded myself as a representative, as I am-


John Andrew W. Drysdale: Of the simple minded.


John Whitney Pickersgill: -who has three times been chosen to be the representative of the fishermen and loggers of my constituency, none of whom would pretend to be very learned in the law but most of whom have a good deal more common sense than some hon. members of this house demonstrate on some occasions.


John Andrew W. Drysdale: On the point of order, Mr. Chairman, I want to make clear that I was referring to this particular statute, the Income Tax Act, which is exceedingly technical
Income Tax Act
in nature. I merely mentioned how the hon. member had qualified himself. I had merely hoped that there was somebody in the Liberal party who was capable of dealing with it in a technical way, and the technical aspect was referred to by the hon. member for Kenora-Rainy River.


John Whitney Pickersgill: Mr. Chairman, perhaps you might permit me to say that happily we have no keeper in the Liberal party.


John Andrew W. Drysdale: Have you all escaped?


Jacques Flynn: Order. This so-called point of order and so-called question of privilege has, I think, provided a change of tempo which everybody has appreciated, and we can now revert to the bill.


[Stage Direction]
Subclause agreed to.
Subclause 5 agreed to.
On clause 29.
John Whitney Pickersgill: Mr. Chairman, perhaps the parliamentary secretary, who sat here so patiently waiting to get a word in edgewise, could oblige us by telling us what clause 29 is all about.


Mr. Bell (Carleion):: Mr. Chairman, as the explanatory note indicates, this is consequential solely upon the repeal of section 34. This simply deletes the reference to section 34 from the paragraphs in clause 29.


William Hector McMillan: Are we on clause 29 now?


Jacques Flynn: Renumbered clause 29.


William Hector McMillan: What would be the position of a part owner of a syndicate or partnership that struck oil if he sold out and made a very large profit? Would that be considered a capital gain? So far as income tax is concerned, would he be allowed to deduct any expenditures in connection with exploration? I know that some of these syndicates go on to form a company and the company takes over from the syndicate. What is the procedure in these cases? How are these deductions from income tax made?


Thomas Miller Bell: I think the hon. member is referring to the old clause 29 which is now clause 28. I am not too sure that I understood his question relating to that clause, which has already been passed. On a matter as technical as these clauses are, I would certainly be hesitant to give my hon. friend anything approaching a legal opinion. I would be very glad indeed to discuss the whole matter with him and secure for him all the information he requires.


Jacques Flynn: Shall clause 29 carry?

Income Tax Act


John Whitney Pickersgill: Mr. Chairman, I think there was an understandable confusion. You called clause 29 and the hon. member was quite properly looking at the 29 that is in the bill. I am sure the parliamentary secretary does not have the slightest intention of abridging the hon. member's rights-


Thomas Miller Bell: No.


John Whitney Pickersgill: -because I know the hon. gentleman has been meditating on this question.


Thomas Miller Bell: My genial friend from Welland would be the last one whose rights I would seek to abridge in any way.


William Hector McMillan: What clause are we actually on now? I should like to know, because we were just discussing-


Jacques Flynn: Clause 28, formerly clause 29, has been carried, but if the hon. member wishes to pursue this matter I am sure there is no objection. At present we are considering clause 29, formerly clause 30, and it is to be found on page 30.


John Whitney Pickersgill: Mr. Chairman, I might make a suggestion that I am sure would be agreeable to the parliamentary secretary, that no other member would ask any further questions but that the hon. member for Welland, because of the misunderstanding, might pursue his point briefly when we come back after lunch. That will perhaps give the two hon. gentlemen an opportunity to confer so that things can be speeded up.
At one o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 2.30 p.m.
Robert Jardine McCleave: When the committee rose it was agreed that the hon. member for Welland be permitted to .ask questions on old clause 29 which has been renumbered new clause 28.


William Hector McMillan: I was asking about a syndicate that might sell out at a capital gain. 3 have knowledge of a partnership or syndicate that had rights for the drilling of natural gas within a certain area and they struck gas in the first well, then sold out at a considerable profit. This was quite a common thing at one time in southwestern Ontario.
According to the answer I received, this would be a capital gain and the cost of drilling would not appear in any income tax calculation. My question is, would the purchaser have the right to write off any of
[The Chairman.]
these earlier drilling costs? Could he, for instance, split up his costs and show the drilling cost as a separate item, then write it off immediately? I take it that the rest of the holding would be written off at a reduced rate. I wonder if these drilling costs could be written off immediately on purchase.


Thomas Miller Bell: The gain to which the hon. gentleman refers may or may not be a capital gain, depending of course upon whether or not the syndicate, association or partnership is engaged generally in business or trade. If it is as the hon. gentleman has suggested, in fact a capital gain, then there would be no deduction from that capital gain for the purposes of section 83A. Such deductions are deductions only from income. I only want to emphasize to the hon. gentleman that in the particular circumstances he describes, I would not wish to be considered as giving a legal opinion that the gain was, in fact, a capital gain.


Robert Jardine McCleave: The
Chair takes it that in the absence of further questions from the hon. member for Welland old clause 29, new clause 28, is carried.


[Stage Direction]
Clause agreed to.
New clause 29 agreed to.
On new clause 30.
John Whitney Pickersgill: Could the minister give an explanation of this?


Donald Methuen Fleming: The first subclause of old clause 31 concerns reserves which taxpayers may deduct in computing income. The Income Tax Act, in section 85B (l)(d) provides that if a taxpayer has been required to include an amount in income on account of property sold during the year and the proceeds of the sale are not fully receivable within two years, the taxpayer may deduct as a reserve the amount that can reasonably be regarded as a portion of the profits from the sale. The two year rule is intended to leave out a great number of sales where payment is made over a period shorter than two years. It has been the practice when real estate was sold on a deferred payment basis to bring into income annually that proportion of the profit on the transaction that the payments receive in a year bore to the total sales price.
However, this concession to the taxpayer may not be completely provided for under the present law. Moreover, it has become apparent that some provision should be made to cover the method of operation followed by land development companies. These companies, frequently made up of builders, acquire land, subdivide it, instal services and

sell it to builders. The Department of National Revenue takes the position that a sale is made when a lot is transferred to a builder, but the builder may not be able to make payment for several months. It may extend over the year-end of the land company. This means that the land company has to include in income money it has not actually received, and because the term of the payment does not extend more than two years it does not qualify for a reserve under the present provisions of the act. The amendment provides that a reserve may be deducted with respect to sales of land where the proceeds of the sale are not receivable until after the end of the taxation year.


[Stage Direction]
Clause agreed to.
On new clause 31.
William Moore Benidickson: We have a subsection 2 in this clause that hardly relates to subsection 1, as I see it. I take it that there will be an order in council now with respect to policy reserves. Will that be gazetted? Will that be something which will now be standard and known to the people in the insurance business in contrast, perhaps, to the past system where simply the approval of the superintendent of insurance had to be negotiated in the case of each individual company?


Donald Methuen Fleming: The answer to the first part of the question is yes.


John Whitney Pickersgill: The minister did not give any general explanation of this clause, but I was particularly interested in the marginal note. I wonder if the minister could throw any light on that.


Donald Methuen Fleming: Mr. Chairman,
clause 32, which has been renumbered 31, is consequential upon the reduction in individual and corporation income taxes commencing in 1962. It is intended to prevent taxpayers from receiving a double benefit. It is similar to the amendment described earlier in connection with clauses 17 and 20.


John Whitney Pickersgill: The minister has no light to throw on the marginal note?


Donald Methuen Fleming: I do not think the hon. gentleman needs any.


John Whitney Pickersgill: Just so that it will be in Hansard, may I say that the marginal note is "election". I do not think there is any subject on which the house would be more interested in having some light thrown by the hon. gentleman than the marginal note to this clause.


[Stage Direction]
Clause agreed to.
Income Tax Act
On new clause 32.
Mr. Herridge:: With respect to subclause 2 the explanatory note reads as follows:
(2) This new paragraph provides that expenditures of a capital nature on scientific research in Canada made by a predecessor corporation but not deducted by it shall be available for deduction by a new corporation formed as a result of an amalgamation.
Will the minister inform the committee the reason for this amendment? What representations were made to have this amendment included? It seems to be a rather unusual clause from my point of view.


Donald Methuen Fleming: I do not recall any specific representations on this point. However, this is part of the program that we worked out for giving the utmost encouragement through tax measures for the carrying on of research particularly for industrial purposes.


Herbert Wilfred Herridge: Does this mean that a corporation that was formerly carrying out research, forming another corporation or company for the purpose of specifically carrying out research, can deduct for tax purposes the money spent in the previous year by the parent corporation.


Donald Methuen Fleming: Not precisely. What we are dealing with here are first of all expenditures of a capital nature on scientific research. We are only dealing with expenditures on research in Canada. That runs through all these provisions. We are dealing here with expenditures of a capital nature made by a corporation, expenditures which had not been deducted by it. If it amalgamates with another corporation this amalgam, the resulting corporation, may deduct those expenditures made on scientific research which had not previously been deducted by the predecessor corporation. I am told that there was a recommendation to this effect from the Canadian Bar Association and the Canadian institute of chartered accountants.


[Stage Direction]
Clause agreed to.
On new clause 33.
John Whitney Pickersgill: I think we ought to have an explanation, Mr. Chairman.


Donald Methuen Fleming: Clause 34, renumbered 33, is a relieving provision. The act at present permits a corporation to elect to pay a special 15 per cent tax on an amount of undistributed income which has been matched by dividends paid to shareholders. This amendment will allow a corporation to include in the dividends used for this matching certain dividends it may have been deemed to have paid to shareholders.


[Stage Direction]
Clause agreed to.
[Stage Direction]
Income Tax Act On new clause 34.
Jacques Flynn: Shall clause 35, renumbered 34, carry?


John Whitney Pickersgill: After an explanation.


Donald Methuen Fleming: This is a relieving provision.


John Whitney Pickersgill: Is this to create a situation of fairness and equity, or is this to provide an incentive for expansion?


Donald Methuen Fleming: The amendments to the law following the supplementary budget of December 20 provided that the 15 per cent non-resident withholding tax would in future apply to interest paid to non-residents in a foreign currency. However, it provided an exemption from this tax for obligations incurred prior to December 20, 1960.
This amendment provides that where a taxpayer was paying interest in a foreign currency to a non-resident on an obligation incurred prior to December 20, 1960, and that taxpayer's property is purchased by someone else who assumes all the vendor's obligations, the interest shall continue to be exempt when paid by the purchaser.


[Stage Direction]
Clause agreed to.
On new clause 35.
William Moore Benidickson: This is quite a technical amendment. I think those in the accounting business and otherwise would like to have an explanation on the record.


Donald Methuen Fleming: There are two parts to clause 36, renumbered 35. Subclause 1 contains an amendment which is relieving. It will prevent the double taxation of certain income by providing that a redemption of shares which were deemed to be received as a dividend shall not also be deemed to be subject to the 15 per cent non-resident withholding tax.
Subclause 2 contains an amendment which is intended to close a loophole whereby a non-resident shareholder might arrange to have the dividends to which he is entitled paid to another non-resident who is not a shareholder in order to avoid the 15 per cent non-resident tax.


[Stage Direction]
Clause agreed to.
New clause 36 agreed to.
On new clause 37.
John Whitney Pickersgill: Can the minister explain this clause?


Donald Methuen Fleming: This amendment provides that the minister may issue a notice of assessment-that is the Minister of National 
Revenue-on account of non-resident withholding tax or for an amount that is due as a penalty.


[Stage Direction]
Clause agreed to.
On new clause 38.
John Whitney Pickersgill: This is partly on a deferred profit sharing plan. Perhaps the minister ought to just indicate its relationship to the general scheme.


Donald Methuen Fleming: Clause 39, renumbered 38, contains provisions that are consequential upon the provisions already made for deferred profit sharing plans. I think the reasons for them are obvious.
As to subclause 2, I point out that this amendment is in conformity with the amendment made to section 16, provided by clause 5 of the bill. Subclause 3 is consequential upon subclause 4. Subclause 4 extends the meaning of residence. Subclause 5 is, I think, fully explained by the explanatory note in the bill. Subclause 6 deals with residence of a corporation. Subclause 7 is necessary to close a possible loophole in the rules dealing with associated companies.


[Stage Direction]
Clause agreed to.
On clause 40.
Donald Methuen Fleming: There is an amendment to strike out clause 40. I would ask my colleague the Minister of Veterans Affairs to make that motion.


Mr. Churchill:: I so move, Mr. Chairman.


[Stage Direction]
Motion agreed to.
Title agreed to.
Bill reported.
The Acting Speaker (Mr. McCleave):: When shall the bill be read the third time?


Some hon. Members:: Now.


John Whitney Pickersgill: Next sitting of the house.


The Acting Speaker (Mr. McCleave):: Next sitting of the house.



CANADIAN NATIONAL RAILWAYS


[Stage Direction]
The house resumed, from Saturday July 8, consideration of the motion of Mr. Fleming (Eglinton) for the second reading of Bill No. C-121, to authorize the provision of moneys to meet certain capital expenditures of the Canadian National Railways system for the period from the 1st day of January, 1961, to the 30th day of June, 1962, and to authorize

the guarantee by Her Majesty of certain securities to be issued by the Canadian National Railway Company.
John Whitney Pickersgill: Mr. Speaker, when the house rose at six o'clock on Saturday Your Honour had just drawn my attention to the scope of the bill, and there had been some discussion about a point which I was in the midst of making and which I did not have an opportunity to complete.
The point I was making was this. It is a very simple and a very obvious point, but one about which there seems to be an amazing amount of misunderstanding and confusion, and indeed a very marked change in attitude in the case of one very distinguished person. I refer to the question of who is sovereign in this country.
Lest Your Honour should think I am embarking upon a line of argument that is not germane to the bill, I will deal with that point first. The whole point of the argument I was making following the argument made, without any exception being taken to it, by my hon. friend from Laurier was that since parliament is sovereign in this country, parliament certainly has a right, before granting large sums of money to be expended by a crown corporation, to know who is going to be the head of that corporation and who its directors are going to be. That is the precise objection that we on this side of the house are taking to the government proceeding with this bill without first telling us the answer to that question.
My hon. friend from Laurier on the orders of the day this morning asked the Prime Minister whether the directors and the chairman had yet been appointed as a result of the legislation passed by this house some time ago. I remember very well that the legislation was passed by this house before the famous by-elections, because I made certain predictions about it that I am afraid are not going to be fulfilled quite literally. However, I think they are a fair indication of what is likely to happen in due course with regard to that legislation. I say, as my hon. friend from Laurier has already said, that we as a sovereign parliament are entitled to know who is going to be in charge of this crown corporation, who is going to be spending these millions and millions of dollars, before the taxpayers' money is invested in this fashion. I use the word "invested" because of course these are capital sums with which we are dealing in this bill.
In the days when the present government was not in office and when the right hon. gentleman and some of the other occupants of
Canadian National Railways the treasury benches were over here on this side of the house, this kind of argument in this set of circumstances was very frequently made both inside and outside the house. In order to illustrate the importance of the argument I am making I wish to cite as an authority the Prime Minister himself in the days when he was leader of the opposition.
I recognize that was for a very short period, and therefore I have not many citations. In fact I wish to cite only one. I have in my hand a clipping from the Halifax Chronicle-Herald, a newspaper that I find very useful for reference. This is a clipping from that newspaper of March 22, 1957, headed:
Diefenbaker demands reforms-Parliament "puppet of few cabinet ministers".
In an address in Halifax the present Prime Minister appealed for:
Restoration of the prestige of parliament which today "has become the plaything and puppet of a few cabinet ministers".
I suggest that in respect of the Canadian National Railways that is precisely what has happened. Since last September nine months and eleven days have passed during which this government has declined to decide who should be the regularly appointed chairman of the board and who should be the directors of that railway, the greatest railway in North America. It does seem to me that the government, or a few cabinet ministers are treating parliament in exactly the kind of way to which the right hon. gentleman took exception at the time when he was over here on this side of the house. In other words they are seeking to make parliament the puppet of a few cabinet ministers. We are not entitled to know-we are supposed to vote this money blindly-who these people are who are to manage this railway; who is to be the head of the management of the railway; whether Mr. Gordon is finally to get out of the death cell in which he has found himself ever since last September; whether his exit from it is to be to the executioner's block, or whether he is to get a reprieve.


John Andrew W. Drysdale: He looks pretty lively.


John Whitney Pickersgill: As a matter of fact there is many a tiger in a cage that looks pretty lively, but that does not mean he is not still in a cage. If Mr. Gordon-and I did not mean to reflect on him in any way-has perhaps exhibited some of the impatience of a caged tiger upon occasion, who can blame him, after nine months and eleven days of suspended sentence? How, indeed, can any man be expected to discharge great responsibilities when so little confidence is shown in him by those who have the responsibility for his appointment or his dismissal?
7866	HOUSE OF
Canadian National Railways
I want to make it very clear, as I think I did the other day and as my hon. triend from Laurier did, that we do not question the right of the government to replace Mr. Gordon. That is their right under the law. And we are not suggesting that parliament should usurp the functions of the government; not at all. What we are suggesting is the government should do what it is supposed to do. It should do it when it is supposed to do it, and then account for its conduct to parliament so parliament can make an intelligent judgment. If the government have found someone better than Mr. Gordon to run this railway, let them appoint him. If they cannot find anyone, let them take Mr. Gordon out of this state of suspense and reappoint him. Either course would be a respectable and a responsible course. The course that is being followed is irresponsible. It is bound to lead to bad morale; it cannot help but do so, and it should not be continued.
In this same newspaper clipping I read this:
Mr. Diefenbaker complained that the prestige of parliament had been dropping because "members were denied information on affairs of the nation".
What we have witnessed in the last few weeks and the last few months-all through this session, as a matter of fact-in the denial of information is something the equal of which cannot be found at any time since confederation. Let me go on with the Prime Minister's words:
The "shutters were drawn down whenever there was a question not in the best interest of the Liberal party."
That is what he said.


John Andrew W. Drysdale: That is true.


John Whitney Pickersgill: Mr. Speaker, I hear a feeble little bleat from behind me saying "That is true".


John Andrew W. Drysdale: True.


John Whitney Pickersgill: What is true is that the shutters have been pulled down, bolted and barred by the present government. But they have gone a lot further than that. They now assert that parliament has no right at all to the information.


Mr. Speakman:: Who said that, besides yourself?


John Whitney Pickersgill: The Prime Minister stated that in this house last Friday. He said the government of Canada was sovereign. His words are in Hansard and I can quote them if anybody wishes me to do so.


James Stanley Speakman: Quote them.


John Whitney Pickersgill: It was the Prime Minister who said there could not be two sovereignties, and one of those sovereignties he described as the government of Canada.


Michael Starr: And the other one?


John Whitney Pickersgill: It does not make any difference what the other one was.


Michael Starr: Yes, it does. The other one was the governor of the Bank of Canada.


John Whitney Pickersgill: One of them was described as the government of Canada. These are the ministers who are trying to make puppets of parliament, in the words of the present Prime Minister on a former occasion. Now parliament does not matter at all, it is the government that is sovereign. That is the present doctrine.


An hon. Member:: Oh, come now.


John Whitney Pickersgill: I should like to remind the hon. member who is interrupting that Hitler too won an election before he established his dictatorship, so the fact that there was a huge majority in 1958 is no excuse for saying that the government and not parliament is sovereign. This is a subversion of our whole conception of responsible government and our whole conception of parliamentary government. This is the doctrine of dictators.
The government say, "We have won the election and the other side have no rights". In that same direction the Prime Minister went further and said, "We are staying". He did not say "We will stay if the people want us"; he simply said "We are staying". His words are right there in Hansard to see. Of course we know that has happened. These people have got in office in the past by winning elections and then they have stayed and stayed without any more elections.


An hon. Member:: Yes, for 22 years.


John Whitney Pickersgill: I say this is a very strange doctrine coming from the right hon. gentleman who in 1955 in this house, during the debate on the Defence Production Act, which was being put on the statute books solely to deal with the emergency of a possible war and only to be used in those circumstances, had this to say, and this is from Hansard of June 8 of 1955 as reported at page 4558:
However, there has been no suggestion on the part of the government that it intends to deviate one whit from the trend that apparently is to be followed, of establishing for ministers of the crown and this government an absolutism.
Those are the words of the present Prime Minister applied to the government of that day in 1955. Those words apply to the Prime Minister today who, when he is asked whether the directors of the Canadian National Railways have been appointed, on a day when the government is coming here theoretically asking us-in fact ordering us-to vote this money, says, "No, you are not entitled to this information". They said it was urgent

to get the bill through so they could appoint the directors and settle Mr. Gordon's fate, yet six weeks afterwards no appointments have been made, no decisions arrived at. Parliament has the right to know these things. As my friend the hon. member for Laurier said the other day, once we in parliament can be got rid of the government can perhaps start leafing through its list of defeated candidates and other supporters of their party to fill up these holes.


An hon. Member:: We do not have any defeated candidates.


John Whitney Pickersgill: The hon. member says they do not have many defeated candidates, and I suggest they have not got nearly as many as they will have after the next election.


Mr. Speaker:: Order. Perhaps if the hon. member did not mention the next election so much there would be less difficulty in keeping the attention of the house.


John Whitney Pickersgill: Mr. Speaker, I made reference a few moments ago to trends, and it may be that I am simply following one which exists in the atmosphere around us. I shall endeavour to resist it. This opposition not only has the right but the inescapable duty to resist this tendency toward cabinet dictatorship, this tendency that was epitomized in the words of the Prime Minister when he said that the government of Canada is sovereign. I venture to say that no Prime Minister in the history of this country has ever before uttered those words in the House of Commons.


Mr. Aiken:: To which page does the hon. member refer?


John Whitney Pickersgill: What is the page reference? I thought hon. gentlemen listened with the greatest of care to their leader's speech, but he will find those words at the bottom of page 7685 of Hansard, beginning in the first column and carrying on to the top of the second column. He will find an entirely false antithesis there which I am not going to waste the time of the house in reading. That statement clearly says that the government is sovereign. That statement slipped out. The Prime Minister was speaking his real mind that day with that sincerity which is his most famous characteristic. It was frightening; it was very frightening in a free parliament to hear the Prime Minister of this country say not that this parliament is sovereign and the ministers are its servants, as all his predecessors have said, but that the government is sovereign.


Gordon Harvey Aiken: He did not say that at all.


John Whitney Pickersgill: Yes, he did.
Canadian National Railways


Gordon Harvey Aiken: Read the statement.


John Whitney Pickersgill: The other day when I attempted to read it I was precluded from doing so because hon. gentlemen opposite did not want to hear it read.


Thomas Miller Bell: Read it now.


John Whitney Pickersgill: I shall read it with great pleasure, sir. The statement of the Prime Minister to which I referred as recorded at page 7685 of Hansard for July 7, 1961 reads as follows:
Sir, these letters reveal-
That is to say, certain communications which Mr. Coyne had addressed to the hon. gentleman opposite and which were made public.
Sir, these letters reveal an attitude which, if accepted by the government, would result in two sovereignties in Canada, the government of Canada and the governor of the Bank of Canada;-


An hon. Member:: That is right, but not in that order.


John Whitney Pickersgill: Yes, he said the "government of Canada".


An hon. Member:: Read on; go ahead and read on.


John Whitney Pickersgill: That is all that I am concerned about, sir, because-


Thomas Miller Bell: Well, if the hon. gentleman-


Mr. Speaker:: Order. Hon. gentlemen must allow the hon. member who has the floor to make his own speech.


Mr. Marlin (Essex Easl):: Hear, hear.


Donald Methuen Fleming: And make his own mistakes.


Thomas Miller Bell: Is the hon. gentleman not aware that the crown and the two houses of parliament are the government of Canada?


John Whitney Pickersgill: I am not aware of that fact. I am aware of the fact that that is a false proposition. The government of Canada is Her Majesty's ministers for the time being, it is not parliament. Of course the hon. member for Carleton, being a real old Tory, would suggest that the crown was sovereign. We do not think the crown is sovereign, we think parliament is sovereign.
Som hon. Members: Hear, hear.


John Whitney Pickersgill: This is a false doctrine, but a Tory doctrine, that government is superior to parliament and, in the words of the Prime Minister, parliament is the puppet of a few cabinet ministers. That is something

Canadian National Railways we thought was dead in this country. However, sir, I should like to come back to the bill.


An hon. Member:: It is about time.


John Whitney Pickersgill: Well, if the hon. gentlemen-


Mr. Speaker:: Order.


Some hon. Members:: Oh oh.


Mr. Speaker:: Order.


John Whitney Pickersgill: Mr. Speaker, I should like to come back to this-


Mr. Bell (Carleton):: Does the hon. gentleman think-


John Whitney Pickersgill: Perhaps the hon. gentleman can make his speech when I have finished mine. He has been of great assistance to me on previous occasions, but on this occasion I can do without that assistance. I suggest to you, sir, that this parliament, has the right to be told, and we have a duty as the opposition to use our resources in this parliament to find out, who are the individuals who will run this railway before we dispose of vast sums of money, millions of dollars, to unknown persons. Indeed, we should not dispose of these vast sums of money to unknown persons.
There is a second point, Mr. Speaker, which seems to me to be very relevant. That is that the government has responsibility for the management of the railway. The government is not charged with management, but parliament has charged the Canadian National Railways under the statute with management. However, the government has the responsibility for the management. The Minister of Finance has denied that the government has any responsibility in another field, but in this field I do not think even the Minister of Finance would deny that he has the ultimate responsibility to this parliament for the deficit. It is not Mr. Gordon who is responsible; the responsibility lies on the Minister of Finance. The government cannot escape that responsibility. If the government is to discharge that responsibility to this parliament as it should be discharged the government must have management of the railway in which it has confidence, and it must back up that management in the way it should be backed up, or it should get rid of it.
I remember very often Right Hon. Mr. St. Laurent, who had a very different conception of the relationship between the government and parliament and a very different conception of the responsibility of government for agencies under its control, saying in this house that we must either have confidence in the management of the railway or we


must get a new management. That is the only proper way to do it, but this government will not do either. As my hon. friend from Laurier said, it expresses no confidence in the management. It refuses. It continues to sit by and listen to the backbenchers abuse Mr. Gordon and attack the management. It expresses no confidence in the management. It is true the Minister of Transport said that he liked Mr. Gordon and he got on very well with him, but he did not say "We have confidence in Mr. Gordon; we think he is the best man for the job, and we are backing him up".


Mr. Ricard:: Do you?


John Whitney Pickersgill: That is not my affair; it is the government's affair. The government is responsible. Every time anybody in this house suggests that this government should take responsibility for something they reply, "Do you take responsibility for it?" Why, sir, the Prime Minister was in Winnipeg the other day, and according to news reports he is even blaming the Liberals for the drought. They just cannot take responsibility for anything, not even themselves.
The plain fact is, sir, that whatever one may feel about Mr. Gordon, he has been treated in a shocking way by this government, in what my hon. friend from Laurier has described over and over again as a disgraceful way. If they do not believe in Mr. Gordon, if they think he is no good, they do not need to keep him there; they can let him go and do something else. But if they do think he is the best man they should confirm his appointment and give him the necessary prestige and confidence to carry on this tremendous responsibility. It is a tremendous responsibility to run any railway these days, and to run this greatest of all the railways on the North American continent is one of the biggest jobs on this continent, and one of the most difficult. Surely, if we are going to have any kind of management at all, that management has got to be invested with the confidence and backing of the government.
Of course this is just part of a system. As one well known citizen of this country has said, this is just part of that systematic attack on all crown companies which seems to pervade the ranks of hon. gentlemen opposite. I do not say that the members of the government themselves do it directly, but one knows something from long association with politics and long experience in parliament that the backbenchers do not talk the way they do, they do not make the kind of reports they do, if they are discouraged. I do not say they are encouraged.


John Ferguson Browne: They do not have freedom in the Liberal party to say anything.


John Whitney Pickersgill: Then, of course, they start talking about Mr. Gordon being a Liberal appointee. Mr. Gordon's term expired in the autumn of 1957. In the autumn of 1957 this government reappointed him, and they reappointed him quite hastily. Of course they did not have a majority then. Perhaps they were a little more conscious then that parliament was sovereign and not the government, as the Prime Minister now says.


Gordon Minto Churchill: Where did the Prime Minister say that?


John Whitney Pickersgill: I read it to the hon.
gentleman.


Gordon Minto Churchill: You did not read it. I challenge you to read it.


John Whitney Pickersgill: And he may read it himself again as often as he likes. I read to him from Hansard.


Gordon Minto Churchill: You just twisted the words.


John Whitney Pickersgill: There is no getting around it; the Prime Minister said-


Richard Albert Bell: Ridiculous hypocrisy.


John Whitney Pickersgill: -there could not he two
sovereignties in this country, the government and the governor of the Bank of Canada.


Gordon Minto Churchill: He said no such thing.


Richard Albert Bell: You twisted it.


John Whitney Pickersgill: Hon. gentlemen can try to put it straight if they like.


Gordon Minto Churchill: Mr. Speaker, this is a matter of privilege which affects every member of the House of Commons. The hon. gentleman has purported to read from Hansard words which are not in the order in which he read them out. This is an insult to the members of the House of Commons, because at page 7685 of Hansard the Prime Minister used these words:
Sir, these letters reveal an attitude which, if accepted by the government, would result in two sovereignties in Canada, the government of Canada and the governor of the Bank of Canada; but not in that order.
The letters reveal an attitude which, if accepted, would result in two sovereignties in Canada, the government of Canada and the governor of the Bank of Canada; but not in that order. Now I protest, sir, against the statement of the hon. member for Bonavista-Twillingate that the Prime Minister said that the government of Canada was sovereign. That is not there in the record.


Lionel Chevrier: Mr. Speaker,-


Mr. Speaker:: Order.


Lionel Chevrier: -I rise on a point of order, if I may.
Canadian National Railways


Mr. Speaker:: I do not think there is any need to make a point of it. The hon. member who has the floor is entitled to interpret the words in the sense in which he thinks they will support his argument, and it is open to other hon. members to give them any interpretation they wish. Actually the words have been read by the hon. member for Bonavista-Twillingate and by the Minister of Veterans Affairs, and members can draw their own conclusions as to their meaning. It is not a point of privilege to interpret the meaning of words which have been read to the house. As I follow what the hon. member has said, he is making an argument based on those words but he is not ascribing any words to the Prime Minister which have not been read.


Donald Methuen Fleming: I rise on a question of privilege.


Lionel Chevrier: I rise on a question of privilege, Mr. Speaker. I had the floor a moment ago.


Mr. Speaker:: Order. I have just listened to a question of privilege raised by the house leader, and I hope I have disposed of it to the satisfaction of the house. If there is another question of privilege which the hon. member for Laurier and the Minister of Finance wish to raise I will hear them, of course.


Lionel Chevrier: I wanted to reply to the words of the house leader. Your Honour said you had disposed of the point; therefore I am perfectly satisfied to leave it at that. The Minister of Finance wants to put his oar in, too. If that is the case, then I want to continue with my point.


Mr. Speaker:: I trust the matter has been disposed of. If hon. members disagree with the interpretation put on the words they will rise and make their own speeches.


John Whitney Pickersgill: I thank Your Honour for that, because I am making an argument when I say that these are the words of the Prime Minister, and nowhere in any of Mr. Coyne's letters will these words be found. These words are the Prime Minister's interpretation of Mr. Coyne's letters, and I take the Prime Minister's interpretation of Mr. Coyne's letters to mean that the Prime Minister feels that one of these two is sovereign or he would not have put it that way. I was extremely fair; when I was asked to read the words I read them. I say they betray the real bent of the Prime Minister's mind after four years in office; that the government is sovereign, not parliament.

Canadian National Railways


Thomas Miller Bell: This twisting is in the hon. gentleman's mind.


John Whitney Pickersgill: Perhaps it was in his mind all along; perhaps even four years ago when he said "parliament, the puppet of a few cabinet ministers", he was looking forward to this day. I repeat, sir, there are two things that are shocking about the situation in which we find ourselves in relation to this present bill. The first is that we cannot find out, we are not told, whether the government has any confidence in the present day to day management of the railway, because that is what it is; and that is destructive of morale. The second point is that the government, which undertook as soon as the legislation was through to appoint the remaining directors and the chairman, has not carried out that undertaking to parliament, and is asking us to pass this legislation without that undertaking having been carried out.
Sir, in order to get the opinion of the house on this question I should like now to move an amendment to the second reading of this bill. I move, seconded by the hon. member for Ottawa West (Mr. Mcllraith):
That all the words after "that" be deleted and the following substituted therefor:
"this house declines to give second reading to a bill providing large sums for capital expenditures on the railway system while the house is not possessed of the identity of those, namely, the chairman and members of the board of directors, who will be responsible for the making of such expenditures".


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


John Ferguson Browne: Mr. Speaker, the amendment seems to me to be entirely out of order, because the house knows very well who are the chairman and members of the board of directors. They were appointed some time ago and under the statutes of this country are continuing in office. I am sure the house knows very well that Mr. Donald Gordon is president of the C.N.R., and the directors are readily ascertainable by anybody who wants to take the trouble to look up their names.


Lionel Chevrier: Does Your Honour wish to hear argument on this point?


Mr. Speaker:: I think it is unnecessary if that is the only objection taken to the amendment. Is the house ready for the question?


Paul Joseph James Martin: Mr. Speaker, I have listened with considerable interest to the speech just made by the hon. member for Bonavista-Twillingate, and I listened with equal interest to the several statements made on Saturday by some hon. members, notably the hon. member for Laurier. The issue before

us at this moment is a simple one. We are being asked to provide very considerable sums of money under this bill which is to authorize the provision of moneys to meet certain capital expenditures of the Canadian National Railways system for the period from the 1st day of January, 1961, to the 30th day of June, 1962, and to authorize the guarantee by Her Majesty of certain securities to be issued by the Canadian National Railway Company.
The hon. member for Bonavista-Twillingate has just contended that before voting these moneys we should learn from the administration what its intentions are with regard to the president, whoever he shall be, of the Canadian National Railways. We are also asking who are to be appointed to fill certain vacancies on the board of directors of this great national railway system. This is not an unusal request under any circumstances, but in the circumstances that now attend the situation with regard to the direction of this railroad I think our justification for asking for this information is great.
We are reminded that the term of office of the president of Canadian National Railways, Mr. Donald Gordon, expired some nine months ago, and that he has been carrying on, I think one may say, on sufferance during this period without any indication whether or not his term of office is to be extended of whether in fact he is to be reappointed for a fixed term under the statute. The Canadian National Railways is a large operation, the largest railway system in the world, yet for some reason this government refuses to indicate whether it proposes to continue the present president in the direction of this railroad. That is an impossible situation.
There are limits on the prerogatives, even by custom, to which a government can legitimately cling. No government can be forced to announce the appointment of a particular individual unless it has been given ample opportunity to make up its mind. But that cannot be contended in this case, because the definite term of the president expired nine months ago. Is it fair to this railway system, is it fair to this parliament, is it fair to this country that this uncertainty should prevail?
The hon. member for Bovavista-Twillingate says you have asked for certain moneys, and before those moneys are granted we are entitled to know who is going to direct the operations connected with the moneys to be appropriated under this bill. This is a reasonable request. I well remember, during the course of another debate this session, attacks were made on the president of the Canadian National Railways largely by members who sit

behind the treasury benches. The Minister of Transport was Anally prevailed upon to come to the defence of an official who serves under him.
It took some pressure to convince the Minister of Transport that it was not fair for a minister to refrain from commenting on attacks that had been made on an official who reports to parliament through him. Finally, after a long and protracted debate, the Minister of Transport manfully acknowledged that as far as he was concerned he had nothing but high commendation for the president of Canadian National Railways. But he qualified his tribute by saying "as far as I am concerned". The hon. gentleman did to an extent meet the tradition that it is always incumbent upon a minister to defend a public official with whom he has official connections, but the minister would not go further than to say "as far as I am concerned".
What we are entitled to know now is what is the regard that this government has for the president of Canadian National Railways? It can express its view as to his competence by giving us some definite indication of what it intends to do by way of reappointment or by way of replacement, but surely we are entitled to have this information. Why has the government not made up its mind, if that is the situation? If it has made up its mind, why should it not tell this house? If it has not made up its mind, then it surely owes to parliament some explanation for this long delay in determining if Mr. Donald Gordon is the kind of man it wishes to see continued as the president of Canadian National Railways.
There is a further principle involved. It is connected with other situations that have nothing to do, of course, with the operation of the railroad. It is that more and more in this country there is a growing feeling, justified or not, that the government is not satisfied with the heads of certain crown corporations, with certain leading public servants.


Mr. Speaker:: Order. I question whether the course which the hon. member is following is relevant to this fairly narrow question. The question is the voting of funds for Canadian National Railways and the amendment has placed before the house a very precise reason for not voting those funds, namely, that the house has not been given the names of the chairman and members who will have responsibility for making expenditures. I would think that to discuss the views of the country at large on the government's attitude toward1 other public servants is not relevant to this issue.
Canadian National Railways


Paul Joseph James Martin: I cannot quarrel with the position that you take, except that this was not my main argument. I was surely entitled, in commenting upon the substance of what I have to say, to relate my remarks to the general disquiet which I believe exists with regard to the government's treatment of certain public officials of our country. It was only in that context that I had made my observations.
We have been told in another place by one distinguished senator who happens to be the president of the Progressive Conservative party, that the government has intentions with regard to the division of functions at the top of the management of Canadian National Railways. The suggestion has been made that the office of president will be filled by one individual and that he will not continue as chairman of the board. This is a very important announcement to have come from someone who may be close to the administration but has no official functions whatever in so far as the government of Canada is concerned. We are entitled to know whether or not that announcement of policy from that quarter represents what the government really has in mind.
Does the government intend to divide the functions, as was announced by Senator Thorvaldson or was Senator Thorvaldson talking through his hat? Was he talking with justification or had he been informed of this by the government? Surely it is not treating parliament fairly to suggest that that kind of announcement can be made in another place but that we may not expect any comment on it from a member of the government in this chamber. Surely we are entitled to know, not only if the present president is going to be continued in office, but whether his functions are going to be divided as Senator Thorvaldson indicated.
The Minister of Transport is now in his seat. He has not had the advantage of listening to the earlier part of the discussion. I would tell him, therefore, that we have been arguing here, notably today through the rather moderate but vigorous statement of the hon. member for Bonavista-Twillingate who has presented an amendment, that before we accede to the request for certain moneys as contained in this bill we should be advised what the government's intentions are with regard to continuing in the office of president the present incumbent. We have pointed out that nine months have elapsed since the term of Mr. Gordon came to an end, and that it is wholly irresponsible for the government, after nine months, not to be in a position to indicate what its intentions are as to the replacement of Mr. 7872	HOUSE OF
Canadian National Railways Gordon or his continuing in office or dividing the functions at the top level of the management of the railroad system.
How long does the government intend to allow this situation of uncertainty to persist? Is there any obligation on the government to make up its mind with regard to this matter? I will admit that the Minister of Transport has not been minister of transport very long.


Gordon Minto Churchill: But he is very effective.


Paul Joseph James Martin: I wish some other ministers were equally effective. I am not going to name the Minister of Veterans Affairs when I say that, but I simply say I wish the Minister of Transport had some other colleagues who deserved the designation the Minister of Veterans Affairs says applies in this particular case.
The Minister of Transport has not been in office for the full period of these nine months. However, he has been in office now long enough to know what the situation is. He, himself, has said he has confidence in the present president of Canadian National Railways. He made that statement, as I pointed out a few minutes ago, only after considerable prodding. He will remember that for two days strong criticism had been levelled in this house against Mr. Gordon, notably by hon. gentlemen who sit behind the minister. It was only after we had pointed out repeatedly that there was an obligation on the part of the minister either to agree with those criticisms or to defend the president of the railway, that the minister's statement was made. If he agreed with the criticisms, then it was clear what the responsibility of the government with regard to Mr. Gordon must be. The minister is satisfied. He has given the present president full endorsation. No one could have paid a more generous tribute to the competence of Mr. Gordon than did the Minister of Transport.
What we are entitled to know today is whether or not that tribute in appreciation of Mr. Gordon's competence is shared by his colleagues in the government, and whether or not they intend to continue that gentleman in office. This is the gist of the amendment that is before the house at the present time. The amendment deals also with the members of the board of directors who have yet to be appointed. I ask the Minister of Transport, and I ask the Minister of Finance-I would simply say in passing that if the Minister of Finance feels he is being unduly detained in this house, and on that account cannot accept the invitation which has been extended to him in the other place-


Donald Methuen Fleming: There has been no invitation, so do not litter the record again with untruths.


Paul Joseph James Martin: What is untrue?


Donald Methuen Fleming: What you just said.


Paul Joseph James Martin: Let me repeat what I have said.


Donald Methuen Fleming: Mr. Speaker, are we going to discuss this bill or are we going to have a discussion based on the misstatement just uttered?


Murdo William Martin: Don't be so sensitive.


Mr. Speaker:: I think the hon. member would do well not to bring in what is a purely extraneous matter and is certainly not an uncontroversial one.


Murdo William Martin: I did not catch that last observation, Mr. Speaker, and I like to hear what you say.


Mr. Speaker:: I was just observing that it would be well for the hon. member not to bring in purely extraneous matters and which, as he has observed, are not uncontroversial.


Murdo William Martin: I was just observing, Mr. Speaker, that the Minister of Transport is here now-


Mr. Speaker:: I know what the hon. member was observing, and I was asking him not to observe that.


Murdo William Martin: I was just observing that the Minister of Transport is now in his place, and if the Minister of Finance who has, after all, been under considerable fire now for many days in this house, feels that he wishes to attend-


Mr. Speaker:: Order; the hon. member appears to be deliberately following what I suggested to him was not a proper course to take. I trust that he will accept the responsibility of the Chair for some determination of what course this debate should take.


Murdo William Martin: I am not going to pursue the point, Mr. Speaker, except to say, with great respect, that I find it difficult to accede to that suggestion. But under the circumstances there may be some other way of dealing with it. I would think it was most extraordinary that in the course of the debate one was precluded from saying to an hon. member that he could absent himself for particular purposes. I find it difficult to accede to the suggestion that such is not the case. However, I have such great respect for Your Honour and for the sensitivity of all the circumstances implied in what I have said that, for the time being, I am prepared to

pass on to my plea to the Minister of Transport. In doing so, however, I cannot help but note how sensitive the Minister of Finance is. I say this to the Minister of Transport. Surely he cannot now take the position that he can go on denying to us knowledge of the government's intention, particularly when we are now approaching the end of the present session or the present portion of this session of parliament. Is the government going to take the position that it will make an announcement with regard to the president of the railroad and the nomination of the new directors after parliament will have risen and before parliament returns? Is the government going to take advantage of that interval to announce if Mr. Gordon is going to be retained and who the new directors are? If that is the decision the government proposes to take I will say now that it will be a demonstration of this government's disregard for parliament. Or let the minister tell us frankly, "We are not in a position to announce it. We have certain considerations in mind that have not yet been realized. We cannot tell the house who the new president is going to be or whether Mr. Gordon is going to be continued or who the new directors are to be." Let the minister take the house into his confidence. But to deny us this information at this time is incomprehensible.
Let the people of this country recognize and recall the fact that we are not asking for something to be settled that has only suddenly arisen but rather something that has been in existence now for almost nine months. The hon. member for Bonavista-Twillingate took the position that before money was granted parliament had the right to know who was going to be the head of the Canadian National Railways. This morning we were told by the Prime Minister that the government had not yet decided who was going to be the president. When is that matter going to be decided? Are we then going to be denied this information only to be confronted when we leave here with a revelation of information that is now being denied to the house? Some hon. members who are new to this chamber find it irritating to find those of us in the Liberal opposition persistently making arguments of this kind. If they will look over the record of Hansard they will see the kind of arguments that were made by the present Minister of Finance and the present Prime Minister, without having anything like the justification that attends us in this particular instance. Because we are asking for what I think it is our duty to ask, we are being criticized and hon. members opposite find our interventions irritating and annoying. They may be annoying and they may be irritating but these are the instruments
Canadian National Railways which an opposition is entitled to use in order to elicit from a reluctant executive information which the public and parliament are entitled to have.


An hon. Member:: A filibuster.


Paul Joseph James Martin: My hon. friend says "a filibuster". I do not say that this applies to him in particular but among hon. gentlemen sitting around him there are those who know the meaning of filibuster when we think of the way in which private members of the Conservative party during this session held up government business and are partly responsible for the fact that this is the longest session on record.


Some hon. Members:: Oh, oh.


Paul Joseph James Martin: Let no private member in the Conservative party talk about a filibuster. They have filibustered important legislation in this house as no other group has ever done, I suppose, in the history of parliament. We think of the filibustering on A.R.D.A., a bill which was introduced by the Minister of Agriculture and which does nothing for the farmers of Canada in the short term. We think of all of those instances of filibuster. Let no one suggest that we in the Liberal party are filibustering. If we are filibustering-


An hon. Member:: You are just blustering.


Paul Joseph James Martin: -we are filibustering with justification.


Some hon. Members:: Oh, oh.


Murdo William Martin: I see the hon. member for Regina City in his place. Does he not think that we are entitled to know after nine months, when the term of office of the president of the railroad has expired? Are we not entitled, or is he not entitled as a representative of the people of Regina, to know who the next head of the Canadian National Railways is going to be?


Mr. More:: I can ask my own questions.


Murdo William Martin: Are we entitled to vote moneys when this information is denied us?


An hon. Member:: Have you any recommendations?


Murdo William Martin: I see the hon.
member for Cornwall who has just come in. He is a member of this house. He represents people in this parliament. What explanation is he going to offer to his constituents, people who are putting up taxes, who are putting up money that ultimately finds its way into the exchequer of the Canadian National Railways? The people of Cornwall want to know.

Canadian National Railways


John Andrew W. Drysdale: Do you want Gordon fired?


Murdo William Martin: Now we hear from the hon. member for Vancouver-Kingsway.


John Ferguson Browne: Mr. Speaker, I must rise on a question of privilege. The hon. member for Essex East seems to be making some reference to me. I made no interjection or comment.


Murdo William Martin: I mean the hon. member for Burnaby-Kichmond.


Mr. Speaker:: Order. In dealing with the question of privilege may I request the cooperation of hon. members on my left but beyond the speaker who seem to be diverting the hon. member for Essex East from the main path of his argument.


Murdo William Martin: In this instance, Mr. Speaker, I have no difficulty in readily accepting what you have suggested, although I must say that I find these diversions somewhat helpful. I asked the hon. member for Burnaby-Richmond this question. How will he justify on going back to his constituents, voting millions of dollars to the Canadian National Railways and not having joined with the rest of us in ascertaining from the government who is to be head of the Canadian National Railways?


John Andrew W. Drysdale: It is very easy because I know.


Murdo William Martin: My hon. friend says he knows. Oh, now we have it.


Some hon. Members:: Oh, oh.


Murdo William Martin: The hon. gentleman says he knows.


John Andrew W. Drysdale: Just read the annual report of the C.N.R.


Murdo William Martin: That is exactly the information given to the other place by Senator Thorvaldson who said that the office of president was going to be divided, that the person who was president would not continue to act as chairman of the board of governors. That was an announcement of policy made in the other place. We have been asking in this house for a confirmation of that announcement by the president of the Progressive Conservative party and yet we have not been able to obtain any information in that particular from the minister. Now from the generous and amiable member from Burnaby-Richmond we learn that he knows who is going to be the next president.


John Andrew W. Drysdale: Read the annual report.


Murdo William Martin: We now learn that he knows whether or not the present president is going to be continued. That can mean only one thing, namely that he as a member of the Conservative party has been given information by the members of the government-by the Minister of Finance, by the Minister of Transport-perhaps in caucus, which information is being denied to parliament.


John Andrew W. Drysdale: I rise on a question of privilege.


Mr. Speaker:: I cannot hear the hon. member from that place.


Murdo William Martin: I think if the hon. member wishes to raise a question of privilege the house ought to accord him that right, even though he finds it convenient not to be in his place.


An hon. Member:: Put him in his place.


John Andrew W. Drysdale: Mr. Speaker, I rise on a question of privilege. In the first place I might say I object strenuously, as I indicated earlier, to this matter of seating, but I understand it is under review by the committee of the house. The point I wanted to raise and direct to the attention of the hon. member for Essex East is that the information I was conveying to him is readily available to all hon. members-in fact, to the rest of the world- because it is in the Canadian National annual report, which indicates that Mr. Donald Gordon is the president. This should answer the question contained in this very important motion raised at this time.


Mr. Cresiohl:: Who is the chairman of the board?


Murdo William Martin: I am sure the hon. member, who has crossed the chamber to sit in a seat he prefers, will recognize that he has not raised a question of privilege. However I do not make any comment on that. I can understand what the hon. member is trying to do in not being in his seat; he is trying to get as far away as he can from the ministerial benches. I can well understand why.
The situation is quite clear. In the face of what has been alleged today I hope the Minister of Transport, who comes to this debate fresh, perhaps with information which is not now in the possession of the Minister of Finance, will be able to give us the information to which we are entitled. He was not in the house when the hon. member for Bona-vista-Twillingate read his amendment and therefore I should like to read it again:
This house declines to give second reading to a bill providing large sums for capital expenditures on the railway system while the house is not possessed of the identity of those, namely, the

chairman and members of the board of directors, who will be responsible for the making of such expenditures.
Our request, our justified demand is embodied in the terms of this amendment and by no contrivance possible can the ministry justify refusing to give the house this information. The government is entitled to these moneys in support of the railway, but there must be an answer to our questions. To ask us to vote moneys when the government does not know who is going to head the railway, or when it refuses to give this information, is wholly irresponsible and is in keeping with the disregard for parliament which this government continues to demonstrate.


Donald Methuen Fleming: Mr. Speaker, the house did not need to be told by the hon. member who has just resumed his seat that he and his colleagues are conducting a filibuster. That was perfectly well known to all hon. members of the house. Before they carry on their filibuster any longer, Mr. Speaker, I think I should say something to them about the consequences of their filibuster.
It is essential for the provision of the funds required by the Canadian National Railways that this measure should be carried without delay. We have now had the measure before us at the resolution stage and the bill stage. I think this is the third day it has been under discussion.


George James McIlraith: Why did you not bring it in earlier?


Donald Methuen Fleming: There is plenty of opportunity for anyone who has anything serious to say about the bill to do so; but there is no opportunity for filibuster on this bill or intentional delay unless such hon. members as are participating in that intentional delay and obstruction wish to see the operations of the Canadian National Railways hampered.


Some hon. Members:: Oh, oh.


Donald Methuen Fleming: I make that statement, Mr. Speaker, so there will be no misunderstanding of the situation. There will be opportunity for fair discussion, serious discussion, but there is not time for wilful obstruction and filibuster.


Paul Joseph James Martin: Give us the information for which we are asking.


Donald Methuen Fleming: The information hon. members need to have will be forthcoming in answers to inquiries they may wish to make on the clauses of the bill. That information will be forthcoming. But I just wish to sound this word of warning to hon. members opposite.


Some hon. Members:: Oh, oh.
Canadian National Railways


Donald Methuen Fleming: If they are thinking about prolonging an obvious filibuster I am giving them due warning now that the operations of the Canadian National Railways are going to suffer. That happens to be the fact. If they wish to continue to be irresponsible about this and ignore the position of the Canadian National Railways and the need on the part of the Canadian National Railways for having the financial provisions this bill contains for the railway, they can go ahead and do injustice to the Canadian National Railways and deprive that crown corporation of the provisions it needs from this bill.
The situation is just that, Mr. Speaker. So they can make their choice now between going gaily ahead with their filibuster and denying to the Canadian National Railways provisions which that company now requires, or on the other hand they can deal responsibly with the bill. We can have a serious and sensible discussion without obvious delay, endless repetition, deliberate filibuster and obstruction.


An hon. Member:: That is too much to expect.


Donald Methuen Fleming: Hon. members
opposite seem to think that just by sheer repetition they are going to compel the government to embark upon-


John Whitney Pickersgill: To make up its mind.


Donald Methuen Fleming: -a course that is not within the power of the government to follow at this moment without further steps being taken. They are demanding-demanding, Mr. Speaker-that the government should tell them who are going to be appointed to the additional places on the board of directors of Canadian National Railways as provided by legislation passed through this house several weeks ago.
They are demanding also that the government should take some action with respect to the term of the existing principal executive officer, the president and chairman of the corporation. Let me say this, that the appointments of those additional directors have not been made.


An hon. Member:: Why not?


Donald Methuen Fleming: They cannot be made until the legislation has been proclaimed.


Some hon. Members:: Oh, oh.


Paul Joseph James Martin: Ridiculous.


Donald Methuen Fleming: The legislation has not been proclaimed, and I doubt if under the existing pressure of business in this house
7876	HOUSE OF
Canadian National Railways there is any use of hon. members thinking for one minute that the legislation is going to be proclaimed and those appointments made this week. In resorting to that kind of demand they are just exposing their own intention to filibuster and delay this measure. Every hon. member knows that the president and chairman is in office; he is carrying on as he has heretofore.
When the bill is proclaimed and it becomes then appropriate to make the appointments, those appointments will be made. But hon. members opposite merely delude themselves if they think that by conducting a filibuster of this kind and hurling abuse at this side of the house they are going to accomplish their purpose.
I wish to be understood. I am speaking very plainly, Mr. Speaker, to the opposition and I am telling them that if they think they are going to accomplish the purpose they profess to have by this filibuster, they are not going to succeed. They are simply going to deprive the Canadian National Railways of the arrangements that this bill proposes to make for the railway and which the railway requires.


George James McIlraith: Mr. Speaker, we have just heard from the lips of the Minister of Finance an indictment of the government the like of which we have not heard for some time. I invite hon. members to consider the argument of the minister. He accused the opposition of a filibuster because one hon. member had dared to speak in support of an amendment that was offered to this house.


Donald Methuen Fleming: About 15 speeches on Saturday, and endless repetition.


George James McIlraith: I wonder whether the Minister of Finance would observe the courtesies and rules of the house.


Donald Methuen Fleming: Well, tell the truth.


George James McIlraith: I will tell the precise truth, and not follow the precedent set by the Minister of Finance in that respect.


Donald Methuen Fleming: Tell the whole truth.


John Whitney Pickersgill: Who is the Minister of Finance to be talking about telling the truth?


George James McIlraith: I will tell the whole truth and, therefore, not follow the precedent set by the Minister of Finance.


Donald Methuen Fleming: You are telling only part of it.


George James McIlraith: The Minister of Finance persists in this course of interjecting. That is a course to which I have no objection if he


has the ability to make his interjections relevant or pointed, or if he makes them with some skill or dexterity. However, if they are mere clumsy, repetitious statements on his part I should ask him to desist until his turn comes to speak.
The minister accuses the opposition of filibustering this measure for having dared to have one speaker speak in support of this motion.


Donald Methuen Fleming: That is not what I said. You had a dozen speakers on Saturday.


George James McIlraith: Your remarks are on the record and the record will speak for itself.


An hon. Member:: It sure will.


George James McIlraith: The Minister of Finance then made the threat that further discussion in respect to this bill would in some way jeopardize the position of the Canadian National Railways, because it would not have the funds available for this capital work. Let me point out to him that if that is so he owes an apology to the House of Commons for coming to parliament with this legislation so late. If what he has said is true, and is the whole truth, as he put it, then the government has failed in its responsibility in bringing this legislation forward so late that it cannot be considered properly by the house.
To show just how far the minister has gone let me say this. When my desk mate, the hon. member for Essex East was speaking in support of the amendment to the motion, the minister referred to his argument as an inane argument. I should like to follow up the hon. minister's remarks in that regard.
Let me analyse just exactly what he is asking this government to do. He is asking this house to approve a bill providing some $178,900,000 for the Canadian National Railways for purposes more particularly set out in the bill. I remind the Minister of Finance that that represents $10 out of the pocket of each citizen of Canada; those who work, those who are too young to work, and those who are unable to work because of illness. That is the magnitude of this bill. The amount of money asked for is the equivalent of $30 from the pocket of each member of the labour force. That is the amount he is asking the taxpayers to provide this year as well as that enormous amount of money required to offset the budget deficit.
Surely this is a matter of major importance to the citizens of this country. Surely if the Minister of Finance is asking the taxpayers to make this substantial contribution out of their earnings in one year he has an

obligation to tell the taxpayers why he wants that money, because this bill certainly has the effect of arbitrarily taking that money from them.
If the Minister of Finance is going to tell the whole truth, as he refers to it, is he going to tell the taxpayers that he will not inform them who is going to be in charge of spending this vast amount of money? Is he not going to tell them who is to be responsible? Is he going to tell them if they search through the statute books they will find there a board of directors and a chairman of the board, but that he will not tell them who they are? Is he going to tell them that this government will not indicate what its policy is in this regard? Is he going to tell them that if they look at the statute and read it carefully they will find that the government has the right to make these appointments but that the government is going to take this money from the taxpayers without telling them who the management is to be, and only after the government has received the money will it then tell who is to manage the railway?


Paul Joseph James Martin: Parliament be damned.


George James McIlraith: Surely that is not a responsible way to treat the taxpayers of Canada. Surely that is not a responsible way to treat the members of the House of Commons who, in the final analysis, are nothing more or less than those individuals elected by the voters of Canada to represent the taxpayers. Surely it is not inane to ask the Minister of Finance to reveal the policy of the government in this regard and to reveal the government's action before parliament joins in taking this very large sum of money from the taxpayers for this purpose.
Mr. Speaker, the Minister of Finance becomes very wrathful about these things and wonders why we should dare to defend the right of parliament to have this information. He wonders why we should dare to try to maintain the responsibility of parliament. He wonders why we should attempt to make the government answerable to parliament. According to his theory the government is apparently no longer answerable to parliament. But that is a question which will be resolved at some time or another in the future. However, I warn the minister that if he persists in this high handed, arbitrary and arrogant method of dealing with parliament he must be prepared to accept the consequences.
Earlier this session when the opposition presented an amendment to a supply motion on February 20 and February 21 having to do with monetary policy there was reference made to the head of an institution very much 90205-6-497
Canadian National Railways occupying public attention today. On that occasion the Minister of Finance defended the head of that institution at some length. I remember the argument very well because I intervened in it.


Donald Methuen Fleming: Order.


George James McIlraith: I am wondering today, in regard to this debate on the railway bill, why the Minister of Transport is not bearing the burden of the argument in presenting this bill. Maybe he has not had a chance because of the Minister of Finance, but whatever the reason he is not bearing that burden.
The Minister of Transport has made it clear that the government proposes to appoint promptly the members to the board of the directors of the Canadian National Railways and also that the chairman of the board had the support of the government. This was exactly the pattern followed by the Minister of Finance in that other connection. Then the Prime Minister entered the picture. I am wondering if in a few weeks the Minister of Transport will not be forced to take the same type of action vis-a-vis the four directors whose term of office is expiring shortly, and the chairman of the board of directors, as the Minister of Finance was forced to take a few weeks ago vis-a-vis the head of the Bank of Canada. It seems to me that is the kind of situation we are confronted with today. I believe we would be remiss in our duty if we did not press the government of the day to give an explanation regarding the appointment of the men who will be responsible for the direction and administration of this great railway system. Surely that elementary information should be given before this money is provided. I suggest it is an impertinence on the part of the government to go to the taxpayers of Canada and take from them this vast sum of money without giving that information. It is an impertinence to parliament for the Minister of Finance to submit this bill without being ready and willing to give such information.
For my part I completely repudiate the criticism of the Minister of Finance that we are conducting an obvious filibuster. I regard the proceedings in respect to this legislation and the way in which this government is putting it through as an obvious demonstration of arrogance on the part of the government toward parliament. I regard it as the duty of members of parliament to endeavour to obtain this information before this large sum of money is provided from the taxpayers' pockets.


James MacKerras Macdonnell: Mr. Speaker, I had little intention of speaking on this matter but I arrived in the chamber just

Canadian National Railways in time to hear the proposed amendment. I like to think that I usually speak in moderate terms but I find it difficult to do so this afternoon because, quite frankly, I find it impossible to understand how a serious man could propose such an amendment.
Why do I say that? I say that because although I was not on the railway committee this year I was on the committee for a good many years. I have heard representations made by the president of the railway and his staff. I have taken part in the deliberations of the committee.
We have then had this measure following, the committee reports, and I suggest it is practically a routine measure.


George James McIlraith: A measure having to do with $180 million?


James MacKerras Macdonnell: Do not let us be led astray by the fact that there are large amounts of money involved. The question is whether this proposal has come before us with the proper authorization. This proposal comes to us from the railway. It does not creep up out of the ground. It has not come in any accidental way. It has been approved by the board of the railway, and the president of the railway came and presented it; then it was discussed by a responsible committee of this house. It was then reduced to legislation and it comes to us with the imprimatur of that committee. In that sense, as I said, it is routine. I have sat on the other side of the house and I have taken part in discussion of this legislation and I have made comments on it but I do not think it ever occurred to me previously that we were acting in an almost irresponsible way and asking the House of Commons to dig up huge amounts of money. What I thought we were doing was coming to the House of Commons, following the careful and responsible sittings of the railway committee, such as took place this year. What is suggested? It is suggested that by reason of an accident, an accidental situation, namely that there are four directors still to be appointed and that the president's appointment, which has expired, has not been repeated yet, in some way that means that we should not vote the amount. It is difficult to understand, as I say, why reasonable men would suggest that. Do they think if we do not know the names today that we will wake up tomorrow morning and find that a lot of third-rate people have been appointed to this board?


Paul Joseph James Martin: Will my hon. friend permit a question? He has said this is a routine matter and in the context he employed that may be the case; but does the hon. gentleman deny that we in the opposition are justified in asking if the president

will be continued in office, particularly in view of the fact that his term expired nine months ago, and that hon. gentlemen opposite have criticized him and the government itself has not defended him? In these circumstances are we not entitled to ask, and make as a condition precedent to our vote, that the government tell us what they intend to do with regard to filling the post of president of the railway?


James MacKerras Macdonnell: Of course you are entitled to ask. You have asked it a dozen times. I have never objected to your trying to do that. Incidentally, I have spoken in favour of the president of the railway. I think he is a great executive. That is another matter. It has nothing whatever to do with this. I maintain that these two things are just as far apart as the east is from the west. We have here a bill which came to us following the deliberations of a serious committee. It is a thing which, as I say, is routine, and in the sense in which I use the terms the hon. member admits it. It comes up every year. Are hon. members to say that because there are still four directors to be appointed and the president's appointment has not yet been continued the money is not to be spent but is to be held back? As I say, it is difficult for me to understand how serious men would ever make such a proposal, it is such a trivial argument. One might go on and argue that the eight men who are on that board now no doubt, were a party to these amounts being produced before the committee and that the committee sent on the measure now before us. Incidentally, those eight men would still be an effective majority on the board. However, that is a trivial argument and I do not make much of that. I return to my original point. This is a measure in the ordinary course of business, sanctioned by our practice year after year. In my view it is trivial to suggest that this measure should not be passed because we have not got the full list of members of the board of directors. Do we think that a lot of wild men are going to be appointed? Do we think that some men utterly incompetent to run the railway are going to be appointed? No, of course we do not.


Mr. John R. Matheson (Leeds):: Mr. Speaker, I wish to address myself briefly to this motion. On July 7 we heard the Prime Minister say that civil servants like children should be seen and not heard. Today, July 11, we heard the Minister of Finance go one step further and enunciate the principle that the opposition like children should be seen and not heard.


An hon. Member:: You are one.


Mr. Malheson:: As an example, the Minister of Finance mentioned the subject of filibuster. We are reminded of what happened on Friday, June 20 last, when there was introduced by the same Minister of Transport who appears here today a measure to provide for the construction of a line of railway in the province of Alberta and in the Northwest Territories for the Canadian National Railway company involving a proposed expenditure of something of the order of $86 million. On that occasion, sir, in order to be co-operative, there was a minimum of discussion on this side of the house. The hon. member for Laurier and the hon. member for Kootenay West spoke briefly agreeing, in effect, to the proposition as put forward in order that business proceed. Thereafter, sir, we had lengthy speeches by the hon. member for Peace River (Mr. Baldwin), which speech appears at page 7322 of Hansard; then the hon. member for Vancouver-Kingsway (Mr. Browne), at page 7326; then the hon. member for Athabasca (Mr. Biggs) at page 7327; then the hon. member for Edmonton-Strathcona (Mr. Nugent), at page 7330; and then the hon. member for Lethbridge (Mr. Gundlock), at page 7333 and he concluded only because it was five o'clock. I submit that a study of those pages of Hansard indicates that this administration was not prepared to proceed with real business that day. We sat and listened to congratulatory speeches which contained nothing serious at all. I refer to the time-wasting speeches that were made in this house on that bill after the hon. member for Kootenay West concluded his remarks.
Now, sir, this is not a theoretical railroad to the Northwest Territories; it is the C.N.R., the most important link in our nation. It is one of the most important instruments of our economy and of our way of life. Surely we have the right to question the administration on some of these matters, having in mind the context of other developments in the last few weeks. These things cannot be forgotten when we ask questions now. We do not know who is going to preside over this great business in our country today. I point out, sir, this is not a case of railway business simply seen in isolation. The economic value of the C.N.R. to our community is determined not by the railway's income account and balance sheet but by the social dividends the community receives in reduced costs of transportation. The primary dividend is the money saved by using rail transport rather than any other kind of transport. I am reading these words from the study of the Canadian National Railways, volume I, by G. R. Stevens.
You will recall, sir, that Mr. Gordon received his appointment on January 1, 1950. When he took over from his eminent and 90205-6-497J
Canadian National Railways worthy predecessor, Robert Charles Vaughan, there was a deficit from the preceding year of $42 million. By great energy and devotion the new president was able to reduce that deficit immediately to something slightly over $3 million. It increased to $15 million, and thereafter for two years he was able to operate this great line at a surplus to this country. There was a slight deficit in 1954 and then for two years, until this government took over, we were operating in the black. Commencing in 1957 we find the situation where the railroad under this administration starts to slip. But what didn't slip? From a deficit of approximately $29 million they now creep up to the end of 1960 with a deficit of $67,497,000. Nevertheless under Mr. Gordon's administration we have been able to increase our operating revenues by 38 per cent and at the same time increase the average hourly earnings per employee by over 77 per cent.
We know nothing about what is going to happen in the future. We are seriously and earnestly concerned about what is going to happen to perhaps the greatest industry of our country, an industry not only important for its own sake but because it is the framework, the sinew, the arterial system for everything else in Canada. Probably there are no two things as important to the general prosperity as transportation and currency. These are the reasons why we rise today, not for the purpose of delaying the house but to put before parliament legitimately some of those problems that are very much in the minds of members of the opposition if not in the minds of members of the administration.


Mr. J. Edgar Fournier (Resligouche-Mada-waska):: Mr. Speaker, before I embark on the subject that is before us today I should like to make a few remarks in my native tongue.
(Translation):
Mr. Speaker, I did not intend to take part in any discussion during this session which, I think, could be adjourned any moment now, but instead I wanted to listen, observe and take my bearings. So, I am not following the tradition of this house according to which the maiden speech of a new member should deal mainly with his constituency. I defer that to some later occasion. In the meantime, I will endeavour to set the record straight about the Restigouche-Madawaska election. In fact, Hansard contains some erroneous remarks made by certain opposition members.
Mr. Speaker, I do not need to acquaint the house today with the Restigouche-Madawaska

Canadian National Railways constituency. For years, that constituency was neglected and forgotten by Liberal representatives, but my predecessor, Mr. Van Horne, took it out of the Liberal party muck to restore it to its lawful place. I am determined to see to it that it retains that place.
(Text):
I have sat in the house for 17 days, Mr. Speaker, and, as I said in French a minute ago, I have been making observations and listening to the debates. Sometimes I have found them very interesting and instructive, especially when the speakers have been on the government side, but I am afraid that I cannot pay the same compliment to the opposition as on many occasions their arguments are shocking, degrading and do not add to the dignity of the house, especially when the frontbenchers are trying to overrule the Speaker.
In listening to this debate on the C.N.R. I am sure my knowledge is very limited as I was not privileged to attend the committee meetings. However, I should like to make a few observations. My riding of Restigouche-Madawaska used to have two major C.N.R. railway centres, Edmundston and Campbell-ton. They were two divisional points with a great number of people employed there but today they are largely ghost shops.
In the early fifties under Liberal management an overnight transformation to diesel power took place which should have been carried out at a much slower rate in order to save millions of horsepower. I am referring to steam engines, most of which were practically new but had to go to the scrap pile at the expense of the taxpayers. If the transformation had been carried out more slowly management would have had ample time to transfer some of the men to other departments instead of throwing them out on the street without jobs. The machinery to bring about this sudden transformation was established under the Liberal administration.
Today the government is rebuilding those two centres. I wish to compliment the government on the new station which has been built at Edmundston, a station which was in the Liberal platform for some 30 years. It was built by this government in 1959 and included a freight shed which had also been promised by the Liberals. In Campbellton a complete new transformation is to be started in the near future.
There is one major problem, Mr. Speaker, which seems to puzzle me and to puzzle all the taxpayers of Canada. It is the difference between authority and management. Last Friday in the house some hon. members made reference to some dispute involving

the private trucking companies and competition in the trucking business by the C.N.R. The answer given by the Minister of Transport was, "This is a decision for the authorities".
I have no doubt that this good and conscientious minister has inherited such a situation as a result of 22 long years of Liberal administration when authorities, management, administrations and politicians were all riding in the same private car. My question to you, sir, is this. Are we asked to vote several hundred millions of dollars to be spent by this so-called authority while at the same time we, the government members, not the opposition, have no authority as to where and how such expenditures will be made?
I am sure everyone in this house will agree that somewhere along the line there is confusion, and under our democratic system I am sure that those elected by the majority vote of the taxpayers, who have been given the responsibility by the taxpayers to vote these moneys, should have some authority with regard to how and where they will be spent. If not, then some better understanding should be in order.
There are many instances I could mention at this time where the so-called responsible authorities in the C.N.R. have cost the taxpayers of Canada thousands of dollars, if not millions. There is concrete evidence that authorities, administration and management are not working hand in hand to save public money. I know these are matters for committee meetings, Mr. Speaker, and I will not discuss them further now.
There is more than money involved in administration. Such things are involved as co-ordination of various departments, duplication of services, spending within the revenue, and public relations, and on the last topic I wish to make a few comments.
Every time the working force of the C.N.R. has received an increase in salary or an adjustment of some sort through the efforts of their unions the price has always been a mass lay-off that followed. This, Mr. Speaker, is again a sign of poor administration. If those men were needed before the increase in salaries why were they not needed after the increase was granted, or were they fired for political motives or motives of revenge? If the management of the C.N.R. would put half the effort they are now expending on firing employees on the promotion of jobs we would have better public relations than exist now between the employees and the management.
But what can we do? Under the long regime of Liberal administration the C.N.R. got out of control and it will take some time

to bring it back to where it should be. Let this so-called authority not forget that under our democratic system our elected members of the government are the ones who are responsible to the people, that the elected members of the government are responsible to the people of Canada and that the so-called authority is only authority under the duly elected members of the government.
The C.N.R. is Canada's largest business. It is spread from coast to coast and involves all classes of society and all walks of life. Again, I agree with the remarks of the hon. member for Port Arthur, as found on page 7740 of Hansard, when he quoted Mr. G. R. Stevens as having said:
The economic value of a railway to the community is determined not by the railway's income account and balance sheet, but by the social dividends the community receives from the reduced cost of transportation.
I would add that it is also determined by the services rendered to the community and I think this is the most important criterion. We have no objection to voting the necessary funds to keep this railroad operating for the welfare of the community and to offer a balanced service throughout the country, but we do take strong objection to voting money which will be spent by irresponsible so-called authorities. I refer again to the matter of trucking which I mentioned a while ago. I would suggest that for some time yet the C.N.R. should not go too strongly into the trucking business but rather should approach the matter with moderation. Since last year's operations were not too successful, and before we find ourselves with another hungry child which will have to be fed with taxpayers' money, I would suggest that effort should be made by the railways to keep their box cars filled and moving on the railroad, rather than moving them onto our highways.
In closing, Mr. Speaker, I wish to say that my three weeks in this house have revealed some things to me which I never expected to see and of which I am sure the people of Canada are not aware. I refer to the behaviour of the opposition in this house and to some statements made in this house about this bill. Who do they think they are, Mr. Speaker? Do they think they are still the government? Do they not remember the shocking [DOT] events of 1957 and the disaster of 1958 when the people of Canada told them on what side of the house to sit for some time to come? This time may prove to be much longer than they expect if they continue to filibuster the proceedings of this house. If the people of Canada could only see them. No one will deny that Liberal politics have been placed ahead of the interests of the country at the taxpayers' expense.
Canadian National Railways
Is this government responsible to the opposition or is it responsible to the people of Canada? Is the Canadian National responsible to the government or to the opposition? Who makes the appointments to the Canadian National Railways, the government or the opposition? Who runs the affairs of the country, the government or the opposition? Let us vote on this bill and let us keep a close watch on the expenses. In closing, let me remind my hon. friends of the opposition that instead of giving advice to this house they should direct their efforts to organizing their own camp.
(Translation):


Mr. Azellus Denis (Si. Denis):: Mr. Speaker, I feel I must heartily congratulate-


Mr. Parizeau:: Here is the shining light of the opposition.


Azellus Denis: -the hon. member for Resti-gouche-Madawaska (Mr. Fournier) who has just delivered his maiden speech in this House of Commons.
I congratulate him all the more heartily as his speech did not hurt the Liberal opposition very much. I express the wish that at least after the next election, he will put his vast knowledge to the service of his country, not in this parliament, but rather in his province or his municipality.
We note that at the last by-election, the hon. member for Restigouche-Madawaska obtained a majority of some 900 votes. Whereas, in 1958, his predecessor had obtained a majority of about 4,000 votes. I am sure that is not due to the candidate.


Edgar E. Fournier: Mr. Speaker, on a point of order. I wish to rectify right now an error that has crept into the debate and that I wanted to correct later.
My friend just said that I obtained a majority of only 900 or 960 votes. In fact, it was 1,022 votes. On the other hand, if we go back to the 1958 election, it is to be noted that 7,000 Liberals had voted for the present government. So, the majority I obtained is not 960, but 7,000 votes.


Azellus Denis: I am ready to concede a few thousand votes to the hon. member, to please his imagination, but after the next election, the situation will not be the same.


Joseph Aimé Roger Parizeau: You will not even be in this house.


Azellus Denis: In any event, if the hon. member's majority has declined, we must not necessarily believe it is his fault; it is rather that of the present administration, of the present government, in other words of the hon. members forming the government.

Canadian National Railways


Joseph Aimé Roger Parizeau: The hon. member for St. Denis will lose his deposit at the next election.


Azellus Denis: It is too bad the Minister of Finance (Mr. Fleming) was not here when the hon. member for Restigouche-Madawaska and the hon. member for Greenwood (Mr. Macdonnell) made their speeches. He could then have realized that it is the Conservative members who are filibustering on this bill.
For some time, the government has been threatening everybody. Nobody is allowed to make any speech, to criticize the government, to oppose its views.
For some time, Mr. Speaker, the government has been asking that everything goes according to its views, to its fancies. It will not allow the opposition to criticize the policy of the government, which for four years has been made up of confusion, obstruction, vision and contradiction.
I do not know what is happening now but even this bill is not supported by each and every Conservative member. Some are in favour, some are against. In a word, nobody knows where we are going. Does the government support its backbenchers who are criticizing Mr. Gordon? Does the government support Mr. Gordon? Does it reject him? We do not know.
And we are asked to vote the considerable amount of $178 million without being told whether Mr. Gordon will remain in his position or whether he will be fired.
If we are to believe the hon. member for Joliette-L'Assomption-Montcalm (Mr. Pigeon), Mr. Gordon is public enemy No. 1 in this country. He is asking nothing less than his resignation, as we can see at page 6039 of Hansard, where the hon. member charges Mr. Gordon with being autocratic.
He is enemy No. 1 of national unity.
He asks the government not to renew Mr. Gordon's mandate.
If those assertions are accurate, what is the government waiting for? If they were accurate last year, why did it not act last year? If they were accurate two years ago, why did it not act two years ago.
The president of the Canadian National Railways is managing millions, hundreds of millions of dollars of the taxpayers, should I say, since the railway shows a deficit every year and that president is hired only from day to day.
His term of office is over. We do not know whether he is going to be president of the C.N.R. tomorrow or the day after tomorrow. And in spite of that, we are asked to vote a sum of $178 million without knowing who is going to see to it that the amount is well spent.

Mr. Speaker, suppose you are a shareholder of a company. You would certainly like to know who would manage the thousands of dollars you would invest in it.


Joseph Aimé Roger Parizeau: It certainly would not be the Liberals.


Azellus Denis: It seems but reasonable and fair that the country be told now, before a sum of $178 million is committed to the care of an unknown individual. The house is entitled to know who will be president and also the names of the five new directors the government intends to appoint. We do not know where we are going. We are on tender-hooks. Yesterday, a president was fired. Today another one is on the point of being fired. There are threats of a reform or of the abolition of the Senate. They threaten us with an election. But, Mr. Speaker, I can assure you that we do not fear an election. I would like action to be taken on these threats about a general election, because if there were a general election this year, I am sure the people would be glad to rid themselves as soon as possible of a government which has so badly administered the country during four years. The Liberal party, which would then replace it, would tell the house who would be appointed president, who would be appointed directors, and if a president or director were not suitable, it would dismiss him if he deserved it but it would give him a chance to defend himself before the house.
(Text):


Mr. Deputy Speaker:: The hon. member for Laurier.
(Translation):


Joseph Aimé Roger Parizeau: Quebec's great defender. (Text):


Lionel Chevrier: Mr. Speaker, I should like to join with those of my colleagues who have spoken on this amendment and to deal with a number of matters that have come up and which, in my opinion, are nothing more nor less than pretexts on the part of the government. It is unfortunate that the Minister of Finance, after having warned the house of the importance of this bill, should have left the house abruptly. It would have been much more satisfying to me were he in his seat now because there are certain things I should like to say to him in answer to the charges which he made and which I think need to be said on this occasion.
The Minister of Finance said that it was essential that this measure be carried without

delay. Why is it so essential at this time? It was in the power of the government to bring this measure before the house many weeks ago, in fact several months ago; but suddenly the Minister of Finance sees great urgency in the measure. He goes further; he warns and even threatens the opposition that, unless this legislation is passed, the operations of the Canadian National Railways will be hampered. He says this is no time for willful obstruction on the part of the opposition. May I say that the operations of the C.N.R. will go on notwithstanding the warnings and threats of the Minister of Finance. Whether this bill is delayed another day or two is a matter that will not affect the operations of the Canadian National Railways, and no one knows that better than does the Minister of Finance. After all, this great railway has been hampered by the present administration in the fact that the committee dealing with the annual report of the C.N.R. and T.C.A. met this year many weeks, in fact months, after the time at which it normally meets.
Then the Minister of Finance made this rather strange assertion. "Why", said he, "have the directors of the Canadian National Railways not been named? They cannot be named unless this legislation is proclaimed." That is not so. That is an untrue statement and no one knows it better than does the Minister of Finance.


Mr. Speaker:: Order. I question whether the hon. member meant that sequence to his remarks. He said first it is an untrue statement. Then he said the minister knew it was an untrue statement. I would hope he would not leave that on the record because that is contrary to all the rules.


John Ferguson Browne: It is
not an untrue statement anyway.


Lionel Chevrier: Mr. Speaker, I certainly would not want to charge the Minister of Finance with voluntarily having made the statement. If you feel that, in the remarks I have made, such is the case, I of course amend them immediately. What I had in mind, however, and what I intended to say was that the statement made by the Minister of Finance was wholly inaccurate. It is not a fact to say in this house that the directors of the Canadian National Railways cannot be named until this legislation is proclaimed. That is not a fact. That is not so. That is the same old story that we were given when we asked the Minister of Transport why the directors of the Canadian National Railways were not named for days after the legislation increasing the directors from seven to 12 was passed. We were told then, "Wait until the committee has
Canadian National Railways dealt with the annual report of the C.N.R.". Now that the last piece of legislation dealing with the affairs of the Canadian National Railways is before the house we are told "Oh, no; you cannot have this information until the legislation is proclaimed". That is not so. It is not a fact. It is an inaccurate statement by the Minister of Finance and I say to the Minister of Finance that no one knows better than he does that the statement is inaccurate.


Léon Balcer: May I ask the hon. member a question?


Lionel Chevrier: Yes.


Léon Balcer: Is it not a fact that this act increases the number of directors of the C.N.R. has to be proclaimed before the number of C.N.R. directors is increased from seven to 12? Is that not a fact?


Lionel Chevrier: That is not what the Minister of Finance said.


Léon Balcer: He said five new directors could not be named until this act was proclaimed and he said the house knew about it.


Lionel Chevrier: Just a moment. The minister asked me a question and I am going to reply to him. The opposition is not in possession of the information. The government is in possession of the information. The government knows whether or not the legislation has been proclaimed. However, that is not what the Minister of Finance said. I took down his words. He said that the directors of the Canadian National Railways cannot be named or appointed until this legislation is proclaimed; not until the other legislation is proclaimed but until this legislation is proclaimed. I say that statement is not accurate.
Then I return to the statement I made earlier, namely that all of this fuss could have been avoided a long time ago if the government had only had its legislation in order. However, such was not the case. The government has been bungling all along. It has not been prepared. Its legislation was not prepared for the house. Even the bill which the Minister of Transport brought down the other day was not ready. The resolution was ready and then it was based on an agreement which had not yet been made between the parties.


Léon Balcer: There is nothing wrong with that.


Lionel Chevrier: There is a great deal wrong with that and I will tell the minister why there is a great deal wrong with it. The bargaining position of the government of Canada is being endangered by bringing into the House of Commons a resolution based upon

Canadian National Railways an agreement which has not yet been negotiated. In other words, now the parties to the construction of this railway know on the one hand that the government is going ahead with it and this knowledge will strengthen their hand in bargaining powers as between themselves on the one side and the government on the other. That is why I say it is bad business on the part of any government or any administration to bring in a resolution that is based on an agreement that has not been completed.
The hon. member for Greenwood rose in his place in this debate as he had a perfect right to do, and he said he found it strange that in regard to this routine matter there should be such a long discussion about this bill which involves the expenditure of some $180 million. He also suggested that the president and the director not being known had nothing to do with the legislation before the house. He referred to his experience in the past and I may say that he has a great deal of experience. I say to him in fairness that no one has criticized the refinancing legislation of the Canadian National Railways more constructively than has the hon. member for Greenwood. But when he makes the statement he made a while ago I say this to him. The circumstances today and the circumstances yesterday are entirely different. In past years under a Liberal administration there was no question as to who was to be the director and the president of the Canadian National Railways. At the present time there is a question. Before we vote these huge sums of money I say that we are entitled to know why it is that the government will not make up its mind and will not tell parliament.
There is a great deal in what the hon. member for Bonavista-Twillingate said earlier today, namely that the reason is, as the Prime Minister said when he was leader of the opposition, that parliament is a puppet. That is the reason. In the view of hon. gentlemen opposite parliament is exactly what the Prime Minister said; there are two sovereignties. As far as I am concerned, there is only one sovereignty and that is parliament and parliament alone. Before we vote these huge sums of money we should be entitled to know who the people are who are going to spend these sums of money.


James MacKerras Macdonnell: Will the hon. member permit a question?


Lionel Chevrier: Yes.


James MacKerras Macdonnell: I think the hon. member wishes to be fair. However, he has entirely ignored what was perhaps my strongest point,

namely that a committee of this house has been over these figures and has approved them.
While I am on my feet may I ask another question? Does the hon. member, with his experience, not agree that the passing of this bill is necessary in order that the arrangements for financing and so on, with which he is so familiar, can go forward? They cannot go forward, as I understand it, until this bill is passed.


Lionel Chevrier: Yes, that is quite correct; but what difference does it make whether it goes forward today or next week? Why is it that legislation was brought down in this house six months ago, was dealt with in stages and was not completed until last week? Whose fault is that? That is of course the fault of the government. It is also the fault of the government that we have this situation in connection with the C.N.R. If the committee had met earlier, if the affairs concerning the Canadian National Railways had been dealt with earlier we would have disposed of this matter a long time ago.
Mr. Speaker, I was passing on to another matter with which I wished to deal before I closed my remarks. It has to do with the report of the royal commission on transportation. That report, as the house knows, has been submitted to the government in at least its first part and two other volumes will be brought before the house in due course.
In this first volume it has been recommended that large sums of money be paid to the railways in four fields. First in the field of passenger train service, where the Canadian National Railways testified that their train service deficit in 1958 was $40 million, and where the Canadian Pacific Railways testified to the same effect, that their passenger train service burden in 1958 was in the neighbourhood of $15 million to $16 million, and wherein too the MacPherson commission recommended large, maximum annual payments in respect of this loss of service ranging from $40 million in 1961 to $8 million in 1965.
The second recommendation in the report had to do with light density lines and therein, too, was a recommendation for a subsidy. That also applies to export grain traffic, where the commission has recommended that in the case of C.P.R. a sum of $9 million annually shall be paid on behalf of the export grain traffic as a contribution to constant costs. There is one other matter having to do with statutory free transportation.
I raise this matter because there is to be found in the supplementary estimates of the Department of Transport an amount of $50 million which has not yet been reached during the discussion of these estimates. I

have tried to obtain information as to what this sum represents. Does it represent a partial acknowledgement or acceptance of the recommendations of the royal commission? Does it represent a payment for the wages in connection with the dispute between Canadian National Railways and its non-operating employees, or does it represent a straight subsidy in connection with both?
I think the house is entitled to receive that information before we vote on this amendment, and on the bill, if need be. I attempted to obtain this information from the committee when it dealt with the annual report of the Canadian National Railways, but again I did not get very far in that attempt because it was felt that questions relating to this matter were very close to the borderline because the commission had not yet finally reported, and in any event the wording of this item in the estimates, No. 590, was such that it was clear.
Well, I never thought it was clear at any juncture. If there ever was evidence of lack of clarity, it is in this item. I should now like to read it into Hansard. It is entitled, "Board of transport commissioners". The item reads:
Interim payments, related to recommendations of the royal commission on railway problems pending its complete report, to companies as defined in the Freight Rates Reduction Act of an aggregate amount in respect of the calendar year 1961 of $50 million, to be paid in instalments at such times and in accordance with such method of allocation as may be determined by the board of transport commissioners for Canada, as compensation to such companies for the maintenance of their rates on freight traffic at reduced levels as provided for in the said act.
So it covers the whole field. It covers the world. It covers in part the recommendation; in part salaries; in part reductions in freight rates. Again we have an example of the manner in which this government proceeds to deal with important matters of this character. We were also told we would have legislation in connection with these recommendations. That was a statement made repeatedly by the Prime Minister (Mr. Diefen-baker) during one of the debates of this house. We are still awaiting that legislation.
If the government had in mind the welfare of the railways and of the people of Canada it would, after this long period of time in which the report has been in its hands, have had legislation to deal with the situation as we find it. Under those circumstances, Mr. Speaker, there was every reason for the hon. member for Bonavista-Twillingate to move this amendment, which we on this side of the house will support.


Mr. Speaker:: Is the house ready for the question?
90205-6-498
Railway Act


Some hon. Members:: Question.


Some hon. Members:: Five o'clock.
(Translation):


Joseph-Alphonse-Anaclet Habel: Mr. Speaker, we definitely have the right to ask the government to tell us, in all fairness-
(Text):


Mr. Speaker:: Order. The house will now proceed to the consideration of private and public bills, the former having precedence pursuant to section 3 of standing order 15.


Donald Methuen Fleming: Mr. Speaker, would the house be willing to continue during this hour from five to six o'clock the business on which it was engaged at five o'clock?


Some hon. Members:: Agreed.


Some hon. Members:: No.


Lionel Chevrier: No, Mr. Speaker.


Donald Methuen Fleming: The old filibuster. PRIVATE BILLS



THE CUMBERLAND RAILWAY AND COAL COMPANY AND THE SYDNEY AND LOUISBURG RAILWAY COMPANY

[Stage Direction]
On the order:
House in committee on Bill No. S-19, respecting the Cumberland Railway and Coal Company and the Sydney and Louisburg Railway Company (Without amendment)-Mr. Maclnnis.
Gordon Minto Churchill: Stands, Mr. Speaker.
Order stands.



RAILWAY ACT


[Stage Direction]
On the order:
Second reading of Bill No. C-39, to amend the Railway Act-Mr. Browne (Vancouver-Kingsway).
John Whitney Pickersgill: Mr. Speaker, I think the hon. gentleman who is sponsoring this bill indicated the last time this matter came up that he would be prepared to proceed on the next occasion. If he is not prepared to proceed, I think he should lose his place in the queue.


John Ferguson Browne: Mr. Speaker, I might-


Mr. Speaker:: Would the hon. member wait just a minute.


Hazen Robert Argue: That was reserved for the opposition.


Mr. Speaker:: The hon. member for Vancouver-Kingsway.


John Ferguson Browne: Mr. Speaker, when this bill came up last Friday it was suggested by the house leader that

Transport Act
he agreed to its standing on the basis that it would be delayed for perhaps a week because private bills come up on Tuesday, and I indicated at that time, and felt the house had accepted it, that it would go ahead on the following Friday.


Mr. Peters:: Why not take it now?


Mr. Speaker:: Is the hon. member ready to proceed?


John Ferguson Browne: Mr. Speaker, I ask that it stand.


Hazen Robert Argue: No, Mr. Speaker.


Mr. Speaker:: Is the government prepared to request that it stand?


Gordon Minto Churchill: I ask that it stand, Mr. Speaker.


Mr. Speaker:: It stands at the request of the government.
Ar. Howard: Favouritism.


James Stanley Speakman: Mr. Speaker, on a point of order, the hon. member for Skeena has just /aid "favouritism" and I think that remark should be withdrawn.


Hazen Robert Argue: It is true.


Mr. Speaker:: Order.


Frank Howard: Mr. Speaker, I should like to speak on the point of order.


Mr. Speaker:: I do not see that there is a point of order.


Frank Howard: Mr. Speaker, on the point of order-


Mr. Speaker:: Order. There is no point of order. Would the hon. member resume his seat.
Order stands.



TRANSPORT


[Stage Direction]
On the order:
Second reading of Bill No. C-44, an act to regulate extraprovincial transportation-Mr. Chown.
Mr. Speaker:: The order stands.


John Whitney Pickersgill: Mr Speaker, does this stand at the request of the government?


James Stanley Speakman: It stands but not at the
request of the government.


John Whitney Pickersgill: In that event, Mr. Speaker, I do not believe we would agree that it stand.


Mr. Speaker:: This just means it goes to the bottom of the list.
Order stands.



FINANCIAL ADMINISTRATION ACT


[Stage Direction]
The house resumed, from Tuesday, November 29, 1960, consideration of the motion of Mr. Boulanger for the second reading of Bill No. C-6, to amend the Financial Administration Act.
(Translation):
Mr. Samuel Boulanger (Drummond-Ariha-baska):: Mr. Speaker, this is the fifth-
(Text):


Mr. Speaker:: Order. I must inform the house that if the hon. member speaks now he will close the debate.


John Whitney Pickersgill: Question.
(Translation):


J.-H.-Théogène Ricard: Mr. Speaker, it is rather amusing to see the Liberals take the attitude they are adopting now. This is not the first time that the matter of bilingual cheques has been on the order paper of this house. On several occasions in the past, a measure similar to that of the hon. member for Drummond-Arthabaska (Mr. Boulanger) has been submitted for approval by this house and on each occasion, the bill was delayed with the result that again today we have to discuss it-


Samuel Boulanger: Question.


J.-H.-Théogène Ricard: -and our hon. friends have had all the time they needed-


An hon. Member:: You have had it too.


J.-H.-Théogène Ricard: -to make a decision on this matter. However, today they act as they always did, they recommend one thing and do another.
They certainly recall the days when the hon. member for Beauce, Dr. Raoul Poulin, year in and year out, used to introduce in the house a piece of legislation similar to the one introduced today by the hon. member for Drummond-Arthabaska.
I went through the official record for years prior to 1957, and made a particular study of the speeches made, in reference to this legislation, by the hon. members for Maisonneuve-Rosemont (Mr. Deschatelets), for St. Denis (Mr. Denis), for Levis (Mr. Bourget), for Hochelaga (Mr. Eudes) and for Richelieu-Vercheres (Mr. Cardin), and, to my great surprise, Mr. Speaker, I have not been able to find, except a short-


Mr. Bourgel:: Allow me, Mr. Chairman, to raise a point of order. I understand the hon. member for St. Hyacinthe-Bagot has referred to me as one of those who dealt with this bill. Could the hon. member indicate the page and the date of the speech I am supposed to have made.


J.-H.-Théogène Ricard: The hon. member for Levis is going too fast. He is trying to put in my mouth words I have not said. I said that I had searched the record prior to 1957 in order to know what stand had been taken by the hon. members I mentioned a minute ago, and I was just going to say that none of them, except the hon. member for Maison-neuve-Rosemont, had anything to say with respect to this bill in the past.


Maurice Bourget: Mr. Speaker, on the same point of order and again on the same question, I submit the member has intimated that I had spoken to the bill now before the house.


J.-H.-Théogène Ricard: I said exactly the opposite.


Maurice Bourget: Mr. Speaker, I am positive that tomorrow, the official report will show that he actually said he had searched Hansard in order to scrutinize speeches made by the hon. members for Maisonneuve-Rose-mont, St. Denis and myself. Then, I can only conclude that he is suggesting-


Mr. Tremblay:: No, no.


Maurice Bourget: If you would let me talk, perhaps we could understand each other better.


Léonard-David Sweezey Tremblay: Exactly-you do not understand.
(Text):


Mr. Speaker:: I take it the hon. member by way of personal explanation is correcting the statement that he had spoken in this debate when in fact he has not spoken on this bill at all?


Maurice Bourget: That is the situation, Mr. Speaker. The hon. member said a few moments ago that he had searched through Hansard and found that the hon. members for Maisonneuve-Rosemont (Mr. Deschatelets), St. Denis (Mr. Denis) and Levis (Mr. Bourget) had spoken in regard to this bill. I must say that I have not said a word in regard to this bill.


Mr. Speaker:: We have the assurance of the hon. member for Levis that he did not speak on this bill. I understood that the hon. mem-
90205-6-498i
Financial Administration Act ber for St. Hyacinthe-Bagot (Mr. Ricard) asserted that he had spoken on this subject in years past but not in respect to this particular bill. In any event the hon. member has made it clear that he has not spoken before on this bill.
(Translation):


J.-H.-Théogène Ricard: Mr. Speaker, I was saying that I had looked up Hansard to make sure-let us give the hon. member for Levis the benefit of the doubt, let us say that I looked up Hansard to find speeches, but he rose a little too soon, because I was going to say that I had found no speech of the hon. members of the opposition, except the one delivered by the hon. member for Maisonneuve-Rosemont, who talked out the bill before the house on January 31, 1957.
I should like-


Mr. Richard (Ottawa East):: Just as you are
doing now.


J.-H.-Théogène Ricard: The hon. member for Ottawa East (Mr. Richard) had ample opportunity himself, when he was a member of the Liberal administration-


Samuel Boulanger: That was four years ago-


J.-H.-Théogène Ricard: You had many opportunities to adopt such a bill if you had wanted to. But in keeping with your habit, you had one policy for the province of Quebec and another for the rest of the country. That is exactly what you have always done-try to divide and rule.
I have here, Mr. Speaker, an article of the newspaper Le Devoir of February 7, 1958, which I should like to quote in part:
The subject of bilingual cheques is not new. It has been discussed since the creation of family allowances at the end of the war. It is a known fact that the federal government had thought of issuing two sets of allowance cheques-bilingual cheques in the province of Quebec and English cheques for the other provinces in confederation.
Well, Mr. Speaker, that is evidence that the Liberals advocated two policies, one for Quebec and another for the rest of the country. It is a requirement of their political education. They always follow the same policy- divide and rule.
I continue:
French Canadians protested against such a rule which was inspired by the Quebec reserve thesis and requested bilingual cheques for the whole country in accordance with the spirit of the constitution. They soon referred to the fact that family allowance cheques were not the only cheques issued by the federal government, even if there were more of those and they asked that all cheques like currency be bilingual.

Financial Administration Act
The Conseil de Vie frangaise was our spokesman. On the eve of the 1953 election, it sent a delegation to Ottawa to submit a brief on bilingual cheques to Mr. Douglas Abbott.
The association made repeated representations to the different ministers of finance who came afterwards-i.e. Walter Harris and Donald Fleming. These representations were always well received but gave limited results.
In the commons, the independent member for Beauce supported these claims by introducing year after year a very well written bill that would have settled the question once and for all. His efforts were not useless since they forced the four federal political parties to accept the principle of a reform.
All that, Mr. Speaker, happened under the former Liberal government. That government could have given us bilingual cheques. But it did not.
Now that the Liberals are in the opposition, they demand that the government take steps they refused to take themselves.
I resume my reading of the article:
A quarter of a century ago, parliament and the nation had to deal with the question of bilingual currency. In those days as today, a Conservative government was in power in Ottawa and the Liberals who had been deaf to our demands, suddenly found themselves most zealous in the opposition.
Ever since the Liberal party has been confined to the cold regions of the opposition, they have felt a sudden outburst of patriotic and bilingual fever.
It still remains that they never did anything.
To further the expansion of bilingualism, the present Conservative government favours it not only in government buildings, but everywhere.
Indeed, everybody knows that the Department of Public Works is at present substituting bilingual traffic signs for unilingual ones.
The Liberals have been in power for 22 years and apparently, they never noticed this anomaly which the Conservative government is pleased to correct.
I would add that the Conservative government has no advice to take from the Liberal party in that respect and in many others.
Here is another proof of that. It was under a Conservative government led by the Right Hon. R. B. Bennett that the currency minted in Canada was worded in French. Never before that had the Liberals dared take such a step. Never before had it occurred to them that there should be some French on our currency.
It is therefore R. B. Bennett who had the honour of having bank notes printed in French for the first time.
The purpose of the present resolution is to have negotiable instruments printed in both languages in Canada.
This motion should not have been introduced by a private member, because it calls for a spending of moneys and it rests with the government alone to introduce such a bill.
Be it as it may, hon. members may rest assured that, at the right moment, bilingual cheques shall be printed. And again a Conservative government will be the one to take steps in the interest of bilingualism.
For those reasons, Mr. Speaker, I trust that the Minister of Finance (Mr. Fleming), when he deems advisable to do so, will give this country bilingual cheques, not only for the satisfaction of Conservative members, but for that of all the people of Canada, much to the regret of the Liberal members who, during the long years when they were in office, have not found time to do anything in that field.
(Text):


Hazen Robert Argue: Mr. Speaker, I am very pleased at this time to speak in strong and very sincere support of the bill now before us.


An hon. Member:: Did you ever speak in its favour before?


Hazen Robert Argue: My record on this subject is consistent. In spite of the interruptions I hear from the opposite side I would suggest that the record is a consistent one and I am very proud to be able to speak at this time in support of what I think is a very important piece of legislation. This is a bilingual country; it is a bicultural country and I think it behooves members of parliament to recognize this fact.
The hon. member for St. Hyacinthe-Bagot says that this government, or at least the Conservative party, will provide for bilingual cheques at the opportune time. I suggest that now is the opportune time. I ask why should we wait? For what reason are they delaying? I am certain that this measure would receive the unanimous support of this house now as it has on former occasions and that instead of talking it out a member of the cabinet should rise in his place and say that the government is prepared to accept the measure and to issue the proper instructions that instruments referred to in this measure be made bilingual.
It is easy for hon. members opposite to say, "Well, the Liberals should have done this. Why did they wait so long? They were here for 22 years and they failed to replace the plaques in the House of Commons by

substituting bilingual plaques". Well, if there have been mistakes in the past surely that is no excuse for continuing the mistake in this field. Why hark back to something that happened years ago when there are things that should be corrected now? To blame people for what happened over a 22-year period is certainly no excuse for talking on this bill at length, if that should be the position of hon. members opposite, and failing to bring it to a vote.
I am prepared to congratulate the government whenever it makes a move in this direction, but when criticism is justified I think that criticism should be made. Although for some years some of us have said that there should be placed within the employ of the government, that is within the civil service, at least two persons, one to instruct French speaking people in the English language and the other to instruct English speaking people in the French language, this has not been done. I do not know why this has not been done. Some members of parliament at any rate have been pressing it. There was a professor by the name of Edouard Pelo-quin who came to Ottawa periodically from Montreal one or two days a week to assist some of us in studying the French language. He was unable to continue his trips to Ottawa because of financial problems. The classes were not paying and he was losing money and was not able to finance these trips out of his own pocket. Some of us intervened with members of the government-


An hon. Member:: Order.


Hazen Robert Argue: If you can talk about the ordering of plaques by the Department of Public Works, surely we can talk about this matter. When we intervened the answer was, "It is too complicated; we have tried and it cannot be done". I say it is a disgrace to this country that the government has failed to provide a teaching staff to enable highly placed civil servants to learn both languages, and the record of the government is not nearly as good as was stated in the house this afternoon by the preceding speaker.
I said that we do not have to go back to mistakes of the past. We can talk about the things that should be done now and the passing of this measure is one of the things that should be done now. I am confident that not only will this kind of proposal receive the support of the C.C.F. members of parliament if we have an opportunity to vote on it but this kind of recognition of the bilingual and bicultural nature of our country will be recognized, I am confident, in all its aspects by the New party whose program-


Some hon. Members:: Oh, oh.
Financial Administration Act


Hazen Robert Argue: Hon. members can snicker. They may think it is a joke but I do not think the question of bilingual cheques and the bilingual nature of this country are anything to snicker about.


Mr. Nesbitt:: You are the joke.


Hazen Robert Argue: My friend can get up and speak if he likes, but I am certain it is the Conservative party that is lagging in this regard. I am confident that the hon. member for Drummond-Arthabaska-


Wallace Bickford (Wally) Nesbitt: Will the hon. member permit a question? Is the hon. member aware that in the Department of External Affairs at least-I cannot speak for other government departments-civil servants are given extra allowances to learn another language?


Hazen Robert Argue: Mr. Speaker, I think the allowances should be increased. Apparently very few are taking advantage of them because the number of bilingual people in the Department of External Affairs does not in any way reflect the bilingual nature of this country. It may be that some efforts have been made but they are feeble and inadequate efforts. One of the strengths of our nation is the bilingual nature of our country. One of the strengths of Canada in international affairs lies in the fact that we are a bilingual country. Let parliament itself, let all parties in the House of Commons recognize this fact by passing this bill and not have any part in delay and obstruction which would prevent the bill from coming to a vote.
(Translation):


Mr. J. J. Martel (Chapleau):: Mr. Speaker, it gives me pleasure to take part in this debate on Bill C-6, introduced by the hon. member for Drummond-Arthabaska, in view of the fact that as early as 1959, I had placed my views on the record with regard to this matter.
In my humble view, it would not even be necessary to vote such a bill because, as the hon. member for Assiniboia (Mr. Argue) indicated a moment ago, the government could make this move without any legislative amendment. In fact, that was the view I expressed in 1959, and while I of course support the principle of this bill, I am still of the same opinion.
At that time, I argued that the problem could be settled through a government decision. As a matter of fact, I am sure the government will settle the matter in due course, despite what may be said to the contrary by our good friends in the opposition and even by members of the C.C.F. party, or the New party as it will soon be called, because as I understood the remarks
7890	HOUSE OF
Financial Administration Act just made by the present leader of the C.C.F. and perhaps the future leader of the New party, he more or less disowned the remarks previously made in this house by another member of his party either in regard to this matter or with respect to bilingualism.
I referred a moment ago to the suggestion which he says was made years ago for the provision of courses for unilingual civil servants. I have not been a member of this house very long, but I do not think that suggestion was made so many years ago. I rather think it was made this year, when the new Civil Service Act came up, by the hon. member for Timiskaming (Mr. Peters).
I have no doubt that the teaching of English to French speaking civil servants and the teaching of French to English speaking civil servants would help solve the problem of bilingualism. However, it would not settle the whole problem which we considered when discussing that bill.
But to come back to the bill before us, with regard to the opportunity of enacting legislation to provide for the printing of negotiable instruments in both English and French, I think we did approve some bill to this effect before. It is, of course, another bill altogether and I do not want to deal with it, but it is more complete. I refer to Bill C-31 submitted by the hon. member for Joliette-L'Assomption-Montcalm (Mr. Pigeon) and which, to my mind, is more explicit than the one introduced by the hon. member for Drummond-Arthabaska.
I shall not discuss it in detail, because I would be out of order since we are not allowed to deal with another bill when discussing a particular measure. However, I simply want to remind hon. members that I still think such legislation is unnecessary, and that the government can always take action in this respect. However, if the question were put, I say that I would still believe the other bill introduced by my colleague from Joliette-L'Assomption-Montcalm to be more adequate.


Samuel Boulanger: Oh, oh.


Jean-Jacques Martel: Of course my hon. friend from Drummond-Arthabaska thinks this is very funny. I have no objection to his finding the matter hilarious. He can hardly be blamed for not having submitted his bill earlier, when his party was in power, because at that time he was in fact like myself, not a member of this house. Indeed, if my memory serves me well he had himself elected as an independent, and I think he would have done better at


that time to join the Conservative party. His bill would be enacted today, not straight away, perhaps, but he might have come to some understanding with the hon. member for Joliette-L'Assomption-Montcalm to have his bill adopted.


Samuel Boulanger: Never, never.


Jean-Jacques Martel: In any event, Mr. Speaker, I refer to the discussion which took place in 1959 on the matter, when the hon. member for Drummond-Arthabaska introduced an identical bill. At that time, I took part in the discussion in which various things were mentioned, like the constitutional guarantees with regard to the rights of the French and English languages and of bilingualism, guarantees which every year are more widely recognized, especially since the Conservative party came into power. It was referred to in some newspaper items and more particularly in an editorial printed in Le Droit, part of which I will read into today's record in a few moments, if I may do so, Mr. Speaker.
The various opinions expressed at that time were described as strange in some newspapers. I know that mine in particular was considered rather strange because it was said that although I was a French Canadian I was seeking to kill the bill. Such was not my intention, since I had already said that the government could implement such a plan without the necessity of making amendments to the act. An way, I feel that the attitude of our opponents who just took part in the discussion is not less strange, since now they are endeavouring to take credit for such legislation, which was introduced for the first time, as everybody knows, by the independent member for Beauce (Mr. Poulin). I am referring more particularly to the year 1956. It is true I was not in the house then, but I have looked into that matter. I should like to come back to the editorial quoted a moment ago by the hon. member for St. Hyacinthe-Bagot to the effect that when the Liberals were in power nothing was done to help pass the bill introduced by the former independent member for Beauce.
Not only that but when that bill came before the house in 1957, the Liberals resorted to all sorts of tricks and tactics behind the scenes. They even had statements in the press, trying to ridicule the hon. member for Beauce, Mr. Raoul Poulin, saying that he was seeking to bury his own bill, which was completely false, for if there was one who fought for bilingualism in this house, it is the former independent member for Beauce.

Mr. Speaker, in concluding I should like simply to record in Hansard part of an editorial which appeared in Le Droit of February 14, 1959 and dealing with a debate on bilingual cheques which had taken place a few days before. This article was written by Mr. Pierre Chaloult. It is too long to be read in full, unless my hon. friends would allow my recording it in Hansard without first reading it. Anyway, I can quote a few excerpts which seem most relevant. I quote:
The matter which is now raised in this connection is that of bilingual cheques, according to the request made by the independent member for Beauce, during the second last federal session, Mr. Raoul Poulin.
And further on, the article refers precisely to the opinion I expressed in 1959, which I mentioned again a moment ago, and goes on to say:
But there remains a very simple way of avoiding all those inconveniences, without displeasing, French speaking Canadians, since the Minister of Finance, Mr. Donald Fleming, has merely to repeat, in 1959, the action taken once by Mr. Pierre Veniot. Mr. Fleming may, in fact, close the debate forever by telling the house that he has, on the very day, or the day before, or when it pleases him to do so, given instructions for the printing of federal government cheques in both official languages of this country.
Since this bill would interfere with nobody's rights or convictions, no one should complain about it.
Well, Mr. Speaker, I think that would be the solution. We would not have to vote any legislation in that regard.
I believe that the government has the power to do so and will do it at the first opportunity.
Since the Conservative party took over, many necessary measures have been adopted.
We are now in the midst of a debate which has already been going on for days and we have seen several lengthy debates on various matters.
Besides, the Conservative government has already shown its goodwill in relation with the establishment of integral bilingualism in Canada by giving us simultaneous translation and by appointing a perfectly bilingual governor general. Furthermore, several other measures of a similar nature have been passed, which very clearly indicate the good intentions of the Conservative government in the matter of bilingualism. So, I have no fear in stating that it will give us bilingual cheques at the earliest possible date.
Obviously, there is still a very important matter to settle, that of the Bank of Canada. For many years, that institution has been issuing bilingual bank notes. The Senate is now discussing a bill concerning the position
Financial Administration Act of the governor of the Bank of Canada, and I know that the views of this house will finally prevail and that the present governor will be dismissed. I hope, furthermore, that the Conservative government will soon give its approval to the issuance of bilingual cheques.
Mr. Speaker, I close my remarks and leave the floor to another member who would like to deal with this matter.


Jean-Paul Deschatelets: Mr. Speaker, my remarks will be brief, but I do not want to let this debate come to an end without straightening out a few facts.
First, I should like to commend the hon. member for Drummond-Arthabaska (Mr. Boulanger) for introducing this measure.
This is a simple bill, and only one thing is important here, namely to vote the bilingual cheques. I do hope that the house will have an opportunity to vote on the matter before six o'clock.
Now, Mr. Speaker, I find that some hon. members have referred back to earlier periods such as in 1956. In considering the whole question of bilingual cheques, I should like to ask them to go over the Hansard of the time. They will find that in 1956, when the Liberal party was in office, a special committee was set up and that the names of the members of that committee are recorded in Hansard. Moreover, I think it was the hon. member for Joliette-L'Assomption-Montcalm (Mr. Breton) who was then chairman of that committee.
A vote was taken previously in this house on this matter of bilingual cheques, in January 1958, and I am pleased to remind our Conservative friends, who seem to have a weak memory in this respect, that the Liberals without exception voted in favour of bilingual cheques. On the other hand, I must say that at least nine government members voted against the scheme, when the Conservative party was in office.
Mr. Speaker, I find that the Minister of Veterans Affairs (Mr. Churchill) is at his desk. If what I am going to say about him is untrue, he may rise and I shall be glad to withdraw my statement. If I remember correctly, the minister voted at the time, namely in January 1958, against the adoption of bilingual cheques, together with nine of his colleagues, and at the time-
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Financial Administration Act
(Text):


Gordon Minto Churchill: Has the hon. member verified that statement? On a point of order, may I ask the hon. member if he will give the reference in Hansard to indicate the accuracy of his statement.


Jean-Paul Deschatelets: I am glad to put the
record straight. Before doing so, I said that if I was wrong I was ready to apologize. Here are the names of the nine Conservative members who voted against this measure concerning bilingual cheques.


Gordon Minto Churchill: What is the page?


Jean-Paul Deschatelets: The page of Hansard is 4322, for January 31, 1958, French edition. The names are Messrs. Hales, Hodgson, Kennedy, McGregor, Milligan, Noble, Small, Smith (Calgary South), Wratten.


Gordon Minto Churchill: I accept your apology now.


Jean-Paul Deschatelets: No, I agree that the name of the Minister of Veterans Affairs (Mr. Churchill) is not there. However, I am still right when I say that nine Conservatives voted against a similar measure, and no Liberals have ever voted against such a measure in the only vote that has been taken in this house on this subject so far as I can recall. I simply wish to put the position clearly.


Gordon Minto Churchill: Will the hon. member-


Jean-Paul Deschatelets: No, I have the floor, Mr. Speaker. The minister can speak afterwards.
(Translation):
Mr. Speaker, I must add that at the time I naturally voted with the Liberal party, because our party was unanimous.
A few moments ago, the hon. member for St. Hyacinthe-Bagot (Mr. Ricard) dealt with the matter of bilingual currency. May I tell him that in 1935, a Conservative government, in order, as he so well put it, to divide and rule, divided our currency. The currency printed in French was for Quebec and the currency printed in English for the nine other provinces.


J.-H.-Théogène Ricard: That is what you did with those bilingual cheques, with the family allowance cheques.


Jean-Paul Deschatelets: In a report on what happened in 1935, published by the Globe and Mail of Saturday, July 1, 1961, I find this: (Text):
Red serial numbers appear twice on the face with the prefix A on the English notes and F on the French notes.


(Translation):
On the other hand when we took over in 1936, that is 25 years ago, we established bilingual currency for the whole country, one currency for one country and-
(Text):


Hazen Robert Argue: Hear, hear.
(Translation) :


Jean-Paul Deschatelets: And here, according to Hansard of June 11, 1936, the former leader of the Conservative party, Mr. Bennett, had this to say in respect of that legislation, and I quote Le Droit of June 10 1961:
Twenty live years ago

The Conservative leader R. B. Bennett objects to bilingual currency, saying that a minority should not impose its will upon a majority. He insists that the section of the Bank of Canada bill, which contains the promise that bank-notes will from now on be bilingual, should not be left in the bill.
Now, I hope that the Conservative members who like so much to talk about their former leader, Mr. Bennett, who after his defeat, it will be recalled, standing on the gangway of a liner, turned to one of his supporters and said, with tears in his eyes: "At last, I am going back home".
Well, I suggest to my Conservative friends, when they speak about bilingual currency, to tell exactly what happened. It is the Liberal party which gave Canada bilingual currency and many more references will be found in Hansard on this subject.
These last few days, the Minister of Public Works (Mr. Walker) made much of the fact that he had bilingual signs put up in the parliament buildings. I had no intention of mentioning this, but since he raised the matter himself, may I ask him to be more practical, for the sake of bilingualism, and see that elevators are run by bilingual operators.
Now, Mr. Speaker, the opposition not only has indicated their approval of bilingual cheques this afternoon but their intention of voting in favour of the bill.
Moreover, I should like to congratulate the C.C.F. leader-


J.-H.-Théogène Ricard: On a point of order. The hon. member for Maisonneuve-Rosemont has just hinted that the parliament's elevator operators do not speak French. Some operators speak French just as there are some who speak English. I wanted that fact recorded in Hansard.


Jean-Paul Deschatelets: Mr. Speaker-


Mr. Deputy Speaker:: There is no point of order. I could add, however, that that remark was not too relevant.


Jean-Paul Deschatelets: Mr. Speaker, in reply to what has just been said, I should just like to state that if the Minister of Public Works fully wishes to respect bilingualism-it was fine of him to have bilingual signs put up- he should see to it that the parliament's elevators are operated by bilingual employees.


J.-H.-Théogène Ricard: There are bilingual operators.


Jean-Paul Deschatelets: I have nothing else to say-


J.-H.-Théogène Ricard: Some of the operators are bilingual.


Jean-Paul Deschatelets: Some of them are not.


J.-H.-Théogène Ricard: There are some, just like when your party was in power.


Jean-Paul Deschatelets: I was saying that the parties of the opposition are in favour of that bill and are quite anxious to vote on it.
I also wish to congratulate the leader of the C.C.F. party for the stand he has taken.
Those are the remarks I wanted to put on Hansard. I hope it will be possible for us to vote on the bill before six o'clock.
(Text):


Mr. W. L. M. Creaghan (Westmorland):: Mr. Speaker, in rising to take part in this debate I wish first of all to place on the record a statement to the effect that I am in favour of the principle of this bill. We have had a very short debate on the subject of bilingual cheques. However, this subject under discussion has been before parliament on numerous occasions in the past. A similar bill was introduced by the same sponsor in 1959 and was debated in this house during the month of February of that year.
Although on the face of it the bill is a very simple one, the subject matter is of great importance. At the present time government cheques are issued in the English language in some parts of the country while other government cheques are issued in the French language. The debate in 1959 disclosed that, in addition to having English and French cheques, we have some cheques printed in both official languages. I believe the hon. member for Parkdale (Mr. Maloney) mentioned the fact that cheques of the St. Lawrence seaway authority and cheques of the C.B.C. were printed in both official languages. Hon. members who have spoken today, as have others in the past, suggested that legislation may not be necessary. I am one who supports that principle. However, debate on the principle is certainly necessary.
The explanatory note has not been mentioned today but for the purpose of the record I think some reference should be made thereto. It simply states that the purpose of the bill is to provide that cheques, drafts,
Financial Administration Act et cetera, and any other similar remittance of any department as defined in the Financial Administration Act shall be printed in both the English and the French languages. All hon. members and the public at large are familiar with the fact that currency under the Bank of Canada Act is bilingual. This has worked out satisfactorily and without any hardship or inconvenience. Bringing forth bilingual or bilingually printed cheques, et cetera would also be something easy to administer.
It was amusing to hon. members to hear the house leader of the C.C.F. speak in support of this bill. I believe all hon. members are generally in support of it. However, unlike the hon. member for Assiniboia, none of us is trying at this hour to appeal to the delegates who will soon be assembling at the convention in this city. Perhaps the delegates will listen to his words today and those from Quebec will be influenced by his statement.
I think the government as such is probably in favour of the principle because it was this government during this parliament that brought forth simultaneous translation of the debates of this house. Since then the record will show that this parliament has had more debate in the French language than has any parliament in recent years. In addition, it was this government that selected and appointed an outstanding Canadian of French origin to be Canada's first French speaking, native born governor general. Not long thereafter it was this government that supplied the funds in order to permit the C.B.C. to open the first French language television station east of Quebec. That station was opened a couple of years ago in Moncton, New Brunswick, a bilingual city supporting both the English culture and the French culture. After the opening of the television station this same government permitted the Canadian National Railways at great expense to construct a second microwave set-up in order to make it possible for the people of eastern New Brunswick and satellite areas to have daily live television emanating from Montreal owing to the existence of this second microwave facility.
Consequently, it should be very easy for hon. members on all sides, and particularly supporters of the government, to use their influence in order to convince the government of the importance of taking the necessary steps to implement the demand or request introduced by this bill. It may not require legislation to do so. However, the government must have an expression of the wishes of the people. I refer not only to the expression of the feeling of members of the House of Commons but editorial comment which may possibly follow this debate.
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Financial Administration Act
The constitution of 1867 provided for a certain amount of bilingualism, including debates in both languages in this house and the printing in both languages of statutes of the legislature of Quebec and of federal statutes. In 1951 the census return showed that, apart from Quebec, there was great growth in the numbers of French speaking persons in Canada. According to the census of 10 years ago, in 1951 the province of New Brunswick was 38 per cent bilingual. I suggest that when the results of 1961 are published the growth of French speaking people in Canada-again apart from Quebec-will once again be substantially increased and this increase will occur primarily in New Brunswick, particularly the northern part of the province and the east coast.
I am not one who says that this bill must necessarily be adopted by vote today. I make that statement because I feel that is not the way a government which believes in tradition does things. It would be wrong for hon. members supporting the government to simply sit back and permit such a bill to become law. Changes of this type which are of national importance, changes that affect the feelings of many people must be fully considered and then introduced by the government by way of administrative action or by necessary legislation. It is for that reason, and for that reason alone that I would be inclined to vote against this legislation at this time.
I have in my riding not only a French T.V. station, as was mentioned a few moments ago, but also the only daily French newspaper published east of Quebec. I also have in my riding a French radio station owned by the C.B.C. These news media, radio, press and T.V. have done much in the past few years to acquaint the English speaking people with the culture of their French neighbours throughout eastern New Brunswick. I know that the situation existing in my riding also prevails in many parts of Ontario. Hon. members from Ontario have spoken in previous debates in favour of this bill. I mention particularly the hon. member for Parkdale who spoke on a similar bill in 1959.
In conclusion, Mr. Speaker, I should like to quote from the hon. member's speech as reported at page 643 of Hansard of 1959. At that time the hon. member said, quoting his words as reported at page 203 of Hansard for 1957:
I am of the belief that our nation is a greater nation because of the historical association of two great races of people, the English and the French. They have lived side by side, more often than not, in harmony and good will. Out of this association has developed a nationality which makes us, not only a more interesting country in the eyes of the world but an example in tolerance and understanding.


Samuel Boulanger: Question.


Mr. Speaker:: The hon. member for York-Scarborough.


Mr. McFarlane:: Mr. Speaker, I just wish to take up a few moments of the time of the house on this matter-


Mr. McGee:: I understood you to have
recognized me, Mr. Speaker.


Mr. Speaker:: Yes. The hon. member for Y ork-Scarborough.


Frank Charles McGee: Mr. Speaker, before coming to the principle of the bill I should like to comment briefly on the contribution made by the hon. member for Assiniboia. I regret very much that he is not in the house at this moment. I know it is quite improper to impute motives to any hon. member in debate, so perhaps I can suggest what I have in mind this way, that one might be forgiven for coming to the conclusion that an event in the not too distant future has prompted a sudden interest on the part of the hon. member for Assiniboia in certain French Canadian delegates who might be at that convention. I might say we all wish him well in his endeavours at that convention, recognizing that the fact he is here in the House of Commons places serious limitations on his activities in that connection.
The contribution of the hon. member for Assiniboia was typical in many other respects. He rose; he stated his point of view and then asserted in a vigorous manner that, having heard from the hon. member for Assiniboia, we should all sit down, be quiet and vote. This is a pretty typical attitude of that group except when they happen to be discussing something that serves their purposes in another way.
I would remind the hon. member for Assiniboia of the statement made by the respected hon. member for Kootenay West when speaking on another matter not dissimilar to the proposition suggested in this bill. As reported at page 1326 of Hansard, the hon. member for Kootenay West had this to say, and I commend these words to the hon. member for Assiniboia:
Mr. Speaker, I rise because I have a few words to say on this resolution. Let me say first I think it is a good thing, whether or not we come to a conclusion tonight, that we discuss this question.
The question at issue at that time, of course, was a national flag. I submit, with deference to the hon. member for Kootenay West who is in the house and listening most attentively-that this subject is in the same category as the one being discussed at that time. But the most typical thing about the remarks of the hon. member for Assiniboia was his

trigger-like action. First he demanded that we have teachers summoned from all points of Canada to train our civil servants to speak both languages, and he was off and flying on this demand. He was perhaps overlooking several constitutional impediments, but let that matter stand aside for the moment. Then upon being interrupted by the hon. member from Oxford and being advised that in the department of which the hon. member has such distinguished knowledge this practice is in effect, that allowances for this purpose are given, without halting, breathing or interrupting himself the hon. member for As-siniboia said the allowances must be raised immediately; something is wrong; those are inadequate allowances, and must be raised. That somehow seems to sum up the New Party, C.C.F.-call them what you will- attitude on things generally: whatever it is, we do not know what it is, but it is not enough.


William Arnold Peters: Mr. Speaker, I wonder why it is the hon. member was not educated himself in this way in that department?


Frank Charles McGee: Mr. Speaker, to come back to the principle of this bill, it has been my privilege on a number of previous occasions to speak in support of this proposition. As I see my time is coming quickly to a close I should like to place on record and bring to the attention of the house the attendance in the gallery of Mr. Joe McCulley, the very well known warden of Hart House, who in his own way has had a great deal to do with one aspect of bilingualism. I refer to the University of Montreal and the University of Toronto week-end exchanges of young English speaking people from the province of Ontario and young French speaking people from Montreal. These young people have exchanged visits through the winter. On one occasion I had the privilege of attending one part of that program, albeit a social part, and I can commend it highly. I should like to commend Mr. McCulley for his part in that program.
At six o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at 7.30 p.m.


[Stage Direction]
The house resumed consideration of the motion of Mr. Fleming (Eglinton) for the second reading of Bill No. C-121, to authorize
Canadian National Railways the provision of moneys to meet certain capital expenditures of the Canadian National Railways system for the period from the 1st day of January, 1961, to the 30th day of June, 1962, and to authorize the guarantee by Her Majesty of certain securities to be issued by the Canadian National Railway Company, and the amendment thereto of Mr. Pickers-gill.
(Translation):
Joseph-Alphonse-Anaclet Habel: When the house adjourned at five o'clock for the hour devoted to private and public bills, I was just saying that we were quite justified in asking the minister to provide more information to the house. I think the hon. members opposite, at least those who have sat in the opposition, will agree that it is the duty of the opposition to give close scrutiny to the legislation placed before parliament, and that the essential duty of the opposition is to seek all the necessary information, particularly when it comes to a substantial amount such as we are asked to vote in Bill C-121, involving as it does an expenditure of $178 million.
The Minister of Transport (Mr. Balcer) stated this afternoon that it was impossible to appoint the five new directors before the proclamation of the relevant legislation. It is therefore the responsibility of the opposition to ask the government, in the hope that the Minister of Finance (Mr. Fleming) will reply, what is holding up the government in proclaiming this act which was passed weeks ago in the house.
Furthermore, what is the government doing with regard to the four present directors and the president of the C.N.R., whose terms of office expired last September. The opposition surely is entitled to ask these questions, and it is also entitled to a reply. This afternoon, reference was made in the house to the fact that a few days ago, the Minister of Transport was finally forced, I would say, to admit before the house that he personally got along fine with the president of the C.N.R. The fact remains, however, that parliament is entitled to know, as the hon. member for Burnaby-Richmond mentioned this afternoon when he ventured out on rather dangerous ground, that the committee report clearly indicated who would be the next president of the C.N.R. As I say, parliament has a right to insist on being told the name of the president who will have to see that the $178 million dollars we are being asked to vote are properly spent. Parliament is also entitled to
7896	HOUSE OF
Canadian National Railways know whether this time, as it happened before, the Prime Minister will not interfere and prevent in some way or other, according to what the hon. member for Burnaby-Richmond said this afternoon, the appointment of the person recommended by the railway committee.
It seems to me that we are entitled to expect answers to those questions.
Is the government waiting so as to appoint puppets that the Prime Minister will be able to handle as he pleases?
The Canadian people must depend on the opposition to know what goes on behind those underhand practices. Deceived in the last four years by visions that are turning to be disillusions, it is time that parliament knew whether the country is run by one man or by a government made up of a responsible cabinet. It seems to me that the time is past when a one-man government could prevail over an informed parliament knowing where a one-man government might lead a country.
It is time, Mr. Speaker, to have those questions answered and cabinet members should give us the answers instead of beating around the bush for fear of giving away a great secret-the secret of government by one man, who calls all the tunes for the ministers to dance to.
The amendment now before us, Mr. Speaker, is a very responsible one which, on behalf of the Canadian people, asks for an announcement concerning the board of directors which will be called upon to spend the not inconsiderable amount of $178 million.
(Text):


Douglas Mason Fisher: Mr. Speaker, we do not agree with the amendment and will, of course, vote against it. We have already indicated that we support the measure and look upon it as being largely routine.
In regard to what appears to be the desire of the official opposition to debate this measure more thoroughly, I think they should have a certain amount of compassion for the Minister of Finance, as I am sure he is busy and has many things on his mind. I know there is another place where he would probably like to be and no doubt he hopes to get there very soon. I am sure the sooner he is given that opportunity the sooner there will be a rising barometer in respect to his mood and general attitude toward life.
It seems to me that in their remarks hon. members of the official opposition are overbuilding the issue with regard to who the directors are going to be and whether the appointment of Mr. Gordon as both chairman of the board and president is going to be renewed. We have a certain number of directors 

at the present time, although there is a shortage of one as a result of the unfortunate death of Mr. Bickle. But judging from the information we have had before our parliamentary committee, I do not feel that there is any indication that the board of directors is that important or that vital in so far as the day to day operations of the railway are concerned. While we are very much in sympathy with the bill that increases the number of directors, we do not feel that the fact there has been a delay in appointing them is a vital issue in any way. It may reflect what is a characteristic of the government, namely procrastination, but in this particular instance it does not seem to me that it is fundamental.
I indicated on second reading, Mr. Speaker, we do not think Mr. Gordon can continue in an indefinite position, but again in the short run we do not think it is working any hardship on the railway. In fact, it may be helping to keep him on the move in meeting the problems that the railway has at the present time, particularly with regard to this most grievous problem of morale. Therefore the bill comes down to being not an issue of the directors or of Mr. Gordon's position, whether definite or not, but whether the C.N.R. is going to be provided with money. I think a much better argument could be made against-


James MacKerras Macdonnell: Does the hon. member advocate that as a general policy, that is, the state of uncertainty, to promote efficiency of officials?


Douglas Mason Fisher: No, I do not think so, but I do not know of any group that is more in a state of uncertainty than members of parliament and I have never thought that this particular uncertainty did any harm. As a matter of fact many people would say this is one of the great merits of elections and their prospects; it keeps us all in jeopardy.


John Whitney Pickersgill: Would the hon. member permit me to ask him a question at this point. The hon. gentleman said he does not think that the uncertainty of being a member of parliament has any effect on our efficiency.
I would ask the hon. gentleman whether he thinks that applies equally to people who have administrative responsibilities, instead of loquacious responsibilities, as we have?


An hon. Member:: As you have.


John Ferguson Browne: Speak for yourself.


John Whitney Pickersgill: I speak for the hon. member.


Douglas Mason Fisher: As far as loquacity is concerned, it seems to me, as I have sat here

listening to the Liberals, that one could become tremendously irreverent and begin to sing "Show me the way to go home". But I suppose the house is something like an Ontario beer parlour and singing is not allowed.
I was almost tempted this afternoon, as the debate dragged on, to launch into that.


Leon David Crestohl: Will the hon. member permit one more question? Would the hon. member favour the philosophy for employees?


Douglas Mason Fisher: In so far as employees are concerned, no. I think employees should know where they stand. But in this particular case Mr. Gordon has been left in charge. I should like to see him go, but it is quite apparent to me that he is not going to go.


An hon. Member:: Despite all those Tory
wolves.


Douglas Mason Fisher: If the official opposition want an issue relating to the spending of money, why do they not get involved in a discussion of the money that is probably coming from this bill that is going into the expansion of the Canadian National trucking operations? It seems to me they would have a real issue there. I know the Liberal opposition is a free enterprise party. They believe in the extension of private competition wherever possible.


An hon. Member:: In theory.


Douglas Mason Fisher: I saw a report in the Montreal Gazette this morning that the trucking association of Quebec is appealing to the government to disallow the licence of Midland Superior, one of the large trucking companies bought, we understand, for approximately $2 million by the Canadian National Railways. We discovered in the committee meetings that the C.N.R. has put the money to one side and has not even paid it yet. The deal is hanging fire. Apparently they do not want to go through with the deal because they are afraid Quebec will cancel this trucker's licence. Truckers in Quebec are protesting that Midland Superior, because it is running apparently under a kind of phony ownership at this time, should not be allowed to carry on. This, it seems to me, would be a real issue to offer the opposition in terms of the debate of this bill as being a reason why they should block the bill, rather than the lesser issue of the uncertainty under which civil servants are operating.
It seems to me, Mr. Speaker, I was one of the first advocates in this parliament of, not so much uncertainty for civil servants, but of a bit more dash and drive on the part of this government to get away from the big excuse that one encounters all the time from government members. That excuse seems
Canadian National Railways to be that "many leading civil servants are not really pulling with us." There is a kind of grudge; a chip on the shoulder attitude. Many members of the government somehow feel they have not had the co-operation, the liaison, the confidence and support of so many people at the head of the public service. It is difficult for an outsider, such as an opposition member in a case like this, to judge.
I do not know really whether it is the case. The point is that if the government members feel this way they should move and they should have moved long ago. This is the point that I would bring up in so far as the president of the C.N.R. is concerned, or even with regard to the governor of the Bank of Canada. But, as I say, I think we should expedite this bill and allow the Minister of Finance to get off and prepare for what I would expect to be sure to follow, namely his visit to the other place.


John Whitney Pickersgill: Before the hon. gentleman takes his seat may I ask another question? Do I understand the hon. member to agree with the hon. member for Restigouche-Madawaska who entertained us rather irrelevantly this afternoon in his-


Some hon. Members:: Oh, oh.


John Whitney Pickersgill: -assertion that the C.N.R. should be run as the Intercolonial was run; in other words, there should be no independence of management and no merit system and the government should appoint all the employees?


Douglas Mason Fisher: I just finished going through certain parts of Colonel Stevens', his first volume on the history of the C.N.R. I recall a story drawn from New Brunswick to the effect that with respect to the Intercolonial, a gravel pit that should have cost $5,000 wound up costing the Intercolonial $500,000. This was many years ago. I must admit I believe it was under a Liberal administration. Certainly we should not go back to that state of affairs.


John Whitney Pickersgill: Surely that is what the hon. member wanted. May I be permitted to ask the hon. gentleman one more question. Is the hon. gentleman suggesting, as he seems to be, that the government backbenchers were quite right in suggesting the government should fire all the senior civil servants and put in a lot of Tories? Is the hon. gentleman not really suggesting that that would be the end result?


Douglas Mason Fisher: No. My point is that a government should have complete confidence in its senior public servants.


John Whitney Pickersgill: Hear, hear.
7898	HOUSE OF
Canadian National Railways Mr. Fisher: Where it has not got complete confidence it should not have the excuse referred to, even in its own mind. It should do something about it. The point I was trying to make was that this government in this kind of situation has not indicated its intention. After all, I have been fired off jobs. I do not see why any civil servant should necessarily complain if he is fired for the reason that the government does not think he is doing an efficient job. My point is that the government did not move and has not moved in many cases-


John Whitney Pickersgill: That is my point too.


Douglas Mason Fisher: -and yet it is trying to use that excuse.


John Whitney Pickersgill: Perhaps I might be permitted one more question if the hon. member is agreeable. Does my amendment not say that the government should either put up or shut up, and should the hon. member not vote for it?
(Translation):


Mr. Gabriel Roberge (Meganiic):: Mr. Speaker, we now have before us Bill C-121, the title of which reads as follows:
An act to authorize the provision of moneys to meet certain capital expenditures of the Canadian National Railways system for the period from the 1st day of July, 1961 to the 30th day of June, 1962 and to authorize the guarantee by Her Majesty of certain securities to be issued by the Canadian National Railway Company.
What is the government asking of us by this bill? It is asking us to vote, for the benefit of the Canadian National Railways, a sum of $178,900,000. The hon. member for Bonavista-Twillingate (Mr. Pickersgill), during the debate on second reading, moved the following amendment:
(Text):
That all the words after "that" be deleted and the following substituted therefor:
"this house declines to give second reading to a bill providing large sums for capital expenditures on the railway system while the house is not possessed of the identity of those, namely, the chairman and members of the board of directors, who will be responsible for the making of such expenditures."
(Translation):
The government is asking us to vote the sum of $178,900,000 for the Canadian National Railway Company; a crown corporation. Why? To refinance that crown corporation.
It seems to me that we have a right to know before agreeing to vote such an imposing amount, who are the people who will be appointed to administer the C.N.R. in the coming year. At this point, we are still in the dark. Perhaps the ministers do know. 

Perhaps the Minister of Transport (Mr. Balcer) does know. But certainly parliament does not know.
Mr. Speaker, the comments made by the hon. member for Restigouche-Madawaska (Mr. Fournier) somehow surprised me. Incidentally, may I commend him for rising this afternoon to give his maiden speech in this house.
I am most surprised that a former minister of the crown from one of Canada's provinces should make the statement on constitutional theory he did this afternoon. He said, in fact, that it was up to the government to vote the necessary sums of money. I always thought that the members for the house were responsible for such control.
We are not only asked to give a cheque of considerable value to the C.N.R., but we are not even to be told in whose name that cheque will be made out. The company is, at present, administered by a president appointed from day to day whose term of office may expire overnight.
A bill was adopted on May 22 last, authorizing the government to increase the number of directors of the C.N.R. from seven to 12. There are, consequently, five directors to be appointed.
The minister told us then that he had in mind to appoint some fine Canadians. The Minister of Transport would surely not appoint a bad Canadian as director of the C.N.R. But one thing remains: these appointments are the responsibility of the government. Almost seven weeks have passed since that bill was carried. And it was said at that time that the bill would be put into effect as soon as proclamation would be given. What keeps the minister from going to his colleagues from the cabinet and telling them: "Now is the time to act; now is the time to proclaim this legislation". What keeps him from making his colleagues see reason? Would he, by chance, not have his word to say in the cabinet? Is this a one man government, who would appoint his own creatures to the board of directors of the C.N.R.?
We have been accused of repeating ourselves in this debate as well as in many others. But we are compelled to repeat ourselves because here is a government which refuses to take action when the time has come to act. Here is a government which refuses to take its responsibilities. The present government beats about the bush and waits until things have come to a crisis before settling problems. It is notorious for its confusion, irresponsibility and irresolution.

Mr. Speaker, the hon. member for Port Arthur (Mr. Fisher) has stated that we should look into other questions, for instance the trucking industry. I would like to point out that we will have an opportunity of discussing that point when the bill is before the committee. Right now, we are debating the amendment which has been moved. That point was raised by the hon. member for Maisonneuve-Rosemont (Mr. Deschatelets), amongst others. We will consider it when the bill is examined in committee and we will take that opportunity to ask the minister to what precise use those $178.9 million will be put.
Mr. Speaker, I should like to urge the minister once more to take his responsibilities and to see that Bill C-94 is proclaimed, so that the new C.N.R. directors may be appointed.
(Text):


William Arnold Peters: Mr. Speaker, I wish to say a word or two on this matter. I am not of the opinion that we should refuse to make this money available to the C.N.R. because it is a maintenance grant in lieu of revenue and really is in the form of a loan to maintain the operations of the railway; yet I am in agreement with the fact that the government is not to be trusted in the making of appointments when it gets around to doing so. In parliament we have only certain methods of enabling the government to do what we wish it to do and one of them is by the voting of money to make these things possible.
We have seen what has happened in the case of some of the appointments made by the government. When these people were under pressure from the government they did things that they were not willing to do of their own free will. Not because the government has the responsibility for appointing these people and probably not because of the responsibility we expect them to have to parliament but because of the responsibility that we have to parliament itself, I believe it is exceedingly important that we must examine and on the basis of our knowledge be very cautious about appointments the government makes.
It is quite possible that Canadian National Railways is not being operated properly and will not be operated properly unless the right people are appointed to the board. On many occasions my colleague, the hon. member for Port Arthur, has shown his reluctance to support the chairman of the board. I was not a member of the railway committee this year but I am told that when he appeared before it his attitude had changed. He did make some suggestions. He did, so to speak, turn over a new leaf. I believe that
Canadian National Railways now it is the responsibility of the government to tell us, during the discussion of this bill, what their intention is in relation to his reappointment. The government should tell us whether they are going to appoint to the board people who are capable and qualified and who have the interests of the trucking industry at heart. It seems to me that trucking is becoming a greater and greater part of the transportation system known as Canadian National Railways, and it seems to me that the easiest way to make it impossible for us Canadians to afford a national railway system is to appoint people who are not qualified to speak for the trucking industry.
I believe, therefore, that we as members of parliament have a right to know who the directors are going to be. I believe we have the right to know whether they are being appointed for political reasons or whether they are being appointed because of a certain aptitude for the job they will be asked to do. Having in mind the remarks that have been made in the newspapers during the last two or three days about a board of directors, most of whom were appointed by this government in recent years, which made a decision and then for political reasons or under political direction made a complete about-face, I do not believe it is unfair for us to request this information. While it is not my intention to hinge our support of this measure on this request, I think it is important that, as members of parliament, we should give much closer attention to appointments to boards of directors of crown corporations. It seems to me there is a lack of good sense or good business judgment exhibited in the picking of directors for these companies. It would appear that in the case of one member of a board, to whom reference has been made in this house, the appointment depended entirely on the size of the contribution made to a candidate during the last election campaign.
I can see no reason why the minister cannot give us some indication of when these positions will be filled and who will fill them before we are called upon to pass this measure. This money will be used for the maintenance of the railway and it is necessary, therefore, to vote against the amendment which, in effect, would kill the loan that is to be made to Canadian National Railways. I do not believe our good judgment will permit us to pass on matters of this nature for much longer without being better informed than we are at the present time.


William Moore Benidickson: Mr. Chairman, the minister is of course introducing an annual bill; it is required every year. This year I think the annual expenditures are perhaps lower than we have experienced for some years. On the other hand we know that the committee on railways, air lines and shipping owned and controlled by the government was confronted not only with a capital budget that may be reduced but also with operating reports which indicate that last year the railway had an unprecedented deficit notwithstanding capital revision. The situation that concerns many of us is the fact that for 1961, despite the forecast of the Minister of Finance that we might have an increase in gross national product, we will still have a deficit of $64 million in this most important crown company.
In addition to that, only in the last portion of Bill No. C-121 do I find clauses in language unsimilar to that of those which we have met every year heretofore. There we have a very interesting and significant matter. I think this committee should concern itself with this matter because we have a proposal from the government to defer responsibility in two or three items upon which this house reached a decision ten years ago when there was another revision of the capital structure of the Canadian National Railways.
I think three clauses of this amending bill for 1691 are simply items of procrastination, and they are important items of procrastination. They refer to deferment of interest that might otherwise have been paid to the crown by this crown corporation on two or three items of concession given to the Candian National Railways ten years ago in 1951 in the revision of its capital structure. I hope the Minister of Finance will not be offended when I say this is rather typical of the procrastination in respect to decisions for which this government has been noted in recent times.
I indicated at the resolution stage that these capital revisions are of great consequence and I am not going to repeat myself in respect to that tonight. However, I indicated at that time that there had been write-offs to the extent of $700 million in 1951 and now a prospective write-off of an equivalent amount is to be postponed for one year. I think the minister should give us some indication when we are considering matters of this importance as to the direction in which the government might be leaning.
This government is now familiar with the testimony the chairman of the board of directors has given to the committee of this

house during its sittings this year. In view of the write-offs in 1937 and in 1951 of these gigantic amounts, in each case almost $700 million, I think the minister should explain why this government is not willing to face up this year to those obligations which were made evident by the statute some ten years ago at which time there was a revision following the royal commission. What is the reason behind the failure of this government to face up to its obligations rather than asking us by means of three new clauses in this annual bill to defer this obligation? What is the reason for the procrastination and indecision on the part of this government in carrying out its obligations made evident in at least two statutes? I refer, of course, to the Canadian National Railways Refunding Act revision of 1955, and of course the basic Canadian National Railways Refunding Act of 1951. The debts incurred as a result of those two revisions normally would require interest payments.
The main difficulty as I see it is that this government is nonchalantly evading its obligation to make a decision in respect to the management of the Canadian National Railways and is again asking for a deferment. This measure indicates procrastination and indecision on the part of the government in respect to this important matter of which it should obviously have been aware because of the statutes of some ten years ago to which I have referred. At that time it was known that the expiry date would be 1960 or 1961. Yet by these three clauses in this bill we are now being asked to give the government a blank cheque, further time and condonation in respect to its indecision and procrastination. I think the minister should indicate the reason for this inasmuch as it was known some ten years ago that this would be required either this year or last. It was known ten years ago that the chickens would come home to roost this year. I ask the minister to explain to this committee why he is now asking us to condone this indecision, because obviously there is to be no decision in this regard this year, despite the fact that he promised last year that there would be. I ask the minister why this committee should now give this government a postponement by adopting the subclauses of this bill, the effect of which will simply give the government another year to make up its mind.


Donald Methuen Fleming: Mr. Chairman, the hon. member is discussing matters pertinent to three specific clauses in the bill. I will be glad to discuss those matters when we reach consideration of those clauses, being No. 11, No. 12 and No. 13.
Canadian National Railways


Robert Jardine McCleave: Shall clause 1 carry?
(Translation):


Gabriel Roberge: I should like to deal with the matter of the trucking industry in Canada as related in particular to the C.N.R.
I think that, when we come to clause 3, I shall also take the opportunity to put questions about that matter to the Minister of Finance (Mr. Fleming).
We have learned on June 29 last, in a letter from Reimer Express Lines Limited addressed, I think, to all members, that the East-West Transport Limited, a crown corporation financed by the crown, was one of those who were cutting rates in the trucking industry. We were also informed in a telegram sent to all members that the C.N.R. proposes to ask the Quebec provincial transport board permission to buy certain trucking companies. Needless to say the telegram was a protest against such a request.
We were given the opportunity to see the brief submitted in November 1960 to the Minister of Transport (Mr. Balcer) by the Quebec trucking association, a brief prepared by Mr. Camille Archambault, assistant to the chairman of public relations of the association. The brief shows on page 4 that the association includes:
-1,046 members, owners of motor transports with more than 15,000 commercial vehicles for public transportation.
If the Canadian National Railways start buying out private trucking companies, they certainly are going to offer disastrous competition-to say the least-to small businesses with considerable transportation as well as handling personnel.
I quote Mr. Archambault's remarks, on page 4:
The intrusion of railways into highway operations would certainly have serious consequences for the users and professionals in that field, as well as for our economy as a whole.
In my opinion, Mr. Chairman, the proposed C.N.R. request-it may be pending before the provincial authority at present-should not be made or should not have been made. I know that some will object that the federal government has no business interfering with the administration of the provincial board of transport and I agree. But obviously the Canadian National Railways

Canadian National Railways may or may not apply for such authority to purchase trucking companies to operate a highway transportation system in the province of Quebec or anywhere in Canada for that matter.
When we come to clause 3, I will ask the minister if in the amount mentioned there is something toward the purchase of such a system of road transportation.
(Text) :


Robert Jardine McCleave: Shall clause 1 carry?


John Whitney Pickersgill: Before clause 1 carries, sir, in a rather menacing tone on my amendment on second reading the minister said that if this bill was not passed very promptly great harm would be done to the Canadian National. Would he specify what harm that would be?


Donald Methuen Fleming: Mr. Chairman, those who are familiar with the purposes of the bill and with the resolution that preceded it will be aware that the bill authorizes the provision of money to meet certain capital expenditures of the C.N.R. for the period from January 1, 1961 to June 30, 1962. This bill provides authority for certain capital expenditures which, unless the bill is passed very quickly, will be impeded.


John Whitney Pickersgill: Can the minister cite one single expenditure that has so far been delayed because of any delay in the passage of this bill?


Donald Methuen Fleming: I am informed that funds pursuant to the provisions of this bill will be required by July 15.


John Whitney Pickersgill: The minister cannot assure us that there has been anything delayed because the bill has not passed.


Donald Methuen Fleming: I was informed, Mr. Chairman, that if the bill was not passed through all its stages by the 15th, which means this week, so that money will be released under its terms, then those programs would suffer.


John Whitney Pickersgill: Can the minister say which programs?


Donald Methuen Fleming: The whole program which depends upon the release of funds by July 15. They require funds by July 15.


[Stage Direction]
Clause agreed to.
Clause 2 agreed to.
On clause 3-Capital expenditures authorized.
William Moore Benidickson: In this clause, Mr. Chairman, we have perhaps the central concern of


all of us in passing this legislation, because it refers to capital expenditures which make this annual bill necessary. In his capacity as Minister of Finance, can the minister indicate to us when we might reach the stage where depreciation might approximate the capital requirements of the Canadian National Railways? We now have to provide loans for capital investment in this crown company as a result of which depreciation amounts to $120 million a year, I think. I see the Minister of Transport in his seat. Perhaps he might have some views on this subject to assist the Minister of Finance. When we get into the position where depreciation alone on capital assets that have resulted from appropriations by parliament is about $120 million, are we going to be asked in future years for capital advances that actually increase the over-all debt, and capital requirements that exceed the equivalent of normal depreciation rates on this vast asset in the Canadian National Railways?


Donald Methuen Fleming: I would not wish to hazard an answer to that question. The depreciation accruals for 1961 are estimated at $108.1 million.


William Moore Benidickson: I said about $120 million.


Donald Methuen Fleming: The figure I have is $108.1 million.


William Moore Benidickson: It is $118 million, is it not?


Donald Methuen Fleming: No, $108.1 million.


Gabriel Roberge: Will the Minister of Finance now tell us whether the Canadian National Railway has made a request to the provincial transport board of Quebec for permission to acquire certain trucking companies?


Donald Methuen Fleming: That I do not know, Mr. Chairman.


Gabriel Roberge: Does the Minister of Transport know the answer to that question?


Léon Balcer: Repeat your question. (Translation):


Gabriel Roberge: Could the Minister of Transport say whether it is true or false that the C.N.R. has filed an application with the Quebec transport board with a view to acquiring certain trucking companies?


Léon Balcer: Yes, that is the information I have received.


Jean-Paul Deschatelets: I should like to know from the Minister of Transport whether he has received a telegram from various trucking associations in Quebec, protesting this attempt by the C.N.R. to get into the Quebec trucking business?

(Text):


Léon Balcer: The answer is yes, Mr. Chairman.


Gabriel Roberge: Would the minister indicate to us whether in the amount that we are being asked to vote, especially in the material item, of approximately $14 million, any money is provided for the purchase of trucking equipment?


Donald Methuen Fleming: I am told that there is $6 million in round figures in this capital budget for highway equipment of all kinds. This includes some owned by the railway.


Gabriel Roberge: If the minister has the information can he tell us what are the transport trucking companies that the C.N.R. is thinking of buying at the present time?


Donald Methuen Fleming: Mr. Chairman, I have not that information but I do not know that it is ever given in advance of acquisition. It would be an extraordinary thing if before acquisition or during negotiations the Canadian National Railways were asked to make public its intention of making approaches to some companies with a view to arriving at a bargain with them. That would not be a conceivable way of carrying on business.


Gabriel Roberge: Surely, Mr. Chairman, if the Canadian National Railways has made application to the provincial board to acquire some transport companies the approach has already been made. I am told that the minister does not have the information. I am not satisfied with the minister's answer, but I have to accept it.


Mr. Tucker:: I should be grateful if the minister would advise whether any consideration is being given to enlarging the Newfoundland hotel in St. John's in view of the increased population of the city. St. John's now has a population of approximately 80,000. In view of the fact that in 1958 the Newfoundland hotel had a profit after allowance for interest and depreciation of approximately $153,000, $152,000 in 1959 and $152,000 in 1960 or more than $450,000 in three years, and in view of the existing conditions and the hardship on the travelling public in trying to secure hotel accommodation, would the minister advise whether any consideration is being given to the enlarging of the Newfoundland hotel in St. John's?


Donald Methuen Fleming: There is no provision in this capital budget for the enlargement of that hotel.


Jean-Paul Deschatelets: I should like to know whether Mr. Gordon, before making applica-
Canadian National Railways tion to the provincial transport board, discussed the matter with the Minister of Transport.


Donald Methuen Fleming: The hon. member heard the answer of the Minister of Transport on the subject.


William Moore Benidickson: Mr. Chairman, in clause 3 dealing with capital expenditures we have a very substantial item involving branch line construction. This usually involves ancillary legislation related to particular new lines for which parliament takes responsibility and not the C.N.R., and included in the bills would be an authorized expenditure. We merely give to Canadian National Railways the administration of these roads. So many things are so long delayed this session, and although there was a reference in the speech from the throne to the desirability of proceeding with the Pine Point railway from the point of view of assisting in an upturn in the economy, we know that about six months have elapsed and nothing has been done.
I believe that under branch line construction on page 2 of the bill there is some provision for the Pine Point railway. We are now over half-way through the calendar year 1961. How much is likely to be expended in the calendar year 1961 on construction of the Pine Point railway?


Donald Methuen Fleming: That will depend, of course, on action by parliament. It will not be possible to undertake construction until parliament has passed the necessary enabling legislation.


William Moore Benidickson: The minister wants to be fair and he knows that this bill includes not only authorization to the C.N.R. We do not hold up the C.N.R. This is a massive bill in so far as the authorization of capital expenditures is concerned. We are authorizing this capital budget of Canadian National Railways for the calendar year and, in fact, we go beyond that. In another clause of the bill we assure that the railway is not going to be held up and that in the first six months of the subsequent year it is going to have funds so that it can go ahead with a project such as I have described. What we are doing tonight in looking at this legislation has nothing at all to do with the programming of the Pine Point railway. There is a reference to $10 million in the contingency fund of Canadian National Railways for the Pine Point railway. I am simply asking the minister how rapidly is that money going to be spent? How rapidly is construction of the road likely to progress? To what extent will there be expenditures in the calendar year 1961?
7904	HOUSE OF
Canadian National Railways Mr. Fleming (Eglinion): I do not think anyone can answer that at the moment. One would have to know when parliament is going to take action on the measure on the order paper. There is provision, as the hon. member has indicated, by way of contingency to meet this or any other opportunities that arise for the construction of branch lines, but I cannot indicate to the hon. member what amount is likely to be expended during the present calendar year because I do not know when parliament is going to authorize construction of the Pine Point railway.


Gabriel Roberge: Mr. Chairman, I suppose the minister is aware that in lower town in Quebec city there is a building belonging to the C.N.R. I was told that it was the intention of the C.N.R. to expand or make alterations or improvements to the building or possibly even to construct a new building there. In the $14 million is there any amount provided for that purpose?


Donald Methuen Fleming: I understand not.


William Moore Benidickson: Mr. Chairman, admittedly in clause 3 of the bill there is a substantial amount of capital requirement that involves a completely owned subsidiary of Canadian National Railways, Trans-Canada Air Lines. The amount is almost $20 million. Does this involve capital commitments made irrespective of the policy of the government with respect to a possible enlargement of the activities of the chief competitor of Trans-Canada Air Lines? I refer to Canadian Pacific Air Lines which now has a limited franchise. As far as I am aware, Trans-Canada Air Lines executives say that the air line can go forward successfully only if it is not faced with undue competition in the domestic sphere. Are these expenditures of almost $20 million to be made by Trans-Canada Air Lines irrespective of any decision that might be made by the air transport board which might increase domestic competition on the part of Canadian Pacific Air Lines?


Donald Methuen Fleming: Yes.


William Moore Benidickson: The commitments have already been made for these capital expenditures. I assume that they involve up to date jet planes, that the orders have perhaps been placed and that irrespective of any decision that is made by the air transport board Trans-Canada Air Lines is committed to these financial expenditures. Is that right?


Donald Methuen Fleming: Mr. Chairman, major expenditures were necessary in 1960 on account of ground facilities and maintenance facilities for the DC-8 and Vanguard aircraft. Of the $39 million for property and equipment in the 1961 T.C.A. budget, $29.5 

million relates to programs approved in previous years' budgets. The major new commitments for 1961 are initial payments on the delivery in 1963 of five additional DC-8's-


William Moore Benidickson: 1963?


Donald Methuen Fleming: Yes, delivery in 1963 of five additional DC-8's and the delivery in 1965 of 14 medium range jet aircraft.


Jean-Paul Deschatelets: On page 2 under the heading "Investments in affiliated companies", there is an item amounting to $5,922,000. Has this item anything to do with investment of any sum in the trucking industry?


Donald Methuen Fleming: There is an item of $5 million here for Canadian National Transportation Limited.


[Stage Direction]
Clause agreed to.
On clause 4-Issue of securities.
Herbert Wilfred Herridge: Mr. Chairman, subclause 1 of clause 4 reads:
Subject to the provisions of this act and with the approval of the governor in council, the national company may issue notes, equipment trust certificates, bonds, debentures or other securities, bearing such rates of interest and subject to such other terms and conditions as the governor in council may approve, to provide amounts required for the purposes of section 3.
My question is this. Would the minister explain to the committee under what circumstances they issue notes, equipment trust certificates, bonds, debentures or other securities, and what the other securities would be? I was interested in the terms of this clause because of the different types of securities given. In what proportion of the total are they usually issued?


Donald Methuen Fleming: This is a standard clause, Mr. Chairman, that has appeared in this bill for some years. As to the practice, I may say that in the case of advances made by the Minister of Finance to Canadian National Railways, these are on an interim basis and are secured by demand notes. So far as equipment trust certificates are concerned, I believe there has not been a case of the issuance of equipment trust certificates in recent years. So far as bonds are concerned, the company has been offering a bond issue on an average of about once a year, sometimes less often and sometimes a little more often. As to debentures and other securities, I do not believe there have been any debentures issued in recent years, as distinguished from bonds.


Herbert Wilfred Herridge: What would the other securities be? I would be interested in that.


Donald Methuen Fleming: I am not aware of any other form of securities that the company

has issued in the last tour years. This is an enabling provision which has been well established. Of course, in the case of privately owned companies these various forms of security would no doubt be used, depending on the circumstances. The circumstances would dictate the particular form that the security would take. These are all well recognized forms of security in the case of privately owned companies.


Herbert Wilfred Herridge: Does the company ever give mortgages on its property as security?


Donald Methuen Fleming: No, it has not in
my time, Mr. Chairman.


[Stage Direction]
Clause agreed to.
Clauses 5 to 8 inclusive agreed to.
On clause 9-Minister may place amounts at disposal of company.
(Translation):
Jean-Paul Deschatelets: I have a question to ask, Mr. Chairman, with regard to clause 9. This clause deals with the amounts paid by the C.N.R. to the trucking service.
If the income proved inadequate, could the C.N.R. under clause 9 apply to the Minister of Transport (Mr Balcer) for more funds, and could the minister, with the approval of the governor in council, make the additional money available?
Is my interpretation correct?
Let me put it more clearly. Could the C.N.R., assuming that receipts from the trucking service proved inadequate, come back for additional funds, and get the requested funds subject to the approval of the governor in council? Is my interpretation correct?
(Text):


Donald Methuen Fleming: The deficits on any particular line, Mr. Chairman, or a particular operation of the total system are lumped, in the end, in the total financial report and figures of the entire system.


Jean-Paul Deschatelets: If I am right in my assumption, Mr. Chairman, that means that the $6 million that is going to be used by the Canadian National and given to the trucking business is only a minimum.


Donald Methuen Fleming: If the hon. member will permit me to say so, I think he is confusing the current and capital budgets. The figure that was mentioned a little while ago of $6 million related to the capital budget. The hon. member then proceeded to ask me a question about deficits incurred on current operations. What I am saying is that in a huge system like Canadian National Railways system, where there are numerous railway
Canadian National Railways lines some of which are still operated as separate railway lines, as well as other forms of transportation carried on by subsidiary corporations, the total operating statement of the system includes all of those whether the operation of a particular line has resulted in a deficit or a surplus.


Leon David Crestohl: I wonder whether the minister could explain what to me appears to be a contradiction between clause 3 and clause 9. Under clause 3 we are asked that a fixed amount be provided, and subclause 6 states that no amounts shall be spent for a purpose mentioned in this section in excess of the amount authorized. Then, under clause 9, apparently there is provision made to the effect that whatever amounts have been spent in excess of that fixed amount they shall be reimbursed out of the funds of the government. I cannot follow the reasoning. Why, in one clause, are we asked for a fixed sum and why in another clause is it stated that if the company goes beyond that amount they shall be reimbursed out of the national revenues. Would the minister expain that?


Donald Methuen Fleming: Again, if the hon. member would permit it, I would say he is under a misapprehension here. Clauses 3 and 9 are not related. Clause 3 deals with capital expenditures while clause 9 deals with temporary loans by the government for the purpose of meeting income deficits. The two clauses are not related and clause 9 is in no sense a means of providing additional capital funds to the Canadian National Railways in excess of the amount permitted by clause 3.


[Stage Direction]
Clause agreed to.
Clause 10 agreed to.
On clause 11-Extension of period in respect of which no interest payable.
William Moore Benidickson: I do not believe the minister made any reply to the remarks I made earlier on this subject. I advanced the criticism that this government should have had adequate warnings and should have provided a new plan before the expiry of the ten year term. I know that we have had a reference to a royal commission. Did the royal commission deal with this particular problem? In what way did it deal with it? What were its recommendations? I take it that what is involved here is really an addition of one year to the ten year term of interest free lending to the Canadian National Railways on a principal sum of $100 million. I am sure the government realized this matter was coming up. It was in the bill that followed the Turgeon royal commission. Why are we avoiding facing up to what is required
7906	HOUSE OF
Canadian National Railways here, or am I wrong in thinking that we are really giving another year or an eleventh year of interest free lending to the extent of $100 million to the Canadian National Railways?


Donald Methuen Fleming: No. The hon. member is quite correct. The effect of section 11 is to extend for another year the moratorium on interest on the $100 million loan authorized by the capital revision act of 1952. The reason for this further extension is that this would not have been a suitable time to be undertaking another revision of the capital structure of the Canadian National Railways when the royal commission is studying some matters which are of very great and far reaching importance to railways' financial operations in Canada. I do not suggest for one moment that the royal commission has been asked to make recommendations specifically with relation to the revision of the capital structure of the Canadian National Railways. I do not suggest that at all. However, the fact is that the matters that were referred to the royal commission for study and report are matters that are quite fundamental to the earnings position of the two great national railway systems in this country. It is surely the part of wisdom to await the report of the royal commission before launching into a subject like capital revision. We do not very often undertake capital revisions of the Canadian National system. The last one was to cover ten years. The next one may cover some years. I think the hon. member will agree that it would have been quite unwise to attempt one of these relatively rare and far reaching revisions before we had received the final report of the royal commission on the railway freight rates.


[Stage Direction]
Clause agreed to.
On clause 12-Continuation for further year of application of R.S., c. 311, s. 6(1).
William Moore Benidickson: I wonder whether the minister would explain this clause. It seems to me that this is a repetition of a clause we had for the first time in our annual bill of last year. Am I right? This too results from a little procrastination in deciding what is going to be done about further revision of the capital structure of the C.N.R. You concluded debate very properly, Mr. Chairman, on the previous clause; but perhaps in courtesy the minister might just reply to this question. Notwithstanding the sittings of the royal commission, did the minister and the chairman of the Canadian National Railways confer at any time; and did the minister authorize the chairman of the Canadian National Railways to make the proposal he made to the House of Commons committee 

on railways, air lines and shipping, government owned, with respect to another very substantial write-off of capital debt?


Mr.. Fleming (Eglinton):: Clause 12 of the bill arises out of the same circumstances as. does clause 11. The clause is new but its intent, as the hon. member has indicated, is similar to that of section 11 of the 1960 act. The effect of the clause is to extend the authority for purchase by the minister of the four per cent preferred stock of the company for a period of one year beyond the present expiry date of December 31, 1961.
This is not a matter of procrastination, Mr. Chairman. It is a matter of taking a wise course in the light of the fact that a royal commission is studying the whole question of our railway freight rate structure.


William Moore Benidickson: My question was this, Mr. Chairman. Had the chairman of the Canadian National Railways, prior to his testimony before the committee on railways, air lines and shipping, government owned, discussed with the Minister of Finance his proposal which was described by one member of the committee as a bombshell, namely a suggestion that another $700 million to $900 million of advances by taxpayers to this crown company might be written off on a further capital revision? Was that matter discussed with the Minister of Finance?


Donald Methuen Fleming: Yes. I had communication with the president of the Canadian National system on this subject. There has been an exchange of communications. He has submitted his views to me and study has been given to them. I can assure you, Mr. Chairman, that no decision has been reached.


John Whitney Pickersgill: It is hardly necessary.


[Stage Direction]
Clause agreed to.
On clause 13-Issue of substituted securities: 1955, c. 31, s. 3.
William Moore Benidickson: I am satisfied with the explanation the minister gave at the resolution stage. What was the date of that stage?
I do not have it before me.


Donald Methuen Fleming: Thursday, July 6.


William Moore Benidickson: I thought the minister then explained fully the requirement for this clause. This involves a completely different amendment from the one that was made in 1955. I am satisfied with that explanation. I simply wish to draw attention to the fact that an explanation was given in considerable fullness when the resolution was discussed.


[Stage Direction]
Clause agreed to.

On clause 14-Auditors.
John Whitney Pickersgill: I should like to ask the minister whether there is in Mr. de Lalanne's contract with the Canadian National Railways or whatever arrangement there is with him any stipulation that he should have leave of absence if he wished to be a Conservative candidate at the next election.


Some hon. Members:: Carried.


Douglas Mason Fisher: I assume that the hon. member for Bonavista-Twillingate is not to receive an answer to his question. There was some disappointment on the part of several members of the railways, air lines and shipping committee. I do not think I am taking too much on myself in saying that there was more than one who, without being critical of Mr. de Lalanne's evidence, felt that the annual report of the Auditor General is in many ways too brief and does not contain enough narrative to indicate the various steps taken and the way in which the work is approached and handled. I should like to make a suggestion at this particular time. I understand that he follows what is said in the house about the Canadian National Railways. Perhaps next year, if the minister does not draw it to his attention, the committee will receive from him perhaps more of a preliminary explanation and so would make our inquiry a little more forthcoming for us. I know the hon. member for Greenwood is looking at me. Of course he has experience in financial matters and I suppose chartered accountants and their doings are familiar to him. But Mr. Gordon himself said a number of times in the committee that chartered accountants have a language and a gobbledygook all their own and you really needed a translator. That was somewhat the impression we got from the very terse and very narrow replies we obtained to questions addressed to Mr. de Lalanne.
I would emphasize again that this is not expressed as any criticism of him. I just hope that in future we will get a more thorough explanation, more of an introduction and more of a narrative to indicate just how completely he does the job and how he sets about it. This would give us a better indication of what we can ask him in regard to what he discovered.


Robert Jardine McCleave: The
hon. member for Maisonneuve-Rosemont.


William Moore Benidickson: Mr. Chairman, before
another hon. member rises there is this question that I wish to ask having heard the hon. member for Port Arthur. I think perhaps inadvertently the hon. member referred to a report of the Auditor General. I am sure he meant the auditor of the Canadian National
Canadian National Railways Railways because it has always been mentioned in debate on this matter that the Auditor General is not the auditor of the accounts of the Canadian National Railways.
Does the hon. member for Port Arthur confirm that when he was referring to the auditor mentioned in the last clause of the bill he was referring to this gentleman who is a private auditor, and not the Auditor General?


Douglas Mason Fisher: I certainly was. Perhaps we have the Auditor General on our minds these days, those of us who were in the broadcasting committee and saw his performance there. Perhaps he looms larger than he really should. I have one final question to ask the minister, if it has not already been put to him. What role is the Glassco commission playing in analysing the Canadian National Railways?


Donald Methuen Fleming: Mr. Chairman, I do not believe the Glassco commission is playing any part in any detailed analysis of the affairs of the Canadian National Railways system. It may be looking at some general features of the relationship to government of this very large system. It would be a huge undertaking of itself to conduct an examination of the whole system internally from the point of view of those subjects upon which the Glassco commission has been directed to make its study and report.


Douglas Mason Fisher: I raise this matter because that commission is doing some work in connection with the Canadian Broadcasting Corporation. That is not as large an organization as the Canadian National Railways, but I think it is No. 2 in government corporations. It seems to me the C.N.R. could be an appropriate field of analysis just as much as the C.B.C., if not more so. I thought the Minister of Finance could indicate whether the Glassco commission is, for example, going to examine the relationship between members of the House of Commons and the C.N.R. in so far as their questions going through the Department of Transport and the cost of them are concerned.
We certainly got the impression from Mr. Gordon in several instances that while the C.N.R. management was prepared to spend a great deal of time getting answers to questions of members of parliament, it was an expensive business and one that took away people from duties that were more intimately connected with the railway. I suggest that as a possible area for the Glassco commission to look at, because it always seems to be a good rebuttal to say to a member of parliament who asks detailed questions, "Well,

Canadian National Railways look at the inordinate expense. What do you want the information for anyway?
As the minister probably knows, a study was made last year of government organizations. I have forgotten the author, but the work was published by Yale University I think. This man went back through the history of the relationships of these organizations to parliament, and by a long way the Canadian National Railways led all the rest in terms of consumption of parliament's time, volume of questions placed on the order paper and of starred questions. So apparently in our probing we create a great deal of work for the system and perhaps our inquiries cost a great deal of money. This, I underline again, might be an area for examination by the Glassco commission.


Jean-Paul Deschatelets: Mr. Chairman, I have a question supplementary to the point raised by the hon. member for Bonavista-Twillin-gate. Will the minister be kind enough to tell us when Mr. de Lalanne was appointed? My second question is: is it the same Mr. de Lalanne who was an unsuccessful Conservative candidate for Westmount, I think, a few years ago?


Donald Methuen Fleming: Mr. de Lalanne was first appointed auditor of Canadian National Railways in 1958. He is a very eminent accountant, with a most enviable reputation in his profession.


Jean-Paul Deschatelets: Has the minister any answer to my second question?


Donald Methuen Fleming: No.


John Whitney Pickersgill: Such innocence.


William Moore Benidickson: I have no doubt that the Minister of Finance, for whom I have a high regard, with his usual seriousness and attentiveness to his duties has looked at the committee reports. I was not a member of the sessional committee this year but in reading its report I felt that perhaps the report of the auditor should be drawn especially to the attention of the Minister of Finance.
I assume the minister has looked at the report of the sessional committee but I wish to draw his attention to page 401, where it is indicated that capital expenditures on property investment were in the region of $169 million for 1960. Then on page 402 it is indicated that during the year there was an increase of $141 million in long term debt of the Canadian National Railways.
I raised this matter last year and I say it is something to which we have to face up. It is not dissimilar to the situation we have had in the last 10 or 15 years. But when does this increase in long term debt of this magnitude come to a stop? If the minister is not

looking into this matter, is he asking somebody outside the Canadian National Railways, somebody in treasury board, to look at the statements of increase in long term debt of the Canadian National Railways compared with the increase in debt of Canadian Pacific Railway?
I have attempted to look into this matter and I know the minister cannot do it personally. I know I cannot. I have had a cursory look each year. But is there a serious study of this matter on the part of the cabinet, which makes available to the Canadian National Railways these massive sums? The long term result is that there is a steady increase in the fixed charges of the railway. As I see it, it is the fixed charges of the railway which are crippling the railway. I am not so sure-


Robert Jardine McCleave: Order.


William Moore Benidickson: Mr. Chairman, this is referred to in the auditor's report, if you look at page 403-


Robert Jardine McCleave: The
Chair will need some guidance from the hon. member to determine whether the hon. member is within clause 14 which, as I understand it, deals with the auditing of the Canadian National Railways' accounts.


William Moore Benidickson: Quite. I have reference directly to the report of the auditor who is the man being reappointed and whose report is to be found at page 403 of the proceedings and evidence of the committee on railways, air lines and shipping. I have related my remarks directly to that report, Mr. Chairman.
I do not wish to delay the committee. However, I am very concerned about this and I expressed my anxiety last year. I think there is some substantial reduction this year in the total amount of borrowing required by this crown company. That relieves some of my anxiety and distress. However, the facts are plain if one looks at the auditor's reports of last year and this year. I suggest that an increase of $141 million in over-all capital debt obligations of this railroad in this year plus a debt of $67 million is something deserving of careful attention.


Donald Methuen Fleming: When you said "debt" I take it you meant deficit?


William Moore Benidickson: Yes, I intended to refer to the deficit of $67 million. I should like some assurance from the minister that this situation is receiving consideration. I feel that an investment of $1 billion in improved and efficient equipment of this railroad should enable it to occupy a position of earnings which would show up to more advantage.

However, on the contrary, we have the largest deficit experienced in many years. I am wondering about this increase of $141 million in one year as disclosed in the auditor's report to the House of Commons committee, and I felt that concern was related to this clause of the bill.


Donald Methuen Fleming: Mr. Chairman, I can assure the hon. member that this is a matter of continuing concern and directs attention to the whole question of the capital structure of the system. In 1960 there was a very high deficit amounting to some $67.5 million. There has been no deficit as high. The company did show a net revenue from railway operations of $7,347,000. The huge deficit is accounted for by the burden of fixed charges. At the same time there has been this continuing increase over the years in long term debt. Against that picture must be set the fact that some of the major capital investment programs of the company are coming to a close. The whole dieselization program which naturally has been costly in terms of the amount of investment is now relatively complete, and there will be operating savings as a result of that dieselization throughout the system. However, the matter to which the hon. member has called attention is one which will have to receive very careful study in relation to the proposed revision in the capital structure of the system within the coming year.


Herbert Wilfred Herridge: Mr. Chairman, there is a bit of confusion in this quarter of the committee as to the reply given by the minister to the hon. member for Maisonneuve-Rose-mont when he asked the minister whether Mr. J. A. deLalanne of Montreal, the auditor for the Canadian National Railways, was at any time a federal candidate of the Progressive Conservative party. I am sure the minister wishes the committee to have the facts. Can the minister say that Mr. J. A. deLalanne of Montreal, the auditor for the Canadian National Railways, was not a candidate for the Progressive Conservative party?


Donald Methuen Fleming: Mr. Chairman, I will say that he is a leader in his profession and a very eminent chartered accountant.


John Whitney Pickersgill: How coy.


Robert Jardine McCleave: Shall clause 14 carry?


Douglas Mason Fisher: Mr. Chairman, there is one point in connection with the auditor's report which I should like to draw to the attention of the minister. When the auditor was being questioned in the committee on railways, air lines and shipping I asked him certain questions about the trucking operations of the 90205-6-499
Canadian National Railways C.N.R. I should like to quote a portion of that discussion which is to be found at page 405 of the minutes of proceedings and evidence of the sessional committee on railways, air lines and shipping. I asked the following question:
In your work this year did you go into the operations and the accounts of these subsidiaries?
Mr. de Lalanne replied as follows:
Once these companies were actually 100 per cent or partially owned C.N.R. companies, I naturally considered it was part of my duty to satisfy myself with regard to whatever was being accumulated in the accounts of the C.N.R., for consolidation in these statements, and that the accounts were reasonably accurate, the same as I would in regard to hotels, telecommunications, and other things.
Now that I have looked at that statement in retrospect comparing it with the fact that Mr. Gordon indicated to us that Midland Superior, which is the largest of the trucking subsidiaries purchased by the C.N.R., is not included as actually being owned by the C.N.R., I would very much appreciate knowing whether Midland Superior came under audit in 1960. It has been suggested by other members that these trucking operations are in a peculiar position. I would certainly feel much better about that particular aspect of the Canadian National Railways trucking operation if we knew that it was being audited by the auditor for the Canadian National Railways. In view of the explanation given at page 405 of that report to which I have referred there is certainly some doubt in my mind that this is so. I felt this was a point worthy of bringing to the minister's attention for many reasons, not the least being because the president of the C.N.R. indicated that the profit from his particular company which apparently the C.N.R. does not own and does not show in its books was enough to balance the losses it incurred through the other trucking subsidiaries that it purchased. We have a most unusual situation here which I think is worthy of the minister's attention, and I should like to ask him to check with the auditor in this regard.


Herbert Wilfred Herridge: Mr. Chairman, I should like to ask one final question in respect to this bill. Some 12 or 13 years ago a former minister of fisheries, who was the humble member for Coast-Capilano introduced a private member's bill which provided that the Auditor General would audit the book of accounts of the Canadian National Railways. If I remember correctly, that time he received some vociferous support from members of the Progressive Conservative party. In view of that support for that private member's bill by some members of the present government when they were in opposition, would the minister inform this committee whether the

Dominion-Provincial Relations government has given consideration at any time to this auditing being done by the Auditor General?


Donald Methuen Fleming: Mr. Chairman, it would not be possible for the Auditor General with his limited staff to undertake the auditing for the Canadian National Railways. To do so would involve a drastic revision of the whole set-up of the Auditor General's office. This involves a major audit and I think hon. members will appreciate that the present organization of the Auditor General is not such that it could undertake this audit.


[Stage Direction]
Clause agreed to.
Title agreed to.
Bill reported.
Mr. Speaker:: When shall the bill be read the third time?


John Whitney Pickersgill: By leave, now.
Bill read the third time and passed.



DOMINION-PROVINCIAL RELATIONS AGREEMENTS RESPECTING TAX COLLECTION, ANNUAL GRANTS, ETC.

Donald Methuen Fleming: that the house go into committee to consider the following resolution:
Resolved that it is expedient to introduce a measure to authorize tax collection agreements with the governments of the provinces and to provide that the minister may pay to a province, out of the consolidated revenue fund, in respect of any fiscal year in the period commencing on the 1st day of April, 1962 and ending on the 31st day of March, 1967,
(a)	a tax equalization payment;
(b)	a provincial revenue stabilization payment;
(c)	additional annual grants of ten and a half million dollars to each of the provinces of Nova Scotia, New Brunswick and Newfoundland, and of three and a half million dollars to the province of Prince Edward Island;
(d)	a further additional annual grant of eight million dollars to the province of Newfoundland;
(e)	where a province does not levy a succession duty, an amount equal to the standard estate tax applicable to the province for the fiscal year; and
(f)	advance payments on account of amounts collected under a tax collection agreement that may be entered into with the province.
Motion agreed to and the house went into committee thereon, Mr. McCleave in the chair.


Donald Methuen Fleming: Mr. Chairman,
since assuming office four years ago, the government has devoted much time and study to the problem of federal-provincial fiscal arrangements. It has materially increased the return to the provinces from the existing tax-sharing arrangements by raising from 10 per cent to 13 per cent the standard rate on personal income tax; and by introducing the Atlantic Provinces Adjustment Grants, it has greatly broadened the fiscal aid element of federal assistance, and for the first time given full recognition to the special

financial disabilities of the Atlantic region. Although it has greatly improved the financial substance of the present arrangements, this government has recognized the weaknesses of the tax rental system which it inherited, both from the provincial and federal standpoint, and has become increasingly convinced of the need for a new approach which would give greater freedom and responsibility to the provincial governments, and which would be compatible with the constitution.
During the past year we have held three dominion-provincial conferences for the purpose of reaching agreement with the provinces on the form of the financial arrangements which should exist after the expiry of the present Federal-Provincial TaxSharing Arrangements Act on March 31, 1962. The first of those conferences was held July 25 to 27, 1960; the second, October 26 to 28, 1960 and the third February 23 to 24 of this year.
At the first of those dominion-provincial conferences, held July 25 to 27, 1960, the provinces presented their views on the form the new arrangements should take. Consideration of the financial substance of the provincial proposals made at that first conference will reveal the major weakness of the tax rental system. The provinces, like the federal government, have great and expanding responsibilities. In aggregate, the provincial proposals made at the July conference would have cost the federal treasury something in excess of $2 billion annually, an additional cost equal to more than one third of the total federal revenues for the fiscal year 1960-61. Under such circumstances it became increasingly evident that the tax rental system was unsound. It placed on the federal government the whole responsibility for levying the additional taxes to support large increases in provincial expenditures. The provincial governments assumed no responsibility for imposing the rented taxes on which they depended for revenues nor had they any freedom to amend the rates of these taxes in line with their current needs. Such a system was clearly destructive of provincial responsibility and initiative, and incompatible with the constitution which grants equal access to the federal and provincial governments in these fields of direct taxation.
Accordingly, at the October conference the Prime Minister suggested that the provinces might consider again imposing their own taxes on individual and corporate income, and their own succession duties at such rates as they judged appropriate in view of their needs for revenue. To make the

provincial re-entry into these tax fields practicable, the federal government was prepared to recommend to parliament that the federal tax rates in the three shared tax fields be reduced at the time of the termination of the present tax rental agreements, March 31, 1962, by the amount of the present effective standard rates, that is the so-called 13-9-50 formula.
I should explain that under section 2(3) of the Federal-Provincial Tax-Sharing Arrangements Act the standard individual income tax rate of 13 per cent is altered to compensate for any change in federal income tax rates from the rates in effect January 6, 1956. At the time of the October conference the effective rate determined in accordance with section 2(3) was 13.98353 per cent, or approximately 14 per cent. While offering a reduction in taxes equal to the standard rates the federal government was at the same time mindful of the need to support the revenue systems of the less well-to-do provinces and accordingly offered to recommend the continuation of a system of equalization.
On the basis of the discussion of the suggestions made at the October conference and further intensive study, the federal government advanced certain proposals at the dominion-provincial conference February 23 and 24 of this year. The Prime Minister's statement to the conference appears as an appendix to Hansard of February 28. As I stated in my budget speech of June 20, the main proposals were that the tax rental system be discontinued, that the provinces impose their own taxes and that a fair and more realistic system of equalization be introduced. At the same time the federal government undertook to reduce its income taxes to a larger extent than was suggested at the October conference. Instead of reducing the personal income tax by 14 per cent, which is the approximate effective standard rate at the present time, the federal government was prepared to recommend to parliament withdrawing from the personal income tax by 16 per cent in the first year of the agreements and an additional percentage point in each of the subsequent years so that in the final year the withdrawal would be 20 per cent.
This additional tax room was offered to the provinces in the personal income tax rather than in the corporation income tax quite deliberately and for good reasons: first, because of the steadier and more rapid growth of personal income tax yields the personal income tax is a more satisfactory revenue source from a provincial standpoint; second, many corporations operate on a national scale and corporation profits are therefore generally regarded as more appropriate 90205-6-499J
Dominion-Provincial Relations for taxation by the federal government; third, the present provincial share of corporation income taxes is 9 percentage points on corporate taxable income, or about 22 per cent to 23 per cent of total corporation income taxes, so that it is reasonable to increase the provincial share of personal income tax before making any adjustment with respect to corporation income taxes.
In short, the provinces would reassume their constitutional rights and responsibilities to impose and vary their tax levies as they saw fit. At the same time in the interests of administrative simplicity and uniformity and in order to save the provinces the expense of setting up tax collection machinery of their own, the federal government was prepared to collect the provincial personal income and corporation income taxes free of charge provided the provincial tax base was identical with the federal tax base at all times. It was explained that this offer could not be extended to the estate tax since the provinces do not have the constitutional power to levy an estate tax on the federal basis. Accordingly, the federal offer in respect of the estate tax was that any province not levying succession duties would receive half the yield of the federal estate tax while an abatement of 50 per cent of the federal estate tax would be granted as at present to provinces levying their own succession duties.
The proposals presented by the Prime Minister to the conference on February 23 and 24 were discussed at that conference and subsequently received intensive consideration and re-examination by federal and provincial officials at two meetings of the Continuing Committee on Fiscal and Economic Matters. In the light of this further study, the proposals were re-examined by the federal government and a letter was written to the provincial premiers by the Prime Minister on June 16 of this year. This letter was tabled in this house and appears in Hansard of June 19.
As the present resolution indicates, the proposal of a system of tax collection agreements to replace the tax rental agreements is a central part of the new approach and is provided for in the bill which I shall introduce. Obviously a system which gives the provinces the right to vary the rates of taxation without imposing on them the administrative burden of collecting the taxes has great advantages for them. It restores the necessary flexibility to the provincial tax system, enabling the provinces to meet increased needs for revenue not only from such sources as the sales tax, the gasoline tax and motor vehicle revenues but from the direct taxes on income which have for the past 20 years been controlled by agreement. The counterpart of

Dominion-Provincial Relations this freedom and flexibility is the independence and responsibility of the provinces. There can be no question that in a healthy federal state in which the goal should be enlightened co-operation rather than centralization, it will be better for the provinces to face up to their responsibilities of levying taxes for provincial purposes in the tax fields which were assigned to them by the constitution.
I referred in my budget speech to the fact that replacing the tax rental agreements by tax collection agreements would also have advantages from the federal standpoint. The provinces will be in the position of having to assess realistically their new proposals for expenditure in the light of their revenue potential rather than placing increasing pressure on the federal government. The federal budget will no longer be inflated by taxation which can and should be imposed at the provincial level. I estimate that for the first year of the new arrangements the adoption of a tax collection system will remove more than $300 million from the federal budget.
I have referred to the fact that the federal government was prepared to recommend to parliament certain reductions in the rates of the federal income tax in order to permit the re-entry of the provincial governments into these fields. The amount of these reductions was set forth in my budget speech.

When this government took office in 1957 the standard rates under the tax rental agreements were 10-9-50, that is to say, the provinces received 10 per cent of the personal income tax collections, 9 percentage points on the taxable income of corporations and 50 per cent of the succession duty or estate tax. In 1958 this government introduced legislation increasing the provincial share of the personal income tax from 10 to 13 per cent. With the permission of the house I should like to place on Hansard at this point table No. 1 which indicates the increase in provincial revenue which resulted from this increase of 3 percentage points in the standard rate of individual income tax. May I have that leave, Mr. Chairman?


John Whitney Pickersgill: Could the minister say what years that covers? Is it all the years since the change was made?


Donald Methuen Fleming: It covers the years 1958-59 up to 1961-62 inclusive.


Robert Jardine McCleave: Does
the committee give leave to have this table printed in Hansard?


Some hon. Members:: Agreed.
[Editor's note: The table above referred to follows:]



TABLE 1

[Stage Direction]
Effect on Tax-Sharing Arrangements with the Provinces of the 3% Increase in the Standard Individual Income Tax including tax abatements
(in thousands of dollars)
1958-59	1959-60	Preliminary 1960-61	Estimate 1961-6213-9-50	10-9-50	Increase	13-9-50	10-9-50	Increase	13-9-50	10-9-50	Increase	13-9-50	10-9-50	Increase1. Newfoundland	17,572	16,552	1,020	20,027	18,204	1,823	19,533	18,188	1,345	20,692	18,986	1,7062. Prince Edward Island	4,269	4,269	-	4,549	4,323	226	4,593	4,593	-	4,739	4,739	-3. Nova Scotia	28,488	25,843	2,645	31,936	29,029	2,907	30,765	27,662	3,103	32,205	28,981	3,2244. New Brunswick	23,151	21,102	2,049	26,314	23,917	2,397	25,528	22,953	2,575	26,916	24,215	2,7015. Quebec	... 195,943 (61,490)	177,782 (53,919)	18,161 (7,571)	222,950 (73,735)	202,645 (65,087)	20,305 (8,648)	217,259 (73,067)	195,364 (63,774)	21,895 (9,293)	230,000 (77,152)	206,937 (67,352)	23,063 (9,800)6. Ontario	... 241,454 (95,016)	219,527 (73,089)	21,927 (21,927)	273,222 (106,294)	248,692 (81,764)	24,530 (24,530)	265,867 (114,907)	239,350 (88,390)	26,517 (26,517)	282,066 (120,937)	254,157 (93,028)	27,909 (27,909)7. Manitoba	34,902	32,541	2,361	39,470	35,880	3,590	38,252	34,755	3,497	40,282	36,244	4,0388. Saskatchewan	35,628	32,320	3,308	40,232	36,569	3,663	38,725	34,821	3,904	40,503	36,446	4,0579. Alberta	48,181	43,718	4,463	55,437	50,387	5,050	54,590	49,086	5,504	58,375	52,518	5,85710. British Columbia	64,762	64,762	-	70,016	67,354	2,662	70,852	70,852	-	73,812	73,812	-Total including abatements	... 694,350	638,416	55,934	784,153	717,000	67,153	765,964	697,624	68,340	809,590	737,035	72,555Total excluding abatements	... (413,459)	(368,115)	(45,344)	(468,010)	(412,514)	(55,496)	(470,812)	(415,074)	(55,738)	(495,613)	(436,321)	(59,292)
The calculations for 1958-59 are based on the Final Calculation of Standard Taxes, Equalization and Stabilization Payments for the fiscal year 1958-59 dated Dec. 24, 1959; for 1959-60 on the Final Calculation of Standard Taxes, Equalization and Stabilization for fiscal year 1959-60 dated Dec. 22, 1960; for 1960-61 on the Fifth Estimate of Standard Taxes, Equalization and Stabilization for fiscal year 1960-61 dated Jan. 6, 1961; and for 1961-62 on the First Estimate of Standard Taxes, Equalization and Stabilization for fiscal year 1961-62 dated May, 8, 1961. The Atlantic Provinces Adjustment Grant and the deduction on account of Quebec special corporations taxes are excluded.
The figures in brackets exclude the amount of the abatements.
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Donald Methuen Fleming: In 1958-59 this increase was worth $55.9 million to the provinces, in 1959-60 $67.2 million, in 1960-61 $68.3 million, and the estimated value for 1961-62 is $72.6 million or a total of $262 million for the four years.
The withdrawal provided for under the new arrangements is 16 per cent of the personal income tax in the first year and rises by 1 percentage point each year to 20 per cent in the last year, that is, by 1966. Thus the share which the provincial governments will receive of personal income taxation will by the final year of these agreements be double the share which was provided when this government took office. Having in mind the system of Atlantic Provinces Adjustment Grants introduced by this government and the very great rise in federal payments to the provinces on account of conditional grants as well as the increase in other federal responsibilities, the offer to provide for this increased provincial share in the personal
income tax is very generous. The offer to increase the withdrawal in the personal income tax from the effective rate of approximately 14 per cent at present to 20 per cent by the end of the next five year period means that the federal government has offered to increase the provincial share of this tax field over the next five years by more than 40 per cent even if the provinces impose taxes no greater than the amount of the federal withdrawal. I should like at this point to place on Hansard table No. 2 showing the federal contributions to or for the benefit of the provinces and certain provincial institutions for the fiscal years 1956-57 to date, including the estimated amounts for 1961-62.


Robert Jardine McCleave: Has
the minister leave to have this table printed in Hansard?


Some hon. Members:: Agreed.
[Editor's note: The table above referred to follows:]



TABLE 2 CANADA

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Summary of Federal Contributions to the Provinces and Certain Payments to Institutions in the Provinces for the fiscal years 1956-57 to 1961-62
(thousands of dollars)
1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimates 1961-62	TotalA. Unconditional Grants 1.	Statutory Subsidies	
2.	Transitional Grant (Newfoundland)	
3.	Tax Abatements (estimated)	
4.	Tax Rental (*)	
5.	Equalization	
6.	Stabilization	
7.	50% share of Income Tax on Power Utilities	
8.	Atlantic Provinces Adjustment Grant	
9.	Term 29 Award (Newfoundland)	20,571 2,250 157,281 365,938 6,613	20,571 1,400 275,564 213,868 135,978 3,458 7,360	20,571 1,050 275,119 249,039 143,438 5,676 8,682 25,000 13,550	20,748 700 313,778 279,730 182,985 -2,315 4,753 25,000 7,300	20,689 350 303,723 288,663 188,909 2,327 4,226 25,000 7,650	23,115 323,464 298,837 190,056 1,515 6,000 25,000 8,000	126,265 5,750 1,648,929 1,696,075 841,366 10,661 37,634 100,000 36,500Sub-total	552,653	658,199	742,125	832,679	841,537	875,987	4,503,180B. Conditional Grants 1.	Agriculture	
2.	Health	
3.	Hospital Insurance	
4.	Welfare	
5.	Vocational Training etc- 	
0. Highways and Transportation	
7.	Resource Development	
8.	Civil Defence	
9.	Municipal Winter Works	
10. Other	938 36,438 38,353 4,668 26,909 2,717 814 137	1,037 34,596 48,149 4,765 50,943 4,314 968 72	1,864 45,909 54,708 74,072 8,057 53,669 8,741 1,025 249 62	6,732 45,974 150,593 90,861 8,372 56,746 15,266 1,564 6,584 62	3,716 47,878 189,000 102,935 8,677 48,696 17,946 2,966 8,908	2,036 45,373 274,491 96,034 27,336 54,110 21,150 2,628 26,946	16,323 256,168 668,792 450,404 61,875 291,073 70,134 9,965 42,687 333Sub-total	110,974	144,844	248,356	3S2.754	430,722	550,104	1,867,754C. Payments for the benefit of Provincial institutions 1.	University Grants	[DOT]	
2.	Grants to Municipalities in lieu of Taxes on federal property	16,049 9,676	16,558 17,535	25,524 21,852	26,112 22,551	19,008 24,326	19,403 24,645	122,654 120,585Sub-total	25,725	34,093	47,376	48,663	43,334	44,048	243,239TOTAL	689,352	837,136	1,037,857	1,264,096	1,315,593	1,470,139	6,614,173
.. ._______tVio in';? Airrppmpnt, for the fiscal vears 1957-58 to 1961-62 has not been deducted from the tax rental payments for these
provinces ^Newfoundland $102,315 per annum; Prince Edward Island $228,221 per annum; New Brunswick $182,201 per annum; Manitoba $209,938 per annum and Saskatchewan $304,180 per annum.	30.6.61
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1. NEWFOUNDLAND-1956-57 to 1961-62
(in thousands of dollars)
co *-[DOT] O)
				Preliminary	Estimates	
1956-57	1957-58	1958-59	1959-60	1960-61	1961-62	Total
A. Unconditional Grants
1.	Statutory Subsidies	
2.	Transitional Grant	
3.	Tax Rental (')	
4.	Equalization	
5.	Stabilization	
6.	50% share of Income Tax on Power Utilities	
7.	Atlantic Provinces Adjustment Grant	
8.	Term 29 Award	1,569 2,250 13,805 214	1,569 1,400 4,449 11,579 247	1,569 1,050 4,737 12,155 286 7,500 13,550	1,569 700 5,725 14,292 177 7,500 7,300	1,569 350 5,068 15,391 130 7,500 7,650	1,655 5,421 15,271 185 7,500 8,000	9,500 5,750 39,205 68,688 1,239 30,000 36,500Sub-total	17,838	19,244	40,847	37,263	37,658	38,032	190,882B. Conditional Grants	1. Agriculture	130	137	171	150	142	142	8722. Health	1,026	1,095	887	1,065	845	2,035	6,9533. Hospital Insurance	-	-	2,858	4,708	5,100	5,990	18,6564. Welfare	3,716	3,456	5,266	5,965	5,109	5,944	29,4565. Vocational Training, etc	406	385	377	195	236	2,212	3,8116. Highways and Transportation	1,171	861	4,753	5,359	6,579	6,000	24,7237. Resource Development	66	56	165	462	935	877	2,5618. Civil Defence	33	14	25	19	60	60	2119. Municipal Winter Works	-	-	-	25	39	200	26410. Other	25	-	-	-	25Sub-total	6,573	6,004	14,502	17,948	19,045	23,460	87,532C. Payments for the benefit of provincial institutions	1. University Grants	415	426	657	673	688	703	3,5622. Grants to Municipalities in lieu of Taxes on federal property	-	33	133	76	147	77	466Sub-total	415	459	790	749	835	780	4,028TOTAL	24,826	25,707	56,139	55,960	57,538	62,272	282,442
(!) The recovery of the overpayment under the 1952 Agreement which amounts to some $102,315 per annum for fiscal years 1957-58 to 1961-62 has not been deducted from the tax rental payments for those above years to which the deduction applies.
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2. PRINCE EDWARD ISLAND-1956-57 to 1961-62
(in thousands of dollars)
				Preliminary	Estimates	
1956-57	1957-58	1958-59	1959-60	1960-61	1961-62	Total
A. Unconditional Grants
1.	Statutory Subsidies	
2.	Tax Rental (l)	
3.	Equalization	
4.	Stabilization	
5.	50% share of Income Tax on Power Utilities	
6.	Atlantic Provinces Adjustment Grant	657 3,073 36	657 769 2,955 412 52	657 785 3,074 418 49 2,500	657 1,544 3,005 -159 36 2,500	657 1,138 3,454 210 42 2,500	657 1,195 3,394 150 59 2,500	3,942 8,504 15,882 1,031 274 10,000Sub-total	3,766	4,845	7,483	7,583	8,001	7,955	39,633B. Conditional Grants	1. Agriculture	38	39	56	67	79	79	3582. Health	300	335	438	421	448	359	2,3013. Hospital Insurance	-	-	-	447	1,000	1,235	2,6824. Welfare	305	366	475	561	544	586	2,8375. Vocational Training, etc	33	62	110	134	25	136	5006. Highways and Transportation	434	1,233	535	1,172	551	650	4,5757. Resource Development	15	17	21	1,171	1,500	1,192	3,9168. Civil Defence	-	-	1	6	24	25	569. Municipal Winter Works	-	-	-	1	-	25	2610. Other	-	-	-	-	-	-	-Sub-total	1,125	2,052	1,636	3,980	4,171	4,287	17,251C. Payments for the benefit of provincial institutions	1. University Grants	99	99	150	153	154	156	8112. Grants to Municipalities in lieu of Taxes on federal property	58	76	89	113	102	116	554Sub-total	157	175	239	266	256	272	1,365TOTAL	5,048	7,072	9,358	11,829	12,428	12,514	58,249
(*>
The recovery of the overpayment under the 1952 Agreement which amounts to some $228,221 per annum for fiscal years 1957-58 to 1961-62 has not been deducted from the tax rental payments for those above years to which the deduction applies.
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3. NOVA SCOTIA-1956-57 to 1961-62
(in thousands of dollars)
CD *-« 00
	1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimates 1961-62	Total
A. Unconditional Grants							
1. Statutory Subsidies	2,057	2,057	2,057	2,057	2,057	2,127	12,4122. Tax Rental	22,333	9,032	11,824	11,280	11,224	11,692	77,3853. Equalization	-	17,375	15,575	20,665	21,019	20,513	95,1474. Stabilization	-	-	-	-	-	-	-5. 50% share of Income Tax on Power Utilities	238	401	460	233	346	491	2,1696. Atlantic Provinces Adjustment Grant	-	-	7,500	7,500	7,500	7,500	30,000Sub-total	24,628	28,865	37,416	41,735	42,146	42,323	217,113B. Conditional Grants	1. Agriculture	62	93	127	109	109	110	6102. Health	1,719	1,855	1,921	1,514	2,875	2,249	12,1333. Hospital Insurance	-	-	1,573	8,163	9,600	10,948	30,2844. Welfare	1,573	2,127	2,962	3,422	4,415	4,034	18,5335. Vocational Training, etc	420	452	495	472	609	1,795	4,2436. Highways and Transportation	951	3,532	2,934	3,799	3,257	1,500	15,9737. Resource Development	64	51	111	2,131	1,178	1,066	4,6018. Civil Defence	25	39	49	92	294	175	6749. Municipal Winter Works	-	-	-	338	220	450	1,00810. Other	5	5	5	5	-	-	20Sub-total	4,819	8,154	10,177	20,045	22,557	22,327	88,079C. Payments for the benefit of provincial institutions	1. University Grants	695	702	1,065	1,074	1,085	1,095	5,7162. Grants to Municipalities in lieu of Taxes on federal property	1,194	1,892	1,922	2,175	2,100	2,183	11,466Sub-total	1,889	2,594	2,987	3,249	3,185	3,278	17,182TOTAL	31,336	39,613	50,580	65,029	67,888	67,928	322,374
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4. NEW BRUNSWICK-1956-57 to 1961-62
(in thousands of dollars)
	1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimates 1961-62	Total
A. Unconditional Grants							
1. Statutory Subsidies	1,679	1,679	1,679	1,679	1,679	1,754	10,1492. Tax Rental (A)	17,807	12,609	13,613	9,434	9,333	9,348	72,1443. Equalization	-	8,645	8,651	16,864	17,416	17,568	69,1444. Stabilization	-	-	-	-	-	-	-5. 50% share of Income Tax on Power Utilities	228	220	202	100	115	164	1,0296. Atlantic Provinces Adjustment Grant	-	-	7,500	7,500	7,500	7,500	30,000Sub-total	19,714	23,153	31,645	35,577	36,043	36,334	182,466B. Conditional Grants	1. Agriculture	53	51	93	116	117	119	5492. Health	1,926	1,813	1,739	1,359	1,582	2,087	10,5063. Hospital Insurance	-	-	-	4,575	7,900	8,727	21,2024. Welfare	1,848	2,332	2,934	3,103	4,218	3,893	18,3285. Vocational Training, etc	248	278	359	424	993	2,776	5,0786. Highways and Transportation	3,982	3,977	11,682	8,252	3,461	3,000	34,3547. Resource Development	664	1,074	582	1,031	1,507	985	5,8438. Civil Defence	21	34	38	70	122	130	4159. Municipal Winter Works	-	-	61	311	196	535	1,10310. Other	-	-	-	-	-	-	-Sub-total	8,742	9,559	17,488	19,241	20,096	22,252	97,378C. Payments for the benefit of provincial institutions 1. University Grants	555	565	866	885	900	915	4,6862. Grants to Municipalities in lieu of Taxes on federal property	494	781	926	904	1,074	923	5,102Sub-total	1,049	1,346	1,792	1,789	1,974	1,838	9,788TOTAL	29,505	34,058	50,925	56,607	58,113	60,424	289,632
(i) The recovery of the overpayment under the 1952 Agreement which amounts to some $182,201 per annum for fiscal years 1957-58 to 1961-62 has not been deducted from the tax rental payments for those above years to which the deduction applies.
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5. QUEBEC-1956-57 to 1961-62
(in thousands of dollars)
					Preliminary	Estimates	
	1956-57	1957-58	1958-59	1959-60	1960-61	1961-62	Total
A. Unconditional Grants
1.	Statutory Subsidies	
2.	Tax Abatements (estimated)	
3.	Tax Rental	
4.	Equalization	
5.	Stabilization	
6.	50% share of Income Tax on Power Utilities	3,301 143,634 1,186	3,301 124,740 43,060 1,675	3,301 132,590 55,004 2,281	3,301 150,978 68,631 1,504	3,301 151,435 70,365 1,221	3,995 160,782 71,947 1,733	20,500 864,159 309,007 9,600Sub-total	148,121	172,776	193,176	224,414	226,322	238,457	1,203,266B. Conditional Grants	1. Agriculture	350	278	783	900	931	925	4,16710,291	8,332	15,940	15,116	14,000	12,473	76,1523. Hospital Insurance	-	-	-	13,900	72,000	85,9004. Welfare	11,746	16,069	20,457	28,281	35,000	29,329	140,8825. Vocational Training, etc	648	5	2	3	44	1,003	1,7056. Highways and Transportation	445	99	438	447	-	17,300	18,7297. Resource Development	04	16	109	165	926	3,208	4,4888. Civil Defence	-	-	-	-	-	-	12,5129. Municipal Winter Works	-	-	-	1,426	1,686	9,400	10. Other	-	-	-	-	Sub-total	23,544	24,799	37,729	46,338	66,487	145,638	344,535C. Payments for the benefit of provincial institutions	1. University Grants	4,628	4,758	7,326	7,499	-	-	24,2112. Grants to Municipalities in lieu of Taxes on federal property	1,170	2,424	2,769	4,026	4,831	5,760	20,980Sub-total	5,798	7,182	10,095	11,525	4,831	5,760	45,191Total	177,463	204,757	241,000	282,277	297,640	389,855	1,592,992
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6. ONTARIO-1956-57 to 1961-62
(in thousands of dollars)
				Preliminary	Estimates	
1956-57	1957-58	1958-59	1959-60	1960-61	1961-62	Total
A. Unconditional Grants
1. Statutory Subsidies	3,641	3,641	3,641	3,641	3,641	4,618	22,8232. Tax Rental	160,558	74,379	93,322	106,211	113,792	120,937	669,1993. Tax Abatements (estimated)	13,647	150,824	142,529	162,800	152,288	162,682	784,7704. Equalization	-	-	-	-	5. Stabilization	-	6. 50% share of Income Tax on Power Utilities	1,428	1,333	1,590	1,043	578	821	6,793Sub-total	179,274	230,177	241,082	273,695	270,299	289,058	1,483,585B. Conditional Grants	1. Agriculture	63	91	91	201	108	102	6562. Health	10,606	9,955	11,782	15,096	15,755	14,129	77,3233. Hospital Insurance	-	-	13,140	71,893	84,500	97,647	267,1804. Welfare	7,134	11,173	20,586	25,444	24,770	23,540	112,6475. Vocational Training, etc	1,234	703	3,264	3,260	3,487	9,710	21,6586. Highways and Transportation	5,184	12,927	16,579	19,673	17,869	7,610	79,8427. Resource Development	850	1,237	2,925	2,240	3,124	3,721	14,0978. Civil Defence	348	451	449	586	1,173	1,200	4,2079. Municipal Winter Works	-	-	-	1,996	2,447	6,700	11,14310. Other	27	27	27	27	108Sub-total	25,446	36,564	68,843	140,416	153,233	164,359	588,861C. Payments for the benefit of provincial institutions	1. University Grants	5,405	5,622	8,705	8,928	9,133	9,339	47,1322. Grants to Municipalities in lieu of Taxes on federal property	4,762	8,166	9,821	9,771	9,739	9,981	52,240Sub-total	10,167	13,788	18,526	18,699	18,872	19,320	99,372TOTAL	214,887	280,529	328,451	432,810	442,404	472,737	2,171,818
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7. MANITOBA 1956-57 to 1961-62
(in thousands of dollars)
1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimated 1961-62	TotalA. Unconditional Grants 1.	Statutory Subsidies	
2.	Tax Rental (*)	
3.	Equalization	
4.	Stabilization	
5.	50% share of Income Tax on Power Utilities	2,032 27,889 51	2,032 18,418 13,932 61	2,032 20,688 12,889 46	2,065 26,471 12,981 20	2,054 25,974 14,104 27	2,082 26,331 13,951 38	12,297 145,771 67,857 243Sub-total	29,972	34,443	35,655	41,537	42,159	42,402	226,168B. Conditional Grants 1.	Agriculture	
2.	Health	
3.	Hospital Insurance	
4.	Welfare	
5.	Vocational Training, etc	
6.	Highways and Transportation	
7.	Resource Development	
8.	Civil Defence	
9.	Municipal Winter Works	
10. Other	108 2,676 2,213 262 3,124 78 32 18	156 2,241 2,523 362 2,747 316 33	156 2,419 7,148 3,791 329 1,820 489 61 51	342 2,280 11,324 4,601 431 1,725 1,418 92 383	435 2,996 13,100 5,226 545 542 1,983 152 259	318 2,339 15,140 5,891 1,977 750 3,189 213 2,871	1,515 14,951 46,712 24,245 3,906 10,708 7,473 583 3,564 18Sub-total	8,511	8,378	16,264	22,596	25,238	32,688	113,675C. Payments for the benefit of provincial institutions 1.	University Grants	
2.	Grants to Municipalities in lieu of Taxes on federal property	850 788	860 1,040	1,305 1,545	1,327 1,259	1,349 1,454	1,370 1,286	7,061 7,372Sub-total	1,638	1,900	2,850	2,586	2,803	2,656	14,433TOTAL	40,121	44,721	54,769	66,719	70,200	77,746	354,276
(i) The recovery of the overpayment under the 1952 Agreement which amounts to some $209,938 per annum for fiscal years 1957 58 to 1961 62 has not been deducted from the tax rental payments for those above years to which the deduction applies.
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8. SASKATCHEWAN-1956-57 to 1961-62
(in thousands of dollars)
1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimates 1961-62	TotalA. Unconditional Grants 1.	Statutory Subsidies	
2.	Tax Rental i1)	
3.	Equalization	
4.	Stabilization	
5.	50% share of Income Tax on Power Utilities	2,080 27,432 50	2,080 13,874 19,197 66	2,080 14,399 19,862 96	2,098 20,052 20,180 51	2,092 16,855 23,723 58	2,110 17,994 22,509 83	12,540 110,006 105,471 404Sub-total	
B. Conditional Grants 1.	Agriculture	
2.	Health	
3.	Hospital Insurance	
4.	Welfare	
5.	Vocational Training, etc	
6.	Highways and Transportation	
7.	Resource Development	
8.	Civil Defence	
9.	Municipal Winter Works	
10. Other	29,562 30 2,095 2,199 340 2,919 49 49 42	35,217 55 2,275 2,577 419 3,351 216 43 10	36,437 186 3,006 8,430 3,913 452 366 1,116 51 33 10	42,381 3,043 2,254 13,378 4,238 1,274 87 1,601 71 322 10	42,728 403 2,486 14,500 4,627 920 34 2,301 164 789	42,696 58 2,544 16,920 4,516 1,105 150 1,151 200 1,140	229,021 3,775 14,660 53,228 22,070 4,510 6,907 6,434 578 2,284 72Sub-total	7,723	8,946	17,563	26,278	26,224	27,784	114,518C. Payments for the benefit of provincial institutions 1. University Grants	881	879	1,332	1,353	1,365	1,377	7,1872. Grants to Municipalities in lieu of Taxes on federal property	284	625	726	747	846	763	3,991Sub-total	1,165	1,504	2,058	2,100	2,211	2,140	11,178TOTAL	38,450	45,667	56,058	70,759	71,163	72,620	354,717
C1) The recovery of the overpayment under the 1952 Agreement which amounts to some $304,180 per annum for fiscal years 1957-58 to 1961-62 has not been deducted from the tax rental payments for those above years to which the deduction applies.
Dominion-Provincial Relations
9. ALBERTA-1956-57 to 1961-62
(in thousands of dollars)
1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimates 1961-62	TotalA. Unconditional Grants 1.	Statutory Subsidies	
2.	Tax Rental	
3.	Equalization	
4.	Stabilization	
5.	50% share of Income Tax on Power Utilities	2,274 37,311 1,767	2,274 28,892 14,744 1,980	2,274 38,350 7,991 2,216	2,400 40,261 15,109 1,239	2,358 39,636 17,511 1,449	2,434 40,845 17,530 2,057	14,014 225,295 72,885 10,708Sub-total	41,352	47,890	50,831	59,009	60,954	62,866	322,902B. Contitional Grants 1.	Agriculture	
2.	Health	
3.	Hospital Insurance	
4.	Welfare	
5.	Vocational Training, etc	
6.	Highways and Transportation	
7.	Resource Development	
8.	Civil Defence	
9.	Municipal Winter Works	
10. Other	66 2,589 1,648 528 2,019 21 119 10	67 2,888 2,148 1,380 5,398 184 142 20	69 3,527 8,775 4,492 1,652 2,229 476 126 10	1,688 2,906 15,699 4,802 870 1,109 2,462 278 1,069 10	1,157 2,748 16,900 5,420 926 268 2,131 441 1,545	83 3,501 19,441 5,069 3,579 150 2,394 275 2,500	3,130 18,159 60,815 23,579 8,935 11,173 7,668 1,381 5,114 50Sub-total	7,000	12,227	21,356	30,893	31,536	36,992	140,004C. Payments for the benefit of provincial institutions 1.	University Grants	
2.	Grants to Municipalities in lieu of Taxes on federal property	1,123 330	1,160 1,045	1,802 1,676	1,865 1,605	1,925 1,591	1,985 1,640	9,860 7,887Sub-total	1,453	2,205	3,478	3,470	3,516	3,625	17,747TOTAL	49,805	62,322	75,665	93,372	96,006	103,483	480,653
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Dominion-Provincial Relations
10. BRITISH COLUMBIA-1956-67 to 1961-62
(in thousands of dollars)
	1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimates 1961-62	Total
A. Unconditional Grants							
1. Statutory Subsidies	1,281	1,281	1,281	1,281	1,281	1,683	8,0882. Tax Rental	55,730	51,446	51,321	58,752	65,643	65,074	347,9663. Equalization	-	4,491	8,237	11,258	5,926	7,373	37,2854. Stabilization	-	3,046	5,258	-2,156	2,117	1,365	9,6305. 50% share of Income Tax on Power Utilities	1,415	1,325	1,456	350	260	369	5,175Sub-total	58,426	61,589	67,553	69,485	75,227	75,864	408,144B. Conditional Grants	1. Agriculture	38	70	132	116	235	100	6912. Health	3,210	3,807	4,250	3,963	4,143	3,657	23,0303. Hospital Insurance	-	-	12,784	20,406	22,500	26,443	82,1334. Welfare	5,971	5,378	9,196	10,444	13,606	13,232	57,8275. Vocational Training, etc	549	719	1,017	1,309	892	3,043	7,5296. Highways and Transportation	6,680	16,818	12,333	15,123	10,135	17,000	84,0897. Resource Development	846	1,147	2,747	2,585	2,361	3,367	13,0538. Civil Defence	187	212	225	350	536	350	1,8609. Municipal Winter Works	-	-	104	713	1,727	3,125	5,66910. Other	10	10	10	10	-	-	40Sub-total	17,491	28,161	42,798	55,019	62,135	70,317	275,921C. Payments for the benefit of provincial institutions	1. Universitv Grants	1,398	1,487	2,316	2,355	2,409	2,463	12,4282. Grants to Municipalities in lieu of Taxes on federal property	596	1,453	2,245	1,875	2,442	1,916	10,527Sub-total	1,994	2,940	4,561	4,230	4,851	4,379	22,955TOTAL	77,911	92,690	114,912	128,734	142,213	150,560	707,020
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Dominion-Provincial Relations
Donald Methuen Fleming: The table indicates that the total value of these payments and abatements has more than doubled in the short space of five years-from $689.4 million in 1956-57 to $1,470.1 million in 1961-62.
As I mentioned earlier, the proposal to offer tax collection agreements and to increase the share of the personal income tax available to the provinces was accompanied by a proposal for an improved system of equalization and larger grants to the Atlantic provinces. As the resolution indicates, provision is made for equalization payments, payments to the Atlantic provinces, stabilization payments, and payments of a special grant of $8 million per annum to Newfoundland.
Under the present arrangements equalization is based on the per capita yield from the three standard taxes, that is, from the personal income tax, corporation income tax and succession duties at the standard rates of 13-9-50 in the two provinces which have the highest per capita yield. There are two fundamental weaknesses in this formula. The first is that equalization to the per capita yield in the two provinces with the highest yield is not realistic. The second is that by limiting the equalization formula to the three standard taxes no account is taken of wide variation in the revenues from other provincial sources. Equalization based on standard tax yields in the top two provinces led in some instances to larger payments than could be defended on the basis of fiscal need. At the same time it took no account of variations in fiscal capacity due to differences in other revenue sources.
It was with these considerations in mind that the government decided to propose an equalization formula based on the national average yields of standard taxes plus 50 per cent of the natural resource revenues. I should like at this point to refer to two tables which were presented to the dominion-provincial conference of February 23-24 of this year and which appear as an appendix to Hansard of March 7, 1961, in order to illustrate the effect of the new proposals. The first is a table showing natural resource revenue for the years 1956, 1957 and 1958, and the second is a table which illustrates the effect of including provincial natural resource revenue in the equalization formula. It will be seen from examination of the first table that there is an extremely wide variation in the amount of natural resource revenue per capita in the provinces, ranging from a low of 18 cents per capita for the three year average in Prince Edward Island to a high of $112.17 per capita in Alberta. The national average is $16.62 per capita. It was because of this extreme variation that it was decided that the inclusion
of some portion of natural resource revenue in the equalization formula would produce a much better indication of fiscal need. It was decided therefore to include only 50 per cent of the average natural resource revenue on the ground that this would allow for some variation in the different rates of taxation in the provinces while at the same time not discouraging the provinces from using this revenue source.
The other element in the equalization formula consists of the standard taxes. For purposes of the equalization formula, the standard rates will be the rates by which the federal government withdraws from the standard tax fields, that is, 16-9-50 in the first year, 17-9-50 in the second year, 18-9-50 in the third year, 19-9-50 in the fourth year, and 20-9-50 in the fifth and final year of the new period. This means that the basis of the equalization payments will rise throughout the period as the federal government leaves increasing room in the personal income tax field for the provinces. The national average per capita yield of the standard taxes for any year plus 50 per cent of national average per capita return from natural resources for the average of the three preceding years will thus constitute the level below which no province can fall.
In addition, two equalization guarantees are provided. First, for provinces below the national average in the yield of standard taxes and 50 per cent of natural resource revenue, the equalization will never be less than enough to make them at least as well off as they would have been under a projection of the present arrangements. Second, for no province will the equalization payments ever be less than enough to bring its total receipts under the new arrangements up to the level of its total receipts in the final year of the old arrangements or in the average of the last two years of the old arrangements, whichever is the greater. The equalization provisions are applicable to all provinces whether or not they enter into tax collection agreements with the government of Canada.
At this point, with the permission of the house, I should like to place on Hansard table No. 3 containing a hypothetical illustration of how the equalization formula would apply to the year 1962-63 on certain assumptions.


Robert Jardine McCleave: Has
the minister such permission?


Some hon. Members:: Agreed.
[Editor's note: The table referred to follows: ]



TABLE 3

[Stage Direction]
Hypothetical Illustration or Provincial revenues for the Year 1962-63 under New Formula Assuming Rate of Growth of 5% per Annum in Tax Yields and no Change in the 19G1-62 Percentage Distribution by Provinces of Tax Yields or Population
(thousand of dollars)
Nfld. P.E.I. N.S. N.B. Que. Ont. Man. Sask. Alta. B.C. Total
New Formula {16-9-50)-revenues projected to 1962-63 from First Estimate for 1961-62 standard taxes at 1962-63 rate of federal withdrawal (16-9-50)	
equalization	
Atlantic Provinces Adjustment Grants	
Additional Grant to Newfoundland	
Total	
6,037	1,314	13,052	10,371	169,19314,397	3,399	19,459	15,394	72,30710,500	3,500	10,500	10,500	-8,000	-	-	-	-38,934	8,213	43,011	36,265	241,500314,480	29,482	20,201	45,758	72,835	682,723-	12,814	22,327	12,617	977	173,091-	-	-	35,000-	-	-	-	-	8,000314,480	42,296	42,528	58,375	73,812	899,414
r
►<
Present Formula {1S-9-50)-revenues projected to 1962-63 from First Estimate for 1961-62 using same assumptions as with New Formula:
total revenues from standard taxes at 13-9-50, equalization, stabilization, Atlantic Provinces Adjustment Grants, Additional Grant to Newfoundland	 37,227
1957 Formula {10-9-50)-revenues projected to 1962-63 from First Estimate for 1961-62 using same assumptions as with New Formula:
total revenues from standard taxes at 10-9-50,
equalization, stabilization	 19,556
7,381	41,315	35,762	241,500	296,170 42,296	42,528	61,294	76,0694,881	30,430	25,426	217,284	266,865 38,056	38,268	55,144	76,026
881,542
771,936
Note: The projection of the New Formula is based on standard taxes of 16-9-60, i.e., on rates equal to the federal withdrawal.' The provincesi will of course be free to levy higher or lower rates than these and if they do so their receipts will be correspondingly higher or lower. 1 he federal withdrawal m the individual income tax will rise progressively during the five year period commencing March 31, 1962 reaching 20% in the fifth year. The value of the additional four points made available to the Province of British Columbia, for example, will be $8,942,000 in terms of 1962-63 tax yields as estimated above.
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Dominion-Provincial Relations
7928	HOUSE OF
Dominion-Provincial Relations
Donald Methuen Fleming: I should point out that the figures in this hypothetical illustration differ somewhat from those presented at the February conference and tabled in Hansard of March 7, 1961, because they are based on more up to date estimates.
The above table gives a comparison between the estimated amount the provinces would have received under a projection of the arrangements in effect when this government took office four years ago when the standard rates were 10-9-50 and their estimated receipts under the new arrangements proposed. It will be seen from this table that in aggregate the provinces will be $127.5 million better off under the proposed arrangements than they would have been under the arrangements in effect four years ago. This is the estimated benefit in the first year of the proposed arrangements. This benefit will increase materially in subsequent years as the federal income tax withdrawal increases from 16 per cent to 20 per cent.
The resolution also refers to increased grants to the Atlantic provinces, bringing the total of these grants from $25 million in each of the last four years to $35 million for each of the five years in the next period. This special and separate recognition of the fiscal problems of the Atlantic region was initiated by this government and has been widely acclaimed, not only in the Atlantic region. It complements the improved equalization formula. The decision to increase these grants by 40 per cent for the next five year period is a further indication of the emphasis which this government wishes to put upon the need for placing all regions of Canada in a position to supply essential services without resorting to unduly burdensome levels of taxation.
The resolution also indicates that the bill will provide for an additional payment of $8 million per annum to the province of Newfoundland for each of the five years of the new period. This is in recognition of the special fiscal need of the province of Newfoundland.
The over-all effect of the new equalization formula taken together with the Atlantic provinces adjustment grants and the special payment of $8 million per annum to Newfoundland will be a greater emphasis on fiscal need. I should like to illustrate this fact by making certain comparisons. In 1957-58, the first year of the present tax rental arrangements, the total equalization payments of $136.0 million were distributed as follows: Newfoundland, 8.5 per cent; Prince Edward Island, 2.2 per cent; Nova Scotia, 12.8 per cent; New Brunswick, 6.4 per cent;

Quebec, 31.7 per cent; Ontario, nil; Manitoba, 10.2 per cent; Saskatchewan, 14.1 per cent; Alberta, 10.8 per cent; and British Columbia, 3.3 per cent.
In the first year of the new proposals the estimated total of fiscal aid including equalization, Atlantic provinces grants and the special grant of $8 million to Newfoundland will be $216.7 million and will be distributed as follows: Newfoundland, 15.2 per cent; Prince Edward Island, 3.2 per cent; Nova Scotia, 13.8 per cent; New Brunswick, 11.9 per cent; Quebec, 33.4 per cent; Ontario, nil; Manitoba, 5.9 per cent; Saskatchewan, 10.3 per cent; Alberta, 5.8 per cent; and British Columbia, 0.5 per cent. Thus the share of these greatly increased fiscal aid payments going to the Atlantic region will have risen from 29.9 per cent to 44.1 per cent. By the end of the five year period of the new proposals the share going to the Atlantic region will be over 50 per cent, provided rates of growth are not greater in the Atlantic region than elsewhere in Canada. Thus the new formula gives full recognition to the principle of equalization and fiscal need which this government has always maintained to be essential. At the same time the federal treasury will be saved the expense of paying equalization on an unrealistic basis and unsupported by fiscal need.
Under the present tax rental agreements certain stabilization provisions were included to protect the provinces against an undue decline in the revenue from the standard taxes and equalization. It can be argued that it is not the federal government's responsibility under tax collection agreements to protect the provinces from declines in the yield of their own taxes. It was evident, however, during the course of the discussions, that the provinces attached considerable importance to the stabilization provisions of previous agreements. Under the existing arrangements, the stabilization provisions ensure that a province will not receive less in any year from standard taxes, equalization, and stabilization than 95 per cent of the total it received in the average of the two preceding years. It was decided as a concession to the provinces to continue this provision so that even under tax collection arrangements all provinces, including those which do not enter into collection agreements, will be protected from an inordinate decline in the revenues from the standard taxes and equalization.
Reference is made in the resolution to the fact that the bill will provide for advance payments in respect of the taxes collected under the tax collection agreements with the provinces. The details of the tax collection agreements will have to be worked out in the course of the succeeding months. However, it

has been evident from the discussions to date that some of the provinces will wish the tax collection payments to provide for an even flow of revenue throughout each fiscal period as is provided under the present tax rental agreements. Therefore it is necessary to provide authority for the federal government to pay out money to the provinces on an estimated basis pending the final determination of the amounts of provincial tax assessed year by year.
I wish at this time to refer to three other matters which are not included in the bill but which may nevertheless be regarded as part of the proposed fiscal arrangements for the provinces for the period after March 31, 1962.
Under the 1947 and 1952 Tax Eental Agreements Acts provision was made for paying to the provinces half of the federal income tax collected from certain public utility corporations whose main business is the distribution or generation for distribution to the public of electrical energy, gas or steam in respect of income of the corporation derived from the said distribution or generation. This sharing has been continued on a year to year basis since then and has been provided for in the estimates. It was evident from the discussions at the conferences that most of the provinces attach great importance to the continuation of this arrangement. As a concession to the representations made by the provinces, the government proposes to give the assurance that this sharing will be continued throughout the period of the next agreements, that is, for the next five years up to and including the fiscal year 1966-67.
A second matter which will be dealt with outside the provisions of the bill is the matter of a co-operative approach toward the taxation of the forest industry. Under the Federal-Provincial Tax-Sharing Arrangements Act, provincial taxes on the income from logging operations are specifically excluded from the corporation taxes which a province must refrain from levying in order to enter into a tax rental agreement with the government of Canada. Taxes on logging profits are imposed in two provinces, Ontario and British Columbia, and although these taxes are deductible as expenses in computing federal income tax, the result has been that in these provinces the forest industry bears somewhat higher income taxes than other industries. It was because of the government's concern with this situation that the Prime Minister made the following statement in his letter of June 16, 1961 to the provincial premiers:
At the conference I stated that the federal government was prepared to consider certain concessions in connection with the taxation of the forest industry if the provinces were willing also to make some concessions. It has been conceded
Dominion-Provincial Relations that because the logging profits tax is levied in addition to the corporation income tax, the forest industry bears a greater tax burden than other industries. The possibilities of lessening the burden of taxation on the forest industry have been discussed at the official level. One of the possibilities discussed was that a tax credit, shared between a province and Canada, might be granted to the industry.
Before this can be done some further technical discussions will be required to reach agreement on the definition of logging income which will be subject to tax and accepted for the purpose of this tax credit. Subject to reaching agreement on this matter of the definition of logging income, the federal government is prepared as a means of relieving the tax burden on the forest industry to offer a tax credit equal to two thirds of the logging tax up to a maximum rate of 10 per cent, provided the province gives a tax credit equal to the remaining one third of such logging tax.
A third matter has been under discussion with the provinces for some time and that is the application of provincial sales taxes to federal agencies and corporations. Similar agencies and corporations at the provincial level have been subject to federal sales and excise taxes and it has been the contention of the provinces that federal agencies should be placed in the same position. At the February conference the Prime Minister made the following statement concerning this matter:
We have given further thought to the means of achieving reciprocity of treatment in the position of provincial crown corporations and agencies under federal sales and excise taxes and the position of federal corporations and agencies under provincial direct taxes on purchases. We are prepared to waive federal immunity from taxation and instruct federal corporations and agencies to pay provincial purchase taxes and other similar taxes, on the understanding that provincial corporations and agencies will be subject to federal sales and excise taxes. We think that this is an equitable arrangement, being in accordance with the general principles followed in regard to the payment of federal taxes on purchases by federal departments. We think it is better than reciprocal exemptions as an administrative and accounting arrangement, preserving as it will a fairer relationship between crown corporations and agencies in general and private businesses.
We are proceeding with the preparation of a list of federal agencies and corporations which would be subject to provincial sales taxes and any necessary legislation providing for such payment of taxes will be introduced to take effect April 1 next year.
I have now explained the main features of the bill as provided for in the resolution and have dealt with certain ancillary matters which are part of the fiscal arrangements. The provisions of the bill will reaffirm and strengthen the principle that equalization payments must take full account of fiscal need and at the same time enable the provinces to exercise their constitutional rights of taxation. The government is convinced that the new arrangements provided for under the bill

Dominion-Provincial Relations will be the basis for a sound partnership between the provinces and the federal government and will usher in a new era of cooperation on more equal terms.


Lester Bowles Pearson: In what some of us still persist in hoping are the dying hours of this session which began last November the minister has put before the committee a resolution dealing with a subject which is almost as important as any subject can be in a federal state, namely the fiscal and financial relationships between the provinces and the central government. Our whole history shows the importance of this matter in national development, unity and strength. If that development in our federal society cannot proceed in a way which provides for the maintenance of a reasonably balanced level of essential services throughout the country so that there will not be in this federation underdeveloped areas in that sense, our history shows that the federation cannot be strong. Our history also shows that this consideration puts an obligation on the federal government to assist, through fiscal aid and financial aid, those provinces which are not as fortunate as others in their resources and because of that fact have not access to as much financial resources as have some of the more fortunate and richer provinces. That is the basis on which the federal government has helped the provinces ever since 1867.
In his statement the minister said that the principle in the relations between the provinces and the federal government in this field, and I would add in every other field, must be one of enlightened co-operation rather than centralization. Of course, Mr. Chairman, we all agree with that statement. We on this side will consider the application of this formula in that light, namely whether it implements the principle of enlightened cooperation; whether it is fair in its impact on the poorer provinces; and above all, whether it implements in a fair and equitable way the principle to which we on this side have always attached so much importance, namely the principle of equalization. The minister spoke for some time, Mr. Chairman, and we will examine with great care what he has said. Especially will we examine the statistical tables he has placed on the record. I thought some of the minister's arguments and some of his statements, and especially his passion now for the principle of equalization, were a little disingenuous in the light of the past history of the attitude of his party to this matter. I also noticed that, among the tables which the minister inserted into the record, he did not include, or at least I did not gather that he did so, one which we would certainly like to see included, namely a table 
which would show what the continuation of the present arrangement would mean to the provinces in comparison with the application of the new formula.


Donald Methuen Fleming: That is on record in one of the earlier tables.


Lester Bowles Pearson: As I say, we will study these tables with interest. I have not had much chance tonight to do that. We will have something to say about these tables and we shall also be glad indeed to put on Hansard a few tables of our own, as our interpretation of the application of this new formula is certainly not that which has been given to us tonight by the minister. In any event, this new formula or this new deal embodied in this resolution on which a bill will be based is apparently the result of four years' consideration given to this matter by the federal government. This is the final outcome of the promises made by the Prime Minister and his colleagues in the election campaigns of 1957 and 1958 when they told the provinces there would be a new deal which would be acceptable to all the provinces and welcomed by them. We remember particularly the statements made by the Prime Minister in Ontario and the reaction of those statements by the premier of Ontario. We also remember the amount which the premier of Ontario said would be fair to that province under the new deal which he assumed the new government would give him and on the strength of which he begged the people of Ontario to "follow John".


Paul Joseph James Martin: That amount was $100 million.


Lester Bowles Pearson: That amount was $100 million. They have not followed John into $100 million for Ontario but they followed him into a sales tax for Ontario.


Some hon. Members:: Oh, oh.


Lester Bowles Pearson: If these proposals which the minister has put before the committee tonight carry out all these desirable principles which the minister has mentioned such as equalization, enlightened co-operation, greater assistance to the provinces and greater recognition of provincial fiscal needs, it is a strange thing that these proposals have not been accepted with enthusiasm by all the provinces.
That has not happened. Most of the provinces have been dissatisfied with the deal which has been put before them. Some provinces, especially the less rich provinces, are complaining about the inadequacy of this formula which is a result of four years' consideration by this government and which was

to put the fiscal relations of the provinces and the federal government on a new and more satisfactory basis.
The resolution contains these words:
That it is expedient to introduce a measure to authorize tax collection agreements with the governments of the provinces-
We will have something to say about these agreements:
-and to provide that the minister may pay to a province, out of the consolidated revenue fund, in respect of any fiscal year in the period commencing on the 1st day of April, 1962 and ending on the 31st day of March, 1967,
(a) a tax equalization payment;
The minister had a great deal to say this evening about this principle of equalization and the way this formula was implementing it in a way which would strengthen rather than weaken the principle. We claim, and we will be able to produce evidence to support the claim, that the equalization formula weakens rather than strengthens the principle. In any event, the principle itself is not so important as the base on which the principle is applied. For the minister to argue that by altering the base from the top two provinces to the national average strengthens rather than weakens the principle is very, very difficult for us on this side of the house to understand. We would like the minister in the course of this discussion to tell us how this equalization payment under the new formula will actually affect the various individual provinces. I am not sure whether the tables the minister introduced tonight deal with that matter, but perhaps he will deal with it before the debate is over.
The government has claimed, and the minister has repeated the claim this evening, that these new tax collection agreements represent a return to the spirit of the constitution and this gives back to the provinces their complete rights in the field of direct taxation. The minister claims that this represents, in that sense, a very great advance over the tax rental agreement formula. Of course that claim, if I may use the minister's favourite word, is nonsense. Under the present system which has been applied since 1957 three options were offered to the provinces. They could levy and collect their taxes at whatever rates they wished to determine themselves. They have always had that option. They could simply rent the three direct tax fields or they could levy those taxes, and the federal government was willing to collect them provided the provincial rates did not exceed the standard rates. Up to the present, then, the provinces have had these three options. Nobody forced them into the tax rental agreement field. They had the other options. Under the new formula the rental option would
Business of the House cease to be available and the federal government would be willing to collect provincial taxes at any rates.
While this last change-the minister went to some pains to illustrate this point this evening-may be an improvement for certain of the richer provinces, it can hardly be described as a revolutionary change. The minister called it-and I am paraphrasing what he said-a sort of introduction of the idea of flexibility. He said this provides more flexibility in these areas. But this new arrangement may very well lead to the tax jungle of the 1930's. Moreover, to the extent that the provinces will have to depend on additional direct taxes without equalization for their financing, great regional inequalities will arise because for most of the provinces equalization is a very important source of revenue. We claim that the principle of equalization and the application of that principle in the new formula will react to the disadvantage of the poorer provinces. Indeed the provinces themselves have already pointed that out to the minister. They seem singularly ungrateful for this new deal which according to the minister is going to mean so much to them.
Therefore we on this side of the house claim that the equalization principle is weakened under this new formula and we will produce evidence to support that contention. We claim that the new proposal is much more a return to the tax jungle and the inequalities of the 1930's than even the 1867 arrangement which embodied a large element of equalization.
Mr. Chairman, may I call it 10.30.
Progress reported.



BUSINESS OF THE HOUSE

John Whitney Pickersgill: Mr. Speaker, I wonder whether the house leader would indicate what business the government intends to bring forward tomorrow?


Gordon Minto Churchill: It will be a continuation of the program as outlined; third reading of Bill No. C-120 regarding the Income Tax Act, then a continuation of the debate on the resolution with which the committee has just been dealing, and the other item on the order paper, Bill No. C-71, an act respecting the civil service of Canada. Those are the legislative items that will be available to the house tomorrow.


John Whitney Pickersgill: Has the minister any views about the report of the committee on procedure?


Gordon Minto Churchill: I am waiting for an opportunity, when the house is free of some of the

Business of the House other business, to consider that matter. Then, of course, we have interim supply to take into consideration.


Lester Bowles Pearson: Mr. Speaker, I wonder
whether the house leader would consider bringing in the civil service bill tomorrow so that the Minister of Finance might be
free to attend, if he so desires, the Senate committee on the Bank of Canada Act.


Donald Methuen Fleming: Oh, your solicitude is so impressive. You are most unselfish.
At 10.30 p.m. the house adjourned, without question put, pursuant to special order.

Questions



ANSWERS TO 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. Meunier: 1.	How many houses have been repossessed for Central Mortgage and Housing, by provinces, for each year from 1957 to 1960 inclusive?
2.	What is the value, by provinces, of these repossessions?
Answer by: Hon. D. J. Walker (Minisier of Public Works):
(1) Number of houses acquired by the mortgage insurance fund.
Province	1957	1958	1959	1960	1957-1960Newfoundland	
1	1	2Prince Edward Island	Nova Scotia	-	New Brunswick	-	-	-	-Quebec	
1	6	15	48	70Ontario	
4	3	20	108	135Manitoba	-	-Saskatchewan	-	1	1Alberta	1	3	4British Columbia	
-	-	-	12	12CANADA	
6	10	36	172	224
(2) Value* of houses acquired by the mortgage insurance fund.
Province	1957	1958	1959	1960	1957-1960$	$	$	$	$N ewfoundland	
12,336	11,785	24,121Prince Edward Island	-	-	-Nova Scotia	-	-	-New Brunswick	-	-	-	-	-Quebec	
9,123	46,553	150,325	508,290	714,291Ontario	
40,768	26,142	220,017	1,202,153	1,489,080Manitoba	-	-Saskatchewan	-	-	9,539	-	9,539Alberta	-	7,984	-	30,173	38,157British Columbia	
~	-	-	131,756	131,756CANADA	
62,227	80,679	379,881	1,884,157	2,406,944
* Amount of claim or outstanding balance at time of acquisition.


HOUSING
Mr. McCleave: What are the latest figures under the National Housing Act for (a) housing (b) assistance on municipal sewage projects (c) loans for university residences, during 1961?
Answer by: Hon. D. J. Walker (Minisier of Public Works):
(a)	In June, housing starts in urban centres numbering 10,644 dwelling units were at the highest level since November, 1959, and represented an increase of 22.3 per cent over June, 1960.
Starts for the first six months of 1961 totalled 39,981 an increase of 35.3 per cent over the figure for the first half of 1960.
N.H.A. lending activity continued to improve in June, bringing loan approvals for the first six months of the year to 29,823 dwelling units, up 190.6 per cent over the 10,262 reported for January-June, 1960.
(b)	Up until June 30, 72 loans amounting to $30,426,000 for the purpose of providing assistance in the construction of municipal sewage treatment projects have been approved by Central Mortgage and Housing Corporation. Loans have now been approved to municipalities in each of the 10 provinces. In addition, 14 formal applications are on hand for loans amounting to $2,450,000, together with another 199 preliminary inquiries. For 123 of the latter, the municipalities' estimate of loans required totals $67,558,000.

Questions
(c)	Central Mortgage and Housing Corporation has also made 11 loans in an amount of more than $9.5 million to universities to assist in the construction of student residences. The universities for which loans have been approved are: University of New Brunswick, Acadia University, University of King's College, St. Francis Xavier University, Assumption University, Waterloo Lutheran University, Brandon College, United College, Winnipeg,
Emmanuel College, Saskatoon, Notre Dame College, Wilcox, Saskatchewan and University of British Columbia. The residences to be built with the assistance of these loans will accommodate more than 2,000 students.
In addition to loans approved, the corporation has received and is reviewing applications from 13 other universities that are seeking loans aggregating some $19.5 million to accommodate 4,500 students.

Wednesday, July 12, 1961


COMMONWEALTH RELATIONS
Howard Charles Green: Mr. Speaker, I have a short statement to make concerning Canada's special commonwealth African aid program.
The house will be interested to know that agreement has been reached for an aerial mapping project to be undertaken in Nigeria as a part of our assistance program. This project, which is the first Canadian capital project in Nigeria since that country attained independence, will include an aerial survey and topographical mapping of approximately 28,000 square miles. It is expected that the maps which will result from this project will greatly facilitate the economic development of Nigeria. The cost of the entire project is estimated at $1,350,000. It will be undertaken by a Canadian company over a period of two or three years, subject to the appropriation of the necessary funds by parliament.


Paul Joseph James Martin: Mr. Speaker, I simply want to say that when the minister of labour of Nigeria was here the other day we expressed our warm admiration for his country, and indication then was given of our interest in trying to assist that country in ways now covered by the announcement made by the minister.


Hazen Robert Argue: Mr. Speaker, this is the kind of announcement that receives the wholehearted support of the Canadian people. In particular, I think any assistance by Canada to the developing nations in Africa is most welcome, is most desirable and is in our mutual interest. Our only criticism in the past has been that Canada should raise its sights and do more in this regard.


FINANCE
[Stage Direction]
On the orders of the day:
Lester Bowles Pearson: Mr. Speaker, I should like to ask the Minister of Finance whether he will tell the house why he chose to keep the House of Commons in ignorance until June of this year concerning a change in policy affecting
the use of the exchange fund to affect the value of the Canadian dollar, which he secretly put into effect last December.


Donald Methuen Fleming: Mr. Speaker, I do not think there were any questions asked about this matter in the meantime. There was a modification of the policy, not an extensive or far reaching modification but a modification. I think if anyone had chosen to ask a question and the opposition had been on its toes, for instance, this information would have been forthcoming in reply to any questions. The position of the exchange control fund is published as at the end of each month. There is no secrecy attending that.
In addition, Mr. Speaker, I say this information now comes to light not by reason of any questions asked in the house but by another breach of confidence by the man who is the governor of the agent of the government in these matters. This is a shocking breach of confidence by a man who pretends to stand on principle and to be defending principle.


Lester Bowles Pearson: Mr. Speaker, is the minister not aware that when this matter was brought up in the house he gave the house an assurance that the exchange fund was being used to level off fluctuations in the rate of exchange but not to affect the rate itself?


Donald Methuen Fleming: That was the policy that was observed, Mr. Speaker, as I have indicated to the house in reply to any question there has been on this subject. I would not wish the house to be misled by what has been said elsewhere into thinking that there was some far reaching or extensive departure from the policy that had been followed. It was a very modest modification of the formula that had been observed up until that time. I emphasize that fact-a very modest modification, not the impression that has been created elsewhere on the subject.


Lester Bowles Pearson: Would the minister tell the house whether there is any relation between the use of the fund in this way and his description of the reduction of the dollar by a significant discount?


Donald Methuen Fleming: Mr. Speaker, I should like to answer the hon. gentleman's question clearly if I fully apprehend it. What he has asked me about is, I take it, something that occurred after December 20 and

Inquiries of the Ministry prior to June 20. I have been asked questions and I have answered questions as to what is in our minds in relation to a significant discount at any particular time depending upon Canada's total economic circumstances. That has been made very clear, Mr. Speaker. If I have not fully apprehended the hon. gentleman's question, I will be glad to enlarge further.


Erhart Regier: Mr. Speaker, I should like to ask the minister another supplementary question. The minister mentioned a breach of confidence. Does the minister consider it a breach of confidence that he revealed to the house that in-


Mr. Speaker:: Order. I think the hon. member is now presenting an argument in the form of a question. There have been two sup-plementaries on a matter which has been debated at great length in the house, and I would think it should not be allowed to go on to the point where it becomes another debate.



INTERNATIONAL MONETARY FUND


[Stage Direction]
On the orders of the day:
Erhart Regier: Mr. Speaker, I should like to ask the Minister of Finance whether he is in a position to give a denial or otherwise to an allegation found in a Canadian Press dispatch in this morning's Globe and Mail to the effect that Canada is guilty of having violated our agreement under the international monetary fund, in that we did not hold prior consultation with the executives of the fund before the bringing down of the budget.


Donald Methuen Fleming: Mr. Speaker, Canada is quite prepared to defend her action in the light of the articles of the international monetary fund. I made that matter very clear previously. Allegations emanating from another source suggesting that this action on Canada's part was in violation of the articles of the international monetary fund we reject as unfounded and improper.



TRANS-CANADA AIR LINES REQUEST FOR INVESTIGATION INTO LABOUR DISPUTE

[Stage Direction]
On the orders of the day:
Hazen Robert Argue: I have a question for the Minister of Labour, Mr. Speaker. Has the minister received a telegram from Mr. E. P. O'Neal, secretary treasurer of the British Columbia federation

of labour, requesting a full and thorough investigation by the federal government into all aspects of T.C.A.'s conduct relative to the current contract dispute, in which he states that T.C.A.'s actions are a direct violation of the principles of the Industrial Relations and Disputes Investigation Act? Has the minister undertaken the investigation which has been requested?


Michael Starr: Mr. Speaker, I can best answer that question by reading the telegram which I sent in reply to Mr. O'Neal. It reads:
Retel seventh concerning dispute affecting flight attendants employed by T.C.A. Every effort being made to obtain settlement of dispute before strike deadline set for July 21. Complaint concerning company actions made by representative C.A.L.F.A.A. on May 28 and at my request statement in that regard subsequently made by T.C.A. which also issued statement to employees in attempt to clarify any misunderstanding that might have arisen. To date have had no further complaint from C.A.L.F.A.A. in this regard and would assume that it is considered more constructive action to direct efforts toward settlement of dispute relating to wages and working conditions.



BRIDGES


[Stage Direction]
On the orders of the day:
Hubert Badanai: Mr. Speaker, I have a question for the Minister of Public Works. My question arises out of a resolution passed by the Fort William city council urging the government to give consideration to the construction of a bridge across the Kaministikwia river as an extension of Eighth avenue to the city road to provide access to highway No. 61. Has the minister received this request from the city of Fort William, and, if so, is he in a position to say that consideration will be given to this project?
Hon. D. J. Walker (Minisier of Public
Works): Mr. Speaker, I wish to thank the hon. member for giving me notice of his intention to ask this question. I have received the resolution referred to, and I have the answer.
The letter containing the resolution of the city of Fort William concerning a bridge over the Kaministikwia river was received only today. I have not had much opportunity to study the resolution as such. However, I have in the past examined the request for a bridge over this river, which would appear to be a link in the road system of the city and province. I stress those latter words. As such, it did not appear to be a responsibility of the federal Department of Public Works.
The hon. member raised a question on this matter during discussion of the estimates

of my department on June 15, as reported at page 6392 of Hansard of that date. He suggested that a future extension of the terminal might require such a bridge. Our present plan for the lakehead is extensive, as the hon. member mentioned, and can be enlarged two or three times if necessary without affecting the proposed bridge. Our traffic connections to the seaway terminal will be quite adequate in view of the large overpass now under construction which will connect the terminal directly to the main highway arteries. The answer, therefore, is no; we do not intend to build a bridge.



FISHERIES


[Stage Direction]
On the orders of the day:
Robert Muir: Mr. Speaker, I should like to direct a question to the Minister of Fisheries.
I refer the minister to my question of July
8.	Is the minister now in a position to give any information in reply to requests for an extension of the lobster season in district 6B?


Robert Simpson MacLellan: Mr. Speaker, before the minister replies to that question may I ask him at the same time to report on the request for an extension of the season in district 6A?


John Angus MacLean: Mr. Speaker, on Saturday last I said I hoped to be in a position to make a report today. I am now able to say that up to July 6 the catch in lobster district 6B was about 90 per cent of the average for the last three years. At that date there were still nine days of fishing remaining and catches were heavy. It is expected that by July 15 at least an average catch will have been harvested. In lobster district 6A the catch up to and including July 6 was about 86 per cent of the average for the last two years. With nine days remaining from that date and with catches heavy, it is anticipated that this district also will have at least an average catch. Under the circumstances no extension of the season in these two districts can be justified. I might add that requests for extensions which were received some time ago were based on the assumption that the catches in these districts would be much below normal.



INDUSTRY


[Stage Direction]
On the orders of the day:
Alan Aylesworth Macnaughton: Mr. Speaker, I should like to address a question 90205-6-495
Inquiries of the Ministry to the Minister of Finance. Has the attention of the minister been directed to the announcement by Imperial Oil Limited and Texaco Canada Limited, appearing on the front page of the Montreal Gazette today, to the effect that they have boosted the price of gasoline by 1 cent per gallon throughout greater Montreal, the Hull area and western Quebec? Has the minister any comment to make thereon?


Donald Methuen Fleming: Mr. Speaker, I have not seen the article or advertisement or whatever it may be in question.


Alan Aylesworth Macnaughton: It was an announcement on the front page of the Montreal Gazette today.


Donald Methuen Fleming: Mr. Speaker, the hon. member for Mount Royal has sent over to me the article in this morning's Gazette which was the basis of his earlier question. I have now had an opportunity to read it. I draw attention to the fact that this article indicates that two companies have announced an increase of 1 cent per gallon in the price of gasoline in local areas, greater Montreal, Hull and western Quebec, and that there had been a similar increase announced in Ontario.
Attention is drawn in this article to the fact that this is an outcome of the price wars that have prevailed hitherto, and it is described in the report as a correction of a situation arising out of price wars. I do not think it has any significance as far as parliament is concerned. I do not know whether it has any significance with regard to the policies in the province of Quebec.


Lionel Chevrier: It is related to the budget.


Donald Methuen Fleming: Now we have the missing link; the hon. member for Laurier has said it is related to the budget. It is quite obvious that no person who takes this article at its face value and applies an honest judgment to it could by any stretch of the imagination think it had anything to do with the budget, because it says itself:
An Imperial Oil spokesman said price wars in Quebec and Ontario the last three years had driven down the price to what the company felt was an "unsatisfactory level" and that the increase was aimed at correcting the situation.
So it is quite obvious, Mr. Speaker, that anyone who tries to connect this with the budget is not only drawing a long bow but is resorting to his distorted imagination.


Lionel Chevrier: Mr. Speaker, may I ask a supplementary question of the minister and ask him how it is, then, that the

Inquiries of the Ministry price of certain commodities in Canada has already increased; for instance, the price of bread-


Some hon. Members:: Oh, oh.


Lionel Chevrier: -which it has been stated is directly related to the budget, as this item is directly related to the budget.


Mr. Speaker:: Order. I think the hon. member should not attempt to renew the budget debate on orders of the day.


Donald Methuen Fleming: With respect, the hon. member has not contented himself with asking a question; he has put a statement on the record. With respect, Mr. Speaker, I think I should be entitled to say this briefly about the situation-


Mr. Speaker:: If the minister wishes to comment briefly upon the price of a loaf of bread I will allow him to do so.


John Whitney Pickersgill: Let them eat cake.


Donald Methuen Fleming: Mr. Speaker, the hon. member has said there has been an increase. What there was in fact was a suggestion that there might be an increase. I have already drawn attention to the fact that the increase in the world price of wheat, from which Canadian wheat producers do derive some benefit after all, would not account for more than one eighth or one ninth of a cent per 24-ounce loaf of bread. That is the molehill out of which the hon. member for Laurier is trying to construct a mountain in his own imagination.


George James McIlraith: Mr. Speaker, might I ask the Minister of Finance if he is aware that the increase in the price of flour since the budget was delivered is greater, on the quantity of flour used by each of the major bakeries, than the total-


Mr. Speaker:: Order. If the hon. member completes his question the minister will wish to reply. I heard all this discussion in the budget debate, and it does not seem to me there is any urgency about anything that is now being said.


Lionel Chevrier: Where there no price increases in the budget?


George James McIlraith: You will have observed, Mr. Speaker, that my question was seeking information, and it did not contain argument.


Mr. Speaker:: I did observe that, but I was afraid the debate would be continued by hon. members.


George James McIlraith: Mr. Speaker, the question is in order. The answer may be out of order. 1 think the time to rule it out of order is when the answer is given.


Donald Methuen Fleming: Mr. Speaker, I would love to answer that question. I would just like to say that if the price of bread or flour has been increased in the manner indicated by hon. members opposite, it could not be attributed to the budget. I think the western wheat producer will be very glad to see an increase in the world price of wheat.


George James McIlraith: Mr. Speaker, in view of the answer, or the statement permitted which was not related to my question, I should like to put my question. It is this. Is the minister aware of the fact that the profits of the major bread companies in Canada last year in each case were less than the amount of the increase in the price of flour they buy?


Donald Methuen Fleming: No. Mr. Speaker, I have no knowledge of what the hon. gentleman refers to as a fact. I would wish to examine that very carefully before I regarded this statement on his part as any justification for associating any reputed increase in the price of this product with the budget, because it is quite clear that hon. members opposite are simply trying to make a whipping boy out of the budget for something for which the budget is in no way responsible.


Mr. Speaker:: Order.


Lionel Chevrier: We rely on the facts.


Donald Methuen Fleming: I will not come to you for instruction on facts.


Lionel Chevrier: You have been doing pretty badly.


Frank Howard: Mr. Speaker, I should like to direct a supplementary question to the Minister of Justice. I wonder whether the minister can tell the house whether the combines investigation branch will investigate the announcement of the Imperial Oil Company increasing the retail price of gasoline, and consider whether such an increase would be a contravention of the resale price maintenance provisions of the combines act.


Edmund Davie Fulton: Mr. Speaker, the director of the combines restrictive trade practices commission is aware of this announcement, and will take any necessary action.



CANADIAN NATIONAL RAILWAYS


[Stage Direction]
On the orders of the day:
Lionel Chevrier: Mr. Speaker, may I direct a question to the Prime Minister and ask him whether the vacancies

on the board of directors of the C.N.R. have been filled, and whether the chairman of the board has been appointed.


John George Diefenbaker: Mr. Speaker, the answer is no.
(Translation):



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Jean-Paul Deschatelets: Mr. Speaker, I should like to put a question to the Minister of Transport. Is the minister aware that several hundred employees will be laid off at Dorval as a result of the granting of a lubrication service contract to an American firm?
Could the minister give us some explanation on this matter?


Léon Balcer: That is the first time I have heard of it, Mr. Speaker. I will have inquiries made by my departmental officials.



PUBLIC SERVICE


[Stage Direction]
On the orders of the day:
Noël Dorion: Mr. Speaker, I should like to supply some information in reply to the questions which were directed to me recently concerning the advisability of granting leave with pay to part time employees. Generally speaking, the government-and this includes the civil service commission-has followed the policy of granting regular leave only to full time civil servants. A thorough review of that policy is now being made. The new policy we are now considering would be aimed at granting leave to all employees on the basis of their period of employment. When the civil service commission has completed its study of the matter, the house will be informed of the way in which this principle would apply.
(Text):



ARTS, LETTERS AND SCIENCES &quot;LADY CHATTERLEY'S LOVER&quot;  REPORTED WITH- DRAWAL FROM SALE

[Stage Direction]
On the orders of the day:
Douglas Mason Fisher: Mr. Speaker, I should like to ask the Minister of Justice a question with regard to statements that the book "Lady Chatterley's Lover" has been 90205-6-495J
Inquiries of the Ministry withdrawn from sale by publishers. I should like to ask the minister whether his department has given any advice to Canadian publishers to the effect that this book should be removed from sale, or any advice to the customs department that no more copies should be allowed into Canada.


Edmund Davie Fulton: Mr. Speaker, I cannot speak from personal knowledge because I have not asked my officials, but I feel quite certain that my department has given no such advice.



INQUIRY AS TO POLICY ON DELIVERIES TO FEED MILLS

[Stage Direction]
On the orders of the day:
Hazen Robert Argue: Mr. Speaker, I should like to direct a question to the right hon. Prime Minister. In view of the fact that the new crop year is just a few weeks away, and the government has stated there would be a review of the policy of the wheat board in relation to the delivery of grain to feed mills, has any consideration been given to this policy, and can the Prime Minister say whether grain deliveries to feed mills within the designated areas will begin the first of this crop year and will be brought under delivery quotas?


John George Diefenbaker: Mr. Speaker, naturally I wish to look into the implications of that question and get the relative information.



EXTERNAL AFFAIRS


[Stage Direction]
On the orders of the day:
Frank Howard: Mr. Speaker,
before orders of the day are called I should like to remind the Secretary of State for External Affairs that on July 5, 1961 the hon. member for Trinity-Conception directed the following question to the Minister of Fisheries:
Can the minister say whether active negotiations are being carried on at the present time with the nations which are fishing off the east coast of Canada to extend the fishery limit to twelve miles?
At that time the Minister of Fisheries said he would bring the matter to the attention of his colleague. I wonder whether the Secretary of State for External Affairs is now in a position to answer that question?


Howard Charles Green: Mr. Speaker, as members of the house will recall, Canada made intensive efforts both before and during the 1960 conference on the law of the sea to bring about international agreement on the breadth of the territorial sea and contiguous

Income Tax Act
zone. The failure of the conference has not, however, meant the abandonment of our interest or our efforts in this field. Canada has continued, along with other like minded countries, to seek an answer to these questions which will afford adequate protection to our fishing interests and at the same time contribute toward an international solution of this problem.
Because of the confidential nature of these developments I am not at liberty to disclose the solution which Canada is pursuing. I can assure the members of the house, however, that no efforts are being spared in our attempt to bring about a resolution of this problem. With respect to the particular question asked, the proposal we have in mind would apply equally to both Canada's east and west coasts.


Frank Howard: Mr. Speaker, I should like to ask a supplementary question. I wonder whether the government would give consideration to the adoption of Bill No. C-96, which stands in my name on the order paper, to provide a solution in this regard?


Hazen Robert Argue: Hear, hear.


Howard Charles Green: Mr. Speaker, I realize that the hon. member for Skeena is an authority on divorce, but I doubt very much whether he is an authority on the law of the sea, and I should have to take a very clear look at the bill before I decide to adopt it.


Hazen Robert Argue: That is a pretty cheap answer.


Some hon. Members:: Oh, oh.


Frank Howard: Mr. Speaker, as a fellow British Columbian I am sure the minister wil agree that each of us has an interest in all sorts of fields.


Lester Bowles Pearson: Mr. Speaker, may I ask whether the government is considering initiating negotiations for an international agreement to cover those countries which support the twelve mile zone?


Howard Charles Green: Mr. Speaker, I am afraid I cannot go any further than the statement I have already made. It would not be helpful if I were to make a disclosure along the lines of the question asked by the Leader of the Opposition.


INCOME TAX ACT
[Stage Direction]
The house resumed from Monday, July 10, consideration in committee of Bill No. C-120, to amend the Income Tax Act-Mr. Fleming (Eglinton)-Mr. Flynn in the chair.

On clause 27.
Jacques Flynn: When the committee rose last night we were considering the subclauses listed on page 23 of the bill. Has the consideration of this portion been completed?
On subclause 3.


John Whitney Pickersgill: Mr. Chairman, I wonder whether you could perhaps suggest to hon. members that we should be allowed to hear ourselves think.
Subclause 3 agreed to.
On subclause 4.


John Whitney Pickersgill: There does not appear to be anything in subclause 3 that would call for any particular explanation beyond what has already been given to my friend the hon. member for Drummond-Arthabaska last evening. I wonder whether the minister could tell us what point is involved in subclause 4.


Donald Methuen Fleming: Mr. Chairman, the tax advantages accorded to such a plan depend upon registration. Therefore they run from the date of registration, and that is why this subclause has been included.


John Whitney Pickersgill: Mr. Chairman, that answer is not very illuminating, if I may say so. The language of the subclause says:
Where a profit sharing plan is accepted by the minister for registration as a deferred profit sharing plan, the plan shall be deemed to have become registered as a deferred profit sharing plan
(a)	on the date the application for registration of the plan was made, or
(b)	where in the application for registration a later date is specified as the date upon which the plan is to commence as a deferred profit sharing plan, on that date.
Does that mean that if an application is not considered for a considerable period of time, as might very well be the case while an investigation was being carried on, it would in fact be considered to be in force from the very date on which the application was received by the Minister of National Revenue?


Donald Methuen Fleming: Yes, Mr. Chairman, unless the application indicated that the plan was to come into effect at some date later than the date of application.
Subclause 4 agreed to.
On subclause 5.


John Whitney Pickersgill: Mr. Chairman, the explanation to subclause 5 does not leap to the eye. No doubt the minister can explain it very simply.


Donald Methuen Fleming: Mr. Chairman, I should have thought this was plain. This clause states that for a period during which

a plan is a deferred profit sharing plan, the plan shall be deemed, for the purposes of the act, not to be an employees' profit sharing plan. There is a difference between an employees' profit sharing plan and a deferred profit sharing plan. The definitions of this clause under consideration are included in subclause 1.
Subclause 5 agreed to.
On subclause 6.


John Whitney Pickersgill: Mr. Chairman, perhaps the minister ought to give us some explanation in respect to paragraph (b) of subclause 6.


Donald Methuen Fleming: Perhaps I should add to my last observation that employees' profit sharing plans are defined in section 79, subsection 1 of the act.


John Whitney Pickersgill: I see; that is not in this bill.


Donald Methuen Fleming: There is a definition in this bill of profit sharing plans as well as a definition of deferred profit sharing plan, but there is a definition in the act now in respect to employees' profit sharing plans.


John Whitney Pickersgill: Mr. Chairman, I must confess that this did puzzle me a little bit and, of course, it is for the reason the minister gave to the committee last night, that I do not have that familiarity with the act that he has. It did seem to me that they were both employees' profit sharing plans but one was deferred. I was a little puzzled by the language. I can see that one is an immediate profit sharing plan while the other is a deferred one, if I might put it that way. Perhaps "immediate" would not be the right word to use. Perhaps it is an annual disbursement profit sharing plan or something of that sort; is that correct?


Donald Methuen Fleming: No, not necessarily. If the hon. member will have regard to the section of the act he will readily see the difference. Here we are dealing with the principle that to derive the tax advantages that this clause accords to deferred profit sharing plans there must be proof to the minister that the plan comes within the definition of a deferred profit sharing plan.


William Moore Benidickson: Subclause (7)(b) contains a reference, I take it, to a pension plan, and the maximum that can be deducted by an employer would be the amount of the pension and the deferred profit sharing. How long has the maximum been set at $1,500?


Donald Methuen Fleming: I am told since 1954.


John Whitney Pickersgill: My hon. friend from
Kenora-Rainy River got up before I had
Income Tax Act
completed the question I wanted to ask about this deferred profit sharing plan and the employees' profit sharing plan. In his answer the minister rather gave the impression, and the language in subclause 5 does give the impression, that a deferred profit sharing plan is not an employees' profit sharing plan; that is, my understanding is that a deferred profit sharing plan is a plan for profit sharing by employees only. Is that not correct?


Donald Methuen Fleming: Yes, employees in the broad sense of the word. It might of course include officers of the company.


John Whitney Pickersgill: I think the minister will see where my difficulty lies, in that I had not read the definition in the act itself. I think the language is not very fortunate, because here we are told a deferred profit sharing plan shall be deemed not to be an employees' profit sharing plan, but a profit sharing plan is an employees' profit sharing plan. It does seem to me there ought to be a little more clarity in the definition to draw a distinction between a deferred profit sharing plan and an employees' profit sharing plan. It seems to me that you need another word that is the antithesis of "deferred" in there, because both plans relate only to employees. Does the minister not think there might be defective draftsmanship there?


Donald Methuen Fleming: No, sir.


John Whitney Pickersgill: Would the minister give consideration to the possibility that there might be, and there might be an occasion for misunderstanding, and perhaps have it reviewed further?


Donald Methuen Fleming: Mr. Chairman, I do not find any lack of clarity in this provision that the hon. gentleman sees.


[Stage Direction]
Subclause agreed to.
On subclause 8.
John Whitney Pickersgill: I have asked the minister whether he would say something about the 90 per cent figure in paragraph 6.


Donald Methuen Fleming: Well, Mr. Chairman, I did refer to that last evening in reviewing the clause and pointing out the exemption that exists. I drew attention particularly to the difference between the terms of this measure and the terms of Bill C-84 which was introduced last year. I said the present bill adds a requirement that the trust for a deferred profit sharing plan must receive 90 per cent of its income from sources in Canada. I also pointed out this is in conformity with the proposals that were advanced in the budget speech of December 20 and became law following that date.

Income Tax Act


John Whitney Pickersgill: This is, of course, one of the measures that is calculated by the government, I suppose-perhaps not to direct; that is far too strong a word-but to suggest to Canadians who have savings plans of one kind or another that it would be desirable for them to invest those savings in Canada. That is a position that I do not quarrel with, a position that Mr. Coyne, of course, has been taking for a long time, and that the government appeared to accept from him in the baby budget.


Donald Methuen Fleming: The government did not accept it from Mr. Coyne in the supplementary budget or anywhere else.


John Whitney Pickersgill: I know the minister hates to admit that Mr. Coyne was ever of any assistance to him, but we have observed, sir, that with respect to practically every idea that the minister has produced in the last seven or eight months, we have now found their source.


Donald Methuen Fleming: It was not Mr. Coyne.


John Whitney Pickersgill: We will let the public judge that and they are making a judgment, I might add; but that perhaps, sir, is slightly irrelevant to the discussion here. I may say that personally I think it is desirable, notwithstanding the fact that this government proclaims that it is a great free enterprise government, that where these tax incentives and tax advantages are given they should be used in order to encourage, to provide incentives for people to invest in their own country. The clause certainly commends itself to me as I would imagine it does to most other members of the house; but it did seem to me, sir, that perhaps the government was hiding its light under a bushel, and hiding the source of its light under a bushel.


William Moore Benidickson: Mr. Chairman, in the submission of the Canadian chamber of commerce to the minister in April, 1961 they reported to him that they had examined last year's Bill C-84, and the executive council went on record as endorsing the postponement of tax on members of deferred profit sharing plans until such times as payments were actually received. In the submission reference is made to the three year average formula provided in section 36 of the Income Tax Act as an appropriate means of determining the amount of tax. Now, is that commendation provided for in this legislation to set up the new section 79 (c) for deferred profit sharing plans? Is there in this bill the equivalent of what the chamber of commerce commended when they referred to section 36 and the three year average formula?


Donald Methuen Fleming: Mr. Chairman, if the hon. member will look back at clause 16 of this bill I think he will find the answer to his question. There cannot be an unqualified answer to the question he posed. If the payments are derived from the fund at the time of retirement in accordance with terms of a registered deferred profit sharing plan, then they will qualify under section 36 of the act; but if they should be withdrawn before that time for any reason, then they would not qualify under section 36 of the act. I am speaking of withdrawals before retirement.


John Whitney Pickersgill: Can the minister give us just a word of explanation on subclause 8?


Donald Methuen Fleming: The gist of it, Mr. Chairman, is completely set forth in the explanatory note. Where you have two or more taxpayers who are not dealing at arm's length-for instance, they are associated companies and they have had arrangements between them in relation to deferred profit sharing plans-and you may have the same person being an officer of the two associated companies, this provision is to make it quite clear that only one of the taxpayers, only one of those employers, is entitled to claim the deduction on account of the contribution made in respect of that particular person.


William Moore Benidickson: Does this clause apply only to employers?


Donald Methuen Fleming: Yes, sir.


[Stage Direction]
Subclause agreed to.
On subclause 9.
John Whitney Pickersgill: The minister might give us an explanation of this subclause.


Donald Methuen Fleming: Mr. Chairman, I will be glad to give an explanation, but in this case you have a short clause and the whole pith and substance of the clause has been stated in the explanatory note. I can read the note to you, but I do not think I can improve on the note.


[Stage Direction]
Subclause agreed to.
On subclause 10.
John Whitney Pickersgill: I think paragraph 10 is an amplification of paragraph 9, and for the benefit of some of us who are not quite as good at arithmetic as the minister perhaps he might give a brief explanation of it.


Donald Methuen Fleming: This clause will take account of the change that will probably be brought about in various plans following the adoption of this measure. It is quite obvious that various plans will now seek to qualify as deferred profit sharing plans under the act in order to obtain the tax advantages

provided under this legislation. This clause is designed to look at what may happen in relation to some existing plans which must undergo certain changes in order to qualify as deferred profit sharing plans for registration under the act. That is the background against which this provision is written, and this applies to the beneficiary, the employee who may have been contributing under a plan himself. What is to become now of the contributions he has made into a plan if he is to withdraw them? What is to be the position of the withdrawals?


William Moore Benidickson: Upon which under the law in the past he has paid tax.


Donald Methuen Fleming: Yes. This clause deals with that situation and, as indicated, the beneficiary, the employee, will be allowed to receive tax free an amount equal to the aggregate of the amounts that he was required to include in computing income in previous years by virtue of an allocation made to him under the employee profit sharing plan but which he has not actually received previously. In the second place, he will also be allowed to receive tax free the return of all his own contributions which he did not previously receive and the net capital gains made by the trust and allocated to him when the plan was an employees' profit sharing plan.


William Hector McMillan: I take it, then, that there is no tax paid on capital gains in respect of any of these funds?


Donald Methuen Fleming: Only on the capital gains made after the plan has qualified.


William Hector McMillan: And no credit is given for capital loss.


John Whitney Pickersgill: I think the minister perhaps used a word inadvertently. He referred to contributions made by an employee prior to the coming into force. I presume he meant contributions made by the employer in respect of an employee; because these profit sharing plans, the minister told us last night, do not have any employee contributions.


Donald Methuen Fleming: On such a plan you might have contributions by employees also. A deferred profit sharing plan under the new provisions does not take account of contributions by an employee but among existing plans that have not qualified for tax benefit you might have had plans where the employee made a contribution and, of course, received no tax deduction.


John Whitney Pickersgill: I am afraid I may be very obtuse but I do not see how that could happen.
Income Tax Act
How could the employee contribute to a profit sharing plan? Surely the profits are made by the employer.


Donald Methuen Fleming: You could have plans that were a combination of profit sharing plans and pension plans. There are all kinds of varieties of these plans up to the present time, but this will not qualify the definition being written into the bill.


John Whitney Pickersgill: In other words, this relates not merely to profit sharing plans but also to a kind of mixed arrangement where there might be a combination of a pension plan and a profit sharing plan?


Donald Methuen Fleming: It would more likely be a savings plan than a pension plan so far as the employee is concerned.


John Whitney Pickersgill: But once one of these is converted into a deferred profit sharing plan there could be no more employee contribution to it in order to qualify under this law.


Donald Methuen Fleming: There could be a plan where the employee is making contributions, but there would be no tax advantage to him in consequence of doing so.


John Whitney Pickersgill: The minister has raised a point there, or perhaps I raised it and the minister has enlarged on it a little. Would the Minister of National Revenue accept for registration a mixed plan that was partly a deferred profit sharing plan and partly a savings plan? It would not appear to come within the categories that we considered on page 22 at a length to which the minister rather took exception last night. It seems to me that if you had such a mixed plan the attribution of capital gains, for example, and perhaps even the attribution of the shares of the various participants would be made very much more difficult. In other words, I think we ought to know whether these plans have to be strictly deferred profit sharing plans or if they can also have a savings element and other elements added to them without being disqualified under the legislation.


Donald Methuen Fleming: The hon. member will find the answer to his question in subclause 1(b) of this clause, the definition of a profit sharing plan. The concluding words beginning in line 15 are "whether or not payments are also made to the trustee by the employees".


John Whitney Pickersgill: Perhaps the minister could translate that into layman's language.


Donald Methuen Fleming: I will be glad to translate the whole bill, but it is surely not too much to ask hon. members to contemplate the use of these words and their meaning.

Income Tax Act
Surely this means very clearly that a plan that qualifies as a profit sharing plan in positive terms because it has all the ingredients that the statute prescribes for the deferred profit sharing plan does not cease thereby to be a profit sharing plan because it also includes other provisions, such as contributions by the employees; but there is no tax advantage accruing to anyone in respect of the contributions made by the employees.


[Stage Direction]
Subclause agreed to.
Subclause 11 agreed to.
On subclause 12.
William Moore Benidickson: Just what is envisaged here? What type of appropriation by the employer is being forbidden here from the point of view of tax benefit? Has it reference to use of the funds for the business itself?


Donald Methuen Fleming: It is to stop abuse of the fund by the employer.


William Moore Benidickson: The fund has to be quite separate from the operations of the business?


Donald Methuen Fleming: That is the intention, that the fund shall not be permitted to be abused by the employer or used as a cloak for his own operations.


William Hector McMillan: Is there any control over any securities that might be held in such a fund? For instance, could the fund be made up of common stock in a company? In the case of some of these funds in the United States I believe that common stock of the company is held as security.


Donald Methuen Fleming: We had that last night, Mr. Chairman. If the hon. member will look back at subclause 2(c) he will find that the plan must not provide that any part of the funds in the trust governed by the plan may be invested in notes, bonds, debentures, or similar obligations of (1) an employer by whom payments are made in trust to a trustee under the plan for the benefit of beneficiaries thereunder, or (2) a corporation with whom that employer does not deal at arm's length.


John Whitney Pickersgill: In other words it is perfectly clear that under no circumstances will one of these plans be recognized if any part of the funds in it is used in any fashion as capital or as a loan to the company that has made the profits. Perhaps the minister could explain that. That is what it seems to me to be.


Donald Methuen Fleming: He can invest in shares of the company.


John Whitney Pickersgill: Could the whole amount be invested in shares of the company?


Donald Methuen Fleming: Yes, Mr. Chairman. There is no limit on the shareholdings of the company.


John Whitney Pickersgill: I wish to pursue that a little further. I understood from what the minister said that these funds could not be invested in any way in the company.


Donald Methuen Fleming: The reference is to notes, bonds, debentures or similar obligations. Capital stock is not an obligation.


John Whitney Pickersgill: I quite appreciate that, but that raises this question. Why should there be this distinct prohibition on fixed interest obligations and things of that sort? Why should it be competent to invest in something that may or may not produce a profit?


Donald Methuen Fleming: A great many of these plans are designed to encourage the employees to acquire a share of the stock ownership of the company that is the employer.


John Whitney Pickersgill: What fear is there of having them invest in the other obligations of the company? Is this a treasury provision? What does the treasury fear may happen?


Donald Methuen Fleming: We were on this subject last night, Mr. Chairman. It is in kind with various other provisions of the act. If such provisions were not written into the act here and elsewhere it would be possible for a taxpayer who has obtained a tax advantage under given circumstances to get his money back by the appearance of a loan. We dealt with this subject last evening. It is the same situation, and the same reason applies.


John Whitney Pickersgill: It would appear to me to be equally easy, if the company had an authorized capital which had not all been subscribed, for the fund to subscribe to the additional stock and the company thereby to get back the money just as effectively and indeed more effectively, because there would be no obligation to pay any interest on it. That would appear to me to be as easy or easier than would be the case with a loan or bonds or debentures. To my simple mind there does not appear to be much valid reason in what the minister said about getting back the money. There may be some other reason, as indeed I am sure there must be. I am sure this was not included simply to make the bill more complicated.
What precisely is the concern? When all is said and done I assume that the company,

unless it went broke and defaulted, would have to pay back this amount and would have to pay interest in the meantime. There does not seem to be any possible loss to the treasury because of this provision. It would appear to me that it must be included in order, in some way, to protect the funds. If it is included to avoid a loss to the treasury I wish the minister would explain how a loss to the treasury could occur.


Donald Methuen Fleming: I have endeavoured to do that, Mr. Chairman. I think the hon. member does not appreciate the difference between the acquisition of stock in a company which carries with it a share of ownership in the company and the distribution or recovery by the company of money through the issuance of what would appear to be debentures, notes or bonds thus recovering the benefit of money that has been contributed to the fund by the employer and for which he has received a tax deduction. This is fully understood by the business community.


John Whitney Pickersgill: Well, Mr. Chairman, no doubt it is understood by the business community but I am a member of parliament, just like everyone else in this chamber.


John Andrew W. Drysdale: Not quite like anyone else in this chamber.


John Whitney Pickersgill: The mere fact that it is understood by the business community does not justify the failure of the minister to give a comprehensive reason. I put this question to the minister. Let us suppose that company A which has one of these deferred profit sharing plans borrows $10,000 from the Bank of Montreal at the same rate of interest as company B, which borrows a similar sum from the trustee of the profit sharing plan. Is not the relationship of both those loans to the treasury precisely the same? What tax advantage would company B receive through borrowing from the trustee over what company A would receive as a result of borrowing from the Bank of Montreal at the same rate of interest? If that were explained to me I think I would see the point, but at the moment I fail to see that the source of funds makes any difference as far as the treasury is concerned.


Donald Methuen Fleming: It makes a great deal of difference if you are opening the door to all kinds of transactions under which the employer is simply recovering his money and handing over what may be no more than a piece of paper, a note. This would open the door to all kinds of devices that could defeat the purposes of the legislation.
90205-6-496
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John Whitney Pickersgill: As far as I can make out, what the minister is now saying is that this has nothing at all to do with revenue and nothing to do with the treasury. This represents an attempt to protect these funds from abuse, to protect the participants in the funds from unscrupulous employers who might borrow the money, pay no interest on it and never pay it back. Surely that would be a felony. It does not seem to me that if the employer borrows some money and pays the same rate of interest he would pay through the Bank of Montreal, there can be any possible difference between the two transactions except that you might say the employer is himself both the lender and the borrower, which is perhaps not a desirable situation to have from the point of view of the solvency of the fund. But from the point of view of the treasury, which the minister implied was the reason for this, I cannot get through my head what conceivable difference there would be in the two sets of circumstances. It seems to me we have not received an adequate explanation.


[Stage Direction]
Subclause agreed to.
On subclause 13.
John Whitney Pickersgill: Mr. Chairman, before this subclause passes I feel the minister should give us-


Donald Methuen Fleming: Mr. Chairman, it is perfectly obvious to any hon. member who will read this subclause that it deals with the circumstances under which the minister may revoke the registration of a deferred profit sharing plan. It sets out the circumstances under which he may do so.


John Whitney Pickersgill: Now that the minister has anticipated what he thought would be my question, Mr. Chairman, I shall put to him the question I wished to have him answer. Even I can read the word "revocation" and even I know what it means. This subclause raises the question which as yet has not been answered, as to how the minister is going to find out when revocation should take place. This is a great vacuum, if I may express it in that way, in this whole scheme.
Provisions are laid down for the registration of these schemes and provision is made for revoking them if the conditions are not fulfilled, but no evidence has been given to us relating to policing and no provision appears to have been made for any form of policing of the schemes. That seems to me to be a serious lack and imperfection in the whole scheme when we are embarking on a savings plan of this kind. It is true, as the minister has said, that these are not employee savings, but this represents a scheme whereby the

Income Tax Act
government in future is going to permit profit sharing, which is now a current annual thing, to be deferred to create a property and estate which the employee may enjoy in his old age. If that is to be done under conditions laid down by this parliament, because many people are not able to protect themselves very well in these matters we should know precisely how these schemes are going to be policed and how effective that policing will be.


Donald Methuen Fleming: The statute does not put any limitations in the way in which information may come to the minister on which he may see fit to act to revoke the registration of a plan. As to what is to be involved in the detailed administration, there is really nothing I can usefully add to what I said last night. We spent considerable time on this matter last evening, and I discussed this subclause in relation to other subclauses bearing on the same subject.


John Whitney Pickersgill: I recognize at once, Mr. Chairman, that what the minister says is quite true. However, I had hoped that after reflecting on this overnight the minister would come to the conclusion that the information he gave us last night was inadequate because the bill itself was inadequate, and that steps ought to be taken to improve the bill so as to provide for this supervision. We spend a good deal of the taxpayers' money with regard to insurance companies; or perhaps it is not the taxpayers' money because possibly a levy is made on the insurance companies for the purpose. However, we make a real effort to see that insurance companies in this country are well run.
The minister in his budget told us that he is now going to try to see that pension funds are better run. Here we are starting a new savings scheme on which a great many simple people will depend for their old age. Surely at the very start it would be prudent, wise and foresighted to make adequate provision for the administration and policing of the scheme. It seems to me that is something to which further consideration should be given.


James MacKerras Macdonnell: May I ask the hon. member a question?


John Whitney Pickersgill: Yes.


James MacKerras Macdonnell: I have listened with great interest to this discussion. It seems to me that the situation is clear. This is something as to which in its early stage the companies concerned are in touch with the taxation department. Their statements come every year. They pay taxes every year. Surely the officials who are presently engaged in this administration

have the most intimate knowledge of the companies financing in all their details. Certainly if the minister had come along and had announced a great new department being set up, with dozens of people in it, I think we would all have been a little bit critical. I think we would have said "Why are you doing that? You have many competent people. Why do you not build this thing up as it comes?" I do not think anyone would deny that the taxation department takes an interest in the affairs of various companies. I have never heard that questioned. I can see no reason to believe that this situation, as it develops, will not come automatically and inevitably to the attention of the present competent officials and those who will be added as necessity demands.


John Whitney Pickersgill: The hon. member for
Greenwood described his intervention as a question. In a way it was a question and I will attempt to answer it. As he almost always is, I think he was exceedingly reasonable in what he said. I think it would have commended itself to me completely if the Minister of Finance himself had not raised a query in our minds about trustee pension funds in his budget speech. But for the very precise reason that he did that, he raised in everyone's mind the question whether the Department of National Revenue was equipped at the present time or perhaps had the authority at the present time to do this very thing.
As my friend the hon. member for Kenora-Rainy River put it so well last night, it is precisely because of the question that the minister himself, with all his authority and all his knowledge, raised in his own budget speech with respect to trustee pension funds that we have been alerted to this problem. We perhaps would never have thought of raising this question ourselves; as the minister is so fond of telling us, we are such an inefficient opposition, and we do not think of these things ourselves. We perhaps would never have thought of it if the minister had not put the idea in our minds in his budget speech with reference to another form of deferred benefit for which there is an immediate tax abatement. It is precisely for that reason, namely that the minister himself has suggested that there is a deficiency in our existing machinery in respect of a very similar thing, that we feel we should not allow that kind of situation to grow up.
I quite agree with the hon. member for Greenwood. Indeed, I doubt whether there is in this house any other hon. member, since Mr. Thatcher went to another place, who is as concerned about saving the taxpayers' money as I am, with the possible exception of the hon. member for Greenwood, who I

think shares with me a kind of old-fashioned frugal attitude to life. I certainly do not include the Minister of Finance, who has inflated the expenditures of this country out of all recognition since the days when Mr. Harris administered them frugally up to 1957. If Mr. Harris had still been here I would have included him in that select category. But perhaps this semi-biographical material is not very relevant.


Donald Methuen Fleming: That is very true.


John Whitney Pickersgill: What I am coming back to is this. If this could be done by a very modest improvement in the establishment of the Department of National Revenue; or if the department feels this is not its proper function, as it might, if some arrangement could be made with the superintendent of insurance, who really has much more of this kind of function, to keep an eye on these things, it seems to me that we might avoid a situation which would be regrettable in the future. I make no apology for insisting upon this point.


Jacques Flynn: Shall paragraph 12 carry?


William Moore Benidickson: In connection with this matter of registration may I say this. I recall that some years ago there was some considerable anxiety among officials and ministers as to what responsibility, if any, rested upon the administration simply by the registration of a pension plan. Here we are asking for registration of another form of employees' benefits. If the trustee mismanages that fund we fear registration might involve the government in the same manner as we feared registration might involve the government in some responsibility with the pension plan. What has the minister to say as to the justification for an employee saying, if the fund is mismanaged and the assets are not there when he retires and he complains, "I thought this was a fine fund; it was registered with the government" and who feels that the government is to blame for not having had adequate supervision? I know we discussed this matter with respect to pension plans, the blue book and so on. I am wondering what the minister has to say as to future liability merely by registration without perhaps more supervision.


Donald Methuen Fleming: I think the hon. member was parliamentary assistant to the minister of finance at the time the statute was amended to strike out the word "approved" as applied to those pension plans and substitute the word "registered". The change emphasized the fact that the government was not to be deemed to be giving approval to the plan or the operations under 90205-6-4961
Income Tax Act
it. This present clause contemplates registration on the conditions described in the subclause. I do not think I can add anything useful to that. The employee who has important rights at stake here will have to take some responsibility on his own shoulders also for seeing that the fund in which he is interested is properly administered, and to that end assuring that there will be a competent trustee.


Jacques Flynn: Shall clause 13 carry?


[Stage Direction]
Subclause agreed to.
On subclause 14.
William Moore Benidickson: Will the minister explain the effect of clause 14 (b)?


Donald Methuen Fleming: Putting it briefly, Mr. Chairman, this means that where the registration is revoked the tax advantages die with the revocation and remain in that condition as long as the registration is revoked.


John Whitney Pickersgill: When one of these plans is revoked is there an attempt made immediately to recover the tax over the years on all the funds that have been put into the plan?


Donald Methuen Fleming: No. The tax advantage that the clause contemplates continues during the period of registration. It begins with the registration; it ends with the revocation of registration. But remember that if the funds are paid out on any other basis than the provisions of the plan, which will contemplate on retirement of the employee, of course the payment out becomes taxable in the hands of the recipient.


John Whitney Pickersgill: Could the minister explain very briefly just what would happen after a plan had been revoked? As far as what had happened between the date of registration and the date of revocation was concerned, would the plan still operate, in so far as the treasury was concerned, as though it had not been revoked? In other words would the revocation merely apply to the future and not in any way to the past?


Donald Methuen Fleming: The revocation will take effect from its own date. I dealt with this question, Mr. Chairman. I have pointed out that if one of the grounds, or if a ground, upon which the minister proceeded to withdraw or revoke the registration was payment out in breach of the conditions of the plan upon which it had been admitted to registration, then certainly tax would be collected on the payment out in the hands of the recipients.
Subclause 14 agreed to.

Income Tax Act
On subclause 15.


William Moore Benidickson: Mr. Chairman, I do not understand the explanatory note, where there is reference to a percentage. The explanatory note says:
-even although it is not expressed as a percentage of profits-
What does the minister have in mind with respect to "percentage of profits"?


Donald Methuen Fleming: Mr. Chairman, this is a relieving provision. It is designed to make clear that the plan does not have to stipulate in advance for a fixed percentage of the profits of the employer being paid over at the end of the year.


William Moore Benidickson: A fixed percentage is really what is involved?


Donald Methuen Fleming: Yes.
Subclause 15 agreed to.
On subclause 16.


John Whitney Pickersgill: What precisely is the purpose of this subclause?


Donald Methuen Fleming: Throughout clause 27-as renumbered now, 26-in various places there is the expression "the employee or other beneficiary". This subclause 16 defines the expression "other beneficiary". It says:
-"other beneficiary" shall be construed as meaning any person, other than the employee, to whom any amount is or may become payable by a trustee under the plan-


John Whitney Pickersgill: How can that be done?


Donald Methuen Fleming: It might be his widow on his death.


John Whitney Pickersgill: I understand that. But there are of course strict provisions, if I remember rightly, against any assignment or any hypothec, or anything of that sort, of any of these funds. So the beneficiary here would only be a beneficiary within the terms of the plan itself; that is to say, at the end of the period of deferment. There could be no beneficiary in the interval, I take it?


Donald Methuen Fleming: It would have to be a beneficiary defined by the plan, and the terms of the plan must all conform to the terms of the clause before us.


John Whitney Pickersgill: May I put a hypothetical case to the minister. Is it envisaged that these plans would provide that in the case of the death of an employee, whoever his legal heir was would be a beneficiary and would be able to draw upon the fund once the will had been probated or the estate wound up?


Donald Methuen Fleming: I cannot imagine any plan under which the rights of the employee in the fund would terminate on his

death if the payments out to him had not been exhausted as of that date.


John Whitney Pickersgill: The minister does not know of any such plan?


Donald Methuen Fleming: I cannot imagine any plan under which the employee's rights under the fund would terminate on death, if the payments out to him had not then exhausted his interest in the fund.


John Whitney Pickersgill: There are such plans.
Subclause 16 agreed to.


Jacques Flynn: Shall paragraph 2, clause 27, carry?


John Whitney Pickersgill: This is clause 28.


William Moore Benidickson: This is what was amended, is it? This is consequential to the long amendment?


Donald Methuen Fleming: No. I think the hon. member did not hear the chairman. The chairman is putting to us, now that we have adopted subclause 2, clause 27 as amended, renumbered clause 26.


[Stage Direction]
Clause agreed to.
On clause 28.
Donald Methuen Fleming: Mr. Chairman, on clause 28 there is an amendment which hon. members have. I would ask my colleague the Solicitor General to move that amendment to clause 28.


John Ferguson Browne: I beg to
move, Mr. Chairman.


Jacques Flynn: Mr. Browne (St. John's West) moves:
That clause 28 be amended by striking out subclauses 1 and 2 of clause 28 and renumbering subclause 3 of clause 28 as clause 27.
Shall the amendment carry?


[Stage Direction]
Amendment agreed to.
Jacques Flynn: Shall clause 27 carry?
On renumbered clause 27.


William Moore Benidickson: Mr. Chairman, this undistributed income of a corporation is always a complicated matter. I wonder whether for the record the minister would give us a full explanation of the effect of this amendment.


Donald Methuen Fleming: 
Jacques Flynn: Shall clause 27 as amended carry?


Some hon. Members:: Carried.


John Whitney Pickersgill: I take it that subclause 3 is struck out?


Donald Methuen Fleming: Yes.


John Whitney Pickersgill: That was included in the amendment?


Donald Methuen Fleming: Yes, it is included in the amendment.


Jacques Flynn: Subclause 3 becomes clause 27.


[Stage Direction]
Clause agreed to.
Donald Methuen Fleming: Mr. Chairman, if we have now passed 28, which was renumbered 27, there is an amendment to the succeeding clauses of the bill simply dealing with the numbering. It is that clauses 29 to 39 be renumbered as clauses 28 to 38 respectively. I would ask my colleague the Solicitor General so to move.


John Ferguson Browne: I so move, Mr. Chairman.


Jacques Flynn: Mr. Browne (St. John's West) moves:
That the bill be amended by renumbering clauses 29 to 39 as clauses 28 to 38 respectively.
Shall the amendment carry?


[Stage Direction]
Amendment agreed to.
Jacques Flynn: We will now proceed to new clause 28.
On new clause 28-Deductions from income from businesses of associations, etc.


John Whitney Pickersgill: Mr. Chairman, I hope the minister is going to give us some explanation of this clause.


Donald Methuen Fleming: This is clause 29, renumbered 28. This amendment deals with a deduction for drilling and exploration expenses incurred in searching for oil or natural gas. The act at present permits an association, partnership or syndicate formed for the purpose of drilling or exploring for petroleum or natural gas to deduct its drilling and exploration expenses. However, a member of such an association may not deduct his share of these expenses from his income from other sources. This amendment will extend the present concession and permit a taxpayer to apply his share of the expenses from one
Income Tax Act
association or partnership against his income from another association or partnership.
Subclause 2 involves an amendment which deals with bonus payments made to a government for a lease to extract petroleum or natural gas, or for the right to explore for these products. The act at the present time permits-


John Whitney Pickersgill: Mr. Chairman, I wonder whether I could make a suggestion to the minister. Would it be more convenient, since the subclauses do not seem to be too clearly related, if we could clear up each one separately and then go on to the next? This might save a lot of time. I should like to ask one question in respect to the first provision. Does this involve a relaxation or a tightening up of the law? I must say this is an aspect of the law-


Donald Methuen Fleming: It is a relieving provision.


John Whitney Pickersgill: That is to say it is another concession or tax benefit?


Donald Methuen Fleming: Yes.


John Whitney Pickersgill: What is the reason for extending this tax benefit?


Donald Methuen Fleming: I think it is fairness and equity, Mr. Chairman, having regard to the purposes which I have indicated.


John Whitney Pickersgill: Well, the minister is suggesting-


Donald Methuen Fleming: We are proposing to extend the concession by permitting an individual taxpayer to apply his share of the expenses in one association or partnership against his income from another association or partnership. So in this respect it is a matter of equity, extending to individuals the kind of treatment that has hitherto been accorded to associations, partnerships or syndicates.


John Whitney Pickersgill: Mr. Chairman, what the minister is saying in other words is that the present law is not equitable. Could the minister say when the government discovered that the present law was inequitable, how it discovered that, how this amendment came about, and whether representations have been made?


Donald Methuen Fleming: Mr. Chairman, I should not attempt to pinpoint that for a moment. We receive representations all the time, and these matters are under study at all times.


John Whitney Pickersgill: Is this something in respect of which the government received representations a year ago and did not accept them? Was the inequity maintained all last year?

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Donald Methuen Fleming: Mr. Chairman, this is a matter that has been discussed from time to time over some period.


John Whitney Pickersgill: Mr. Chairman, I have been rather interested in this regard because to a simple mind, what is equitable in 1961 should also have been equitable in 1960. The minister is defending this amendment on the basis of fairness and equity, yet he says he has been receiving representations for several years. I think the minister ought to tell us when it dawned upon him that this was inequitable.


Donald Methuen Fleming: Mr. Chairman, the observations about what was equity in 1960 will equally apply to 1956 or the early part of 1957. These matters are under study and there are representations received from time to time. They are subjected to very careful study, and we are satisfied now that this amendment should be made, and we so recommend to the committee.


John Whitney Pickersgill: Will this amendment, apart from being equitable, which is, of course, the first concern of the government-that is, justice as between one taxpayer and another -be productive of any advantage to the national interest? Will it result in any greater investment or any greater expansion, shall we say, or is it merely a matter of being equitable as between taxpayers?


Donald Methuen Fleming: Mr. Chairman, I should expect it to be of particular assistance to individuals who may be interested in drilling and exploration for oil or natural gas. This is a provision which is going to be of assistance to individuals, people of small interests.


William Moore Benidickson: Mr. Chairman, when we have dealt with the amendments to section 83 we shall have legislation in two parts, one with respect to drilling for petroleum or natural gas, and then in the same area of the tax statute we have a comparable concession to those engaged in metal mining. What is the situation at the present time in respect to an individual who enters upon exploration activities in so far as metal mining is concerned?


Donald Methuen Fleming: I am informed that this form of syndicate or association has prevailed in the gas and oil exploration field but has not been used in relation to metal mining. Certainly we have had no representations from anyone interested in metal mining in this regard.


John Whitney Pickersgill: Mr. Chairman, we were just dealing with the first subclause. The minister had started to explain the second

one, and if no one else has anything to say I should like him to continue his explanation in that regard.


Donald Methuen Fleming: In the second subclause you will see that this amendment deals with bonus payments made to a government for a lease to extract petroleum or natural gas, or the right to explore for these products. The act at present permits a corporation to deduct such expenditures if the property leased is subsequently abandoned as unproductive. This amendment will extend this right of deduction to a successor corporation which has acquired the property of the corporation which originally made the bonus payment.


John Whitney Pickersgill: What inspired this particular amendment?


Donald Methuen Fleming: Representations and study.


John Whitney Pickersgill: Is this an amendment for the purpose of making the tax more equitable, or is this an incentive to expansion?


Donald Methuen Fleming: This again is a relieving provision which should aid in the development of resources.


John Whitney Pickersgill: That is not exactly an answer to my question. I will put each question separately so the minister can explain them separately. Is it felt that this is required because there is some inequity or unfairness in the existing tax structure?


Donald Methuen Fleming: This is recommended to the house, Mr. Chairman, because it is considered fair and because the government has an interest in encouraging people to concern themselves with exploration. It is thought that this will provide an encouragement to that end.


John Whitney Pickersgill: In what way will it
provide an encouragement? Can the minister explain just what the incentive feature of it is?


Donald Methuen Fleming: Mr. Chairman, I think if the hon. member has attempted to follow what I said he will see that it is quite clear. I will go over it again. I have said that the amendment deals with bonus payments made to a government for a lease to extract petroleum or natural gas or for the right to explore for these products. The act at present permits a corporation to deduct such expenditures if the property leased is subsequently abandoned as unproductive. This amendment will extend this right of deduction to a successor corporation which has acquired the property of the corporation which originally made the bonus payment. There are transactions going on

between corporations in this field, those that originally have undertaken the exploration which proved unproductive, and there are naturally tax implications in every one of these transactions. In this case it is thought it will facilitate exploration if the tax benefit that arises in the case where the outlay has proven to be unproductive is available to the successor corporation.


John Whitney Pickersgill: I take it that these bonus payments are payments made to governments other than the federal government, because otherwise there would not seem to be much sense in collecting the bonus payments and then treating them as an expense of doing business.


Donald Methuen Fleming: It depends where it is, whether it is in a province or the territories.


John Whitney Pickersgill: Perhaps the minister would explain to me what advantage it would be for the federal government to exact one of these bonus payments if it is going to be given back to the taxpayer, either because he incurred a loss or because he made a gain. In what circumstances could the federal treasury ever get anything out of this?


Donald Methuen Fleming: This is in a competitive area of competitive business. The hon. member talks about the bonus going back if the venture proves unproductive and treats that as the same situation where an area or property proves productive. He is misleading himself there, Mr. Chairman.


John Whitney Pickersgill: I am not seeking to-


Donald Methuen Fleming: In the interests-of equity there are these government charges. I think you will find them imposed by all provinces in the case of exploration carried on within their provincial boundaries. This is the way in which effort is made not only to raise revenues but also to proceed with some regard for equity in relation to the rights that are given by government to persons interested in exploration. This is dealing with the matter at a later stage; this is dealing with the matter after there has been an outlay and after the bonus has been paid to the government for the lease. Later on, if the property leased has been abandoned as unproductive, there is an advantage today taxwise on the part of the lessee, the lessee being a corporation; it is a very considerable advantage to that lessee to be able to convey that position to a successor corporation. It has the opportunity of conveying its interests to another corporation.


William Moore Benidickson: Have we not always been very loath to permit corporations to merge, one corporation to buy another corporation
Income Tax Act
largely for a tax reason, such as perhaps a tax loss of considerable substance that one company had on its books? Is not this equivalent to encouraging the buying of one company by another company simply because one company is carrying some losses? Is this not the kind of thing that we do not encourage in a normal way, and indeed discourage as between one corporation and another, one corporation with a substantial profit and another with rather heavy losses? One company is merged with the other simply for tax gain. Is this not doing about the same thing?


Donald Methuen Fleming: No, I do not think it is doing the same thing, because this is limited in its application. This applies to the payment made to the government in respect of the lease. I do not think this can be regarded as an inroad on the basic principle of section 83A of the act in that sense.


John Whitney Pickersgill: Mr. Chairman, the minister gave what seemed to me to be a very lucid explanation of this provision as it applied to payments made to some other government. I can see quite clearly that the government, say, of the province of Alberta would get the bonus and the taxpayer would be allowed to treat this bonus, I would think quite properly, as one of the expenses of his operation. But what I cannot get through my head is, if the bonus is paid to the federal government and if the taxpayer is going to be allowed to treat that bonus as an expense of doing business, what conceivable purpose there would be in having the bonus in the first place.


Donald Methuen Fleming: Mr. Chairman, when these blocks are put up for tender no one knows whether the property is going to be productive or unproductive, and you may have various competing bids for the opportunity to obtain a lease. This is the bonus payment. Surely nobody is going to suggest there should not be a charge made for that right by way of this so-called bonus payment.


John Whitney Pickersgill: Let me put it this way, sir. I can see that where you go to Alberta and bid and Alberta gets some benefit from it, but what conceivable purpose there can be, if the taxpayer knows he is going to be able to treat this as an expense, in having this bonus in relation to the federal government leases I just cannot see, and the minister has not yet made it clear to me.


William Moore Benidickson: He gets the benefit only on the tax, does he not?


Jacques Flynn: Shall subclause 2 carry?


[Stage Direction]
Subclause agreed to.
Jacques Flynn: Shall subclause 3 carry?

Income Tax Act


John Whitney Pickersgill: I think we should have an explanation of this, too.


Donald Methuen Fleming: I would have
thought the explanatory note was very clear in providing whatever elucidation is required of this short clause. However, I might say that the amendment in subclause 3 also deals with the deduction for exploration and drilling expenses. The act permits a company engaged in the oil, gas or mining business to deduct exploration and drilling expenses incurred in searching for oil, gas or minerals. The act also permits a company which acquires the property of another company under certain conditions to deduct the drilling and exploration expenses incurred by the former company. However, these provisions do not at present cover the situation where a company acquires a property of its former subsidiary. This amendment is intended to correct this omission.


William Moore Benidickson: This would have exactly the same effect. Suppose we had a mining company that was a failure and on its books it had a very substantial loss. To all intents and purposes, unless there was encouragement from the point of view of tax advantage, we would hear no more about that company; it would disappear and probably surrender its charter. Does not something of this kind simply encourage one profitable mining company to look around for the charter of another company that has to all intents and purposes folded? It takes it over for purposes of tax advantage.


Donald Methuen Fleming: No, Mr. Chairman. I think the hon. member is overlooking what the act now allows. We are simply dealing here with one omission from the general rule that the act provides in this regard now. This is to cover the situation where the company acquires the property of its former subsidiary. That is all it does.


William Moore Benidickson: It may acquire the
property, but the property is just a piece of rock and has proven to be a failure.


Donald Methuen Fleming: The hon. member is overlooking the fact, I think, that the act at present permits a company which is engaged in the oil, gas or mining business to deduct exploration or drilling expenses for oil, gas or minerals, and that it also permits a company which acquires the property of another company under certain conditions to deduct the drilling and exploration expenses incurred by the former company. This simply fills a gap or corrects an omission in dealing
[The Chairman.]
specifically with the situation where a company acquires the property of its former subsidiary, which has always been a subsidiary.


[Stage Direction]
Subclause agreed to.
Jacques Flynn: Shall subclause 4 carry?


John Whitney Pickersgill: I am sure the minister will give us an explanation here.


Donald Methuen Fleming: I think this is very plain. It was set out in the budget resolutions and I referred to it in the budget speech. This amendment extends the right to deduct exploration and drilling expenses to metal fabricating companies.


John Andrew W. Drysdale: Mr. Chairman, I should like to raise a point of order at this time. On two or three occasions today the hon. member for Bonavista-Twillingate has qualified himself by saying "I am a very simple minded individual" or "I have a very simple mind". He has said that he is unable to understand the technical provisions of this very technical statute; yet he is the person who is asking a great majority of the questions and presumably he is representing the Liberal party. It seems to me that we should get some protection from this type of questioning. Surely there is somebody in the Liberal party who would be qualified to ask these necessary technical questions. Of course he has been delegated to keep things going while they are straightening out things in the other house.


Joseph-Alphonse-Anaclet Habel: As the whip of the Liberal party I object very strenuously to the hon. member's remarks and I say he has no right to speak, as he did, from the seat of a Liberal member.


John Andrew W. Drysdale: Mr. Chairman, we are in committee of the whole. It was the hon. member for Bonavista-Twillingate who said "I have a very simple mind". Nobody took issue with that point. I am sure he is in the best position to qualify himself, which he did under those circumstances. I was saying that I hoped there was somebody else in the Liberal party who could perhaps ask some relevant questions on this very technical subject rather than tedious and repetitious questions which are forbidden under our rules.


John Whitney Pickersgill: Mr. Chairman, it would appear that I have a question of privilege as a result of this phony and specious point of order or alleged point of order raised by the hon. member for Burnaby-Richmond, who I see has retreated from the advanced post in a progressive and forward looking party which he occupied when he made his intervention.


John Andrew W. Drysdale: You mean the Conservative party.


John Whitney Pickersgill: I am not surprised, sir, to find the hon. member for Burnaby-Richmond getting closer and closer to the Liberal party.


John Andrew W. Drysdale: Not clear to your thinking;
I can assure you of that.


John Whitney Pickersgill: It is obvious even to the simple minded that in doing so he is simply following the public trend as reflected in the Gallup polls and in a great many other indications of the transformation of opinion that is taking place at the present time in the country. I may say that with a little mild Liberal indoctrination I think perhaps the hon. member for Burnaby-Richmond would be admitted on payment of the appropriate membership fee.


Harold Edward Winch: Now I know he is simple minded.


John Whitney Pickersgill: That might give him some faint hope of coming back here again and adding his simple contribution to those of the other simple minded people in this house who represent the ordinary voters of this country, who are entitled to understand our proceedings without having to go through a great deal of technical jargon.


Harold Edward Winch: Is this not the wrong institution for simple minded persons?


John Whitney Pickersgill: The hon. member for Vancouver East has embarrassed me on one of the rare occasions when I have really been embarrassed in this house. I used "simple" in the old fashioned sense-


Robert Jardine McCleave: So did he.


John Whitney Pickersgill: -of meaning just the plain and ordinary people who use plain and ordinary horse sense. It does seem to me that if more effort were made to translate our statutes into simple language that simple minded people could understand, it would be a great improvement. I have merely regarded myself as a representative, as I am-


John Andrew W. Drysdale: Of the simple minded.


John Whitney Pickersgill: -who has three times been chosen to be the representative of the fishermen and loggers of my constituency, none of whom would pretend to be very learned in the law but most of whom have a good deal more common sense than some hon. members of this house demonstrate on some occasions.


John Andrew W. Drysdale: On the point of order, Mr. Chairman, I want to make clear that I was referring to this particular statute, the Income Tax Act, which is exceedingly technical
Income Tax Act
in nature. I merely mentioned how the hon. member had qualified himself. I had merely hoped that there was somebody in the Liberal party who was capable of dealing with it in a technical way, and the technical aspect was referred to by the hon. member for Kenora-Rainy River.


John Whitney Pickersgill: Mr. Chairman, perhaps you might permit me to say that happily we have no keeper in the Liberal party.


John Andrew W. Drysdale: Have you all escaped?


Jacques Flynn: Order. This so-called point of order and so-called question of privilege has, I think, provided a change of tempo which everybody has appreciated, and we can now revert to the bill.


[Stage Direction]
Subclause agreed to.
Subclause 5 agreed to.
On clause 29.
John Whitney Pickersgill: Mr. Chairman, perhaps the parliamentary secretary, who sat here so patiently waiting to get a word in edgewise, could oblige us by telling us what clause 29 is all about.


Thomas Miller Bell: Mr. Chairman, as the explanatory note indicates, this is consequential solely upon the repeal of section 34. This simply deletes the reference to section 34 from the paragraphs in clause 29.


William Hector McMillan: Are we on clause 29 now?


Jacques Flynn: Renumbered clause 29.


William Hector McMillan: What would be the position of a part owner of a syndicate or partnership that struck oil if he sold out and made a very large profit? Would that be considered a capital gain? So far as income tax is concerned, would he be allowed to deduct any expenditures in connection with exploration? I know that some of these syndicates go on to form a company and the company takes over from the syndicate. What is the procedure in these cases? How are these deductions from income tax made?


Thomas Miller Bell: I think the hon. member is referring to the old clause 29 which is now clause 28. I am not too sure that I understood his question relating to that clause, which has already been passed. On a matter as technical as these clauses are, I would certainly be hesitant to give my hon. friend anything approaching a legal opinion. I would be very glad indeed to discuss the whole matter with him and secure for him all the information he requires.


Jacques Flynn: Shall clause 29 carry?

Income Tax Act


John Whitney Pickersgill: Mr. Chairman, I think there was an understandable confusion. You called clause 29 and the hon. member was quite properly looking at the 29 that is in the bill. I am sure the parliamentary secretary does not have the slightest intention of abridging the hon. member's rights-


Thomas Miller Bell: No.


John Whitney Pickersgill: -because I know the hon. gentleman has been meditating on this question.


Thomas Miller Bell: My genial friend from Welland would be the last one whose rights I would seek to abridge in any way.


William Hector McMillan: What clause are we actually on now? I should like to know, because we were just discussing-


Jacques Flynn: Clause 28, formerly clause 29, has been carried, but if the hon. member wishes to pursue this matter I am sure there is no objection. At present we are considering clause 29, formerly clause 30, and it is to be found on page 30.


John Whitney Pickersgill: Mr. Chairman, I might make a suggestion that I am sure would be agreeable to the parliamentary secretary, that no other member would ask any further questions but that the hon. member for Welland, because of the misunderstanding, might pursue his point briefly when we come back after lunch. That will perhaps give the two hon. gentlemen an opportunity to confer so that things can be speeded up.
At one o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 2.30 p.m.
Robert Jardine McCleave: When the committee rose it was agreed that the hon. member for Welland be permitted to .ask questions on old clause 29 which has been renumbered new clause 28.


William Hector McMillan: I was asking about a syndicate that might sell out at a capital gain. 3 have knowledge of a partnership or syndicate that had rights for the drilling of natural gas within a certain area and they struck gas in the first well, then sold out at a considerable profit. This was quite a common thing at one time in southwestern Ontario.
According to the answer I received, this would be a capital gain and the cost of drilling would not appear in any income tax calculation. My question is, would the purchaser have the right to write off any of
[The Chairman.]
these earlier drilling costs? Could he, for instance, split up his costs and show the drilling cost as a separate item, then write it off immediately? I take it that the rest of the holding would be written off at a reduced rate. I wonder if these drilling costs could be written off immediately on purchase.


Thomas Miller Bell: The gain to which the hon. gentleman refers may or may not be a capital gain, depending of course upon whether or not the syndicate, association or partnership is engaged generally in business or trade. If it is as the hon. gentleman has suggested, in fact a capital gain, then there would be no deduction from that capital gain for the purposes of section 83A. Such deductions are deductions only from income. I only want to emphasize to the hon. gentleman that in the particular circumstances he describes, I would not wish to be considered as giving a legal opinion that the gain was, in fact, a capital gain.


Robert Jardine McCleave: The
Chair takes it that in the absence of further questions from the hon. member for Welland old clause 29, new clause 28, is carried.


[Stage Direction]
Clause agreed to.
New clause 29 agreed to.
On new clause 30.
John Whitney Pickersgill: Could the minister give an explanation of this?


Donald Methuen Fleming: The first subclause of old clause 31 concerns reserves which taxpayers may deduct in computing income. The Income Tax Act, in section 85B (l)(d) provides that if a taxpayer has been required to include an amount in income on account of property sold during the year and the proceeds of the sale are not fully receivable within two years, the taxpayer may deduct as a reserve the amount that can reasonably be regarded as a portion of the profits from the sale. The two year rule is intended to leave out a great number of sales where payment is made over a period shorter than two years. It has been the practice when real estate was sold on a deferred payment basis to bring into income annually that proportion of the profit on the transaction that the payments receive in a year bore to the total sales price.
However, this concession to the taxpayer may not be completely provided for under the present law. Moreover, it has become apparent that some provision should be made to cover the method of operation followed by land development companies. These companies, frequently made up of builders, acquire land, subdivide it, instal services and

sell it to builders. The Department of National Revenue takes the position that a sale is made when a lot is transferred to a builder, but the builder may not be able to make payment for several months. It may extend over the year-end of the land company. This means that the land company has to include in income money it has not actually received, and because the term of the payment does not extend more than two years it does not qualify for a reserve under the present provisions of the act. The amendment provides that a reserve may be deducted with respect to sales of land where the proceeds of the sale are not receivable until after the end of the taxation year.


[Stage Direction]
Clause agreed to.
On new clause 31.
William Moore Benidickson: We have a subsection 2 in this clause that hardly relates to subsection 1, as I see it. I take it that there will be an order in council now with respect to policy reserves. Will that be gazetted? Will that be something which will now be standard and known to the people in the insurance business in contrast, perhaps, to the past system where simply the approval of the superintendent of insurance had to be negotiated in the case of each individual company?


Donald Methuen Fleming: The answer to the first part of the question is yes.


John Whitney Pickersgill: The minister did not give any general explanation of this clause, but I was particularly interested in the marginal note. I wonder if the minister could throw any light on that.


Donald Methuen Fleming: Mr. Chairman,
clause 32, which has been renumbered 31, is consequential upon the reduction in individual and corporation income taxes commencing in 1962. It is intended to prevent taxpayers from receiving a double benefit. It is similar to the amendment described earlier in connection with clauses 17 and 20.


John Whitney Pickersgill: The minister has no light to throw on the marginal note?


Donald Methuen Fleming: I do not think the hon. gentleman needs any.


John Whitney Pickersgill: Just so that it will be in Hansard, may I say that the marginal note is "election". I do not think there is any subject on which the house would be more interested in having some light thrown by the hon. gentleman than the marginal note to this clause.


[Stage Direction]
Clause agreed to.
Income Tax Act
On new clause 32.
Herbert Wilfred Herridge: With respect to subclause 2 the explanatory note reads as follows:
(2) This new paragraph provides that expenditures of a capital nature on scientific research in Canada made by a predecessor corporation but not deducted by it shall be available for deduction by a new corporation formed as a result of an amalgamation.
Will the minister inform the committee the reason for this amendment? What representations were made to have this amendment included? It seems to be a rather unusual clause from my point of view.


Donald Methuen Fleming: I do not recall any specific representations on this point. However, this is part of the program that we worked out for giving the utmost encouragement through tax measures for the carrying on of research particularly for industrial purposes.


Herbert Wilfred Herridge: Does this mean that a corporation that was formerly carrying out research, forming another corporation or company for the purpose of specifically carrying out research, can deduct for tax purposes the money spent in the previous year by the parent corporation.


Donald Methuen Fleming: Not precisely. What we are dealing with here are first of all expenditures of a capital nature on scientific research. We are only dealing with expenditures on research in Canada. That runs through all these provisions. We are dealing here with expenditures of a capital nature made by a corporation, expenditures which had not been deducted by it. If it amalgamates with another corporation this amalgam, the resulting corporation, may deduct those expenditures made on scientific research which had not previously been deducted by the predecessor corporation. I am told that there was a recommendation to this effect from the Canadian Bar Association and the Canadian institute of chartered accountants.


[Stage Direction]
Clause agreed to.
On new clause 33.
John Whitney Pickersgill: I think we ought to have an explanation, Mr. Chairman.


Donald Methuen Fleming: Clause 34, renumbered 33, is a relieving provision. The act at present permits a corporation to elect to pay a special 15 per cent tax on an amount of undistributed income which has been matched by dividends paid to shareholders. This amendment will allow a corporation to include in the dividends used for this matching certain dividends it may have been deemed to have paid to shareholders.


[Stage Direction]
Clause agreed to.
[Stage Direction]
Income Tax Act On new clause 34.
Jacques Flynn: Shall clause 35, renumbered 34, carry?


John Whitney Pickersgill: After an explanation.


Donald Methuen Fleming: This is a relieving provision.


John Whitney Pickersgill: Is this to create a situation of fairness and equity, or is this to provide an incentive for expansion?


Donald Methuen Fleming: The amendments to the law following the supplementary budget of December 20 provided that the 15 per cent non-resident withholding tax would in future apply to interest paid to non-residents in a foreign currency. However, it provided an exemption from this tax for obligations incurred prior to December 20, 1960.
This amendment provides that where a taxpayer was paying interest in a foreign currency to a non-resident on an obligation incurred prior to December 20, 1960, and that taxpayer's property is purchased by someone else who assumes all the vendor's obligations, the interest shall continue to be exempt when paid by the purchaser.


[Stage Direction]
Clause agreed to.
On new clause 35.
William Moore Benidickson: This is quite a technical amendment. I think those in the accounting business and otherwise would like to have an explanation on the record.


Donald Methuen Fleming: There are two parts to clause 36, renumbered 35. Subclause 1 contains an amendment which is relieving. It will prevent the double taxation of certain income by providing that a redemption of shares which were deemed to be received as a dividend shall not also be deemed to be subject to the 15 per cent non-resident withholding tax.
Subclause 2 contains an amendment which is intended to close a loophole whereby a non-resident shareholder might arrange to have the dividends to which he is entitled paid to another non-resident who is not a shareholder in order to avoid the 15 per cent non-resident tax.


[Stage Direction]
Clause agreed to.
New clause 36 agreed to.
On new clause 37.
John Whitney Pickersgill: Can the minister explain this clause?


Donald Methuen Fleming: This amendment provides that the minister may issue a notice of assessment-that is the Minister of National 
Revenue-on account of non-resident withholding tax or for an amount that is due as a penalty.


[Stage Direction]
Clause agreed to.
On new clause 38.
John Whitney Pickersgill: This is partly on a deferred profit sharing plan. Perhaps the minister ought to just indicate its relationship to the general scheme.


Donald Methuen Fleming: Clause 39, renumbered 38, contains provisions that are consequential upon the provisions already made for deferred profit sharing plans. I think the reasons for them are obvious.
As to subclause 2, I point out that this amendment is in conformity with the amendment made to section 16, provided by clause 5 of the bill. Subclause 3 is consequential upon subclause 4. Subclause 4 extends the meaning of residence. Subclause 5 is, I think, fully explained by the explanatory note in the bill. Subclause 6 deals with residence of a corporation. Subclause 7 is necessary to close a possible loophole in the rules dealing with associated companies.


[Stage Direction]
Clause agreed to.
On clause 40.
Donald Methuen Fleming: There is an amendment to strike out clause 40. I would ask my colleague the Minister of Veterans Affairs to make that motion.


Gordon Minto Churchill: I so move, Mr. Chairman.


[Stage Direction]
Motion agreed to.
Title agreed to.
Bill reported.
The Acting Speaker (Mr. McCleave):: When shall the bill be read the third time?


Some hon. Members:: Now.


John Whitney Pickersgill: Next sitting of the house.


The Acting Speaker (Mr. McCleave):: Next sitting of the house.


CANADIAN NATIONAL RAILWAYS
[Stage Direction]
The house resumed, from Saturday July 8, consideration of the motion of Mr. Fleming (Eglinton) for the second reading of Bill No. C-121, to authorize the provision of moneys to meet certain capital expenditures of the Canadian National Railways system for the period from the 1st day of January, 1961, to the 30th day of June, 1962, and to authorize

the guarantee by Her Majesty of certain securities to be issued by the Canadian National Railway Company.
John Whitney Pickersgill: Mr. Speaker, when the house rose at six o'clock on Saturday Your Honour had just drawn my attention to the scope of the bill, and there had been some discussion about a point which I was in the midst of making and which I did not have an opportunity to complete.
The point I was making was this. It is a very simple and a very obvious point, but one about which there seems to be an amazing amount of misunderstanding and confusion, and indeed a very marked change in attitude in the case of one very distinguished person. I refer to the question of who is sovereign in this country.
Lest Your Honour should think I am embarking upon a line of argument that is not germane to the bill, I will deal with that point first. The whole point of the argument I was making following the argument made, without any exception being taken to it, by my hon. friend from Laurier was that since parliament is sovereign in this country, parliament certainly has a right, before granting large sums of money to be expended by a crown corporation, to know who is going to be the head of that corporation and who its directors are going to be. That is the precise objection that we on this side of the house are taking to the government proceeding with this bill without first telling us the answer to that question.
My hon. friend from Laurier on the orders of the day this morning asked the Prime Minister whether the directors and the chairman had yet been appointed as a result of the legislation passed by this house some time ago. I remember very well that the legislation was passed by this house before the famous by-elections, because I made certain predictions about it that I am afraid are not going to be fulfilled quite literally. However, I think they are a fair indication of what is likely to happen in due course with regard to that legislation. I say, as my hon. friend from Laurier has already said, that we as a sovereign parliament are entitled to know who is going to be in charge of this crown corporation, who is going to be spending these millions and millions of dollars, before the taxpayers' money is invested in this fashion. I use the word "invested" because of course these are capital sums with which we are dealing in this bill.
In the days when the present government was not in office and when the right hon. gentleman and some of the other occupants of
Canadian National Railways the treasury benches were over here on this side of the house, this kind of argument in this set of circumstances was very frequently made both inside and outside the house. In order to illustrate the importance of the argument I am making I wish to cite as an authority the Prime Minister himself in the days when he was leader of the opposition.
I recognize that was for a very short period, and therefore I have not many citations. In fact I wish to cite only one. I have in my hand a clipping from the Halifax Chronicle-Herald, a newspaper that I find very useful for reference. This is a clipping from that newspaper of March 22, 1957, headed:
Diefenbaker demands reforms-Parliament "puppet of few cabinet ministers".
In an address in Halifax the present Prime Minister appealed for:
Restoration of the prestige of parliament which today "has become the plaything and puppet of a few cabinet ministers".
I suggest that in respect of the Canadian National Railways that is precisely what has happened. Since last September nine months and eleven days have passed during which this government has declined to decide who should be the regularly appointed chairman of the board and who should be the directors of that railway, the greatest railway in North America. It does seem to me that the government, or a few cabinet ministers are treating parliament in exactly the kind of way to which the right hon. gentleman took exception at the time when he was over here on this side of the house. In other words they are seeking to make parliament the puppet of a few cabinet ministers. We are not entitled to know-we are supposed to vote this money blindly-who these people are who are to manage this railway; who is to be the head of the management of the railway; whether Mr. Gordon is finally to get out of the death cell in which he has found himself ever since last September; whether his exit from it is to be to the executioner's block, or whether he is to get a reprieve.


John Andrew W. Drysdale: He looks pretty lively.


John Whitney Pickersgill: As a matter of fact there is many a tiger in a cage that looks pretty lively, but that does not mean he is not still in a cage. If Mr. Gordon-and I did not mean to reflect on him in any way-has perhaps exhibited some of the impatience of a caged tiger upon occasion, who can blame him, after nine months and eleven days of suspended sentence? How, indeed, can any man be expected to discharge great responsibilities when so little confidence is shown in him by those who have the responsibility for his appointment or his dismissal?
7866	HOUSE OF
Canadian National Railways
I want to make it very clear, as I think I did the other day and as my hon. triend from Laurier did, that we do not question the right of the government to replace Mr. Gordon. That is their right under the law. And we are not suggesting that parliament should usurp the functions of the government; not at all. What we are suggesting is the government should do what it is supposed to do. It should do it when it is supposed to do it, and then account for its conduct to parliament so parliament can make an intelligent judgment. If the government have found someone better than Mr. Gordon to run this railway, let them appoint him. If they cannot find anyone, let them take Mr. Gordon out of this state of suspense and reappoint him. Either course would be a respectable and a responsible course. The course that is being followed is irresponsible. It is bound to lead to bad morale; it cannot help but do so, and it should not be continued.
In this same newspaper clipping I read this:
Mr. Diefenbaker complained that the prestige of parliament had been dropping because "members were denied information on affairs of the nation".
What we have witnessed in the last few weeks and the last few months-all through this session, as a matter of fact-in the denial of information is something the equal of which cannot be found at any time since confederation. Let me go on with the Prime Minister's words:
The "shutters were drawn down whenever there was a question not in the best interest of the Liberal party."
That is what he said.


John Andrew W. Drysdale: That is true.


John Whitney Pickersgill: Mr. Speaker, I hear a feeble little bleat from behind me saying "That is true".


John Andrew W. Drysdale: True.


John Whitney Pickersgill: What is true is that the shutters have been pulled down, bolted and barred by the present government. But they have gone a lot further than that. They now assert that parliament has no right at all to the information.


James Stanley Speakman: Who said that, besides yourself?


John Whitney Pickersgill: The Prime Minister stated that in this house last Friday. He said the government of Canada was sovereign. His words are in Hansard and I can quote them if anybody wishes me to do so.


James Stanley Speakman: Quote them.


John Whitney Pickersgill: It was the Prime Minister who said there could not be two sovereignties, and one of those sovereignties he described as the government of Canada.


Michael Starr: And the other one?


John Whitney Pickersgill: It does not make any difference what the other one was.


Michael Starr: Yes, it does. The other one was the governor of the Bank of Canada.


John Whitney Pickersgill: One of them was described as the government of Canada. These are the ministers who are trying to make puppets of parliament, in the words of the present Prime Minister on a former occasion. Now parliament does not matter at all, it is the government that is sovereign. That is the present doctrine.


An hon. Member:: Oh, come now.


John Whitney Pickersgill: I should like to remind the hon. member who is interrupting that Hitler too won an election before he established his dictatorship, so the fact that there was a huge majority in 1958 is no excuse for saying that the government and not parliament is sovereign. This is a subversion of our whole conception of responsible government and our whole conception of parliamentary government. This is the doctrine of dictators.
The government say, "We have won the election and the other side have no rights". In that same direction the Prime Minister went further and said, "We are staying". He did not say "We will stay if the people want us"; he simply said "We are staying". His words are right there in Hansard to see. Of course we know that has happened. These people have got in office in the past by winning elections and then they have stayed and stayed without any more elections.


An hon. Member:: Yes, for 22 years.


John Whitney Pickersgill: I say this is a very strange doctrine coming from the right hon. gentleman who in 1955 in this house, during the debate on the Defence Production Act, which was being put on the statute books solely to deal with the emergency of a possible war and only to be used in those circumstances, had this to say, and this is from Hansard of June 8 of 1955 as reported at page 4558:
However, there has been no suggestion on the part of the government that it intends to deviate one whit from the trend that apparently is to be followed, of establishing for ministers of the crown and this government an absolutism.
Those are the words of the present Prime Minister applied to the government of that day in 1955. Those words apply to the Prime Minister today who, when he is asked whether the directors of the Canadian National Railways have been appointed, on a day when the government is coming here theoretically asking us-in fact ordering us-to vote this money, says, "No, you are not entitled to this information". They said it was urgent

to get the bill through so they could appoint the directors and settle Mr. Gordon's fate, yet six weeks afterwards no appointments have been made, no decisions arrived at. Parliament has the right to know these things. As my friend the hon. member for Laurier said the other day, once we in parliament can be got rid of the government can perhaps start leafing through its list of defeated candidates and other supporters of their party to fill up these holes.


An hon. Member:: We do not have any defeated candidates.


John Whitney Pickersgill: The hon. member says they do not have many defeated candidates, and I suggest they have not got nearly as many as they will have after the next election.


Mr. Speaker:: Order. Perhaps if the hon. member did not mention the next election so much there would be less difficulty in keeping the attention of the house.


John Whitney Pickersgill: Mr. Speaker, I made reference a few moments ago to trends, and it may be that I am simply following one which exists in the atmosphere around us. I shall endeavour to resist it. This opposition not only has the right but the inescapable duty to resist this tendency toward cabinet dictatorship, this tendency that was epitomized in the words of the Prime Minister when he said that the government of Canada is sovereign. I venture to say that no Prime Minister in the history of this country has ever before uttered those words in the House of Commons.


Gordon Harvey Aiken: To which page does the hon. member refer?


John Whitney Pickersgill: What is the page reference? I thought hon. gentlemen listened with the greatest of care to their leader's speech, but he will find those words at the bottom of page 7685 of Hansard, beginning in the first column and carrying on to the top of the second column. He will find an entirely false antithesis there which I am not going to waste the time of the house in reading. That statement clearly says that the government is sovereign. That statement slipped out. The Prime Minister was speaking his real mind that day with that sincerity which is his most famous characteristic. It was frightening; it was very frightening in a free parliament to hear the Prime Minister of this country say not that this parliament is sovereign and the ministers are its servants, as all his predecessors have said, but that the government is sovereign.


Gordon Harvey Aiken: He did not say that at all.


John Whitney Pickersgill: Yes, he did.
Canadian National Railways


Gordon Harvey Aiken: Read the statement.


John Whitney Pickersgill: The other day when I attempted to read it I was precluded from doing so because hon. gentlemen opposite did not want to hear it read.


Thomas Miller Bell: Read it now.


John Whitney Pickersgill: I shall read it with great pleasure, sir. The statement of the Prime Minister to which I referred as recorded at page 7685 of Hansard for July 7, 1961 reads as follows:
Sir, these letters reveal-
That is to say, certain communications which Mr. Coyne had addressed to the hon. gentleman opposite and which were made public.
Sir, these letters reveal an attitude which, if accepted by the government, would result in two sovereignties in Canada, the government of Canada and the governor of the Bank of Canada;-


An hon. Member:: That is right, but not in that order.


John Whitney Pickersgill: Yes, he said the "government of Canada".


An hon. Member:: Read on; go ahead and read on.


John Whitney Pickersgill: That is all that I am concerned about, sir, because-


Thomas Miller Bell: Well, if the hon. gentleman-


Mr. Speaker:: Order. Hon. gentlemen must allow the hon. member who has the floor to make his own speech.


Murdo William Martin: Hear, hear.


Donald Methuen Fleming: And make his own mistakes.


Thomas Miller Bell: Is the hon. gentleman not aware that the crown and the two houses of parliament are the government of Canada?


John Whitney Pickersgill: I am not aware of that fact. I am aware of the fact that that is a false proposition. The government of Canada is Her Majesty's ministers for the time being, it is not parliament. Of course the hon. member for Carleton, being a real old Tory, would suggest that the crown was sovereign. We do not think the crown is sovereign, we think parliament is sovereign.
Som hon. Members: Hear, hear.


John Whitney Pickersgill: This is a false doctrine, but a Tory doctrine, that government is superior to parliament and, in the words of the Prime Minister, parliament is the puppet of a few cabinet ministers. That is something

Canadian National Railways we thought was dead in this country. However, sir, I should like to come back to the bill.


An hon. Member:: It is about time.


John Whitney Pickersgill: Well, if the hon. gentlemen-


Mr. Speaker:: Order.


Some hon. Members:: Oh oh.


Mr. Speaker:: Order.


John Whitney Pickersgill: Mr. Speaker, I should like to come back to this-


Richard Albert Bell: Does the hon. gentleman think-


John Whitney Pickersgill: Perhaps the hon. gentleman can make his speech when I have finished mine. He has been of great assistance to me on previous occasions, but on this occasion I can do without that assistance. I suggest to you, sir, that this parliament, has the right to be told, and we have a duty as the opposition to use our resources in this parliament to find out, who are the individuals who will run this railway before we dispose of vast sums of money, millions of dollars, to unknown persons. Indeed, we should not dispose of these vast sums of money to unknown persons.
There is a second point, Mr. Speaker, which seems to me to be very relevant. That is that the government has responsibility for the management of the railway. The government is not charged with management, but parliament has charged the Canadian National Railways under the statute with management. However, the government has the responsibility for the management. The Minister of Finance has denied that the government has any responsibility in another field, but in this field I do not think even the Minister of Finance would deny that he has the ultimate responsibility to this parliament for the deficit. It is not Mr. Gordon who is responsible; the responsibility lies on the Minister of Finance. The government cannot escape that responsibility. If the government is to discharge that responsibility to this parliament as it should be discharged the government must have management of the railway in which it has confidence, and it must back up that management in the way it should be backed up, or it should get rid of it.
I remember very often Right Hon. Mr. St. Laurent, who had a very different conception of the relationship between the government and parliament and a very different conception of the responsibility of government for agencies under its control, saying in this house that we must either have confidence in the management of the railway or we


must get a new management. That is the only proper way to do it, but this government will not do either. As my hon. friend from Laurier said, it expresses no confidence in the management. It refuses. It continues to sit by and listen to the backbenchers abuse Mr. Gordon and attack the management. It expresses no confidence in the management. It is true the Minister of Transport said that he liked Mr. Gordon and he got on very well with him, but he did not say "We have confidence in Mr. Gordon; we think he is the best man for the job, and we are backing him up".


J.-H.-Théogène Ricard: Do you?


John Whitney Pickersgill: That is not my affair; it is the government's affair. The government is responsible. Every time anybody in this house suggests that this government should take responsibility for something they reply, "Do you take responsibility for it?" Why, sir, the Prime Minister was in Winnipeg the other day, and according to news reports he is even blaming the Liberals for the drought. They just cannot take responsibility for anything, not even themselves.
The plain fact is, sir, that whatever one may feel about Mr. Gordon, he has been treated in a shocking way by this government, in what my hon. friend from Laurier has described over and over again as a disgraceful way. If they do not believe in Mr. Gordon, if they think he is no good, they do not need to keep him there; they can let him go and do something else. But if they do think he is the best man they should confirm his appointment and give him the necessary prestige and confidence to carry on this tremendous responsibility. It is a tremendous responsibility to run any railway these days, and to run this greatest of all the railways on the North American continent is one of the biggest jobs on this continent, and one of the most difficult. Surely, if we are going to have any kind of management at all, that management has got to be invested with the confidence and backing of the government.
Of course this is just part of a system. As one well known citizen of this country has said, this is just part of that systematic attack on all crown companies which seems to pervade the ranks of hon. gentlemen opposite. I do not say that the members of the government themselves do it directly, but one knows something from long association with politics and long experience in parliament that the backbenchers do not talk the way they do, they do not make the kind of reports they do, if they are discouraged. I do not say they are encouraged.


John Ferguson Browne: They do not have freedom in the Liberal party to say anything.


John Whitney Pickersgill: Then, of course, they start talking about Mr. Gordon being a Liberal appointee. Mr. Gordon's term expired in the autumn of 1957. In the autumn of 1957 this government reappointed him, and they reappointed him quite hastily. Of course they did not have a majority then. Perhaps they were a little more conscious then that parliament was sovereign and not the government, as the Prime Minister now says.


Gordon Minto Churchill: Where did the Prime Minister say that?


John Whitney Pickersgill: I read it to the hon.
gentleman.


Gordon Minto Churchill: You did not read it. I challenge you to read it.


John Whitney Pickersgill: And he may read it himself again as often as he likes. I read to him from Hansard.


Gordon Minto Churchill: You just twisted the words.


John Whitney Pickersgill: There is no getting around it; the Prime Minister said-


Richard Albert Bell: Ridiculous hypocrisy.


John Whitney Pickersgill: -there could not he two
sovereignties in this country, the government and the governor of the Bank of Canada.


Gordon Minto Churchill: He said no such thing.


Richard Albert Bell: You twisted it.


John Whitney Pickersgill: Hon. gentlemen can try to put it straight if they like.


Gordon Minto Churchill: Mr. Speaker, this is a matter of privilege which affects every member of the House of Commons. The hon. gentleman has purported to read from Hansard words which are not in the order in which he read them out. This is an insult to the members of the House of Commons, because at page 7685 of Hansard the Prime Minister used these words:
Sir, these letters reveal an attitude which, if accepted by the government, would result in two sovereignties in Canada, the government of Canada and the governor of the Bank of Canada; but not in that order.
The letters reveal an attitude which, if accepted, would result in two sovereignties in Canada, the government of Canada and the governor of the Bank of Canada; but not in that order. Now I protest, sir, against the statement of the hon. member for Bonavista-Twillingate that the Prime Minister said that the government of Canada was sovereign. That is not there in the record.


Lionel Chevrier: Mr. Speaker,-


Mr. Speaker:: Order.


Lionel Chevrier: -I rise on a point of order, if I may.
Canadian National Railways


Mr. Speaker:: I do not think there is any need to make a point of it. The hon. member who has the floor is entitled to interpret the words in the sense in which he thinks they will support his argument, and it is open to other hon. members to give them any interpretation they wish. Actually the words have been read by the hon. member for Bonavista-Twillingate and by the Minister of Veterans Affairs, and members can draw their own conclusions as to their meaning. It is not a point of privilege to interpret the meaning of words which have been read to the house. As I follow what the hon. member has said, he is making an argument based on those words but he is not ascribing any words to the Prime Minister which have not been read.


Donald Methuen Fleming: I rise on a question of privilege.


Lionel Chevrier: I rise on a question of privilege, Mr. Speaker. I had the floor a moment ago.


Mr. Speaker:: Order. I have just listened to a question of privilege raised by the house leader, and I hope I have disposed of it to the satisfaction of the house. If there is another question of privilege which the hon. member for Laurier and the Minister of Finance wish to raise I will hear them, of course.


Lionel Chevrier: I wanted to reply to the words of the house leader. Your Honour said you had disposed of the point; therefore I am perfectly satisfied to leave it at that. The Minister of Finance wants to put his oar in, too. If that is the case, then I want to continue with my point.


Mr. Speaker:: I trust the matter has been disposed of. If hon. members disagree with the interpretation put on the words they will rise and make their own speeches.


John Whitney Pickersgill: I thank Your Honour for that, because I am making an argument when I say that these are the words of the Prime Minister, and nowhere in any of Mr. Coyne's letters will these words be found. These words are the Prime Minister's interpretation of Mr. Coyne's letters, and I take the Prime Minister's interpretation of Mr. Coyne's letters to mean that the Prime Minister feels that one of these two is sovereign or he would not have put it that way. I was extremely fair; when I was asked to read the words I read them. I say they betray the real bent of the Prime Minister's mind after four years in office; that the government is sovereign, not parliament.

Canadian National Railways


Thomas Miller Bell: This twisting is in the hon. gentleman's mind.


John Whitney Pickersgill: Perhaps it was in his mind all along; perhaps even four years ago when he said "parliament, the puppet of a few cabinet ministers", he was looking forward to this day. I repeat, sir, there are two things that are shocking about the situation in which we find ourselves in relation to this present bill. The first is that we cannot find out, we are not told, whether the government has any confidence in the present day to day management of the railway, because that is what it is; and that is destructive of morale. The second point is that the government, which undertook as soon as the legislation was through to appoint the remaining directors and the chairman, has not carried out that undertaking to parliament, and is asking us to pass this legislation without that undertaking having been carried out.
Sir, in order to get the opinion of the house on this question I should like now to move an amendment to the second reading of this bill. I move, seconded by the hon. member for Ottawa West (Mr. Mcllraith):
That all the words after "that" be deleted and the following substituted therefor:
"this house declines to give second reading to a bill providing large sums for capital expenditures on the railway system while the house is not possessed of the identity of those, namely, the chairman and members of the board of directors, who will be responsible for the making of such expenditures".


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


John Ferguson Browne: Mr. Speaker, the amendment seems to me to be entirely out of order, because the house knows very well who are the chairman and members of the board of directors. They were appointed some time ago and under the statutes of this country are continuing in office. I am sure the house knows very well that Mr. Donald Gordon is president of the C.N.R., and the directors are readily ascertainable by anybody who wants to take the trouble to look up their names.


Lionel Chevrier: Does Your Honour wish to hear argument on this point?


Mr. Speaker:: I think it is unnecessary if that is the only objection taken to the amendment. Is the house ready for the question?


Paul Joseph James Martin: Mr. Speaker, I have listened with considerable interest to the speech just made by the hon. member for Bonavista-Twillingate, and I listened with equal interest to the several statements made on Saturday by some hon. members, notably the hon. member for Laurier. The issue before

us at this moment is a simple one. We are being asked to provide very considerable sums of money under this bill which is to authorize the provision of moneys to meet certain capital expenditures of the Canadian National Railways system for the period from the 1st day of January, 1961, to the 30th day of June, 1962, and to authorize the guarantee by Her Majesty of certain securities to be issued by the Canadian National Railway Company.
The hon. member for Bonavista-Twillingate has just contended that before voting these moneys we should learn from the administration what its intentions are with regard to the president, whoever he shall be, of the Canadian National Railways. We are also asking who are to be appointed to fill certain vacancies on the board of directors of this great national railway system. This is not an unusal request under any circumstances, but in the circumstances that now attend the situation with regard to the direction of this railroad I think our justification for asking for this information is great.
We are reminded that the term of office of the president of Canadian National Railways, Mr. Donald Gordon, expired some nine months ago, and that he has been carrying on, I think one may say, on sufferance during this period without any indication whether or not his term of office is to be extended of whether in fact he is to be reappointed for a fixed term under the statute. The Canadian National Railways is a large operation, the largest railway system in the world, yet for some reason this government refuses to indicate whether it proposes to continue the present president in the direction of this railroad. That is an impossible situation.
There are limits on the prerogatives, even by custom, to which a government can legitimately cling. No government can be forced to announce the appointment of a particular individual unless it has been given ample opportunity to make up its mind. But that cannot be contended in this case, because the definite term of the president expired nine months ago. Is it fair to this railway system, is it fair to this parliament, is it fair to this country that this uncertainty should prevail?
The hon. member for Bovavista-Twillingate says you have asked for certain moneys, and before those moneys are granted we are entitled to know who is going to direct the operations connected with the moneys to be appropriated under this bill. This is a reasonable request. I well remember, during the course of another debate this session, attacks were made on the president of the Canadian National Railways largely by members who sit

behind the treasury benches. The Minister of Transport was Anally prevailed upon to come to the defence of an official who serves under him.
It took some pressure to convince the Minister of Transport that it was not fair for a minister to refrain from commenting on attacks that had been made on an official who reports to parliament through him. Finally, after a long and protracted debate, the Minister of Transport manfully acknowledged that as far as he was concerned he had nothing but high commendation for the president of Canadian National Railways. But he qualified his tribute by saying "as far as I am concerned". The hon. gentleman did to an extent meet the tradition that it is always incumbent upon a minister to defend a public official with whom he has official connections, but the minister would not go further than to say "as far as I am concerned".
What we are entitled to know now is what is the regard that this government has for the president of Canadian National Railways? It can express its view as to his competence by giving us some definite indication of what it intends to do by way of reappointment or by way of replacement, but surely we are entitled to have this information. Why has the government not made up its mind, if that is the situation? If it has made up its mind, why should it not tell this house? If it has not made up its mind, then it surely owes to parliament some explanation for this long delay in determining if Mr. Donald Gordon is the kind of man it wishes to see continued as the president of Canadian National Railways.
There is a further principle involved. It is connected with other situations that have nothing to do, of course, with the operation of the railroad. It is that more and more in this country there is a growing feeling, justified or not, that the government is not satisfied with the heads of certain crown corporations, with certain leading public servants.


Mr. Speaker:: Order. I question whether the course which the hon. member is following is relevant to this fairly narrow question. The question is the voting of funds for Canadian National Railways and the amendment has placed before the house a very precise reason for not voting those funds, namely, that the house has not been given the names of the chairman and members who will have responsibility for making expenditures. I would think that to discuss the views of the country at large on the government's attitude toward1 other public servants is not relevant to this issue.
Canadian National Railways


Paul Joseph James Martin: I cannot quarrel with the position that you take, except that this was not my main argument. I was surely entitled, in commenting upon the substance of what I have to say, to relate my remarks to the general disquiet which I believe exists with regard to the government's treatment of certain public officials of our country. It was only in that context that I had made my observations.
We have been told in another place by one distinguished senator who happens to be the president of the Progressive Conservative party, that the government has intentions with regard to the division of functions at the top of the management of Canadian National Railways. The suggestion has been made that the office of president will be filled by one individual and that he will not continue as chairman of the board. This is a very important announcement to have come from someone who may be close to the administration but has no official functions whatever in so far as the government of Canada is concerned. We are entitled to know whether or not that announcement of policy from that quarter represents what the government really has in mind.
Does the government intend to divide the functions, as was announced by Senator Thorvaldson or was Senator Thorvaldson talking through his hat? Was he talking with justification or had he been informed of this by the government? Surely it is not treating parliament fairly to suggest that that kind of announcement can be made in another place but that we may not expect any comment on it from a member of the government in this chamber. Surely we are entitled to know, not only if the present president is going to be continued in office, but whether his functions are going to be divided as Senator Thorvaldson indicated.
The Minister of Transport is now in his seat. He has not had the advantage of listening to the earlier part of the discussion. I would tell him, therefore, that we have been arguing here, notably today through the rather moderate but vigorous statement of the hon. member for Bonavista-Twillingate who has presented an amendment, that before we accede to the request for certain moneys as contained in this bill we should be advised what the government's intentions are with regard to continuing in the office of president the present incumbent. We have pointed out that nine months have elapsed since the term of Mr. Gordon came to an end, and that it is wholly irresponsible for the government, after nine months, not to be in a position to indicate what its intentions are as to the replacement of Mr. 7872	HOUSE OF
Canadian National Railways Gordon or his continuing in office or dividing the functions at the top level of the management of the railroad system.
How long does the government intend to allow this situation of uncertainty to persist? Is there any obligation on the government to make up its mind with regard to this matter? I will admit that the Minister of Transport has not been minister of transport very long.


Gordon Minto Churchill: But he is very effective.


Paul Joseph James Martin: I wish some other ministers were equally effective. I am not going to name the Minister of Veterans Affairs when I say that, but I simply say I wish the Minister of Transport had some other colleagues who deserved the designation the Minister of Veterans Affairs says applies in this particular case.
The Minister of Transport has not been in office for the full period of these nine months. However, he has been in office now long enough to know what the situation is. He, himself, has said he has confidence in the present president of Canadian National Railways. He made that statement, as I pointed out a few minutes ago, only after considerable prodding. He will remember that for two days strong criticism had been levelled in this house against Mr. Gordon, notably by hon. gentlemen who sit behind the minister. It was only after we had pointed out repeatedly that there was an obligation on the part of the minister either to agree with those criticisms or to defend the president of the railway, that the minister's statement was made. If he agreed with the criticisms, then it was clear what the responsibility of the government with regard to Mr. Gordon must be. The minister is satisfied. He has given the present president full endorsation. No one could have paid a more generous tribute to the competence of Mr. Gordon than did the Minister of Transport.
What we are entitled to know today is whether or not that tribute in appreciation of Mr. Gordon's competence is shared by his colleagues in the government, and whether or not they intend to continue that gentleman in office. This is the gist of the amendment that is before the house at the present time. The amendment deals also with the members of the board of directors who have yet to be appointed. I ask the Minister of Transport, and I ask the Minister of Finance-I would simply say in passing that if the Minister of Finance feels he is being unduly detained in this house, and on that account cannot accept the invitation which has been extended to him in the other place-


Donald Methuen Fleming: There has been no invitation, so do not litter the record again with untruths.


Paul Joseph James Martin: What is untrue?


Donald Methuen Fleming: What you just said.


Paul Joseph James Martin: Let me repeat what I have said.


Donald Methuen Fleming: Mr. Speaker, are we going to discuss this bill or are we going to have a discussion based on the misstatement just uttered?


Murdo William Martin: Don't be so sensitive.


Mr. Speaker:: I think the hon. member would do well not to bring in what is a purely extraneous matter and is certainly not an uncontroversial one.


Murdo William Martin: I did not catch that last observation, Mr. Speaker, and I like to hear what you say.


Mr. Speaker:: I was just observing that it would be well for the hon. member not to bring in purely extraneous matters and which, as he has observed, are not uncontroversial.


Murdo William Martin: I was just observing, Mr. Speaker, that the Minister of Transport is here now-


Mr. Speaker:: I know what the hon. member was observing, and I was asking him not to observe that.


Murdo William Martin: I was just observing that the Minister of Transport is now in his place, and if the Minister of Finance who has, after all, been under considerable fire now for many days in this house, feels that he wishes to attend-


Mr. Speaker:: Order; the hon. member appears to be deliberately following what I suggested to him was not a proper course to take. I trust that he will accept the responsibility of the Chair for some determination of what course this debate should take.


Murdo William Martin: I am not going to pursue the point, Mr. Speaker, except to say, with great respect, that I find it difficult to accede to that suggestion. But under the circumstances there may be some other way of dealing with it. I would think it was most extraordinary that in the course of the debate one was precluded from saying to an hon. member that he could absent himself for particular purposes. I find it difficult to accede to the suggestion that such is not the case. However, I have such great respect for Your Honour and for the sensitivity of all the circumstances implied in what I have said that, for the time being, I am prepared to

pass on to my plea to the Minister of Transport. In doing so, however, I cannot help but note how sensitive the Minister of Finance is. I say this to the Minister of Transport. Surely he cannot now take the position that he can go on denying to us knowledge of the government's intention, particularly when we are now approaching the end of the present session or the present portion of this session of parliament. Is the government going to take the position that it will make an announcement with regard to the president of the railroad and the nomination of the new directors after parliament will have risen and before parliament returns? Is the government going to take advantage of that interval to announce if Mr. Gordon is going to be retained and who the new directors are? If that is the decision the government proposes to take I will say now that it will be a demonstration of this government's disregard for parliament. Or let the minister tell us frankly, "We are not in a position to announce it. We have certain considerations in mind that have not yet been realized. We cannot tell the house who the new president is going to be or whether Mr. Gordon is going to be continued or who the new directors are to be." Let the minister take the house into his confidence. But to deny us this information at this time is incomprehensible.
Let the people of this country recognize and recall the fact that we are not asking for something to be settled that has only suddenly arisen but rather something that has been in existence now for almost nine months. The hon. member for Bonavista-Twillingate took the position that before money was granted parliament had the right to know who was going to be the head of the Canadian National Railways. This morning we were told by the Prime Minister that the government had not yet decided who was going to be the president. When is that matter going to be decided? Are we then going to be denied this information only to be confronted when we leave here with a revelation of information that is now being denied to the house? Some hon. members who are new to this chamber find it irritating to find those of us in the Liberal opposition persistently making arguments of this kind. If they will look over the record of Hansard they will see the kind of arguments that were made by the present Minister of Finance and the present Prime Minister, without having anything like the justification that attends us in this particular instance. Because we are asking for what I think it is our duty to ask, we are being criticized and hon. members opposite find our interventions irritating and annoying. They may be annoying and they may be irritating but these are the instruments
Canadian National Railways which an opposition is entitled to use in order to elicit from a reluctant executive information which the public and parliament are entitled to have.


An hon. Member:: A filibuster.


Paul Joseph James Martin: My hon. friend says "a filibuster". I do not say that this applies to him in particular but among hon. gentlemen sitting around him there are those who know the meaning of filibuster when we think of the way in which private members of the Conservative party during this session held up government business and are partly responsible for the fact that this is the longest session on record.


Some hon. Members:: Oh, oh.


Paul Joseph James Martin: Let no private member in the Conservative party talk about a filibuster. They have filibustered important legislation in this house as no other group has ever done, I suppose, in the history of parliament. We think of the filibustering on A.R.D.A., a bill which was introduced by the Minister of Agriculture and which does nothing for the farmers of Canada in the short term. We think of all of those instances of filibuster. Let no one suggest that we in the Liberal party are filibustering. If we are filibustering-


An hon. Member:: You are just blustering.


Paul Joseph James Martin: -we are filibustering with justification.


Some hon. Members:: Oh, oh.


Murdo William Martin: I see the hon. member for Regina City in his place. Does he not think that we are entitled to know after nine months, when the term of office of the president of the railroad has expired? Are we not entitled, or is he not entitled as a representative of the people of Regina, to know who the next head of the Canadian National Railways is going to be?


Kenneth Hamill (Ken) More: I can ask my own questions.


Murdo William Martin: Are we entitled to vote moneys when this information is denied us?


An hon. Member:: Have you any recommendations?


Murdo William Martin: I see the hon.
member for Cornwall who has just come in. He is a member of this house. He represents people in this parliament. What explanation is he going to offer to his constituents, people who are putting up taxes, who are putting up money that ultimately finds its way into the exchequer of the Canadian National Railways? The people of Cornwall want to know.

Canadian National Railways


John Andrew W. Drysdale: Do you want Gordon fired?


Murdo William Martin: Now we hear from the hon. member for Vancouver-Kingsway.


John Ferguson Browne: Mr. Speaker, I must rise on a question of privilege. The hon. member for Essex East seems to be making some reference to me. I made no interjection or comment.


Murdo William Martin: I mean the hon. member for Burnaby-Kichmond.


Mr. Speaker:: Order. In dealing with the question of privilege may I request the cooperation of hon. members on my left but beyond the speaker who seem to be diverting the hon. member for Essex East from the main path of his argument.


Murdo William Martin: In this instance, Mr. Speaker, I have no difficulty in readily accepting what you have suggested, although I must say that I find these diversions somewhat helpful. I asked the hon. member for Burnaby-Richmond this question. How will he justify on going back to his constituents, voting millions of dollars to the Canadian National Railways and not having joined with the rest of us in ascertaining from the government who is to be head of the Canadian National Railways?


John Andrew W. Drysdale: It is very easy because I know.


Murdo William Martin: My hon. friend says he knows. Oh, now we have it.


Some hon. Members:: Oh, oh.


Murdo William Martin: The hon. gentleman says he knows.


John Andrew W. Drysdale: Just read the annual report of the C.N.R.


Murdo William Martin: That is exactly the information given to the other place by Senator Thorvaldson who said that the office of president was going to be divided, that the person who was president would not continue to act as chairman of the board of governors. That was an announcement of policy made in the other place. We have been asking in this house for a confirmation of that announcement by the president of the Progressive Conservative party and yet we have not been able to obtain any information in that particular from the minister. Now from the generous and amiable member from Burnaby-Richmond we learn that he knows who is going to be the next president.


John Andrew W. Drysdale: Read the annual report.


Murdo William Martin: We now learn that he knows whether or not the present president is going to be continued. That can mean only one thing, namely that he as a member of the Conservative party has been given information by the members of the government-by the Minister of Finance, by the Minister of Transport-perhaps in caucus, which information is being denied to parliament.


John Andrew W. Drysdale: I rise on a question of privilege.


Mr. Speaker:: I cannot hear the hon. member from that place.


Murdo William Martin: I think if the hon. member wishes to raise a question of privilege the house ought to accord him that right, even though he finds it convenient not to be in his place.


An hon. Member:: Put him in his place.


John Andrew W. Drysdale: Mr. Speaker, I rise on a question of privilege. In the first place I might say I object strenuously, as I indicated earlier, to this matter of seating, but I understand it is under review by the committee of the house. The point I wanted to raise and direct to the attention of the hon. member for Essex East is that the information I was conveying to him is readily available to all hon. members-in fact, to the rest of the world- because it is in the Canadian National annual report, which indicates that Mr. Donald Gordon is the president. This should answer the question contained in this very important motion raised at this time.


Leon David Crestohl: Who is the chairman of the board?


Murdo William Martin: I am sure the hon. member, who has crossed the chamber to sit in a seat he prefers, will recognize that he has not raised a question of privilege. However I do not make any comment on that. I can understand what the hon. member is trying to do in not being in his seat; he is trying to get as far away as he can from the ministerial benches. I can well understand why.
The situation is quite clear. In the face of what has been alleged today I hope the Minister of Transport, who comes to this debate fresh, perhaps with information which is not now in the possession of the Minister of Finance, will be able to give us the information to which we are entitled. He was not in the house when the hon. member for Bona-vista-Twillingate read his amendment and therefore I should like to read it again:
This house declines to give second reading to a bill providing large sums for capital expenditures on the railway system while the house is not possessed of the identity of those, namely, the

chairman and members of the board of directors, who will be responsible for the making of such expenditures.
Our request, our justified demand is embodied in the terms of this amendment and by no contrivance possible can the ministry justify refusing to give the house this information. The government is entitled to these moneys in support of the railway, but there must be an answer to our questions. To ask us to vote moneys when the government does not know who is going to head the railway, or when it refuses to give this information, is wholly irresponsible and is in keeping with the disregard for parliament which this government continues to demonstrate.


Donald Methuen Fleming: Mr. Speaker, the house did not need to be told by the hon. member who has just resumed his seat that he and his colleagues are conducting a filibuster. That was perfectly well known to all hon. members of the house. Before they carry on their filibuster any longer, Mr. Speaker, I think I should say something to them about the consequences of their filibuster.
It is essential for the provision of the funds required by the Canadian National Railways that this measure should be carried without delay. We have now had the measure before us at the resolution stage and the bill stage. I think this is the third day it has been under discussion.


George James McIlraith: Why did you not bring it in earlier?


Donald Methuen Fleming: There is plenty of opportunity for anyone who has anything serious to say about the bill to do so; but there is no opportunity for filibuster on this bill or intentional delay unless such hon. members as are participating in that intentional delay and obstruction wish to see the operations of the Canadian National Railways hampered.


Some hon. Members:: Oh, oh.


Donald Methuen Fleming: I make that statement, Mr. Speaker, so there will be no misunderstanding of the situation. There will be opportunity for fair discussion, serious discussion, but there is not time for wilful obstruction and filibuster.


Paul Joseph James Martin: Give us the information for which we are asking.


Donald Methuen Fleming: The information hon. members need to have will be forthcoming in answers to inquiries they may wish to make on the clauses of the bill. That information will be forthcoming. But I just wish to sound this word of warning to hon. members opposite.


Some hon. Members:: Oh, oh.
Canadian National Railways


Donald Methuen Fleming: If they are thinking about prolonging an obvious filibuster I am giving them due warning now that the operations of the Canadian National Railways are going to suffer. That happens to be the fact. If they wish to continue to be irresponsible about this and ignore the position of the Canadian National Railways and the need on the part of the Canadian National Railways for having the financial provisions this bill contains for the railway, they can go ahead and do injustice to the Canadian National Railways and deprive that crown corporation of the provisions it needs from this bill.
The situation is just that, Mr. Speaker. So they can make their choice now between going gaily ahead with their filibuster and denying to the Canadian National Railways provisions which that company now requires, or on the other hand they can deal responsibly with the bill. We can have a serious and sensible discussion without obvious delay, endless repetition, deliberate filibuster and obstruction.


An hon. Member:: That is too much to expect.


Donald Methuen Fleming: Hon. members
opposite seem to think that just by sheer repetition they are going to compel the government to embark upon-


John Whitney Pickersgill: To make up its mind.


Donald Methuen Fleming: -a course that is not within the power of the government to follow at this moment without further steps being taken. They are demanding-demanding, Mr. Speaker-that the government should tell them who are going to be appointed to the additional places on the board of directors of Canadian National Railways as provided by legislation passed through this house several weeks ago.
They are demanding also that the government should take some action with respect to the term of the existing principal executive officer, the president and chairman of the corporation. Let me say this, that the appointments of those additional directors have not been made.


An hon. Member:: Why not?


Donald Methuen Fleming: They cannot be made until the legislation has been proclaimed.


Some hon. Members:: Oh, oh.


Paul Joseph James Martin: Ridiculous.


Donald Methuen Fleming: The legislation has not been proclaimed, and I doubt if under the existing pressure of business in this house
7876	HOUSE OF
Canadian National Railways there is any use of hon. members thinking for one minute that the legislation is going to be proclaimed and those appointments made this week. In resorting to that kind of demand they are just exposing their own intention to filibuster and delay this measure. Every hon. member knows that the president and chairman is in office; he is carrying on as he has heretofore.
When the bill is proclaimed and it becomes then appropriate to make the appointments, those appointments will be made. But hon. members opposite merely delude themselves if they think that by conducting a filibuster of this kind and hurling abuse at this side of the house they are going to accomplish their purpose.
I wish to be understood. I am speaking very plainly, Mr. Speaker, to the opposition and I am telling them that if they think they are going to accomplish the purpose they profess to have by this filibuster, they are not going to succeed. They are simply going to deprive the Canadian National Railways of the arrangements that this bill proposes to make for the railway and which the railway requires.


George James McIlraith: Mr. Speaker, we have just heard from the lips of the Minister of Finance an indictment of the government the like of which we have not heard for some time. I invite hon. members to consider the argument of the minister. He accused the opposition of a filibuster because one hon. member had dared to speak in support of an amendment that was offered to this house.


Donald Methuen Fleming: About 15 speeches on Saturday, and endless repetition.


George James McIlraith: I wonder whether the Minister of Finance would observe the courtesies and rules of the house.


Donald Methuen Fleming: Well, tell the truth.


George James McIlraith: I will tell the precise truth, and not follow the precedent set by the Minister of Finance in that respect.


Donald Methuen Fleming: Tell the whole truth.


John Whitney Pickersgill: Who is the Minister of Finance to be talking about telling the truth?


George James McIlraith: I will tell the whole truth and, therefore, not follow the precedent set by the Minister of Finance.


Donald Methuen Fleming: You are telling only part of it.


George James McIlraith: The Minister of Finance persists in this course of interjecting. That is a course to which I have no objection if he


has the ability to make his interjections relevant or pointed, or if he makes them with some skill or dexterity. However, if they are mere clumsy, repetitious statements on his part I should ask him to desist until his turn comes to speak.
The minister accuses the opposition of filibustering this measure for having dared to have one speaker speak in support of this motion.


Donald Methuen Fleming: That is not what I said. You had a dozen speakers on Saturday.


George James McIlraith: Your remarks are on the record and the record will speak for itself.


An hon. Member:: It sure will.


George James McIlraith: The Minister of Finance then made the threat that further discussion in respect to this bill would in some way jeopardize the position of the Canadian National Railways, because it would not have the funds available for this capital work. Let me point out to him that if that is so he owes an apology to the House of Commons for coming to parliament with this legislation so late. If what he has said is true, and is the whole truth, as he put it, then the government has failed in its responsibility in bringing this legislation forward so late that it cannot be considered properly by the house.
To show just how far the minister has gone let me say this. When my desk mate, the hon. member for Essex East was speaking in support of the amendment to the motion, the minister referred to his argument as an inane argument. I should like to follow up the hon. minister's remarks in that regard.
Let me analyse just exactly what he is asking this government to do. He is asking this house to approve a bill providing some $178,900,000 for the Canadian National Railways for purposes more particularly set out in the bill. I remind the Minister of Finance that that represents $10 out of the pocket of each citizen of Canada; those who work, those who are too young to work, and those who are unable to work because of illness. That is the magnitude of this bill. The amount of money asked for is the equivalent of $30 from the pocket of each member of the labour force. That is the amount he is asking the taxpayers to provide this year as well as that enormous amount of money required to offset the budget deficit.
Surely this is a matter of major importance to the citizens of this country. Surely if the Minister of Finance is asking the taxpayers to make this substantial contribution out of their earnings in one year he has an

obligation to tell the taxpayers why he wants that money, because this bill certainly has the effect of arbitrarily taking that money from them.
If the Minister of Finance is going to tell the whole truth, as he refers to it, is he going to tell the taxpayers that he will not inform them who is going to be in charge of spending this vast amount of money? Is he not going to tell them who is to be responsible? Is he going to tell them if they search through the statute books they will find there a board of directors and a chairman of the board, but that he will not tell them who they are? Is he going to tell them that this government will not indicate what its policy is in this regard? Is he going to tell them that if they look at the statute and read it carefully they will find that the government has the right to make these appointments but that the government is going to take this money from the taxpayers without telling them who the management is to be, and only after the government has received the money will it then tell who is to manage the railway?


Paul Joseph James Martin: Parliament be damned.


George James McIlraith: Surely that is not a responsible way to treat the taxpayers of Canada. Surely that is not a responsible way to treat the members of the House of Commons who, in the final analysis, are nothing more or less than those individuals elected by the voters of Canada to represent the taxpayers. Surely it is not inane to ask the Minister of Finance to reveal the policy of the government in this regard and to reveal the government's action before parliament joins in taking this very large sum of money from the taxpayers for this purpose.
Mr. Speaker, the Minister of Finance becomes very wrathful about these things and wonders why we should dare to defend the right of parliament to have this information. He wonders why we should dare to try to maintain the responsibility of parliament. He wonders why we should attempt to make the government answerable to parliament. According to his theory the government is apparently no longer answerable to parliament. But that is a question which will be resolved at some time or another in the future. However, I warn the minister that if he persists in this high handed, arbitrary and arrogant method of dealing with parliament he must be prepared to accept the consequences.
Earlier this session when the opposition presented an amendment to a supply motion on February 20 and February 21 having to do with monetary policy there was reference made to the head of an institution very much 90205-6-497
Canadian National Railways occupying public attention today. On that occasion the Minister of Finance defended the head of that institution at some length. I remember the argument very well because I intervened in it.


Donald Methuen Fleming: Order.


George James McIlraith: I am wondering today, in regard to this debate on the railway bill, why the Minister of Transport is not bearing the burden of the argument in presenting this bill. Maybe he has not had a chance because of the Minister of Finance, but whatever the reason he is not bearing that burden.
The Minister of Transport has made it clear that the government proposes to appoint promptly the members to the board of the directors of the Canadian National Railways and also that the chairman of the board had the support of the government. This was exactly the pattern followed by the Minister of Finance in that other connection. Then the Prime Minister entered the picture. I am wondering if in a few weeks the Minister of Transport will not be forced to take the same type of action vis-a-vis the four directors whose term of office is expiring shortly, and the chairman of the board of directors, as the Minister of Finance was forced to take a few weeks ago vis-a-vis the head of the Bank of Canada. It seems to me that is the kind of situation we are confronted with today. I believe we would be remiss in our duty if we did not press the government of the day to give an explanation regarding the appointment of the men who will be responsible for the direction and administration of this great railway system. Surely that elementary information should be given before this money is provided. I suggest it is an impertinence on the part of the government to go to the taxpayers of Canada and take from them this vast sum of money without giving that information. It is an impertinence to parliament for the Minister of Finance to submit this bill without being ready and willing to give such information.
For my part I completely repudiate the criticism of the Minister of Finance that we are conducting an obvious filibuster. I regard the proceedings in respect to this legislation and the way in which this government is putting it through as an obvious demonstration of arrogance on the part of the government toward parliament. I regard it as the duty of members of parliament to endeavour to obtain this information before this large sum of money is provided from the taxpayers' pockets.


James MacKerras Macdonnell: Mr. Speaker, I had little intention of speaking on this matter but I arrived in the chamber just

Canadian National Railways in time to hear the proposed amendment. I like to think that I usually speak in moderate terms but I find it difficult to do so this afternoon because, quite frankly, I find it impossible to understand how a serious man could propose such an amendment.
Why do I say that? I say that because although I was not on the railway committee this year I was on the committee for a good many years. I have heard representations made by the president of the railway and his staff. I have taken part in the deliberations of the committee.
We have then had this measure following, the committee reports, and I suggest it is practically a routine measure.


George James McIlraith: A measure having to do with $180 million?


James MacKerras Macdonnell: Do not let us be led astray by the fact that there are large amounts of money involved. The question is whether this proposal has come before us with the proper authorization. This proposal comes to us from the railway. It does not creep up out of the ground. It has not come in any accidental way. It has been approved by the board of the railway, and the president of the railway came and presented it; then it was discussed by a responsible committee of this house. It was then reduced to legislation and it comes to us with the imprimatur of that committee. In that sense, as I said, it is routine. I have sat on the other side of the house and I have taken part in discussion of this legislation and I have made comments on it but I do not think it ever occurred to me previously that we were acting in an almost irresponsible way and asking the House of Commons to dig up huge amounts of money. What I thought we were doing was coming to the House of Commons, following the careful and responsible sittings of the railway committee, such as took place this year. What is suggested? It is suggested that by reason of an accident, an accidental situation, namely that there are four directors still to be appointed and that the president's appointment, which has expired, has not been repeated yet, in some way that means that we should not vote the amount. It is difficult to understand, as I say, why reasonable men would suggest that. Do they think if we do not know the names today that we will wake up tomorrow morning and find that a lot of third-rate people have been appointed to this board?


Paul Joseph James Martin: Will my hon. friend permit a question? He has said this is a routine matter and in the context he employed that may be the case; but does the hon. gentleman deny that we in the opposition are justified in asking if the president

will be continued in office, particularly in view of the fact that his term expired nine months ago, and that hon. gentlemen opposite have criticized him and the government itself has not defended him? In these circumstances are we not entitled to ask, and make as a condition precedent to our vote, that the government tell us what they intend to do with regard to filling the post of president of the railway?


James MacKerras Macdonnell: Of course you are entitled to ask. You have asked it a dozen times. I have never objected to your trying to do that. Incidentally, I have spoken in favour of the president of the railway. I think he is a great executive. That is another matter. It has nothing whatever to do with this. I maintain that these two things are just as far apart as the east is from the west. We have here a bill which came to us following the deliberations of a serious committee. It is a thing which, as I say, is routine, and in the sense in which I use the terms the hon. member admits it. It comes up every year. Are hon. members to say that because there are still four directors to be appointed and the president's appointment has not yet been continued the money is not to be spent but is to be held back? As I say, it is difficult for me to understand how serious men would ever make such a proposal, it is such a trivial argument. One might go on and argue that the eight men who are on that board now no doubt, were a party to these amounts being produced before the committee and that the committee sent on the measure now before us. Incidentally, those eight men would still be an effective majority on the board. However, that is a trivial argument and I do not make much of that. I return to my original point. This is a measure in the ordinary course of business, sanctioned by our practice year after year. In my view it is trivial to suggest that this measure should not be passed because we have not got the full list of members of the board of directors. Do we think that a lot of wild men are going to be appointed? Do we think that some men utterly incompetent to run the railway are going to be appointed? No, of course we do not.


John Ross Matheson: Mr. Speaker, I wish to address myself briefly to this motion. On July 7 we heard the Prime Minister say that civil servants like children should be seen and not heard. Today, July 11, we heard the Minister of Finance go one step further and enunciate the principle that the opposition like children should be seen and not heard.


An hon. Member:: You are one.


Neil Alexander Matheson: As an example, the Minister of Finance mentioned the subject of filibuster. We are reminded of what happened on Friday, June 20 last, when there was introduced by the same Minister of Transport who appears here today a measure to provide for the construction of a line of railway in the province of Alberta and in the Northwest Territories for the Canadian National Railway company involving a proposed expenditure of something of the order of $86 million. On that occasion, sir, in order to be co-operative, there was a minimum of discussion on this side of the house. The hon. member for Laurier and the hon. member for Kootenay West spoke briefly agreeing, in effect, to the proposition as put forward in order that business proceed. Thereafter, sir, we had lengthy speeches by the hon. member for Peace River (Mr. Baldwin), which speech appears at page 7322 of Hansard; then the hon. member for Vancouver-Kingsway (Mr. Browne), at page 7326; then the hon. member for Athabasca (Mr. Biggs) at page 7327; then the hon. member for Edmonton-Strathcona (Mr. Nugent), at page 7330; and then the hon. member for Lethbridge (Mr. Gundlock), at page 7333 and he concluded only because it was five o'clock. I submit that a study of those pages of Hansard indicates that this administration was not prepared to proceed with real business that day. We sat and listened to congratulatory speeches which contained nothing serious at all. I refer to the time-wasting speeches that were made in this house on that bill after the hon. member for Kootenay West concluded his remarks.
Now, sir, this is not a theoretical railroad to the Northwest Territories; it is the C.N.R., the most important link in our nation. It is one of the most important instruments of our economy and of our way of life. Surely we have the right to question the administration on some of these matters, having in mind the context of other developments in the last few weeks. These things cannot be forgotten when we ask questions now. We do not know who is going to preside over this great business in our country today. I point out, sir, this is not a case of railway business simply seen in isolation. The economic value of the C.N.R. to our community is determined not by the railway's income account and balance sheet but by the social dividends the community receives in reduced costs of transportation. The primary dividend is the money saved by using rail transport rather than any other kind of transport. I am reading these words from the study of the Canadian National Railways, volume I, by G. R. Stevens.
You will recall, sir, that Mr. Gordon received his appointment on January 1, 1950. When he took over from his eminent and 90205-6-497J
Canadian National Railways worthy predecessor, Robert Charles Vaughan, there was a deficit from the preceding year of $42 million. By great energy and devotion the new president was able to reduce that deficit immediately to something slightly over $3 million. It increased to $15 million, and thereafter for two years he was able to operate this great line at a surplus to this country. There was a slight deficit in 1954 and then for two years, until this government took over, we were operating in the black. Commencing in 1957 we find the situation where the railroad under this administration starts to slip. But what didn't slip? From a deficit of approximately $29 million they now creep up to the end of 1960 with a deficit of $67,497,000. Nevertheless under Mr. Gordon's administration we have been able to increase our operating revenues by 38 per cent and at the same time increase the average hourly earnings per employee by over 77 per cent.
We know nothing about what is going to happen in the future. We are seriously and earnestly concerned about what is going to happen to perhaps the greatest industry of our country, an industry not only important for its own sake but because it is the framework, the sinew, the arterial system for everything else in Canada. Probably there are no two things as important to the general prosperity as transportation and currency. These are the reasons why we rise today, not for the purpose of delaying the house but to put before parliament legitimately some of those problems that are very much in the minds of members of the opposition if not in the minds of members of the administration.


Edgar E. Fournier: Mr. Speaker, before I embark on the subject that is before us today I should like to make a few remarks in my native tongue.
(Translation):
Mr. Speaker, I did not intend to take part in any discussion during this session which, I think, could be adjourned any moment now, but instead I wanted to listen, observe and take my bearings. So, I am not following the tradition of this house according to which the maiden speech of a new member should deal mainly with his constituency. I defer that to some later occasion. In the meantime, I will endeavour to set the record straight about the Restigouche-Madawaska election. In fact, Hansard contains some erroneous remarks made by certain opposition members.
Mr. Speaker, I do not need to acquaint the house today with the Restigouche-Madawaska

Canadian National Railways constituency. For years, that constituency was neglected and forgotten by Liberal representatives, but my predecessor, Mr. Van Horne, took it out of the Liberal party muck to restore it to its lawful place. I am determined to see to it that it retains that place.
(Text):
I have sat in the house for 17 days, Mr. Speaker, and, as I said in French a minute ago, I have been making observations and listening to the debates. Sometimes I have found them very interesting and instructive, especially when the speakers have been on the government side, but I am afraid that I cannot pay the same compliment to the opposition as on many occasions their arguments are shocking, degrading and do not add to the dignity of the house, especially when the frontbenchers are trying to overrule the Speaker.
In listening to this debate on the C.N.R. I am sure my knowledge is very limited as I was not privileged to attend the committee meetings. However, I should like to make a few observations. My riding of Restigouche-Madawaska used to have two major C.N.R. railway centres, Edmundston and Campbell-ton. They were two divisional points with a great number of people employed there but today they are largely ghost shops.
In the early fifties under Liberal management an overnight transformation to diesel power took place which should have been carried out at a much slower rate in order to save millions of horsepower. I am referring to steam engines, most of which were practically new but had to go to the scrap pile at the expense of the taxpayers. If the transformation had been carried out more slowly management would have had ample time to transfer some of the men to other departments instead of throwing them out on the street without jobs. The machinery to bring about this sudden transformation was established under the Liberal administration.
Today the government is rebuilding those two centres. I wish to compliment the government on the new station which has been built at Edmundston, a station which was in the Liberal platform for some 30 years. It was built by this government in 1959 and included a freight shed which had also been promised by the Liberals. In Campbellton a complete new transformation is to be started in the near future.
There is one major problem, Mr. Speaker, which seems to puzzle me and to puzzle all the taxpayers of Canada. It is the difference between authority and management. Last Friday in the house some hon. members made reference to some dispute involving

the private trucking companies and competition in the trucking business by the C.N.R. The answer given by the Minister of Transport was, "This is a decision for the authorities".
I have no doubt that this good and conscientious minister has inherited such a situation as a result of 22 long years of Liberal administration when authorities, management, administrations and politicians were all riding in the same private car. My question to you, sir, is this. Are we asked to vote several hundred millions of dollars to be spent by this so-called authority while at the same time we, the government members, not the opposition, have no authority as to where and how such expenditures will be made?
I am sure everyone in this house will agree that somewhere along the line there is confusion, and under our democratic system I am sure that those elected by the majority vote of the taxpayers, who have been given the responsibility by the taxpayers to vote these moneys, should have some authority with regard to how and where they will be spent. If not, then some better understanding should be in order.
There are many instances I could mention at this time where the so-called responsible authorities in the C.N.R. have cost the taxpayers of Canada thousands of dollars, if not millions. There is concrete evidence that authorities, administration and management are not working hand in hand to save public money. I know these are matters for committee meetings, Mr. Speaker, and I will not discuss them further now.
There is more than money involved in administration. Such things are involved as co-ordination of various departments, duplication of services, spending within the revenue, and public relations, and on the last topic I wish to make a few comments.
Every time the working force of the C.N.R. has received an increase in salary or an adjustment of some sort through the efforts of their unions the price has always been a mass lay-off that followed. This, Mr. Speaker, is again a sign of poor administration. If those men were needed before the increase in salaries why were they not needed after the increase was granted, or were they fired for political motives or motives of revenge? If the management of the C.N.R. would put half the effort they are now expending on firing employees on the promotion of jobs we would have better public relations than exist now between the employees and the management.
But what can we do? Under the long regime of Liberal administration the C.N.R. got out of control and it will take some time

to bring it back to where it should be. Let this so-called authority not forget that under our democratic system our elected members of the government are the ones who are responsible to the people, that the elected members of the government are responsible to the people of Canada and that the so-called authority is only authority under the duly elected members of the government.
The C.N.R. is Canada's largest business. It is spread from coast to coast and involves all classes of society and all walks of life. Again, I agree with the remarks of the hon. member for Port Arthur, as found on page 7740 of Hansard, when he quoted Mr. G. R. Stevens as having said:
The economic value of a railway to the community is determined not by the railway's income account and balance sheet, but by the social dividends the community receives from the reduced cost of transportation.
I would add that it is also determined by the services rendered to the community and I think this is the most important criterion. We have no objection to voting the necessary funds to keep this railroad operating for the welfare of the community and to offer a balanced service throughout the country, but we do take strong objection to voting money which will be spent by irresponsible so-called authorities. I refer again to the matter of trucking which I mentioned a while ago. I would suggest that for some time yet the C.N.R. should not go too strongly into the trucking business but rather should approach the matter with moderation. Since last year's operations were not too successful, and before we find ourselves with another hungry child which will have to be fed with taxpayers' money, I would suggest that effort should be made by the railways to keep their box cars filled and moving on the railroad, rather than moving them onto our highways.
In closing, Mr. Speaker, I wish to say that my three weeks in this house have revealed some things to me which I never expected to see and of which I am sure the people of Canada are not aware. I refer to the behaviour of the opposition in this house and to some statements made in this house about this bill. Who do they think they are, Mr. Speaker? Do they think they are still the government? Do they not remember the shocking [DOT] events of 1957 and the disaster of 1958 when the people of Canada told them on what side of the house to sit for some time to come? This time may prove to be much longer than they expect if they continue to filibuster the proceedings of this house. If the people of Canada could only see them. No one will deny that Liberal politics have been placed ahead of the interests of the country at the taxpayers' expense.
Canadian National Railways
Is this government responsible to the opposition or is it responsible to the people of Canada? Is the Canadian National responsible to the government or to the opposition? Who makes the appointments to the Canadian National Railways, the government or the opposition? Who runs the affairs of the country, the government or the opposition? Let us vote on this bill and let us keep a close watch on the expenses. In closing, let me remind my hon. friends of the opposition that instead of giving advice to this house they should direct their efforts to organizing their own camp.
(Translation):


Azellus Denis: Mr. Speaker, I feel I must heartily congratulate-


Joseph Aimé Roger Parizeau: Here is the shining light of the opposition.


Azellus Denis: -the hon. member for Resti-gouche-Madawaska (Mr. Fournier) who has just delivered his maiden speech in this House of Commons.
I congratulate him all the more heartily as his speech did not hurt the Liberal opposition very much. I express the wish that at least after the next election, he will put his vast knowledge to the service of his country, not in this parliament, but rather in his province or his municipality.
We note that at the last by-election, the hon. member for Restigouche-Madawaska obtained a majority of some 900 votes. Whereas, in 1958, his predecessor had obtained a majority of about 4,000 votes. I am sure that is not due to the candidate.


Edgar E. Fournier: Mr. Speaker, on a point of order. I wish to rectify right now an error that has crept into the debate and that I wanted to correct later.
My friend just said that I obtained a majority of only 900 or 960 votes. In fact, it was 1,022 votes. On the other hand, if we go back to the 1958 election, it is to be noted that 7,000 Liberals had voted for the present government. So, the majority I obtained is not 960, but 7,000 votes.


Azellus Denis: I am ready to concede a few thousand votes to the hon. member, to please his imagination, but after the next election, the situation will not be the same.


Joseph Aimé Roger Parizeau: You will not even be in this house.


Azellus Denis: In any event, if the hon. member's majority has declined, we must not necessarily believe it is his fault; it is rather that of the present administration, of the present government, in other words of the hon. members forming the government.

Canadian National Railways


Joseph Aimé Roger Parizeau: The hon. member for St. Denis will lose his deposit at the next election.


Azellus Denis: It is too bad the Minister of Finance (Mr. Fleming) was not here when the hon. member for Restigouche-Madawaska and the hon. member for Greenwood (Mr. Macdonnell) made their speeches. He could then have realized that it is the Conservative members who are filibustering on this bill.
For some time, the government has been threatening everybody. Nobody is allowed to make any speech, to criticize the government, to oppose its views.
For some time, Mr. Speaker, the government has been asking that everything goes according to its views, to its fancies. It will not allow the opposition to criticize the policy of the government, which for four years has been made up of confusion, obstruction, vision and contradiction.
I do not know what is happening now but even this bill is not supported by each and every Conservative member. Some are in favour, some are against. In a word, nobody knows where we are going. Does the government support its backbenchers who are criticizing Mr. Gordon? Does the government support Mr. Gordon? Does it reject him? We do not know.
And we are asked to vote the considerable amount of $178 million without being told whether Mr. Gordon will remain in his position or whether he will be fired.
If we are to believe the hon. member for Joliette-L'Assomption-Montcalm (Mr. Pigeon), Mr. Gordon is public enemy No. 1 in this country. He is asking nothing less than his resignation, as we can see at page 6039 of Hansard, where the hon. member charges Mr. Gordon with being autocratic.
He is enemy No. 1 of national unity.
He asks the government not to renew Mr. Gordon's mandate.
If those assertions are accurate, what is the government waiting for? If they were accurate last year, why did it not act last year? If they were accurate two years ago, why did it not act two years ago.
The president of the Canadian National Railways is managing millions, hundreds of millions of dollars of the taxpayers, should I say, since the railway shows a deficit every year and that president is hired only from day to day.
His term of office is over. We do not know whether he is going to be president of the C.N.R. tomorrow or the day after tomorrow. And in spite of that, we are asked to vote a sum of $178 million without knowing who is going to see to it that the amount is well spent.

Mr. Speaker, suppose you are a shareholder of a company. You would certainly like to know who would manage the thousands of dollars you would invest in it.


Joseph Aimé Roger Parizeau: It certainly would not be the Liberals.


Azellus Denis: It seems but reasonable and fair that the country be told now, before a sum of $178 million is committed to the care of an unknown individual. The house is entitled to know who will be president and also the names of the five new directors the government intends to appoint. We do not know where we are going. We are on tender-hooks. Yesterday, a president was fired. Today another one is on the point of being fired. There are threats of a reform or of the abolition of the Senate. They threaten us with an election. But, Mr. Speaker, I can assure you that we do not fear an election. I would like action to be taken on these threats about a general election, because if there were a general election this year, I am sure the people would be glad to rid themselves as soon as possible of a government which has so badly administered the country during four years. The Liberal party, which would then replace it, would tell the house who would be appointed president, who would be appointed directors, and if a president or director were not suitable, it would dismiss him if he deserved it but it would give him a chance to defend himself before the house.
(Text):


Mr. Deputy Speaker:: The hon. member for Laurier.
(Translation):


Joseph Aimé Roger Parizeau: Quebec's great defender. (Text):


Lionel Chevrier: Mr. Speaker, I should like to join with those of my colleagues who have spoken on this amendment and to deal with a number of matters that have come up and which, in my opinion, are nothing more nor less than pretexts on the part of the government. It is unfortunate that the Minister of Finance, after having warned the house of the importance of this bill, should have left the house abruptly. It would have been much more satisfying to me were he in his seat now because there are certain things I should like to say to him in answer to the charges which he made and which I think need to be said on this occasion.
The Minister of Finance said that it was essential that this measure be carried without

delay. Why is it so essential at this time? It was in the power of the government to bring this measure before the house many weeks ago, in fact several months ago; but suddenly the Minister of Finance sees great urgency in the measure. He goes further; he warns and even threatens the opposition that, unless this legislation is passed, the operations of the Canadian National Railways will be hampered. He says this is no time for willful obstruction on the part of the opposition. May I say that the operations of the C.N.R. will go on notwithstanding the warnings and threats of the Minister of Finance. Whether this bill is delayed another day or two is a matter that will not affect the operations of the Canadian National Railways, and no one knows that better than does the Minister of Finance. After all, this great railway has been hampered by the present administration in the fact that the committee dealing with the annual report of the C.N.R. and T.C.A. met this year many weeks, in fact months, after the time at which it normally meets.
Then the Minister of Finance made this rather strange assertion. "Why", said he, "have the directors of the Canadian National Railways not been named? They cannot be named unless this legislation is proclaimed." That is not so. That is an untrue statement and no one knows it better than does the Minister of Finance.


Mr. Speaker:: Order. I question whether the hon. member meant that sequence to his remarks. He said first it is an untrue statement. Then he said the minister knew it was an untrue statement. I would hope he would not leave that on the record because that is contrary to all the rules.


John Ferguson Browne: It is
not an untrue statement anyway.


Lionel Chevrier: Mr. Speaker, I certainly would not want to charge the Minister of Finance with voluntarily having made the statement. If you feel that, in the remarks I have made, such is the case, I of course amend them immediately. What I had in mind, however, and what I intended to say was that the statement made by the Minister of Finance was wholly inaccurate. It is not a fact to say in this house that the directors of the Canadian National Railways cannot be named until this legislation is proclaimed. That is not a fact. That is not so. That is the same old story that we were given when we asked the Minister of Transport why the directors of the Canadian National Railways were not named for days after the legislation increasing the directors from seven to 12 was passed. We were told then, "Wait until the committee has
Canadian National Railways dealt with the annual report of the C.N.R.". Now that the last piece of legislation dealing with the affairs of the Canadian National Railways is before the house we are told "Oh, no; you cannot have this information until the legislation is proclaimed". That is not so. It is not a fact. It is an inaccurate statement by the Minister of Finance and I say to the Minister of Finance that no one knows better than he does that the statement is inaccurate.


Léon Balcer: May I ask the hon. member a question?


Lionel Chevrier: Yes.


Léon Balcer: Is it not a fact that this act increases the number of directors of the C.N.R. has to be proclaimed before the number of C.N.R. directors is increased from seven to 12? Is that not a fact?


Lionel Chevrier: That is not what the Minister of Finance said.


Léon Balcer: He said five new directors could not be named until this act was proclaimed and he said the house knew about it.


Lionel Chevrier: Just a moment. The minister asked me a question and I am going to reply to him. The opposition is not in possession of the information. The government is in possession of the information. The government knows whether or not the legislation has been proclaimed. However, that is not what the Minister of Finance said. I took down his words. He said that the directors of the Canadian National Railways cannot be named or appointed until this legislation is proclaimed; not until the other legislation is proclaimed but until this legislation is proclaimed. I say that statement is not accurate.
Then I return to the statement I made earlier, namely that all of this fuss could have been avoided a long time ago if the government had only had its legislation in order. However, such was not the case. The government has been bungling all along. It has not been prepared. Its legislation was not prepared for the house. Even the bill which the Minister of Transport brought down the other day was not ready. The resolution was ready and then it was based on an agreement which had not yet been made between the parties.


Léon Balcer: There is nothing wrong with that.


Lionel Chevrier: There is a great deal wrong with that and I will tell the minister why there is a great deal wrong with it. The bargaining position of the government of Canada is being endangered by bringing into the House of Commons a resolution based upon

Canadian National Railways an agreement which has not yet been negotiated. In other words, now the parties to the construction of this railway know on the one hand that the government is going ahead with it and this knowledge will strengthen their hand in bargaining powers as between themselves on the one side and the government on the other. That is why I say it is bad business on the part of any government or any administration to bring in a resolution that is based on an agreement that has not been completed.
The hon. member for Greenwood rose in his place in this debate as he had a perfect right to do, and he said he found it strange that in regard to this routine matter there should be such a long discussion about this bill which involves the expenditure of some $180 million. He also suggested that the president and the director not being known had nothing to do with the legislation before the house. He referred to his experience in the past and I may say that he has a great deal of experience. I say to him in fairness that no one has criticized the refinancing legislation of the Canadian National Railways more constructively than has the hon. member for Greenwood. But when he makes the statement he made a while ago I say this to him. The circumstances today and the circumstances yesterday are entirely different. In past years under a Liberal administration there was no question as to who was to be the director and the president of the Canadian National Railways. At the present time there is a question. Before we vote these huge sums of money I say that we are entitled to know why it is that the government will not make up its mind and will not tell parliament.
There is a great deal in what the hon. member for Bonavista-Twillingate said earlier today, namely that the reason is, as the Prime Minister said when he was leader of the opposition, that parliament is a puppet. That is the reason. In the view of hon. gentlemen opposite parliament is exactly what the Prime Minister said; there are two sovereignties. As far as I am concerned, there is only one sovereignty and that is parliament and parliament alone. Before we vote these huge sums of money we should be entitled to know who the people are who are going to spend these sums of money.


James MacKerras Macdonnell: Will the hon. member permit a question?


Lionel Chevrier: Yes.


James MacKerras Macdonnell: I think the hon. member wishes to be fair. However, he has entirely ignored what was perhaps my strongest point,

namely that a committee of this house has been over these figures and has approved them.
While I am on my feet may I ask another question? Does the hon. member, with his experience, not agree that the passing of this bill is necessary in order that the arrangements for financing and so on, with which he is so familiar, can go forward? They cannot go forward, as I understand it, until this bill is passed.


Lionel Chevrier: Yes, that is quite correct; but what difference does it make whether it goes forward today or next week? Why is it that legislation was brought down in this house six months ago, was dealt with in stages and was not completed until last week? Whose fault is that? That is of course the fault of the government. It is also the fault of the government that we have this situation in connection with the C.N.R. If the committee had met earlier, if the affairs concerning the Canadian National Railways had been dealt with earlier we would have disposed of this matter a long time ago.
Mr. Speaker, I was passing on to another matter with which I wished to deal before I closed my remarks. It has to do with the report of the royal commission on transportation. That report, as the house knows, has been submitted to the government in at least its first part and two other volumes will be brought before the house in due course.
In this first volume it has been recommended that large sums of money be paid to the railways in four fields. First in the field of passenger train service, where the Canadian National Railways testified that their train service deficit in 1958 was $40 million, and where the Canadian Pacific Railways testified to the same effect, that their passenger train service burden in 1958 was in the neighbourhood of $15 million to $16 million, and wherein too the MacPherson commission recommended large, maximum annual payments in respect of this loss of service ranging from $40 million in 1961 to $8 million in 1965.
The second recommendation in the report had to do with light density lines and therein, too, was a recommendation for a subsidy. That also applies to export grain traffic, where the commission has recommended that in the case of C.P.R. a sum of $9 million annually shall be paid on behalf of the export grain traffic as a contribution to constant costs. There is one other matter having to do with statutory free transportation.
I raise this matter because there is to be found in the supplementary estimates of the Department of Transport an amount of $50 million which has not yet been reached during the discussion of these estimates. I

have tried to obtain information as to what this sum represents. Does it represent a partial acknowledgement or acceptance of the recommendations of the royal commission? Does it represent a payment for the wages in connection with the dispute between Canadian National Railways and its non-operating employees, or does it represent a straight subsidy in connection with both?
I think the house is entitled to receive that information before we vote on this amendment, and on the bill, if need be. I attempted to obtain this information from the committee when it dealt with the annual report of the Canadian National Railways, but again I did not get very far in that attempt because it was felt that questions relating to this matter were very close to the borderline because the commission had not yet finally reported, and in any event the wording of this item in the estimates, No. 590, was such that it was clear.
Well, I never thought it was clear at any juncture. If there ever was evidence of lack of clarity, it is in this item. I should now like to read it into Hansard. It is entitled, "Board of transport commissioners". The item reads:
Interim payments, related to recommendations of the royal commission on railway problems pending its complete report, to companies as defined in the Freight Rates Reduction Act of an aggregate amount in respect of the calendar year 1961 of $50 million, to be paid in instalments at such times and in accordance with such method of allocation as may be determined by the board of transport commissioners for Canada, as compensation to such companies for the maintenance of their rates on freight traffic at reduced levels as provided for in the said act.
So it covers the whole field. It covers the world. It covers in part the recommendation; in part salaries; in part reductions in freight rates. Again we have an example of the manner in which this government proceeds to deal with important matters of this character. We were also told we would have legislation in connection with these recommendations. That was a statement made repeatedly by the Prime Minister (Mr. Diefen-baker) during one of the debates of this house. We are still awaiting that legislation.
If the government had in mind the welfare of the railways and of the people of Canada it would, after this long period of time in which the report has been in its hands, have had legislation to deal with the situation as we find it. Under those circumstances, Mr. Speaker, there was every reason for the hon. member for Bonavista-Twillingate to move this amendment, which we on this side of the house will support.


Mr. Speaker:: Is the house ready for the question?
90205-6-498
Railway Act


Some hon. Members:: Question.


Some hon. Members:: Five o'clock.
(Translation):


Joseph-Alphonse-Anaclet Habel: Mr. Speaker, we definitely have the right to ask the government to tell us, in all fairness-
(Text):


Mr. Speaker:: Order. The house will now proceed to the consideration of private and public bills, the former having precedence pursuant to section 3 of standing order 15.


Donald Methuen Fleming: Mr. Speaker, would the house be willing to continue during this hour from five to six o'clock the business on which it was engaged at five o'clock?


Some hon. Members:: Agreed.


Some hon. Members:: No.


Lionel Chevrier: No, Mr. Speaker.


Donald Methuen Fleming: The old filibuster. PRIVATE BILLS


THE CUMBERLAND RAILWAY AND COAL COMPANY AND THE SYDNEY AND LOUISBURG RAILWAY COMPANY
[Stage Direction]
On the order:
House in committee on Bill No. S-19, respecting the Cumberland Railway and Coal Company and the Sydney and Louisburg Railway Company (Without amendment)-Mr. Maclnnis.
Gordon Minto Churchill: Stands, Mr. Speaker.
Order stands.


RAILWAY ACT
[Stage Direction]
On the order:
Second reading of Bill No. C-39, to amend the Railway Act-Mr. Browne (Vancouver-Kingsway).
John Whitney Pickersgill: Mr. Speaker, I think the hon. gentleman who is sponsoring this bill indicated the last time this matter came up that he would be prepared to proceed on the next occasion. If he is not prepared to proceed, I think he should lose his place in the queue.


John Ferguson Browne: Mr. Speaker, I might-


Mr. Speaker:: Would the hon. member wait just a minute.


Hazen Robert Argue: That was reserved for the opposition.


Mr. Speaker:: The hon. member for Vancouver-Kingsway.


John Ferguson Browne: Mr. Speaker, when this bill came up last Friday it was suggested by the house leader that

Transport Act
he agreed to its standing on the basis that it would be delayed for perhaps a week because private bills come up on Tuesday, and I indicated at that time, and felt the house had accepted it, that it would go ahead on the following Friday.


William Arnold Peters: Why not take it now?


Mr. Speaker:: Is the hon. member ready to proceed?


John Ferguson Browne: Mr. Speaker, I ask that it stand.


Hazen Robert Argue: No, Mr. Speaker.


Mr. Speaker:: Is the government prepared to request that it stand?


Gordon Minto Churchill: I ask that it stand, Mr. Speaker.


Mr. Speaker:: It stands at the request of the government.
Ar. Howard: Favouritism.


James Stanley Speakman: Mr. Speaker, on a point of order, the hon. member for Skeena has just /aid "favouritism" and I think that remark should be withdrawn.


Hazen Robert Argue: It is true.


Mr. Speaker:: Order.


Frank Howard: Mr. Speaker, I should like to speak on the point of order.


Mr. Speaker:: I do not see that there is a point of order.


Frank Howard: Mr. Speaker, on the point of order-


Mr. Speaker:: Order. There is no point of order. Would the hon. member resume his seat.
Order stands.


TRANSPORT
[Stage Direction]
On the order:
Second reading of Bill No. C-44, an act to regulate extraprovincial transportation-Mr. Chown.
Mr. Speaker:: The order stands.


John Whitney Pickersgill: Mr Speaker, does this stand at the request of the government?


James Stanley Speakman: It stands but not at the
request of the government.


John Whitney Pickersgill: In that event, Mr. Speaker, I do not believe we would agree that it stand.


Mr. Speaker:: This just means it goes to the bottom of the list.
Order stands.


FINANCIAL ADMINISTRATION ACT
[Stage Direction]
The house resumed, from Tuesday, November 29, 1960, consideration of the motion of Mr. Boulanger for the second reading of Bill No. C-6, to amend the Financial Administration Act.
(Translation):
Samuel Boulanger: Mr. Speaker, this is the fifth-
(Text):


Mr. Speaker:: Order. I must inform the house that if the hon. member speaks now he will close the debate.


John Whitney Pickersgill: Question.
(Translation):


J.-H.-Théogène Ricard: Mr. Speaker, it is rather amusing to see the Liberals take the attitude they are adopting now. This is not the first time that the matter of bilingual cheques has been on the order paper of this house. On several occasions in the past, a measure similar to that of the hon. member for Drummond-Arthabaska (Mr. Boulanger) has been submitted for approval by this house and on each occasion, the bill was delayed with the result that again today we have to discuss it-


Samuel Boulanger: Question.


J.-H.-Théogène Ricard: -and our hon. friends have had all the time they needed-


An hon. Member:: You have had it too.


J.-H.-Théogène Ricard: -to make a decision on this matter. However, today they act as they always did, they recommend one thing and do another.
They certainly recall the days when the hon. member for Beauce, Dr. Raoul Poulin, year in and year out, used to introduce in the house a piece of legislation similar to the one introduced today by the hon. member for Drummond-Arthabaska.
I went through the official record for years prior to 1957, and made a particular study of the speeches made, in reference to this legislation, by the hon. members for Maisonneuve-Rosemont (Mr. Deschatelets), for St. Denis (Mr. Denis), for Levis (Mr. Bourget), for Hochelaga (Mr. Eudes) and for Richelieu-Vercheres (Mr. Cardin), and, to my great surprise, Mr. Speaker, I have not been able to find, except a short-


Maurice Bourget: Allow me, Mr. Chairman, to raise a point of order. I understand the hon. member for St. Hyacinthe-Bagot has referred to me as one of those who dealt with this bill. Could the hon. member indicate the page and the date of the speech I am supposed to have made.


J.-H.-Théogène Ricard: The hon. member for Levis is going too fast. He is trying to put in my mouth words I have not said. I said that I had searched the record prior to 1957 in order to know what stand had been taken by the hon. members I mentioned a minute ago, and I was just going to say that none of them, except the hon. member for Maison-neuve-Rosemont, had anything to say with respect to this bill in the past.


Maurice Bourget: Mr. Speaker, on the same point of order and again on the same question, I submit the member has intimated that I had spoken to the bill now before the house.


J.-H.-Théogène Ricard: I said exactly the opposite.


Maurice Bourget: Mr. Speaker, I am positive that tomorrow, the official report will show that he actually said he had searched Hansard in order to scrutinize speeches made by the hon. members for Maisonneuve-Rose-mont, St. Denis and myself. Then, I can only conclude that he is suggesting-


Léonard-David Sweezey Tremblay: No, no.


Maurice Bourget: If you would let me talk, perhaps we could understand each other better.


Léonard-David Sweezey Tremblay: Exactly-you do not understand.
(Text):


Mr. Speaker:: I take it the hon. member by way of personal explanation is correcting the statement that he had spoken in this debate when in fact he has not spoken on this bill at all?


Maurice Bourget: That is the situation, Mr. Speaker. The hon. member said a few moments ago that he had searched through Hansard and found that the hon. members for Maisonneuve-Rosemont (Mr. Deschatelets), St. Denis (Mr. Denis) and Levis (Mr. Bourget) had spoken in regard to this bill. I must say that I have not said a word in regard to this bill.


Mr. Speaker:: We have the assurance of the hon. member for Levis that he did not speak on this bill. I understood that the hon. mem-
90205-6-498i
Financial Administration Act ber for St. Hyacinthe-Bagot (Mr. Ricard) asserted that he had spoken on this subject in years past but not in respect to this particular bill. In any event the hon. member has made it clear that he has not spoken before on this bill.
(Translation):


J.-H.-Théogène Ricard: Mr. Speaker, I was saying that I had looked up Hansard to make sure-let us give the hon. member for Levis the benefit of the doubt, let us say that I looked up Hansard to find speeches, but he rose a little too soon, because I was going to say that I had found no speech of the hon. members of the opposition, except the one delivered by the hon. member for Maisonneuve-Rosemont, who talked out the bill before the house on January 31, 1957.
I should like-


Jean-Thomas Richard: Just as you are
doing now.


J.-H.-Théogène Ricard: The hon. member for Ottawa East (Mr. Richard) had ample opportunity himself, when he was a member of the Liberal administration-


Samuel Boulanger: That was four years ago-


J.-H.-Théogène Ricard: You had many opportunities to adopt such a bill if you had wanted to. But in keeping with your habit, you had one policy for the province of Quebec and another for the rest of the country. That is exactly what you have always done-try to divide and rule.
I have here, Mr. Speaker, an article of the newspaper Le Devoir of February 7, 1958, which I should like to quote in part:
The subject of bilingual cheques is not new. It has been discussed since the creation of family allowances at the end of the war. It is a known fact that the federal government had thought of issuing two sets of allowance cheques-bilingual cheques in the province of Quebec and English cheques for the other provinces in confederation.
Well, Mr. Speaker, that is evidence that the Liberals advocated two policies, one for Quebec and another for the rest of the country. It is a requirement of their political education. They always follow the same policy- divide and rule.
I continue:
French Canadians protested against such a rule which was inspired by the Quebec reserve thesis and requested bilingual cheques for the whole country in accordance with the spirit of the constitution. They soon referred to the fact that family allowance cheques were not the only cheques issued by the federal government, even if there were more of those and they asked that all cheques like currency be bilingual.

Financial Administration Act
The Conseil de Vie frangaise was our spokesman. On the eve of the 1953 election, it sent a delegation to Ottawa to submit a brief on bilingual cheques to Mr. Douglas Abbott.
The association made repeated representations to the different ministers of finance who came afterwards-i.e. Walter Harris and Donald Fleming. These representations were always well received but gave limited results.
In the commons, the independent member for Beauce supported these claims by introducing year after year a very well written bill that would have settled the question once and for all. His efforts were not useless since they forced the four federal political parties to accept the principle of a reform.
All that, Mr. Speaker, happened under the former Liberal government. That government could have given us bilingual cheques. But it did not.
Now that the Liberals are in the opposition, they demand that the government take steps they refused to take themselves.
I resume my reading of the article:
A quarter of a century ago, parliament and the nation had to deal with the question of bilingual currency. In those days as today, a Conservative government was in power in Ottawa and the Liberals who had been deaf to our demands, suddenly found themselves most zealous in the opposition.
Ever since the Liberal party has been confined to the cold regions of the opposition, they have felt a sudden outburst of patriotic and bilingual fever.
It still remains that they never did anything.
To further the expansion of bilingualism, the present Conservative government favours it not only in government buildings, but everywhere.
Indeed, everybody knows that the Department of Public Works is at present substituting bilingual traffic signs for unilingual ones.
The Liberals have been in power for 22 years and apparently, they never noticed this anomaly which the Conservative government is pleased to correct.
I would add that the Conservative government has no advice to take from the Liberal party in that respect and in many others.
Here is another proof of that. It was under a Conservative government led by the Right Hon. R. B. Bennett that the currency minted in Canada was worded in French. Never before that had the Liberals dared take such a step. Never before had it occurred to them that there should be some French on our currency.
It is therefore R. B. Bennett who had the honour of having bank notes printed in French for the first time.
The purpose of the present resolution is to have negotiable instruments printed in both languages in Canada.
This motion should not have been introduced by a private member, because it calls for a spending of moneys and it rests with the government alone to introduce such a bill.
Be it as it may, hon. members may rest assured that, at the right moment, bilingual cheques shall be printed. And again a Conservative government will be the one to take steps in the interest of bilingualism.
For those reasons, Mr. Speaker, I trust that the Minister of Finance (Mr. Fleming), when he deems advisable to do so, will give this country bilingual cheques, not only for the satisfaction of Conservative members, but for that of all the people of Canada, much to the regret of the Liberal members who, during the long years when they were in office, have not found time to do anything in that field.
(Text):


Hazen Robert Argue: Mr. Speaker, I am very pleased at this time to speak in strong and very sincere support of the bill now before us.


An hon. Member:: Did you ever speak in its favour before?


Hazen Robert Argue: My record on this subject is consistent. In spite of the interruptions I hear from the opposite side I would suggest that the record is a consistent one and I am very proud to be able to speak at this time in support of what I think is a very important piece of legislation. This is a bilingual country; it is a bicultural country and I think it behooves members of parliament to recognize this fact.
The hon. member for St. Hyacinthe-Bagot says that this government, or at least the Conservative party, will provide for bilingual cheques at the opportune time. I suggest that now is the opportune time. I ask why should we wait? For what reason are they delaying? I am certain that this measure would receive the unanimous support of this house now as it has on former occasions and that instead of talking it out a member of the cabinet should rise in his place and say that the government is prepared to accept the measure and to issue the proper instructions that instruments referred to in this measure be made bilingual.
It is easy for hon. members opposite to say, "Well, the Liberals should have done this. Why did they wait so long? They were here for 22 years and they failed to replace the plaques in the House of Commons by

substituting bilingual plaques". Well, if there have been mistakes in the past surely that is no excuse for continuing the mistake in this field. Why hark back to something that happened years ago when there are things that should be corrected now? To blame people for what happened over a 22-year period is certainly no excuse for talking on this bill at length, if that should be the position of hon. members opposite, and failing to bring it to a vote.
I am prepared to congratulate the government whenever it makes a move in this direction, but when criticism is justified I think that criticism should be made. Although for some years some of us have said that there should be placed within the employ of the government, that is within the civil service, at least two persons, one to instruct French speaking people in the English language and the other to instruct English speaking people in the French language, this has not been done. I do not know why this has not been done. Some members of parliament at any rate have been pressing it. There was a professor by the name of Edouard Pelo-quin who came to Ottawa periodically from Montreal one or two days a week to assist some of us in studying the French language. He was unable to continue his trips to Ottawa because of financial problems. The classes were not paying and he was losing money and was not able to finance these trips out of his own pocket. Some of us intervened with members of the government-


An hon. Member:: Order.


Hazen Robert Argue: If you can talk about the ordering of plaques by the Department of Public Works, surely we can talk about this matter. When we intervened the answer was, "It is too complicated; we have tried and it cannot be done". I say it is a disgrace to this country that the government has failed to provide a teaching staff to enable highly placed civil servants to learn both languages, and the record of the government is not nearly as good as was stated in the house this afternoon by the preceding speaker.
I said that we do not have to go back to mistakes of the past. We can talk about the things that should be done now and the passing of this measure is one of the things that should be done now. I am confident that not only will this kind of proposal receive the support of the C.C.F. members of parliament if we have an opportunity to vote on it but this kind of recognition of the bilingual and bicultural nature of our country will be recognized, I am confident, in all its aspects by the New party whose program-


Some hon. Members:: Oh, oh.
Financial Administration Act


Hazen Robert Argue: Hon. members can snicker. They may think it is a joke but I do not think the question of bilingual cheques and the bilingual nature of this country are anything to snicker about.


Wallace Bickford (Wally) Nesbitt: You are the joke.


Hazen Robert Argue: My friend can get up and speak if he likes, but I am certain it is the Conservative party that is lagging in this regard. I am confident that the hon. member for Drummond-Arthabaska-


Wallace Bickford (Wally) Nesbitt: Will the hon. member permit a question? Is the hon. member aware that in the Department of External Affairs at least-I cannot speak for other government departments-civil servants are given extra allowances to learn another language?


Hazen Robert Argue: Mr. Speaker, I think the allowances should be increased. Apparently very few are taking advantage of them because the number of bilingual people in the Department of External Affairs does not in any way reflect the bilingual nature of this country. It may be that some efforts have been made but they are feeble and inadequate efforts. One of the strengths of our nation is the bilingual nature of our country. One of the strengths of Canada in international affairs lies in the fact that we are a bilingual country. Let parliament itself, let all parties in the House of Commons recognize this fact by passing this bill and not have any part in delay and obstruction which would prevent the bill from coming to a vote.
(Translation):


Jean-Jacques Martel: Mr. Speaker, it gives me pleasure to take part in this debate on Bill C-6, introduced by the hon. member for Drummond-Arthabaska, in view of the fact that as early as 1959, I had placed my views on the record with regard to this matter.
In my humble view, it would not even be necessary to vote such a bill because, as the hon. member for Assiniboia (Mr. Argue) indicated a moment ago, the government could make this move without any legislative amendment. In fact, that was the view I expressed in 1959, and while I of course support the principle of this bill, I am still of the same opinion.
At that time, I argued that the problem could be settled through a government decision. As a matter of fact, I am sure the government will settle the matter in due course, despite what may be said to the contrary by our good friends in the opposition and even by members of the C.C.F. party, or the New party as it will soon be called, because as I understood the remarks
7890	HOUSE OF
Financial Administration Act just made by the present leader of the C.C.F. and perhaps the future leader of the New party, he more or less disowned the remarks previously made in this house by another member of his party either in regard to this matter or with respect to bilingualism.
I referred a moment ago to the suggestion which he says was made years ago for the provision of courses for unilingual civil servants. I have not been a member of this house very long, but I do not think that suggestion was made so many years ago. I rather think it was made this year, when the new Civil Service Act came up, by the hon. member for Timiskaming (Mr. Peters).
I have no doubt that the teaching of English to French speaking civil servants and the teaching of French to English speaking civil servants would help solve the problem of bilingualism. However, it would not settle the whole problem which we considered when discussing that bill.
But to come back to the bill before us, with regard to the opportunity of enacting legislation to provide for the printing of negotiable instruments in both English and French, I think we did approve some bill to this effect before. It is, of course, another bill altogether and I do not want to deal with it, but it is more complete. I refer to Bill C-31 submitted by the hon. member for Joliette-L'Assomption-Montcalm (Mr. Pigeon) and which, to my mind, is more explicit than the one introduced by the hon. member for Drummond-Arthabaska.
I shall not discuss it in detail, because I would be out of order since we are not allowed to deal with another bill when discussing a particular measure. However, I simply want to remind hon. members that I still think such legislation is unnecessary, and that the government can always take action in this respect. However, if the question were put, I say that I would still believe the other bill introduced by my colleague from Joliette-L'Assomption-Montcalm to be more adequate.


Samuel Boulanger: Oh, oh.


Jean-Jacques Martel: Of course my hon. friend from Drummond-Arthabaska thinks this is very funny. I have no objection to his finding the matter hilarious. He can hardly be blamed for not having submitted his bill earlier, when his party was in power, because at that time he was in fact like myself, not a member of this house. Indeed, if my memory serves me well he had himself elected as an independent, and I think he would have done better at


that time to join the Conservative party. His bill would be enacted today, not straight away, perhaps, but he might have come to some understanding with the hon. member for Joliette-L'Assomption-Montcalm to have his bill adopted.


Samuel Boulanger: Never, never.


Jean-Jacques Martel: In any event, Mr. Speaker, I refer to the discussion which took place in 1959 on the matter, when the hon. member for Drummond-Arthabaska introduced an identical bill. At that time, I took part in the discussion in which various things were mentioned, like the constitutional guarantees with regard to the rights of the French and English languages and of bilingualism, guarantees which every year are more widely recognized, especially since the Conservative party came into power. It was referred to in some newspaper items and more particularly in an editorial printed in Le Droit, part of which I will read into today's record in a few moments, if I may do so, Mr. Speaker.
The various opinions expressed at that time were described as strange in some newspapers. I know that mine in particular was considered rather strange because it was said that although I was a French Canadian I was seeking to kill the bill. Such was not my intention, since I had already said that the government could implement such a plan without the necessity of making amendments to the act. An way, I feel that the attitude of our opponents who just took part in the discussion is not less strange, since now they are endeavouring to take credit for such legislation, which was introduced for the first time, as everybody knows, by the independent member for Beauce (Mr. Poulin). I am referring more particularly to the year 1956. It is true I was not in the house then, but I have looked into that matter. I should like to come back to the editorial quoted a moment ago by the hon. member for St. Hyacinthe-Bagot to the effect that when the Liberals were in power nothing was done to help pass the bill introduced by the former independent member for Beauce.
Not only that but when that bill came before the house in 1957, the Liberals resorted to all sorts of tricks and tactics behind the scenes. They even had statements in the press, trying to ridicule the hon. member for Beauce, Mr. Raoul Poulin, saying that he was seeking to bury his own bill, which was completely false, for if there was one who fought for bilingualism in this house, it is the former independent member for Beauce.

Mr. Speaker, in concluding I should like simply to record in Hansard part of an editorial which appeared in Le Droit of February 14, 1959 and dealing with a debate on bilingual cheques which had taken place a few days before. This article was written by Mr. Pierre Chaloult. It is too long to be read in full, unless my hon. friends would allow my recording it in Hansard without first reading it. Anyway, I can quote a few excerpts which seem most relevant. I quote:
The matter which is now raised in this connection is that of bilingual cheques, according to the request made by the independent member for Beauce, during the second last federal session, Mr. Raoul Poulin.
And further on, the article refers precisely to the opinion I expressed in 1959, which I mentioned again a moment ago, and goes on to say:
But there remains a very simple way of avoiding all those inconveniences, without displeasing, French speaking Canadians, since the Minister of Finance, Mr. Donald Fleming, has merely to repeat, in 1959, the action taken once by Mr. Pierre Veniot. Mr. Fleming may, in fact, close the debate forever by telling the house that he has, on the very day, or the day before, or when it pleases him to do so, given instructions for the printing of federal government cheques in both official languages of this country.
Since this bill would interfere with nobody's rights or convictions, no one should complain about it.
Well, Mr. Speaker, I think that would be the solution. We would not have to vote any legislation in that regard.
I believe that the government has the power to do so and will do it at the first opportunity.
Since the Conservative party took over, many necessary measures have been adopted.
We are now in the midst of a debate which has already been going on for days and we have seen several lengthy debates on various matters.
Besides, the Conservative government has already shown its goodwill in relation with the establishment of integral bilingualism in Canada by giving us simultaneous translation and by appointing a perfectly bilingual governor general. Furthermore, several other measures of a similar nature have been passed, which very clearly indicate the good intentions of the Conservative government in the matter of bilingualism. So, I have no fear in stating that it will give us bilingual cheques at the earliest possible date.
Obviously, there is still a very important matter to settle, that of the Bank of Canada. For many years, that institution has been issuing bilingual bank notes. The Senate is now discussing a bill concerning the position
Financial Administration Act of the governor of the Bank of Canada, and I know that the views of this house will finally prevail and that the present governor will be dismissed. I hope, furthermore, that the Conservative government will soon give its approval to the issuance of bilingual cheques.
Mr. Speaker, I close my remarks and leave the floor to another member who would like to deal with this matter.


Jean-Paul Deschatelets: Mr. Speaker, my remarks will be brief, but I do not want to let this debate come to an end without straightening out a few facts.
First, I should like to commend the hon. member for Drummond-Arthabaska (Mr. Boulanger) for introducing this measure.
This is a simple bill, and only one thing is important here, namely to vote the bilingual cheques. I do hope that the house will have an opportunity to vote on the matter before six o'clock.
Now, Mr. Speaker, I find that some hon. members have referred back to earlier periods such as in 1956. In considering the whole question of bilingual cheques, I should like to ask them to go over the Hansard of the time. They will find that in 1956, when the Liberal party was in office, a special committee was set up and that the names of the members of that committee are recorded in Hansard. Moreover, I think it was the hon. member for Joliette-L'Assomption-Montcalm (Mr. Breton) who was then chairman of that committee.
A vote was taken previously in this house on this matter of bilingual cheques, in January 1958, and I am pleased to remind our Conservative friends, who seem to have a weak memory in this respect, that the Liberals without exception voted in favour of bilingual cheques. On the other hand, I must say that at least nine government members voted against the scheme, when the Conservative party was in office.
Mr. Speaker, I find that the Minister of Veterans Affairs (Mr. Churchill) is at his desk. If what I am going to say about him is untrue, he may rise and I shall be glad to withdraw my statement. If I remember correctly, the minister voted at the time, namely in January 1958, against the adoption of bilingual cheques, together with nine of his colleagues, and at the time-
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Financial Administration Act
(Text):


Gordon Minto Churchill: Has the hon. member verified that statement? On a point of order, may I ask the hon. member if he will give the reference in Hansard to indicate the accuracy of his statement.


Jean-Paul Deschatelets: I am glad to put the
record straight. Before doing so, I said that if I was wrong I was ready to apologize. Here are the names of the nine Conservative members who voted against this measure concerning bilingual cheques.


Gordon Minto Churchill: What is the page?


Jean-Paul Deschatelets: The page of Hansard is 4322, for January 31, 1958, French edition. The names are Messrs. Hales, Hodgson, Kennedy, McGregor, Milligan, Noble, Small, Smith (Calgary South), Wratten.


Gordon Minto Churchill: I accept your apology now.


Jean-Paul Deschatelets: No, I agree that the name of the Minister of Veterans Affairs (Mr. Churchill) is not there. However, I am still right when I say that nine Conservatives voted against a similar measure, and no Liberals have ever voted against such a measure in the only vote that has been taken in this house on this subject so far as I can recall. I simply wish to put the position clearly.


Gordon Minto Churchill: Will the hon. member-


Jean-Paul Deschatelets: No, I have the floor, Mr. Speaker. The minister can speak afterwards.
(Translation):
Mr. Speaker, I must add that at the time I naturally voted with the Liberal party, because our party was unanimous.
A few moments ago, the hon. member for St. Hyacinthe-Bagot (Mr. Ricard) dealt with the matter of bilingual currency. May I tell him that in 1935, a Conservative government, in order, as he so well put it, to divide and rule, divided our currency. The currency printed in French was for Quebec and the currency printed in English for the nine other provinces.


J.-H.-Théogène Ricard: That is what you did with those bilingual cheques, with the family allowance cheques.


Jean-Paul Deschatelets: In a report on what happened in 1935, published by the Globe and Mail of Saturday, July 1, 1961, I find this: (Text):
Red serial numbers appear twice on the face with the prefix A on the English notes and F on the French notes.


(Translation):
On the other hand when we took over in 1936, that is 25 years ago, we established bilingual currency for the whole country, one currency for one country and-
(Text):


Hazen Robert Argue: Hear, hear.
(Translation) :


Jean-Paul Deschatelets: And here, according to Hansard of June 11, 1936, the former leader of the Conservative party, Mr. Bennett, had this to say in respect of that legislation, and I quote Le Droit of June 10 1961:
Twenty live years ago

The Conservative leader R. B. Bennett objects to bilingual currency, saying that a minority should not impose its will upon a majority. He insists that the section of the Bank of Canada bill, which contains the promise that bank-notes will from now on be bilingual, should not be left in the bill.
Now, I hope that the Conservative members who like so much to talk about their former leader, Mr. Bennett, who after his defeat, it will be recalled, standing on the gangway of a liner, turned to one of his supporters and said, with tears in his eyes: "At last, I am going back home".
Well, I suggest to my Conservative friends, when they speak about bilingual currency, to tell exactly what happened. It is the Liberal party which gave Canada bilingual currency and many more references will be found in Hansard on this subject.
These last few days, the Minister of Public Works (Mr. Walker) made much of the fact that he had bilingual signs put up in the parliament buildings. I had no intention of mentioning this, but since he raised the matter himself, may I ask him to be more practical, for the sake of bilingualism, and see that elevators are run by bilingual operators.
Now, Mr. Speaker, the opposition not only has indicated their approval of bilingual cheques this afternoon but their intention of voting in favour of the bill.
Moreover, I should like to congratulate the C.C.F. leader-


J.-H.-Théogène Ricard: On a point of order. The hon. member for Maisonneuve-Rosemont has just hinted that the parliament's elevator operators do not speak French. Some operators speak French just as there are some who speak English. I wanted that fact recorded in Hansard.


Jean-Paul Deschatelets: Mr. Speaker-


Mr. Deputy Speaker:: There is no point of order. I could add, however, that that remark was not too relevant.


Jean-Paul Deschatelets: Mr. Speaker, in reply to what has just been said, I should just like to state that if the Minister of Public Works fully wishes to respect bilingualism-it was fine of him to have bilingual signs put up- he should see to it that the parliament's elevators are operated by bilingual employees.


J.-H.-Théogène Ricard: There are bilingual operators.


Jean-Paul Deschatelets: I have nothing else to say-


J.-H.-Théogène Ricard: Some of the operators are bilingual.


Jean-Paul Deschatelets: Some of them are not.


J.-H.-Théogène Ricard: There are some, just like when your party was in power.


Jean-Paul Deschatelets: I was saying that the parties of the opposition are in favour of that bill and are quite anxious to vote on it.
I also wish to congratulate the leader of the C.C.F. party for the stand he has taken.
Those are the remarks I wanted to put on Hansard. I hope it will be possible for us to vote on the bill before six o'clock.
(Text):


William Lawrence Marven Creaghan: Mr. Speaker, in rising to take part in this debate I wish first of all to place on the record a statement to the effect that I am in favour of the principle of this bill. We have had a very short debate on the subject of bilingual cheques. However, this subject under discussion has been before parliament on numerous occasions in the past. A similar bill was introduced by the same sponsor in 1959 and was debated in this house during the month of February of that year.
Although on the face of it the bill is a very simple one, the subject matter is of great importance. At the present time government cheques are issued in the English language in some parts of the country while other government cheques are issued in the French language. The debate in 1959 disclosed that, in addition to having English and French cheques, we have some cheques printed in both official languages. I believe the hon. member for Parkdale (Mr. Maloney) mentioned the fact that cheques of the St. Lawrence seaway authority and cheques of the C.B.C. were printed in both official languages. Hon. members who have spoken today, as have others in the past, suggested that legislation may not be necessary. I am one who supports that principle. However, debate on the principle is certainly necessary.
The explanatory note has not been mentioned today but for the purpose of the record I think some reference should be made thereto. It simply states that the purpose of the bill is to provide that cheques, drafts,
Financial Administration Act et cetera, and any other similar remittance of any department as defined in the Financial Administration Act shall be printed in both the English and the French languages. All hon. members and the public at large are familiar with the fact that currency under the Bank of Canada Act is bilingual. This has worked out satisfactorily and without any hardship or inconvenience. Bringing forth bilingual or bilingually printed cheques, et cetera would also be something easy to administer.
It was amusing to hon. members to hear the house leader of the C.C.F. speak in support of this bill. I believe all hon. members are generally in support of it. However, unlike the hon. member for Assiniboia, none of us is trying at this hour to appeal to the delegates who will soon be assembling at the convention in this city. Perhaps the delegates will listen to his words today and those from Quebec will be influenced by his statement.
I think the government as such is probably in favour of the principle because it was this government during this parliament that brought forth simultaneous translation of the debates of this house. Since then the record will show that this parliament has had more debate in the French language than has any parliament in recent years. In addition, it was this government that selected and appointed an outstanding Canadian of French origin to be Canada's first French speaking, native born governor general. Not long thereafter it was this government that supplied the funds in order to permit the C.B.C. to open the first French language television station east of Quebec. That station was opened a couple of years ago in Moncton, New Brunswick, a bilingual city supporting both the English culture and the French culture. After the opening of the television station this same government permitted the Canadian National Railways at great expense to construct a second microwave set-up in order to make it possible for the people of eastern New Brunswick and satellite areas to have daily live television emanating from Montreal owing to the existence of this second microwave facility.
Consequently, it should be very easy for hon. members on all sides, and particularly supporters of the government, to use their influence in order to convince the government of the importance of taking the necessary steps to implement the demand or request introduced by this bill. It may not require legislation to do so. However, the government must have an expression of the wishes of the people. I refer not only to the expression of the feeling of members of the House of Commons but editorial comment which may possibly follow this debate.
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Financial Administration Act
The constitution of 1867 provided for a certain amount of bilingualism, including debates in both languages in this house and the printing in both languages of statutes of the legislature of Quebec and of federal statutes. In 1951 the census return showed that, apart from Quebec, there was great growth in the numbers of French speaking persons in Canada. According to the census of 10 years ago, in 1951 the province of New Brunswick was 38 per cent bilingual. I suggest that when the results of 1961 are published the growth of French speaking people in Canada-again apart from Quebec-will once again be substantially increased and this increase will occur primarily in New Brunswick, particularly the northern part of the province and the east coast.
I am not one who says that this bill must necessarily be adopted by vote today. I make that statement because I feel that is not the way a government which believes in tradition does things. It would be wrong for hon. members supporting the government to simply sit back and permit such a bill to become law. Changes of this type which are of national importance, changes that affect the feelings of many people must be fully considered and then introduced by the government by way of administrative action or by necessary legislation. It is for that reason, and for that reason alone that I would be inclined to vote against this legislation at this time.
I have in my riding not only a French T.V. station, as was mentioned a few moments ago, but also the only daily French newspaper published east of Quebec. I also have in my riding a French radio station owned by the C.B.C. These news media, radio, press and T.V. have done much in the past few years to acquaint the English speaking people with the culture of their French neighbours throughout eastern New Brunswick. I know that the situation existing in my riding also prevails in many parts of Ontario. Hon. members from Ontario have spoken in previous debates in favour of this bill. I mention particularly the hon. member for Parkdale who spoke on a similar bill in 1959.
In conclusion, Mr. Speaker, I should like to quote from the hon. member's speech as reported at page 643 of Hansard of 1959. At that time the hon. member said, quoting his words as reported at page 203 of Hansard for 1957:
I am of the belief that our nation is a greater nation because of the historical association of two great races of people, the English and the French. They have lived side by side, more often than not, in harmony and good will. Out of this association has developed a nationality which makes us, not only a more interesting country in the eyes of the world but an example in tolerance and understanding.


Samuel Boulanger: Question.


Mr. Speaker:: The hon. member for York-Scarborough.


Murray Lincoln McFarlane: Mr. Speaker, I just wish to take up a few moments of the time of the house on this matter-


Frank Charles McGee: I understood you to have
recognized me, Mr. Speaker.


Mr. Speaker:: Yes. The hon. member for Y ork-Scarborough.


Frank Charles McGee: Mr. Speaker, before coming to the principle of the bill I should like to comment briefly on the contribution made by the hon. member for Assiniboia. I regret very much that he is not in the house at this moment. I know it is quite improper to impute motives to any hon. member in debate, so perhaps I can suggest what I have in mind this way, that one might be forgiven for coming to the conclusion that an event in the not too distant future has prompted a sudden interest on the part of the hon. member for Assiniboia in certain French Canadian delegates who might be at that convention. I might say we all wish him well in his endeavours at that convention, recognizing that the fact he is here in the House of Commons places serious limitations on his activities in that connection.
The contribution of the hon. member for Assiniboia was typical in many other respects. He rose; he stated his point of view and then asserted in a vigorous manner that, having heard from the hon. member for Assiniboia, we should all sit down, be quiet and vote. This is a pretty typical attitude of that group except when they happen to be discussing something that serves their purposes in another way.
I would remind the hon. member for Assiniboia of the statement made by the respected hon. member for Kootenay West when speaking on another matter not dissimilar to the proposition suggested in this bill. As reported at page 1326 of Hansard, the hon. member for Kootenay West had this to say, and I commend these words to the hon. member for Assiniboia:
Mr. Speaker, I rise because I have a few words to say on this resolution. Let me say first I think it is a good thing, whether or not we come to a conclusion tonight, that we discuss this question.
The question at issue at that time, of course, was a national flag. I submit, with deference to the hon. member for Kootenay West who is in the house and listening most attentively-that this subject is in the same category as the one being discussed at that time. But the most typical thing about the remarks of the hon. member for Assiniboia was his

trigger-like action. First he demanded that we have teachers summoned from all points of Canada to train our civil servants to speak both languages, and he was off and flying on this demand. He was perhaps overlooking several constitutional impediments, but let that matter stand aside for the moment. Then upon being interrupted by the hon. member from Oxford and being advised that in the department of which the hon. member has such distinguished knowledge this practice is in effect, that allowances for this purpose are given, without halting, breathing or interrupting himself the hon. member for As-siniboia said the allowances must be raised immediately; something is wrong; those are inadequate allowances, and must be raised. That somehow seems to sum up the New Party, C.C.F.-call them what you will- attitude on things generally: whatever it is, we do not know what it is, but it is not enough.


William Arnold Peters: Mr. Speaker, I wonder why it is the hon. member was not educated himself in this way in that department?


Frank Charles McGee: Mr. Speaker, to come back to the principle of this bill, it has been my privilege on a number of previous occasions to speak in support of this proposition. As I see my time is coming quickly to a close I should like to place on record and bring to the attention of the house the attendance in the gallery of Mr. Joe McCulley, the very well known warden of Hart House, who in his own way has had a great deal to do with one aspect of bilingualism. I refer to the University of Montreal and the University of Toronto week-end exchanges of young English speaking people from the province of Ontario and young French speaking people from Montreal. These young people have exchanged visits through the winter. On one occasion I had the privilege of attending one part of that program, albeit a social part, and I can commend it highly. I should like to commend Mr. McCulley for his part in that program.
At six o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at 7.30 p.m.

[Stage Direction]
The house resumed consideration of the motion of Mr. Fleming (Eglinton) for the second reading of Bill No. C-121, to authorize
Canadian National Railways the provision of moneys to meet certain capital expenditures of the Canadian National Railways system for the period from the 1st day of January, 1961, to the 30th day of June, 1962, and to authorize the guarantee by Her Majesty of certain securities to be issued by the Canadian National Railway Company, and the amendment thereto of Mr. Pickers-gill.
(Translation):
Joseph-Alphonse-Anaclet Habel: When the house adjourned at five o'clock for the hour devoted to private and public bills, I was just saying that we were quite justified in asking the minister to provide more information to the house. I think the hon. members opposite, at least those who have sat in the opposition, will agree that it is the duty of the opposition to give close scrutiny to the legislation placed before parliament, and that the essential duty of the opposition is to seek all the necessary information, particularly when it comes to a substantial amount such as we are asked to vote in Bill C-121, involving as it does an expenditure of $178 million.
The Minister of Transport (Mr. Balcer) stated this afternoon that it was impossible to appoint the five new directors before the proclamation of the relevant legislation. It is therefore the responsibility of the opposition to ask the government, in the hope that the Minister of Finance (Mr. Fleming) will reply, what is holding up the government in proclaiming this act which was passed weeks ago in the house.
Furthermore, what is the government doing with regard to the four present directors and the president of the C.N.R., whose terms of office expired last September. The opposition surely is entitled to ask these questions, and it is also entitled to a reply. This afternoon, reference was made in the house to the fact that a few days ago, the Minister of Transport was finally forced, I would say, to admit before the house that he personally got along fine with the president of the C.N.R. The fact remains, however, that parliament is entitled to know, as the hon. member for Burnaby-Richmond mentioned this afternoon when he ventured out on rather dangerous ground, that the committee report clearly indicated who would be the next president of the C.N.R. As I say, parliament has a right to insist on being told the name of the president who will have to see that the $178 million dollars we are being asked to vote are properly spent. Parliament is also entitled to
7896	HOUSE OF
Canadian National Railways know whether this time, as it happened before, the Prime Minister will not interfere and prevent in some way or other, according to what the hon. member for Burnaby-Richmond said this afternoon, the appointment of the person recommended by the railway committee.
It seems to me that we are entitled to expect answers to those questions.
Is the government waiting so as to appoint puppets that the Prime Minister will be able to handle as he pleases?
The Canadian people must depend on the opposition to know what goes on behind those underhand practices. Deceived in the last four years by visions that are turning to be disillusions, it is time that parliament knew whether the country is run by one man or by a government made up of a responsible cabinet. It seems to me that the time is past when a one-man government could prevail over an informed parliament knowing where a one-man government might lead a country.
It is time, Mr. Speaker, to have those questions answered and cabinet members should give us the answers instead of beating around the bush for fear of giving away a great secret-the secret of government by one man, who calls all the tunes for the ministers to dance to.
The amendment now before us, Mr. Speaker, is a very responsible one which, on behalf of the Canadian people, asks for an announcement concerning the board of directors which will be called upon to spend the not inconsiderable amount of $178 million.
(Text):


Douglas Mason Fisher: Mr. Speaker, we do not agree with the amendment and will, of course, vote against it. We have already indicated that we support the measure and look upon it as being largely routine.
In regard to what appears to be the desire of the official opposition to debate this measure more thoroughly, I think they should have a certain amount of compassion for the Minister of Finance, as I am sure he is busy and has many things on his mind. I know there is another place where he would probably like to be and no doubt he hopes to get there very soon. I am sure the sooner he is given that opportunity the sooner there will be a rising barometer in respect to his mood and general attitude toward life.
It seems to me that in their remarks hon. members of the official opposition are overbuilding the issue with regard to who the directors are going to be and whether the appointment of Mr. Gordon as both chairman of the board and president is going to be renewed. We have a certain number of directors 

at the present time, although there is a shortage of one as a result of the unfortunate death of Mr. Bickle. But judging from the information we have had before our parliamentary committee, I do not feel that there is any indication that the board of directors is that important or that vital in so far as the day to day operations of the railway are concerned. While we are very much in sympathy with the bill that increases the number of directors, we do not feel that the fact there has been a delay in appointing them is a vital issue in any way. It may reflect what is a characteristic of the government, namely procrastination, but in this particular instance it does not seem to me that it is fundamental.
I indicated on second reading, Mr. Speaker, we do not think Mr. Gordon can continue in an indefinite position, but again in the short run we do not think it is working any hardship on the railway. In fact, it may be helping to keep him on the move in meeting the problems that the railway has at the present time, particularly with regard to this most grievous problem of morale. Therefore the bill comes down to being not an issue of the directors or of Mr. Gordon's position, whether definite or not, but whether the C.N.R. is going to be provided with money. I think a much better argument could be made against-


James MacKerras Macdonnell: Does the hon. member advocate that as a general policy, that is, the state of uncertainty, to promote efficiency of officials?


Douglas Mason Fisher: No, I do not think so, but I do not know of any group that is more in a state of uncertainty than members of parliament and I have never thought that this particular uncertainty did any harm. As a matter of fact many people would say this is one of the great merits of elections and their prospects; it keeps us all in jeopardy.


John Whitney Pickersgill: Would the hon. member permit me to ask him a question at this point. The hon. gentleman said he does not think that the uncertainty of being a member of parliament has any effect on our efficiency.
I would ask the hon. gentleman whether he thinks that applies equally to people who have administrative responsibilities, instead of loquacious responsibilities, as we have?


An hon. Member:: As you have.


John Ferguson Browne: Speak for yourself.


John Whitney Pickersgill: I speak for the hon. member.


Douglas Mason Fisher: As far as loquacity is concerned, it seems to me, as I have sat here

listening to the Liberals, that one could become tremendously irreverent and begin to sing "Show me the way to go home". But I suppose the house is something like an Ontario beer parlour and singing is not allowed.
I was almost tempted this afternoon, as the debate dragged on, to launch into that.


Leon David Crestohl: Will the hon. member permit one more question? Would the hon. member favour the philosophy for employees?


Douglas Mason Fisher: In so far as employees are concerned, no. I think employees should know where they stand. But in this particular case Mr. Gordon has been left in charge. I should like to see him go, but it is quite apparent to me that he is not going to go.


An hon. Member:: Despite all those Tory
wolves.


Douglas Mason Fisher: If the official opposition want an issue relating to the spending of money, why do they not get involved in a discussion of the money that is probably coming from this bill that is going into the expansion of the Canadian National trucking operations? It seems to me they would have a real issue there. I know the Liberal opposition is a free enterprise party. They believe in the extension of private competition wherever possible.


An hon. Member:: In theory.


Douglas Mason Fisher: I saw a report in the Montreal Gazette this morning that the trucking association of Quebec is appealing to the government to disallow the licence of Midland Superior, one of the large trucking companies bought, we understand, for approximately $2 million by the Canadian National Railways. We discovered in the committee meetings that the C.N.R. has put the money to one side and has not even paid it yet. The deal is hanging fire. Apparently they do not want to go through with the deal because they are afraid Quebec will cancel this trucker's licence. Truckers in Quebec are protesting that Midland Superior, because it is running apparently under a kind of phony ownership at this time, should not be allowed to carry on. This, it seems to me, would be a real issue to offer the opposition in terms of the debate of this bill as being a reason why they should block the bill, rather than the lesser issue of the uncertainty under which civil servants are operating.
It seems to me, Mr. Speaker, I was one of the first advocates in this parliament of, not so much uncertainty for civil servants, but of a bit more dash and drive on the part of this government to get away from the big excuse that one encounters all the time from government members. That excuse seems
Canadian National Railways to be that "many leading civil servants are not really pulling with us." There is a kind of grudge; a chip on the shoulder attitude. Many members of the government somehow feel they have not had the co-operation, the liaison, the confidence and support of so many people at the head of the public service. It is difficult for an outsider, such as an opposition member in a case like this, to judge.
I do not know really whether it is the case. The point is that if the government members feel this way they should move and they should have moved long ago. This is the point that I would bring up in so far as the president of the C.N.R. is concerned, or even with regard to the governor of the Bank of Canada. But, as I say, I think we should expedite this bill and allow the Minister of Finance to get off and prepare for what I would expect to be sure to follow, namely his visit to the other place.


John Whitney Pickersgill: Before the hon. gentleman takes his seat may I ask another question? Do I understand the hon. member to agree with the hon. member for Restigouche-Madawaska who entertained us rather irrelevantly this afternoon in his-


Some hon. Members:: Oh, oh.


John Whitney Pickersgill: -assertion that the C.N.R. should be run as the Intercolonial was run; in other words, there should be no independence of management and no merit system and the government should appoint all the employees?


Douglas Mason Fisher: I just finished going through certain parts of Colonel Stevens', his first volume on the history of the C.N.R. I recall a story drawn from New Brunswick to the effect that with respect to the Intercolonial, a gravel pit that should have cost $5,000 wound up costing the Intercolonial $500,000. This was many years ago. I must admit I believe it was under a Liberal administration. Certainly we should not go back to that state of affairs.


John Whitney Pickersgill: Surely that is what the hon. member wanted. May I be permitted to ask the hon. gentleman one more question. Is the hon. gentleman suggesting, as he seems to be, that the government backbenchers were quite right in suggesting the government should fire all the senior civil servants and put in a lot of Tories? Is the hon. gentleman not really suggesting that that would be the end result?


Douglas Mason Fisher: No. My point is that a government should have complete confidence in its senior public servants.


John Whitney Pickersgill: Hear, hear.
7898	HOUSE OF
Canadian National Railways Mr. Fisher: Where it has not got complete confidence it should not have the excuse referred to, even in its own mind. It should do something about it. The point I was trying to make was that this government in this kind of situation has not indicated its intention. After all, I have been fired off jobs. I do not see why any civil servant should necessarily complain if he is fired for the reason that the government does not think he is doing an efficient job. My point is that the government did not move and has not moved in many cases-


John Whitney Pickersgill: That is my point too.


Douglas Mason Fisher: -and yet it is trying to use that excuse.


John Whitney Pickersgill: Perhaps I might be permitted one more question if the hon. member is agreeable. Does my amendment not say that the government should either put up or shut up, and should the hon. member not vote for it?
(Translation):


Gabriel Roberge: Mr. Speaker, we now have before us Bill C-121, the title of which reads as follows:
An act to authorize the provision of moneys to meet certain capital expenditures of the Canadian National Railways system for the period from the 1st day of July, 1961 to the 30th day of June, 1962 and to authorize the guarantee by Her Majesty of certain securities to be issued by the Canadian National Railway Company.
What is the government asking of us by this bill? It is asking us to vote, for the benefit of the Canadian National Railways, a sum of $178,900,000. The hon. member for Bonavista-Twillingate (Mr. Pickersgill), during the debate on second reading, moved the following amendment:
(Text):
That all the words after "that" be deleted and the following substituted therefor:
"this house declines to give second reading to a bill providing large sums for capital expenditures on the railway system while the house is not possessed of the identity of those, namely, the chairman and members of the board of directors, who will be responsible for the making of such expenditures."
(Translation):
The government is asking us to vote the sum of $178,900,000 for the Canadian National Railway Company; a crown corporation. Why? To refinance that crown corporation.
It seems to me that we have a right to know before agreeing to vote such an imposing amount, who are the people who will be appointed to administer the C.N.R. in the coming year. At this point, we are still in the dark. Perhaps the ministers do know. 

Perhaps the Minister of Transport (Mr. Balcer) does know. But certainly parliament does not know.
Mr. Speaker, the comments made by the hon. member for Restigouche-Madawaska (Mr. Fournier) somehow surprised me. Incidentally, may I commend him for rising this afternoon to give his maiden speech in this house.
I am most surprised that a former minister of the crown from one of Canada's provinces should make the statement on constitutional theory he did this afternoon. He said, in fact, that it was up to the government to vote the necessary sums of money. I always thought that the members for the house were responsible for such control.
We are not only asked to give a cheque of considerable value to the C.N.R., but we are not even to be told in whose name that cheque will be made out. The company is, at present, administered by a president appointed from day to day whose term of office may expire overnight.
A bill was adopted on May 22 last, authorizing the government to increase the number of directors of the C.N.R. from seven to 12. There are, consequently, five directors to be appointed.
The minister told us then that he had in mind to appoint some fine Canadians. The Minister of Transport would surely not appoint a bad Canadian as director of the C.N.R. But one thing remains: these appointments are the responsibility of the government. Almost seven weeks have passed since that bill was carried. And it was said at that time that the bill would be put into effect as soon as proclamation would be given. What keeps the minister from going to his colleagues from the cabinet and telling them: "Now is the time to act; now is the time to proclaim this legislation". What keeps him from making his colleagues see reason? Would he, by chance, not have his word to say in the cabinet? Is this a one man government, who would appoint his own creatures to the board of directors of the C.N.R.?
We have been accused of repeating ourselves in this debate as well as in many others. But we are compelled to repeat ourselves because here is a government which refuses to take action when the time has come to act. Here is a government which refuses to take its responsibilities. The present government beats about the bush and waits until things have come to a crisis before settling problems. It is notorious for its confusion, irresponsibility and irresolution.

Mr. Speaker, the hon. member for Port Arthur (Mr. Fisher) has stated that we should look into other questions, for instance the trucking industry. I would like to point out that we will have an opportunity of discussing that point when the bill is before the committee. Right now, we are debating the amendment which has been moved. That point was raised by the hon. member for Maisonneuve-Rosemont (Mr. Deschatelets), amongst others. We will consider it when the bill is examined in committee and we will take that opportunity to ask the minister to what precise use those $178.9 million will be put.
Mr. Speaker, I should like to urge the minister once more to take his responsibilities and to see that Bill C-94 is proclaimed, so that the new C.N.R. directors may be appointed.
(Text):


William Arnold Peters: Mr. Speaker, I wish to say a word or two on this matter. I am not of the opinion that we should refuse to make this money available to the C.N.R. because it is a maintenance grant in lieu of revenue and really is in the form of a loan to maintain the operations of the railway; yet I am in agreement with the fact that the government is not to be trusted in the making of appointments when it gets around to doing so. In parliament we have only certain methods of enabling the government to do what we wish it to do and one of them is by the voting of money to make these things possible.
We have seen what has happened in the case of some of the appointments made by the government. When these people were under pressure from the government they did things that they were not willing to do of their own free will. Not because the government has the responsibility for appointing these people and probably not because of the responsibility we expect them to have to parliament but because of the responsibility that we have to parliament itself, I believe it is exceedingly important that we must examine and on the basis of our knowledge be very cautious about appointments the government makes.
It is quite possible that Canadian National Railways is not being operated properly and will not be operated properly unless the right people are appointed to the board. On many occasions my colleague, the hon. member for Port Arthur, has shown his reluctance to support the chairman of the board. I was not a member of the railway committee this year but I am told that when he appeared before it his attitude had changed. He did make some suggestions. He did, so to speak, turn over a new leaf. I believe that
Canadian National Railways now it is the responsibility of the government to tell us, during the discussion of this bill, what their intention is in relation to his reappointment. The government should tell us whether they are going to appoint to the board people who are capable and qualified and who have the interests of the trucking industry at heart. It seems to me that trucking is becoming a greater and greater part of the transportation system known as Canadian National Railways, and it seems to me that the easiest way to make it impossible for us Canadians to afford a national railway system is to appoint people who are not qualified to speak for the trucking industry.
I believe, therefore, that we as members of parliament have a right to know who the directors are going to be. I believe we have the right to know whether they are being appointed for political reasons or whether they are being appointed because of a certain aptitude for the job they will be asked to do. Having in mind the remarks that have been made in the newspapers during the last two or three days about a board of directors, most of whom were appointed by this government in recent years, which made a decision and then for political reasons or under political direction made a complete about-face, I do not believe it is unfair for us to request this information. While it is not my intention to hinge our support of this measure on this request, I think it is important that, as members of parliament, we should give much closer attention to appointments to boards of directors of crown corporations. It seems to me there is a lack of good sense or good business judgment exhibited in the picking of directors for these companies. It would appear that in the case of one member of a board, to whom reference has been made in this house, the appointment depended entirely on the size of the contribution made to a candidate during the last election campaign.
I can see no reason why the minister cannot give us some indication of when these positions will be filled and who will fill them before we are called upon to pass this measure. This money will be used for the maintenance of the railway and it is necessary, therefore, to vote against the amendment which, in effect, would kill the loan that is to be made to Canadian National Railways. I do not believe our good judgment will permit us to pass on matters of this nature for much longer without being better informed than we are at the present time.


William Moore Benidickson: Mr. Chairman, the minister is of course introducing an annual bill; it is required every year. This year I think the annual expenditures are perhaps lower than we have experienced for some years. On the other hand we know that the committee on railways, air lines and shipping owned and controlled by the government was confronted not only with a capital budget that may be reduced but also with operating reports which indicate that last year the railway had an unprecedented deficit notwithstanding capital revision. The situation that concerns many of us is the fact that for 1961, despite the forecast of the Minister of Finance that we might have an increase in gross national product, we will still have a deficit of $64 million in this most important crown company.
In addition to that, only in the last portion of Bill No. C-121 do I find clauses in language unsimilar to that of those which we have met every year heretofore. There we have a very interesting and significant matter. I think this committee should concern itself with this matter because we have a proposal from the government to defer responsibility in two or three items upon which this house reached a decision ten years ago when there was another revision of the capital structure of the Canadian National Railways.
I think three clauses of this amending bill for 1691 are simply items of procrastination, and they are important items of procrastination. They refer to deferment of interest that might otherwise have been paid to the crown by this crown corporation on two or three items of concession given to the Candian National Railways ten years ago in 1951 in the revision of its capital structure. I hope the Minister of Finance will not be offended when I say this is rather typical of the procrastination in respect to decisions for which this government has been noted in recent times.
I indicated at the resolution stage that these capital revisions are of great consequence and I am not going to repeat myself in respect to that tonight. However, I indicated at that time that there had been write-offs to the extent of $700 million in 1951 and now a prospective write-off of an equivalent amount is to be postponed for one year. I think the minister should give us some indication when we are considering matters of this importance as to the direction in which the government might be leaning.
This government is now familiar with the testimony the chairman of the board of directors has given to the committee of this

house during its sittings this year. In view of the write-offs in 1937 and in 1951 of these gigantic amounts, in each case almost $700 million, I think the minister should explain why this government is not willing to face up this year to those obligations which were made evident by the statute some ten years ago at which time there was a revision following the royal commission. What is the reason behind the failure of this government to face up to its obligations rather than asking us by means of three new clauses in this annual bill to defer this obligation? What is the reason for the procrastination and indecision on the part of this government in carrying out its obligations made evident in at least two statutes? I refer, of course, to the Canadian National Railways Refunding Act revision of 1955, and of course the basic Canadian National Railways Refunding Act of 1951. The debts incurred as a result of those two revisions normally would require interest payments.
The main difficulty as I see it is that this government is nonchalantly evading its obligation to make a decision in respect to the management of the Canadian National Railways and is again asking for a deferment. This measure indicates procrastination and indecision on the part of the government in respect to this important matter of which it should obviously have been aware because of the statutes of some ten years ago to which I have referred. At that time it was known that the expiry date would be 1960 or 1961. Yet by these three clauses in this bill we are now being asked to give the government a blank cheque, further time and condonation in respect to its indecision and procrastination. I think the minister should indicate the reason for this inasmuch as it was known some ten years ago that this would be required either this year or last. It was known ten years ago that the chickens would come home to roost this year. I ask the minister to explain to this committee why he is now asking us to condone this indecision, because obviously there is to be no decision in this regard this year, despite the fact that he promised last year that there would be. I ask the minister why this committee should now give this government a postponement by adopting the subclauses of this bill, the effect of which will simply give the government another year to make up its mind.


Donald Methuen Fleming: Mr. Chairman, the hon. member is discussing matters pertinent to three specific clauses in the bill. I will be glad to discuss those matters when we reach consideration of those clauses, being No. 11, No. 12 and No. 13.
Canadian National Railways


Robert Jardine McCleave: Shall clause 1 carry?
(Translation):


Gabriel Roberge: I should like to deal with the matter of the trucking industry in Canada as related in particular to the C.N.R.
I think that, when we come to clause 3, I shall also take the opportunity to put questions about that matter to the Minister of Finance (Mr. Fleming).
We have learned on June 29 last, in a letter from Reimer Express Lines Limited addressed, I think, to all members, that the East-West Transport Limited, a crown corporation financed by the crown, was one of those who were cutting rates in the trucking industry. We were also informed in a telegram sent to all members that the C.N.R. proposes to ask the Quebec provincial transport board permission to buy certain trucking companies. Needless to say the telegram was a protest against such a request.
We were given the opportunity to see the brief submitted in November 1960 to the Minister of Transport (Mr. Balcer) by the Quebec trucking association, a brief prepared by Mr. Camille Archambault, assistant to the chairman of public relations of the association. The brief shows on page 4 that the association includes:
-1,046 members, owners of motor transports with more than 15,000 commercial vehicles for public transportation.
If the Canadian National Railways start buying out private trucking companies, they certainly are going to offer disastrous competition-to say the least-to small businesses with considerable transportation as well as handling personnel.
I quote Mr. Archambault's remarks, on page 4:
The intrusion of railways into highway operations would certainly have serious consequences for the users and professionals in that field, as well as for our economy as a whole.
In my opinion, Mr. Chairman, the proposed C.N.R. request-it may be pending before the provincial authority at present-should not be made or should not have been made. I know that some will object that the federal government has no business interfering with the administration of the provincial board of transport and I agree. But obviously the Canadian National Railways

Canadian National Railways may or may not apply for such authority to purchase trucking companies to operate a highway transportation system in the province of Quebec or anywhere in Canada for that matter.
When we come to clause 3, I will ask the minister if in the amount mentioned there is something toward the purchase of such a system of road transportation.
(Text) :


Robert Jardine McCleave: Shall clause 1 carry?


John Whitney Pickersgill: Before clause 1 carries, sir, in a rather menacing tone on my amendment on second reading the minister said that if this bill was not passed very promptly great harm would be done to the Canadian National. Would he specify what harm that would be?


Donald Methuen Fleming: Mr. Chairman, those who are familiar with the purposes of the bill and with the resolution that preceded it will be aware that the bill authorizes the provision of money to meet certain capital expenditures of the C.N.R. for the period from January 1, 1961 to June 30, 1962. This bill provides authority for certain capital expenditures which, unless the bill is passed very quickly, will be impeded.


John Whitney Pickersgill: Can the minister cite one single expenditure that has so far been delayed because of any delay in the passage of this bill?


Donald Methuen Fleming: I am informed that funds pursuant to the provisions of this bill will be required by July 15.


John Whitney Pickersgill: The minister cannot assure us that there has been anything delayed because the bill has not passed.


Donald Methuen Fleming: I was informed, Mr. Chairman, that if the bill was not passed through all its stages by the 15th, which means this week, so that money will be released under its terms, then those programs would suffer.


John Whitney Pickersgill: Can the minister say which programs?


Donald Methuen Fleming: The whole program which depends upon the release of funds by July 15. They require funds by July 15.


[Stage Direction]
Clause agreed to.
Clause 2 agreed to.
On clause 3-Capital expenditures authorized.
William Moore Benidickson: In this clause, Mr. Chairman, we have perhaps the central concern of


all of us in passing this legislation, because it refers to capital expenditures which make this annual bill necessary. In his capacity as Minister of Finance, can the minister indicate to us when we might reach the stage where depreciation might approximate the capital requirements of the Canadian National Railways? We now have to provide loans for capital investment in this crown company as a result of which depreciation amounts to $120 million a year, I think. I see the Minister of Transport in his seat. Perhaps he might have some views on this subject to assist the Minister of Finance. When we get into the position where depreciation alone on capital assets that have resulted from appropriations by parliament is about $120 million, are we going to be asked in future years for capital advances that actually increase the over-all debt, and capital requirements that exceed the equivalent of normal depreciation rates on this vast asset in the Canadian National Railways?


Donald Methuen Fleming: I would not wish to hazard an answer to that question. The depreciation accruals for 1961 are estimated at $108.1 million.


William Moore Benidickson: I said about $120 million.


Donald Methuen Fleming: The figure I have is $108.1 million.


William Moore Benidickson: It is $118 million, is it not?


Donald Methuen Fleming: No, $108.1 million.


Gabriel Roberge: Will the Minister of Finance now tell us whether the Canadian National Railway has made a request to the provincial transport board of Quebec for permission to acquire certain trucking companies?


Donald Methuen Fleming: That I do not know, Mr. Chairman.


Gabriel Roberge: Does the Minister of Transport know the answer to that question?


Léon Balcer: Repeat your question. (Translation):


Gabriel Roberge: Could the Minister of Transport say whether it is true or false that the C.N.R. has filed an application with the Quebec transport board with a view to acquiring certain trucking companies?


Léon Balcer: Yes, that is the information I have received.


Jean-Paul Deschatelets: I should like to know from the Minister of Transport whether he has received a telegram from various trucking associations in Quebec, protesting this attempt by the C.N.R. to get into the Quebec trucking business?

(Text):


Léon Balcer: The answer is yes, Mr. Chairman.


Gabriel Roberge: Would the minister indicate to us whether in the amount that we are being asked to vote, especially in the material item, of approximately $14 million, any money is provided for the purchase of trucking equipment?


Donald Methuen Fleming: I am told that there is $6 million in round figures in this capital budget for highway equipment of all kinds. This includes some owned by the railway.


Gabriel Roberge: If the minister has the information can he tell us what are the transport trucking companies that the C.N.R. is thinking of buying at the present time?


Donald Methuen Fleming: Mr. Chairman, I have not that information but I do not know that it is ever given in advance of acquisition. It would be an extraordinary thing if before acquisition or during negotiations the Canadian National Railways were asked to make public its intention of making approaches to some companies with a view to arriving at a bargain with them. That would not be a conceivable way of carrying on business.


Gabriel Roberge: Surely, Mr. Chairman, if the Canadian National Railways has made application to the provincial board to acquire some transport companies the approach has already been made. I am told that the minister does not have the information. I am not satisfied with the minister's answer, but I have to accept it.


James Roy Tucker: I should be grateful if the minister would advise whether any consideration is being given to enlarging the Newfoundland hotel in St. John's in view of the increased population of the city. St. John's now has a population of approximately 80,000. In view of the fact that in 1958 the Newfoundland hotel had a profit after allowance for interest and depreciation of approximately $153,000, $152,000 in 1959 and $152,000 in 1960 or more than $450,000 in three years, and in view of the existing conditions and the hardship on the travelling public in trying to secure hotel accommodation, would the minister advise whether any consideration is being given to the enlarging of the Newfoundland hotel in St. John's?


Donald Methuen Fleming: There is no provision in this capital budget for the enlargement of that hotel.


Jean-Paul Deschatelets: I should like to know whether Mr. Gordon, before making applica-
Canadian National Railways tion to the provincial transport board, discussed the matter with the Minister of Transport.


Donald Methuen Fleming: The hon. member heard the answer of the Minister of Transport on the subject.


William Moore Benidickson: Mr. Chairman, in clause 3 dealing with capital expenditures we have a very substantial item involving branch line construction. This usually involves ancillary legislation related to particular new lines for which parliament takes responsibility and not the C.N.R., and included in the bills would be an authorized expenditure. We merely give to Canadian National Railways the administration of these roads. So many things are so long delayed this session, and although there was a reference in the speech from the throne to the desirability of proceeding with the Pine Point railway from the point of view of assisting in an upturn in the economy, we know that about six months have elapsed and nothing has been done.
I believe that under branch line construction on page 2 of the bill there is some provision for the Pine Point railway. We are now over half-way through the calendar year 1961. How much is likely to be expended in the calendar year 1961 on construction of the Pine Point railway?


Donald Methuen Fleming: That will depend, of course, on action by parliament. It will not be possible to undertake construction until parliament has passed the necessary enabling legislation.


William Moore Benidickson: The minister wants to be fair and he knows that this bill includes not only authorization to the C.N.R. We do not hold up the C.N.R. This is a massive bill in so far as the authorization of capital expenditures is concerned. We are authorizing this capital budget of Canadian National Railways for the calendar year and, in fact, we go beyond that. In another clause of the bill we assure that the railway is not going to be held up and that in the first six months of the subsequent year it is going to have funds so that it can go ahead with a project such as I have described. What we are doing tonight in looking at this legislation has nothing at all to do with the programming of the Pine Point railway. There is a reference to $10 million in the contingency fund of Canadian National Railways for the Pine Point railway. I am simply asking the minister how rapidly is that money going to be spent? How rapidly is construction of the road likely to progress? To what extent will there be expenditures in the calendar year 1961?
7904	HOUSE OF
Canadian National Railways Mr. Fleming (Eglinion): I do not think anyone can answer that at the moment. One would have to know when parliament is going to take action on the measure on the order paper. There is provision, as the hon. member has indicated, by way of contingency to meet this or any other opportunities that arise for the construction of branch lines, but I cannot indicate to the hon. member what amount is likely to be expended during the present calendar year because I do not know when parliament is going to authorize construction of the Pine Point railway.


Gabriel Roberge: Mr. Chairman, I suppose the minister is aware that in lower town in Quebec city there is a building belonging to the C.N.R. I was told that it was the intention of the C.N.R. to expand or make alterations or improvements to the building or possibly even to construct a new building there. In the $14 million is there any amount provided for that purpose?


Donald Methuen Fleming: I understand not.


William Moore Benidickson: Mr. Chairman, admittedly in clause 3 of the bill there is a substantial amount of capital requirement that involves a completely owned subsidiary of Canadian National Railways, Trans-Canada Air Lines. The amount is almost $20 million. Does this involve capital commitments made irrespective of the policy of the government with respect to a possible enlargement of the activities of the chief competitor of Trans-Canada Air Lines? I refer to Canadian Pacific Air Lines which now has a limited franchise. As far as I am aware, Trans-Canada Air Lines executives say that the air line can go forward successfully only if it is not faced with undue competition in the domestic sphere. Are these expenditures of almost $20 million to be made by Trans-Canada Air Lines irrespective of any decision that might be made by the air transport board which might increase domestic competition on the part of Canadian Pacific Air Lines?


Donald Methuen Fleming: Yes.


William Moore Benidickson: The commitments have already been made for these capital expenditures. I assume that they involve up to date jet planes, that the orders have perhaps been placed and that irrespective of any decision that is made by the air transport board Trans-Canada Air Lines is committed to these financial expenditures. Is that right?


Donald Methuen Fleming: Mr. Chairman, major expenditures were necessary in 1960 on account of ground facilities and maintenance facilities for the DC-8 and Vanguard aircraft. Of the $39 million for property and equipment in the 1961 T.C.A. budget, $29.5 

million relates to programs approved in previous years' budgets. The major new commitments for 1961 are initial payments on the delivery in 1963 of five additional DC-8's-


William Moore Benidickson: 1963?


Donald Methuen Fleming: Yes, delivery in 1963 of five additional DC-8's and the delivery in 1965 of 14 medium range jet aircraft.


Jean-Paul Deschatelets: On page 2 under the heading "Investments in affiliated companies", there is an item amounting to $5,922,000. Has this item anything to do with investment of any sum in the trucking industry?


Donald Methuen Fleming: There is an item of $5 million here for Canadian National Transportation Limited.


[Stage Direction]
Clause agreed to.
On clause 4-Issue of securities.
Herbert Wilfred Herridge: Mr. Chairman, subclause 1 of clause 4 reads:
Subject to the provisions of this act and with the approval of the governor in council, the national company may issue notes, equipment trust certificates, bonds, debentures or other securities, bearing such rates of interest and subject to such other terms and conditions as the governor in council may approve, to provide amounts required for the purposes of section 3.
My question is this. Would the minister explain to the committee under what circumstances they issue notes, equipment trust certificates, bonds, debentures or other securities, and what the other securities would be? I was interested in the terms of this clause because of the different types of securities given. In what proportion of the total are they usually issued?


Donald Methuen Fleming: This is a standard clause, Mr. Chairman, that has appeared in this bill for some years. As to the practice, I may say that in the case of advances made by the Minister of Finance to Canadian National Railways, these are on an interim basis and are secured by demand notes. So far as equipment trust certificates are concerned, I believe there has not been a case of the issuance of equipment trust certificates in recent years. So far as bonds are concerned, the company has been offering a bond issue on an average of about once a year, sometimes less often and sometimes a little more often. As to debentures and other securities, I do not believe there have been any debentures issued in recent years, as distinguished from bonds.


Herbert Wilfred Herridge: What would the other securities be? I would be interested in that.


Donald Methuen Fleming: I am not aware of any other form of securities that the company

has issued in the last tour years. This is an enabling provision which has been well established. Of course, in the case of privately owned companies these various forms of security would no doubt be used, depending on the circumstances. The circumstances would dictate the particular form that the security would take. These are all well recognized forms of security in the case of privately owned companies.


Herbert Wilfred Herridge: Does the company ever give mortgages on its property as security?


Donald Methuen Fleming: No, it has not in
my time, Mr. Chairman.


[Stage Direction]
Clause agreed to.
Clauses 5 to 8 inclusive agreed to.
On clause 9-Minister may place amounts at disposal of company.
(Translation):
Jean-Paul Deschatelets: I have a question to ask, Mr. Chairman, with regard to clause 9. This clause deals with the amounts paid by the C.N.R. to the trucking service.
If the income proved inadequate, could the C.N.R. under clause 9 apply to the Minister of Transport (Mr Balcer) for more funds, and could the minister, with the approval of the governor in council, make the additional money available?
Is my interpretation correct?
Let me put it more clearly. Could the C.N.R., assuming that receipts from the trucking service proved inadequate, come back for additional funds, and get the requested funds subject to the approval of the governor in council? Is my interpretation correct?
(Text):


Donald Methuen Fleming: The deficits on any particular line, Mr. Chairman, or a particular operation of the total system are lumped, in the end, in the total financial report and figures of the entire system.


Jean-Paul Deschatelets: If I am right in my assumption, Mr. Chairman, that means that the $6 million that is going to be used by the Canadian National and given to the trucking business is only a minimum.


Donald Methuen Fleming: If the hon. member will permit me to say so, I think he is confusing the current and capital budgets. The figure that was mentioned a little while ago of $6 million related to the capital budget. The hon. member then proceeded to ask me a question about deficits incurred on current operations. What I am saying is that in a huge system like Canadian National Railways system, where there are numerous railway
Canadian National Railways lines some of which are still operated as separate railway lines, as well as other forms of transportation carried on by subsidiary corporations, the total operating statement of the system includes all of those whether the operation of a particular line has resulted in a deficit or a surplus.


Leon David Crestohl: I wonder whether the minister could explain what to me appears to be a contradiction between clause 3 and clause 9. Under clause 3 we are asked that a fixed amount be provided, and subclause 6 states that no amounts shall be spent for a purpose mentioned in this section in excess of the amount authorized. Then, under clause 9, apparently there is provision made to the effect that whatever amounts have been spent in excess of that fixed amount they shall be reimbursed out of the funds of the government. I cannot follow the reasoning. Why, in one clause, are we asked for a fixed sum and why in another clause is it stated that if the company goes beyond that amount they shall be reimbursed out of the national revenues. Would the minister expain that?


Donald Methuen Fleming: Again, if the hon. member would permit it, I would say he is under a misapprehension here. Clauses 3 and 9 are not related. Clause 3 deals with capital expenditures while clause 9 deals with temporary loans by the government for the purpose of meeting income deficits. The two clauses are not related and clause 9 is in no sense a means of providing additional capital funds to the Canadian National Railways in excess of the amount permitted by clause 3.


[Stage Direction]
Clause agreed to.
Clause 10 agreed to.
On clause 11-Extension of period in respect of which no interest payable.
William Moore Benidickson: I do not believe the minister made any reply to the remarks I made earlier on this subject. I advanced the criticism that this government should have had adequate warnings and should have provided a new plan before the expiry of the ten year term. I know that we have had a reference to a royal commission. Did the royal commission deal with this particular problem? In what way did it deal with it? What were its recommendations? I take it that what is involved here is really an addition of one year to the ten year term of interest free lending to the Canadian National Railways on a principal sum of $100 million. I am sure the government realized this matter was coming up. It was in the bill that followed the Turgeon royal commission. Why are we avoiding facing up to what is required
7906	HOUSE OF
Canadian National Railways here, or am I wrong in thinking that we are really giving another year or an eleventh year of interest free lending to the extent of $100 million to the Canadian National Railways?


Donald Methuen Fleming: No. The hon. member is quite correct. The effect of section 11 is to extend for another year the moratorium on interest on the $100 million loan authorized by the capital revision act of 1952. The reason for this further extension is that this would not have been a suitable time to be undertaking another revision of the capital structure of the Canadian National Railways when the royal commission is studying some matters which are of very great and far reaching importance to railways' financial operations in Canada. I do not suggest for one moment that the royal commission has been asked to make recommendations specifically with relation to the revision of the capital structure of the Canadian National Railways. I do not suggest that at all. However, the fact is that the matters that were referred to the royal commission for study and report are matters that are quite fundamental to the earnings position of the two great national railway systems in this country. It is surely the part of wisdom to await the report of the royal commission before launching into a subject like capital revision. We do not very often undertake capital revisions of the Canadian National system. The last one was to cover ten years. The next one may cover some years. I think the hon. member will agree that it would have been quite unwise to attempt one of these relatively rare and far reaching revisions before we had received the final report of the royal commission on the railway freight rates.


[Stage Direction]
Clause agreed to.
On clause 12-Continuation for further year of application of R.S., c. 311, s. 6(1).
William Moore Benidickson: I wonder whether the minister would explain this clause. It seems to me that this is a repetition of a clause we had for the first time in our annual bill of last year. Am I right? This too results from a little procrastination in deciding what is going to be done about further revision of the capital structure of the C.N.R. You concluded debate very properly, Mr. Chairman, on the previous clause; but perhaps in courtesy the minister might just reply to this question. Notwithstanding the sittings of the royal commission, did the minister and the chairman of the Canadian National Railways confer at any time; and did the minister authorize the chairman of the Canadian National Railways to make the proposal he made to the House of Commons committee 

on railways, air lines and shipping, government owned, with respect to another very substantial write-off of capital debt?


Mr.. Fleming (Eglinton):: Clause 12 of the bill arises out of the same circumstances as. does clause 11. The clause is new but its intent, as the hon. member has indicated, is similar to that of section 11 of the 1960 act. The effect of the clause is to extend the authority for purchase by the minister of the four per cent preferred stock of the company for a period of one year beyond the present expiry date of December 31, 1961.
This is not a matter of procrastination, Mr. Chairman. It is a matter of taking a wise course in the light of the fact that a royal commission is studying the whole question of our railway freight rate structure.


William Moore Benidickson: My question was this, Mr. Chairman. Had the chairman of the Canadian National Railways, prior to his testimony before the committee on railways, air lines and shipping, government owned, discussed with the Minister of Finance his proposal which was described by one member of the committee as a bombshell, namely a suggestion that another $700 million to $900 million of advances by taxpayers to this crown company might be written off on a further capital revision? Was that matter discussed with the Minister of Finance?


Donald Methuen Fleming: Yes. I had communication with the president of the Canadian National system on this subject. There has been an exchange of communications. He has submitted his views to me and study has been given to them. I can assure you, Mr. Chairman, that no decision has been reached.


John Whitney Pickersgill: It is hardly necessary.


[Stage Direction]
Clause agreed to.
On clause 13-Issue of substituted securities: 1955, c. 31, s. 3.
William Moore Benidickson: I am satisfied with the explanation the minister gave at the resolution stage. What was the date of that stage?
I do not have it before me.


Donald Methuen Fleming: Thursday, July 6.


William Moore Benidickson: I thought the minister then explained fully the requirement for this clause. This involves a completely different amendment from the one that was made in 1955. I am satisfied with that explanation. I simply wish to draw attention to the fact that an explanation was given in considerable fullness when the resolution was discussed.


[Stage Direction]
Clause agreed to.

On clause 14-Auditors.
John Whitney Pickersgill: I should like to ask the minister whether there is in Mr. de Lalanne's contract with the Canadian National Railways or whatever arrangement there is with him any stipulation that he should have leave of absence if he wished to be a Conservative candidate at the next election.


Some hon. Members:: Carried.


Douglas Mason Fisher: I assume that the hon. member for Bonavista-Twillingate is not to receive an answer to his question. There was some disappointment on the part of several members of the railways, air lines and shipping committee. I do not think I am taking too much on myself in saying that there was more than one who, without being critical of Mr. de Lalanne's evidence, felt that the annual report of the Auditor General is in many ways too brief and does not contain enough narrative to indicate the various steps taken and the way in which the work is approached and handled. I should like to make a suggestion at this particular time. I understand that he follows what is said in the house about the Canadian National Railways. Perhaps next year, if the minister does not draw it to his attention, the committee will receive from him perhaps more of a preliminary explanation and so would make our inquiry a little more forthcoming for us. I know the hon. member for Greenwood is looking at me. Of course he has experience in financial matters and I suppose chartered accountants and their doings are familiar to him. But Mr. Gordon himself said a number of times in the committee that chartered accountants have a language and a gobbledygook all their own and you really needed a translator. That was somewhat the impression we got from the very terse and very narrow replies we obtained to questions addressed to Mr. de Lalanne.
I would emphasize again that this is not expressed as any criticism of him. I just hope that in future we will get a more thorough explanation, more of an introduction and more of a narrative to indicate just how completely he does the job and how he sets about it. This would give us a better indication of what we can ask him in regard to what he discovered.


Robert Jardine McCleave: The
hon. member for Maisonneuve-Rosemont.


William Moore Benidickson: Mr. Chairman, before
another hon. member rises there is this question that I wish to ask having heard the hon. member for Port Arthur. I think perhaps inadvertently the hon. member referred to a report of the Auditor General. I am sure he meant the auditor of the Canadian National
Canadian National Railways Railways because it has always been mentioned in debate on this matter that the Auditor General is not the auditor of the accounts of the Canadian National Railways.
Does the hon. member for Port Arthur confirm that when he was referring to the auditor mentioned in the last clause of the bill he was referring to this gentleman who is a private auditor, and not the Auditor General?


Douglas Mason Fisher: I certainly was. Perhaps we have the Auditor General on our minds these days, those of us who were in the broadcasting committee and saw his performance there. Perhaps he looms larger than he really should. I have one final question to ask the minister, if it has not already been put to him. What role is the Glassco commission playing in analysing the Canadian National Railways?


Donald Methuen Fleming: Mr. Chairman, I do not believe the Glassco commission is playing any part in any detailed analysis of the affairs of the Canadian National Railways system. It may be looking at some general features of the relationship to government of this very large system. It would be a huge undertaking of itself to conduct an examination of the whole system internally from the point of view of those subjects upon which the Glassco commission has been directed to make its study and report.


Douglas Mason Fisher: I raise this matter because that commission is doing some work in connection with the Canadian Broadcasting Corporation. That is not as large an organization as the Canadian National Railways, but I think it is No. 2 in government corporations. It seems to me the C.N.R. could be an appropriate field of analysis just as much as the C.B.C., if not more so. I thought the Minister of Finance could indicate whether the Glassco commission is, for example, going to examine the relationship between members of the House of Commons and the C.N.R. in so far as their questions going through the Department of Transport and the cost of them are concerned.
We certainly got the impression from Mr. Gordon in several instances that while the C.N.R. management was prepared to spend a great deal of time getting answers to questions of members of parliament, it was an expensive business and one that took away people from duties that were more intimately connected with the railway. I suggest that as a possible area for the Glassco commission to look at, because it always seems to be a good rebuttal to say to a member of parliament who asks detailed questions, "Well,

Canadian National Railways look at the inordinate expense. What do you want the information for anyway?
As the minister probably knows, a study was made last year of government organizations. I have forgotten the author, but the work was published by Yale University I think. This man went back through the history of the relationships of these organizations to parliament, and by a long way the Canadian National Railways led all the rest in terms of consumption of parliament's time, volume of questions placed on the order paper and of starred questions. So apparently in our probing we create a great deal of work for the system and perhaps our inquiries cost a great deal of money. This, I underline again, might be an area for examination by the Glassco commission.


Jean-Paul Deschatelets: Mr. Chairman, I have a question supplementary to the point raised by the hon. member for Bonavista-Twillin-gate. Will the minister be kind enough to tell us when Mr. de Lalanne was appointed? My second question is: is it the same Mr. de Lalanne who was an unsuccessful Conservative candidate for Westmount, I think, a few years ago?


Donald Methuen Fleming: Mr. de Lalanne was first appointed auditor of Canadian National Railways in 1958. He is a very eminent accountant, with a most enviable reputation in his profession.


Jean-Paul Deschatelets: Has the minister any answer to my second question?


Donald Methuen Fleming: No.


John Whitney Pickersgill: Such innocence.


William Moore Benidickson: I have no doubt that the Minister of Finance, for whom I have a high regard, with his usual seriousness and attentiveness to his duties has looked at the committee reports. I was not a member of the sessional committee this year but in reading its report I felt that perhaps the report of the auditor should be drawn especially to the attention of the Minister of Finance.
I assume the minister has looked at the report of the sessional committee but I wish to draw his attention to page 401, where it is indicated that capital expenditures on property investment were in the region of $169 million for 1960. Then on page 402 it is indicated that during the year there was an increase of $141 million in long term debt of the Canadian National Railways.
I raised this matter last year and I say it is something to which we have to face up. It is not dissimilar to the situation we have had in the last 10 or 15 years. But when does this increase in long term debt of this magnitude come to a stop? If the minister is not

looking into this matter, is he asking somebody outside the Canadian National Railways, somebody in treasury board, to look at the statements of increase in long term debt of the Canadian National Railways compared with the increase in debt of Canadian Pacific Railway?
I have attempted to look into this matter and I know the minister cannot do it personally. I know I cannot. I have had a cursory look each year. But is there a serious study of this matter on the part of the cabinet, which makes available to the Canadian National Railways these massive sums? The long term result is that there is a steady increase in the fixed charges of the railway. As I see it, it is the fixed charges of the railway which are crippling the railway. I am not so sure-


Robert Jardine McCleave: Order.


William Moore Benidickson: Mr. Chairman, this is referred to in the auditor's report, if you look at page 403-


Robert Jardine McCleave: The
Chair will need some guidance from the hon. member to determine whether the hon. member is within clause 14 which, as I understand it, deals with the auditing of the Canadian National Railways' accounts.


William Moore Benidickson: Quite. I have reference directly to the report of the auditor who is the man being reappointed and whose report is to be found at page 403 of the proceedings and evidence of the committee on railways, air lines and shipping. I have related my remarks directly to that report, Mr. Chairman.
I do not wish to delay the committee. However, I am very concerned about this and I expressed my anxiety last year. I think there is some substantial reduction this year in the total amount of borrowing required by this crown company. That relieves some of my anxiety and distress. However, the facts are plain if one looks at the auditor's reports of last year and this year. I suggest that an increase of $141 million in over-all capital debt obligations of this railroad in this year plus a debt of $67 million is something deserving of careful attention.


Donald Methuen Fleming: When you said "debt" I take it you meant deficit?


William Moore Benidickson: Yes, I intended to refer to the deficit of $67 million. I should like some assurance from the minister that this situation is receiving consideration. I feel that an investment of $1 billion in improved and efficient equipment of this railroad should enable it to occupy a position of earnings which would show up to more advantage.

However, on the contrary, we have the largest deficit experienced in many years. I am wondering about this increase of $141 million in one year as disclosed in the auditor's report to the House of Commons committee, and I felt that concern was related to this clause of the bill.


Donald Methuen Fleming: Mr. Chairman, I can assure the hon. member that this is a matter of continuing concern and directs attention to the whole question of the capital structure of the system. In 1960 there was a very high deficit amounting to some $67.5 million. There has been no deficit as high. The company did show a net revenue from railway operations of $7,347,000. The huge deficit is accounted for by the burden of fixed charges. At the same time there has been this continuing increase over the years in long term debt. Against that picture must be set the fact that some of the major capital investment programs of the company are coming to a close. The whole dieselization program which naturally has been costly in terms of the amount of investment is now relatively complete, and there will be operating savings as a result of that dieselization throughout the system. However, the matter to which the hon. member has called attention is one which will have to receive very careful study in relation to the proposed revision in the capital structure of the system within the coming year.


Herbert Wilfred Herridge: Mr. Chairman, there is a bit of confusion in this quarter of the committee as to the reply given by the minister to the hon. member for Maisonneuve-Rose-mont when he asked the minister whether Mr. J. A. deLalanne of Montreal, the auditor for the Canadian National Railways, was at any time a federal candidate of the Progressive Conservative party. I am sure the minister wishes the committee to have the facts. Can the minister say that Mr. J. A. deLalanne of Montreal, the auditor for the Canadian National Railways, was not a candidate for the Progressive Conservative party?


Donald Methuen Fleming: Mr. Chairman, I will say that he is a leader in his profession and a very eminent chartered accountant.


John Whitney Pickersgill: How coy.


Robert Jardine McCleave: Shall clause 14 carry?


Douglas Mason Fisher: Mr. Chairman, there is one point in connection with the auditor's report which I should like to draw to the attention of the minister. When the auditor was being questioned in the committee on railways, air lines and shipping I asked him certain questions about the trucking operations of the 90205-6-499
Canadian National Railways C.N.R. I should like to quote a portion of that discussion which is to be found at page 405 of the minutes of proceedings and evidence of the sessional committee on railways, air lines and shipping. I asked the following question:
In your work this year did you go into the operations and the accounts of these subsidiaries?
Mr. de Lalanne replied as follows:
Once these companies were actually 100 per cent or partially owned C.N.R. companies, I naturally considered it was part of my duty to satisfy myself with regard to whatever was being accumulated in the accounts of the C.N.R., for consolidation in these statements, and that the accounts were reasonably accurate, the same as I would in regard to hotels, telecommunications, and other things.
Now that I have looked at that statement in retrospect comparing it with the fact that Mr. Gordon indicated to us that Midland Superior, which is the largest of the trucking subsidiaries purchased by the C.N.R., is not included as actually being owned by the C.N.R., I would very much appreciate knowing whether Midland Superior came under audit in 1960. It has been suggested by other members that these trucking operations are in a peculiar position. I would certainly feel much better about that particular aspect of the Canadian National Railways trucking operation if we knew that it was being audited by the auditor for the Canadian National Railways. In view of the explanation given at page 405 of that report to which I have referred there is certainly some doubt in my mind that this is so. I felt this was a point worthy of bringing to the minister's attention for many reasons, not the least being because the president of the C.N.R. indicated that the profit from his particular company which apparently the C.N.R. does not own and does not show in its books was enough to balance the losses it incurred through the other trucking subsidiaries that it purchased. We have a most unusual situation here which I think is worthy of the minister's attention, and I should like to ask him to check with the auditor in this regard.


Herbert Wilfred Herridge: Mr. Chairman, I should like to ask one final question in respect to this bill. Some 12 or 13 years ago a former minister of fisheries, who was the humble member for Coast-Capilano introduced a private member's bill which provided that the Auditor General would audit the book of accounts of the Canadian National Railways. If I remember correctly, that time he received some vociferous support from members of the Progressive Conservative party. In view of that support for that private member's bill by some members of the present government when they were in opposition, would the minister inform this committee whether the

Dominion-Provincial Relations government has given consideration at any time to this auditing being done by the Auditor General?


Donald Methuen Fleming: Mr. Chairman, it would not be possible for the Auditor General with his limited staff to undertake the auditing for the Canadian National Railways. To do so would involve a drastic revision of the whole set-up of the Auditor General's office. This involves a major audit and I think hon. members will appreciate that the present organization of the Auditor General is not such that it could undertake this audit.


[Stage Direction]
Clause agreed to.
Title agreed to.
Bill reported.
Mr. Speaker:: When shall the bill be read the third time?


John Whitney Pickersgill: By leave, now.
Bill read the third time and passed.


DOMINION-PROVINCIAL RELATIONS AGREEMENTS RESPECTING TAX COLLECTION, ANNUAL GRANTS, ETC.
Donald Methuen Fleming: that the house go into committee to consider the following resolution:
Resolved that it is expedient to introduce a measure to authorize tax collection agreements with the governments of the provinces and to provide that the minister may pay to a province, out of the consolidated revenue fund, in respect of any fiscal year in the period commencing on the 1st day of April, 1962 and ending on the 31st day of March, 1967,
(a)	a tax equalization payment;
(b)	a provincial revenue stabilization payment;
(c)	additional annual grants of ten and a half million dollars to each of the provinces of Nova Scotia, New Brunswick and Newfoundland, and of three and a half million dollars to the province of Prince Edward Island;
(d)	a further additional annual grant of eight million dollars to the province of Newfoundland;
(e)	where a province does not levy a succession duty, an amount equal to the standard estate tax applicable to the province for the fiscal year; and
(f)	advance payments on account of amounts collected under a tax collection agreement that may be entered into with the province.
Motion agreed to and the house went into committee thereon, Mr. McCleave in the chair.


Donald Methuen Fleming: Mr. Chairman,
since assuming office four years ago, the government has devoted much time and study to the problem of federal-provincial fiscal arrangements. It has materially increased the return to the provinces from the existing tax-sharing arrangements by raising from 10 per cent to 13 per cent the standard rate on personal income tax; and by introducing the Atlantic Provinces Adjustment Grants, it has greatly broadened the fiscal aid element of federal assistance, and for the first time given full recognition to the special

financial disabilities of the Atlantic region. Although it has greatly improved the financial substance of the present arrangements, this government has recognized the weaknesses of the tax rental system which it inherited, both from the provincial and federal standpoint, and has become increasingly convinced of the need for a new approach which would give greater freedom and responsibility to the provincial governments, and which would be compatible with the constitution.
During the past year we have held three dominion-provincial conferences for the purpose of reaching agreement with the provinces on the form of the financial arrangements which should exist after the expiry of the present Federal-Provincial TaxSharing Arrangements Act on March 31, 1962. The first of those conferences was held July 25 to 27, 1960; the second, October 26 to 28, 1960 and the third February 23 to 24 of this year.
At the first of those dominion-provincial conferences, held July 25 to 27, 1960, the provinces presented their views on the form the new arrangements should take. Consideration of the financial substance of the provincial proposals made at that first conference will reveal the major weakness of the tax rental system. The provinces, like the federal government, have great and expanding responsibilities. In aggregate, the provincial proposals made at the July conference would have cost the federal treasury something in excess of $2 billion annually, an additional cost equal to more than one third of the total federal revenues for the fiscal year 1960-61. Under such circumstances it became increasingly evident that the tax rental system was unsound. It placed on the federal government the whole responsibility for levying the additional taxes to support large increases in provincial expenditures. The provincial governments assumed no responsibility for imposing the rented taxes on which they depended for revenues nor had they any freedom to amend the rates of these taxes in line with their current needs. Such a system was clearly destructive of provincial responsibility and initiative, and incompatible with the constitution which grants equal access to the federal and provincial governments in these fields of direct taxation.
Accordingly, at the October conference the Prime Minister suggested that the provinces might consider again imposing their own taxes on individual and corporate income, and their own succession duties at such rates as they judged appropriate in view of their needs for revenue. To make the

provincial re-entry into these tax fields practicable, the federal government was prepared to recommend to parliament that the federal tax rates in the three shared tax fields be reduced at the time of the termination of the present tax rental agreements, March 31, 1962, by the amount of the present effective standard rates, that is the so-called 13-9-50 formula.
I should explain that under section 2(3) of the Federal-Provincial Tax-Sharing Arrangements Act the standard individual income tax rate of 13 per cent is altered to compensate for any change in federal income tax rates from the rates in effect January 6, 1956. At the time of the October conference the effective rate determined in accordance with section 2(3) was 13.98353 per cent, or approximately 14 per cent. While offering a reduction in taxes equal to the standard rates the federal government was at the same time mindful of the need to support the revenue systems of the less well-to-do provinces and accordingly offered to recommend the continuation of a system of equalization.
On the basis of the discussion of the suggestions made at the October conference and further intensive study, the federal government advanced certain proposals at the dominion-provincial conference February 23 and 24 of this year. The Prime Minister's statement to the conference appears as an appendix to Hansard of February 28. As I stated in my budget speech of June 20, the main proposals were that the tax rental system be discontinued, that the provinces impose their own taxes and that a fair and more realistic system of equalization be introduced. At the same time the federal government undertook to reduce its income taxes to a larger extent than was suggested at the October conference. Instead of reducing the personal income tax by 14 per cent, which is the approximate effective standard rate at the present time, the federal government was prepared to recommend to parliament withdrawing from the personal income tax by 16 per cent in the first year of the agreements and an additional percentage point in each of the subsequent years so that in the final year the withdrawal would be 20 per cent.
This additional tax room was offered to the provinces in the personal income tax rather than in the corporation income tax quite deliberately and for good reasons: first, because of the steadier and more rapid growth of personal income tax yields the personal income tax is a more satisfactory revenue source from a provincial standpoint; second, many corporations operate on a national scale and corporation profits are therefore generally regarded as more appropriate 90205-6-499J
Dominion-Provincial Relations for taxation by the federal government; third, the present provincial share of corporation income taxes is 9 percentage points on corporate taxable income, or about 22 per cent to 23 per cent of total corporation income taxes, so that it is reasonable to increase the provincial share of personal income tax before making any adjustment with respect to corporation income taxes.
In short, the provinces would reassume their constitutional rights and responsibilities to impose and vary their tax levies as they saw fit. At the same time in the interests of administrative simplicity and uniformity and in order to save the provinces the expense of setting up tax collection machinery of their own, the federal government was prepared to collect the provincial personal income and corporation income taxes free of charge provided the provincial tax base was identical with the federal tax base at all times. It was explained that this offer could not be extended to the estate tax since the provinces do not have the constitutional power to levy an estate tax on the federal basis. Accordingly, the federal offer in respect of the estate tax was that any province not levying succession duties would receive half the yield of the federal estate tax while an abatement of 50 per cent of the federal estate tax would be granted as at present to provinces levying their own succession duties.
The proposals presented by the Prime Minister to the conference on February 23 and 24 were discussed at that conference and subsequently received intensive consideration and re-examination by federal and provincial officials at two meetings of the Continuing Committee on Fiscal and Economic Matters. In the light of this further study, the proposals were re-examined by the federal government and a letter was written to the provincial premiers by the Prime Minister on June 16 of this year. This letter was tabled in this house and appears in Hansard of June 19.
As the present resolution indicates, the proposal of a system of tax collection agreements to replace the tax rental agreements is a central part of the new approach and is provided for in the bill which I shall introduce. Obviously a system which gives the provinces the right to vary the rates of taxation without imposing on them the administrative burden of collecting the taxes has great advantages for them. It restores the necessary flexibility to the provincial tax system, enabling the provinces to meet increased needs for revenue not only from such sources as the sales tax, the gasoline tax and motor vehicle revenues but from the direct taxes on income which have for the past 20 years been controlled by agreement. The counterpart of

Dominion-Provincial Relations this freedom and flexibility is the independence and responsibility of the provinces. There can be no question that in a healthy federal state in which the goal should be enlightened co-operation rather than centralization, it will be better for the provinces to face up to their responsibilities of levying taxes for provincial purposes in the tax fields which were assigned to them by the constitution.
I referred in my budget speech to the fact that replacing the tax rental agreements by tax collection agreements would also have advantages from the federal standpoint. The provinces will be in the position of having to assess realistically their new proposals for expenditure in the light of their revenue potential rather than placing increasing pressure on the federal government. The federal budget will no longer be inflated by taxation which can and should be imposed at the provincial level. I estimate that for the first year of the new arrangements the adoption of a tax collection system will remove more than $300 million from the federal budget.
I have referred to the fact that the federal government was prepared to recommend to parliament certain reductions in the rates of the federal income tax in order to permit the re-entry of the provincial governments into these fields. The amount of these reductions was set forth in my budget speech.

When this government took office in 1957 the standard rates under the tax rental agreements were 10-9-50, that is to say, the provinces received 10 per cent of the personal income tax collections, 9 percentage points on the taxable income of corporations and 50 per cent of the succession duty or estate tax. In 1958 this government introduced legislation increasing the provincial share of the personal income tax from 10 to 13 per cent. With the permission of the house I should like to place on Hansard at this point table No. 1 which indicates the increase in provincial revenue which resulted from this increase of 3 percentage points in the standard rate of individual income tax. May I have that leave, Mr. Chairman?


John Whitney Pickersgill: Could the minister say what years that covers? Is it all the years since the change was made?


Donald Methuen Fleming: It covers the years 1958-59 up to 1961-62 inclusive.


Robert Jardine McCleave: Does
the committee give leave to have this table printed in Hansard?


Some hon. Members:: Agreed.
[Editor's note: The table above referred to follows:]


TABLE 1
[Stage Direction]
Effect on Tax-Sharing Arrangements with the Provinces of the 3% Increase in the Standard Individual Income Tax including tax abatements
(in thousands of dollars)
1958-59	1959-60	Preliminary 1960-61	Estimate 1961-6213-9-50	10-9-50	Increase	13-9-50	10-9-50	Increase	13-9-50	10-9-50	Increase	13-9-50	10-9-50	Increase1. Newfoundland	17,572	16,552	1,020	20,027	18,204	1,823	19,533	18,188	1,345	20,692	18,986	1,7062. Prince Edward Island	4,269	4,269	-	4,549	4,323	226	4,593	4,593	-	4,739	4,739	-3. Nova Scotia	28,488	25,843	2,645	31,936	29,029	2,907	30,765	27,662	3,103	32,205	28,981	3,2244. New Brunswick	23,151	21,102	2,049	26,314	23,917	2,397	25,528	22,953	2,575	26,916	24,215	2,7015. Quebec	... 195,943 (61,490)	177,782 (53,919)	18,161 (7,571)	222,950 (73,735)	202,645 (65,087)	20,305 (8,648)	217,259 (73,067)	195,364 (63,774)	21,895 (9,293)	230,000 (77,152)	206,937 (67,352)	23,063 (9,800)6. Ontario	... 241,454 (95,016)	219,527 (73,089)	21,927 (21,927)	273,222 (106,294)	248,692 (81,764)	24,530 (24,530)	265,867 (114,907)	239,350 (88,390)	26,517 (26,517)	282,066 (120,937)	254,157 (93,028)	27,909 (27,909)7. Manitoba	34,902	32,541	2,361	39,470	35,880	3,590	38,252	34,755	3,497	40,282	36,244	4,0388. Saskatchewan	35,628	32,320	3,308	40,232	36,569	3,663	38,725	34,821	3,904	40,503	36,446	4,0579. Alberta	48,181	43,718	4,463	55,437	50,387	5,050	54,590	49,086	5,504	58,375	52,518	5,85710. British Columbia	64,762	64,762	-	70,016	67,354	2,662	70,852	70,852	-	73,812	73,812	-Total including abatements	... 694,350	638,416	55,934	784,153	717,000	67,153	765,964	697,624	68,340	809,590	737,035	72,555Total excluding abatements	... (413,459)	(368,115)	(45,344)	(468,010)	(412,514)	(55,496)	(470,812)	(415,074)	(55,738)	(495,613)	(436,321)	(59,292)
The calculations for 1958-59 are based on the Final Calculation of Standard Taxes, Equalization and Stabilization Payments for the fiscal year 1958-59 dated Dec. 24, 1959; for 1959-60 on the Final Calculation of Standard Taxes, Equalization and Stabilization for fiscal year 1959-60 dated Dec. 22, 1960; for 1960-61 on the Fifth Estimate of Standard Taxes, Equalization and Stabilization for fiscal year 1960-61 dated Jan. 6, 1961; and for 1961-62 on the First Estimate of Standard Taxes, Equalization and Stabilization for fiscal year 1961-62 dated May, 8, 1961. The Atlantic Provinces Adjustment Grant and the deduction on account of Quebec special corporations taxes are excluded.
The figures in brackets exclude the amount of the abatements.
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Donald Methuen Fleming: In 1958-59 this increase was worth $55.9 million to the provinces, in 1959-60 $67.2 million, in 1960-61 $68.3 million, and the estimated value for 1961-62 is $72.6 million or a total of $262 million for the four years.
The withdrawal provided for under the new arrangements is 16 per cent of the personal income tax in the first year and rises by 1 percentage point each year to 20 per cent in the last year, that is, by 1966. Thus the share which the provincial governments will receive of personal income taxation will by the final year of these agreements be double the share which was provided when this government took office. Having in mind the system of Atlantic Provinces Adjustment Grants introduced by this government and the very great rise in federal payments to the provinces on account of conditional grants as well as the increase in other federal responsibilities, the offer to provide for this increased provincial share in the personal
income tax is very generous. The offer to increase the withdrawal in the personal income tax from the effective rate of approximately 14 per cent at present to 20 per cent by the end of the next five year period means that the federal government has offered to increase the provincial share of this tax field over the next five years by more than 40 per cent even if the provinces impose taxes no greater than the amount of the federal withdrawal. I should like at this point to place on Hansard table No. 2 showing the federal contributions to or for the benefit of the provinces and certain provincial institutions for the fiscal years 1956-57 to date, including the estimated amounts for 1961-62.


Robert Jardine McCleave: Has
the minister leave to have this table printed in Hansard?


Some hon. Members:: Agreed.
[Editor's note: The table above referred to follows:]


TABLE 2 CANADA
[Stage Direction]
Summary of Federal Contributions to the Provinces and Certain Payments to Institutions in the Provinces for the fiscal years 1956-57 to 1961-62
(thousands of dollars)
1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimates 1961-62	TotalA. Unconditional Grants 1.	Statutory Subsidies	
2.	Transitional Grant (Newfoundland)	
3.	Tax Abatements (estimated)	
4.	Tax Rental (*)	
5.	Equalization	
6.	Stabilization	
7.	50% share of Income Tax on Power Utilities	
8.	Atlantic Provinces Adjustment Grant	
9.	Term 29 Award (Newfoundland)	20,571 2,250 157,281 365,938 6,613	20,571 1,400 275,564 213,868 135,978 3,458 7,360	20,571 1,050 275,119 249,039 143,438 5,676 8,682 25,000 13,550	20,748 700 313,778 279,730 182,985 -2,315 4,753 25,000 7,300	20,689 350 303,723 288,663 188,909 2,327 4,226 25,000 7,650	23,115 323,464 298,837 190,056 1,515 6,000 25,000 8,000	126,265 5,750 1,648,929 1,696,075 841,366 10,661 37,634 100,000 36,500Sub-total	552,653	658,199	742,125	832,679	841,537	875,987	4,503,180B. Conditional Grants 1.	Agriculture	
2.	Health	
3.	Hospital Insurance	
4.	Welfare	
5.	Vocational Training etc- 	
0. Highways and Transportation	
7.	Resource Development	
8.	Civil Defence	
9.	Municipal Winter Works	
10. Other	938 36,438 38,353 4,668 26,909 2,717 814 137	1,037 34,596 48,149 4,765 50,943 4,314 968 72	1,864 45,909 54,708 74,072 8,057 53,669 8,741 1,025 249 62	6,732 45,974 150,593 90,861 8,372 56,746 15,266 1,564 6,584 62	3,716 47,878 189,000 102,935 8,677 48,696 17,946 2,966 8,908	2,036 45,373 274,491 96,034 27,336 54,110 21,150 2,628 26,946	16,323 256,168 668,792 450,404 61,875 291,073 70,134 9,965 42,687 333Sub-total	110,974	144,844	248,356	3S2.754	430,722	550,104	1,867,754C. Payments for the benefit of Provincial institutions 1.	University Grants	[DOT]	
2.	Grants to Municipalities in lieu of Taxes on federal property	16,049 9,676	16,558 17,535	25,524 21,852	26,112 22,551	19,008 24,326	19,403 24,645	122,654 120,585Sub-total	25,725	34,093	47,376	48,663	43,334	44,048	243,239TOTAL	689,352	837,136	1,037,857	1,264,096	1,315,593	1,470,139	6,614,173
.. ._______tVio in';? Airrppmpnt, for the fiscal vears 1957-58 to 1961-62 has not been deducted from the tax rental payments for these
provinces ^Newfoundland $102,315 per annum; Prince Edward Island $228,221 per annum; New Brunswick $182,201 per annum; Manitoba $209,938 per annum and Saskatchewan $304,180 per annum.	30.6.61
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1. NEWFOUNDLAND-1956-57 to 1961-62
(in thousands of dollars)
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				Preliminary	Estimates	
1956-57	1957-58	1958-59	1959-60	1960-61	1961-62	Total
A. Unconditional Grants
1.	Statutory Subsidies	
2.	Transitional Grant	
3.	Tax Rental (')	
4.	Equalization	
5.	Stabilization	
6.	50% share of Income Tax on Power Utilities	
7.	Atlantic Provinces Adjustment Grant	
8.	Term 29 Award	1,569 2,250 13,805 214	1,569 1,400 4,449 11,579 247	1,569 1,050 4,737 12,155 286 7,500 13,550	1,569 700 5,725 14,292 177 7,500 7,300	1,569 350 5,068 15,391 130 7,500 7,650	1,655 5,421 15,271 185 7,500 8,000	9,500 5,750 39,205 68,688 1,239 30,000 36,500Sub-total	17,838	19,244	40,847	37,263	37,658	38,032	190,882B. Conditional Grants	1. Agriculture	130	137	171	150	142	142	8722. Health	1,026	1,095	887	1,065	845	2,035	6,9533. Hospital Insurance	-	-	2,858	4,708	5,100	5,990	18,6564. Welfare	3,716	3,456	5,266	5,965	5,109	5,944	29,4565. Vocational Training, etc	406	385	377	195	236	2,212	3,8116. Highways and Transportation	1,171	861	4,753	5,359	6,579	6,000	24,7237. Resource Development	66	56	165	462	935	877	2,5618. Civil Defence	33	14	25	19	60	60	2119. Municipal Winter Works	-	-	-	25	39	200	26410. Other	25	-	-	-	25Sub-total	6,573	6,004	14,502	17,948	19,045	23,460	87,532C. Payments for the benefit of provincial institutions	1. University Grants	415	426	657	673	688	703	3,5622. Grants to Municipalities in lieu of Taxes on federal property	-	33	133	76	147	77	466Sub-total	415	459	790	749	835	780	4,028TOTAL	24,826	25,707	56,139	55,960	57,538	62,272	282,442
(!) The recovery of the overpayment under the 1952 Agreement which amounts to some $102,315 per annum for fiscal years 1957-58 to 1961-62 has not been deducted from the tax rental payments for those above years to which the deduction applies.
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2. PRINCE EDWARD ISLAND-1956-57 to 1961-62
(in thousands of dollars)
				Preliminary	Estimates	
1956-57	1957-58	1958-59	1959-60	1960-61	1961-62	Total
A. Unconditional Grants
1.	Statutory Subsidies	
2.	Tax Rental (l)	
3.	Equalization	
4.	Stabilization	
5.	50% share of Income Tax on Power Utilities	
6.	Atlantic Provinces Adjustment Grant	657 3,073 36	657 769 2,955 412 52	657 785 3,074 418 49 2,500	657 1,544 3,005 -159 36 2,500	657 1,138 3,454 210 42 2,500	657 1,195 3,394 150 59 2,500	3,942 8,504 15,882 1,031 274 10,000Sub-total	3,766	4,845	7,483	7,583	8,001	7,955	39,633B. Conditional Grants	1. Agriculture	38	39	56	67	79	79	3582. Health	300	335	438	421	448	359	2,3013. Hospital Insurance	-	-	-	447	1,000	1,235	2,6824. Welfare	305	366	475	561	544	586	2,8375. Vocational Training, etc	33	62	110	134	25	136	5006. Highways and Transportation	434	1,233	535	1,172	551	650	4,5757. Resource Development	15	17	21	1,171	1,500	1,192	3,9168. Civil Defence	-	-	1	6	24	25	569. Municipal Winter Works	-	-	-	1	-	25	2610. Other	-	-	-	-	-	-	-Sub-total	1,125	2,052	1,636	3,980	4,171	4,287	17,251C. Payments for the benefit of provincial institutions	1. University Grants	99	99	150	153	154	156	8112. Grants to Municipalities in lieu of Taxes on federal property	58	76	89	113	102	116	554Sub-total	157	175	239	266	256	272	1,365TOTAL	5,048	7,072	9,358	11,829	12,428	12,514	58,249
(*>
The recovery of the overpayment under the 1952 Agreement which amounts to some $228,221 per annum for fiscal years 1957-58 to 1961-62 has not been deducted from the tax rental payments for those above years to which the deduction applies.
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3. NOVA SCOTIA-1956-57 to 1961-62
(in thousands of dollars)
CD *-« 00
	1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimates 1961-62	Total
A. Unconditional Grants							
1. Statutory Subsidies	2,057	2,057	2,057	2,057	2,057	2,127	12,4122. Tax Rental	22,333	9,032	11,824	11,280	11,224	11,692	77,3853. Equalization	-	17,375	15,575	20,665	21,019	20,513	95,1474. Stabilization	-	-	-	-	-	-	-5. 50% share of Income Tax on Power Utilities	238	401	460	233	346	491	2,1696. Atlantic Provinces Adjustment Grant	-	-	7,500	7,500	7,500	7,500	30,000Sub-total	24,628	28,865	37,416	41,735	42,146	42,323	217,113B. Conditional Grants	1. Agriculture	62	93	127	109	109	110	6102. Health	1,719	1,855	1,921	1,514	2,875	2,249	12,1333. Hospital Insurance	-	-	1,573	8,163	9,600	10,948	30,2844. Welfare	1,573	2,127	2,962	3,422	4,415	4,034	18,5335. Vocational Training, etc	420	452	495	472	609	1,795	4,2436. Highways and Transportation	951	3,532	2,934	3,799	3,257	1,500	15,9737. Resource Development	64	51	111	2,131	1,178	1,066	4,6018. Civil Defence	25	39	49	92	294	175	6749. Municipal Winter Works	-	-	-	338	220	450	1,00810. Other	5	5	5	5	-	-	20Sub-total	4,819	8,154	10,177	20,045	22,557	22,327	88,079C. Payments for the benefit of provincial institutions	1. University Grants	695	702	1,065	1,074	1,085	1,095	5,7162. Grants to Municipalities in lieu of Taxes on federal property	1,194	1,892	1,922	2,175	2,100	2,183	11,466Sub-total	1,889	2,594	2,987	3,249	3,185	3,278	17,182TOTAL	31,336	39,613	50,580	65,029	67,888	67,928	322,374
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4. NEW BRUNSWICK-1956-57 to 1961-62
(in thousands of dollars)
	1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimates 1961-62	Total
A. Unconditional Grants							
1. Statutory Subsidies	1,679	1,679	1,679	1,679	1,679	1,754	10,1492. Tax Rental (A)	17,807	12,609	13,613	9,434	9,333	9,348	72,1443. Equalization	-	8,645	8,651	16,864	17,416	17,568	69,1444. Stabilization	-	-	-	-	-	-	-5. 50% share of Income Tax on Power Utilities	228	220	202	100	115	164	1,0296. Atlantic Provinces Adjustment Grant	-	-	7,500	7,500	7,500	7,500	30,000Sub-total	19,714	23,153	31,645	35,577	36,043	36,334	182,466B. Conditional Grants	1. Agriculture	53	51	93	116	117	119	5492. Health	1,926	1,813	1,739	1,359	1,582	2,087	10,5063. Hospital Insurance	-	-	-	4,575	7,900	8,727	21,2024. Welfare	1,848	2,332	2,934	3,103	4,218	3,893	18,3285. Vocational Training, etc	248	278	359	424	993	2,776	5,0786. Highways and Transportation	3,982	3,977	11,682	8,252	3,461	3,000	34,3547. Resource Development	664	1,074	582	1,031	1,507	985	5,8438. Civil Defence	21	34	38	70	122	130	4159. Municipal Winter Works	-	-	61	311	196	535	1,10310. Other	-	-	-	-	-	-	-Sub-total	8,742	9,559	17,488	19,241	20,096	22,252	97,378C. Payments for the benefit of provincial institutions 1. University Grants	555	565	866	885	900	915	4,6862. Grants to Municipalities in lieu of Taxes on federal property	494	781	926	904	1,074	923	5,102Sub-total	1,049	1,346	1,792	1,789	1,974	1,838	9,788TOTAL	29,505	34,058	50,925	56,607	58,113	60,424	289,632
(i) The recovery of the overpayment under the 1952 Agreement which amounts to some $182,201 per annum for fiscal years 1957-58 to 1961-62 has not been deducted from the tax rental payments for those above years to which the deduction applies.
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5. QUEBEC-1956-57 to 1961-62
(in thousands of dollars)
					Preliminary	Estimates	
	1956-57	1957-58	1958-59	1959-60	1960-61	1961-62	Total
A. Unconditional Grants
1.	Statutory Subsidies	
2.	Tax Abatements (estimated)	
3.	Tax Rental	
4.	Equalization	
5.	Stabilization	
6.	50% share of Income Tax on Power Utilities	3,301 143,634 1,186	3,301 124,740 43,060 1,675	3,301 132,590 55,004 2,281	3,301 150,978 68,631 1,504	3,301 151,435 70,365 1,221	3,995 160,782 71,947 1,733	20,500 864,159 309,007 9,600Sub-total	148,121	172,776	193,176	224,414	226,322	238,457	1,203,266B. Conditional Grants	1. Agriculture	350	278	783	900	931	925	4,16710,291	8,332	15,940	15,116	14,000	12,473	76,1523. Hospital Insurance	-	-	-	13,900	72,000	85,9004. Welfare	11,746	16,069	20,457	28,281	35,000	29,329	140,8825. Vocational Training, etc	648	5	2	3	44	1,003	1,7056. Highways and Transportation	445	99	438	447	-	17,300	18,7297. Resource Development	04	16	109	165	926	3,208	4,4888. Civil Defence	-	-	-	-	-	-	12,5129. Municipal Winter Works	-	-	-	1,426	1,686	9,400	10. Other	-	-	-	-	Sub-total	23,544	24,799	37,729	46,338	66,487	145,638	344,535C. Payments for the benefit of provincial institutions	1. University Grants	4,628	4,758	7,326	7,499	-	-	24,2112. Grants to Municipalities in lieu of Taxes on federal property	1,170	2,424	2,769	4,026	4,831	5,760	20,980Sub-total	5,798	7,182	10,095	11,525	4,831	5,760	45,191Total	177,463	204,757	241,000	282,277	297,640	389,855	1,592,992
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6. ONTARIO-1956-57 to 1961-62
(in thousands of dollars)
				Preliminary	Estimates	
1956-57	1957-58	1958-59	1959-60	1960-61	1961-62	Total
A. Unconditional Grants
1. Statutory Subsidies	3,641	3,641	3,641	3,641	3,641	4,618	22,8232. Tax Rental	160,558	74,379	93,322	106,211	113,792	120,937	669,1993. Tax Abatements (estimated)	13,647	150,824	142,529	162,800	152,288	162,682	784,7704. Equalization	-	-	-	-	5. Stabilization	-	6. 50% share of Income Tax on Power Utilities	1,428	1,333	1,590	1,043	578	821	6,793Sub-total	179,274	230,177	241,082	273,695	270,299	289,058	1,483,585B. Conditional Grants	1. Agriculture	63	91	91	201	108	102	6562. Health	10,606	9,955	11,782	15,096	15,755	14,129	77,3233. Hospital Insurance	-	-	13,140	71,893	84,500	97,647	267,1804. Welfare	7,134	11,173	20,586	25,444	24,770	23,540	112,6475. Vocational Training, etc	1,234	703	3,264	3,260	3,487	9,710	21,6586. Highways and Transportation	5,184	12,927	16,579	19,673	17,869	7,610	79,8427. Resource Development	850	1,237	2,925	2,240	3,124	3,721	14,0978. Civil Defence	348	451	449	586	1,173	1,200	4,2079. Municipal Winter Works	-	-	-	1,996	2,447	6,700	11,14310. Other	27	27	27	27	108Sub-total	25,446	36,564	68,843	140,416	153,233	164,359	588,861C. Payments for the benefit of provincial institutions	1. University Grants	5,405	5,622	8,705	8,928	9,133	9,339	47,1322. Grants to Municipalities in lieu of Taxes on federal property	4,762	8,166	9,821	9,771	9,739	9,981	52,240Sub-total	10,167	13,788	18,526	18,699	18,872	19,320	99,372TOTAL	214,887	280,529	328,451	432,810	442,404	472,737	2,171,818
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Dominion-Provincial Relations
7. MANITOBA 1956-57 to 1961-62
(in thousands of dollars)
1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimated 1961-62	TotalA. Unconditional Grants 1.	Statutory Subsidies	
2.	Tax Rental (*)	
3.	Equalization	
4.	Stabilization	
5.	50% share of Income Tax on Power Utilities	2,032 27,889 51	2,032 18,418 13,932 61	2,032 20,688 12,889 46	2,065 26,471 12,981 20	2,054 25,974 14,104 27	2,082 26,331 13,951 38	12,297 145,771 67,857 243Sub-total	29,972	34,443	35,655	41,537	42,159	42,402	226,168B. Conditional Grants 1.	Agriculture	
2.	Health	
3.	Hospital Insurance	
4.	Welfare	
5.	Vocational Training, etc	
6.	Highways and Transportation	
7.	Resource Development	
8.	Civil Defence	
9.	Municipal Winter Works	
10. Other	108 2,676 2,213 262 3,124 78 32 18	156 2,241 2,523 362 2,747 316 33	156 2,419 7,148 3,791 329 1,820 489 61 51	342 2,280 11,324 4,601 431 1,725 1,418 92 383	435 2,996 13,100 5,226 545 542 1,983 152 259	318 2,339 15,140 5,891 1,977 750 3,189 213 2,871	1,515 14,951 46,712 24,245 3,906 10,708 7,473 583 3,564 18Sub-total	8,511	8,378	16,264	22,596	25,238	32,688	113,675C. Payments for the benefit of provincial institutions 1.	University Grants	
2.	Grants to Municipalities in lieu of Taxes on federal property	850 788	860 1,040	1,305 1,545	1,327 1,259	1,349 1,454	1,370 1,286	7,061 7,372Sub-total	1,638	1,900	2,850	2,586	2,803	2,656	14,433TOTAL	40,121	44,721	54,769	66,719	70,200	77,746	354,276
(i) The recovery of the overpayment under the 1952 Agreement which amounts to some $209,938 per annum for fiscal years 1957 58 to 1961 62 has not been deducted from the tax rental payments for those above years to which the deduction applies.
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8. SASKATCHEWAN-1956-57 to 1961-62
(in thousands of dollars)
1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimates 1961-62	TotalA. Unconditional Grants 1.	Statutory Subsidies	
2.	Tax Rental i1)	
3.	Equalization	
4.	Stabilization	
5.	50% share of Income Tax on Power Utilities	2,080 27,432 50	2,080 13,874 19,197 66	2,080 14,399 19,862 96	2,098 20,052 20,180 51	2,092 16,855 23,723 58	2,110 17,994 22,509 83	12,540 110,006 105,471 404Sub-total	
B. Conditional Grants 1.	Agriculture	
2.	Health	
3.	Hospital Insurance	
4.	Welfare	
5.	Vocational Training, etc	
6.	Highways and Transportation	
7.	Resource Development	
8.	Civil Defence	
9.	Municipal Winter Works	
10. Other	29,562 30 2,095 2,199 340 2,919 49 49 42	35,217 55 2,275 2,577 419 3,351 216 43 10	36,437 186 3,006 8,430 3,913 452 366 1,116 51 33 10	42,381 3,043 2,254 13,378 4,238 1,274 87 1,601 71 322 10	42,728 403 2,486 14,500 4,627 920 34 2,301 164 789	42,696 58 2,544 16,920 4,516 1,105 150 1,151 200 1,140	229,021 3,775 14,660 53,228 22,070 4,510 6,907 6,434 578 2,284 72Sub-total	7,723	8,946	17,563	26,278	26,224	27,784	114,518C. Payments for the benefit of provincial institutions 1. University Grants	881	879	1,332	1,353	1,365	1,377	7,1872. Grants to Municipalities in lieu of Taxes on federal property	284	625	726	747	846	763	3,991Sub-total	1,165	1,504	2,058	2,100	2,211	2,140	11,178TOTAL	38,450	45,667	56,058	70,759	71,163	72,620	354,717
C1) The recovery of the overpayment under the 1952 Agreement which amounts to some $304,180 per annum for fiscal years 1957-58 to 1961-62 has not been deducted from the tax rental payments for those above years to which the deduction applies.
Dominion-Provincial Relations
9. ALBERTA-1956-57 to 1961-62
(in thousands of dollars)
1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimates 1961-62	TotalA. Unconditional Grants 1.	Statutory Subsidies	
2.	Tax Rental	
3.	Equalization	
4.	Stabilization	
5.	50% share of Income Tax on Power Utilities	2,274 37,311 1,767	2,274 28,892 14,744 1,980	2,274 38,350 7,991 2,216	2,400 40,261 15,109 1,239	2,358 39,636 17,511 1,449	2,434 40,845 17,530 2,057	14,014 225,295 72,885 10,708Sub-total	41,352	47,890	50,831	59,009	60,954	62,866	322,902B. Contitional Grants 1.	Agriculture	
2.	Health	
3.	Hospital Insurance	
4.	Welfare	
5.	Vocational Training, etc	
6.	Highways and Transportation	
7.	Resource Development	
8.	Civil Defence	
9.	Municipal Winter Works	
10. Other	66 2,589 1,648 528 2,019 21 119 10	67 2,888 2,148 1,380 5,398 184 142 20	69 3,527 8,775 4,492 1,652 2,229 476 126 10	1,688 2,906 15,699 4,802 870 1,109 2,462 278 1,069 10	1,157 2,748 16,900 5,420 926 268 2,131 441 1,545	83 3,501 19,441 5,069 3,579 150 2,394 275 2,500	3,130 18,159 60,815 23,579 8,935 11,173 7,668 1,381 5,114 50Sub-total	7,000	12,227	21,356	30,893	31,536	36,992	140,004C. Payments for the benefit of provincial institutions 1.	University Grants	
2.	Grants to Municipalities in lieu of Taxes on federal property	1,123 330	1,160 1,045	1,802 1,676	1,865 1,605	1,925 1,591	1,985 1,640	9,860 7,887Sub-total	1,453	2,205	3,478	3,470	3,516	3,625	17,747TOTAL	49,805	62,322	75,665	93,372	96,006	103,483	480,653
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10. BRITISH COLUMBIA-1956-67 to 1961-62
(in thousands of dollars)
	1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61	Estimates 1961-62	Total
A. Unconditional Grants							
1. Statutory Subsidies	1,281	1,281	1,281	1,281	1,281	1,683	8,0882. Tax Rental	55,730	51,446	51,321	58,752	65,643	65,074	347,9663. Equalization	-	4,491	8,237	11,258	5,926	7,373	37,2854. Stabilization	-	3,046	5,258	-2,156	2,117	1,365	9,6305. 50% share of Income Tax on Power Utilities	1,415	1,325	1,456	350	260	369	5,175Sub-total	58,426	61,589	67,553	69,485	75,227	75,864	408,144B. Conditional Grants	1. Agriculture	38	70	132	116	235	100	6912. Health	3,210	3,807	4,250	3,963	4,143	3,657	23,0303. Hospital Insurance	-	-	12,784	20,406	22,500	26,443	82,1334. Welfare	5,971	5,378	9,196	10,444	13,606	13,232	57,8275. Vocational Training, etc	549	719	1,017	1,309	892	3,043	7,5296. Highways and Transportation	6,680	16,818	12,333	15,123	10,135	17,000	84,0897. Resource Development	846	1,147	2,747	2,585	2,361	3,367	13,0538. Civil Defence	187	212	225	350	536	350	1,8609. Municipal Winter Works	-	-	104	713	1,727	3,125	5,66910. Other	10	10	10	10	-	-	40Sub-total	17,491	28,161	42,798	55,019	62,135	70,317	275,921C. Payments for the benefit of provincial institutions	1. Universitv Grants	1,398	1,487	2,316	2,355	2,409	2,463	12,4282. Grants to Municipalities in lieu of Taxes on federal property	596	1,453	2,245	1,875	2,442	1,916	10,527Sub-total	1,994	2,940	4,561	4,230	4,851	4,379	22,955TOTAL	77,911	92,690	114,912	128,734	142,213	150,560	707,020
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Donald Methuen Fleming: The table indicates that the total value of these payments and abatements has more than doubled in the short space of five years-from $689.4 million in 1956-57 to $1,470.1 million in 1961-62.
As I mentioned earlier, the proposal to offer tax collection agreements and to increase the share of the personal income tax available to the provinces was accompanied by a proposal for an improved system of equalization and larger grants to the Atlantic provinces. As the resolution indicates, provision is made for equalization payments, payments to the Atlantic provinces, stabilization payments, and payments of a special grant of $8 million per annum to Newfoundland.
Under the present arrangements equalization is based on the per capita yield from the three standard taxes, that is, from the personal income tax, corporation income tax and succession duties at the standard rates of 13-9-50 in the two provinces which have the highest per capita yield. There are two fundamental weaknesses in this formula. The first is that equalization to the per capita yield in the two provinces with the highest yield is not realistic. The second is that by limiting the equalization formula to the three standard taxes no account is taken of wide variation in the revenues from other provincial sources. Equalization based on standard tax yields in the top two provinces led in some instances to larger payments than could be defended on the basis of fiscal need. At the same time it took no account of variations in fiscal capacity due to differences in other revenue sources.
It was with these considerations in mind that the government decided to propose an equalization formula based on the national average yields of standard taxes plus 50 per cent of the natural resource revenues. I should like at this point to refer to two tables which were presented to the dominion-provincial conference of February 23-24 of this year and which appear as an appendix to Hansard of March 7, 1961, in order to illustrate the effect of the new proposals. The first is a table showing natural resource revenue for the years 1956, 1957 and 1958, and the second is a table which illustrates the effect of including provincial natural resource revenue in the equalization formula. It will be seen from examination of the first table that there is an extremely wide variation in the amount of natural resource revenue per capita in the provinces, ranging from a low of 18 cents per capita for the three year average in Prince Edward Island to a high of $112.17 per capita in Alberta. The national average is $16.62 per capita. It was because of this extreme variation that it was decided that the inclusion
of some portion of natural resource revenue in the equalization formula would produce a much better indication of fiscal need. It was decided therefore to include only 50 per cent of the average natural resource revenue on the ground that this would allow for some variation in the different rates of taxation in the provinces while at the same time not discouraging the provinces from using this revenue source.
The other element in the equalization formula consists of the standard taxes. For purposes of the equalization formula, the standard rates will be the rates by which the federal government withdraws from the standard tax fields, that is, 16-9-50 in the first year, 17-9-50 in the second year, 18-9-50 in the third year, 19-9-50 in the fourth year, and 20-9-50 in the fifth and final year of the new period. This means that the basis of the equalization payments will rise throughout the period as the federal government leaves increasing room in the personal income tax field for the provinces. The national average per capita yield of the standard taxes for any year plus 50 per cent of national average per capita return from natural resources for the average of the three preceding years will thus constitute the level below which no province can fall.
In addition, two equalization guarantees are provided. First, for provinces below the national average in the yield of standard taxes and 50 per cent of natural resource revenue, the equalization will never be less than enough to make them at least as well off as they would have been under a projection of the present arrangements. Second, for no province will the equalization payments ever be less than enough to bring its total receipts under the new arrangements up to the level of its total receipts in the final year of the old arrangements or in the average of the last two years of the old arrangements, whichever is the greater. The equalization provisions are applicable to all provinces whether or not they enter into tax collection agreements with the government of Canada.
At this point, with the permission of the house, I should like to place on Hansard table No. 3 containing a hypothetical illustration of how the equalization formula would apply to the year 1962-63 on certain assumptions.


Robert Jardine McCleave: Has
the minister such permission?


Some hon. Members:: Agreed.
[Editor's note: The table referred to follows: ]


TABLE 3
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Hypothetical Illustration or Provincial revenues for the Year 1962-63 under New Formula Assuming Rate of Growth of 5% per Annum in Tax Yields and no Change in the 19G1-62 Percentage Distribution by Provinces of Tax Yields or Population
(thousand of dollars)
Nfld. P.E.I. N.S. N.B. Que. Ont. Man. Sask. Alta. B.C. Total
New Formula {16-9-50)-revenues projected to 1962-63 from First Estimate for 1961-62 standard taxes at 1962-63 rate of federal withdrawal (16-9-50)	
equalization	
Atlantic Provinces Adjustment Grants	
Additional Grant to Newfoundland	
Total	
6,037	1,314	13,052	10,371	169,19314,397	3,399	19,459	15,394	72,30710,500	3,500	10,500	10,500	-8,000	-	-	-	-38,934	8,213	43,011	36,265	241,500314,480	29,482	20,201	45,758	72,835	682,723-	12,814	22,327	12,617	977	173,091-	-	-	35,000-	-	-	-	-	8,000314,480	42,296	42,528	58,375	73,812	899,414
r
►<
Present Formula {1S-9-50)-revenues projected to 1962-63 from First Estimate for 1961-62 using same assumptions as with New Formula:
total revenues from standard taxes at 13-9-50, equalization, stabilization, Atlantic Provinces Adjustment Grants, Additional Grant to Newfoundland	 37,227
1957 Formula {10-9-50)-revenues projected to 1962-63 from First Estimate for 1961-62 using same assumptions as with New Formula:
total revenues from standard taxes at 10-9-50,
equalization, stabilization	 19,556
7,381	41,315	35,762	241,500	296,170 42,296	42,528	61,294	76,0694,881	30,430	25,426	217,284	266,865 38,056	38,268	55,144	76,026
881,542
771,936
Note: The projection of the New Formula is based on standard taxes of 16-9-60, i.e., on rates equal to the federal withdrawal.' The provincesi will of course be free to levy higher or lower rates than these and if they do so their receipts will be correspondingly higher or lower. 1 he federal withdrawal m the individual income tax will rise progressively during the five year period commencing March 31, 1962 reaching 20% in the fifth year. The value of the additional four points made available to the Province of British Columbia, for example, will be $8,942,000 in terms of 1962-63 tax yields as estimated above.
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Dominion-Provincial Relations
7928	HOUSE OF
Dominion-Provincial Relations
Donald Methuen Fleming: I should point out that the figures in this hypothetical illustration differ somewhat from those presented at the February conference and tabled in Hansard of March 7, 1961, because they are based on more up to date estimates.
The above table gives a comparison between the estimated amount the provinces would have received under a projection of the arrangements in effect when this government took office four years ago when the standard rates were 10-9-50 and their estimated receipts under the new arrangements proposed. It will be seen from this table that in aggregate the provinces will be $127.5 million better off under the proposed arrangements than they would have been under the arrangements in effect four years ago. This is the estimated benefit in the first year of the proposed arrangements. This benefit will increase materially in subsequent years as the federal income tax withdrawal increases from 16 per cent to 20 per cent.
The resolution also refers to increased grants to the Atlantic provinces, bringing the total of these grants from $25 million in each of the last four years to $35 million for each of the five years in the next period. This special and separate recognition of the fiscal problems of the Atlantic region was initiated by this government and has been widely acclaimed, not only in the Atlantic region. It complements the improved equalization formula. The decision to increase these grants by 40 per cent for the next five year period is a further indication of the emphasis which this government wishes to put upon the need for placing all regions of Canada in a position to supply essential services without resorting to unduly burdensome levels of taxation.
The resolution also indicates that the bill will provide for an additional payment of $8 million per annum to the province of Newfoundland for each of the five years of the new period. This is in recognition of the special fiscal need of the province of Newfoundland.
The over-all effect of the new equalization formula taken together with the Atlantic provinces adjustment grants and the special payment of $8 million per annum to Newfoundland will be a greater emphasis on fiscal need. I should like to illustrate this fact by making certain comparisons. In 1957-58, the first year of the present tax rental arrangements, the total equalization payments of $136.0 million were distributed as follows: Newfoundland, 8.5 per cent; Prince Edward Island, 2.2 per cent; Nova Scotia, 12.8 per cent; New Brunswick, 6.4 per cent;

Quebec, 31.7 per cent; Ontario, nil; Manitoba, 10.2 per cent; Saskatchewan, 14.1 per cent; Alberta, 10.8 per cent; and British Columbia, 3.3 per cent.
In the first year of the new proposals the estimated total of fiscal aid including equalization, Atlantic provinces grants and the special grant of $8 million to Newfoundland will be $216.7 million and will be distributed as follows: Newfoundland, 15.2 per cent; Prince Edward Island, 3.2 per cent; Nova Scotia, 13.8 per cent; New Brunswick, 11.9 per cent; Quebec, 33.4 per cent; Ontario, nil; Manitoba, 5.9 per cent; Saskatchewan, 10.3 per cent; Alberta, 5.8 per cent; and British Columbia, 0.5 per cent. Thus the share of these greatly increased fiscal aid payments going to the Atlantic region will have risen from 29.9 per cent to 44.1 per cent. By the end of the five year period of the new proposals the share going to the Atlantic region will be over 50 per cent, provided rates of growth are not greater in the Atlantic region than elsewhere in Canada. Thus the new formula gives full recognition to the principle of equalization and fiscal need which this government has always maintained to be essential. At the same time the federal treasury will be saved the expense of paying equalization on an unrealistic basis and unsupported by fiscal need.
Under the present tax rental agreements certain stabilization provisions were included to protect the provinces against an undue decline in the revenue from the standard taxes and equalization. It can be argued that it is not the federal government's responsibility under tax collection agreements to protect the provinces from declines in the yield of their own taxes. It was evident, however, during the course of the discussions, that the provinces attached considerable importance to the stabilization provisions of previous agreements. Under the existing arrangements, the stabilization provisions ensure that a province will not receive less in any year from standard taxes, equalization, and stabilization than 95 per cent of the total it received in the average of the two preceding years. It was decided as a concession to the provinces to continue this provision so that even under tax collection arrangements all provinces, including those which do not enter into collection agreements, will be protected from an inordinate decline in the revenues from the standard taxes and equalization.
Reference is made in the resolution to the fact that the bill will provide for advance payments in respect of the taxes collected under the tax collection agreements with the provinces. The details of the tax collection agreements will have to be worked out in the course of the succeeding months. However, it

has been evident from the discussions to date that some of the provinces will wish the tax collection payments to provide for an even flow of revenue throughout each fiscal period as is provided under the present tax rental agreements. Therefore it is necessary to provide authority for the federal government to pay out money to the provinces on an estimated basis pending the final determination of the amounts of provincial tax assessed year by year.
I wish at this time to refer to three other matters which are not included in the bill but which may nevertheless be regarded as part of the proposed fiscal arrangements for the provinces for the period after March 31, 1962.
Under the 1947 and 1952 Tax Eental Agreements Acts provision was made for paying to the provinces half of the federal income tax collected from certain public utility corporations whose main business is the distribution or generation for distribution to the public of electrical energy, gas or steam in respect of income of the corporation derived from the said distribution or generation. This sharing has been continued on a year to year basis since then and has been provided for in the estimates. It was evident from the discussions at the conferences that most of the provinces attach great importance to the continuation of this arrangement. As a concession to the representations made by the provinces, the government proposes to give the assurance that this sharing will be continued throughout the period of the next agreements, that is, for the next five years up to and including the fiscal year 1966-67.
A second matter which will be dealt with outside the provisions of the bill is the matter of a co-operative approach toward the taxation of the forest industry. Under the Federal-Provincial Tax-Sharing Arrangements Act, provincial taxes on the income from logging operations are specifically excluded from the corporation taxes which a province must refrain from levying in order to enter into a tax rental agreement with the government of Canada. Taxes on logging profits are imposed in two provinces, Ontario and British Columbia, and although these taxes are deductible as expenses in computing federal income tax, the result has been that in these provinces the forest industry bears somewhat higher income taxes than other industries. It was because of the government's concern with this situation that the Prime Minister made the following statement in his letter of June 16, 1961 to the provincial premiers:
At the conference I stated that the federal government was prepared to consider certain concessions in connection with the taxation of the forest industry if the provinces were willing also to make some concessions. It has been conceded
Dominion-Provincial Relations that because the logging profits tax is levied in addition to the corporation income tax, the forest industry bears a greater tax burden than other industries. The possibilities of lessening the burden of taxation on the forest industry have been discussed at the official level. One of the possibilities discussed was that a tax credit, shared between a province and Canada, might be granted to the industry.
Before this can be done some further technical discussions will be required to reach agreement on the definition of logging income which will be subject to tax and accepted for the purpose of this tax credit. Subject to reaching agreement on this matter of the definition of logging income, the federal government is prepared as a means of relieving the tax burden on the forest industry to offer a tax credit equal to two thirds of the logging tax up to a maximum rate of 10 per cent, provided the province gives a tax credit equal to the remaining one third of such logging tax.
A third matter has been under discussion with the provinces for some time and that is the application of provincial sales taxes to federal agencies and corporations. Similar agencies and corporations at the provincial level have been subject to federal sales and excise taxes and it has been the contention of the provinces that federal agencies should be placed in the same position. At the February conference the Prime Minister made the following statement concerning this matter:
We have given further thought to the means of achieving reciprocity of treatment in the position of provincial crown corporations and agencies under federal sales and excise taxes and the position of federal corporations and agencies under provincial direct taxes on purchases. We are prepared to waive federal immunity from taxation and instruct federal corporations and agencies to pay provincial purchase taxes and other similar taxes, on the understanding that provincial corporations and agencies will be subject to federal sales and excise taxes. We think that this is an equitable arrangement, being in accordance with the general principles followed in regard to the payment of federal taxes on purchases by federal departments. We think it is better than reciprocal exemptions as an administrative and accounting arrangement, preserving as it will a fairer relationship between crown corporations and agencies in general and private businesses.
We are proceeding with the preparation of a list of federal agencies and corporations which would be subject to provincial sales taxes and any necessary legislation providing for such payment of taxes will be introduced to take effect April 1 next year.
I have now explained the main features of the bill as provided for in the resolution and have dealt with certain ancillary matters which are part of the fiscal arrangements. The provisions of the bill will reaffirm and strengthen the principle that equalization payments must take full account of fiscal need and at the same time enable the provinces to exercise their constitutional rights of taxation. The government is convinced that the new arrangements provided for under the bill

Dominion-Provincial Relations will be the basis for a sound partnership between the provinces and the federal government and will usher in a new era of cooperation on more equal terms.


Lester Bowles Pearson: In what some of us still persist in hoping are the dying hours of this session which began last November the minister has put before the committee a resolution dealing with a subject which is almost as important as any subject can be in a federal state, namely the fiscal and financial relationships between the provinces and the central government. Our whole history shows the importance of this matter in national development, unity and strength. If that development in our federal society cannot proceed in a way which provides for the maintenance of a reasonably balanced level of essential services throughout the country so that there will not be in this federation underdeveloped areas in that sense, our history shows that the federation cannot be strong. Our history also shows that this consideration puts an obligation on the federal government to assist, through fiscal aid and financial aid, those provinces which are not as fortunate as others in their resources and because of that fact have not access to as much financial resources as have some of the more fortunate and richer provinces. That is the basis on which the federal government has helped the provinces ever since 1867.
In his statement the minister said that the principle in the relations between the provinces and the federal government in this field, and I would add in every other field, must be one of enlightened co-operation rather than centralization. Of course, Mr. Chairman, we all agree with that statement. We on this side will consider the application of this formula in that light, namely whether it implements the principle of enlightened cooperation; whether it is fair in its impact on the poorer provinces; and above all, whether it implements in a fair and equitable way the principle to which we on this side have always attached so much importance, namely the principle of equalization. The minister spoke for some time, Mr. Chairman, and we will examine with great care what he has said. Especially will we examine the statistical tables he has placed on the record. I thought some of the minister's arguments and some of his statements, and especially his passion now for the principle of equalization, were a little disingenuous in the light of the past history of the attitude of his party to this matter. I also noticed that, among the tables which the minister inserted into the record, he did not include, or at least I did not gather that he did so, one which we would certainly like to see included, namely a table 
which would show what the continuation of the present arrangement would mean to the provinces in comparison with the application of the new formula.


Donald Methuen Fleming: That is on record in one of the earlier tables.


Lester Bowles Pearson: As I say, we will study these tables with interest. I have not had much chance tonight to do that. We will have something to say about these tables and we shall also be glad indeed to put on Hansard a few tables of our own, as our interpretation of the application of this new formula is certainly not that which has been given to us tonight by the minister. In any event, this new formula or this new deal embodied in this resolution on which a bill will be based is apparently the result of four years' consideration given to this matter by the federal government. This is the final outcome of the promises made by the Prime Minister and his colleagues in the election campaigns of 1957 and 1958 when they told the provinces there would be a new deal which would be acceptable to all the provinces and welcomed by them. We remember particularly the statements made by the Prime Minister in Ontario and the reaction of those statements by the premier of Ontario. We also remember the amount which the premier of Ontario said would be fair to that province under the new deal which he assumed the new government would give him and on the strength of which he begged the people of Ontario to "follow John".


Paul Joseph James Martin: That amount was $100 million.


Lester Bowles Pearson: That amount was $100 million. They have not followed John into $100 million for Ontario but they followed him into a sales tax for Ontario.


Some hon. Members:: Oh, oh.


Lester Bowles Pearson: If these proposals which the minister has put before the committee tonight carry out all these desirable principles which the minister has mentioned such as equalization, enlightened co-operation, greater assistance to the provinces and greater recognition of provincial fiscal needs, it is a strange thing that these proposals have not been accepted with enthusiasm by all the provinces.
That has not happened. Most of the provinces have been dissatisfied with the deal which has been put before them. Some provinces, especially the less rich provinces, are complaining about the inadequacy of this formula which is a result of four years' consideration by this government and which was

to put the fiscal relations of the provinces and the federal government on a new and more satisfactory basis.
The resolution contains these words:
That it is expedient to introduce a measure to authorize tax collection agreements with the governments of the provinces-
We will have something to say about these agreements:
-and to provide that the minister may pay to a province, out of the consolidated revenue fund, in respect of any fiscal year in the period commencing on the 1st day of April, 1962 and ending on the 31st day of March, 1967,
(a) a tax equalization payment;
The minister had a great deal to say this evening about this principle of equalization and the way this formula was implementing it in a way which would strengthen rather than weaken the principle. We claim, and we will be able to produce evidence to support the claim, that the equalization formula weakens rather than strengthens the principle. In any event, the principle itself is not so important as the base on which the principle is applied. For the minister to argue that by altering the base from the top two provinces to the national average strengthens rather than weakens the principle is very, very difficult for us on this side of the house to understand. We would like the minister in the course of this discussion to tell us how this equalization payment under the new formula will actually affect the various individual provinces. I am not sure whether the tables the minister introduced tonight deal with that matter, but perhaps he will deal with it before the debate is over.
The government has claimed, and the minister has repeated the claim this evening, that these new tax collection agreements represent a return to the spirit of the constitution and this gives back to the provinces their complete rights in the field of direct taxation. The minister claims that this represents, in that sense, a very great advance over the tax rental agreement formula. Of course that claim, if I may use the minister's favourite word, is nonsense. Under the present system which has been applied since 1957 three options were offered to the provinces. They could levy and collect their taxes at whatever rates they wished to determine themselves. They have always had that option. They could simply rent the three direct tax fields or they could levy those taxes, and the federal government was willing to collect them provided the provincial rates did not exceed the standard rates. Up to the present, then, the provinces have had these three options. Nobody forced them into the tax rental agreement field. They had the other options. Under the new formula the rental option would
Business of the House cease to be available and the federal government would be willing to collect provincial taxes at any rates.
While this last change-the minister went to some pains to illustrate this point this evening-may be an improvement for certain of the richer provinces, it can hardly be described as a revolutionary change. The minister called it-and I am paraphrasing what he said-a sort of introduction of the idea of flexibility. He said this provides more flexibility in these areas. But this new arrangement may very well lead to the tax jungle of the 1930's. Moreover, to the extent that the provinces will have to depend on additional direct taxes without equalization for their financing, great regional inequalities will arise because for most of the provinces equalization is a very important source of revenue. We claim that the principle of equalization and the application of that principle in the new formula will react to the disadvantage of the poorer provinces. Indeed the provinces themselves have already pointed that out to the minister. They seem singularly ungrateful for this new deal which according to the minister is going to mean so much to them.
Therefore we on this side of the house claim that the equalization principle is weakened under this new formula and we will produce evidence to support that contention. We claim that the new proposal is much more a return to the tax jungle and the inequalities of the 1930's than even the 1867 arrangement which embodied a large element of equalization.
Mr. Chairman, may I call it 10.30.
Progress reported.



BUSINESS OF THE HOUSE

John Whitney Pickersgill: Mr. Speaker, I wonder whether the house leader would indicate what business the government intends to bring forward tomorrow?


Gordon Minto Churchill: It will be a continuation of the program as outlined; third reading of Bill No. C-120 regarding the Income Tax Act, then a continuation of the debate on the resolution with which the committee has just been dealing, and the other item on the order paper, Bill No. C-71, an act respecting the civil service of Canada. Those are the legislative items that will be available to the house tomorrow.


John Whitney Pickersgill: Has the minister any views about the report of the committee on procedure?


Gordon Minto Churchill: I am waiting for an opportunity, when the house is free of some of the

Business of the House other business, to consider that matter. Then, of course, we have interim supply to take into consideration.


Lester Bowles Pearson: Mr. Speaker, I wonder
whether the house leader would consider bringing in the civil service bill tomorrow so that the Minister of Finance might be
free to attend, if he so desires, the Senate committee on the Bank of Canada Act.


Donald Methuen Fleming: Oh, your solicitude is so impressive. You are most unselfish.
At 10.30 p.m. the house adjourned, without question put, pursuant to special order.

Questions



ANSWERS TO 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. Meunier: 1.	How many houses have been repossessed for Central Mortgage and Housing, by provinces, for each year from 1957 to 1960 inclusive?
2.	What is the value, by provinces, of these repossessions?
Answer by: Hon. D. J. Walker (Minisier of Public Works):
(1) Number of houses acquired by the mortgage insurance fund.
Province	1957	1958	1959	1960	1957-1960Newfoundland	
1	1	2Prince Edward Island	Nova Scotia	-	New Brunswick	-	-	-	-Quebec	
1	6	15	48	70Ontario	
4	3	20	108	135Manitoba	-	-Saskatchewan	-	1	1Alberta	1	3	4British Columbia	
-	-	-	12	12CANADA	
6	10	36	172	224
(2) Value* of houses acquired by the mortgage insurance fund.
Province	1957	1958	1959	1960	1957-1960$	$	$	$	$N ewfoundland	
12,336	11,785	24,121Prince Edward Island	-	-	-Nova Scotia	-	-	-New Brunswick	-	-	-	-	-Quebec	
9,123	46,553	150,325	508,290	714,291Ontario	
40,768	26,142	220,017	1,202,153	1,489,080Manitoba	-	-Saskatchewan	-	-	9,539	-	9,539Alberta	-	7,984	-	30,173	38,157British Columbia	
~	-	-	131,756	131,756CANADA	
62,227	80,679	379,881	1,884,157	2,406,944
* Amount of claim or outstanding balance at time of acquisition.


HOUSING
Mr. McCleave: What are the latest figures under the National Housing Act for (a) housing (b) assistance on municipal sewage projects (c) loans for university residences, during 1961?
Answer by: Hon. D. J. Walker (Minisier of Public Works):
(a)	In June, housing starts in urban centres numbering 10,644 dwelling units were at the highest level since November, 1959, and represented an increase of 22.3 per cent over June, 1960.
Starts for the first six months of 1961 totalled 39,981 an increase of 35.3 per cent over the figure for the first half of 1960.
N.H.A. lending activity continued to improve in June, bringing loan approvals for the first six months of the year to 29,823 dwelling units, up 190.6 per cent over the 10,262 reported for January-June, 1960.
(b)	Up until June 30, 72 loans amounting to $30,426,000 for the purpose of providing assistance in the construction of municipal sewage treatment projects have been approved by Central Mortgage and Housing Corporation. Loans have now been approved to municipalities in each of the 10 provinces. In addition, 14 formal applications are on hand for loans amounting to $2,450,000, together with another 199 preliminary inquiries. For 123 of the latter, the municipalities' estimate of loans required totals $67,558,000.

Questions
(c)	Central Mortgage and Housing Corporation has also made 11 loans in an amount of more than $9.5 million to universities to assist in the construction of student residences. The universities for which loans have been approved are: University of New Brunswick, Acadia University, University of King's College, St. Francis Xavier University, Assumption University, Waterloo Lutheran University, Brandon College, United College, Winnipeg,
Emmanuel College, Saskatoon, Notre Dame College, Wilcox, Saskatchewan and University of British Columbia. The residences to be built with the assistance of these loans will accommodate more than 2,000 students.
In addition to loans approved, the corporation has received and is reviewing applications from 13 other universities that are seeking loans aggregating some $19.5 million to accommodate 4,500 students.

Wednesday, July 12, 1961