1961-06-29

[Stage Direction]
Miss Margaret Aitken (York-Humber) presented the thirteenth report of the standing committee on standing orders, and moved that the report be concurred in.
Motion agreed to.


[Stage Direction]
On the orders of the day:
Hon. L. B. Pearson (Leader of the Opposition):: May I ask the Minister of Finance, in the absence of the Minister of Trade and Commerce, if he can give the house any information about the uranium contract negotiations with the United Kingdom, concerning which details have appeared in the press?


Hon. Donald M. Fleming (Minister of Finance):: I think there is nothing further to report at this time. The house has been made acquainted with the negotiations which took place in Ottawa a fortnight ago when Sir Roger Makins was here with a group of experts representing the United Kingdom. There were exchanges at that time, and arrangements were made for continued discussions at the official level after Sir Roger's return to the United Kingdom.



HEALTH AND WELFARE


[Stage Direction]
On the orders of the day:
Mr. Harold E. Winch (Vancouver Easl):: I should like to direct a question to the Minister of National Health and Welfare. Has the attention of the minister's department been drawn to a report in the Vancouver Province of June 24, 1961, that success has been achieved in treating drug addicts of between two and 28 years' addiction with a natural substance known as DPN (diphosphopyridine) which has been reported by researcher Dr. Paul O'Hallaren in the United States. If so, is this new development being closely followed in view of the serious drug addiction problem in Canada?


Hon. J. W. Monteilh (Minister of National Health and Welfare):: I wish to thank the hon. member for having given me notice of his intention to ask this question. Some days ago the chief of the narcotic control division of my department first heard of the drug mentioned by the hon. member, and immediately wrote to Dr. O'Hallaren in Seattle asking for any information he might be prepared to release covering his research work.
This substance has not been prepared or used in Canada to my knowledge, and I have asked that all possible information on its apparent value be obtained. It would seem that it is used to alleviate withdrawal symptoms when an addict is undergoing treatment for addiction to heroin.



UNEMPLOYMENT INSURANCE


[Stage Direction]
On the orders of the day:
Mr. Erharl Regier (Burnaby-Coquitlam):: should like to direct a question to the Minister of Labour. Would the minister explain to the house why employees of Westeel Products of Saskatoon have had their unemployment insurance benefits discontinued even though neither a strike nor a walkout exists; and will the minister take immediate action to bring about a new interpretation of the regulations in regard to this and other like cases.


Hon. Michael Starr (Minister of Labour):: I wish to thank the hon. member for having given me notice of his intention to ask this question. I want to inform him that this matter was brought to my attention some two weeks ago by the steel workers union, and at that time I asked the commission to undertake an investigation.
I am informed by the unemployment insurance commission that certain personnel were laid off at Westeel and that the management gave, as a reason for the lay-off, "anticipating a strike". Under the circumstances, I am advised that the unemployment office at Saskatoon had no alternative but to disqualify these people.
This is a matter which is covered not by the regulations but by the act itself. Section 63(1) of the Unemployment Insurance Act reads as follows:
An insured person who has lost his employment by reason of a stoppage of work attributable to a

Inquiries of the Ministry
labour dispute at the factory, workshop or other premises at which he was employed, is disqualified from receiving benefit until
(a)	a termination of the stoppage of work,
(b)	he becomes bona fide employed elsewhere in the occupation that he usually follows, or
(c)	he has become regularly engaged in some other occupation, whichever event first occurs.
In view of this I am informed that the officials had no alternative but to disqualify these people and that those laid off have been disqualified as of June 2.


Erhart Regier: I wonder if I might ask the minister whether he would look into the serious consequences of disqualifying people on grounds of an anticipated strike, and if he will consider introducing legislation to amend the act in this regard.



PAYMENTS TO PERSONS ATTENDING PRECENSUS SCHOOLS

[Stage Direction]
On the orders of the day:
Hon. J. W. Pickersgill (Bonavista-Twillin-gale):: I should like to ask the Minister of Labour whether persons who attended precensus schools in Toronto were paid for attending them by the unemployment insurance commission.


Michael Starr: Mr. Speaker, I am not aware of any such thing happening. I do not know where the hon. member gets his information.


John Whitney Pickersgill: Mr. Speaker, I have information that a cheque was received by one of the persons attending such a course from Mr. R. W. Oliver, treasury officer, stating it was from the unemployment insurance commission. I wonder whether the minister would investigate.



FISHERIES


[Stage Direction]
On the orders of the day:
Mr. Harold Hicks (Fraser Valley):: Mr. Speaker, I wish to direct a question to the Minister of Fisheries. Is it a fact that the international salmon commission is building a laboratory at Cultus lake in the lower mainland area of British Columbia at a cost of $150,000?


Hon. J. A. MacLean (Minister of Fisheries):: Mr. Speaker, I wish to thank the hon. member for having given me notice of his intention to ask this question. There is an item of $110,000 in the recently approved estimates of my department for construction of a research field station for the international Pacific salmon fisheries commission. This station is to be constructed at the lower

end of Cultus lake for use by the commission in the study of fish behaviour, the effects of pollution, etc. Article VIII of the convention establishing the commission specifies that land acquired for use by the commission will be purchased by the country within whose territory it lies. This principle is being applied to construction of this station. On completion, however, the sharing of costs of operation will apply. The site has been acquired in co-operation with the Department of Public Works, and tenders for construction have been invited by this department.


Mr. Mcllrailh:: The answer to the question is yes.
st. John's, nfld.-reported damage from



DUMPING OF DEBRIS

[Stage Direction]
On the orders of the day:
Mr. J. R. Tucker (Triniiy-Conception):: Mr. Speaker, I should like to direct a question to the Minister of Public Works. Will the minister please advise the house whether he has received a petition from the St. John's local of the Newfoundland federation of fishermen protesting against construction companies working on the St. John's harbour development project dumping debris outside the narrows of St. John's, thereby causing damage to the fishermen's nets? If so, what action has been taken?


Hon. D. J. Walker (Minister of Public Works):: I want to thank the hon. member for Trinity-Conception for giving me notice of this question. The answer is no.



NOVA SCOTIA


[Stage Direction]
On the orders of the day:
Mr. H. J. Robichaud (Gloucester):: I should like to direct a question to the Minister of Fisheries. Can the minister advise the house whether he has received any representations asking for a further extension of the lobster season in district 7B after July 5 and, if so, what decision if any has been reached in this regard?


John Angus MacLean: Representations have been received requesting in some cases that the season be further extended and in other cases that it not be extended further. Up to date figures are now being compiled on the catch as of yesterday or the day before, I am not sure which. The catch has been heavy in the last few days, it would appear to be about a normal catch by July 5. No decision has yet been made, but I expect to be able to make a statement on the matter within the next day or two.


Mr. Russell H. MacEwan (Piclou):: May I
ask the Minister of Fisheries whether he has received a communication or telegram from the Northumberland fishermen's association representing fishermen from districts 7A and 7B, asking that the present lobster fishing season be not extended?


John Angus MacLean: Mr. Speaker, I have received a communication from this organization, but as to their request I would not want to say categorically at the moment which side of the argument they are on. However, I should be able to give the hon. member a definite reply tomorrow.



SINCLAIR REPORT


[Stage Direction]
On the orders of the day:
Erhart Regier: I should like to ask the Minister of Fisheries this question. Is the government planning to hold public hearings in Vancouver on the recommendations on fishing to be found in Dr. Sinclair's report? If so, can the minister indicate how soon such hearings will be held?


John Angus MacLean: Mr. Speaker, I wish to thank the hon. member for giving me notice of his intention to ask this question. The department has now received comments on the Sinclair report from most of the interested groups in British Columbia. These comments are now being studied, and where necessary clarification of the views presented is being sought. A decision will be made as soon as possible with regard to the possibility of public hearings. If it is decided that public hearings would be advantageous, they will be held as soon as possible, but I would not want to forecast a date as to when they might take place.



ONTARIO WHEAT


[Stage Direction]
On the orders of the day:
Hon. Paul Marlin (Essex East):: Mr. Speaker, may I ask the Minister of Agriculture if he is in a position to tell the house whether the federal government has agreed to take action providing for authorized deductions from Ontario wheat farmers under the Agricultural Products Marketing Act?


Hon. Alvin Hamilton (Minister of Agriculture):: Mr. Speaker, I think the hon. gentleman is referring to the fact that application has been made for the extension of the powers of the Agricultural Products Marketing Act.


Paul Joseph James Martin: That is right, with regard to authorized deductions.
Inquiries of the Ministry


Francis Alvin George Hamilton: Mr. Speaker, in that connection I can say only this. That matter is under review, and if any announcement is to be made it will be made in due course.


Paul Joseph James Martin: May I ask another somewhat related question, Mr. Speaker. In view of the lateness of the season and the fact that July 1 marks the official and traditional recognition of Ontario farmers with regard to the growing of wheat, will the minister before that date announce the price with regard to Ontario grown wheat?


Francis Alvin George Hamilton: Mr. Speaker, last year the price was announced on July 22.


Paul Joseph James Martin: Too late.


Francis Alvin George Hamilton: The crop year ended on June 20 as the hon. member knows. Several products under the Agricultural Prices Stabilization Act are before the government for consideration at the present time, and I hope to make an announcement within the next few days.



AGRICULTURE


[Stage Direction]
On the orders of the day:
Paul Joseph James Martin: A further supplementary question, Mr. Speaker. With regard to Ontario farmers, when may we expect an announcement concerning a floor price on soybeans?


Francis Alvin George Hamilton: Mr. Speaker, this is one of the several products now before the government for consideration.



REQUEST FOR REPORT ON CROP CONDITIONS IN WESTERN CANADA

[Stage Direction]
On the orders of the day:
Mr. Jack McIntosh (Swift Current-Maple Creek):: Mr. Speaker, I should like to address a question to the Prime Minister. In view of his recent trip to the prairies, can he give the house a report on crop conditions as of yesterday and the day before?


Right Hon. J. G. Diefenbaker (Prime Minister):: Mr. Speaker, I was in Saskatchewan yesterday and the night before last I was in Winnipeg. Generally speaking the situation is one of grave seriousness in respect to the cattle fodder situation. Every endeavour will be made to meet the problem. In the course of a conversation with an outstanding leader in western Canada I was told that in the province of Manitoba, for instance, even with the fullest fodder assistance being given many cattle will have to be sold.

Inquiries of the Ministry
The situation in eastern Saskatchewan is also a repetition of those days in the past when drought struck the prairies.
With respect to the situation in Alberta, 1 think possibly tomorrow the Minister of Agriculture will be able to give a general outline of the position there and in the various parts of the western provinces. Suffice it to say the western farmer now faces one of those problems which exercise the hearts of men.



SHIPPING


[Stage Direction]
On the orders of the day:
Mr. Grant Campbell (Stormont):: Mr. Speaker, may I direct a question to the Minister of Transport and ask how many of the 24 pilots in the Montreal-Cornwall division and the 32 pilots in the Cornwall-Kingston division have given their address as Cornwall.


Hon. Leon Balcer (Minister of Transport):: 


Mr.   Speaker-Mr. Pickersgill@: On a point of order, Mr. Speaker, I suggest that the information asked for by the hon. gentleman is statistical information of a kind Your Honour has ruled out of order repeatedly.


Mr. Speaker:: It is that kind of information but if the hon. member has given notice and the minister is in a position to answer, I will allow the question.


Léon Balcer: Mr. Speaker, the hon. member has given me notice. I hope that all hon. members of the opposition paid close attention to what my hon. friend said. The answer is 7 in the Cornwall-Kingston division and none in the Montreal-Cornwall division.


Grant Campbell: May I ask one
supplementary, Mr. Speaker. Is there any way of determining whether the 7 pilots referred to have only temporary summer addresses in Cornwall?


Léon Balcer: No, Mr. Speaker.



BRITISH COLUMBIA


[Stage Direction]
On the orders of the day:
Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, I wish to address a question to the Minister of Transport. My question is based on correspondence from persons interested in the welfare of labour on the Pacific coast.


Mr. Brunsden:: And telephone calls.


Herbert Wilfred Herridge: In view of the minister's announcement of the provision of substantial
[Mr. Diefenbaker.l
government subsidies to the shipping industry, and in view of the fact that it would be improper for public funds to be used to subsidize companies considered by organized labour to be anti-union or anti-labour, would the minister inform the house whether he has received any protests with respect to the hiring of guards from the United States-owned and controlled Pinkertons of Canada at the north shore Burrard drydock, particularly during the construction or repair of government subsidized shipping?


Léon Balcer: Mr. Speaker, I do not recall receiving any representations about this matter. However, I will check my files.



NATIONAL REVENUE


[Stage Direction]
On the orders of the day:
John Whitney Pickersgill: Mr. Speaker, I should like to ask the Acting Minister of National Revenue whether he has yet been able to find out from the department whether an inspector from the department visited the Jean Talon hospital to make an investigation and, if so, whether the department is in possession of a report from the inspector.


Jay Waldo Monteith: Mr. Speaker, an inspector of the department did visit the Jean Talon hospital just as inspectors of the department visit many other businesses during the course of their duties.


John Whitney Pickersgill: May I ask the hon. gentleman a supplementary question. Has the minister's temporary department taken note of and is it making a special effort to speed up its investigations into the various revelations before certain royal commissions in the province of Quebec with a view to collecting income tax?


Some hon. Members:: Oh, oh.


John Whitney Pickersgill: Is the minister not going to answer?


Jay Waldo Monteith: I have answered the same question many times. I would simply point out that it is not public policy to give statements which would indicate various matters involving income tax procedures.


John Whitney Pickersgill: I would ask the minister whether he does not think an exception might be made in this case-


Some hon. Members:: No.


John Whitney Pickersgill: -as was done by the Minister of Labour when he wished to defame a certain unemployed person.



INDUSTRY


[Stage Direction]
On the orders of the day:
Paul Joseph James Martin: In view of the possible adjournment of the house within the next 30 days may I ask the Minister of Finance whether he can give any indication when he will be prepared to act or not act on the recommendations of the Bladen royal commission? For instance, is there a possibility of the government acting on this matter in September, if we come back?


Donald Methuen Fleming: Whenever it becomes a matter of government policy to make recommendations to the house in regard to this subject, of course the house will be made acquainted with the government proposals. I dealt with the subject in the budget speech, Mr. Speaker, inviting the house to take action in certain regards and pointing out that certain other recommendations of the Bladen royal commission will be the subject of discussion on the part of interested groups in the course of time. Beyond that, I think the hon. member must be aware that the budget has been put before the house and that we are asking for action on its proposals.


Paul Joseph James Martin: I shall deal with that this afternoon.


Donald Methuen Fleming: That will be something to look forward to, I am sure.



PUBLICATIONS


[Stage Direction]
On the orders of the day:
Lester Bowles Pearson: Mr. Speaker, I should like to ask the Prime Minister if he can give the house any information on the consultations which are now taking place with the United States government in regard to the recommendations of the O'Leary commission report.


John George Diefenbaker: Mr. Speaker, for many years the hon. gentleman occupied the position of secretary of state for external affairs and he realizes, of course, that any discussions that are continuing are not placed before parliament during the progress of the discussions.
Inquiries of the Ministry


Lester Bowles Pearson: Yes, I realize that, but I wondered whether the Prime Minister could give us an indication whether these discussions will be concluded in time for action this session on the recommendations of that report.


John George Diefenbaker: Mr. Speaker, I have long since ceased to have any ideas as to how long this session is going to continue.



BUSINESS OF THE HOUSE


[Stage Direction]
On the orders of the day:
Mr. Frank Howard (Skeena):: Mr. Speaker, I should like to raise a matter with respect to two questions which stood in my name on yesterday's order paper but do not appear on today's. I refer to questions Nos. 238 and 239, which sought specific information about subventions and loans to incorporated companies other than crown corporations and which were phrased in such a way as to ask for such information from each department.
As shown on page 7224 of Hansard for yesterday, answers were filed to these two questions by the Minister of Agriculture and the answer given in each case was "nil". I think an error has been made in assuming that the questions had been completely answered, and as a result they were inadvertently dropped from the order paper. I would ask that questions 238 and 239 be restored to the order paper in order that each department may answer these questions, as was originally requested.
I say that this was perhaps done in error. Question No. 238 reads in part as follows:
Since January 1, 1950, have any subventions been paid to any incorporated companies other than crown corporations?
The answer given by the Minister of Agriculture was "nil", yet we know that such subventions are paid, for instance, by the Canadian maritime commission to Northland Navigation Company on the west coast. I submit that the answer of the Minister of Agriculture can only apply to his department, and that the question should not be taken as having been completely answered. My request is that questions 238 and 239 be restored to the order paper in order that they may be answered fully.


Mr. Speaker:: If the hon. member has reason to be dissatisfied with the answers he is at liberty to restore the questions to the order paper, or I take it that he is at liberty at the appropriate time to complain about the insufficiency or inaccuracy of the answer. I am not sure that the hon. member is correct

Inquiries of the Ministry in asking the Chair to restore questions because he regards the answers as insufficient. It seems to me there are other remedies. However, I shall consider the matter.



AIR TRANSPORT


[Stage Direction]
On the orders of the day:
Mr. W. H. McMillan (Welland):: I should like to direct a question to the Minister of Transport and ask him whether he has anything further to report on the meetings in Washington concerning the application of Canadian air lines for further air routes into the United States?


Léon Balcer: I have nothing to report at the moment, Mr. Speaker.



NORTHERN AFFAIRS


[Stage Direction]
On the orders of the day:
John Whitney Pickersgill: I should like to ask the Minister of Northern Affairs and National Resources whether it is correct that Mr. Homer Stevens, the communist secretary of the fishermen's union in British Columbia, has been invited to participate in one of the panels of the national conference on resources for tomorrow, and whether this is the same Mr. Stevens who attended the preliminary conference in Montreal last fall.


Hon. W. G. Dinsdale (Minister of Northern Affairs and National Resources):: Mr. Speaker, this matter has not come to my attention. I shall investigate and bring in an answer to the hon. member.



POST OFFICE DEPARTMENT


[Stage Direction]
On the orders of the day:
Mr. Arnold Peters (Timiskaming):: I should like to direct a question to the Postmaster General. Is it true that postal employees will be celebrating Dominion day this year as a statutory holiday without pay? And is it true that those postal employees required to work will not receive double time as is the recognized practice?


Mr. Speaker:: Order. I think the hon. member will find the answer to his question if he looks back in Hansard. The matter was thoroughly dealt with a day or two ago.



HANDLING OF U.S. PUBLICATIONS REMAILED IN CANADA

[Stage Direction]
On the orders of the day:
Mr. D. M. Fisher (Port Arthur):: I should like to ask the Postmaster General a question. In view of the United States postal rate increase to 8 cents a pound for United States periodicals mailed to Canada, effective July 1, has the Canadian post office made preparations to handle a huge increase in remailing of United States periodicals in Canada which will take advantage of the much lower Canadian rate on such material?


Hon. W. M. Hamilton (Postmaster General):: Mr. Speaker, we do not anticipate any huge increase. The substantial difference in rates will exist only for one month, since our new rate goes into effect on August 1, and it is not the custom for a publisher to make extensive changes in the way of handling his material for one month only.
I might point out that the reason our rate is underneath the United States rate is to compensate for the cost to the publisher of trucking or carrying this material from the United States to the Canadian point where it is placed in the mails. It is of very great interest and benefit to us to have this material placed in the mails in Canada, because if it is placed in the mails in the United States we are obliged to handle it anyway and we get no revenue whatsoever. We therefore established a rate which, together with the cost of transportation, is approximately equivalent to the United States rate thus getting as much revenue as possible.



COMBINES


[Stage Direction]
On the orders of the day:
Frank Howard: I should like to ask the Minister of Justice whether he is able to indicate to the house the activities of the restrictive trade practices commission as of this date with respect to hearings into the production, sale and distribution of raw fish, and whether there are still some court decisions that are barring those hearings.


Hon. E. D. Fulion (Minister of Justice):: Yes, Mr. Speaker. I am sorry I am not able to give my hon. friend the details as to the position with regard to injunctions, but there are still several injunction applications outstanding which make it impossible for the commission to proceed.



OLD AGE SECURITY


[Stage Direction]
On the orders of the day:
Paul Joseph James Martin: May I ask
the Minister of National Health and Welfare if, before adjournment, he could tell us whether he has been able to complete his study of the Clark report. If so, can he tell us when we may except an announcement of government policy pursuant to the assurances given by the Prime Minister in January of 1958?


Jay Waldo Monteith: If the hon. member had been in the house last Saturday during the discussion of my estimates I am sure he would have been in a position to have my views.


Paul Joseph James Martin: Perhaps the minister would ask the Prime Minister why I was not in the house on the day his estimates were introduced in this chamber.


John George Diefenbaker: Simply because the hon. member wanted to go home.



THE BUDGET


[Stage Direction]
The house resumed, from Wednesday, June 28, consideration of the motion of Hon. Donald M. Fleming (Minister of Finance) that Mr. Speaker do now leave the chair for the house to go into committee of ways and means.
George James McIlraith: Mr. Speaker, the Minister of Finance took two hours and 40 minutes to deliver his budget speech, and some 37 or 38 minutes yesterday to deliver a further speech on it. Of that fact I have no complaint whatever. I think it was quite proper-


Donald Methuen Fleming: Thirty two minutes, to be exact.


George James McIlraith: In any event, I think it was quite proper for the minister to do so. The point I wish to make is that I find it somewhat difficult, in the 30 minutes allowed to a private member, to deal thoroughly or adequately with the budget speech. I think the present budget is of such significance to the country that it deserves thorough and analytical examination rather than the shorter, somewhat abrupt treatment that may be given to certain points of it because of the requirement of completing my remarks within 30 minutes. To me it is a matter of regret
The Budget-Mr. Mcllraith that as a private member I do not have more time in which to deal with it as I should like to do.
This budget undoubtedly is significant to the economy of this country. It is of very real significance to the economy of this country this year, and I think a great many of its points have very dangerous implications and are of harmful significance. I should like to be able to analyse my reasons for making that statement in a somewhat more careful way than I will be able to do. Because of the time limit it is going to be necessary to leave out reference to many points I should like to discuss, and it also will be impossible to make a proper analysis of some of the points with which I will try to deal.
There is one thing I should like to point out to the minister before launching into a general discussion of the budget. That is that yesterday in his remarks he made the point that since the budget was delivered the financial markets of this country are stronger than they were before the budget was introduced. The term he used was "the financial markets". I point out to the minister that just last night's newspapers that were on so many desks at the very time he was making that statement, as was pointed out to me at the time-I did not interrupt the minister because I did not wish to consume any of his time-were to the very opposite effect. The Canadian Press story in the Ottawa Journal of yesterday evening was headed "Toronto stocks move downhill". That was supported by a subsidiary story on the Montreal market. The Citizen had a story to the same effect.


Donald Methuen Fleming: That was the one
day.


George James McIlraith: No; the story goes on to say "-continued the downhill move". I could read the lengthy story but I do not want to digress. It refers to the continuing downhill movement in stocks.


Donald Methuen Fleming: Mr. Speaker, I think the hon. member will agree that I was speaking of bond values and the effect on interest yields.


George James McIlraith: That is the point I wish to make. I trust the minister will bear with me. I tried to be courteous yesterday and not interrupt him because his time was limited. I will try to make my points as clearly as I can. The Montreal Gazette has the same type of story in this morning's issue headed "Market dips again". That is followed by a story headed "Bonds easier". I think what the minister was seeking to deal with was the bond market only and not the financial market generally. I want to point that out

The Budget-Mr. Mcllraith because the other statement is much too wide, as I think an analysis will bear out.
It seemed to me that the budget did not generally represent a well integrated document or program for the economy of this country for the coming year. It seemed to me to be rather a collection, indeed it could probably be called a conglomeration, of contradictory objectives. It is with some of those contradictions that I wish to deal today.
There was one interesting fact that came cut of the minister's presentation. It was the rather startling revelation that the budget had not been prepared in conjunction or with the benefit of discussions with the governor of the Bank of Canada. I do not want to digress into a debate on that matter because there is a bill before the house and it can be discussed fully on another occasion. However I do want to point out that this lack of co-ordination of policies and of the benefit of the experience of that institution is very apparent in this budget. Indeed, from the minister's statement it is apparent that there had been a lack of co-operation and coordination of the Minister of Finance and his department with the Bank of Canada. That, to me, explains many of the inconsistent policies which the minister has revealed in the previous four budgets, and particularly in this one.
I for one got the impression from the minister's statement on that point in his budget speech, and again from his preoccupation last night with the governor of the Bank as opposed to budget matters which had been debated here, that he had been nurturing a grudge. Whether or not he is well justified is another matter which can be debated on the other bill. The point is that the Minister of Finance must assume the responsibility for not attempting to resolve the problem directly. That part of it must surely belong and rest squarely on the minister's shoulders. If the situation was as the minister described it-and those facts have not all been proven yet; they are the subject of controversy- surely the minister owed an obligation to this country to seek to reconcile the governor to his point of view during these last four years.
It is clear from the minister's own words that he was not doing that; and it is clear that had he followed that proper course and the reconciliation could not have been effected, the governor would have had no option but to resign. But to come forward and have the country suffer because the Minister of Finance, for reasons of his own, did not seek to reconcile the governor of the


bank to his views in these matters is something that has sad consequences for the country, and those consequences are reflected in the budget itself.
Mr. Speaker, there are a number of specific comments I wish to make on different aspects of the budget. I think by far the most inadequate portion of the minister's budget speech was the part devoted to international trade and international commercial policies. The minister, it seemed to me, did not develop that subject in the way that was his obligation in the circumstances this country is in at this time with relation to the international trade field. The speech contained no evidence at any point to show that the government realizes the urgency which is required on the part of this country to deal with the revolutionary changes that are taking place today in the field of international trade.
The wording of the speech was so similar to earlier speeches that one would think there had been no changes in that field since 1958. As a matter of fact I compared the objectives in that field which the minister expressed in his 1958 budget speech-those objectives will be found at page 1236 of Hansard of 1958-with the objectives given by the minister in his budget speech of this year, to be found at page 6650 of Hansard. It is rather interesting to find what that comparison shows. In 1958 the minister stated five objectives. In 1961 he lists only three. Upon close reading I discover that the 1961 objectives are in part a summary of the 1958 objectives, but there is one significant difference. I want to point out this significant difference and ask the minister to deal with it at an appropriate stage. I wish to quote two parts of these objectives to point out the difference. In 1958 objective No. 3 read:
To support and promote a regime of law, order and morality in the field of international trade; to respect the spirit and intent of international commitments; and to stand ready to defend our rights and interests if they are challenged or ignored;
In the 1961 budget the same objective reads as follows:
To support and promote a regime of law and order in international trade; to respect our international commitments; and to stand ready to defend our rights and interest.
I wish to point out to hon. members that there are several important differences. I do not intend to make any point of the fact that the minister apparently no longer wishes to support the promotion of a regime of morality in international trade. Of much greater importance, I think, is this point, which I think should be underlined and dealt with by the government on an appropriate occasion. The government apparently no longer intends to

respect the spirit as well as the written content of our international commitments. Perhaps it was an error in drafting; I do not know. If it was, I point out to the government that it is a very substantial error, one which the minister must clarify and one with which he should deal on an appropriate occasion at greater length and with greater care than I am able to deal with it today.


Donald Methuen Fleming: I could deal with it now if the hon. member wished. It would only take a moment.


George James McIlraith: The minister will surely bear with me. He had ample time in which to deliver his speech, and the house did extend him courtesy in that respect. After all, under our system of government we do discuss and debate these things. I am trying to be strictly relevant to the subject and deal with it as best I can, and surely the minister can abide by the usual rules of conduct in this house.
The minister made much of the use of the exchange fund in dealing with the balance of payments problem and the exchange rate. I point out to him that his remarks in this respect were extremely imprecise. I shall deal further with this matter later. The minister was going to lower the value of the Canadian dollar to an indefinite, unspecified level, and it seems to me that this is contrary to the spirit of the international monetary fund. This is an international agreement which Canada has assumed and which, indeed, we have always been meticulously careful to honour.
It seems to me there is a danger in the failure of the government to speak of the spirit of international commitments for the very good reason that we may be interpreted as not being prepared to live up to the spirit of our commitments in this connection. Indeed, there was a question asked by my colleague from Kenora-Rainy River about what consultations there had been on this point, and the answer was not very clear. Perhaps I can leave that point there. I hope the minister will deal with it fully on an appropriate occasion, because it could have important international implications particularly since our reputation in this field generally has been good, and one of which Canadians are proud.
Before elaborating on this question of international trade I should like to say one thing. It seems to me to be basic that before deciding on any policy there must be a clear analysis of the problem. This step must underlie any successful policy. To act on any other basis or to act on the basis of an inadequate analysis means that the policy itself
The Budget-Mr. Mcllraith will be erroneous and inadequate. I believe the minister would agree with me in this respect.
The point I wish to emphasize in relation to this field of international trade is that it seems to me the minister has failed altogether to appreciate the underlying problem. He has failed to make a competent or thorough analysis of the situation. He has failed to pay sufficient attention to the trend toward regional blocs, a trend which may, in many respects, be outside our control, but which nevertheless should not simply be ignored for that reason. There can be no adequate policy developed for Canada unless there is a recognition of what is going on.
I could elaborate a great deal, but it seems to me that in his budget the hon. gentleman has failed to take into account the developments taking place in connection with the European common market. He has failed to recognize the progressive and continuous movement of the outer seven into closer relationship with the European common market group. The minister will have noticed further news items on this very point in today's press. It seems to me that in dealing with our relationship to Great Britain the hon. gentleman has not adapted his mind to the fact that Britain may very well seek to move into the common market. I am not proposing to debate at this time whether she should or should not do so, because that is a matter which will be determined by the United Kingdom and it is not my intention to encroach upon decisions which must remain hers, but we have a very close interest in the subject. The minister's attitude has been in the nature of threats of retaliatory action if they take such a step.


Donald Methuen Fleming: Never.


George James McIlraith: My views on this subject were advanced in an earlier debate on April 24 and 25, on one of the supply motions. Perhaps I could leave them now without further elaboration. But there must surely be in this country a greater appreciation of these developments which are taking place, and an attempt to bring ourselves into a better relationship with the facts as they exist. This may involve our having to make some changes.
The minister made no reference at all to the Latin American free trade area which came into effect a few weeks ago. The whole subject is dealt with in the Montevideo treaty. That is something which should be acknowledged and it must be considered when policy is set for the future of this country. It is true that our dollar trade in that area last year was relatively small. I think our exports last year were of the order of $100 million. But

The Budget-Mr. Mcllraith the potential there is something which cannot be ignored, and this is certainly a bloc with a very large population. There is every indication that there may be a rapidly developing economy in that area.
It seems to me the minister's policy approach in this direction is completely inadequate. The hon. gentleman has ignored the situation. Indeed, in an earlier debate on the subject of trade I accused him of making speeches which were of a threatening nature, and I sought on that occasion to quote many items in support of my assertion. It seems to me that the same weakness is in his budget speech. It is not satisfactory, and for my part I think there must be a complete new examination and a movement forward to a more constructive position in our own self interest.
We have put forward a program. My leader did it particularly well in the debate to which I have referred and on several other occasions, so perhaps I need not restate the principles which we believe should be asserted in bringing ourselves into better alignment with these trade movements which are coming about in Europe. If we fail to do this, then the unemployment problem, which is a very real problem in Canada, will not be solved. It seems to me that the government has taken no step toward the solution of our trade difficulties in this respect.
Now I wish to turn to another subject, namely the minister's reference in his budget speech to the adjustment of the exchange rate. The minister proposes to use the exchange fund to add substantial amounts to its holdings of United States dollars through purchases in the exchange market. I wish to quote the minister precisely on that point. In dealing with the subject he said "It may well be appropriate for it"-that is, the exchange rate-"to move to a significant discount". That was the language he used. Then in a totally inadequate way he made the bald assertion that the decline in the exchange rate would mean modest price advances. In another place he said the price advances would be minimal. I believe those were the minister's exact words.
In his remarks yesterday the hon. gentleman sought to deal with the Liberal position on this issue. I think he did himself a great injustice in the quotations he used, because if he had taken the trouble to closely examine those quotations he would have seen they were dealing with the artificially high exchange rate in an attempt to reduce it from an artificially high level. I think all hon. members will agree that the balance of payments problem has been and is a very real one in Canada, and that our high exchange rate should be reduced; but that is not what the minister said in his budget speech. He

did not take that line at all. He said that it may well be appropriate for it to move to a significant discount.
Hon. members will notice the looseness of language. The minister referred to "a significant discount", but did not say what was a significant discount. Did he have reference to the Canadian dollar being below the value of the United States dollar by the former rate of 20 per cent? Did he mean 10 per cent, 5 per cent, 2 per cent or 1 per cent? That kind of imprecision is not good enough for a minister of finance in dealing with this difficult and important subject. That kind of handling of this subject may have very serious effects on the economy of this country. The minister did not deal with this problem in a well integrated way.
The minister went on to say he was going to use the exchange fund, which I understand has about $1.8 billion or more of United States dollars. That is to say, the Canadian taxpayers have about that amount of United States dollars held in that account. Is he going to add to it? What amount will he add? What are the financial implications of that part of his speech? Did he take the financial implications into account in fixing his estimate of the deficit for this year? What is the minister's attitude on that? Nothing was said. Is it any wonder that there is uneasiness in the financial markets of this country? Is it any wonder that there is in those markets criticism of the minister's imprecision?
It is quite true that bringing down the Canadian dollar from its high level will give an admitted temporary advantage to our export industries. I think anyone would agree that that is desirable. I am sure there is no quarrel with that. But that desirable effect must be weighed against the consequences of what the minister has done in this budget by his attempt to bring down the exchange rate to an undefined significant discount. You will notice he is using the phrase "significant discount", and you take your choice as to what it means. The consequences of doing so may be very adverse to this country. It is that kind of looseness on the part of the minister in dealing with this important subject that caused me at the opening of my remarks to deplore the lack of a well integrated statement on the part of the minister, and the lack of the benefit of the experience of the Bank of Canada in the preparation of the budget.
Let me point out some of the adverse things that must be taken into consideration if the minister succeeds in bringing down the dollar, not to par but to a significant discount. Undoubtedly our cost of living will

increase. I was rather shocked that the minister should have dismissed that subject so lightly. It is rather elementary. If you take the volume of imports to this country and consider that some are consumer goods, some are raw materials and some are semi-finished materials going into production, it means an increase in the cost of living. There was no assessment of that counterbalancing problem on the part of the minister. There was no attempt on his part to exercise the judgment and care that should be exercised on this subject so the problem could be dealt with in a way that would not have led to our backing into a worse and more destructive problem.
We must remember that this cost of living increase is coming at a time when the Ontario provincial government is placing a tax of 3 per cent on the sale of practically all goods. When one bears in mind the importance of Ontario to the economy of Canada in terms of population, productive capacity and so on, one can readily see how significant the cost of living increase may be this year at a time when we have a high level of unemployment and much unused capacity. The minister has not dealt with that in a thorough way in his budget.
The minister said he was going to reduce interest rates. That was an interesting statement to come from the minister who did so much to start the increase in interest rates, especially as a result of his mishandling of the conversion loan of 1958. First the interest rates were forced up as a result of his mishandling of that loan. He forced municipal borrowers and many corporate borrowers to go to the United States for their borrowings. If the minister succeeds in achieving a significant discount on our dollar he will force the municipal borrowers to pay a premium on their interest charges in the United States after having initially created the problem for them. He will place an added burden on the municipalities and corporations.
What is the minister's analysis of that problem in his budget speech? I simply do not find it. He simply said he is going to reduce interest charges. He did not tell us what impact his billion dollar borrowings this year would have on interest rates. Can one be blamed for suspecting that the implication of that is that it will tend to increase interest rates rather than lower them? I may be naive, but I thought the federal government going into the markets of this country and borrowing a billion dollars this year would lessen the money available for investment in corporation, municipal and provincial securities, and that it would have created 90205-6-457
The Budget-Mr. Macdonnell considerable pressure to raise interest rates. But, no; the minister did not see fit to deal with that problem at all.


John Whitney Pickersgill: The hon. gentleman is going to use the printing presses.


George James McIlraith: Unfortunately that is what I am beginning to suspect. In any event, let me deal with another aspect of it.
The minister is concerned about that problem also. If he is truly concerned, why did he not in his budget deal with the consequences of bringing down the value of the Canadian dollar from its artificially high level not to par but to a significant discount? What effect will that have on United States investment in Canada? It will mean that investment in Canada will be more enticing to United States investors because with $100 of United States money American investors can purchase a larger share of ownership and more securities than they could purchase before the exchange rate was brought down to this significant discount. That is a problem that should be carefully analysed, and I regret that time does not permit me to do so. The minister has not dealt with these things which are inherent in this budget. These are the inconsistencies that show up in the budget.
I wanted to speak about one other thing. The minister said yesterday that we had not put forward positive recommendations. We have put forward positive recommendations as to what should be done to get us out of the economic difficulty in which we find ourselves. We put forward many matters that are strictly budgetary, on April 25 at page 3985 of Hansard and on May 3 at page 3402.


Mr. Deputy Speaker:: Order. I am sorry to interrupt the hon. member, but his time has expired.


George James McIlraith: Those recommendations
have been supported by other speakers, and notably by the chairman of the national productivity council.


Hon. J. M. Macdonnell (Greenwood):: Mr. Speaker, I am glad to have a chance to speak briefly in this budget debate for two reasons. First of all, no one will deny that it is an important budget. One has only to look at the things pending in the world, so to speak, such as Britain's trading relation with Europe, our own attitude toward the organization of American states, and the question of aid to underdeveloped countries, as well as other problems. That is one reason I am glad to speak. The other is that I am glad to be speaking because I have an old relationship and friendship with the Minister of Finance and if I can do anything, however small, to help him on his way I am glad to do it. He
7238	HOUSE OF
The Budget-Mr. Macdonnell and I shared a room here for four years. Of course many hon. members will sympathize with both of us for that reason, but we managed to come through it pretty well unscathed.
In my opinion the minister has been very realistic in what he has said, and I want to try to act in the same way. I am not going to deal with the points he dealt with yesterday, the questions of exchange, the deficit, the interest rate, particularly vis-a-vis the opposition, because I think he handled them adequately. I want to say just one word about what the hon. member for Ottawa West has been saying, namely the suggestion that the minister had not been sufficiently concerned with external trade, but that somehow that was being neglected. In that connection I suggest that the Minister of Finance and the Minister of Trade and Commerce have really beaten a path to all kinds of discussions of this broad and important question, both in Europe and in the United States. I feel that any suggestion that it is being ignored or dealt with carelessly just does not click.
My anxiety today is to try to sense public opinion particularly as indicated by the press. In doing that it is useful to see what the enemy is saying. I have looked at those newspapers which we usually find taking the other side. Naturally I went first of all to the Winnipeg Free Press. One can always be sure that in the case of the Winnipeg Free Press, to adopt the words they used to use in the air force, we will get "loud and clear" expression of what they have to say, particularly in that left-hand column with which we are all so familiar. I was not disappointed. I found a couple of typical phrases. I imagine these phrases are probably in what I could call the cliche morgue. We know there is a morgue for photographs. They have them on hand when people die, and I imagine there is a morgue for cliches as well, and in a sense you pick them out perhaps with the help of a card index.
I found a couple of the usual things. First of all I found that the budget was motivated by "desperation and political expediency" and that "the government had decided to exert open and partisan political influence over the economy". Well, there you are. That is exactly what you would expect, and one would be disappointed if the Winnipeg Free Press did not come up with something like that. My feeling about that is that it can be answered in the words of the English yokel who was insulted by one of his friends. He passed it off by saying "It pleases he and it don't hurt I". I feel that is the attitude one can take toward that indomitable left-hand column of the Winnipeg Free Press.


However, there was a contributed editorial by one signing himself "M.W.". It was not in the sacred left-hand column, it was in the middle. I was really quite astonished because common sense seemed to creep in there, and some things were said which I thought the writer would hardly dare to say. Let me quote just a few words. He said:
The budget offers various new incentives to Canadian industry to undertake re-equipment, modernization of plant and greater research activity in Canada. These are important but like many of the other changes too detailed for consideration here.
It struck me that that was rather typical. When you come to good things they are "too detailed"; the good things done by this government are too detailed for much consideration in the Winnipeg Free Press.
I go back now to the left-hand column. We had, of course, the usual diatribe about high tariffs, entirely ignoring the loyalty which this government has shown to GATT and to the aims of increasing world trade. But again I say we must not take it too seriously. We must understand; we must realize that they just cannot help it, that they are born that way and these things have to be said. They are still living in the atmosphere of 1911, the time of the reciprocity campaign.
I come next to the Toronto Star, and really something happened that I would not have believed possible. I find myself sympathizing with the Toronto Star. I never thought I could do that. But when I found that in a short editorial they were forced to use words of approval of the Minister of Finance I said to myself these are new days. For the Toronto Star perhaps they are sad days, but they welcomed devaluation and lower interest rates. Of course they covered themselves by saying it was just their own idea which the Minister of Finance had copied. They went on to say that this should "stimulate business considerably".
Of course they had a complaint. The complaint was that the Minister of Finance is "not sure how far and how fast he must go". Well I am quite sure that the Star-and I apply this also to the hon. member for Ottawa West-does not have the idea that the minister is going now to give a lot of figures and tell us just exactly what is going to happen. That surely is not within the realm of common sense. No sane man would suggest that. It has to depend on the march of events, and the minister put it extremely well. He said "Our objective is to achieve an exchange rate which will contribute to a better balance in our current account position." That is common sense, and no common sense man would want to do more than that.

I come for a moment to the Globe and Mail, which in my opinion bravely tries to steer a middle course between the respective traditions of its progenitors, the Grit Globe and the Tory Mail and Empire. While they criticize the minister for failing to reduce taxes, they have some general words of approval which I would like to quote because they have some interesting implications. The Globe and Mail says:
The public may have been led to expect a major fiscal miracle from Mr. Fleming because the other political parties have not hesitated to assert that, placed in power, they would engage in that kind of hocus-pocus. It should be remembered that these political aspirants base their promises upon two false premises. One, is that Canada is in a hopeless economic condition;-
That is the Liberals. I continue:
-the other, is that the system which has given us the second highest level of prosperity in the world is a worthless system and ought to be scrapped.
I continue to quote from the Globe and Mail:
Mr. Fleming approached his budget in the belief, which we share, that Canada is not a ruined country, although it is in difficulties. He justly pointed out that we still have vast natural resources and talent which can be put to constructive wealth creating use. Equally, he held to the belief that on the whole the system of free enterprise and free competition offers the best chance for our progress.
I have quoted that because the Globe and Mail has taken the position I want to take of applauding the minister because he has not believed in miracles but rather has believed in patience, detailed discussion of problems, and dealing with them one by one. As I said, the Globe and Mail did criticize the minister because he did not lower high taxes. My answer to that is that the minister was facing huge expenditures, largely inherited and resulting in a large deficit, and that he might well hesitate to increase this by further large decreases in taxation which might have an inflationary effect. That satisfies me and I think it would satisfy the ordinary sensible person.
I want to say a few words at this point about the course of economic events since the war. There is no mystery about what has seen happening. We had a boom for more ;han ten years. I think the Hamilton Spectator described this period admirably when it said in its issue of June 21:
In the post-war years when Canada had everything its own way, when a rebuilding Europe and a bursting economy at home had us in the seller's pulpit, with buyers at almost any price we cared to ask, the Liberal government of the day put up massive ... spending levels.
I think that is true, and I do not know that I am saying it particularly critically.
90205-6-4574
The Budget-Mr. Macdonnell They had the revenue and they were tempted to spend it. At first we did not realize that this boom was coming after the war. We were very apprehensive that things might be very flat, and it is interesting to note that at that time, not realizing the boom that was coming, not realizing that the flames were going to be burning pretty brightly anyway, we fanned the flames in a quite substantial way by a loan of a billion and a quarter to Great Britain, which we approved. I made a speech in favour of it myself.
It is interesting to remember that the loan was put before the House of Commons by Mr. Ilsley, the minister of that day, really on the basis of two main arguments. The first was that Britain, who had borne the burden and heat of the day and had divested herself of many of her investments, was entitled to assistance if anyone ever was. Second, and just as important, he pointed out that this was in our own interests, that our external trade greatly needed to be built up, that Britain was unable to be a purchaser, and and that therefore it was highly in our own interests to make them advances so they could buy. It was really just like a wholesaler who assists an important customer who for the moment is broke. That was the argument which was made. That money was spent here and, as I say, it fanned the flames and, as the Hamilton Spectator said, we really had it all our own way. It would not have been human if we had not taken advantage of it but, mark you, it left a situation which we ought to look at very carefully and try to understand now.
A little later, of course, we had the Korean episode which again fanned the flames and incidentally, of course, at that time the cost of living was going up very rapidly. Between 1945 and 1952 the cost of living went up by about 50 per cent. In 1945 the consumer price index, on the basis of 1949 equalling 100, stood at 75 and in 1952 it was 116.5. It was inevitable that this should happen. I am not criticizing it particularly; I am just pointing out the situation. I want to try to be realistic as I think the minister was realistic. I think we have got serious problems and we ought to face them like serious men. We can never face them if we do not know what they are.
As I say, there is no mystery about what has happened since. That gorgeous period pretty well came to an end in 1955 or 1956. I say there is no mystery about what has happened since. The boom came to an end. One strange thing about booms is that people always think they are going to go on forever but they never do go on forever. The boom came to an end. It did not come to an
7240	HOUSE OF
The Budget-Mr. Macdonnell end with a terrific flop; it came to an end rather quietly. Things flattened out rather than having a tremendous fall.
At the same time two other terribly important things happened. The competition of western Europe came into the picture in a big way. We all know what that meant. Western Europe had been given a flying start by the Marshall plan. I was reading just last night about General Marshall and the Marshall plan. We owe a great deal to that very great man for the courage he showed. But what did it mean? It meant that western Europe had new machinery, new methods and, as I say, was given a flying start. More than that, and this is the thing we should all be registering in this country of ours, they not only had a healthy and skilled industrial class but in some way they managed to make the industrial class feel they were working for themselves. There was a better relationship between employer and employee. I fear we must admit that is so, and if it is true we should register it and seriously consider it. I fear it is true that they had and still have a better relationship, partly because of the laws, between employer and employee. These men realized, as I say, that they were working for themselves, and as a result western Europe has become a formidable competitor in the foreign trade market. This is something we cannot laugh off. One of the things I give the minister credit for is that he is telling us this faithfully and straightly and trying to make us realize that it depends on ourselves to pull up our socks, that it cannot all be done by government.
At the same time we should not forget that Japan has been revitalized and is a great competitor, as we know; that the communist countries, whenever it suits them, can sell at prices which have no relation to cost, and that the United States too is pulling up its socks. There is a danger, as the Minister of Trade and Commerce has warned people, that a softening process has gone on. The minister compared us to a boxer-he was once a boxer himself-who has gone soft and feels that there is no real reason for special effort. We have reached the stage now when there is a reason for special effort, and the minister has tried to impress that on us.
There is another thing which has happened which affects the situation and is a commonplace to us all, of course. I am referring now particularly to unemployment and the effect of automation. There is also the movement of people from the land to the cities resulting in a decline in the agricultural population. The bright lights are more attractive and, of course, new and improved farm machinery means that a machine can produce as much


food as 20 or 30 men and such machines have taken the place of those who have left the farm.
There is one other thing I should like to mention in passing. There has been quite a lot of talk about a $2 billion deficit over four years. I should like to put on the record the figures as to increased expenditure since the government came into power, nearly all inherited. There has been a rise each year from 1957-58 to 1960-61 over the expenditure of the preceding year, and in the four years the total increase has been $2,719 million of added burdens that the minister has had to carry. It is not very surprising that there has been a deficit.
I said that I thought the minister had been realistic, and I should like to say briefly what I mean by that. He has resisted the idea that we can cure the situation by bookkeeping or by tariff tricks. The minister has refused showy and quick remedies. He seems to me like a man who is trying to build a solid structure and not a jerry-built affair which in a few years we might find cracking and letting us down. I think he has been courageous and wise in what he has done, and I believe that the course of events will prove the value of his decision.
He is not hesitating to accept new ideas, particularly in connection with the matter of exchange. Incidentally, in that connection it is fashionable now to suggest that the minister has changed his mind. All right. It is only people of stature who can change their minds. I like a quotation which I ran across the other day from Joseph Chamberlain, the father of Neville, who was a great figure 50 years ago. Somebody charged him once with having changed his mind. He said "Anyone is welcome to my discarded opinions". I think that is a very good comment on the idea that a man must never change his mind as circumstances change.
As I said a moment ago, the minister has not pretended that governments by tariff or bookkeeping tricks can deal wholly with the situation or bring the economy back to a satisfactory position. He has in plain terms left this burden where it belongs, namely on the energy, capacity and, if necessary, the sacrifice of Canadian citizens. Yes, that is what the President of the United States put up to the Americans, namely sacrifice if necessary. He has had no part in what the Globe and Mail calls hocus-pocus. He is helping people to help themselves.
Let us consider a few of the things which the Free Press did not have time to mention. First of all there is the substantial extension of the powers of the industrial development bank. That is an important matter. It can help

a great deal. It can help people who could not get credit previously. Its powers are being extended. There was a time when credit could be given by the bank only when it had been refused elsewhere.
Let us also consider other things which the Free Press had not time to mention. There are the tax incentives to stimulate scientific research; double depreciation, the 50 per cent increase in the rates of capital cost allowance applicable to new assets. These are only a few of the array of things which the budget brought in. What I like about them is that each one of them appears to me to be a sound contribution to assist the economy. They all seem to me to be things which have been investigated, studied and assessed having regard to the value they can be to the economy. The matter cannot be better put than in the way it was put by the minister in his speech. As found at page 6642 of Hansard he said this:
I need not remind hon. members that there is no royal road, no magic which a minister of finance may invoke to achieve these goals. If there were easy solutions they would have been adopted long ago.
How true that statement is.
Nor can these objectives be attained by federal government measures alone. In our free enterprise system we shall need self-discipline and the full co-operation of business, labour and all levels of government-indeed of all our people-if we are to succeed.
Those are the minister's words, and I do not think the matter could be better put. There is no hocus-pocus as the Globe and Mail said. There is no claim of magic power on the part of government. However, there is reference to self-discipline, co-operation, courage and caution. Surely this is the kind of language and the kind of action that serious people like ourselves are entitled to expect from the government.


Herbert Wilfred Herridge: Mr. Speaker, I listened with interest to the philosophical apologia given by our highly respected friend1 the hon. member for Greenwood. I was greatly interested to note that he recognized the international aspects of our economic problems. I think we all must recognize them. There are certain factors over which we have little or no control, and which make our problems more complicated and serious today than they have possibly ever been in world history.
The hon. member made some reference to the editorial writer of the Free Press sloughing over the details of some of the good things in the budget. While I do not blame the hon. gentleman for highlighting them to the best
The Budget-Mr. Herridge of his ability, may I say that possibly the editor on that ocasion failed to have a microscope with him.
The hon. member mentioned our vast resources in this country. We are not a finished or a poor people. I am sure no members of this house think Canada is in a state of ruin, particularly when we all realize that we have the vast resources mentioned by the hon. gentleman which can be developed over a period of many years. We also have a virile and industrious people who can apply their energy to the development of these resources. We in this group are also very much concerned with the fact that we have hundreds of thousands of working people in Canada who are anxious to have that opportunity.
The hon. gentleman also mentioned the afterwar boom period, and rightly so. One of the fundamental approaches that we take to economic problems is with regard to this continuing boom and bust in capitalist society. We think that the application of human intelligence and a spirit of co-operation can remedy the boom and bust society with its consequent insecurity for large numbers of good people.
The minister delivered what I think has been quite correctly termed his marathon speech with his usual Cromwellian stance and stentorian voice. I always watch the minister with great interest, and I give him full marks for his courage and bold front under economic adversity. I always admire a person who stands up for his convictions and defends what he believes to be the right course. However, I think it is quite fair to say it is obvious that he has changed his direction considerably since the last budget. There are many contradictions in the minister's statements and direction since 1957 which reflect-and I have some sympathy with the minister on this account-the vacillations and uncertainties of the capitalist system under which we live. In my opinion the budget is a sincere attempt on the part of the minister to rationalize the conflict between capitalist interests in Canada, the circumstances that prevail in the country and the politcal necessities of the party in power. I think without a doubt he has done his best to that end, and we give him full marks in that direction.
Mr. Speaker, we are the only group in this house that offers a completely alternative program to meet the necessities of our times.


An hon. Member:: No.


Herbert Wilfred Herridge: This group stands for the principles of democratic socialism as the only effective alternative to the present unplanned, chaotic, monopoly controlled economy. Before proceeding I wish to read a
7242	HOUSE OF
The Budget-Mr. Herridge quotation from a book I was reading recently by Norman Thomas entitled "A Socialist's Faith". I have a great respect for Norman Thomas. I have spoken with him on platforms and have discussed economic and social questions with him. I think he is a man of great character, conviction and intellect. As a sort of prelude to what I have to say later on I wish to read two paragraphs from his book dealing with this particular question of socialism versus capitalism:
Sound democratic socialism will seek public ownership under democratic control of the commanding heights of the modern economic order. It is neither necessary nor desirable, so long as there is unity of purpose in the main direction of our economy, that there should be a monolithic type of ownership and control.
There is no need for that.
There is a wholesome stimulus in competition, or emulation, and in diversity of functional apparatus.
There is large room for private ownership when the owners are serving a useful function, provided that their ownership does not give them undue control over our social life. Public ownership need not be of one type. Generally speaking, the state should be the agency of ownership, and public corporations or authorities of somewhat various types its administrators. But there will be a large place for co-operatives, especially consumers' cooperatives, in the good society.
I read that quotation, Mr. Speaker, because I think it indicates very well the economic philosophy of this group which we have mentioned previously in the house on numerous occasions. It is the mixed economy or dual economy operated for the welfare of the people as a whole and not for the few.
The minister yesterday spoke with great confidence of the press reception of his budget. I think he was somewhat overconfident in that respect. I wish to make brief reference to certain Conservative newspapers which indicate that there is a difference of opinion as to the value of the present budget even amongst Conservative-minded publications. These differences of opinion found coming from Conservative-minded newspapers simply reflect the economic confusion in modern society.


An hon. Member:: Nonsense.


Herbert Wilfred Herridge: Mr. Speaker, an hon. gentleman is making some comments in isolation. But they do reflect the economic confusion.
I am not blaming any individual. Our present circumstances are the result of a long period of development and evolution and on these occasions I do not believe in blaming individuals. The government of the day is doing its best according to its lights to administer capitalism under the circumstances. However, these various editorials do indicate the confused thinking in the minds of many


editors across this country. I mention the Financial Times of June 23, which contains an article reading:
The budget was not worth delay.
The platitudinous preambles to the budget were undoubtedly spoken in Donald Fleming's voice but the words were those of the Prime Minister.
This is clearly a government by fall guys.
We would say that nobody really knows who is next in line for some sort of misery. But what matters at this moment is this budget.
Was it worth being delayed from April till June? It was not.
Is it an expansionist budget? Clearly not.
Do its provisions offset the business uncertainties of the recent past? We cannot see how.
That is a Conservative paper. It is a Conservative editor commenting.


Donald Methuen Fleming: No, it is not a
Conservative paper.


Herbert Wilfred Herridge: The Financial Times, of course, is published for persons interested in financial and business affairs in this country.


Donald Methuen Fleming: No, I do not know how anybody could say it was a Conservative paper.


Herbert Wilfred Herridge: I think it is fair to say, Mr. Speaker, that it is Conservative in the economic sense. Then we come to the Ottawa Journal of June 21. This is another Conservative-minded newspaper. They say, in brief:
Mr. Fleming's spectacles may be too rosy, and he may be guilty of oversimplification, not to speak of pollyannaism. Only time will tell. What can be said, though, is that this is not the budget of a finance minister who is tired or afraid or unwilling to adventure, and least of all of a finance minister who is thinking of votes or just loves applause. Certainly there is no beckoning for votes, no drum roll of an election, in tax cuts-including a dropping of the 7] per cent excise tax on passenger cars-amounting to only $65 million this year and $100 million over a full 12 months.
That editorial is not on the whole excited by the minister's budget. Then we come to the Daily Gleaner of Fredericton, New Brunswick. I am not sure of the political complexion of the Gleaner. The editorial is not highly critical, but in the last paragraph it says:
The budget contains no indication that any special steps will be taken in aid of this area of Canada.
To that extent I presume it is somewhat critical.


Donald Methuen Fleming: It overlooked completely the enlargement of the Atlantic provinces adjustment grants.


Herbert Wilfred Herridge: I am just quoting this editor's opinion. Then we come to the Ottawa Citizen of June 21:

Mr. Fleming's gamble
Mr. Fleming's past performances as a prognosticator being what they are, it is difficult to feel anything but the most profound uneasiness as he offers his new prescription for an ailing economy. The Minister of Finance sounds his usual ringing note of confidence, but the fact remains that he is embarking on a gigantic gamble. It carries the danger if not the outright guarantee of inflation.
I just quote briefly from those few editorials, Mr. Speaker, to indicate the wide difference of opinion among persons who support the present economic order completely. To budget for a deficit of $650 million on current account is very dangerous, in our opinion, and can be costly to future generations. In our opinion it is just the same as arranging a long term loan to pay the grocery bill. We are not blaming the Minister of Finance completely, because of the present circumstances. We are not opposed to deficit financing under certain circumstances, but we do consider it a very dangerous step to begin to budget for this large scale deficit financing for really carrying on the daily affairs of the country.


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


Herbert Wilfred Herridge: Certainly, sir.


Donald Methuen Fleming: What would the hon. member propose to do in the face of this situation, where we are faced with a deficit of $650 million as a result of various measures of which the hon. member is aware? Does he propose that we should reduce the deficit by cutting back on some of these measures, or raise taxes?


Herbert Wilfred Herridge: I was just coming to that; the minister anticipated my solution. In our opinion the deficit could be considerably reduced. In our opinion corporations are still being allowed to retain too large a slice of their profits under these circumstances when we relate their profits to the situation throughout the country with regard to unemployment. Therefore we believe that this deficit could have been considerably reduced by an increase in corporation taxes and by a reduction of depletion allowances in particular circumstances with respect to certain companies where in our opinion this measure is considerably abused; also by the reduction of depreciation allowances under certain circumstances. We are quite in agreement with the minister's attempt to assist small industry and the development of industry with depletion allowances and depreciation allowances, but we are of the opinion that these allowances under the Income Tax Act are being very much abused in some quarters and that with an increase in these taxes we could
The Budget-Mr. Herridge have considerably reduced the present deficit. The minister may not agree with us, but that is what we believe.
In addition we must remember that when it comes to the question of income tax, the only persons in Canada when the government can be certain will meet their income tax obligations in full are employees whose income tax is deducted at the source, or farmers selling through recognized marketing organizations. I have some knowledge of business, and on certain occasions I have been appalled to find out what can be done under the income tax regulations. I think we are particularly generous in that respect.
As socialists I think it is only fair that we should offer alternatives to the present budget proposals, and we do that. We believe we are justified in incurring a large scale deficit as the result of investment in self liquidating, publicly owned projects, which would provide for co-operation in financing provincial projects and an extension of such programs as the winter works program. We believe it is quite sound to go into debt on capital investment in self-liquidating projects because the investment is there to equate the expenditure.
Then we believe there should be a planned program of production to assist the Asian, African and Latin American countries, financed in a way very similar to the way the war production program was financed. We believe this is a serious situation and that we can do something to improve our own domestic economic situation and at the same time accept our responsibilities to an even greater extent to other countries abroad. We believe investment in this field is very sound and will prove a good investment in the present world situation.
We believe in increased capital in the industrial development bank to provide long term loans to medium and small sized industry and business. The minister is providing for that to some extent in his budget. However, we say there should be provision in the loan to the medium or small sized industry for the state to become a partner in such industry or business, or the companies concerned having an opportunity for repayment of the loans in question.
I for one recognize that two and two make four. I do not underestimate the difficulties we face today, but we believe that if we could develop a program of this sort based on planned fiscal development and investment policies which would also require, in my opinion, a revolution with regard to our sense of values, the future would be much brighter than it appears to be today. Of course
7244	HOUSE OF
The Budget-Mr. Herridge these are the things which restrict governments; you cannot move faster than you can obtain a large measure of public support for a project. But we believe that a program of this type with further extensions, as a result of co-operation among provincial, dominion and municipal governments, cooperation with labour, co-operation with agriculture and even co-operation with socially responsible industry and business in this country-and there are large segments of our industry and business which are socially responsible-would lead to results such as our present policies could scarcely hope to achieve. We can implement a program with desirable national objectives under national direction and with a national purpose-that is a very necessary thing-which would provide the same support for the government and for the program that governments receive during wartime.
I am convinced, and so is the party to which I belong, that we must launch out in another direction. We can mobilize support for a program designed to serve the people and controlled by the people, having long term objectives such as I have mentioned. We do not suggest for a moment that all our ills, economic and social, can be cured overnight, but let us change our direction; let us get on a course which can bring results of the type we desire.
We have some examples to guide us. Go to Sweden. Go to Norway, where with far less natural resources than our own and far less opportunities for a program of this kind some marvellous things have been achieved.
I will admit this, that in those countries there is a co-operative philosophy existing among the people, even among the industrialists, which does not exist in this country at the present time. We believe it is up to the national government to give some leadership in this respect. We believe that if we could once change our course, change our direction, we could offer a hope; we could give a purpose to life in Canada, and we could start to march along the road to stability in our economy and basic security for all who are willing to do their share toward this end.
Having made those few remarks with respect to our general approach, I wish to deal with a few of the good features in the budget. We in this group were very glad to hear the minister repeal the excise tax of per cent on passenger cars. This will be welcomed by many people and will be of some assistance to the automobile industry and the employees engaged therein. It is a worth-while poultice on the ills of society.


Paul Joseph James Martin: But too late.


Herbert Wilfred Herridge: The hon. member for Essex East says it came too late and I can well understand him saying that because I have listened to him over the years advocate just such a proposal.
Then the provision for a 50 per cent increase in the capital cost allowance in the first year on assets required for use in Canada above a company's normal capital outlay may be of some assistance. However, when we come to consider the resolution we shall wish to have some further explanation how this is going to operate and who will benefit in the long run. I would term this to be a suitable bromide.
Then we come to the extension of tax deductions for expenditures on scientific research in Canada. This should, it is true, promote research, but it will only benefit the larger companies because they are the only ones who can afford research. I would term this a very worth-while aspirin to cure our minor headaches in society.
I am glad to know that voluntary firemen are going to be allowed income tax relief on amounts up to $300. Members of the opposition have urged that for a number of years. It is very welcome. It has no serious effect on our economy, but it does remedy what we consider to be an injustice suffered by these volunteer firemen. Of course I am a great believer in voluntary service. We are living in an age where there are so many people who before they do anything for the community want to know "What is there in it for me?" When I was a boy, and up until recent years, people served as school trustees and on local community bodies and organizations without any thought of being paid, and I think the tendency to expect payment for performing public service within the community which can be done in a person's spare time is wrong.
I am glad to see the government intends to seek the co-operation of the provinces with regard to a program for portable pensions. I am very interested in this, particularly since the minister on one or two occasions has been telling us that the government had no responsibility in this field. He has expressed this view in response to questions raised by us as grievances.


Donald Methuen Fleming: The hon. member would agree that I pointed out that the jurisdiction of the federal government here is very limited, and that the only way in which the federal government could approach the matter was by way of a tax measure.


Herbert Wilfred Herridge: Yes, I understood the minister's attitude toward this, but portable or transferable pensions cannot become an accomplished fact without leadership from the

federal government because of its control over the federal Income Tax Act.


Paul Joseph James Martin: It should have been done three years ago.


An hon. Member:: Why didn't you do it?


Herbert Wilfred Herridge: We in this group have urged the government to give some leadership in this respect for a long time, but we are glad to know that it is now included in the budget proposals.
We are also glad to note that there is to be a more intensive scrutiny by the income tax branch of expense accounts. In my opinion this section of the act has been greatly abused in recent years. I think we should be most puritanical in our application of this section of the legislation.
The cigarette smokers will be pleased to know that they will be able to cough on a larger cigarette without incurring any extra expense. That is not of great consequence, but it has made a certain percentage of our population happy. Since I am a pipe smoker it does not mean a great deal to me.
May I call it one o'clock?
At one o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at 2.30 p.m.
Herbert Wilfred Herridge: Mr. Speaker, when we recessed at one o'clock for refreshments, replenishment and reflection, I was dealing with that aspect of the budget relating to cigarette tobacco. I may say that during the luncheon recess I was informed by the hon. member for Bonavista-Twillingate that recently on the financial pages of one of the daily papers there was a comment from one of the heads of a tobacco company indicating this provision will not mean more tobacco in the cigarettes for the consumer. The legislation will not have the effect that was expected by the minister and to which he referred in the budget debate.
However, there is another aspect of the question with which I should like to deal, and that is this question of class legislation. There is gross discrimination as between cigarette and pipe smokers. We all know, Mr. Speaker, that young people, as a rule, smoke cigarettes, while the people who are older, and particularly our senior citizens, are addicted to the pipe because of their maturity and the lessened cost. I suggest that in my opinion this section of the budget would not stand close scutiny as against the terms of the bill of rights. I bring that to the minister's attention.
90205-6-458
The Budget-Mr. Herridge
There is a mild tonic in the budget to which I should like to refer. The minister proposes an increase in the lending resources of the industrial development bank from $160 million to $400 million. We support this proposal wholeheartedly and believe it should be of some assistance to the economy if handled properly. I say that, Mr. Speaker, because I have known of one instance in which a corporation owned and controlled in the United States but located in my constituency was able to obtain quite a large loan, while quite a number of smaller Canadian owned companies were not able to take advantage of this act. As I mentioned before, we believe there is an opportunity here for the granting of loans on the basis that the owners of industries are willing to permit the government to become partners in those industries, or they can agree to full repayment of the loan. I believe this provision is worthy of some consideration in view of what has been done in Scandinavian countries in this respect.
I see the minister proposes a clinical examination of our financial structure and institutions, including the Bank of Canada. I think this is a most interesting proposal and has considerable merit. However, I suggest that the terms of reference of the royal commission should be wide enough to permit an examination of similar institutions in European countries, and I am thinking particularly of the Scandinavian countries and some western European countries in which they have had great success in relating monetary, fiscal and economic policies to the advantage of the country concerned.
Now, I have a few suggestions which I consider would improve the present budget. This budget does not provide for any change in personal income taxes. I am of the opinion that consideration should have been given to increasing the exemptions for persons in lower income groups. I believe provision should be made also for exemption of travelling expenses incurred by workers living at some distance from their employment. These monthly expenses can be quite large. Owing to the difficulty of obtaining housing, as well as other circumstances, you find workers living at increasingly greater distances from their place of employment, sometimes up to 25 or 30 miles in my own constituency. As a result they incur heavy travelling expenses.
I have mentioned this in years past, and I have no hesitation in mentioning it again. I believe these workers should be permitted some exemption in respect of these travelling expenses, particularly when we realize the frivolous expenditures that can be included as travelling expenses by travellers for certain
7246	HOUSE OF
The Budget-Hon. P. Martin companies. I have been told of an instance in which a man travelled 100 miles to sell bubble gum, at least that was the pretext upon which the journey was made, and his expenses were allowed in respect of income tax because he worked for a wholesale grocer.
In view of the depreciation allowed mining companies and companies developing oil and gas wells, I say the same consideration should be given to farmers who use their capital or borrow money to bring land into production by clearing, by irrigation or by draining. The whole theory behind depreciation allowances with respect to those mining and oil and gas companies is that they are increasing the productivity of the country, they are adding to the total production. Farmers should be treated in exactly the same way. The farmer who brings land into production should have the opportunity to claim an exemption for the cost of that development. Similar consideration should be given to persons engaged in the conservation and protection of forest resources by the construction of roads, telephone lines and the purchase of equipment for fire protection and efforts taken to overcome destruction by insects and disease.


Mr. Deputy Speaker:: Order. I am sorry to interrupt the hon. member, but his time has expired.


Herbert Wilfred Herridge: I now come to the end of my comments on this patent medicine budget.


Paul Joseph James Martin: This morning I asked the Minister of Finance when the house might expect the government to deal with the recommendations contained in the royal commission report on the automotive industry. The minister's reply was inconclusive. I am sure I can say his reply will be received in the community from which I come with very much regret. I say this because of the dominion bureau of statistics figures regarding the sales of motor vehicles in this country which were given out on June 27. This report shows that in the month of May the shipment of Canadian made motor vehicles declined 4.8 per cent; that is to say, declined to 41,234 units from 43,334 in the corresponding month last year. The report also revealed that shipments of passenger cars in May fell by 5 per cent. In the same month the shipment of commercial vehicles dropped 3.9 per cent.
I believe these figures reveal the considerable urgency and desirability of the government giving immediate consideration to the recommendations of the Bladen royal commission. The royal commission was appointed over a year ago. The government has had the report for some time now. Requests were made by me on several occasions prior to the budget


for an opportunity to peruse the report. However, the government withheld it until the presentation of the budget.
An examination of the royal commission report does not reveal that it contained anything of a character that could not be revealed, unless the government takes the position that the acceptance of the first recommendation, for the elimination of excise tax, was a matter so confidential as to preclude hon. members from seeing the terms of the report. In any event, I suggest that the figures I have just mentioned with regard to the drop in automobile production, together with the decrease in previous months, leave shipments in the January-May period almost 15 per cent below those of a year ago. I believe those figures are such as to warrant a more immediate confrontation by the government of the royal commission report on the automobile industry.


Mr. Bell (Carleion):: Will the hon. member permit a question?


Paul Joseph James Martin: At the end of my
time I shall be glad to answer questions. I regret to think that the report of the Bladen commission is to suffer the fate of the reports of so many other royal commissions appointed by this government. We have had many commissions, such as the O'Leary commission and the royal commission dealing with medical care services announced last December 18 which is only now receiving its full complement of personnel as the result of a decision made about two weeks ago. Now we have a further suggestion by the Minister of Finance of a royal commission on monetary, fiscal and financial matters.
I do not want to digress from the main theme of what I have to say today, but with regard to the proposed royal commission on monetary matters I would simply say that the Bank of Canada Act in this country is so similar to the corresponding legislative provision in the United Kingdom that we might well have profited from the royal commission headed by Lord Radcliffe in the United Kingdom. In any event, much of the work of the proposed commission might well have been performed by a committee of this house. I hope that the fate of those commissions, including the Bladen commission, will not come within the mischief of the attack on the principle of royal commissions by Mr. Alan Herbert, M.P., who spoke of the futility of royal commissions in the United Kingdom a few years ago. Here is what he said:
I am sure that the financial secretary will get this vote without any difficulty, but I should like some asurance that this money is not going to be wasted, as the money spent upon royal commissions is, I do not think it is putting it too high, to say nearly always wasted. I am probably the only

member of this committee who in his election address boldly asserted that when he became a member of parliament he would set his face against the habit of government departments asking royal commissions to find out things which they ought to know already themselves, and which almost everybody else knows. Therefore, I am bound to make my protest now. A royal commission is generally appointed, not so much for digging up the truth, as for digging it in and a government department appointing a royal commission is like a dog burying a bone, except that the dog does eventually return to the bone. In my short experience of royal commission I find that they spend perhaps years going into a question, that public-spirited ladies and gentlemen give their services free in doing that work, that they produce portentous and expensively-printed reports and that nothing happens.
This is a serious indictment on royal commissions, and what Mr. Herbert has said applies for the most part to royal commissions appointed by this government. In my community of Windsor and in places such as Oshawa, St. Catharines, Oakville and other industrial communities of our country there was great expectation from the setting up of the Bladen royal commission. Now, however, a year after its appointment, we are no further advanced with regard to solutions to meet the conditions which prevail in the automotive industry. Because of the reply we had this morning to my question to the Minister of Finance, and from the way in which the Bladen commission report was so carelesly passed over in the budget, 1 am afraid that the report of this commission will suffer the same fate as that of other royal commissions appointed by this government.
It should be clearly understood that the initiative for this commission was not taken by this government; it was taken by the communities concerned, namely Windsor and adjoining communities whose economies are so closely tied to the domestic manufacture of motor vehicles and parts, places such as St. Catharines, Oshawa, Oakville and other industrial centres of our country. I may say on this point that a number of individuals might well be mentioned as having taken the lead in impressing on the government the importance of an objective and thorough study of the problems of the automotive industry. But generally speaking the impetus came from those communities themselves, from municipal leaders, from workers, social welfare agencies and business. It is true that the unions and the automotive companies co-operated to the fullest extent, but I want to emphasize that the royal commission hearing finally granted by the government came about as the result of a popular and broadly based demand by the people of these communities whose present and future are so dependent on a healthy motor vehicle industry in Canada.
90205-6-458i
The Budget-Hon. P. Martin
Among the bodies which made a contribution to the setting up of the commission was the greater Windsor industrial commission, a body that appeared before the Prime Minister in June of 1960. That body pointed out, among other things, that imports of automobile parts in 1959 increased 20 per cent over 1958; that imports of automobile parts in 1959 reached a new high of $319 million; that the United States supplied over 96 per cent of those parts; that imports of completed units in 1959 increased 46 per cent over the previous year; that imports of completed units in 1959 increased 105 per cent over all but one of the preceding years, that the United Kingdom supplied 47.5 per cent of the passenger units in 1959; that West Germany supplied 23.5 per cent of the passenger units in 1959, and imported passenger units from the United Kingdom increased 52 per cent in 1959 over the previous year.
It was as the result of submissions like that from the greater Windsor industrial commission, supported by the mayor of the city of Windsor and the mayors of the adjoining municipalities and the bodies I have mentioned, that the stimulation grew for the establishment of this royal commission. That we should be no further ahead now is a matter of great regret to the community from which I come.


Mr. Best:: What about the excise tax?


Paul Joseph James Martin: I am going to deal with the excise tax which was promised-


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


Paul Joseph James Martin: At the end of my
speech. I only have half an hour and I want to cover this matter. The excise tax was removed only the other day as a result of representations made by opposition members, notwithstanding the promise made by the Prime Minister on at least two occasions, in the election campaigns of 1957 and 1958 when he promised that the excise tax on automobiles would be eliminated, not just partially but completely right away, not four years later.
I say to the minister that he has had an opportunity to examine the Bladen report, and he should have been in a position to tell us on behalf of the government what portions of that report were acceptable to the government. Instead we have this further delay in the face of the situation which now confronts the automobile industry, as indicated by the statistics I have thus far put on the record.
The acceptance of the proposal for the elimination of the excise tax of 7J per cent was very welcome. I have been urging it in

The Budget-Hon. P. Martin this house for some time, as have other hon. members, as a means of providing some solution for the serious unemployment situation that attends the automobile industry. It is significant that Professor Bladen in making his recommendations, which are to be found on page 58 of his report-prepared, by the way, at a considerable expense and valuable only if it receives from the government the kind of attention it warrants-spoke of these proposals as a package, that one proposal by itself will not meet the purpose behind the commissioner's program. For instance, Professor Bladen says:
I want to emphasize, however, that these are not discrete items from which a selection is invited; they constitute a unitary plan, a program for the continued development of the automotive industry in Canada.
The government is not in any way implementing the comprehensive program put forward in the Bladen commission report. Thus far the government again gives evidence of procrastination, perhaps until a further crisis in the industry takes place. I say that we welcome, of course, the elimination of the 7J per cent excise tax, but I say that the government should have recognized this three years ago when it was faced with the large volume of unemployment that confronted the automobile industry. Automobiles are no longer luxuries. The mere recognition of the fact does not do justice to the difficulties being experienced by the industry.
There are a number of factors that must be looked upon in mitigation of the impact of the reduction of this tax provided for at so late a date. I say that I welcome the elimination of this tax, but if this action had been taken three years ago some of the things about which 1 am now going to speak would not exist.
First of all, the value of used cars is likely to decline in proportion to the reduction in the price of new cars, so that the majority of purchasers who wish to trade in cars will not realize a full 7J per cent reduction in price. Second, if the government is successful in its policy of devaluing the Canadian dollar, the cost of Canadian produced automobiles is bound to rise because of the large American parts content. The minister argued the converse, of course, last year when, in referring to the high premium on the Canadian dollar, he said as found on page 2673 of Hansard:
On the other hand, it lowers the cost of imported raw materials and semi-finished goods used by our manufacturers, and it has helped keep down our cost of living and cost of producing.
But that is not the position taken by the minister in the current budget. I further point out that the pending 3 per cent sales tax, which Mr. Frost argues is necessary because of the fiscal arrangements with the federal

government, will itself absorb half the benefits accruing from the elimination of the federal excise tax in the province of Ontario, which is the largest market for Canadian produced automobiles. The premier of Ontario was driven to this tax as a result of the failure of the government's fiscal policies-


Donald Methuen Fleming: Nonsense.


Paul Joseph James Martin: -as a result of the failure of the government in its fiscal relations with the provinces to live up to the commitments solemnly given the Canadian people by the Prime Minister.


Donald Methuen Fleming: Nonsense.


Paul Joseph James Martin: Moreover, Mr. Speaker, I point out that the government should have given more than a promise to study the recommendation of the royal commission on the automotive industry, that the basis for the application of sales tax on imported motor vehicles under the Excise Tax Act be changed from the duty paid value to the sales price to the retailer. I refer to the second recommendation of Professor Bladen, which will be found on page 58 of the report and reads as follows:
That the base for the application of sales tax on imported motor vehicles, under the Excise Tax Act, be changed from the duty paid value to the sale price to the retailer in Canada, and that section 29(1) be amended accordingly.
But no, we do not have any indication whatsoever from the government, notwithstanding these observations of the royal commissioner. Professor Bladen said:
I know of no other country that places domestic manufacturers at a disadvantage in meeting import competition. The United Kingdom levies its purchase tax on imported goods, as on all goods, on their wholesale value in the United Kingdom. The United States applies its excise tax on all automobiles on the price of the automobile in condition for delivery to the purchaser in the United States.
These words of Professor Bladen, for the benefit of the minister since obviously he has not carefully perused this report, will be found at page 61. I ask the minister why he could not in this budget, a budget that had been revised after another one only a short time previously had apparently been abandoned-


Donald Methuen Fleming: That is quite wrong.


Paul Joseph James Martin: -have given effect to the proposal that some relief might be given to the assemblers of motor cars to the degree to which they buy or produce Canadian parts. The fact is that during the first six months of 1961 passenger car output has dropped about 14 per cent behind the 1960

pace. In view of this fact I say to the government, having in mind the economic implications of the automobile industry directly and indirectly it should have acted, should have accepted or rejected the proposals of the Bladen commission, and stated its policy. To have kept this report for all this time, then to have given it only on the night of the budget, and then not to have done more than promise to study the report was, I say, an insult to those who urged the government over a year ago to make this kind of study of the serious situation that confronts the automobile industry.
I say the government has no excuse for the way in which it has said, in a budget speech, "We are going to study the recommendations of this report", without, of course, adding "notwithstanding the fact that we have had it now for six weeks, and notwithstanding the fact that the royal commission was appointed over a year ago". I say that the recommendations of the commission should not have been held in reserve. I suspect that one of the reasons they were held in reserve was as a bargaining point to bring pressure to bear on the United Kingdom in her attitude toward the common market. If the minister thinks this is a far-fetched suggestion I ask him to look at the Times of Thursday, June 22, 1961.


Donald Methuen Fleming: Everything the hon. gentleman is saying is far-fetched.


Mr. Marlin (Essex Easl):: My hon. friend
says that everything I say is far-fetched.


Donald Methuen Fleming: Wild conjecture.


Murdo William Martin: I want my hon. friend to know that what I am saying now will be concurred in by the royal commissioner, by the thousands of unemployed in my city and elsewhere and by the automobile manufacturers who had hoped that this government in this budget would have done something substantial to meet the conditions that confront the automobile industry.


Donald Methuen Fleming: They have written to me congratulating me on the budget.


Murdo William Martin: Here is what the Times said:
Some observers are wondering how far these recommendations for a tariff on British cars and parts are being kept up the minister's sleeve as a bargaining factor which the Canadian government might use in any negotiations with Britain on the common market issue.


Mr. Chambers:: What would be the effect on car sales?


Murdo William Martin: Let the hon. member ask that question at the end of my speech and I shall be very glad to deal with it.
The commission dealt with another matter, namely the possibility of reciprocal free trade
The Budget-Hon. P. Martin with the United States in automobiles and parts. Do we have from this government any indication of what it thinks about the royal commission's commentary and recommendations in this regard? We have not a word in spite of the fact that the three main automobile companies in this country presented briefs recommending exploration of proposals for closer integration of the Canadian and United States automobile industries. The united automobile workers suggested integration of production facilities. Professor Bladen refers to part of the submission made by the united automobile workers in this regard. Their recommendations in part read as follows:
In essence, we suggest that the commission examine the feasibility of an international agreement which would permit free trade in the products of any motor vehicle manufacturing company provided that the company produced in Canada or had produced for it in Canada a quantity of motor vehicles and parts, sufficient to assure maintenance of current levels of employment at current production volume and future increases in employment parallel with the growth of the company's Canadian market.
This is, of course, a proposal that must be carefully examined. It represents the majority view of the united automobile workers. A minority report was put in by one of the locals of the united automobile workers. What does this government say? It says not a word about any of these matters. It proposes to study the royal commission report. When does it propose to give us an answer? I asked the minister this morning whether, if parliament comes back in September and if there is another budget, as we have rumours that there may be, he is going to provide for the situation.


Mr. Benidickson:: One is not good enough.


Paul Joseph James Martin: If there is not a budget, or if that is not his intention now, what justification can the minister offer for not having given evidence of a greater interest in this document, the report of the royal commission on the automotive industry? It will not satisfy the people whom I represent in this house and others in places like St. Catharines, Toronto, Oakville and Oshawa to be told by the minister-[DOT]


An hon. Member:: Speak for yourself.


Murdo William Martin: -that the report is one which the government is going to consider seriously in the long future. This government has established a precedent in the study of reports that is not too encouraging. For instance, we know that the Minister of National Health and Welfare has been studying for three years a report which the Prime Minister of this country told us in January of 1958 had to be prepared in four months-

The Budget-Hon. P. Martin


William Moore Benidickson: In four months, for the election.


Paul Joseph James Martin: -so the government could take action with regard to adopting a system of old age security such as that in operation in the United States. I say this to the Minister of Finance. He may not agree with all the proposals of the Bladen commission-


Donald Methuen Fleming: Does the hon. gentleman agree with all of them?


Paul Joseph James Martin: No, I do not agree with them all.


Donald Methuen Fleming: Which ones?


Paul Joseph James Martin: Let the minister ask me at the end of my speech. My hon. friend is in the government. I would say this. If I were in the government and if I had the responsibility of my hon. friend with regard to a commission which had been appointed a year ago and whose report I had in my hands for weeks, I would have been in a position as minister of finance to say what I would do about that report instead of shelving it.


Donald Methuen Fleming: The hon. member has had it for nine days and he will not tell us which recommendations he favours.


Paul Joseph James Martin: There are many aspects of this budget about which one would like to have a great deal to say. Certainly it is a budget that has been received all over this country with great disfavour.


Donald Methuen Fleming: With great favour.


Paul Joseph James Martin: I suspect that there has never been presented to the Canadian people a budget that was received so widely and so universally with such disfavour as this particular budget-


Donald Methuen Fleming: What has the hon. member been reading?


Paul Joseph James Martin: -and particularly because it was introduced at a time when the minister had created one of the most regrettable incidents in the framework of government in this country, by the situation which he allowed to develop over a dispute with the head of the most important institution dealing with the financial matters in our country, the central bank. That story, about which we shall have more to say later, however, is part of the background causing this budget to be viewed with disfavour, causing the minister's prestige to fall, and causing a diminution in the appreciation of himself and his competence in this particular ministerial capacity of which he at this time, I am sure, has no appreciation.


Donald Methuen Fleming: The hon. member does not believe that.


Paul Joseph James Martin: If my hon. friend will only go to Toronto and spend a few days there he will find that nothing has hurt his government and nothing has hurt him more in the esteem of the people of that city than have this budget and the circumstances attending it.


Donald Methuen Fleming: That is not the
impression that I have gained.


Paul Joseph James Martin: The most important feature of the budget, of course, is the minister's proposal to engage in what he called, up until a few months ago, a huge speculation with public funds which was bound to fail. With the objective of having the Canadian dollar at a level that will enable us to meet foreign competition without imposing an undue burden on the Canadian public I fully agree. There can be no doubt about that objective, but the way in which that objective is attained is the important thing. Quotations from the speeches made by the minister have already been put on the record over and over again, and yesterday by the hon. member for Laurier. The minister has been converted, apparently, to the view that this huge speculation, and that is all it is-


Donald Methuen Fleming: No, it is not.


Paul Joseph James Martin: -which he said was bound to fail, is the only economic salvation for the country. He now contends-


Donald Methuen Fleming: No, no.


Paul Joseph James Martin: If Mr. Barkway was right-


Donald Methuen Fleming: Mr. Barkway is usually wrong.


Paul Joseph James Martin: If Mr. Barkway was right in the press conference held the other day with the minister and other press correspondents, the minister ought to explain the statement made by Mr. Barkway that from December to the end of May, according to official figures, it had cost $120 million to move the dollar down by half a point, and the United States dollar was still at a discount of 1J points.


Donald Methuen Fleming: That statement gave a most misleading impression.


William Moore Benidickson: Look at page 320 of the Bank of Canada monthly report.


Paul Joseph James Martin: What would it cost to bring it down a significant amount? The minister dodged this question in the press conference the other day and made a speech

about something else. That is the minister's favourite tactic. Ask him a question about horses and he tells you all about elephants. If it cost $120 million to move the dollar down by one half or 1 per cent between December and May, how much is it going to cost to bring it down to any significant discount and keep it there?


Donald Methuen Fleming: His was a very misleading statement.


Paul Joseph James Martin: That is a question the minister has not dealt with. He has dodged it at every opportunity. Indeed, the hon. member for Canary-Rainy River-


Donald Methuen Fleming: "Canary" is right.


Paul Joseph James Martin: The hon. member for Kenora-Rainy River pointed to a statement made by the assistant general manager of the Royal bank, that for every one point it would probably cost $200 million. Is that right? To bring it down by five points would involve another $1 billion. Is that right?


Donald Methuen Fleming: No.


Paul Joseph James Martin: No wonder the minister, before his conversion, described this as a "huge financial speculation which was bound to fail".


William Moore Benidickson: That is what he said a year ago.


Paul Joseph James Martin: But there is another important aspect of this problem.


Donald Methuen Fleming: You did not agree with me then.


Paul Joseph James Martin: We have a floating rate which is supposed to be determined by the market and which, until last December, was determined by the market. Mr. Abbott pointed out when we went on the floating rate that the exchange fund would be used to iron out minor fluctuations; that the government would not go into the market; that it would not interfere with the operations of free enterprise for the purpose of making significant-and I pause to repeat the word "significant"-changes in the rate.


Mr. Deputy Speaker:: Order. I am sorry to interrupt the hon. member, but his time has expired.


Paul Joseph James Martin: I simply say to the minister that this is speculation of the most dangerous sort against which we must protect the Canadian people.


Donald Methuen Fleming: Mr. Speaker, would the hon. member permit a question?


Mr. Deputy Speaker:: The consent of the house would be required. Does the house agree to an exchange of questions and answers?
The Budget-Mr. Peters


Some hon. Members:: Agreed.


William Moore Benidickson: A question, yes.


John Whitney Pickersgill: A question, but not a speech.


Donald Methuen Fleming: Mr. Speaker, the hon. member was kind enough to say he would answer a question. I wonder if he would indicate to the house, now that he has had the report for nine days and I am sure has studied it carefully, which of the recommendations in the Bladen report he supports. Does he support, for instance, the proposed increase in tariffs, changes of valuation and other things? Would the hon. member indicate just where he stands on the recommendations?


Paul Joseph James Martin: I will be very glad to deal with that if the house will give me an opportunity, but I will have to have the opportunity.


William Moore Benidickson: Agreed.


An hon. Member:: Just answer the question.


Paul Joseph James Martin: One cannot just say yes or no. I am prepared to speak for another 40 minutes on this subject.


Donald Methuen Fleming: Mr. Speaker, that is the neatest way we have seen yet to dodge a question.


Paul Joseph James Martin: I think what the hon. gentleman ought to do is-


An hon. Member:: Your time is up.


Paul Joseph James Martin: -give the Leader of the Opposition and the rest of us an opportunity at the earliest possible moment to settle these problems which this government is shelving.


Donald Methuen Fleming: Your footwork is not nearly as good as it was. That was pretty clumsy evasion.


William Arnold Peters: Mr. Speaker, I have been very interested in the discussion that has taken place in the last few minutes. In particular I was interested in the final remarks of the hon. member for Essex East in relation to the devaluation of the Canadian dollar and the amount of money that will be involved. I, too, would have liked him to have an opportunity of dealing further with that matter, because it is without doubt of great importance to us. The Financial Post has said:
Most important Ottawa decision this week for all of Canadian business is finance minister Fleming's announcement that the government will use the exchange stabilization fund to lower the exchange rate on the Canadian dollar vis-a-vis its U.S. counterpart.
7252	HOUSE OF
The Budget-Mr. Peters
This article mentions, of course, as did the hon. member for Essex East, the fact that this was not the purpose of the stabilization fund. Then it says:
Fleming's plan to influence downward the exchange rate marks a complete about-face in government policy. As recently as May 16 last year, when speaking to the Vancouver board of trade, he listed five ways in which the government could force down the premium on the dollar, and stated that the disadvantages of the alternatives outweighed the disadvantages of the premium.
I only suggest that the method being used at the present time to stabilize the dollar at any reasonable level may cost the Canadian people a great deal of money. It may be that this fund should be used in the reverse manner to that suggested by the minister; it may be needed to bolster the Canadian dollar rather than to peg it at a relatively low position.
It seems to me that one of the problems we will have to face, and it is certainly not a desirable one, is that if this results in a terrific and variable fluctuation of the dollar so that everyone has to go to the exchange each day to find out what the dollar amounts to, it will not be good for business. It will not allow companies to ascertain what the selling price of their products will be and it will have, in my opinion, a very detrimental effect on stabilizing the exports of this country.
I was very interested the other day to hear the remarks of the Minister of Public Works. Over the years until now he has had some influence in stabilizing the economy of this country through the exceedingly heavy expenditures we have made in the mortgage field through Central Mortgage and Housing Corporation. As I understood the minister's statement, he said that income tax today is lower than it has been for years. It seems to me this is in contradiction of the Financial Post, which on page 8 has a table headed:
Background to the budget. Where the revenue comes from. Income tax bite getting bigger.
This table shows that personal income tax in 1939 was 11 per cent; in 1950 it was 28 per cent; in 1961, 34 per cent. With regard to corporation income tax, in 1939 it was 19 per cent; in 1950, 27 per cent; in 1961, 26 per cent. This does not indicate to me that it is getting easier on the pocketbook of the workers of this country. I think they have a continuing problem in trying to make ends meet. The problems of income tax are not getting less but are getting more, and will continue to get worse. The only way income tax can be reduced is to increase the allowances for those in the low income group, and this has not been done. As long as those


paying income tax have to carry those thousands and thousands of people who are unemployed it will not be very easy to arrive at a situation that will be more advantageous.
It seems surprising to me also that a minister of the crown, and in particular one in as important a position as the Minister of Public Works, should have risen and made the speech he did make the other day. I do not think this is a reflection on the people he mentioned, but it is a reflection on those he did not mention and the fact that many of them have had no interest and are not willing on behalf of the people they represent to express an opinion on this budget and a number of other things about which they could have spoken. I think it is unfair for the government or any member of the cabinet to stand up in this house and say that the opposition takes up too much time; because on a number of occasions we have seen speaker after speaker on the government side talk about things which were only being discussed in order to give the government time to bring in legislation which they were not capable of bringing in earlier. Even in the last few weeks of this session we are still not sure what all the legislation in this session of parliament is going to be. It is interesting to note that the suggestions made by the Prime Minister as to what it is going to be are not necessarily those of the leader of the house, and each one has an opportunity to introduce something of his own.
It has been said that this government is interested in pushing the idea of socialism versus private enterprise. I believe that anyone, including the Prime Minister, who is interested in this argument should read the Ottawa letter which appears in Saturday Night of July 8. It says:
We have neither socialism nor private enterprise and are not going to go whole hog for either one or the other. Now, it seems clear, Mr. Diefenbaker's "issue" seems to boil down to "private profit versus crown corporations".
It goes on to say:
The back benches of the government are packed with little men who literally hate the crown corporations and their top executives. These M.P.'s are not big-minded enough to believe in the neutrality of civil servants.
The article goes on:
Similarly, the little men hate Donald Gordon and his C.N.R. They loathe the C.B.C. They cannot understand why profit-making crown corporation Polymer is not turned over to private pockets. And they want money-saving Eldorado Aviation turned over to private operators.
The article argues that this is in complete contradiction with what the Senate unemployment committee came up with when it

issued a report which made the whole socialism versus private enterprise battle completely irrelevant. The article goes on to say: "The maintenance of an adequate rate of economic growth requires a continuing high level of capital investment, both private and public. Private capital investment must be supplemented and stimulated by an adequate rate of government investment in social capital."
It goes on to mention that this government have considered this and are not in complete agreement with those who believe otherwise, because they are going to add to the capital of the industrial development bank so that government assistance can be given to the little people of this country.
I am particularly interested at the time of this budget in two or three matters which appear to me to be of great interest. One of them is this matter of where the Conservatives stand in relation to labour. This is going to be an important matter this summer. It is going to be discussed without doubt on a number of platforms, and I think we should take a look now at what the program of the government is.
I should like to mention two or three things. This morning I asked a question as to the government's intentions concerning Canadian postal employees. The question was simply this; does the government not believe that those people who are granted statutory holidays should be paid extra in respect of those statutory holidays when they have to work? Is it not the intention of the government to pay those people double time for the work they do on those days which would normally be days off and which are classed as statutory holidays?
If we read the long reply given by the Postmaster General on June 27, as reported at page 7107, we find it boils down to the fact that this government does not believe that employees are entitled to time off or that they should be paid extra for working on statutory holidays. They obviously do not believe in the system of double time for holidays that are worked. I suggest they probably also are in a position where they abuse, and widely abuse, this business of sick leave. In the reply by the minister he referred to the fact that they could take their sick leave and use the sick leave pay as compensation for the day they worked, though the fact that they did come in early every morning could be considered as overtime.
It is generally agreed by everybody who has thought about this matter at all that the interests of this country can only be served by bettering our labour code so that our workers may be in a continually better position to serve the needs of this country. I think it is a step in the wrong direction when the Canadian government itself gives no
The Budget-Mr. Peters assistance in the relationship it has with the postal employees in connection with this latest dispute.
This is shown in other ways. The Prime Minister himself said this year that the workers of the country, particularly those employed in the railway industry, would have an opportunity of presenting their case before a committee of this house. But when the matter of the railway workers was referred to that committee it did not concern all the railway workers of this country but only some of them, those employed by the Canadian National Railways. I believe there is a problem, well known to many members of this house, in relation to those C.P.R. workers who were pensioned off many years ago.
I refer to one example. An engineer who retired in 1953 and one who retired recently, both with 48 years' service, are treated in entirely different ways. The first receives a pension of $123.45 per month with no survivor benefit. The other receives a pension of $346.74. Should he predecease his wife she will receive a pension of $173.37. Her pension will be $49.92 higher than that of the first employee with 48 years of actual service as an engineer. Had the first engineer made provision for his wife his pension would have been reduced to less than $93 to provide her with a pension of less than $46. There were nearly 900 pensioners in British Columbia in 1953 receiving pensions of less than $51 per month with no survivor benefit, who were, at that time, given no consideration whatever.
This same condition applies at every terminal on the Canadian Pacific Railway from coast to coast. All pensioned employees for whom we speak, had they been employed by the Canadian National Railways, would have received equal treatment on the basis of service and income with those who were retired after January 1, 1953, including a survivor benefit.
We raise these matters because they indicate that this government is not being honest with the Canadian people when it says it wants to speak for labour and give labour a fair deal. We should look at what this pension plan really amounts to. It could, of course, be argued that the Canadian National is a government owned railway while the Canadian Pacific is not. I do not pretend to discuss now the merits of the Canadian National as against the Canadian Pacific, but it is simply not true that the Canadian Pacific has stood on its own two feet. I think it could be argued over the years we have spent almost as much on the C.P.R. as we have on the C.N.R. I would not even go so far as to say that we owe much more to one than

The Budget-Mr. Peters we do to the other. I do suggest, however, that these pensioners have not been given any consideration during all these years. The position of that company was not such as to warrant the statement that they could not afford to pay increases to these people on pension.
In looking at the annual report of the Canadian Pacific Railway for 1952, we find that the total reserves and unadjusted credits amount to $555,843,167, which is a sizeable sum of money. By 1960, deferred credits, reserves and provision for depreciation totalled $1,057,665,415. This would indicate to me that we have given a great deal of money, through subsidies and other means to this company in return for which we have received very little, especially by way of consideration for employees who have been helpful during all these years in establishing and maintaining that company.
I believe, therefore, Mr. Speaker, that the Prime Minister was less than fair when he referred to a committee this matter of Canadian National pensions and did not include the question of Canadian Pacific pensions. It seems to me that all these people who believe in the free enterprise system, the social credit members and the union nationale members, are not willing to refer the question of Canadian Pacific Railway operations to a committee, and thus prove to the members of the house that this company is all that is alleged to be. I am suggesting that these members of the house should be willing to follow this course if they are going to be fair to labour and to the Conservative party.
The unemployment insurance fund has been practically depleted. The government has suggested that they are going to put in $170 million to tide this fund over a difficult period. This step should have been taken a long time ago. The fund should never have been allowed to get into the depleted condition in which it is now. I believe that this amount should have been added to the fund, and more, rather than using it as a subsidy to finance government operations in dealing with the recession, something for which this government was responsible.
In recent days, Mr. Speaker, this government has done something else to which labour will have to give some consideration. The hon. member for Burnaby-Coquitlam (Mr. Regier) asked a question the other day concerning lay-offs at the Saskatoon plant of Westeel Products Limited. Evidently the unemployment insurance commission office there had suspended these employees from receiving benefits because of a rumour to the effect the employees had been laid off in anticipation of a strike. Does this action not mean


Mr. Deputy Speaker:: Order. I am sorry to interrupt the hon. member but his time has expired.


Lester Bowles Pearson: Mr. Speaker, the budget debate as well as the speech of the minister and the budget itself which we are now considering have inevitably prompted the question in our minds: Why has "expansionist" finance become a government slogan after four years of recession and slow-down during which the government rejected proposals for expansionist finance from this side whenever they were put forward? Well, the question perhaps is not too difficult to answer. The answer is that we are approaching an election.
This budget has been described by the minister as an economic budget. Well, it is an economic budget in the sense perhaps that it is not itself an election budget; the

The Budget-Mr. Pearson glamorous political gifts are to come next time. The good features in this budget-and there are some, we put some of them forward ourselves-are four years late, but the weaknesses and inadequacy of the budget, and I hope to point out some of the weaknesses, will be felt now.
This budget is a confession of the failure of the government to do anything really effective during four years to halt the decline in our development; a decline shown by the fact-and this cannot be disputed in this house or outside of it-that real output per capita has decreased in those four years, while in the previous eight years it had increased by 20 per cent. Therefore, Mr. Speaker, this budget is simply further evidence that we have a government which mistakes words for action, which is more concerned with the sensation created than the result achieved. It seems to think that cleverness in politics is a substitute for skill, wisdom and steadiness in government, and that excitement is a substitute for efficiency.


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


Lester Bowles Pearson: Yes.


James MacKerras Macdonnell: He says production had increased 20 per cent. Will he indicate how much of that was price increase?


Lester Bowles Pearson: A substantial portion; I could not indicate the figures. I do not know what the price increase was in the eight years; perhaps the hon. member knows more accurately than I do. It would be something like 4 per cent, or 5 per cent, if I had to hazard a guess, but I am not sure.


James MacKerras Macdonnell: I put on the record this morning, if I remember rightly, that from 1945 to 1952 it was 50 per cent.


Lester Bowles Pearson: Well, even if it was 50 per cent-I am not accepting these figures, I just do not know; my hon. friend has not put them forward as being accurate, but even if that were the case-it would still leave a real increase per capita of 10 per cent against an actual decrease in the four years. However, the attitude of the government, the effectiveness of the government is shown, as I was beginning to point out, by the fact, in our view, that problems are allowed to drag on until they become crises. We have said this many times over here. Then expedients are frantically sought out too late, however, to deal with those crises, while a smokescreen is thrown up to conceal failure to act in time. I could give many examples to support that statement. For instance, unemployment was not even, in the eyes of the government, a really serious problem until the autumn of 1960.


The railway problem was allowed to drag on until it became critical, when a subsidy was thrown in, as usual, as a stopgap. Defence policy is in a state of confused indecision. We are spending millions and millions on we know not what kind of defence.


Mr. Harkness:: You don't know but everybody else knows.


Lester Bowles Pearson: We do know one thing, Mr. Speaker, namely that we are buying a secondhand United States interceptor to replace a first class Canadian plane that was scrapped and sunk without a trace except the trace of bitter resentment and national chagrin.


Douglas Scott Harkness: The most impractical effort any government ever made was to start that plane.


Lester Bowles Pearson: Monetary policy is no responsibility of the government. That is the position they took up till February last. When Mr. Coyne exposed the fallacy and, indeed, the danger of that attitude, four years later a royal commission is set up to deal with the problem. We have advocated formally by resolution in this house that monetary policy should be a subject for parliamentary inquiry and investigation, and this should have been done a long time ago. International trade problems can be evaded while the government preaches and lectures and waits for something to happen in Europe. A budget should be balanced, until five failures to do so convert a deficit into a suddenly discovered virtue. And so on and so on and so on- confusion, indecision and delay.
These are the methods that were followed in the production of the budget which we are now considering. It was produced after unprecedented delay and unprecedented excitement, disturbance and crisis for which the government is responsible and which culminated in the unhappy controversy over the governor of the Bank of Canada. The impression was created by all this excitement, and perhaps it was meant to be created, that something really important, something really big, was to be included in the budget, something to lead us out of the valley of recession again, into the uplands of expansion, growth and prosperity, something that would constitute a massive attack on unemployment which remains so distressingly high, higher indeed than the same time last year in spite of all the complacent predictions of ministers.
Indeed, Mr. Speaker, this budget was to have been such an intoxicating one that the governor of the Bank of Canada was to be forced to resign before he could see it. As it happened, there is not very much in the budget to cause him any surprise or provoke much disagreement with it or to give adequate

stimulus to our economy which needs that stimulus so badly. In short, the budget did not live up to its advance billing.
Indeed, so little of expansion is there in the inadequate measures of this budget that the minister himself predicts an increase in our gross national product for the current year of only 3 per cent. That is less than last year when the gross national product was not enough to produce jobs in mid-winter for more than three quarters of a million people. We can perhaps take some comfort from the fact that the minister may be as far off in this prediction as in the others he has made.
This year is to be another deficit year but it is not an expansion deficit. The nature of the budget makes that clear in spite of all the words of the minister in his attempt to prove the contrary. Away back in June, 1958, the Minister of Finance had this to say. I think I have quoted these words already but they bear repetition.
These huge deficits ... carry serious implications for the ... future health ... of our country.
Well, Mr. Speaker, we have had four more since then, accidental and unplanned. The minister chided us and me in particular last evening with inconsistency but what did he say just a year ago? I quote from his budget speech of that time:
The restoration of a balanced budget this year-
That was 1960.
-constitutes the achievement of an objective to which we have been moving purposefully and deliberately for some time. The position we have now reached, with its solid prospect of a fully balanced budget, represents the fruits of carefully designed policies; it is not something that just happened.
That is quite true. It did not happen. The minister's predictions last year were as wrong as his recent praise of a deficit rings hollow. It is true that the minister as a prophet on economic matters still thunders in the best old testament style but few of his prophecies are being fulfilled. So we have learned from experience to take him with several grains of salt when he starts forecasting. Perhaps he will be as bad a prophet this year as in the others. After all, last year he predicted a $12 million surplus which became a $345 million deficit. The reason he gives for that mistake in the white paper is that unfortunately 1960 was a year not of the solid expansion predicted but of adjustment and of special complexity. Indeed, on page 46 of the white paper he finally breaks down and admits that the economy has slowed down since this government took office.


John Whitney Pickersgill: Doom and gloom.
The Budget-Mr. Pearson


Lester Bowles Pearson: So his record of predictions is not a very respectable one. In his budget speech in 1960 the minister made other predictions which in the light of experience have been shown to be away out. We all remember that he said that the gross national product would go up 6 per cent. In fact, we got an increase of 3.2 per cent and only 2 per cent in constant dollars. Yet when I commented in the house on the minister's predictions in my budget speech last year and said that this and certain other predictions were too optimistic, when I said that in my view the increase in the gross national product would more likely be 3.5 per cent-I was a little optimistic-and that there would be serious difficulties in 1960 with regard to unemployment, and when I asked the minister at that time what plans the government had to meet these economic difficulties which we felt were looming up the minister again wrapped the flag around himself and accused us of impugning the honour and reputation of Canada and of selling our country short. Unhappily, Mr. Speaker, we were right and he was wrong.


An hon. Member:: Again.


Lester Bowles Pearson: The minister and his colleagues are no scoundrels but patriotism is often their last refuge against argument that cannot be met in any other way. Look at unemployment. The minister said last year that the situation would improve. In fact we know now that the average during 1960 was 7 per cent compared with 6 per cent in 1959. Capital expenditures in 1960 were $8,200 million or 2.6 per cent below 1959. Capital expenditures in this country as a percentage of gross national production were 22.8 per cent, which is the lowest since 1951.
An increase in private investment was forecast by the minister's colleague, the Minister of Trade and Commerce (Mr. Hees), in one of his predictions. He said it would increase 4 per cent whereas in fact it decreased 2.6 per cent. So, Mr. Speaker, how can we have confidence in this government's fiscal policies and in their administration of them when the Minister of Finance can be so wrong in his assessment of economic conditions in this country and of the government's financial accounts?
Even the minister himself no longer has that same buoyant confidence in his predictions of things to come.


Donald Methuen Fleming: Are you sure?


Lester Bowles Pearson: This year he refused to give us a straightforward and clear-cut forecast for the increase in the gross national product in 1961. He is becoming a little more careful
7258	HOUSE OF
The Budget-Mr. Pearson as he goes on because this is what he said as found on page 6640 of Hansard:
But this improvement-
He is talking about the expected improvement which we all hope will take place:
-which could be expected in the ordinary course of events and without further stimulus, would, I believe, be modest, an increase of about 3 per cent in the G.N.P.
This is less than last year. So the minister has become, in my opinion, overcautious and that is quite a change. In 1960 which was a recession year, the increase was 3.2 per cent. In 1961, a year in which the Prime Minister and the other ministers tell us that the recession is over, the Minister of Finance predicts a rise of only 3 per cent, less than last year. The minister has become a prophet of doom and gloom.


Donald Methuen Fleming: Oh, no.


William Moore Benidickson: We need at least 6 per cent.


Lester Bowles Pearson: In a year in which he says the recession is over, he only has the confidence to predict an increase in the G.N.P. which is less than last year, a year of recession. How is he going to explain that? He has been telling us that the recession is lifting. If it is lifting we shall surely have in our production next year a greater increase than 3 per cent, which was not enough last year to prevent massive unemployment and slow down.
Why has the minister become so pessimistic and so cautious in his forecasting? I can see one reason and I have a feeling that it is the right reason. The minister wants to be in a position to tell us next year that the actual increase has exceeded his expectations. I can picture him in the house, if he is here then, saying that his expectations were exceeded and that the outcome could be due only to his budget and government policies. The modesty of the minister this year is merely intended to serve as a background for his glorification next year.


William Moore Benidickson: Having been struck out four times.


Lester Bowles Pearson: Next year he may feel will be the year before the election. I am prepared to say this, and although he does not need it I should be glad to give the minister permission now to quote these words a year hence if we are both here. I am prepared to say that the minister will be wrong again this year, but for once and for the only time since he has been minister he will be wrong on the conservative side.


Donald Methuen Fleming: The hon. gentleman is hedging now.


Lester Bowles Pearson: In spite of the government's lack of effective policies and because of the hard work of our people, because of price increases-and I shall have something to say about their probability later-because of the resilience of our economy and because of business improvement across the line, I believe that the gross national product in current dollars will be higher than that estimated by the minister.


William Moore Benidickson: There is statesmanship for you; not politics.


Donald Methuen Fleming: Oh, oh.


Lester Bowles Pearson: I am also prepared to say that the average level of unemployment in 1961, in spite of the minister's claim will be at least as high as that in 1960 and in spite of the minister's claim that there is nothing structurally wrong with our economy. The minister has been converted in another respect.


William Moore Benidickson: Somersaults.


Lester Bowles Pearson: He is making a good many trips to the penitent's bench these days.


Paul Joseph James Martin: He should do so.


Lester Bowles Pearson: We all remember how he used to lecture us in this house and how Mr. Coyne used to lecture us also in the country in sombre terms about the dangers of uncontrolled expansion and inflation, and this at a time when we were in the midst of a recession with massive unemployment. Now that we are told that we are out of the recession and that we are on the road to full recovery and expansion again, as the Prime Minister keeps on assuring us, in this situation, which should result in an increase of inflationary pressure, the minister now tells us that any serious danger of inflation has disappeared. I had better quote him. I think these words have already been put on the record. As found at page 6649 of Hansard he said this:
I do not think that we are in any serious danger of inflation under present circumstances, with so much unused capacity in our economy. A decline in the exchange rate will mean modest price advances for some of the goods we obtain from abroad as well as some of our export commodities. I am confident, however, that if under present conditions of unused economic capacity there is any effect on consumer prices and the cost of living-
And he used these words again last night.
-these will be minimal.
I suppose that means practically not noticeable. I believe that when the minister presents his next annual budget, he will have to admit that he has been wrong here, that prices will start to rise again-indeed they are starting already-and that inflation will

be, in the present circumstances, a real danger, as it was in the booming mid fifties. But the great difference with that earlier period will be that the rise in prices now will be largely due to government policies and will be accompanied by unused capacity and abnormal unemployment, whereas in that earlier period it was caused by shortages and bottlenecks in the private sector of our economy. Last year the minister overestimated the rise in the G.N.P. and the danger of inflation. This year I think he has underestimated both.
There is an even more spectacular conversion of the minister. This is his conversion to the virtues of deficit financing.


Murdo William Martin: A planned deficit.


Lester Bowles Pearson: The threat of yesterday has become the opportunity of today. The economic threat of yesterday has become the political opportunity of today. Listen to this excerpt from his budget speech, from this always flexible but now expanding minister. As found at page 6642 of Hansard he said this:
When there is a substantial degree of slackness in the economy .. . budget deficits can provide an important stimulus... If appropriately planned and timed-
Then he says: in present circumstances a sizeable deficit will help to stimulate the economy.


William Moore Benidickson: A year too late.


Lester Bowles Pearson: Why did the minister not talk like this and act on this talk in those earlier years when a deficit in an emergency situation for stimulating the economy and planned for that purpose would have been of such great value.


William Moore Benidickson: He did not see it.


Lester Bowles Pearson: The minister now says that if we quarrel with his conversion to deficit financing we are contradicting ourselves. He went to some lengths to prove this or in attempting to prove this last evening. Our position on this matter has not changed. No one likes going into debt, or he should not like going into debt either personally or nationally. However, when you are in trouble, borrowing can be essential to get you out of trouble but only for that purpose. If it achieves that purpose, then you stop borrowing and begin to put something by, if you are wise, for the next rainy day. But the minister now says we are out of trouble or soon will be out of trouble but we are going to borrow more than ever. The minister in this respect is not contradicting others as he accused me of doing last night. He is contradicting himself, something which is worse.
May I now say a few words about the budget itself, and about the policies that are
The Budget-Mr. Pearson put forward in the budget. The budget contains several policy announcements but, of course, it is also remarkable for its omissions. There is nothing in the budget for agriculture. Does that mean that the wheat producers will not even get this year the $1 per acre payment they received last year, the virtues of which the Prime Minister was preaching yesterday on the prairies? Does this mean, also, that the government claims that eastern farmers have no problems and do not have to face serious difficulties, at a time when their income continues to decline?
There is nothing in the budget to assist the long range development and short range unemployment difficulties of the Atlantic provinces. Surely the government must now realize that its provision for double depreciation is completely inadequate and in its application much too restrictive, if I may use that word, to do the job. If we want to remove the hardship of unemployment and stagnation; if we want our economy to get moving again, we must begin by effective means of assistance-if I may use the expression without being misunderstood-for our economically depressed areas. So far as the opposition are concerned, we have insisted since 1958 on the urgent necessity of remedying this situation of regional chronic unemployment.
In March, 1961, for instance, I put forward in this house a six point program of regional recovery. We had a two day debate on this important matter at that time. But the government, in spite of the most solemn promises which it made in 1958, has refused to do anything adequate for the development of the Atlantic provinces or other underdeveloped areas in this country.
What about trade policy? The Minister of Finance told us a few days before the budget -and somewhat surprisingly because of his record-that he was in favour of an expansionist trade policy. He devoted quite a long section of his budget speech to trade matters, but it was the old lecture. Canada, he said, would continue to adhere to GATT and to respect her international obligations. He suggested at least, if he did not say so in precise terms, that those of us on this side who were advocating proposals looking for an Atlantic free trade area which would be open to any country in the world to enter on the terms which were applicable to the others, were advocating a kind of restrictionist bilateral approach to trade problems. Not at all. This is the way to approach multilateral trade in the present circumstances.
The minister then said this. This is the only indication of his understanding this particular problem:

The Budget-Mr. Pearson
We shall, of course, have to adapt to changes in the world around us and be alert and flexible in meeting new challenges and opportunities as they arise. For the present at least the situation is much too unsettled to consider seriously a sharp reorientation in our policies along these lines.
In other words, let us wait and see. Let us change our policy, if necessary, only after other countries change theirs and when it may be too late to safeguard, let alone promote, our own interests. What a revealing Conservative attitude:	We will not promote
necessary change but we will adapt to the changes which are being made by others which are forced upon us. In this connection I would draw attention to Europe. Where is the positive, dynamic and imaginative trade policy that our country so urgently and so badly needs at this time?
I now come, Mr. Speaker, to the budget proposals which will, according to the minister, transform our recent toils and trials to new triumphs. They can be divided into four main categories. I shall say only a few words about each. There is the exchange rate policy, debt management and interest rates policies, fiscal policy including tax changes, and the deficit.
First the exchange rate policy, about which there has been a good deal said by hon. members on this side of the house. I do not think we need apologize for that because this is certainly one of the most important features of the budget. The minister has at last come to the conclusion that the high premium on the Canadian dollar was hurting our economy. He is now prepared, with all the risks involved-some of which were pointed out by my hon. friend from Essex East this afternoon-to see the exchange fund used to bring down the exchange rate of our dollar. The words he used-and these are the words which cause us so much uneasiness- were to bring the dollar down "to a significant discount".
On this side of the house we have been deploring the high premium on the Canadian dollar since the recession of 1957-58 and we have been steadily advocating appropriate remedial government policies. Notwithstanding what the minister tried to say last evening in accusing us of contradicting ourselves, we still support that view. But the minister has certainly drastically changed his view. Last year-and I think these words were quoted this afternoon-he deplored the high premium, but he claimed that it resulted from "the free play of forces of supply and demand", and he strongly opposed an arbitrary and artificial attempt by the government to work against basic economic forces.
Well, what is he doing now? He had this to say, as reported at page 2673 of Hansard:

An attempt by the government artificially to lower the external price of the Canadian dollar would involve borrowing or raising by taxes very large sums of money with which to buy up foreign exchange.
Then a little later:
In other words we would be embarking upon a gigantic financial speculation with no assurance of success.
Mr. Speaker, that is exactly what the minister is doing now. He is proposing to do just that, to use the exchange fund in "an arbitrary and artificial attempt by the government" to bring about a "significant discount". This was a late conversion by the minister, but we are always glad to see him make progress in understanding and wisdom. But we disagree with the uncertainty of his goal and the danger of speculation which will be created by that uncertainty. We disagree, as has already been pointed out on this side of the house, with the methods he proposes to use in order to reach that goal, if indeed it is a goal at all.
By refusing to define what he means by a "significant discount", the minister will certainly create uncertainty and confusion, if he has not already done so, which surely can only adversely affect our external financial transactions. What is a significant discount- 3 per cent, 5 per cent, 10 per cent, or more? Nobody knows. What a wonderful opportunity for gambling.


Paul Joseph James Martin: The worst kind of speculation.


Lester Bowles Pearson: The minister wants to control the price of our dollar arbitrarily but he does not know where he wants it to be. He will not disclose the discount he wishes to achieve. What could be more arbitrary and artificial than that approach? The significant discount could be 3 per cent one week and I suppose it could be 5 per cent the following week, these figures to be maintained not by market action but presumably by governmental action. How can our exporters and importers carry on their business on that basis, with the constant threat of governmental interference with market forces but with no fixed objective to be attained by that intervention? Surely that is another example of wrong and arbitrary use of ministerial authority.
The elimination of the premium on the Canadian dollar is certainly a worth-while objective. We have been saying that on this side of the house for a long time. It should have been sought long ago. Our trading partners and competitors would then have undoubtedly understood our position and accepted such a move. But to seek to achieve a significant but undetermined discount now through arbitrary governmental action of the

nature proposed by the minister, when we have no currency difficulties, is something very different indeed.
The government is trying to secure through exchange fund operations advantages and benefits which it was not able to secure through tariff and trade negotiations. We are also, presumably, going to try through this kind of action to give greater protection to our domestic industries because we are unable directly to increase tariffs generally due to our international obligations under GATT. The minister has pointed out that we must remain true to them, and I agree. What would happen to international trade and ordinary financial transactions in the world if all other nations were doing what our government is now proposing to do? In so doing, the minister certainly violates the spirit of GATT although in another part of his speech he proclaimed that Canada-and I have quoted this already-must remain a law abiding member of the international financial and commercial community.
What about our position in relation to the international monetary fund? Surely this must be giving the minister some cause for worry.


Donald Methuen Fleming: No.


Lester Bowles Pearson: Well, the hon. gentleman should be worrying about it. While other nations have a fixed exchange rate which they cannot change without the approval of the fund, Canada has been able to avoid this rigidity because we have been willing to let market forces determine our floating exchange rate. What will happen now? Can we be the only member of the fund which can devalue its currency through government action without having an obligation to seek the approval of the other members of the fund? Why should Canada be placed in this preferred position? Perhaps the minister would explain that. It must also be pointed out that this significant devaluation of the Canadian dollar will have certain adverse effects. It will have certain advantageous effects, too, of course, in so far as it will benefit our exporters. If it does that, and the benefits are maintained, that is all to the good. But it will impose-and the minister will surely not deny this-an additional financial burden on the provinces and municipalities which in recent years have been forced to borrow on the American market because of tight money conditions and the high interest rates prevailing in our own economy. Moreover, producers and consumers will also suffer to the extent that they rely on imported goods the prices of which, if they are imported from the United States, will go up.
When the minister last year referred to the high premium on the Canadian dollar he had
The Budget-Mr. Pearson this to say, and I think these words were quoted by my hon. friend from Essex East:
On the other hand it-
That is, lowering the premium on the dollar.
-lowers the cost of imported raw materials and semi-finished goods used by manufacturers. It has helped to keep down our cost of living and the cost of producing.
It has helped, he said, to keep down our cost of living. The minister now reverses that policy. Does he deny, then, that one effect of this reversal might be to help to increase the cost of living?


Donald Methuen Fleming: Conditions are different now.


Lester Bowles Pearson: That is true. I have just said that. Conditions are different in the sense that we are told-and I hope it is right-that we are getting out of the recession. If we are getting out of the recession then our productive capacity is being more and more used and in these circumstances inflationary pressures will be stronger and this kind of exchange action should have a greater effect on the cost of living than it would have had if it had been taken earlier.
The minister has deplored the high level of capital inflow in recent years. He deplored -and I can understand his anxiety because it is one we all share-foreign control and particularly United States control over our industries. He referred to this in his budget speech as reported at page 6645 of Hansard. But that process of foreign capital moving into this country and investing in and taking over our industries will be easier by reason of this exchange action. A significant devaluation of the Canadian dollar will inevitably depreciate the value of Canadian assets in terms of the American dollar and it will give an additional inducement and an additional advantage to American investors as opposed to Canadian investors to purchase existing Canadian firms and do the very thing the minister says he is trying to prevent.
Now we come to debt management and interest rates. The minister, who is the very model of inconsistency, had this to say about interest rates on February 21, 1961. That is not very long ago. He said:
Lest the impression be created in the minds of some hon. members that the government has brought about high interest rates let me point out that interest rates in this country, while they are higher than the government would like to see on borrowings it has to make are lower than the interest rates in the United Kingdom and have been close to the 1960 rates of interest in the United States, the country which is the largest reservoir of capital in the world and whose rates traditionally are lower than interest rates in Canada.

The Budget-Mr. Pearson
That statement appears at page 2267 of Hansard. What does the minister say now? What did he say the other evening in this house as reported at page 6645?
-interest rates in Canada are out of line with those in the United States and some of the European capital exporting countries. We should like to see these spreads narrowed.
Well, I am not aware and I doubt if the minister is aware that those spreads have widened since February.


Donald Methuen Fleming: Yes, they have.


Lester Bowles Pearson: At that time, according to the minister, they did not exist or they were normal.


Donald Methuen Fleming: They have widened since.


Lester Bowles Pearson: In any case, the minister is telling us that he is now in favour of lowering interest rates, another conversion that comes a little late. The lowering of interest rates and easier credit should have been initiated long before now. But the minister in those days said he was fighting inflation. That, according to him, was the primary danger and his sermon was based on the theme of work and save, down with the demon of inflation. He wanted expansion, of course. We all wanted expansion. But he was worried about the kind of expansion we might get and its effect on inflation. Well, the minister in his budget now is giving to the government a set of conflicting policy objectives. I think it is easy to demonstrate this.
What about the demand for funds? This, in the months, ahead, would certainly have an effect on interest rates. If, as we are continually being told, the Canadian economy is on the road to recovery, private demands for loans will inevitably increase. Moreover, all the provinces and a great number of municipalities have already announced that they are planning for cash deficits in 1961 and 1962 and their demands for funds or their borrowing requirements will undoubtedly be heavy. Finally, according to the minister's own estimates, the new borrowing requirements of the federal government are likely to exceed $1 billion, a fact which now gives the hon. gentleman more comfort than the concern it used to give him if we can interpret his remarks last night. This means, surely, that the demand for funds is likely to increase rapidly in this country during the latter part of the current fiscal year. The decision announced by the minister with respect to debt management-and he put forward these figures as a mitigating force which will neutralize, perhaps, in his mind, this danger-will not do very much to curb this demand, or to reduce the pressures which are 
likely to be exerted on our financial markets. The intention, and I use the words of the minister, "to confine new federal market issues for at least the next several months to the 'short end' of the market", is supposed to be one of the things that will save us. That, of course, is not new. Since the great conversion loan most of the borrowings of the federal government have been, I believe, of a short term nature. The change to be made in the portfolio of the unemployment insurance fund is not likely to have any material effect at a time when, we are told and we hope, disbursements will now begin to be in better balance with the revenue of the fund. That is the only possible explanation one can give to the government's refusal to do anything about the fund. Finally, there is the establishment of a purchase fund of $100 million-I do not know where that is coming from-for the orderly retirement of government debt. This cannot possibly have any material influence on the market during the current fiscal year.
So much for demands. Now, what about the supply of funds to meet these rapidly increasing demands and the effect this will have on the minister's policy of trying to get interest rates down. The three main sources of supply are the savings of the Canadian people, the net capital inflow from abroad and changes in the money supply. The minister admitted the other night that the rate of Canadian savings is-I have not got his exact words-already high and reasonably satisfactory and this source of supply is not likely to increase very much with a mild recovery. In any event, he did not hold out any exaggerated-


Donald Methuen Fleming: I did not say the
latter part of that sentence.


Lester Bowles Pearson: Well, I will adopt the latter part as my own words, that supply from this source is not likely to increase very much with a mild recovery.
The second source is capital inflow. The government wants a lower level of capital inflow and has already taken steps to bring that about. Finally, the minister has ruled out, and rightly so, the possibility of a rapid increase in the money supply. I hope that in the face of all the pressure which will begin to develop he will stick to this. The minister said, as reported at page 6645 of Hansard:
It would be folly, for example, to attempt drastically and artificially to force interest rates down by irresponsible increases in the money supply. Such a device would be not only unsound but before long would prove to be self-defeating.
He is certainly right in that.


Donald Methuen Fleming: Would you mind reading the next sentence?


Lester Bowles Pearson: I would be delighted to read the next sentence, but I have not got it here. Perhaps if I am unfair to the minister he would give me the next sentence, because I am sure he would remember it.
Under such conditions of supply and demand we would expect higher, not lower, interest rates and tight, not easier, money. Yet the minister says that he wants-and I have no doubt he does want-to reduce interest rates and to bring about improvements in our capital markets which will be of direct benefit to the provinces, municipalities, business and other borrowers. That was, he claims, one of the main reasons why he found it necessary to get rid of the governor of the Bank of Canada. It will be interesting to see how the minister will achieve all these conflicting objectives he has now indicated. I predict that if economic conditions develop as he has indicated, and if he respects all his other commitments, as he will no doubt desire to do, he will not be able to reduce interest rates or to maintain the money supply at a responsible level as he promised.
We come now to fiscal policies.


Donald Methuen Fleming: I can give the Leader of the Opposition the page now; the second column of page 6645, beginning with the words, "We attach".


Lester Bowles Pearson: I think I had better read it because I do not believe the minister should be quoted in part.
We attach high importance to a climate of confidence and understanding in our financial markets. What is required is a judicious and well coordinated combination of fiscal, monetary and general economic measures, the elements of which vary in acordance with the needs of the times.
That is an admirable doctrine. I am certainly glad to repeat that because the minister emphasizes the desirability and necessity of co-ordinating fiscal and monetary policy. It was not very long ago that the minister was saying he had no responsibility for monetary policy. He now says that in an effort to reduce interest rates and get easier money it is absolutely vital that there is a co-ordination of fiscal, economic and monetary policies. This co-ordination can now be brought about by a government which refused to take responsibility for monetary policy.
I come to fiscal policy and, in particular, to the tax changes which normally would constitute the proof of the minister's claim that this is indeed an expansionist budget. The tax reductions, as we have so often been told in this debate, in the current year will amount
The Budget-Mr. Pearson to $65 million. Of this $65 million, $55 million will come from the elimination of the excise tax on automobiles. I am not going to deal with that because the hon. member for Essex East, who is primarily responsible for the removal of this excise tax, has dealt with it in some detail and pointed out that the benefits which it is hoped will come from the removal of the tax will be modified by certain circumstances which have arisen, including the sales tax in Ontario, the reduction of the exchange rate which will increase the value of imports and the reduction of the allowance for secondhand cars.
However, taking that $55 million out of the $65 million of tax reduction, what have we left? We have $10 million in tax reductions. Surely, we are not going to get a miracle of expansion from this. If that is the measure of the so-called expansionist fiscal policies of the minister, he certainly misled the Canadian people when he made his statement in the house on June 14 about a budget which was meant to be so sensational but which was, in fact, such an anti-climax. We on this side have recommended on more than one occasion during recent years that tax incentives, including specific tax exemptions and reductions, be used to promote a healthy economic development in our country, particularly in a time of recession when the economy has to get a shot in the arm for expansion purposes. The objectives sought by the minister in proposing tax changes in this budget affecting business are sound and sensible, although again they are too late in terms of our economic condition.
However, the methods which he puts forward, as is so often the case when his principles are sound, are completely inadequate and ineffective. Let us consider the technique of accelerated depreciation about which he has made so much. When applied within the limit of capital cost allowances not exceeding 100 per cent, this measure can at best be useful as an anti-recession measure only in persuading business to accelerate its investment program but it cannot induce industry to increase and enlarge such programs. The reason, of course, is that accelerated depreciation, applied within the limited context of 100 per cent capital cost allowance, merely means a deferred tax payment. This is precisely what is wrong with the minister's tax proposal. He wants to use a device which can induce business to re-schedule its investment plan in the short run, and that may be desirable, to promote long term industrial development and to stimulate economic expansion. In spite of the minister's claims for this proposal, the only objective conclusion to be drawn is

The Budget-Mr. Pearson that the proposed tax changes will have very little effect indeed on the rate of growth of Canada's economy.
We are, therefore, left with a deficit as the real shot in the arm for the economy, a deficit which includes $65 million of tax reduction of which $55 million comes from the removal of the excise tax on automobiles. The minister has told us that he does not know what this deficit is going to be. It might be $600 million, it might be $650 million or it might be $700 million. He sort of hit a medium amount between $600 million and $700 million and suggested it may be $650 million. One thing is sure. According to the minister his deficit was planned. He repeated last night that it is a planned deficit this time, and it is timely. It has come just at the right time.


William Moore Benidickson: Everything at the right time.


Lester Bowles Pearson: Well, the deficit of course was not planned at all. The best evidence of this is that it was forecast months ago by the Canadian tax foundation. Were they planning the deficit for the minister? There is no more planning for expansionist purposes in this deficit than there was for last year's deficit which began as a surplus and ended as a deficit of $345 million. It might not have been quite so high if it had not been for Good Friday.
Surely the minister cannot contend that this was a planned deficit. On top of the deficit, the estimates prepared in the fall of 1960 involved an increase of $383 million as compared with the main estimates of 1960-61. According to the minister when he tabled those estimates on January 26, I think it was, of last year, what accounted for this increase? The minister at that time indicated- and I think he had something to say about this last night-that the two main factors accounting for the increase in the estimates were civil service salaries and conditional payments to the provinces, especially to Quebec for the hospitalization plan. As we see it, Mr. Speaker, such increased expenditures could hardly have been planned to meet the economic conditions. Assuming no increase in revenues in 1961-62, as compared with 196061, rising expenditures added to the deficit of $345 million last year would have produced in the current year a deficit of $728 million, which is very close to the estimate given by the minister.
So much for planning. On the revenue side the minister expects an increase in 1961-62 of only $150 million. While he announced tax reductions valued at $65 million it remains true to say that the lack of growth in revenue is mainly due to the recent recession and to the current stagnation. On the basis

of this evidence, it is clear that the minister shows no respect for himself or for the facts when he claims that he planned the deficit this year to bring about expansion.
We also claim, contrary to what the minister has said, that this deficit is badly timed as well as being not expansionist. We are told by the minister, we are told by the Prime Minister and by the Minister of Trade and Commerce ad nauseam, that 1961 will be a year of recovery. We hope it will be. In terms of cyclical pattern, therefore, this year should be compared with 1959 as a year of recovery, while 1958 should be compared with 1960 as a low point in the recession. I think the minister will agree with that. What do we get now in terms of government policies in a year of cyclical recovery but when our structural and long term problems are becoming more evident? In spite of the evidence of recovery we get not an expansion but an antirecession program, with a record, unplanned, peacetime deficit brought about by increased fixed expenditures, which will create inflationary pressures but with no effective measures to deal with the long term structural problems and above all our chronic unemployment. This is why we claim this budget is ineffective and inadequate.
In conclusion, Mr. Speaker, I will sum up our criticism of government economic policies as expressed in this budget and in the minister's statement.
First, we believe that those economic policies are ill-timed, confused and inconsistent.
Second, we believe that the measures proposed by the minister to bring about an uncertain but a "significant" depreciation of the Canadian dollar are not likely to achieve the results that are hoped for and are fraught with danger.
Third, in the field of monetary and debt management policy, the government will have to choose between lower interest rates and a sound increase in the money supply. It will not be able to achieve those two objectives at the same time, especially if it succeeds in reducing foreign capital inflow.
Fourth, the tax incentives provided in the budget will not succeed in bringing the balanced long term growth which is now essential.
Fifth, the government's fiscal policy, as outlined, is not suited for a period of recovery on which it is based and it is not designed to meet the structural problems of the Canadian economy.
Sixth, the fiscal deal with the provinces greatly weakens the principle of equalization and will result in growing regional inequalities which are bound to weaken our federal system.

Seventh, the budget provides no special development assistance to the Atlantic provinces and other areas of underdevelopment and over unemployment.
Finally, in the field of trade policy, the government maintains its creeping protectionism but refuses to face the challenge created by the emergence of new and important trading blocs in the world. In other words, this budget contains a few good measures but they are too little and too late, and they are not capable of dealing with the problem in this country as it should be dealt with at this time.
Many people in this country now agree that this government-and how right they are-is drifting, confused and inconsistent; that in four years this Conservative government has created a financial mess without succeeding in solving the serious difficulties experienced by the economy during those four years, the most important evidence of which is the continuance of massive unemployment. All the facts are there and the minister cannot deny them. He cannot deny them through official records.
Since 1957 our gross public debt will have increased by $4.3 billion and our net debt by more than $2 billion; and yet the volume of our gross national product per capita has declined by 5 per cent, and this is an official figure. Unemployment has reached record levels exceeded only during the great depression of the 1930's and agriculture is still facing serious difficulties. These facts are becoming more and more known to the Canadian people in spite of the huge and continuous outflow of Conservative propaganda. Of course, Mr. Speaker, there is no easy way out of the mess which has been created over a period of more than four years.


Donald Methuen Fleming: If there is a mess it goes back a good deal more than four years.


Lester Bowles Pearson: Whenever we talk about the past four years my hon. friend likes to talk about the years previous to those four years. How many people in Canada would love to go back to those years.


Donald Methuen Fleming: Do you want to find out?


Lester Bowles Pearson: We do indeed want to find out.


Donald Methuen Fleming: How soon?


Lester Bowles Pearson: I ask the minister to do his best to influence the Prime Minister to give us the opportunity as soon as possible. Mr. Speaker, more and more people are looking back to those days of steady and businesslike
The Budget-Mr. R. A. Bell management of our affairs, days of full employment, days of exciting national development, days of great national progress, days when Canada had a great influence in the councils of the world. Our main criticism of this budget, Mr. Speaker, is that it does nothing to give us any hope that those days will be restored.


Mr. Richard A. Bell (Parliamentary Secretary to the Minister of Finance):: Mr. Speaker, in incredulous fascination has the house listened this afternoon in the course of the debate to the speech of the hon. member for Essex East (Mr. Martin) and that of the Leader of the Opposition (Mr. Pearson). The big guns of Liberalism have been mustered in a final assault on this budget. Really, sir, I should have said the obsolete big guns of Liberalism, and I refer to the Leader of the Opposition and the even more obsolete and train-catching hon. member for Essex East. For the house is well aware, sir, that the present big guns of Liberalism are that trio of tyros, Gordon, Drury and Sharp, all of whose ideas as presented at the Kingston conference and at the January rally have been repudiated this afternoon by their erstwhile leaders.
Indeed, sir, as I listened with fascination to the Leader of the Opposition the only conclusion I could achieve was that the only consistency of the Leader of the Opposition was his total inconsistency with all previous pronouncements which he has made. That which he and the hon. member for Essex East have previously supported they themselves this afternoon repudiated. That which they have previously attacked they now assert as revealed wisdom.
Throughout the whole afternoon the Leader of the Opposition blew hot and cold. He straddled the fence, indeed, to such an extent that I thought the rust from the barbs of wire would eat right into his soul.


Lester Bowles Pearson: Quotation.


Thomas Miller Bell: First, I must deal with the pontifications of the hon. member for Essex East on the subject of the automobile industry. Seldom has the house been treated to such skilful evasion as when he was asked what, if any, recommendations of the Bladen report he approved.


John Whitney Pickersgill: Which ones do you approve?


Richard Albert Bell: He squirmed and he wiggled and he evaded.


Paul Joseph James Martin: You always want to know what we would do but you are the government.

The Budget-Mr. R. A. Bell


Richard Albert Bell: He did everything but answer. He poses as an expert, but what an expert. Even when he was offered unanimous consent to state his opinions to the house he avoided and evaded the whole issue. This should not surprise the house.


Paul Joseph James Martin: On a point of order, Mr. Speaker, I did ask for leave of the house to make a second speech but this was denied me and among those who denied me this opportunity was the hon. gentleman who now so unfairly attacks a conscientious member.


Richard Albert Bell: Mr. Speaker, never would I attack the hon. gentleman fairly or unfairly. The hon. member indicated that it would take him 40 minutes to answer a straightforward question which he might have answered in two sentences. He posed and he postured today, and he has on each occasion, as the one responsible for the abolition of the 7J per cent excise tax on motor vehicles.


An hon. Member:: What a laugh.


Richard Albert Bell: What is the record? I want to put that record before the house. According to the Parliamentary Guide, the hon. member for Essex East was sworn in as a cabinet minister on April 18, 1945.


Donald Methuen Fleming: A pretty black day.


Richard Albert Bell: For the following 12 years until the 21st day of June, 1957, he was an integral and very vocal part of the ministry of this country.


Donald Methuen Fleming: He was the whole show.


Richard Albert Bell: What happened to the excise tax on automobiles during that time?


Paul Joseph James Martin: It was reduced to 15 per cent.


Richard Albert Bell: Oh, let my hon. friend possess his soul in patience because I will put the complete record on Hansard.


Paul Joseph James Martin: I want to help you.


Richard Albert Bell: On that black day of April 18, 1945, when the hon. gentleman was sworn in as a minister the excise tax on automobiles was 10 per cent, and on that happy day in 1957 when he ceased to be a minister what was the excise tax?


Paul Joseph James Martin: Ten per cent.


Lester Bowles Pearson: We were selling motor cars in those days.


Richard Albert Bell: Yes, 10 per cent. What happened in the meantime? Here is the situation. On the 17th day of November, 1947,
[Mr. Martin (Essex East) .1

which must have been about the time of taxation by radio, what happened to the excise tax? The tax on the first $1,200 of the value of an automobile was raised to 25 per cent and on the next $800 to 50 per cent. On the value of an automobile in excess of $2,000 it was raised to 75 per cent. During that period of time the hon. member was the minister of national health and welfare and he was the member for Essex East professing to represent the automobile industry. Search the pages of Hansard, search the pages of the newspapers and see if the hon. gentleman ever raised his voice in protest against that.


Paul Joseph James Martin: Will my hon. friend permit a question? I was then a member of the government. Was it possible for me to raise in this house a point involving government policy? Will my hon. friend not say, however, that it is generally known that in cabinet I did fight for that industry and for the workers in the automobile industry.


Richard Albert Bell: Now the hon. member tries to violate his oath of secrecy as a cabinet minister and to state in this house what he said around the cabinet table.


Donald Methuen Fleming: Shame.


Douglas Scott Harkness: You did not do it very effectively.


Thomas Miller Bell: That is the type of belief my hon. friend and his friend, Mr. Coyne, have in the confidentiality of an oath.


Murdo William Martin: Let us keep our tempers.


Thomas Miller Bell: If the hon. gentleman really believed in this, if he was so sincerely interested in the automobile industry, why did he stay in the government?


Murdo William Martin: Because it was a good government.


Thomas Miller Bell: The reason the hon. gentleman stayed in the government was for the emoluments of office in which he believed more than he did in what he thought were the interests of the automobile industry.


Murdo William Martin: On a question of privilege, Mr. Speaker-


Thomas Miller Bell: Then, on the 31st of July-


Mr. Speaker:: Order.


Murdo William Martin: The hon. gentleman may attack me for my views but the hon. gentleman and no other member of this house can, with justification, attack my devotion to the interests of this country.


Thomas Miller Bell: Mr. Speaker, I have not been discussing the hon. gentleman's devotion to his country. I have been discussing his devotion to the automobile industry and may I say that we have heard very little else in the house for the past few days.


Mr. McCleave:: Devotion to himself.


Richard Albert Bell: The hon. member's influence was perhaps a little greater after this. It was in ascendency, because on the 31st of July, 1948, the excise tax was reduced to 10 per cent. However, on the 7th of September, 1950, the hon. gentleman was in a decline again.


Douglas Scott Harkness: After the election.


Richard Albert Bell: The tax went up then to 15 per cent. When it was reduced to 10 per cent on the 31st of July, 1948, that was shortly before an election. Soon after the election on the 7th of September, 1950, it was increased to 15 per cent. Then, on the 10th of April, 1951 it was increased to what? Twenty five per cent. Then the hon. gentleman became a little more wonderful in the government for on the 8th of April 1952, it was reduced to 15 per cent. That was in a budget with another election in prospect. Finally, on the 5th of April, 1955-


John Whitney Pickersgill: I wonder whether the hon. member would permit a question?


Richard Albert Bell: The hon. gentleman has been up many times. I am confined to 30 minutes and I should like to deal with two speeches that have been made and have taken at least two hours to make. Finally, on the 5th of April, 1955 the tax was reduced to 10 per cent.
That was the up and down, on again, off again Finnegan attitude that the hon. member for Essex East and his colleagues adopted during the years in which they were in power. How he can have the effrontery in this house now to claim parenthood for the reduction, I do not know. I suggest he stands exposed by his own inconsistency. His failures when in power to represent the interests of the automobile industry are exposed by what I have put on the record for all to see. How different indeed are the attitudes of the hon. member for Essex West (Mr. Spencer) and the hon. member for Essex South (Mr. Thrasher) who from the very time they came into this chamber have fought in the interests of the automobile industry.
I was interested in hearing the hon. member for Ottawa West (Mr. Mcllraith) speak on the radio and attack the government in sarcastic and scornful tones for not having adopted in full the commercial policy proposals of the
The Budget-Mr. R. A. Bell Bladen report. How very carefully today his deskmate, the hon. member for Essex East, avoided taking any stand. The hon. member for Ottawa West is the official trade critic for the opposition, and his considered statement was that these proposals of far-reaching importance, vital indeed at this sensitive period in our trading history, should have been implemented without any prior consultations with our trading allies or with industry or with management or with unions. Had the government done so without giving such opportunity for consultation, I think the hon. gentleman would have based his attack upon the allegation that we were recklessly jeopardizing our trading relations. What the government has done in this respect is to act responsibility in these far-reaching proposals. I believe the result of this responsible attitude will be generally beneficial to the automobile industry and to the people of Canada as a whole.
Then, Mr. Speaker, what of the speech of the Leader of the Opposition (Mr. Pearson)? Carefully he avoided most of the significant features of the budget. He talked a great deal of an election. How the very thought of that event must make the hon. gentleman shudder. He was bold in January of 1958 when he challenged this government to an election. Oh, how confident he was on January 20, 1958. What was the result? The result was the decimation of his party. Look at the serried ranks of Liberalism opposite.


Thomas Miller Bell: Look at the front row.


An hon. Member:: Look at the quality.


Richard Albert Bell: Then on the eve of
the recent four by-elections what did the hon. gentleman and his new organizer predict? They predicted a clean sweep.


William Moore Benidickson: We received a majority vote.


Richard Albert Bell: What a prophet and what a son of a prophet he was.


Lester Bowles Pearson: A son of a what?


An hon. Member:: A prophet.


Richard Albert Bell: The result of that clean sweep was three to one, and three to one it still is.
The whole speech of the Leader of the Opposition I thought was one of the better examples of Lamontagne phrase making but it carefully avoided any stand on any kind of issue, for all issues he evaded and straddled.
Oh, no, there was one thing on which he seemed to get steady. He seemed to get steady on the Arrow. He opposed the new and most satisfactory deal recently made with the

The Budget-Mr. R. A. Bell United States. This house and this country do not agree with the point of view which the hon. gentleman expressed. I believe that is a most satisfactory arrangement and one which will earn the commendation of the people of this country.


Mr. Hellyer:: That is just the hon. member's opinion.


Thomas Miller Bell: Oh, yes; I took down a phrase, "confusion, indecision and delay". That is what he asserts. He relates that phrase to the most comprehensive, realistic and expansionist budget in our history. That is the test of the hon. gentleman's judgment and of his economic reasoning. He had scorn for the deficit. It is not an expansionist deficit, he said. If it is not an expansionist deficit, what is it? He carefully avoided saying.
On television, as I hear, he very freely admitted that in the unhappy event he had been on the treasury benches this last year, there would have been a deficit and a very large one. Oh, he favours a deficit but not one which is achieved by the far-reaching policies of this government.
As was so carefully pointed out by the Minister of Finance yesterday, there are only two ways in which to avoid a deficit. The first is to reduce expenditures such as expenditures for social justice payments. Does the hon. gentleman wish us to reduce any of these expenditures that this government has increased with respect to the various social justice payments? Does he want us to reduce the payments made to the provinces which this government, in fact, has doubled since 1957? What would he wish us to reduce?


Paul Theodore Hellyer: The interest on the debt.


Lester Bowles Pearson: I will answer the hon. member's question, Mr. Speaker.


Thomas Miller Bell: My hon. friend has had an hour and a half this afternoon. He has had all the time he required and I do not want him to use any of mine.


Lester Bowles Pearson: I was only going to answer the question asked by the hon. gentleman.


Thomas Miller Bell: May I say to the hon. gentleman that at the present time silence for him would not only be golden but unusual.


An hon. Member:: You are asking a
rhetorical question.


Lester Bowles Pearson: Do not ask me questions.


Thomas Miller Bell: The second way in which to avoid a deficit is to raise taxes. Does my hon. friend stand with his friend Jim Coyne in favouring a massive increase in taxes? Does he want a 3 per cent increase

in income and corporate taxes? Does he stand for this new national development tax to raise $300 million or $400 million as his friend Mr. Coyne, under the urging of the hon. member for Bonavista-Twillingate (Mr. Pickersgill), now advocates? Does he favour increases in taxes on cigarettes and liquor as Coyne does? Does he stand with Coyne in the matter of increases in taxes or is he against Coyne?
I myself thought the most unusual thing the hon. gentleman said was this. He said the minister has become a prophet of gloom and doom. What a laugh that was. The test of the hon. gentleman's judgment is just in that phrase. This government, on the eve of the 94th birthday of Canada, is filled with confidence in Canada's future and the greatest of hopes and expectations under the progressive and realistic policies of this government.


William Moore Benidickson: After being asleep for four years.


Thomas Miller Bell: The predictions of the Minister of Finance, said the Leader of the Opposition, erred on the conservative side. By that I assume he meant that the predictions will be exceeded. What interpretation can the house put on this comment? Surely the only interpretation that it can put on it is that the policies in the budget will have an even more significant and salutary effect or impact upon the economy than that which even the Minister of Finance himself predicted. If that be the case-and what other interpretation can one take from what the Leader of the Opposition said?-then what greater commendation of the budget can there be? I invite the hon. gentleman to support the budget which will be, in his opinion, so satisfactory and as to which the predictions are, as he says, on the conservative side.
Of all the spurious arguments that the hon. gentleman advanced at any time, I thought the most spurious one was that in which he dealt with the Atlantic provinces. Hon. members from the Atlantic provinces will be able to bring the hon. gentleman up to date. They will be able to tell him what this government has done for those provinces in the Atlantic provinces grants and in the increases of $10 million in the latest proposal to the provinces. For 22 years the maritimes were wholly neglected by hon. gentlemen opposite. The advent of this government spelled a new era for the Atlantic provinces. I believe that those provinces will show to my hon. friend just how they have reacted to the sort of treatment they have secured in this new era under this new goverment.
Then the Leader of the Opposition spoke of the exchange on the Canadian dollar. In everything he said I thought he was totally

inconsistent, not only with Walter Gordon but really with himself and with everything that he had previously said on the subject. Indeed, I thought his comments were an almost incredible contradiction of the January Liberal rally. Is he for or against the use of the exchange fund? He did not say. He just straddled the fence. Again he tried to get himself into a position in which, whatever happens, he would have on the record some phrases so that he could say "I told you so". That, I submit to the house, is not the course of statesmanship. The house would admire him more if he would make up his mind, take a stand and "stay put". To get on both sides of every issue is not the approach the Canadian people expect of a responsible political leader.
One might go on indefinitely to speak of the speech of the Leader of the Opposition and of all its contradictions and extravagant exaggerations. However, all I wish to say is this. His conclusions were based upon false premises and each of the premises was contradictory of most of his previous assertions. He said there were conflicting objectives in the budget. I throw that statement back at him. I say that this budget is an integral part of a responsible, cohesive program of fiscal, monetary and commercial policy. I say that it has already made a massive start towards the achievement of its objectives. When this house tomorrow, I hope, makes it possible for us to get the co-operation of the Bank of Canada and to place a strong figure in the position of governor of the Bank of Canada, I believe there will be an even greater spurt towards the achievement of those objectives.
In his final words the hon. gentleman said something about the growth in per capita debt. I have dealt with this matter on other occasions in the house. The hon. gentleman so carefully avoided saying anything about the net per capita debt and about our ability to pay.


William Moore Benidickson: Every baby born shares the debt.


Richard Albert Bell: Oh, Mr. Speaker, from his seat the hon. gentleman, my old friend from Kenora-Rainy River, keeps mumbling. I confess I cannot hear what he is saying, though what he says occasionally succeeds in getting on Hansard.


William Moore Benidickson: I said, every baby born shares the debt.


Richard Albert Bell: If the hon. gentleman would contain himself in silence for a while, it would be appreciated. Yesterday afternoon the Minister of Finance set forth in a table at page 7220 of Hansard the precise position with respect to the net per capita debt; the fact that it is considerably lower today 90205-6-459
The Budget-Mr. R. A. Bell than it was in 1950; that the net debt expressed as a percentage of gross national product has been consistently dropping since this government came into power. Whereas in 1950 the net debt expressed as a percentage of gross national product was 70.7 and in 1956 it was 41.6, today it is 34.6. That, sir, is the real test. It is the test of our capacity to pay. As I mentioned in my earlier speech on the budget, the braintrusters of the hon. gentlemen opposite do not agree in any way with the attitude they have taken.
Obviously this budget cannot be analysed in isolation from other government policies. It does not exist in a vacuum, insulated from the other measures proposed to parliament this session. It is part of a cohesive, integrated, positive program of action designed in a massive way to stimulate production, promote economic recovery, expand employment, develop resources and promote our external trade opportunities. The provisions of the supplementary budget have already had a significant impact on the encouragement of more effective use of Canadian savings in the development of our resources and in the improvement of our balance of payments situation. Decidedly the trends have all been in the right direction, although they have not proceeded far enough.
Our exports in the year 1960 reached the highest point in our history, and what is not too generally known is that our deficit in external commodity trade last year was much less than one quarter of the peak level of 1956, the last full year during which hon. gentlemen opposite occupied the treasury benches.


William Moore Benidickson: And the gross national product took the biggest dive we have had since the war.


Thomas Miller Bell: Mr. Speaker, I again hear some type of remark from my hon. friend from Kenora-Rainy River. If the hon. gentleman has anything to say, I wish he would rise and say it.


Lester Bowles Pearson: You won't let us.


Richard Albert Bell: In 1956 our commodity deficit was $728 million. In 1960 it was of the order of $150 million, and the hope is that 1961 may see, for the first time in many years, a surplus on external commodity account.
Sir, at this session parliament has enacted legislation to provide new assistance to housing, including urban renewal and slum clearance, loans for university residences, loans and write-off for municipal sewage installations, new and vitally important capital and maintenance aid for vocational training,
7270	HOUSE OF
The Budget-Mr. Denis small business loans, a program of agricultural rehabilitation and development, increases in veterans pensions and allowances, advances in export credits, to mention but the highlights of the sessional bill of fare.
As I have said, these are each an integral part of a cohesive economic policy and program of real action. The Leader of the Opposition cannot assert, and he has carefully avoided asserting, that there is any other country in the western world which has adopted a program of economic and social action in any way comparable in extent, depth and impact to that which has been presented this session to parliament by this government.


William Moore Benidickson: Why is it the only one that has flopped in the western world?


Richard Albert Bell: Mr. Speaker, this budget constitutes part of that program. This budget deserves the support of the house. It deserves, and I believe it will receive, the support of the country.


Mr. Azellus Denis (St. Denis):: Mr. Speaker, did you notice that the hon. member who has just spoken is very nervous, as are, I suppose, all Conservative members at the present time? He is almost as nervous as the Conservative members from the province of Quebec.


An hon. Member:: You would make anybody nervous.


Azellus Denis: Perhaps it is because he comes from the province of Ontario, where there has been a by-election recently, where a Conservative majority of 3,530 in 1958 melted and changed into a golden Liberal victory of 2,548 according to an early report of the election results. When the hon. member speaks of a three to one victory, I would ask him to bear in mind what I have just said. I think the hon. member is all wrong.
Is he aware that in Kings a Conservative majority of 1,100 has melted to a small majority of 165. Is that the three to one victory referred to by the hon. member who has just spoken? Is he aware that in Esquimalt-Saanich, a Conservative majority of over 14,000 has melted into a small majority of 700?


Mr. Drysdale:: What do you want-a consolation prize?


Azellus Denis: Was that a three to one victory for the Conservative party?


Donald Methuen Fleming: Your figures are wrong.


An hon. Member:: Three to one.


Azellus Denis: In Restigouche-Madawaska a Conservative majority in 1958 of 4,000 melted


into a small majority of 900. Is that a three to one victory for the Conservative party?


John Andrew W. Drysdale: Yes.


Azellus Denis: I would say that if we do not have a general election at this time it is on account of the four by-elections. I am not surprised that the hon. gentleman is very nervous. He even complains because we are using our big guns in order to fight the present budget.


An hon. Member:: Do you consider yourself a big gun?


John Andrew W. Drysdale: Popguns.


Azellus Denis: This is a free democracy. I do not include myself in the big gun category, but I do not think the parliamentary secretary contends that he is a big gun in the Conservative ranks. Since the beginning of the discussion of the budget we have heard from the Conservative ranks only water pistols.


Donald Methuen Fleming: Now we are getting the blunderbuss.


Azellus Denis: Why? To defend a bad budget. (Translation) :
Mr. Speaker, let me rather commend the Leader of the Opposition (Mr. Pearson) for his masterful speech. I am sure the people are only waiting for an opportunity, through a general election, to show their appreciation for the leader of the Liberal party and to take advantage of his competence not in the capacity of Leader of the Opposition, but as prime minister of Canada, to remedy the administration of the present government which has been running the country so badly for four years.
Mr. Speaker, I also wish to commend the hon. member for Essex East (Mr. Martin) for his great victory in relation to the budget. In fact, he has been able to persuade the Conservatives to remove the 71 per cent excise tax on cars. However, as he has indicated, this removal of the tax comes too late, because the season is too far advanced.
I understand that the removal of this tax was designed to provide jobs for the unemployed, in view of the unemployment situation created by the Conservative party in the city of Windsor.
It will take more than a year before those unemployed workers can return to their jobs. Had the tax been removed two or three years ago, the citizens of Windsor who are now unemployed would not have to go back to their jobs, because they would already be there, and we would not see in the province of Quebec and in the other provinces the foreign cars which are displacing Canadian cars. Those cars came into Canada

as a result of the trade mission led by the present Minister of Veterans Affairs (Mr. Churchill), and it seems that our trade commissioners were less interested in selling Canadian cars than in buying cars abroad.


An hon. Member:: Why did your own party not remove this tax in 1956?


Azellus Denis: Mr. Speaker, it seems that this budget is an effort to repair the damage done by the government, but unfortunately, some of the damage will remain. Happily, the Canadian people will not have to wait too long to rid themselves of the present government's sloppy administration.
Mr. Speaker, I also wish to support the position of the hon. member for Skeena (Mr. Howard), who pointed out the meanness of this government in depriving postal employees of statutory leave.
I also take this opportunity to note the arrival in the house of the Postmaster General (Mr. Hamilton), who probably heard that I was going to speak; knowing his great fondness for my speeches, I thank him for coming to the house. While he is here, let me say how mean it is to deprive his employees of statutory leave, when employees of private enterprise are allowed such leave.
What is worse, to my mind, is that those who have intermittent employment, that is who do not regularly work eight hours a day, are not even entitled to annual leave. I think such an attitude is inhuman and small-minded.
In the city of Montreal, there are some postal employees who work intermittently seven days a week, and if one of them wants to leave, he must do so at his own cost and expense, because this government does not pay him a single cent. To my mind, such conditions are inhuman and obsolete.
I asked the Postmaster General a question with regard to this matter and he asked me to wait and reiterate my question when his estimates were discussed. All that is very well, but if a general election comes in the meantime, I am very much afraid that I shall not be able to ask him the same question, for the good reason that he will not be Postmaster General any more.
However, I would ask him not to wait until the post office estimates are discussed next year before he considers this request made to him by the hon. member for Skeena, myself and all opposition members, in view of getting fair treatment for these civil servants who are working intermittently.
90205-6-iS9i
The Budget-Mr. Denis
Mr. Speaker, it would only require a few cents to pay the cost of those statutory and other holidays; in fact, I did suggest some means of doing so that would not cost this government too much.
It is well known that, year after year, the Conservative government has had deficits. Yet, Mr. Speaker, after reading papers this morning, I discovered a gold mine for this government. As a matter of fact, it seems that many thousand dollars do not get to the income tax division. Indeed, I read this morning in the Gazette:
(Text):
The federal Conservative party's chief organizer for eastern Quebec province testified before the Salvas royal commission here yesterday that he received more than $20,000 in National Union kickbacks.
At page 2 I read, referring to the testimony of Mr. Boucher:
His testimony came as the million dollar kickbacks probe-


Mr. Speaker:: Order. Perhaps the hon. member would relate what he is saying to the subject under discussion. There are two problems which present themselves to me. One is that this relates to a provincial inquiry- I am not sure whether it is a judicial inquiry, royal commission or what it is, and to an inquiry into the conduct of an individual, an inquiry which has not yet concluded. The other aspect is that unless the hon. member relates it to the federal budget, it seems to me to be irrelevant.


Azellus Denis: I do not wish to make any comments as far as the issues are concerned. I wish to ask the Minister of Finance and the government to send some investigators there to watch the inquiry and find out whether there is some way of finding more money, because every year the government has deficits of hundreds of millions of dollars. Is it not the same as far as the hospital is concerned? I think the present government should look into every hospital in the province of Quebec which was administered by the Union Nationale. There is one, for instance, St. Luc hospital. Every director of this hospital is a Union Nationale organizer. I want the Minister of Finance to make inquiries about it. If the minister needs money he should ensure that income tax is paid by all Canadians. It is only just that those who pay their income taxes honestly should be protected. The government should ensure that those who perhaps do not earn their money in the same way most Canadian taxpayers do should also pay income tax.
(Translation):
Mr. Speaker, hon. members opposite stated that Canadians were pleased with this budget.

The Budget-Mr. Denis
I also heard some members say that the press had reacted favourably to the budget.
I do not know where they got their information. I personally scanned 35 papers, and almost everyone criticized this government in some way or other.
I have here a paper which says:
This is a record deficit in peacetime.
Another paper has this to say:
This is disappointing.
And another says:
There we have an anti-Coyne budget.
And here read:
(Text):
Too little too late.
(Translation) :
I must tell you, Mr. Speaker, that those papers are published in each of the ten provinces of Canada.
Another paper says:
(Text):
This lack of decisiveness has been a factor in the confused marking time which has been so characteristic of the past year or more.
(Translation):
Another from Saskatchewan says: (Text):
When an individual spends more than his income, he very quickly goes broke, but in the case of a nation, Canada as an example, when expenditures exceed income, it is politely termed deficit financing.
Another from Alberta reads:
In the past both Fleming and Diefenbaker have tried to escape responsibility for unpopular monetary policy by blaming it on the Bank of Canada.
An editorial in an Alberta newspaper calls it: "A dangerous budget". Another newspaper says the budget will increase the cost of living. Another says it is a tradition of Conservative governments to be on the deficit side every year. Another newspaper says there will be no jobs created for the unemployed, at least for many months, and that it is doubtful whether the budget will do anything to help the unemployed at the present time. Another newspaper says the budget is paving the way for inflation. Another newspaper says the budget is "uninspired and uninspiring".
May I also mention here what has been said about the budget by Joe Morris, western regional head of the international woodworkers of America who, as reported in the Nanaimo daily Free Press on June 21 described it as "A lame attempt to disguise the bankrupt fiscal policies of the Diefenbaker government." Almost every newspaper in Canada has criticized the present budget. 1 have gone through 35 of them, and almost every one condemns the government's budget, except of course Montreal Matin, which is so fanatically Conservative that it might even publish something in favour of the hon. member for St. Hyacinthe-Bagot (Mr. Ri-card).

(Translation):
Mr. Speaker, I feel that this budget is a delayed April fool's hoax. It came out in June. And it came wrapped up in heavy paper and by heavy paper I mean that the presentation lasted 2f hours. It is packed up in some kind of piano box.
The mountain in labour has brought forth a mouse.
It took 175 pages, Mr. Speaker, to tell the people of Canada, to the unemployed: You will not get anything this year; to tell the farmers: You will not get anything this year, you will have to wait.
The only thing that may bring you comfort is that you will be able to smoke king size cigarettes at no extra cost.
As I said a moment ago, if we have not a general election this year it is on account of the four by-elections. I think that everything was set, that the Conservative electoral machinery was ready.
They were waiting for the results of the by-elections before launching the campaign which they had prepared in detail.
The Minister of Finance had the Coyne affair. The president of the C.N.R. had been summoned to Ottawa at about the same time.
The president of the Canadian Broadcasting Corporation had also been summoned.
The Minister of Agriculture had gone off to China, to sign a contract for the sale of wheat. Of course, we do not know the terms of that sale.
There was also the question of the merchant marine. It was quickly disposed of. Construction of vessels began immediately, and so quickly that Canadian-produced engines cannot be used.
It was a Conservative member who said that, on June 22, and I must quote what he said, it is too edifying.


Mr. Graffiey:: It is the other text.


Azellus Denis: I heard the hon. member for Brome-Missisquoi (Mr. Grafftey) mumble. I must warn him that if he continues misbehaving, his government will present a bill to have him thrown out of the house.
This is what the hon. member for Kingston (Mr. Allmark) said:
No one who has followed-
(Text):


Mr. Speaker:: Is the hon. member quoting from another debate?


Azellus Denis: No Mr. Speaker. In this debate, at page 7154 of Hansard, the hon. member for Kingston (Mr. Allmark) is reported to have said:

(Translation):
No one who has followed the shipbuilding industry has failed to notice the number of times foreign engines are used in ships belonging to the Canadian government. Too frequently we find that these ships are designed so that Canadian marine engines cannot be adapted for use in them, or that they can be adapted only at considerable additional cost.
Some time before the by-elections, we saw ministers devote their week ends to meetings. We saw some hon. members deliver their little speeches, either on veterans, lotteries, capital punishment, or any other subject, and those speeches were ready to be distributed.
One member went as far as writing to all his constituents here in Ottawa, to ask them if they were willing to take part in the election campaign in the constituency where he worked.
Well, during all that time, everything was ready. However, nasty blows fell on them: the results of the by-elections, the Coyne affair, which went against them. The Conservative backbenchers who make derogatory remarks about our public officials keep in the background and are afraid to question when they are here. I am referring for instance to the hon. member for Joliette-L'Assomption-Montcalm (Mr. Pigeon) who often criticized the president of the C.N.R. in the house; yet, yet, when the parliamentary committee met to hear the president of the C.N.R., the member for Joliette-L'Assomption-Montcalm was conspicuously absent.


Mr. Pigeon:: I cannot attend all committee meetings.


Azellus Denis: Yet, when one makes accusations, especially against so important an official as the president of the C.N.R. and the latter is called here as a witness, it is most important for the member who attacked him in the house to attend the meeting to question him and to tell him personally what he finds wrong with him. But the member for Joliette-L'Assomption-Montcalm did not attend the meeting.
Besides, the members of the province of Quebec were preparing for the electoral campaign. They made speeches for and against a national flag, a national anthem, joint programs and university grants. They spoke for and against the Colombo plan, capital punishment and lotteries. In short there was something for everyone.
Nevertheless, the by-elections turned out against them. Moreover, the Coyne balloon burst, and instead of a "Fleming versus
The Budget-Mr. Denis Coyne" budget, we have a "Fleming versus justice" budget, a "Fleming versus democracy" budget. It has also become a "Fleming versus bill of rights" budget.
I forgot to say that they had also based their campaign on the bill of rights. I understand the bill had been printed on calfhide with some writings intended to convince the Canadian people that this bill was the result of the excellent administration of this government. The strange thing is that this government violates the bill of rights at the first opportunity.
Moreover, another obstacle to a general election were the bombs which kept exploding in Quebec, so much so, that election organizers were not available for an electoral campaign as they were involved in various judicial inquiries.
I do not want to enlarge on that point, except to say that instead of a little chocolate budget which would have been served as dessert to the people in order to conceal from it the bad administration of this Tory government, all those blows which fell at the same time resulted in the Canadians getting not a budget which would have helped the little man. the unemployed, the taxpayer, but a budget which is interesting only by the number of pages it covers.
We were expecting a deficit. We know that the Minister of Finance was wrong in the past, and we think that he is wrong again this time.
In other words, in this budget, there is nothing for the little people, nothing for the man in the street, nothing for the taxpayer in general. If there is anything, it is the opportunity for big financiers to make a killing on the stock market, and I would not be surprised if those rich financiers who do business with the United States and are paid in American money made thousands and thousands of dollars of profits, as a result of the devaluation of the Canadian dollar.
But what about, for instance, borrowers, not lenders, not those who export quantities of products, but those who borrow and have to repay, who have borrowed in the United States and who have to pay back in American dollars the loans they have made, such as municipalities, provinces and even individuals, who have been unable to find money at a reasonable rate during the Conservative administration and who had to go to the

The Budget-Mr. Denis United States to get a better rate of interest? All those people will have to pay more, on account of the government's present policy, on account of the budget now being discussed in this house.
Recently-I think it was yesterday-the Minister of Finance said that the Canadian dollar had been devaluated by 3 per cent. Here is the result of that devaluation. I have here a report of the Ottawa Citizen, and I quote:
(Text):
G. A. Lascelles, finance commissioner of metropolitan Toronto, said each drop of one cent in the value of the Canadian dollar would add $200,000 a year to Toronto's costs on its American indebtedness.
This means that because the present government has devalued the dollar by three points it will cost Toronto $600,000 more a year to pay its indebtedness than it otherwise would.
(Translation):
The situation is the same in all other provinces and all other municipalities.
Montreal is on the market for a loan to build an underground railway, and if the authorities do not find enough money here in Canada, they will have to get it elsewhere, they will have to import the necessary funds. I am wondering, Mr. Speaker, at what rate they will have to borrow from the U.S., now that the Canadian dollar is devaluated according to the wish of this government.
Therefore, those who have borrowed or all those who want to borrow, namely people of low income, will be the losers with this budget. On the other hand all those who lend money, all those who sell something will gain from it-the wealthy, the tycoons will again profit by it. Profitable deals on the stock exchange have multiplied since this budget was brought down. I am sure the budget does not provide for present conditions, where we should do all we can to fight the slump and stop unemployment, to lower the interest rates and the cost of living. This budget will do just the opposite. And if, by chance, it should have some useful results in a year or a year and a half from now, in the meantime, the unemployed will have to be satisfied with their scanty unemployment insurance benefits. It is fortunate the unemployment insurance fund was well filled. In fact, under an act introduced and carried out by a Liberal government, the Conservatives inherited a fund of $900 million, which unfortunately has declined now to $100 million.
Well, where would we find ourselves now, what would have happened to the unemployed if they had not had that fund that was created under a Liberal government? They would be hard-up indeed, they would be completely broke, they would be in trouble and they
TMr. Denis.]
could not buy bread or butter. I would say, Mr. Speaker, that this measure alone is worth more to the Canadian citizens than the four years in office of this government.
Mr. Speaker, my time has run out, but I would have so much more to say to the Conservative government.
(Text):


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


Mr. O. J. Godin (Nickel Belt):: Mr. Speaker, I appreciate the opportunity to take part in the budget debate at this time. Firstly, it gives me the opportunity to indicate my admiration of the wonderful speech made earlier this afternoon by the Leader of the Opposition (Mr. Pearson) in which he dealt with practically all of the items and problems mentioned in the budget speech of the Minister of Finance (Mr. Fleming), a week or so ago.
Second, Mr. Speaker, it gives me the opportunity to express the views of the people of Nickel Belt, the riding which I represent, concerning the budget. We all realize that the budget is possibly the criterion on which the government is judged from year to year, and necessarily this budget is no exception.
As I criticize some of the matters contained in the budget I am sure that the people of my area will agree with me. I feel it is my duty to constructively criticize the budget as have so many newspapers throughout the country and as was so ably done this afternoon by the Leader of the Opposition who criticized the economic position of Canada at the present time after four years of Conservative administration.
As recently as last night a friend of mine presented me with a very small book which I consider to be possibly one of the oldest books in Canada having to do with trade and economic problems. This book was written in 1811, 150 years ago. It is entitled "Cursory Observations". The author is Jeremy Cockloft, the elder. The person who wrote this book thought that at that time the government was going to the dogs. It contains a chapter which deals with economics and trade. It ends up practically stating that the country should be given away to the states. The last phrase of the chapter reads as follows:
*-hastening the disunion ol the federal government, which already begins to totter on its foundation.
Surely, Mr. Speaker, if this writer was living in 1961 he would have the same remarks to make about the present government. I cannot say that without presenting certain proof and I certainly intend to do that. The Minister of Finance has made it quite clear, as has been repeated in this house, that he felt

that what he was presenting to the country was a planned solution to our problems, and that in effect the deficit which the budget indicated was planned also. I feel, Mr. Speaker, as do most Canadians, that the deficits of this government are not planned. If they are one cannot fail to observe that they recur from year to year.
I asked for and received the amounts of the deficits that have been incurred from year to year since this government has been in office. For the year ended March 1, 1958, the deficit was $38.5 million. For the year ended March 31, 1959, the deficit was $609.5 million; for 1960, the deficit was $413 million; for 1961, $345 million; and the budget just brought down by the minister estimates that for 1962 the deficit will be in the neighbourhood of $650 million. This is definitely not sound planning but it is the type of situation that this government creates from year to year. As indicated, there may be reasons why a government must have a deficit from time to time and with that I very much agree. The last one was poorly planned; perhaps it was not planned at all.
As we go about trying to find reasons for this great deficit at this time we find they do not necessarily relate to questions having to do with the needs of the economy. I am told that possibly the Prime Minister (Mr. Diefenbaker) gave the clue to the Minister of Finance for the deficit budget which he presented. The Prime Minister appeared on television the day after the presentation of the budget and it might have been expected that as the head of the government he would have indicated the reasons for the deficit. I have a transcript of his television address on June 21, 1961 in which he explained the reasons for the deficit. One thing he said was, "Should we turn back the clock on the Columbia river"?
It would seem that he meant to indicate to the Canadian people that this was a reason for the deficit forecast by the Minister of Finance. We all know that no such project will possibly even be commenced, let alone have to be paid for, before the termination of the year covered by this budget. We all know that the government has got into a shemozzle with one of the provinces with regard to the Columbia river situation.
I am very grateful to those responsible that I was a member of the delegation to Washington recently. In walking the streets there and talking to the American people one found they were very anxious to know what the situation was with respect to the Columbia river. In the minds of our neighbours some fear has possibly been created because we have not confirmed the Columbia river contract. For the sake of expediency and
The Budget-Mr. Godin possibly publicity on the eve of an election in that country, we purported to sign a contract with that country. Surely it is not fitting and right for the Prime Minister of this country to go on the air the day after the budget speech and indicate to the Canadian people that a deficit was required in order to go ahead with such projects which we all realize it will not be possible to commence during the period covered by this budget.
We were told that the deficit was needed to bring about a reduction in taxes with a consequent reduction in revenue to the government from the people, but we have been told by many that this amounts to barely one tenth of 1 per cent of the deficit or approximately $65,000, and the balance must come from other sources and not through any reduction in taxation.
We are told that this deficit is planned. I believe the Leader of the Opposition made reference to that this afternoon. We all recall very well that around Christmas time last year the Canadian tax foundation made an estimate that the deficit in the present budget would be nearly $700 million. Surely the Minister of Finance cannot establish in this house that the tax foundation was planning his budget and his deficit as well.
We are told that one of the main objects of the budget, which is certainly of great importance to Canadian citizens, is to bring about a decrease in interest rates. If there is to be such a large deficit and if the cash position of the government is short, surely the government will have to find the money somewhere. I am quite prepared to admit that I am not a specialist in economics but there are only two ways of obtaining money when you are short of it. Either you borrow the money or you print it. I feel that the government will surely find itself in that position. With such a very large borrower in the field, I cannot conceive of the availability of money not being decreased with the result that interest rates will increase.
Furthermore, I believe I said in the house a couple of years ago that I had read a definition of a Conservative to this effect, that a Conservative is a person who acts hurriedly after thinking for too long a time. I think this is evident from the budget of the Minister of Finance at this time. We realize that the minister has brought down the budget only after the Canadian people had waited a long time for it and after there had been many requests for it by the opposition. In addition, we find some solutions of problems in the budget which have been put forward repeatedly by the Liberal opposition over a long period of time.

The Budget-Mr. Godin
There is, for instance, the reduction in the excise tax on automobiles. We realize that the devaluation of the dollar will be beneficial in some ways to certain phases of our economy but on the other hand it will harm those industries that buy a great deal from our neighbour to the south. The hon. member for Essex East (Mr. Martin) made it quite clear this afternoon that he had requested the elimination of the excise tax on automobiles on many occasions. However, the minister has brought this about after he has already been made aware that the premier of the province of Ontario, where most of our automobile industry is located, has seen fit to impose a three per cent sales tax on all goods sold in the province of Ontario.
If the Minister of Finance believes that he is doing a great thing for the automotive industry, he must realize he is very late in doing so. The premier of the province of Ontario is quite friendly with the present government. We recall that during the 1958 election he went about the country with the Prime Minister and stated to the people of Ontario that if they would elect Mr. Diefenbaker he, Mr. Frost would come to Ottawa and get hundreds of millions of dollars for the people of Ontario. It would appear now that the promises made to Mr. Frost at that time were not lived up to because he saw fit some months ago to announce the imposition of a 3 per cent sales tax. That tax will take a great big chunk off the reduction in the excise tax.
At six o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at 7.30 p.m.
Osias.-J. Godin: Mr. Speaker, before the dinner recess I was endeavouring to indicate to the house that, in indicating in the budget speech that the excise tax of per cent on automobiles was to be taken off, the minister was well aware that the purchaser of automobiles in Canada had already for some months lost 3 per cent, at least in the province of Ontario, through the sales tax imposed by the premier of that province.
I wish to indicate further that the minister himself in another paragraph in his speech, has taken away a good bit of the 4J per cent which should be left. This is done by his indication that he would make all efforts to devaluate the Canadian dollar in relation to the United States dollar. That action, of course, creates certain problems. They are possibly more marked in the automotive industry than in others. This industry purchases much of its goods and services from the


United States in connection with the manufacture of automobiles.
I am speaking now, Mr. Speaker, on behalf of the purchasers of automobiles in Canada. In this category is included each and every one in my riding as there are no manufacturers in our area. If the dollar is devaluated, we know very well that, in respect of services, the amount the subsidiary companies in the automobile industry in Canada will lose is great. That amount, of course, the purchasers of automobiles in this country will have to meet.
As undoubtedly every person in Canada realizes, it is not by mere accident that the Canadian automobile is absolutely the same in model as the United States automobile. Although the motors are assembled in Canada or are possibly manufactured to a degree in Canada, it is not by a mere coincidence that they happen to be the same as United States motors. Therefore these companies, as well as the bread producers in this country, well realize that they will be paying more for these services, which are a combined service. In paying more for services and materials the Canadian manufacturers will necessarily have to charge more to the Canadian buyers for the same goods which they are now selling.
I say the situation is the same as that in the case of bread. The Minister of Finance can continue to quarrel and to say that this should not be so. However, these companies have accountants who will figure these costs and these costs will be added. Therefore I am quite positive as, I believe, are tne Canadian people, from their understanding of the matter, that this is very close to being a farce when you indicate in one paragraph that you are taking something away while you know very well that practically the entire deduction indicated in that paragraph is taken away absolutely by another paragraph in which you indicate that you will make all efforts to devaluate the dollar to a significant degree. The guess of any other member of this house is as good as mine but "a significant degree" may be very close to the 4J per cent which is left in this instance. I therefore feel that the people of my area and the Canadian people in general find no satisfaction in this reduction made at this time when for months and years it has been requested by the Liberal opposition.
Furthermore, I have indicated that this government acted late and acted on many occasions on the information and the request of the opposition. As a member of the opposition I appreciate that fact. Some members may find this situation odd. However, I find

indicated in this budget measures which will elucidate what I am now trying to indicate to this house. For instance, the members of this house and the Minister of Finance himself will recall that last year, when the budget resolutions were discussed, I was in quite a dogfight with him concerning the fact that in those budget resolutions no exemptions were granted for propane containers whereas the fuel tanks were exempt. This dogfight went on for maybe an hour or two and the minister at that time could see no reason in the request which was made. I say this with some humility, although I was possibly the major proponent of that request. I would ask hon. members to read Excise Tax Act resolution No. 9. I will read the first sentence:
9. That propane bulk tanks for use with furnaces for the heating of buildings... be exempt from sales tax.
This is a clear indication that if we obtain benefits or new propositions, many of them can be attributed to the Liberal opposition. In the same fashion, of course, the Minister of Finance takes more time to study and to adopt these good suggestions made by the opposition.
Hon. members will recall that last summer in this house we were involved in a great discussion. Of course I took part in that discussion also. At that time a ceiling was placed on C.M.H.C. mortgages by the Minister of Public Works (Mr. Walker). It affected greatly the bonus miners in my area especially. It was three months later that the Minister of Public Works was satisfied to accede to the demand of the opposition at that time. He did that in three months. I am happy to see that the Minister of Finance saw the light, although it took him 12 months to do so.
(Translation):
Mr. Speaker, before taking my seat, I should like to make some remarks to the Minister of National Revenue concerning the proposed French television station for the Sudbury area.
For more than a year the people of that town have been hearing about this project. This parliament approved the establishment of the station, but because of some difficulties, the work has not yet been started. First of all, permission had to be secured from the United States to use channel 13 for this French station in northern Ontario.
In the last two months, I have asked several questions of the Minister of Transport who is responsible for obtaining permission to start the work. Even though the minister co-operated with me in this matter, this 90205-6-460
The Budget-Mr. Godin authorization was long to come. However, I am now informed that the required authorization was given a few days ago. Naturally, as a result of that delay, the contracts which were granted a year ago will now have to be changed. With all the hon. members of this house, I hope that the difficulties involved in a new award of contracts a year later will not delay further the construction of that television station.
Mr. Speaker, since I am talking about television, I should like to say that in view of the Conservative government's efforts to gain greater control over publicly-owned corporations and organizations, we are concerned with the fact that the committee on radio and television which is, of course, mostly composed of Conservatives, recommends in its last report to the house that no member of the administration be allowed to sit on the board of directors of the corporation; that leaves out Messrs. Ouimet and Briggs. In other words it seems that this government has decided to seek dictatorial powers over all associations of any value that discharge certain administrative functions in government agencies.
While I am not aware of all the problems that can arise, or of the great difficulties that may exist between the Minister of Finance and Mr. Coyne, I can say on behalf of my constituents that this had created deep concern. On their behalf, I therefore ask for an investigation that would get to the bottom of this quarrel between the Minister of Finance and Mr. Coyne. In so doing, Mr. Speaker, I am not taking sides for anyone. I am convinced, however, that the Coyne incident is similar to the Ouimet and Briggs incident and to others which seem to show that whenever we have occasion to receive a report from a committee, the government is bent on wielding dictatorial powers over those agencies which are absolutely necessary to the administration of the various divisions maintained by the government.
(Text):
Mr. Speaker, as I have almost completed my remarks I think it is fitting to indicate that the attempt by this government to obtain more power within the agencies of government is most significant and I know it worries the Canadian people very much. I am not attempting to take sides. I have heard and read many of the speeches concerning the bill before the house which is known as the Coyne bill, or an act respecting the Bank of Canada.


Paul Joseph James Martin: A bill of attainder.

The Budget-Mr. Lafreniere


Osias.-J. Godin: I demand, on behalf of the citizens I represent, a full inquest to ascertain-


Some hon. Members:: Oh, oh.


An hon. Member:: Do you want a coroner too?


Osias.-J. Godin: -a full inquiry to ascertain the difficulties which may exist at this time. I say this because the Canadian people fear this is on the part of this government another effort, as has been made obvious in reports from our committees, to obtain complete authority over appointments in the public service and government agencies of this country and to prevent these people from having the authority they should have.
The federal crown corporations and agencies have been operating for many years. I have heard many Canadian citizens say they are very pleased with the operations of the C.B.C. and the Bank of Canada. It is most surprising to the Canadian people and to myself that at this time, after the comparatively short period of time in which they have been in office, this government is attempting to make sure it has the means whereby it may appoint men of its choice over whom it will have complete authority and control. On behalf of the people I represent I suggest that in the long run this will be most unfortunate for our country in that we will not have an independent administration in these agencies and corporations which are operating at the moment and of which we are justifiably very proud.
Mr. Speaker, my time has almost elapsed. May I say that it is my opinion and the opinion of the people of my riding that because of this budget and its proposals, and because of the administration of this government during the last four years, nothing will satisfy the Canadian people completely at this time except the opportunity of going to the polls in a general election.
(Translation):


Mr. Robert Lafreniere (Quebec-Monl-morency):: Mr. Speaker, like all the other members now in the house, I heard the hon. member for Nickel Belt (Mr. Godin) express his annoyance about the differences of opinion between the Minister of Finance (Mr. Fleming) and the governor of the Bank of Canada. He said that the people has been worried over the conflict between those two persons. Let me simply tell him that if this government had been soft enough to implement the policies Mr. Coyne advocated, namely credit restriction and tax increases, the people of Canada would have been doubly worried.

Many views have already been expressed by members on both sides of this house, Mr. Speaker, about the budget speech delivered by the Minister of Finance. Quite naturally, a number of those comments were spoken in a spirit of partisanship which sometimes blinds judgement, particularly when one is left in the cool areas of the opposition. I would prefer to quote the comments of Canadians who are experts on economic matters and who are not necessarily related to any political party.
However, I should like first to pay an unrestricted tribute-for, unlike Mr. Coyne, we do not like restrictions-to the Minister of Finance whose greatest merit is, I humbly submit that of having introduced a budget imbued with great Canadianism and having shown his attachment, for which we congratulate him, to the protection of Canadian business and industries.
It is easy to see how popular the last budget has been by looking through many Canadian newspapers. In fact, one of the best informed papers in Ontario, the Globe and Mail, published in the financial column of Mr. Ronald Anderson a lengthy and favourable comment from which I quote the following:
The budget presented Tuesday by the Hon. Donald Fleming, Minister of Finance, contains three important provisions to help Canadian business. The first and most important one is the plan to reduce the external value of the Canadian dollar: second, the proposal to bring about a decrease in interest rates; third, the abolition of the 7] per cent excise tax on passenger cars.
Those are constructive measures. Other significant proposals provide for the extension of the role and financial resources of the industrial development bank and a tax deduction for research expenditures.
A weekly newspaper highly considered by all businessmen across Canada, the Financial Post, had something in the same line as Mr. Anderson. In last week's issue, the following editorial comment could be found:
The budget contains a host of provisions whose unquestionable usefulness the Canadian people will appreciate. An example of this is the incentive given to research conducted in our country. Another is the extension of the functions and powers of the industrial development bank. It is hoped that this will slow down the selling-off of Canadian business.
And I believe, Mr. Speaker, that this is an important point.
The various steps concerning the bond market are very sound. The provision for a new and thorough study of our financial institutions is timely, and our newspaper has often advocated it. These are all fruitful improvements.
Well, Mr. Speaker, I prefer to rely on the views of experts on financial matters

who are somewhat independent from all political parties, rather than on the views put forward by the hon. gentlemen opposite.
Many businessmen express as much satisfaction as the reporters of the Globe and Mail and the Financial Post. Automobile manufacturers welcome the abolition of the 7J per cent excise tax. Textile manufacturers are glad to be able to count on a greater protection for their products. At this point, I must say that I represent a riding where there is a textile mill; it is therefore with pleasure that the workers of my area welcomed the proposals of the present government.
Exporters are pleased to compute the increased profits they will make from larger sales on the world markets. Hundreds of small businessmen will apply with more confidence to the industrial development bank. Finally, special incentives for the replacement and modernization of equipment will step up production in a great many factories.
The Minister of Finance has efficiently coordinated both monetary and fiscal measures. Some opportunist politicians blame him for it. Those who view the situation as statesmen must-like the members of the committee of the other place-commend him for it. The odds are that the Canadian people will finally come into line with the statesmen.
The people will soon realize that the June 20 budget shows a true Canadian spirit. The case of textiles will prove them right.
In order to show the importance of the textile industry in Canada, I shall simply read part of a speech made last April by the president of the Cotton Institute of Canada and managing director of Hamilton Cotton Limited of Hamilton, Ontario. This is what he said:
The manufacturing industry employs today about 25 per cent of the Canadian labour force, compared to 16 per cent for agriculture, only 5 per cent for our resource industries, and about 30 per cent for service industries, including all sectors of trade and transport. It is a well known fact that the so-called service industries greatly depend on the manufacturing industries. In fact, a recent investigation undertaken by the C.N.R. reveals that each job in the manufacturing industry provides 1.17 jobs in other industries.
Therefore, it is obvious that as far as employment is concerned, it is by helping the largest employer, the manufacturing industry, that we will get the most benefit. Now, the textile industry, of which we are a significant group, is a vital sector of the Canadian manufacturing industry. In fact, the primary textile industry is the country's second most important employer in the manufaetur-90205-6-460J
The Budget-Mr. Lafreniere ing field-the first place being occupied by the wearing apparel industry. Its importance is therefore obvious.
Under the Liberals, the textile industry was treated as a poor relative. It was left to the mercy of foreign competition. The present member for Bonavista-Twillingate (Mr. Pickersgill) stated in this house that the textile industry deserves very little consideration because, according to him, it is artificial from three points of view: (1) its skilled labour; (2) its methods; (3) its raw materials.
Unfortunately, those words express only too well the attitude which the Mackenzie King government took with regard to that industry which is such a large employer. Indeed, Mr. Speaker, it is no news for you that the member for Bonavista-Twillingate did not intervene when the customs tariffs which served as a dike against the flooding of our market by imported textile products, were under assault. We had to wait until the Conservatives came to power for the textile industry to recover the protection which is so essential to its survival.
The present Minister of Finance has negotiated agreements under which the Japanese put quotas on their exports to our country. The minister also proposes increases in the tariff rates which should help that industry develop even more. No one will forget that, at least not in the province of Quebec where, not including Montreal, one worker out of seven is in the employ of a textile mill.
I should like here, Mr. Speaker, to quote from a speech made by Mr. Young, president of the Canadian cotton institute, in order to warn the government against the dangers which are involved for this product in the competition from our southern neighbours, the United States. Here is what Mr. Young said:
Since 1956, the United States government has spent nearly $20 million in subsidizing textile goods shipped into Canada. These shipments represent now 45 per cent of the American cotton goods exports and compares with 18 per cent in the carrying out of this program. During the same period, the Canadian cotton textile industry laid off 4,800 employees and, at the end of 1960, it was employing only 17,300 persons.
It is clear that this subsidy is paid to make more business for the American exporters in reducing their export prices.
Consequently, I should like the government to strengthen, if possible, the measures taken to protect our industry against that competition from the United States.

The Budget-Mr. Lafreniere
The June 20 budget shows a true Canadian spirit, as I said, as far as the protection of our foreign markets is concerned. There is every indication that if we can go on selling our raw materials in England, we will have to continue selling our secondary products in the other countries of the commonwealth: India, Australia, New Zealand, the new African states. If we were to press London to join the common market, we would disturb the whole structure of the preferential tariff, we would throw out of key this whole tariff at a time when India and a number of African states, about to enter industrialization, could absorb large quantities of our secondary products.
There is no need to read publications such as Foreign Trade to get a clear indication of the magnitude of our trade with commonwealth countries, and of the possibilities in that field. Any thinking person knows about them. That is why the Minister of Finance could state with his usual firmness:
This historic right of commonwealth free access to the United Kingdom market for agricultural products, industrial material and most manufactured goods is the keystone of the commonwealth trading system. Not only for economic reasons, hut for political reasons as well, we would not wish to see this system abandoned ... We will pursue whatever policies may be required to achieve this end.
Those proud words are in full agreement with the ways in which the Minister of Finance, in international conferences, has stood for the rightful interests of Canadian producers.
After all, if the Minister of Finance has always defended our producers, he has done so by means of structural reforms, to use the words of Mr. Jacques Parizeau, and in referring to those reforms I am led to stress the consistency that any observant person will find in the various budgets introduced by the Minister of Finance. In fact, the June budget is but an extension of the December one. It is its logical outcome.
Have I not referred, a moment ago, to the sound protectionism that the June 20 budget forecasts in the field of textiles? Well, in December, the Minister of Finance had redefined, for customs purposes, products of a class or kind made in Canada. The new definition will have as its essential result to encourage purchasers of machinery to buy their manufacturing equipment in this country. Mr. Jacques Parizeau noted in this connection:
For a long time, the equipment imported into Canada has been segregated by customs authorities under two classifications according to whether it was possible or not for the importer to purchase similar equipment in Canada. In the first instance, tariffs were often from 15 to 25 percent; in the second instance, however, they ranged between nil and 7J per cent. Those provisions have often been evaded in the past and the second classifica-

tion has been rather large compared to the first. Abuse has become general. With a re-definition of those classes, the Minister of Finance in fact has re-defined hundreds of thousands of dollars worth of imports and increased the effective protection of the equipment industry which employs large numbers of workers.
In December last, the Minister of Finance had taken correlated steps to reduce the inflow of imports and favour the Canadians seeking markets abroad for Canadian products. He has provided for the creation of an export bank which offers short and long term credit through the chartered banks. Canadian exporters have benefited from the creation of that bank as of December 1960, as they will benefit from the devaluation of the dollar as of June 20, 1961.
Labour itself has not been ignored either. In December, in order to eliminate unemployment pockets in depressed areas, the Minister of Finance invited business firms to those areas and backed his invitation with generous tax abatements. In June, he has decided to encourage employment in the automobile industry; in fact, he has abolished the 7J per cent excise tax. Because of the automatic reduction of new car prices, demand will increase and production will advance accordingly.
Whether we refer to the main budget or to the baby budget, our findings are the same -the present government pursues the same objectives. Should they be indicated once again?
1.	Balancing our trade through diversification;
2.	Abiding by international commitments, such as GATT and defending our rights and interests;
3.	Protecting our producers against unfair competition in the industrial and agricultural fields.
In view of that threefold aim the government has been trying to rationalize capital inflow. The rate of public and private investments will not be slowed down in the process; there will simply be a substitution of Canadian funds for foreign funds. That is why the Minister of Finance said:
Since our aim is to reduce substantially and fairly quickly our excess of imports, visible and invisible, over our exports, it follows that we must aim at replacing, from Canadian sources, an equivalent amount of funds that would otherwise have been raised abroad. We have been giving most careful thought to ways and means of supplying these funds from Canadian sources.
This cannot happen overnight. For a long time, borrowers in this country have been used to going to New York to raise money. On that world money market, lenders are so easily found that unimaginative borrowers

services, however excellent, of our own financial institutions.
The central government will set an example. Better still, it will take concrete action to ease the long term bond sector available to the provinces and municipal corporations. Therefore, the Minister of Finance announced on June 20:
-I propose to restrict new federal bond issues, at least for many months, to the field of short term securities.
This action is along the same lines as the treasury decision to take over the whole portfolio of the unemployment insurance fund on the basis of the book value of the bonds. To this dual approach should be added the measures taken by the government to open a secondary mortgage market. In June as in December, the government has shown its intention to enlarge and develop the Canadian capital market. Those, Mr. Speaker, are the points on which I wanted to call the attention of the house.
The general idea that one can derive from this budget is that the minister has tried to protect Canadian industry and Canadian companies.
He deserves to be commended for that attitude. It is, indeed, for that reason that every newspaper across the country has spoken favourably of the budget brought down by the Minister of Finance.
Independent and impartial opinions of newspaper columnists and economic experts mean more, in my view, than the more or less sincere opinions which have been expressed by hon. members opposite.
(Text):	,


Miss Judy V. LaMarsh (Niagara Falls):: Mr. Speaker, last week after the Minister of Finance (Mr. Fleming) made his annual fiscal accounting to the Canadian people, there was what purported to be another national accounting made to the people by the Prime Minister (Mr. Diefenbaker). This so-called accounting was made in a television address on the occasion of the fourth anniversary of the mounting to the seats of the mighty by the Conservative party. It is with this latter accounting that I intend to deal for a few moments.
The Prime Minister during his television chat invited Canadians to look over the shadow his administration had cast across Canada under his stewardship. Perhaps more properly I should have said spectre, not
The Budget-Miss LaMarsh shadow. He invited Canadians to join with him in his self-satisfied gloating over the period when, as he said, there had been more development in Canada than in any equal period in the past. Alas, Mr. Speaker, what a sad commentary on the 1957 model man of vision who is now, in 1961, the model man of hallucinations. Is that too strong a word, Mr. Speaker? Surely this is the most charitable explanation of that half hour of half truths which he gave the Canadian people.
This is what he said, Mr. Speaker:
And now, I look back with you over the four years. What have been the effects? The national income has risen 18 per cent and the gross national product-that is all our earnings and income and production-by 17 per cent.
This, Mr. Speaker, so far as it goes-and I say so far as it goes-is the truth. But what he neglected to mention was that during the last four years of Liberal administration, from 1953 to 1957, the national income rose not 18 per cent but 24 per cent and the gross national product during the same period rose not 17 per cent but 27 per cent.
Let me quote what one of the most Conservative of Canadian papers, the Financial Post, said in its editorial "The Spectre of Stagnation" on April 29 last:
What is important about G.N.P., however, is not the sometimes stunning dollar totals and their frequently quoted advances.
What matters to practical business planners and to responsible government officials should be real rates of growth. And here the G.N.P. story reveals the spectre of stagnation.
Consider these comfortless figures:
Since 1947, G.N.P.'s average annual rate of increase has been almost 8 per cent. This, on the surface is a remarkable performance but the average hides the fact that between 1947 and 1956 the annual average was 9 per cent, while in the last four years the rate of increase has been only half as fast-4 per cent per year. To see how small the real volume gains are, take out the effect of price increases. Then the annual 9 per cent gain from 1947 to 1956 turns into a 5.5 per cent advance and the 4 per cent increase 1956- 1960 slows to a 1.7 per cent annual rise.
This, Mr. Speaker, more than shows the hollow puffing of the government, but the most chilling aspect is that if one does take out from the G.N.P. these figures to arrive at the real G.N.P. per person in Canada, without the rise in cost and considering the population increases then in fact in the past four years the G.N.P. per person in Canada has dropped 4 per cent. This means that while under the Liberal administration of 1956 each person produced $96 more, under this government each Canadian produced $55 less.

The Budget-Miss LaMarsh
But to return to the Cheshire cat recital of the Prime Minister of last week, he said at page 7 of the script of his broadcast:
Progress and expansion on the scale of the last four years is not inevitable.
Well, Mr. Speaker, I join with most other Canadians in saying thank heaven that that is so and that it is not inevitable.
Then, as an example of a sheer flight of imagination, listen to what the Prime Minister said on the subject of trade:
And when you think of the doom and gloom remember this, Canadian exports have been steadily increasing since we took office and they're now, 1960-
And I may say this is obviously a speech left over from last year. I continue:
-at an all time high, 12 per cent higher than they were four years ago.
The fact is, Mr. Speaker, that during the last four years of Liberal administration trade in Canada increased by almost the same figure; actually it was somewhat higher, 12.8 per cent. But in the past four years world trade has expanded 20 per cent. Canada has slipped from fourth to fifth place among the world's trading nations.
Then, the Prime Minister took great glee in the drop of 4 per cent in imports, although he was silent on the fact that this is used as a first indication by economists of a drop, and a considerable drop, in personal incomes.
We come now to that part of the Prime Minister's speech where he dealt with the problem of unemployment in Canada, a subject to which perhaps he felt he could at last refer, with the summer season here and people re-employed in the tourist and construction industries. The Prime Minister said:
We have unemployment, the result of men being displaced by technological change.
The Senate committee found a number of reasons for the amount of unemployment in this country but certainly did not dismiss it, as did the Prime Minister, as being merely the result of technological change. Listen to what the Financial Post had to say about the cause of unemployment in the same editorial to which I made reference a while ago.
The result of this trend toward stagnation has been the worst unemployment recession since the 1930's. Unemployment is now averaging 7 per cent a year as against only 2-3 per cent in the early 1950's.
Then the Prime Minister said:
However, in Canada, and it's well to remember this, unemployment has lesser impact on the Canadian than on the American economy. Compare our situation with the United States and then think of this.
Suppose we accept this invitation of the Prime Minister and compare our situation with that of the United States. I should
like to read into the record some figures which I have taken from "Economic Indicators", May, 1961 and from the "Canadian Statistical Review", May, 1961. The figures are as follows:
Percentage of Labour Force Unemployed U.S.A. Canada
1960-	March ....
April....
May	
June ....
July ....
August .... September October .. November December
1961-	January ..
February . March .... April ...
5.5
5.1
5.1
5.4
5.5 5.8
5.7 6.3
6.2
6.8
6.6 6.8 6.9 6.8
6.6
6.8
7.2
6.6
7.1
7.6
7.2
7.6
7.5 7.9
7.7
7.8 7.7
7.6


William Heward Grafftey: Were the methods of compiling the figures the same?


Julia Verlyn (Judy) LaMarsh: The methods of compiling the figures, in answer to those who inquire, are identical. How, unless he is in fact suffering from hallucinations, can the Prime Minister justify his statement when every solitary month of the past 18 our percentage of the labour force unemployed has been a point or two higher than that of the United States.
Then the Prime Minister launched into a reference to a few more figures. He said:
There are 267,000 more Canadians working during the month of May this year than a year ago and this is something that they don't tell you about.
Well, Mr. Speaker, it is certainly correct that no one else but the Prime Minister would dare to tell the Canadian people that, because the d.b.s. figures show that 113,000, not 267,000, more Canadians were employed in May, 1961 than in May, 1960. I assume that either the d.b.s. or the Prime Minister is deliberately false. Then the Prime Minister-


Donald Methuen Fleming: Mr. Speaker, the hon. member appears to have said that either the Prime Minister or the dominion bureau of statistics was deliberately false. Mr. Speaker, this is obviously an unparliamentary expression to use even in this alternative form-


Mr. Chevrier:: Why don't you sit down and let her make her speech?


Donald Methuen Fleming: Mr. Speaker, the objection is to the expression "deliberately false". It is quite unparliamentary.


Julia Verlyn (Judy) LaMarsh: I would hope the Prime Minister was correct and the d.b.s. wrong.


Paul Theodore Hellyer: That is too much to hope for.


Julia Verlyn (Judy) LaMarsh: Then the Prime Minister went on to say-


Donald Methuen Fleming: Mr. Speaker, to go on to add another expression does not constitute a withdrawal of an unparliamentary-expression. I ask that the reference to which I object be withdrawn. It is quite unparliamentary.


Mr. Speaker:: It is an inflexible rule of the house that no member should impute to another a deliberate falsehood. The hon. member's remark was somewhat ambiguous. I would think that the proper course would be to make it clear that she was not imputing a deliberate falsehood to the Prime Minister.


Julia Verlyn (Judy) LaMarsh: I would say this. The speech writer for the Prime Minister might well have been incorrect.


Donald Methuen Fleming: Mr. Speaker, I ask for the withdrawal of an unparliamentary expression. A variation does not constitute a withdrawal. I ask, Mr. Speaker-


Lester Bowles Pearson: He should withdraw his false figures too.


Donald Methuen Fleming: -that that unparliamentary expression be withdrawn in accordance with the practice of the house.


Mr. Speaker:: I think the minister is correct in saying that it is not sufficient to adopt another mode of expression even though it modifies the meaning without removing the offensive words and I would hope that the hon. member would make it clear that she is not imputing deliberate falsehood to the Prime Minister.


Julia Verlyn (Judy) LaMarsh: Mr. Speaker, I would be quite prepared to say that the computers in the dominion bureau of statistics are completely wrong and withdraw any suggestion that the Prime Minister-


Mr. Speaker:: Order. It is customary in the house where exception is taken-and the rules are very clear about offensive statements-to make a wholehearted and not an evasive withdrawal. I would hope that the hon. member at the beginning of her parliamentary career would not leave the record stand as it is.


Julia Verlyn (Judy) LaMarsh: Certainly, Mr. Speaker. If I said something that was unparliamentary I would of course not wish to break the rules of the house, and in making the remark I did I would assume, therefore, that the conclusion would be taken that the computers and those who prepared the figures must have been in error. I am quite prepared to withdraw anything I said which was unparliamentary in the Speaker's opinion.


Paul Joseph James Martin: The figures were
false.
The Budget-Miss LaMarsh


Lionel Chevrier: That is all it was, false figures.


Mr. Speaker:: I will take the hon. member at her word. The imputation of a deliberate falsehood to one or the other I think should be withdrawn because it does leave the imputation even with the explanation that has been made.


Julia Verlyn (Judy) LaMarsh: I abide by your ruling, Mr. Speaker. The Prime Minister went on to follow those figures with this remark:
Now in any other country in the world this would be hailed as an indication of solid economic progress.
How perfectly incredible. During a year when there have been three quarters of a million of his fellow Canadians without employment, although he had promised previously that no one would suffer from unemployment while he was prime minister, and when we have only to compare the number of unemployed in May, 1957, 184,000, with the number of unemployed in May of this year, 457,000, almost three times as many, he casually invites Canadians to crow that this is economic progress.
Once again he mentioned the unemployed in his address. He was speaking about payments of unemployment insurance and he said:
The unemployed? Should their claims be disallowed when they need help most?
This, Mr. Speaker, from an administration that sat calmly by and permitted those who were unemployed, who came here to Ottawa to consult with the Prime Minister and his ministers-and in the face of the assurance of the Minister of Labour (Mr. Starr) to the contrary-to have $4 to $6 cut from their benefits because they exercised their right to come to Ottawa. Again, there was this classic remark in his speech:
Are we giving too much to hospitals?
In the light of some recent revelations in the province of Quebec, it may well be that we are giving too much to some hospitals or to some friends of some hospitals. Passing from such things the Prime Minister went on-


William Heward Grafftey: How are things in Hawkes-bury?


Julia Verlyn (Judy) LaMarsh: -to lift his eyes to the visions of yore and to tell us this:
When they speak of deficits one of the reasons was the program for national development.
I wish to ask, Mr. Speaker, what program for national development? I recall the right hon. gentleman in 1957 and 1958 shouting from the hustings that the former government ought to have had a shelf of public

The Budget-Miss LaMarsh works ready to be used in the face of a recession. Admittedly the Liberal administration had ready all the plans and preparations for the South Saskatchewan dam, and this was the only reason that this government was able to start work on it immediately. But what other national development is there which has necessitated five swelling deficits?


Lester Bowles Pearson: The causeway.


Julia Verlyn (Judy) LaMarsh: Where is the Chignecto canal? Where is the P.E.I. causeway and where, oh where, is the much vaunted Columbia river development?


Lionel Chevrier: Where is the Minister of Justice?


Julia Verlyn (Judy) LaMarsh: Never, Mr. Speaker, has so much money been owed by so many on account of so few and for so little. Yet the Prime Minister said that "in the period of the last four years there has been more development in Canada than in any other equal period in the past". Then he went on to say:
That statement I stand by as one that cannot be challenged in any way.
I for one challenge it and in every way. Before I leave this fascinating exercise in the style of George Orwell's novel, "1984", a sort of big brother who tries to change the record of history by simply making assertions, I should make reference to some of the Prime Minister's comments on deficits. He said in that speech:
I remind those who may he concerned about deficit financing that if we had a deficit of a billion dollars a year, it would still be less than 3 per cent of our gross national product.
If we had a deficit of a billion dollars a year.


Paul Joseph James Martin: You will have next year.


Julia Verlyn (Judy) LaMarsh: I wonder what visions the Prime Minister was seeing when his colleague, the Minister of Finance, told us last week that this year we have a billion dollar cash deficit. What possible excuse is it to say that this is less than the expenditure during the war? We had deficit budgets then for a purpose, not deficit budgets because the government did not know how to avoid them.
If I may, Mr. Speaker, I should like to quote once more from the editorial in the Financial Post to which I have already referred. They have this to say:
Clearly what is needed is less complacency in high places, more realism in appraising Canada's dismal situation and more, infinitely more, government action to prod this economy into faster growth.


William Heward Grafftey: Who wrote that?


Julia Verlyn (Judy) LaMarsh: I have referred again to the Financial Post editorial of April 29, 1961. However, I do offer, Mr. Speaker, in the Prime Minister's words, that one ray of hope offered by the hon. gentleman to the people of Canada:
Progress and expansion on the scale of the last four years is not inevitable.
Let us hope, Mr. Speaker, that there will be, in the style of the new liberal administration in the United States, a return to plain speaking to our people when the facts, unpleasant though they may be, are given to the people, when with a new Liberal administration here in Ottawa this country will in truth return to a period of expansion and prosperity.


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


Some hon. Members:: Question.


Mr. Speaker:: Is it the pleasure of the house to adopt the motion?


Mr. Churchill:: Will you call the yeas and nays, Mr. Speaker?


Mr. Speaker:: Those in favour of the motion will please say yea.


Some hon. Members:: Yea.


Mr. Speaker:: Those opposed will please say nay.


Some hon. Members:: Nay.


Mr. Speaker:: In my opinion the yeas have it.
And more than five members having risen:


Mr. Speaker:: Call in the members.



WAYS AND MEANS

[Stage Direction]
The house in committee of ways and means, Mr. Flynn in the chair.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Excise Act to provide:
1.	That the maximum weight for cigarettes subject to the excise duty of four dollars per thousand cigarettes, be increased from not more than two and one half pounds per thousand cigarettes to not more than three pounds per thousand cigarettes.
2.	That any enactment founded upon this resolution shall come into force on the 1st day of January, 1962.
Excise Act
Jacques Flynn: Shall the resolution carry?


Paul Joseph James Martin: No. As I indicated this afternoon one of the very desirable features in this inadequate budget was, of course, the removal at long last of the excise tax on automobiles which had been promised by the head of this government during two election campaigns. It was only as a result of continued interrogation and prodding by the hon. member for Fort William and others, including myself-


Donald Methuen Fleming: I rise on a point of order, Mr. Chairman. The hon. member is dealing with the wrong resolution. The resolution that was called was the one respecting the Excise Act, not the Excise Tax Act.


Paul Joseph James Martin: The chairman said, "Excise Tax Act". However, if the chairman wishes to change it, it is all right.


Jacques Flynn: Order. The resolution I have is the one relating to the Excise Act.


William Moore Benidickson: I believe, Mr. Chairman, you added the important word that differentiates one statute from the other. However, now that it is clear we are dealing with the Excise Act, I believe the Minister of Finance should explain paragraph 1 relating to the maximum weight of cigarettes subject to this tax, his expectations regarding this recommendation, and so on.


Donald Methuen Fleming: Mr. Chairman, I believe the purpose of this amendment was fully explained in the budget speech. This explanation is to be found at page 6662 of Hansard.
This resolution would have the effect that, in future, cigarettes may weigh as much as three pounds per thousand cigarettes before becoming subject to the higher rate of excise duty. At present the act provides an excise duty of $4 per thousand cigarettes weighing not more than 2J pounds per thousand. If cigarettes weigh more than this limit, the duty is $5 per thousand. This resolution proposes that the point at which the higher rate becomes effective be increased to three pounds per thousand cigarettes. This change will permit manufacturers to put more tobacco in cigarettes than at present without paying higher duty. At the present time most cigarettes longer than normal in size made in Canada are longer because of the filter and are not true "king size" cigarettes as they are known in the United States.
The proposed change will permit the manufacture of so-called "king size" cigarettes without additional tax. It has been estimated by some cigarette manufacturers that this

Excise Act
change may result in the use of an additional ten million pounds of tobacco per year. This is an increase of 8 per cent or 9 per cent in tobacco consumption. Although the change is a tax reduction in that a larger quantity of tobacco may be purchased for the same amount of tax, it is not anticipated the tax revenue will be affected to any significant extent since people purchase cigarettes by number rather than by weight.


William Moore Benidickson: I know very well that after budget night the administration does receive comments upon its proposals, such as this one. Would the minister indicate, in all fairness to this committee, if any such comment has been received by the administration in respect of this particular proposal?


Donald Methuen Fleming: The representations or communications, Mr. Chairman, are of three kinds. First of all, the association representing tobacco growers has given the warmest kind of commendation to this resolution. I have had various communications from the representatives of growers to that effect. There have been representations also from manufacturers. One manufacturer, for instance, warmly commends the resolution in its present form. Another manufacturer asked for more time in which to instal the machinery required for the manufacture of the longer cigarettes. A third manufacturer first of all expressed a preference for the resolution not being proceeded with, and in the second place, if it were proceeded with, that it be deferred to a later period than January 1, 1962 in order to allow more time for the installation of machinery.
We had given some thought to this matter before the resolution was originally drawn, and had considered that a six-month deferment of the effective date of the change would be adequate to permit manufacturers who were not yet equipped with machines to make longer cigarettes the time to do so. In the light of these representations indicating that those manufacturers who are not so equipped would like a further six months to provide themselves with the necessary equipment, I shall be bringing forward an amendment to the second paragraph of this resolution proposing a three months' deferral of the effective date.


William Moore Benidickson: It is almost six months now.


Donald Methuen Fleming: There is a six months' deferral written into the resolution. In other words, the resolution in its original form contemplated January 1, 1962 as the effective date. I am proposing now a further three months' deferral to April 1, 1962, in the

light of these representations made by two manufacturers who think they will require further time to equip themselves with the necessary machinery.
I would ask my colleague the Minister of Veterans Affairs to move the following amendment:
That paragraph 2 of the Excise Act resolution be amended by striking out the expression "the first day of January 1962" and substituting therefor the expression "the first day of April, 1962."


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


Jacques Flynn: Shall the amendment carry?


William Moore Benidickson: This is another sign of indecision and lack of firm judgment, such as we had in the presentation of the budget as a whole. At this stage we are debating the resolution, and later we will have a bill presented to us to amend the Excise Act. The minister has given notice that the government, with all the time at its disposal, apparently has not yet decided when this measure is to come into effect. The government requests another three months. May I ask the minister if it is his intention, before the adjournment of this session, to ask us to deal with second reading of the Excise Act to make effective the proposals contemplated in this resolution? We really do not have the bill before us now, but we have a warning, so to speak, of the government's intention. In as much as this is not going to be operative until April 1, 1962, has the minister any advice to give us on the necessity of debating the consequences of the principles involved here and the effect on the industry at this time? Is it perhaps likely that we would deal with this after the summer recess?


Donald Methuen Fleming: There is of course a bill to follow. The resolution will not become effective unless the bill is passed. I hope that we can proceed swiftly with all stages of the budget resolutions. It is desirable that this legislation be passed soon in order that the manufacturers in this business may know the intention of parliament and be able to make their plans for equipment and the manufacture of the new type of cigarettes accordingly.


William Moore Benidickson: I share with the minister concern that the manufacturers, and I presume the consumers, would have some certainty about the end result of the budget proposals. Am I wrong in my thinking that as of the night of the minister's announcement the Department of National Revenue would have taken the minister at his word in so far as the tax imposition is concerned, knowing that he has a massive majority behind him? Since the night the minister introduced his budget has the Department of

National Revenue been in fact imposing the tax in accordance with the wording of this resolution irrespective of whether we pass it tonight or next September?


Donald Methuen Fleming: No. The resolution proposes that the change in the act become effective on January 1, 1962. The Department of National Revenue is not going to advance the effective date beyond that mentioned in the resolution.


William Moore Benidickson: I think I was wrong there. The minister is perfectly right, but I am right in my general premise that when the minister announces a tax change it becomes effective on the night he announces it. In this instance the effective date would have been, as his budget speech suggested, January 1, 1962. He now proposes an amendment which would make the effective date April 1, 1962. This is not really emergent legislation as far as we are concerned at the moment. Unlike other announcements of the minister on budget night, the first item we are considering would have become operative on January 1, 1962. By the amendment the minister is proposing it will not become operative as a tax item until April 1, 1962. We are asked to proceed with this resolution and I presume the minister has some good reason for advancing it tonight. I am just a little bit suspicious of why we have to deal with this particular amendment if it will not affect the people of Canada under the present intention of the government until April, 1962.
There are many people in this house who think the government has advanced contentious legislation rather late this session if there is a possibility of having a summer recess. Surely this particular legislation is not of very great consequence to the people of Canada if in the first place it was not to be operative until January 1, 1962, and now under a proposed amendment of the government not until April 1, 1962. Am I missing something? Why is this resolution advanced on the basis of priority? Why is it the first item of the budget proposals that the minister thinks should be considered at this particular stage in the session when some of us are perhaps contemplating a recess, but not necessarily so. We are prepared to carry on here as long as necessary but this does not seem to me to be one of the urgent items that should be taken up as the first budget proposal if it is not to be operative in so far as the people are concerned until April, 1962.


Mr. Garland:: I have one question to ask the minister. Did the minister or his department consult with the Department of National Health and Welfare to determine the possible effect, if any, on lung cancer that might result from this increased usage.
Excise Act


Donald Methuen Fleming: Not specifically, Mr. Chairman, but I think it is obvious that the incidence, if any, to which the hon. member refers is not likely to be affected by the present measure. This means longer cigarettes or cigarettes with more tobacco in them.


John Richard Garland: There is a suggestion of increased usage of ten million pounds.


Paul Theodore Hellyer: Can the minister tell us what tax changes there have been on cigarettes since June, 1957?


Donald Methuen Fleming: We had one previously. We had this one change which was made in 1959, which added the equivalent of, I think it was, one dollar per thousand cigarettes to the tax on cigarettes.


John Whitney Pickersgill: The tax has been increased, then?


Paul Theodore Hellyer: Mr. Chairman, it is unfortunate for those people who are interested in this industry that the present government has seen fit to increase the tax on cigarettes over and above what it was in 1957. It is particularly unfortunate in view of the promises which seemed to have been made by the Prime Minister during the campaign in 1958. At Brantford, on February 17, 1958 he is reported to have said:
Prime Minister Diefenbaker last night dropped a clear hint that the taxes on cigarettes, cigars and tobacco soon may be cut.
He told an audience of 1,400 that no industry in Canada suffers a greater degree of taxation than the tobacco industry.
Tobacco growers, he said, are the one segment of agriculture that has not received the attention it deserves, although growers long have clamoured for government aid.
The Prime Minister added: "We want to give them this assistance. We are having a study made of this industry to see what action is needed to give tobacco growers a reasonable return and some security for their efforts."
The tax on a 33 cent pack of cigarettes now is about 18 cents, made up of an excise tax, and excise duty, and a 10 per cent sales tax.
The study probably will be made by the Department of Finance and any ensuing tax cut could be introduced in time for the 1958-1959 federal budget expected in May.
To the Brantford audience, living on the northern fringe of Ontario's tobacco belt-where production has jumped from 63,000 acres in 1943 to 120,000 in 1956-the Prime Minister's hint appeared an effective vote catcher.
It is particularly interesting, Mr. Chairman, in view of this, that presumably after the study by the Department of Finance to which the Prime Minister alluded, their conclusion was not that the farmers should be given relief but on the contrary that the tax should be increased. Surely the report of the Prime Minister's statement in Brantford is very clear that it was his opinion then that the industry was overtaxed, that the tax was

Excise Act
too high. Yet following the study by the Department of Finance the tax was not reduced but on the contrary was increased.
This is one more indication of a promise which was made to the Canadian people in 1958 and was not kept. In respect of the present budget it might be said that one of the greatest areas of expansion in the whole budget is the minister's switch from regular to king size.


Jacques Flynn: Shall the amendment carry?


William Moore Benidickson: No. I think the minister should indicate what research preceded this decision and, having regard particularly to what the hon. member for Trinity has said, to what extent it has been along the lines of a planned program which is something that the minister always talks about.


Jacques Flynn: The question is on the amendment now and we might as well dispose of the amendment before dealing with the rest of the resolution.


William Moore Benidickson: With the expectation that the minister will make some reply on the resolution as amended, that will be satisfactory.


[Stage Direction]
Amendment agreed to.
Jacques Flynn: Shall the resolution carry?


William Moore Benidickson: I would hope that the minister would indicate a little more than he has done so far the background of the investigations that resulted in this decision on the part of the ministry, particularly in view of the comments of the hon. member for Trinity.


Donald Methuen Fleming: Mr. Chairman, this measure has been asked for by the tobacco growers. It has been strongly supported by the growers. Certain manufacturers have asked for it as well, but the strongest plea has come from the tobacco growers.


George James McIlraith: Was the resolution asked for by any of the cigarette manufacturers?


Donald Methuen Fleming: Yes.


George James McIlraith: Of the larger manufacturing companies, how many of them were for it and how many were opposed?


Donald Methuen Fleming: To my knowledge it has been asked for by Rothmans for several years.


John Whitney Pickersgill: Has the minister any indication that the price of these king size cigarettes will be the same or higher than the price of standard cigarettes?


Donald Methuen Fleming: No specific indication in this regard. It will be a matter for the market.


William Moore Benidickson: The minister spoke yesterday with a great deal of vehemence and apparently on the basis of a great deal of research as to the element of cost of a consumer product of great importance. I refer to bread. Apparently he had looked very carefully into the matter and had decided that, so far as bread prices were concerned, a five cent or more increase in the price of wheat would not justify the bakeries in increasing the price of bread. I must admit that I am a consumer of some products but I am not a consumer of this one and I do not know too well what may happen. What is likely to happen so far as consumers of cigarettes are concerned? As the result of this proposal, are they likely to get more value for their expenditure or less?
The minister mentioned that one of the important though lesser manufacturers, Rothmans, had been an advocate of this change. What about the people who are dominant in this field, for instance, Imperial Tobacco Company? Are they for or against this proposal?


Donald Methuen Fleming: I answered that question a few minutes ago as to the position taken by the Imperial Tobacco Company in its representations since the budget. This resolution will have no relationship whatever to cigarettes of the present size with respect to price or anything else, but it will have the effect of reducing the tax and accordingly the price on what are commonly called king size cigarettes. It is expected, and this is the burden of the representations made very strongly by the tobacco growers association, that this resolution will result in the use of an additional ten million pounds of tobacco a year.


William Moore Benidickson: The minister indicated that he thought this was a reduction in tax. Has he or his staff calculated the tax loss so far as the crown is concerned that may result from this reduction?


Donald Methuen Fleming: I dealt with that earlier.
Resolution as amended agreed to.
Resolution reported and concurred in.


CUSTOMS TARIFF
[Stage Direction]
1. Resolved, that it is expedient to introduce a measure to amend the Customs Tariff to provide that the provisions of subsection (2) of section 3 and subsections (1) and (2) of section 5 apply to goods entering Canada through a port of any kind rather than being limited to goods entering through a sea, lake or river port.
Donald Methuen Fleming: Mr. Chairman, perhaps it would facilitate consideration of these resolutions by the committee if I were to say

a word in explanation. There are four resolutions here to amend the Customs Tariff. The first one concerns only a definition. It is customary to deal with changes in definition in the act in the first resolution under this heading. This change in definition results from the fact that goods coming into Canada enjoying British preferential rates can arrive by air and no longer are limited in their transport to entry through a sea, lake ;or river port.
The second resolution concerns changes in the Customs Tariff respecting textiles. As I reported to the house in the budget speech, here we have the results of three reports of the tariff board followed by extensive negotiations, and this is put forward as a complete negotiated package in so far as GATT bindings are concerned. It is a complete package in the sense that in the negotiations the reductions were accepted by the countries in whose favour there were bindings in satisfaction of the increases. So that this is in itself a complete package.
The third resolution embraces a number of miscellaneous items which are bound under GATT, and these have all been the subject of negotiations with those countries in whose favour they were bound under GATT.
The fourth resolution embraces another miscellaneous group of items which are not bound by GATT.


William Moore Benidickson: Mr. Chairman, this is not new. Every year we have amendments to the customs tariff in the manner that these are advanced. I think the minister would be the first to agree that these amendments are of the utmost importance. In view of what he said in his budget speech and again tonight, he himself will recognize that we have had multilateral trading agreements with a great number of countries for many years. This is very important. When we want to raise our tariff against a certain item of import and against a certain country, as the minister has indicated in all too unclear and broad terms, this involves renegotiation.
Before we continue to pass items here in the House of Commons, I feel that the time has come when we should hear not only about the industries and the products that were affected in a beneficial way, but should also hear from the administration about the trading quid pro quo that is involved. This disclosure has been avoided. That is not true with respect to other countries that belong to the same international trading organization. In parliament here, if it is possible, the Minister of Finance talks about the results of his trading that may have helped certain industries but he attempts to avoid telling
Customs Tariff
parliament and the country about the industries and the people employed in those industries who have perhaps been sacrificed as a result of readjustments and trading negotiations that have taken place under GATT.
Under the United States system where these things are announced, they then offer those interested, adversely affected and so on, an opportunity to come forward to register their interests and their complaints. As we have not that system in Canada I feel that every year the Minister of Finance, when he talks about items bound under GATT and other trading agreements, should tell us not only about the positive items where he has negotiated on behalf of certain industries for trade preferences but should tell us the quid pro quo. We know that there has been involved a quid pro quo, as I said. Somebody else has been sacrificed. Who are they? What are the products? What are the industries? Where are they situated? Before we pass not only the resolutions relating to this matter but before we pass at the next stage legislatively the bill that will be founded on these resolutions, I think the Minister of Finance is bound to tell us what the trade was on both sides. He has told us that, in connection with certain textile items, he feels he has provided added advantage in relation to Canada's associates in GATT. That is a multilateral trading agreement involving more than 30 countries.


Donald Methuen Fleming: If the hon. member will permit me to do so, Mr. Chairman, may I draw attention to the fact that there are four separate resolutions here. There is nothing of concern to GATT under the first and fourth resolutions. I have already said that there were bindings or negotiations with respect to bindings in relation to the items embraced in the scope of the second and the third resolutions. We would perhaps have more orderly procedure, Mr. Chairman, if we confined ourselves as we go along to the respective resolutions as they will have to be called separately and adopted separately. The first one concerns the definition only.


Jacques Flynn: I have indicated that I was inviting the committee to consider resolution No. 1.


William Moore Benidickson: You are well aware, Mr. Chairman, that on item No. 1 in committee of the whole it has been the traditional practice, of which the Minister of Finance was a great observer when he was sitting on this side of the chamber, to make some observations about the proposed statute as a statute on a broad basis. It was on that basis that I wanted to refer this committee to the resolution. The opposition is not expected perhaps

Customs Tariff
to be completely cognizant of some of the machinations related to legislative developments. We know that we are changing the Customs Tariff. We look in the first instance to what the minister tells us on budget night.
1	refer to page 6653 of Hansard. The minister, under a heading provided to us of "Tariff board reports and other tariff changes", stated as follows. I will read the first part of the minister's remarks:
The rates of duty on most items of significance in the Canadian tariff are, as hon. members well know, bound against increase under our GATT agreements-
That was the purpose of my rising at this point. The minister then went on to say that in the schedules before us in these resolutions we shall find adjustments, changes and amendments. The minister took time out to say that these changes would benefit a certain segment of our economy. However, the minister has not said what the other side of the picture is, whose ox was gored, or who paid for these concessions that were given when certain changes were required under our basic GATT agreement. I think that matter is important at this stage of the discussion of the resolutions affecting the Customs Tariff. I ask the minister tonight to give to us this information, having regard to the next paragraph of his budget statement in which he referred to renegotiations and to three reports and indicated that, having regard to tariff board reports in Canada, the administration was anxious to fix this matter up with its trading partners across the world. Having done that, or having followed that course, he does not say what exports of Canada were affected in a trading nature to compensate when these items were bound under our GATT agreement, or what industries paid for the concessions that were made with respect to imports. I think we should hear about that matter before we proceed further with these resolutions.


Donald Methuen Fleming: I have already made it quite clear, Mr. Chairman, that the complete answer to the hon. gentleman's question is to be found in resolutions Nos.
2	and 3. There is to be found there the complete story of the changes made in accordance with the provisions of GATT as a result of negotiations. I shall be glad to answer any further questions when we reach the details of those two resolutions.


William Moore Benidickson: The minister flatters me and all members of this committee when he says that the complete answer is to be found if you look at page 6673 of Hansard, of June 20. I thank the minister. He is very complimentary in suggesting that I am just

that knowledgeable about the quid pro quo or the trading and could find it by reading, say, resolution No. 2.


Donald Methuen Fleming: I have already explained that there was a complete package in resolution No. 2 respecting all textile items. It is a complete package. The quid and the quo are both there. A similar situation exists in relation to resolution No. 3, as to the changes made there. The complete answer is that in resolution No. 3, the quids and the quos are both to be found.


William Moore Benidickson: I doubt that anybody can find it outside of the minister, his parliamentary secretary and perhaps one or two others. Certainly I cannot do so. I do not pretend to be that knowledgeable. I doubt that anybody can look at resolution No. 2 and find the answer without the proper, honest disclosure on the part of the minister as to what the trading quid pro quo was. I say that I cannot find it in the fine text of resolution No. 2, and I have had some experience in this regard.
I say that the minister must be more frank with the committee than he is apparently intending to be. On budget night, as reported at page 6653 of Hansard, the minister said there were renegotiations. He told us that certain items were bound and he went on to say that measures have been taken to prevent certain imports that were damaging to certain industries in Canada. I say the minister has not given on that page of Hansard or up till now the other side of the picture, which is, who lost by these renegotiations or these trading agreements to which he referred at page 6653 of Hansard under the heading "Tariff board reports and other tariff changes" which he said were bound.
When he says they are bound, it means that under our multilateral tariff commitments our partners in trade look at the dollar value of the imports that the Minister of Finance boasts at page 6653 of having been curtailed. These approximately 30 traders with whom we have these multilateral agreements are not stupid and I know it would not be possible to change these agreements unless some export industry of Canada had been sacrificed. I want to know which ones were sacrificed to justify the boast that is made at page 6653 of Hansard with regard to the curtailment of imports.
I think at this stage the Minister of Finance should give us more information. This information is generally given. It is certainly given in the United States and then representations are made and there may be an appeal to the tariff board before the government of that country actually enters into a

firm treaty agreement with respect to a commitment on imports and exports.
My point is that the minister has no right to come to parliament and boast that renegotiations have taken place which will give benefit to certain industries in this country which feared imports, without telling us what industries in Canada which exported to our trading partners in GATT were sacrificed. I would like the minister to give an explanation of this matter.


Donald Methuen Fleming: Mr. Chairman, there will be full opportunity to deal with that matter intelligently when we reach the second and third resolutions, which embrace all the items the hon. gentleman is concerned about. I suggest, therefore, that we proceed to adopt resolution No. 1, which concerns a matter of definition, and then we can talk about the first of the groups which concern the GATT bindings, in resolution 2.


George James McIlraith: Mr. Chairman, item No. 1 concerns definition in relation to the port of entry. We had legislation, which indeed is still on the order paper, concerned with definition under this legislation but in another connection altogether. I refer to the class or kind legislation. I would ask the minister the procedure under that legislation in relation to the coming into effect of the change in definition. My reason for asking this question is that I am receiving a great many general complaints for which unfortunately I am not able to give a particular item or entry number. The claim is being made that the new definition contained in the legislation not yet passed by parliament is being applied although the act itself is not yet law. Would the minister deal with that point.


Donald Methuen Fleming: Mr. Chairman, I am told that no questions have yet arisen for determination by the Department of National Revenue in that regard.


George James McIlraith: Do I understand the answer to mean that there have been no cases of definition of class or kind under that legislation?


Donald Methuen Fleming: I am told there have been no cases arising out of the proposed change in the class or kind definition.


George James McIlraith: I am rather mystified by that answer when there are so many items-


Donald Methuen Fleming: Mr. Chairman, we are outside our proper sphere here anyway. The definition we are talking about here is respecting port of entry. If the hon. gentleman desires information on that other subject I shall be glad to obtain it for him. I do not think this is the place or time for it.
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George James McIlraith: I would ask the minister for that information, Mr. Chairman. I think this is a matter of enough significance to warrant an answer. I do not think the minister's answer dealt with the point I raised; I think his answer dealt with a point much narrower than the point I raised. There are a great many of these cases coming up; they are coming up frequently, unfortunately every day. Perhaps the minister would look into this matter and give me an answer at a later stage of this legislation.


Donald Methuen Fleming: It will not affect the legislation now under consideration.


George James McIlraith: No, it does not.


Donald Methuen Fleming: If the hon. member asks me to obtain information on something outside this resolution, of course I will be glad to do it.


George James McIlraith: Thank you very much. Otherwise it is a simple matter to offer an amendment to this legislation and get it in that indirect way, but that is not a method I like to use.


William Moore Benidickson: Mr. Chairman, I directed my remarks in a broad way, as the minister always did when he was in opposition, to resolutions preliminary to the amendment of the Customs Tariff. The minister has asked me to deal with these points section by section. I have warned the minister that I am concerned about the necessity for comment regarding not only what has Canada achieved by these renegotiations for certain industries which are concerned about competitive imports, but that I also want to know, before we pass these resolutions, which export industries have paid in some compensatory way because of these renegotiations.
I am now confining my remarks to resolution No. 1. I hope the minister will give the committee a full explanation of these words contained in the resolution:
-a port of any kind rather than being limited to goods entering through a sea, lake or river port.
Would the minister tell us what has been lacking in the legislation up till now that convinces him this particular legislative enactment is necessary in a statute which will at some time hence follow this resolution.


Donald Methuen Fleming: Mr. Chairman, for many years subsection 2 of section 3 of the Customs Tariff has provided that the benefits of Canada's British preferential tariff shall apply to goods the growth, produce or manufacture of a specified list of British countries "when conveyed without transshipment from a port of any British country enjoying the benefits of the British preferential tariff into

Customs Tariff
a sea, lake or river port of Canada". Similar language appears also in subsections 1 and 2 of section 5. At the time they were introduced, the words "sea, lake or river" in fact covered all ports to which it was physically possible for goods to be shipped direct from British preferential sources. Such goods had to move by vessel. Hence the phrase "sea, lake or river" was all-inclusive. However, with the development of trans-Atlantic, trans-Pacific, and trans-polar air travel, including cargo movements by air, the strict application of the limiting words "sea, lake or river" would now impose an unintended and undesirable restriction. It would exclude from British preferential treatment any goods arriving by air at some airports in Canada. Accordingly, in order to make it clear that goods shipped direct from a British preferential source to a Canadian airport are not excluded from British preferential tariff treatment, it is proposed to amend the provisions in question.


George James McIlraith: I take it this is a matter of clarifying the definition.


Donald Methuen Fleming: I would think, modernizing it.


George James McIlraith: I take it that the preferential tariff was granted to goods that came by air.


Donald Methuen Fleming: Yes.


George James McIlraith: So you are modernizing something which was done, probably, properly but maybe, technically, illegally.


[Stage Direction]
Resolution agreed to.
2. Resolved, that Schedule A to the Customs Tariff be amended by striking out tariff items 521(2), 522(4), 528, 529, 529a, 534(a), 534(b), 538b, 538e, 538f, 538g(l), 538g(2), 538h, 538j, 538k, 538m, 538n, 538p, 541b, 542a, 542b, 545 , 554d, 554e, 554f, 555, 556, 556a, 556b, 562a, 563a, 568, 568a (i), 568a (ii), 574, 574a, 574b, 619, 685 and 810, and the enumerations of goods and the rates of duty set opposite each of these items, and by inserting therein the following items, enumerations of goods and rates of duty:
Donald Methuen Fleming: With regard to this resolution, as I indicated earlier, it embraces all the textile items in italics with respect to which changes are being proposed. This resolution arises from three reports of the tariff board. The reports are those relating to hosiery and knitted goods; narrow fabrics and lace; and wool clothing and manufactures.
It is proposed to introduce 29 new or revised items which replace or consolidate 40 former items. Of the 29 new items, 19 involve the renumbering, rewording or consolidation of existing items without any substantial net change in the rates of duty. Two involve increases in duty, while eight involve decreases.
Most of the items in question were bound under the GATT. Hence negotiations with our

GATT trading partners were necessary before we could act upon the tariff board's recommendations. In these negotiations our principal trading partners recognized, however, that the proposed increases were offset by equally important decreases. May I ask the hon. member for Kenora-Rainy River to pay particular attention to the next sentence? It was not necessary to provide any compensation outside the textile field in order to conclude negotiations with them. In other words, the countries concerned were satisfied that this represents a balance-the quids and the quos as recommended by the tariff board. As a matter of fact, they were so fully satisfied with the reductions recommended by the tariff board that they were not only prepared to agree to the increases recommended by the tariff board but to forgo in three respects benefits they might have expected to receive under the recommendations of the tariff board. It is clear, therefore, that resolution No. 2 is, as I have said, a balanced package which in its result involves neither higher nor lower tariffs.
There are, of course, gains from the adoption of a more logical and orderly nomenclature and arrangement of items recommended by the board. I think that all parties should benefit from this. Moreover, as I mentioned in the budget speech, the resolutions which I have introduced propose certain departures from the tariff board's recommendations, which will provide somewhat more protection for the knit goods and narrow fabrics sectors of the industry than they otherwise would have had.
As to the four departures which I have mentioned, three involve changes which were requested by Canadian textile producers, while the fourth was introduced in the course of negotiations as a result of representations made by Italy. The three departures recommended by Canadian textile producers concerned, first, knitted goods under item 568; second, socks and stockings other than wool, item 568a(2); and third, narrow fabrics of man-made fibres, item 562a(2). The fourth item which, as I have said, was the occasion of representations by Italy, concerned travel rugs under item 534a(2). I shall make this comment on the last, or fourth item, that the departure in this case from the recommendation of the tariff board involves a downward modification in a rate recommended by the tariff board. This was introduced in the course of negotiations in order to meet a special problem in our trade with Italy. The board recommended that the new tariff item for blankets, item 534(a), include travel rugs as well as household blankets. The composite m.f.n. rate of 20 per cent and 15 cents per pound provided for on this item would have

increased the effective rate on low-priced Italian travel rugs from 27J per cent to about 45 per cent. Italy requested that a ceiling of 37 i per cent be introduced for travel rugs, and a settlement was reached on that basis.
In addition, there are a few minor nonsubstantive changes in wording or arrangement. Those have been introduced for technical reasons or for purposes of clarification.


William Moore Benidickson: I thank the minister for his statement introducing the amendments involved in resolution No. 2. When we get to the details of the amendments to the Customs Tariff we are, of course, confronted with a complicated affair. It is to me, and I assume it is to most members of the committee who are listening to the minister. While he was speaking I should not, perhaps, have turned away my attention from his remarks, but I was trying to count the number of items in the Customs Tariff which are up for amendment. I have not had that opportunity, but they are very numerous. They are available for hon. members to see, however, in the resolution before us and they appear at page 6673 and following pages of Hansard of June 20. '


Donald Methuen Fleming: I may tell the hon. gentleman there are changes involved this year in about 80 items.


William Moore Benidickson: Thank you. With regard to textiles, I have not made any comment with respect to the balance of tariff impost involved in these resolutions. I had referred the minister to his own statement made on budget night where he said as reported at page 6653 that these involved renegotiations because, as he has repeated now, most of the items were what we called bound; that is bound against increase under our GATT agreement. As I understand it, the minister in his last statement said that in so far as textiles are concerned, to the extent that textiles comprise items of the 80 which the minister says are in the schedules before us, it has been possible to renegotiate within that very area of textile products. I am glad to hear that. As all members know, we have an opportunity to extract this information at this stage and then we shall have, later, a bill presented giving us a further opportunity to discuss this question. I take it that as far as the 80 items are concerned some will involve textiles, the matter which the minister thought so important that he referred to it in his budget speech as reported at page 6653. I take it that has been the quid pro quo in the trading with the other partners in GATT within that same product area. I am glad this is so.
The minister then went on to say that there were four departures in respect of the advice
Customs Tariff
that was given to the government by our tariff board, a tariff board that is now composed almost exclusively of people appointed by this government. I have no complaint about that.


Donald Methuen Fleming: Not entirely.


William Moore Benidickson: Almost. Who sits on the board who was not appointed by the Conservatives?


Thomas Miller Bell: It is a good board, anyway.


William Moore Benidickson: I am not complaining about the board. I am saying that we have a tariff board and we would like to see that board have an opportunity to investigate the class or kind legislation. That board is composed of people appointed by this government. I have faith in them, faith in their adherence to their oath of office and their willingness to adhere, after appointment, to the laws of the land. I am not so sure, with all respect to ministers and everyone else, that this could be the result if there were not an appeal from bureaucratic decisions, including decisions of political ministers. This is one of the things about which we think.
The minister referred to four departures from tariff board decisions. Now, he skirted around that. He did give some more information when he started talking about some downward revisions of the fourth item which involved negotiations with Italy. However, when it came to three important departures from the recommendations of the tariff board, the minister simply confessed that this was true, this legislation involved three departures. He has not explained what those departures were.


Donald Methuen Fleming: I shall be glad to do that.


William Moore Benidickson: I was going to ask the minister to give us information relating to those departures and the decisions in respect of them.


Donald Methuen Fleming: I shall be pleased to do that. I thought we might more conveniently do that when the items are called in the schedule. If the hon. gentleman wishes it now I shall be glad to give an explanation of these three changes in detail.
The first concerned item 568, knitted goods. The tariff board recommended that no change be made in the British preferential rate of 20 per cent, but that the m.f.n. duty on these goods be reduced from 35 per cent to 32J per cent. Imports under this tariff item average about $18 million annually, of which $6 million enter under the British preferential tariff and $12 million under the m.f.n. After reviewing the position of the knitted

Customs Tariff
goods industry, however, the government decided that on balance it would not be desirable to introduce this tariff reduction at this time.
During the textile negotiations, Austria requested a concession on women's knitted wear valued at not less than $9 per pound. In the circumstances, it was agreed to establish an item, item 568 (2), for these goods providing for an m.f.n. rate of 32J per cent as recommended by the board. This rate has been bound to Austria and the negotiations with that country were concluded on this basis. Imports of these very high priced Austrian knit goods are not competitive with Canadian products in the same sense as lower priced items from other sources.
Then, there is item 568a (2). The tariff board recommended that the specific component of the compound duty on non-woollen hosiery be reduced from 75 cents per dozen pairs to 60 cents per dozen pairs. Again, having regard to the position of the Canadian industry, it was decided not to implement the board's recommendation in that regard.
The third item concerned narrow fabrics of man-made fibres, which is item 562a (2). The tariff board proposed the establishment of a new tariff item to cover narrow fabrics of man-made fibres, which had been classified under several different tariff items at various rates of duty. The new rates recommended by the board were British preferential, 22J per cent and m.f.n., 25 per cent. As a concession to the industry, particularly that sector engaged in the production of synthetic tapes and other narrow fabrics classified under the previous item 562 (a) at higher rates of duty, I have proposed rates of British preferential, 25 per cent and m.f.n., 27J per cent.


William Moore Benidickson: I think the minister said the other night relating to the tariff board report from which he had departed in his recommendations, there was one in connection with nails.


Donald Methuen Fleming: That is resolution No. 3. That is not in this resolution.


William Moore Benidickson: I shall defer my remarks, then.


Donald Methuen Fleming: This resolution concerns textiles only.


William Moore Benidickson: In connection with resolution No. 3, the minister will recall the Canadian Federation of Agriculture made some adverse comments about this item.


George James McIlraith: In connection with the minister's remarks about item 568 (2), which reads:
Knitted garments, women's and girls, wholly or in chief part by weight of wool or hair, valued at not less than $9 per pound.

There does not seem to be any provision for the new luxury items of knitted silk. They are from Italy. Are they dealt with under this item?


Donald Methuen Fleming: If I understand the item to which the hon. gentleman refers, it is not covered by this resolution at all. It is elsewhere.


George James McIlraith: There is no change, then.


Donald Methuen Fleming: It is not in the
budget resolutions at all.


George James McIlraith: There is one other matter which I think should be clarified at this stage. The form of the schedule takes out certain tariff numbers and then substitutes new ones. Sometimes the items substituted do not coincide by number and we find, in the form of the resolution, that the rates proposed are printed and then the rates in effect are printed on the same page. Sometimes the rates proposed in this budget are the same. For example, in respect of item 522 (4), the rates are the same in both instances. I take it that the change there is in the wording which is in italics.


Donald Methuen Fleming: That is correct; as I said earlier, most of the changes here concern matters of nomenclature. This is part of the revision that the board recommended.


George James McIlraith: And the changes in nomenclature may arise out of combining items or dropping items and renumbering items as, for instance, in item 522 (4); that sort of thing?


Donald Methuen Fleming: That is correct.


John Whitney Pickersgill: I understand that generally in these negotiations if there are concessions under GATT there is one particular country with which principal negotiations are conducted. Could the minister say which one it was in connection with these items?


Donald Methuen Fleming: There were a number of countries involved in these changes. The country more concerned than any other in these items, in terms of volume, was the United States.


John Whitney Pickersgill: Does Japan take any part in these negotiations, or is our trade with Japan exclusively governed by the Canadian-Japanese agreement?


Donald Methuen Fleming: There is obligation under GATT, of course, to consult with GATT countries having a supplying interest, and in this case Japan, along with other countries, was consulted.


William Moore Benidickson: The minister indicated in respect of the items involved in resolution

No. 2, which are textile items that have been traded within that group, that the United States was the principal trading country involved. What would be the second and third traders that were involved in these changes?


Donald Methuen Fleming: The second would be the United Kingdom; the third, France.


Jacques Flynn: Shall the resolution carry?


John Whitney Pickersgill: Just before it carries I have one question I want to ask out of sheer curiosity. Will the minister tell me what a pantagraph is?


Paul Theodore Hellyer: Something like a pantaloon.


John Whitney Pickersgill: I refer to item 685.


William Moore Benidickson: The practice has been, as we deal with resolution No. 1, to call the items, item 522 being the first one. I suggest that as we deal with these items we have to watch the wording; it is rather involved. I also suggest, Mr. Chairman, that you call the items slowly. So far as I am concerned I am prepared to have the items called at this stage in resolution No. 2 if we do not do it too quickly because we have to observe the language.


Donald Methuen Fleming: I think I should not keep the hon. member for Bonavista-Twillingate in a condition of curiosity any longer. A pantagraph is part of a printing press.


John Whitney Pickersgill: Is it a textile?


Donald Methuen Fleming: No.


George James McIlraith: I notice from the form of 685 that there are no italicized words in the definition and there is no change in the rate of duty. Why is the item in here?


Donald Methuen Fleming: This item continues without change that portion of the former tariff item 685 relating to pantagraphs and parts, engraving mills and other machinery used in printing textiles and wallpapers.
As a result of the tariff board's recommendations, blankets and blanketing used by textile manufacturers and wallpaper printers have been deleted from item 685. Blanketing for textile machinery will fall under the new item 534c.
In a word, you have a residue now of the former tariff item 685.


John Whitney Pickersgill: In which there is no change?


Donald Methuen Fleming: That is right.


Jacques Flynn: Is it agreed that we call the
items one by one?
Customs Tariff


Donald Methuen Fleming: I thought it was agreed that hon. members were satisfied with the items in resolution No. 2.


William Moore Benidickson: I think the practice of years has been to call the items without undue haste. I leave it to the chairman's discretion.
Items 522 and 528 agreed to.
Customs tariff-532f. Woven billiard cloth composed wholly or in part of wool or hair; melton cloth for use in the manufacture of tennis balls: British preferential tariff, free; most-favourednation tariff 20 per cent; general tariff, 40 per cent; and, per pound, most-favoured-nation tariff, 25 cents; general tariff, 35 cents.


John Whitney Pickersgill: Can the minister tell us whether there is any large quantity of this billiard cloth made in Canada, and where it is made?


Donald Methuen Fleming: The imports in this case come almost entirely from the United Kingdom. As to Canadian manufacture, I am told that none of this is made in Canada.


[Stage Direction]
Item agreed to.
Item 532g agreed to.
Customs tariff-533a. Clothing, wearing apparel and articles made from woven fabrics, and all textile manufactured, wholly or partially manufactured, composed wholly or in part of wool or hair, when the textile component thereof is not more than 50 per cent, by weight, of silk, n.o.p.: British preferential tariff, 25 per cent; mostfavoured-nation tariff, 27£ per cent; general tariff, 55 per cent.
William Moore Benidickson: I notice the additional words at the end of the paragraph. The emphasis is on products of silk. I would not think that they are important to our trade with the United States or the United Kingdom. I was wondering about the significance of our trade under this item? With what country do we find that this change will be most important? What other trading nations will this be important to?


Donald Methuen Fleming: The United Kingdom.


[Stage Direction]
Item agreed to.
Item 533b agreed to.
Customs tariff-534a. (1) Household blankets of any material except wholly of cotton: British preferential tariff, 20 per cent; most-favoured-nation tariff, 20 per cent; general tariff, 40 per cent and, per pound, British preferential tariff, 5 cents; most-favoured-nation tariff, 15 cents; general tariff, 30 cents.
(2) Automobile rugs, steamer rugs, travel rugs and similar articles of any material except wholly of cotton: British preferential tariff, 20 per cent; most-favoured-nation tariff, 20 per cent; general tariff, 40 per cent; and, per pound, British preferential tariff, 5 cents; most-favoured-nation tariff, 15 cents; general tariff, 30 cents.
[Stage Direction]
Customs Tariff
The total duty leviable shall not be in excess of: most-favoured-nation tariff, 37J per cent.
William Moore Benidickson: The minister has already made reference to blankets from Italy as being important in some of the changes we are making here. Is this where we must consider the blanket matter with respect to Italy?


Donald Methuen Fleming: Yes, this is the item, 534a (2).


Paul Theodore Hellyer: Can the minister say why the general tariff rate on this item was increased?


Donald Methuen Fleming: The hon. member understands that practically all of our trade is carried on under British preferential and m.f.n. items. As a rule of thumb it is usually considered desirable that the general rate be double the British preferential rate.


Paul Theodore Hellyer: If that is true, Mr. Chairman, it was much less than double before the change, and now it has been increased to double the smaller amount. The minister might give us some explanation as to why this change was considered necessary?


Donald Methuen Fleming: It is a sort of rule of thumb, and that rule had not been evident in this item previously. The tariff board report concerned1 itself with the British preferential and m.f.n. rates and, as I say, practically all of the trade here is carried on under these categories.


William Moore Benidickson: In so far as Italy is concerned, which apparently is the country of primary export, or import, if you want to call it that, for what is generally referred to in paragraph (2) as automobile rugs, the rate goes up under the most-favoured-nation item and this of course includes Italy. The rate goes up from 20 per cent to 27J.- per cent. Specifically, what do we have to give away to Italy in our GATT negotiations to do the right thing by them in the renegotiations?


Donald Methuen Fleming: Well, the quid pro quo is to be found within this item 534a. The hon. member has referred to the increase with respect to the second part of the item, the rugs, but he will find an offset in 534a (1), under blankets.


[Stage Direction]
Item agreed to.
Customs tariff-534b. Press blankets or blanketing tor use with printing presses and stereotypers' and type casters' blankets or blanketing, of a class or kind not made in Canada: British preferential tariff, free; most-favoured-nation tariff, 5 per cent; general tariff, 10 per cent.
William Moore Benidickson: This poses a technical difficulty for members of the committee trying to follow this type of legislation. We know that generally we look to the columns to see

a change in the rate. When we look at the rates in effect prior to the rates proposed in the budget as against the rates given to us in the schedule to the left, we are in this difficulty. The print is very fine. I may be missing the obvious; I confess that immediately, but on a quick glance at item 534b as a member of the committee I do not see the obvious things that we look for, namely either a change in the rate or italicized changes in language.


Donald Methuen Fleming: You have the italics only where new words are introduced. Where there are no italics obviously the change has consisted of deletions.


William Moore Benidickson: What are the deletions of words that are not obvious to a member of the committee without asking a question?


Donald Methuen Fleming: The old item 538h read as follows:
Stereotypers and typecasters' blankets or blanketing and press blankets or blanketing used for printing presses, of a class or kind not made in Canada.


John Whitney Pickersgill: Could the minister say what has happened to the omitted parts?


Donald Methuen Fleming: This is a very slight change in wording which is introduced solely for the purpose of clarification-


John Whitney Pickersgill: There is no change at all then.


Donald Methuen Fleming: -as recommended by the tariff board.


John Whitney Pickersgill: It is just semantics.


Donald Methuen Fleming: Modernization.


[Stage Direction]
Item agreed to.
Customs tariff-534c. Blankets, blanketing and lapping for use by textile manufacturers on machines used in the manufacture of textiles: British preferential tariff, free; most-favoured-nation tariff, free; general tariff, free.
John Whitney Pickersgill: What about this item? Is this the item that is related to pantagraphs?


Donald Methuen Fleming: No, we are a long
way from that.


John Whitney Pickersgill: Which is the item related to pantagraphs?


Donald Methuen Fleming: Pantagraphs are in the last item.


John Whitney Pickersgill: The minister said there was an item related to pantagraphs that was omitted from it.


Donald Methuen Fleming: Oh, I will give you that. The item, blanketing for textile machinery, will fall under the new item 534c.


John Whitney Pickersgill: In other words, the minister might perhaps apologize because it turns out this is the item that was extracted from the pantagraph item, which was what I asked in the first place.


Donald Methuen Fleming: I have given the answer.


John Whitney Pickersgill: First you said no.


Donald Methuen Fleming: No, I did not say
no.


John Whitney Pickersgill: Then I was somewhat insistent and you finally looked it up with your officials and you found out that that was right. I thought it was from the original explanation you gave. The reason I raise this question is that there does not appear to be any change in the rates at all and I wonder why they have been separated. What purpose was served by all this?


Donald Methuen Fleming: Mr. Chairman, this item continues part of tariff item 685 with no change in rates and with minor changes in wording. The new item is as recommended by the tariff board except that the words "on machines used in the manufacture of textiles" were added. This change was made at the request of Canadian blanket manufacturers to preclude the possibility of blankets and blanketing being imported by Canadian manufacturers for further processing into blankets, clothing and other manufactured articles for resale.


George James McIlraith: So that there is in effect a change by limiting the articles coming in under this item to the end use to be made of them. It is an important clarification and I think a desirable one.


Donald Methuen Fleming: But that in itself is only a clarification.


[Stage Direction]
Item agreed to.
Customs tariff-541b. Woven fabrics, wholly of jute, not exceeding 12 inches in width: British preferential tariff, 15 per cent; most-favoured-nation tariff, 22\ per cent; general tariff, 30 per cent.
William Moore Benidickson: With respect to item
541b I would assume that the minister's answer as to item 534b would be applicable here, namely, that there are some words omitted. If so, would he tell us briefly what the words are that are omitted because otherwise the words before and after would appear to be the same.


Donald Methuen Fleming: This item retains without change in rate or wording that portion of the former item 541b relating to woven fabrics of jute. Braided fabrics will fall under the new tariff item 565b under the words "Braids of all kinds, n.o.p."
Customs Tariff


John Whitney Pickersgill: The minister said that there was no change in rate but it appears to me that the general rate is changed. It is 30 per cent in one case and 25 per cent in the other. What is the reason for that?


William Moore Benidickson: The general tariff is not usually important. Why is there a change there?


Donald Methuen Fleming: The same observation applies as I made to the hon. member for Trinity. The tariff board concerned itself with the British preferential and mostfavoured-nation rates. We have very little trade under the general tariff and the change so far as the general tariff is concerned is one to bring the rate into line with the general practice.


Paul Theodore Hellyer: The rule of thumb given by the minister before was that the general rate should be doubled the most-favoured-nation rate.


Donald Methuen Fleming: No, double the British preferential rate.


[Stage Direction]
Item agreed to.
Items 542a and 562a agreed to.
Customs tariff-562j. Bolting cloth for sifting flour in flour mills:	British preferential tariff, free;
most-favoured-nation tariff, free; general tariff, 45 per cent.
John Whitney Pickersgill: Is this something entirely new?


Donald Methuen Fleming: Prior to the budget of March, 1960, bolting cloth entered duty free under the former tariff item 563. The tariff board recommended that this item be deleted from the tariff and this was done by the budget resolutions of March, 1960. As a result, silk bolting cloth became dutiable under existing tariff item 552a at British preferential 12J per cent and most-favourednation 22J per cent. Synthetic bolting cloth became dutiable under the previous tariff item 562a at British preferential 22J per cent and most-favoured-nation 30 per cent and 20 cents per pound. The new item has been established as a concession jointly to the Canadian flour milling industry and to Switzerland in order to facilitate the textile negotiations with that country.


William Moore Benidickson: We have very few items left to deal with under this resolution. Would the minister indicate in trade or dollar value which are the most important items? We in the opposition lose touch with the consequential items involved in a technical schedule of this kind. Among those items that are yet to be dealt with, which ones really involve important dollar values? When we have the amendments to the Customs Tariff we will

Business of the House
have an opportunity to go over each of these items again in the schedule but perhaps the minister would give us that information as the hour is getting late.


Donald Methuen Fleming: I would not say that any of these are very large items. Probably the largest in this group is 568. Imports under 568 average $18 million annually. That is the knitted goods item, and $6 million enter under the British preferential tariff and $12 million under the most-favoured-nation tariff. That is by far the largest of these items. Individually the others would not be regarded as large items.


William Moore Benidickson: And these, of course, will appear in the schedule to the bill that is going to be presented to us and we will have an opportunity to reconsider some of these items then.


Donald Methuen Fleming: Yes, the schedule will be in the bill as in the resolution.


[Stage Direction]
Item agreed to.
Items 565a, 565b, 565c, 565d, 566a and 566b agreed to.
Customs tariff-568. (1) Knitted garments, knitted fabrics and knitted goods, n.o.p.: British preferential tariff, 20 per cent; most-favoured-nation tariff, 35 per cent, general tariff, 55 per cent.
(2) Knitted garments, women's and girls', wholly or in chief part by weight of wool or hair, valued at not less than $9 per pound: British preferential tariff, 20 per cent; most-favoured-nation tariff, 331 per cent; general tariff, 55 per cent.
William Moore Benidickson: The minister was good enough to say that this was perhaps the most important item so far as dollar value is concerned. We have the words "knitted fabrics" added here. What is the significance of adding those words?


Donald Methuen Fleming: This is a clarification only.


[Stage Direction]
Item agreed to.
Items 568a and 619 agreed to.
Customs tariff-685. Pantagraphs and parts thereof, including diamond points, and engraving mills, for engraving copper rollers used in printing textiles and wallpapers; British preferential tariff, free:	most-favoured-nation tariff, free; general
tariff, free.
Jacques Flynn: Shall item 685 carry?


John Whitney Pickersgill: On division.


[Stage Direction]
Item agreed to.
Resolutions reported and concurred in.

John Whitney Pickersgill: I wonder whether the house leader could indicate what the business will be for the rest of the week and, if possible, as has been the custom in the past, indicate the business for next week.


Gordon Minto Churchill: It is not possible to carry on the custom which we have been following over the last two years, and to indicate the business for next week. The hope of the house, of course, is that we can finish the essential items that are in front of us as quickly as possible. However, I think it is wiser to announce the business from day to day. Tomorrow we will carry on with the resolutions following the budget.


John Whitney Pickersgill: I assume the minister meant what he said, namely that he hoped to get through all the essential business. It would appear to me that there might be a considerable probability that the budget resolutions would not take all of tomorrow. Surely the government has some other business.


Gordon Minto Churchill: Nothing pleases me more than does the request of the house for more business for tomorrow. We have on the order paper Bill No. S-28, to amend the Trust Companies Act.


John Whitney Pickersgill: Surely that is not essential business. That was not in the Prime Minister's list.


Gordon Minto Churchill: These have been through the house and then over to the other place. Then there is Bill No. S-29 to amend the Loan Companies Act. Then there is the resolution in the name of the Minister of Finance dealing with the Industrial Development Bank Act.


John Whitney Pickersgill: And after that what is there? We are seeking to expedite the business of the house and we should like to have enough business to take a whole day.


Gordon Minto Churchill: We fully appreciate that. There is the resolution in the name of the Minister of Transport in connection with the Pine Point railway which also could be considered.


John Whitney Pickersgill: Is that one of the items the Prime Minister indicated was essential?


Gordon Minto Churchill: No.


John Whitney Pickersgill: Would the minister say whether this program will go on for Saturday as well or could he indicate what would be happening on Saturday?


William Moore Benidickson: Will estimates be taken on Saturday?


Gordon Minto Churchill: No. The intention will be to complete, in so far as we can, the resolutions and the bills following the budget. If the house passes the resolutions tomorrow, as has now been indicated, then of course, I think the bills would normally follow on Saturday.


John Whitney Pickersgill: On that point, if I may do
so, I think I should say this. Since we are seeking to expedite the closing of the session or the adjournment, whichever it is, I would suggest this to the minister. I do not believe that, in all the period during which I have observed parliament it has ever been customary to take budget bills immediately after the resolutions. There has always been at least an interval of a full day in order to give the opposition a full opportunity to consider the debate on the resolution stage. I suggest that much greater progress would be made if the government did not seek to depart from that usual convention and would find some other business for Saturday.


Gordon Minto Churchill: For Saturday, and the bills on Monday?
29, 1961	7299
Business of the House


John Whitney Pickersgill: I do not think we could possibly object, after the week end, to having the bills.


Gordon Minto Churchill: These useful suggestions will be taken into consideration and an announcement will be made tomorrow.


John Whitney Pickersgill: There is no question that it is the intention of the government to have the house sit on Saturday, notwithstanding the fact that it is July 1?


Gordon Minto Churchill: In the past we have frequently sat on July 1.


John Whitney Pickersgill: Quite so. We are not objecting.


[Stage Direction]
It being 38 minutes after ten o'clock the house adjourned, without question being put, pursuant to special order.
[Stage Direction]
Friday, June 30, 1961


[Stage Direction]
Miss Margaret Aitken (York-Humber) presented the thirteenth report of the standing committee on standing orders, and moved that the report be concurred in.
Motion agreed to.