1961-06-20

[Stage Direction]
Fourth report of standing committee on public accounts-Mr. Macnaughton.


[Stage Direction]
On the orders of the day:
Hon. L. B. Pearson (Leader of the Opposition):: Mr. Speaker, I should like to ask the Prime Minister whether the government has given consideration to the supply of Canadian aircraft to the international commission in Laos in view of the difficulties that our Secretary of State for External Affairs seems to be encountering in securing the necessary facilities and equipment from the United Kingdom and the Soviet union.


Right Hon. J. G. Diefenbaker (Prime Minister):: Mr. Speaker, the Leader of the Opposition did not give me any notice of this question.


Lester Bowles Pearson: I am sorry.


John George Diefenbaker: I realize that it was not by intention that course was followed. The house, of course, will know that yesterday the Secretary of State for External Affairs spoke at length at the meeting in Geneva. One of the matters particularly dealt with was this question of supplying the necessary aircraft to ensure that the operations of the commission could be carried out effectively. As yet, however, no consideration has been given to the suggestion made in the question. It is a matter that will be given further consideration when the Secretary of State for External Affairs returns. I expect that will be on Thursday.


REPORTED FINANCIAL IRREGULARITIES RESPECTING FORMER SECRETARY OF STATE
[Stage Direction]
On the orders of the day:
Mr. Hazen Argue (Assiniboia):: Mr. Speaker, I should like to direct a question to the Prime Minister. In view of the continuing disquieting reports concerning alleged kickbacks of
public money-this is the kind of thing one could expect in a situation like this-and in fairness to Mr. Courtemanche, would the Prime Minister say whether he has made an inquiry to assure himself that nothing of this kind has been carried on within the jurisdiction of the federal government?


John George Diefenbaker: Mr. Speaker, the first act of the present government when it came into power was to ensure that no minister in the cabinet would hold a portfolio while at the same time having a position as a director of any company, whether public or private. That was to prevent the possibility of there being any connection between the award of contracts and the relationship of a minister to a company which might be in receipt of a contract.
I can only say in answer to the hon. member what I said the other day, that at no time did I ever hear directly or indirectly of anything which would have supported the suggestions that were made the other day during the course of the royal commission hearing. I can only say that we took measures we had advocated through the years, that ministers should not be connected in any way with corporations. That was a course we felt was necessary in order to preserve and maintain the integrity not only of ministers but also the administration.


Hazen Robert Argue: A supplementary question, Mr. Speaker. Do I take it from the Prime Minister's answer that in addition to ensuring that a minister is not associated with any private company that might have received kickbacks, the Prime Minister has made an inquiry to make certain there have been no kickbacks of any kind within the jurisdiction of the federal government?


John George Diefenbaker: Mr. Speaker, I have no information whatsoever in that connection that would lead to the inference that is inherent in the question.


Hazen Robert Argue: On a point of order, Mr. Speaker, there is no inference in the question; it was asking for information. I want to make it perfectly clear that there is no accusation; the question was merely asking for information.


Lester Bowles Pearson: Mr. Speaker, may I ask the Prime Minister, arising out of a question I asked the other day, whether he has yet received

Inquiries of the Ministry the transcript of the evidence of the royal commission in Montreal for which he said he had asked?


John George Diefenbaker: Mr. Speaker, the transcript has not yet been received.


Hon. J. W. Pickersgill (Bonavisia-Twillin-gate):: May I address a question to the Acting Minister of National Revenue and ask him if he is yet in a position to report on the question asked by my colleague the hon. member for Laurier on Saturday, as to whether a federal income tax inspector did, in fact, as alleged, visit the Jean Talon Hospital in Montreal?


Hon. J. W. Monieith (Acting Minister of National Revenue):: No, I am not. At that time I said it was considered that any personal income tax files were secret and that I would look into the question.


John Whitney Pickersgill: Has the minister yet looked into the question, and is he able to satisfy the house as to the factual matter of whether a federal income tax inspector was at that hospital?


Jay Waldo Monteith: No. I said I would look into the question at that time.



HEALTH AND WELFARE


[Stage Direction]
On the orders of the day:
Mr. Percy Vivian (Durham):: Mr. Speaker,
I should like to ask the Prime Minister whether he has any information to give the house on the appointment of members of the royal commission on health.


John George Diefenbaker: Mr. Speaker, the appointments to the royal commission have been made by order in council. There will be a press release today setting out the identity of the various members. In view of the question asked, I will give the house that information now.
The commission will be composed of Miss Alice Girard of Montreal, immediate past president of the Canadian nurses' association and chairman of the Canadian section of the international council of nurses; Dr. Arthur Van Wart of Fredericton, past president of the Canadian Medical Association; Dr. David Baltzan of Saskatoon, past president of the Saskatchewan medical association and a member of the central health services committee of Saskatchewan; Dr. C. L. Strachan of London, Ontario, past president of the Canadian section of the international college of dentists; Professor O. J. Firestone of Ottawa,


former economic adviser to the Department of Trade and Commerce, and Mr. Wallace Mc-Cutcheon of Toronto, who is of course well known both as a businessman and for his work in welfare organizations. I have not the order in council with me at the moment but I will table it tomorrow.


Hon. Paul Martin (Essex East):: A supplementary question, Mr. Speaker. Could the Prime Minister indicate whether there will be a representative of the Canadian Medical Association on the commission? Also, in replying to that question will the Prime Minister indicate if he expects and hopes that there will be a report of the commission before the government decides to call the next federal election?


John George Diefenbaker: I am sure the hon. gentleman has some interest in the next federal election, and at some time his anxiety will be satisfied; not, however, in answer to a question couched in the manner of the one asked a moment ago. As far as the commission is concerned I have referred to the various members and I now have the order in council, which I ask to be tabled.



IMMIGRATION


[Stage Direction]
On the orders of the day:
Mr. M. D. Morton (Davenport):: I should like to direct a question to the Minister of Citizenship and Immigration. Can the minister give the house any information on the results of the discussions she has been having with representatives of the Italian immigration authorities who have recently been visiting Canada?


Hon. Ellen L. Fairclough (Minister of Citizenship and Immigration):: The under secretary of state for immigration in Italy, Hon. Ferdinando Storchi, has been in Canada for some ten days primarily for the purpose of visiting his countrymen who have migrated to this country to see the conditions under which they are living. We have had two very helpful days of discussion, one a week ago Monday and the other yesterday, in the course of which many questions were answered with respect to Canadian laws not only at federal level but at provincial and municipal levels as well. I think the discussions, which took place in a spirit of great friendliness, were helpful. I know they were helpful to our department and I trust they were helpful also to Mr. Storchi and his colleagues.



SHIPPING


[Stage Direction]
On the orders of the day:
Hon. Leon Balcer (Minister of Transport):: On Wednesday last the hon. member for Trinity-Conception asked if the Canadian National proposes to cancel an agreement among shipping companies chartered during the winter months between Halifax and St. John's, Newfoundland. The management of the Canadian National Railways advise that the railway has no charter agreements with steamship companies for service during the winter months between Halifax and St. John's.
This question may arise from negotiations at present under way between the Canadian National and certain steamship companies concerning year round through rates on rail water routes between the Canadian mainland and Newfoundland. An agreement now exists between the railway and these water carriers, inter alia, as to the division of the through rates between the two parties. The Canadian National is now in negotiation with the steamship companies on the matter.



TRANS-CANADA AIR LINES NUMBER OF PILOTS USED IN VANGUARD AIRCRAFT

[Stage Direction]
On the orders of the day:
Léon Balcer: Last week the hon. member for Laurier asked about a report that T.C.A. intended to use three pilots on its Vanguard service into Chicago and New York instead of two as originally announced.
I am informed that T.C.A. in commencing Vanguard service to these two cities is, in the first instance, operating with an air crew composed of two supervisory pilots in each case. Department of Transport inspectors will also be carried frequently on these flights in the early stages. At a later date after the operational pattern has been well established, the two supervisory pilots will be gradually replaced by regular T.C.A. line pilots. The process of introduction of these line pilots may mean, upon occasion, that during the transitional stage there will be three pilots in the cockpit rather than two, but the basic concept of operating the aircraft with an aircrew of two pilots has not been changed, and ultimately the aircraft will be operated by two line pilots.



CANADIAN NATIONAL RAILWAYS


[Stage Direction]
On the orders of the day:
John Whitney Pickersgill: Mr. Speaker, I should like to ask the
Inquiries of the Ministry Minister of Transport whether the government has as yet made the appointments to the board of directors of the Canadian National Railways which were authorized by parliament?


Léon Balcer: No, Mr. Speaker.



NUCLEAR ENERGY


[Stage Direction]
On the orders of the day:
Hazen Robert Argue: Mr. Speaker,
I should like to direct a question to the Prime Minister. In view of the failure of the major powers to reach an agreement banning nuclear tests, and the declaration by the United States that it may resume nuclear testing if an agreement is not obtained, I wonder if the Prime Minister can inform the house whether Canada is opposed to the resumption of nuclear testing even though an agreement is not obtained at an early date.


John George Diefenbaker: Mr. Speaker, as the house knows, Canada has consistently taken the position that nuclear weapon testing should cease. We are, therefore, deeply concerned by the lack of response on the part of the Soviet union to the substantial concessions which the United States and the United Kingdom have made in their latest proposals at the Geneva conference. The western answer to the Soviet aide memoire on nuclear testing and disarmament, which was given to Mr. Kennedy at Vienna, sets out very clearly why the present Soviet proposals are unsatisfactory. The United Kingdom and United States of America reply states that in the absence of progress and an effective controlled nuclear test agreement, governments will be faced with an increasing need to take whatever steps may be necessary to ensure their defence. I think that answers the question of the hon. gentleman.
We have taken a very strong stand in this regard, but the free world will have realized this fact; that however well intentioned people may be toward securing disarmament, our defences must be maintained so long as the Soviet continue their present attitude of refusing a co-operative stand in this regard.


Paul Joseph James Martin: Mr. Speaker, I should like to ask a supplementary question. In view of what the Prime Minister has just said, does this mean that the government of Canada has changed its position as stated by the Secretary of State for External Affairs, that Canada was in favour of a cessation of nuclear tests with or without controls?

Criminal Code


John George Diefenbaker: Mr. Speaker, that does not mean that the Canadian government has changed its position.


Mr. Hellyer:: Of course it has; read the statements and you can tell that.



CRIMINAL CODE

Hon. E. D. Fulton (Minister of Justice) moved: the third reading of Bill No. C-110 to amend the Criminal Code.


Miss Judy V. LaMarsh (Niagara Falls):: Mr. Speaker, I have just a few remarks to make at the third reading stage of this bill. I should first like to recommend to the Minister of Justice, as well as other ministers who may be bringing legislation before this house, that an opportunity be given, particularly in regard to such serious matters as these, for more study prior to the introduction and passage of bills.
This bill was only placed before us at 11 o'clock yesterday morning and received second reading early last evening. It contains provisions of great import, and for the first time provides implementation of the McRuer commission's recommendations by the adoption of a definition and provisions dealing with those individuals now to be classed as dangerous sexual offenders. Because this is a matter which has been discussed for some period of time, there has been a body of opinion expressed already in regard to it. However, some of the other provisions which are included in the amendments contained in the bill have not had such careful study by any such persons.
These provisions are most important, although fortunately in Canada the segment of the population to which they apply is very small. The minister gave us the information that fewer than 40 people have been convicted under the prior provision respecting criminal sexual psychopaths. Nevertheless this problem affects 40 people, and for those and the public whom they may have irreparably damaged it is a serious matter and one which requires care and consideration.
The minister indicated that there are other parts of the report which still must necessarily be implemented. In particular he pointed out that research facilities called for by the commission have not yet been established. Unhappily those who will now be classed as dangerous sexual offenders are individuals who respond but little to any sort of training or treatment carried out by psychiatrists and people in the field. I suggest it is therefore necessary, Mr. Speaker, that research facilities be set up at once in order that modern science may have an opportunity to find a way to assist those people who are psychologically ill.
(Mr. Martin (Essex East).]
If clinics are to be instituted, then perhaps there should be not just one but a number of small ones. I note that in Le Devoir this morning there is a comment from a meeting of mental hygiene specialists in Vancouver with respect to the bill passed previously dealing with drug addicts. They are complaining that the government did not consult them before bringing in its provisions. In fact they suggest that a number of small clinics for the treatment of drug addicts is much preferable to one large one.
I suggest that the government consult those active in the field who have been studying the problem for some time before launching into a program. It is necessary immediately, now that the legislation has been passed, that the government engage personnel consisting of psychiatrists and other people for the training program, and that they commence a building program for research facilities and begin to allocate money and plans in order that those who may be convicted and incarcerated under preventive detention shall receive some assistance. Otherwise it is sterile to say that we will legislate only to segregate them from the population and forget about them after we have them behind bars.
In addition, there was a change in the legislation with respect to habitual criminals. We are fortunate in Canada in that since we have had this legislation only some 54 have been convicted as such and sent to prison. The same provisions are now to apply to those who are convicted on an application as habitual criminals, and they will be incarcerated for preventive detention. It is necessary as well that they receive psychiatric and psychological training and assistance in order that they may be restored to society. As is indicated by the figures, already there have been some habitual criminals restored as decent citizens, and it is apparent that they are good risks when they go back to the community.
The other important group of sections in the bill which has received second reading were those dealing with the small boats regulations. For the benefit of those who were not present may I say there was some discussion and a point was raised about the difficulty of policing. The regulations referred to are those which have already been in force under the responsibility of the Department of Transport. They are now moved into the Criminal Code. Neither the minister nor the members of this house should forget that the mere legislation is not enough. It is necessary to police it.
The hon. member for Kootenay West raised a most interesting point which found favour with the minister, namely that in order to assist provincial authorities in policing the

regulation it may be possible to call upon voluntary associations. The hon. member suggested that perhaps members of boating or yacht clubs would assist. The minister suggested it might be possible to do something along this line with respect to fire wardens or fish and game wardens. I urge upon the minister that this line be followed up because the legislation, without enforcement, is useless.
Briefly then, Mr. Speaker, may I say that the provisions are generally good ones, but they would have benefited from more study. More time should have elapsed between the presentation of the printed bill and the discussion in committee. I hope that before other amendments are brought forward more time will be allowed for study not only by the opposition but by members of the public interested in law enforcement and the code before adoption by this house.
Motion agreed to and bill read the third time and passed.



EXPORT CREDITS INSURANCE ACT


[Stage Direction]
The house resumed from Monday, June 19, consideration of the motion of Mr. Hees for the second reading of Bill No. C-108, to amend the Export Credits Insurance Act.
Hon. George H. Hees (Minister of Trade
and Commerce): Mr. Speaker, the purpose of this bill is to amend the Export Credits Insurance Act by increasing the resources available for the export financing facilities which I announced in the house last November. This financing makes it possible for Canadian exporters to sell capital equipment on long term credit to foreign buyers.
I should like to describe briefly the operations of the Export Credits Insurance Corporation, which is charged with the responsibility of administering the Export Credits Insurance Act. The corporation was originally established to insure Canadian exporters of goods and services against non-payment by foreign buyers. The corporation's annual report for 1960, which was tabled in the house on March 28, 1961 shows that in the 16 years of its insurance operations it insured for its own account and risk a total of $575 million of export sales. The excess of premiums over net losses and expenses is less than one fifth of 1 per cent of export sales insured. Thus as was intended, it has operated on what is practically a break-even basis.
In its insurance operations the Export Credits Insurance Corporation charges premiums related to the risks involved. Rates of premium are established by taking into
Export Credits Insurance Act account the commodity, the credit term, the buyer's country, the volume of the exporter's business, the spread of risk and any other considerations which in the view of the corporation affect the risks underwritten. The average rate of premium for all the short term business insured by the corporation to date is less than three quarters of 1 per cent. As a general rule the maximum credit term for short term business in 180 days. The insurance premium is a flat charge and not on a per annum basis.
Rates for medium term business, that is up to five years, also vary by country and credit term. While premiums for medium term business are also a flat rate charge they work out to about 1.5 per cent per annum on the amount at risk. It should be emphasized that the corporation is not trying to make a profit. On the other hand, neither does it subsidize export sales. The premiums which it charges will in the long run, it is hoped, result in a break-even operation. The maximum liability the corporation may take on for its own account is $200 million. This is under section 14 of the act.
In cases where the board of directors of the corporation is of the opinion that a proposed contract of insurance would impose upon the corporation a liability for a term or an amount in excess of that which the corporation would normally undertake, and if in the opinion of the Minister of Trade and Commerce it is in the national interest that the proposed contract of insurance be entered into, the governor in council may authorize the corporation to issue the insurance policy. In such cases any loss would be paid out of the consolidated revenue fund. Under this section of the act the corporation has insured a total of $360 million of export sales, and there have been no claims.
With the backing of export credits insurance an exporter has no difficulty in getting short term financing from the chartered banks. Even in times when domestic credit has been tight, the Canadian chartered banks have been willing and able to finance short term export business.
To take care of medium term export financing the nine Canadian chartered banks have together established the Export Finance Corporation of Canada, Limited. The Export Finance Corporation has an authorized capital of $50 million, and with this as a base could borrow up to $500 million to finance exports from Canada on medium term credit. This Export Finance Corporation, which recently commenced operations with Mr. H. Duke Scott as general manager, has announced it will finance capital goods transactions involving credit up to five years where the sales are
[Stage Direction]
Export Credits Insurance Act backed by export credits insurance. This is a first class example ol co-operation between government and business for the benefit of the Canadian economy as a whole.
Under section 21A of the act the corporation may, when authorized by the governor in council, guarantee the obligations of a foreign buyer and may also purchase or sell the guaranteed obligations and lend money upon the security of guaranteed instruments. It is by using this authority that the government has undertaken to finance export sales of capital goods for periods extending beyond five years at rates of interest approximately equal to those being offered by major competitors. Government financing is, however, available only for capital goods having a high Canadian content-80 per cent or better-and which are intended for use in economically sound projects in creditworthy countries where it is reasonable to expect continuing foreign sales.
The normal procedure would be that the Export Credits Insurance Corporation would guarantee, by endorsement or otherwise, the long term obligations given by a foreign buyer to a Canadian exporter. The corporation would then "purchase" the obligations, thus giving the exporter cash. The exporter gets cash on the barrel head and the foreign buyer in effect gets a long term credit. If a particular lender were interested in holding the obligations for the interest return the corporation could then "sell" the guaranteed obligations to that lender.
The present intention is that the interest rate charged for a long term loan for export financing would be about 1 per cent above the cost to the government of borrowing money. Thus the rate quoted today is in the order of 6 per cent. This rate makes us competitive with other long term lenders such as the export-import bank of Washington.
There is no fixed or statutory limitation to the period of credit which might be approved. The factors that would be taken into account would be the size or value of the project involved; the useful life or operating period of the equipment; the ability of the buying country to pay, and the terms of payment that would be granted by international lenders such as the world bank or by the export-import bank.
Mr. Mcllrailh:: Mr. Speaker, I wonder whether we could ask the minister to speak a little more loudly so that we could hear him.


Mr. Speaker:: I might also ask hon. members to speak a little more quietly, and the combination of the two might produce the desired result.


Mr. Hees:: Section 21B of the act provides that the limitation of liability for both insurance under section 21 and financing under section 21A is $200 million. As at May 31, 1961 insurance in force under section 21 totals $138 million and financing commitments under section 21A total $48 million, making $186 million in all. This leaves only $14 million available for both additional insurance under section 21 and any long term financing under section 21 A. As stated in the explanatory note to the bill:
The purpose of this bill is to provide that the two hundred million dollar limit of liability specified in section 21B of the act, now applicable to both contracts of insurance entered into by the corporation under section 21 and instruments guaranteed by the corporation under section 21A, be made applicable solely to contracts of insurance entered into under section 21. The bill would also provide a separate limit, in the amount of two hundred million dollars, on the liability of importers under outstanding instruments guaranteed by the corporation under section 21A.
Since the government announced the availability of financing for sales of capital goods on long term credit, applications totalling about $250 million have been received. This is a good indication of the potential export volume of capital goods business. A number of projects have been approved by the committee on export finance, and commitments totalling $48 million have been given. Of the remainder, those which are considered to be eligible for financing are under active examination at this moment.
As I stated in my remarks when presenting the resolution in connection with this proposed amendment to the Export Credits Insurance Act, I am delighted to have to ask parliament to increase the funds available for long term financing. This is another example of the steps which this government is taking to encourage Canadian manufacturers and exporters to enter into the export markets of the world and increase their export sales. Backed by export credit insurance and export credit financing, it is up to the exporters to get out and seek orders from buyers who will buy if delivery is prompt, quality and design are good, and the price is right.


George James McIlraith: Mr. Speaker, I want to thank the minister for his statement. I regret the last sentence or two of it because of a slight historical inaccuracy. It is an inaccuracy that is not too important, and it does not in any way detract from the importance of the legislation and the desirability of the bill. The inaccuracy was quite simple and it was this. The necessity for this bill is due to the failure of the government to listen to question raised by hon. members of the opposition in 1959

when section 21A was added to the bill. What we are doing today is correcting that situation.
However, the amendment is none the less desirable. It is better to be late than never to correct these little omissions, and this was an important omission. I merely wish to correct the minister, because I should not like him to be misled as to what this legislation is, and I should not wish his actions as minister heading up this extremely important department to be influenced by a wrong concept on his part as to the legislation.
The minister is quite right in stressing the importance of this legislation and of the new amendment in relation to the possible export of capital goods. I have always regarded this as a particularly fortunate piece of legislation in the Canadian economy. We have the fact that action was taken one year before the end of the war to bring in this legislation in order to meet what then was the problem in the export market, namely making it possible for our former regular customers to buy our goods through the provisions of the act. Amendments to this act year after year through the intervening 17 years since it was first brought into operation have I think kept the act in a healthy condition and rendered it very useful to our export trade.
The first act was passed in 1944 and was dealt with by the then minister of trade and commerce, the late Hon. J. A. MacKinnon. The first act provided for insurance against the risk of loss arising out of non-payment. As hon. members will recall, it was then basically a matter of payment and exchange control and the uncertainty of exchange all over the world. That act performed its functions. Then in 1945 the then minister of finance introduced a bill amending part of the act to provide for the lending to other government's former customers, of certain sums of money which were very large in relation to the finances as viewed in those days, though perhaps not so large in relation to the figures we hear from finance ministers these days in the House of Commons. However, they were very large then.
Although I have not the reference, I recall many times hearing the hon. member for Greenwood speak about this legislation and some of the benefits that flowed from it. It was interesting that in 1945 two hon. members in the house were rather concerned about what was then this very new legislation because is was advancing and increasing foreign trade and we might forget our home market. It was rather interesting to find that view was asserted by the then hon. member for Davenport, the late Mr. MacNicol. It also seemed to be supported by the hon. member
Export Credits Insurance Act for Rosedale of that day; I refer to Mr. Jackman. I am sure that Mr. Jackman would be the first to agree now that the bill has worked well and that his fears were not in any way justified.
Then in 1948 the bill was again amended in order to meet the changing situation, and the area of insurance was enlarged. Provisions were introduced which enabled the corporation to meet the situation where the liability was in an amount in excess of that which the corporation would normally undertake in relation to any one contract, export, commodity or country. I have references to the hon. member for Greenwood who took an interest in that bill at that time; and I must say that, to his credit, he raised the question of why private insurers were not in this field. It was clear that they were not in it, and I think the need for this legislation has been demonstrated since then.
Then in 1954 there were further amendments to the act. The amendments in 1954 were to increase the capital. The amount of insurance permitted under the ordinary insurance provisions is 10 times the amount of subscribed capital and the amount of the reserve. The capital provision was increased, but in effect the amount of insurance permitted was increased from $100 million to $200 million under the ordinary provisions. That is section 13 of the act.
Incidentally, I may say that at the committee stage I wish to raise a very small point having to do with reserves. The act itself refers to reserves in the financial accounts; two items of reserve are used. What is referred to is the one item only of the reserve, or that is what was intended to be referred to in determining the amount of insurance that could be granted. However, that is a small matter of not too great importance and can be referred to at the committee stage.
Then in 1957 the former government again amended the act and enlarged its scope in relation to the type of goods that could be shipped, and the purposes; that is to say goods for consignment, goods for exhibition and so on. Later in the same year, namely in 1957, after the change of government the new minister of trade and commerce again submitted an amendment increasing the amount of insurance that could be undertaken under the contracts of insurance which the corporation was empowered to enter into under section 21 of the act. That was the section having to do with those types of contracts that the corporation normally would not undertake but which could be undertaken with the approval of the governor in council when certain criteria were met. The former
6606	HOUSE OF
Export Credits Insurance Act minister of trade and commerce increased the limitation under that section from $100 to $200 million.
Then, again in 1959, the former minister introduced the amendments which provided the right of the corporation to discount paper, to guarantee paper, and it is that 1959 provision that is being amended by the bill before us. That was to meet the new demand in the export markets having to do with financing.
It is interesting to observe the change in the problems of the export trade over the years. Formerly it was a question of the countries to which they were selling being able to obtain exchange with which to pay for the goods. Then it was the other risks related to that point. Then it was the question of enlarging the type of insurance we could grant because of the size of some contracts, notably some of the wheat contracts and related matters. In these cases there were risks that because of their size would be so great that a prudent insurance company would not undertake them in relation to one customer.
Then in the last two years we have had the problem that is relatively new but very, very important. This is the problem of the difficulty of exporters financing their sales contracts and their paper. In any event, as far as I am concerned I hope that whatever governments are in office over the years, particular care will be paid to this legislation to see that it is adapted from year to year to meet the problems of exporters, in the way it has been over the past 17 years. I have no doubt at all in my own mind but that this legislation, in that very difficult conversion period after the war, was of very great assistance in getting our exporters into the markets of the world. I have no doubt at all that this kind of assistance will be required in the trading world of tomorrow to meet the very tough type of competition we will have to meet.
The minister said something this morning with relation to the activities of a privately owned corporation which was incorporated, incidentally, in 1959 if I remember correctly, to enter this field of guaranteeing and discounting export paper. It is somewhat unfortunate that the name of that corporation is remarkably similar to the name of this crown-owned corporation, but since there is a relatively small number of persons dealing with the two corporations perhaps there is not too much difficulty caused by that fact. It would have been a matter of real concern were the corporations of such a nature that a great many persons in the country dealt with them. I hope that the House of Commons will in the future take more care in


the granting of names to corporations than it has in the past, because I feel we have been a little careless on this subject over the years, and certainly we have a good example of this in the legislature before us at the moment.
I was not able to hear part of the minister's remarks this morning on the subject of the activities of the private corporation in this field, but I take it I can deal with that subject more closely in the committee stage and perhaps ask the minister to repeat part of his remarks at that time. I take it that the main concern now is for this public corporation to supplement the activities of the private corporation and deal with those types of contracts that cannot receive assistance through the private corporation.
There is one other matter I should like to mention. During the opening part of his remarks on second reading last evening the minister made reference to the contracts of insurance covering the sale of wheat to Poland. Indeed, this legislation has been used as the vehicle for insuring types of sales like the wheat sale to Poland and in former years to Czechoslovakia, I think, and Russia. There may be one or two others. The point I want to make now is this. The very large wheat sale to China apparently does not come under this legislation at all, and the insurance of the payment under those contracts of sale is dealt with separately by the government.
I would hope the government would not develop the practice of only providing part of the insurance and financing provisions that are properly granted to exporters from time to time. I would hope we would not develop a system of having parts of these contracts insured by the government under some other general authority or some other act, and sidetracking this act. As a matter of fact I have always regretted that the sale of wheat was taken away from the Minister of Trade and Commerce and put under the jurisdiction of the Minister of Agriculture. If I recall correctly, I referred to the somewhat truncated functions of the Minister of Trade and Commerce. It seemed to me that so many of the functions that were properly those of the Minister of Trade and Commerce had been taken away from him. In my opinion it was not a satisfactory way in which these matters should be dealt with. In any event, it is not for me to plead the cause of the Minister of Trade and Commerce, but this does pose real problems in the control parliament is to have over expenditures and risks of this sort. It does seem to me to weaken the efficiency of cabinet handling of the responsibilities in this field of export trade. I would hope that the minister responsible for export trade would be left with that responsibility and

fixed with it so that he is answerable for it.
The wheat sale to China is a very important transaction, and in relation to that sale we have no method of obtaining the proper information in the House of Commons. There is no requirement that the related contracts having to do with the insurance and guarantees of payment be tabled, as there is under this legislation. There is no way of getting the information that is ordinarily very important under these types of export contracts for other goods.
For instance, that contract provides for payment in foreign currency. So far as I recall this is the first contract in which we have accepted foreign currency in payment. That is the sort of thing that should be dealt with and examined by the Minister of Trade and Commerce because of the implications that impinge directly on our foreign trade. Whether it is a good thing to do, or is necessary, is another matter. The point is that it is the Minister of Trade and Commerce who should be examining the consequences, in relation to our exports and imports, of taking payments in foreign currency and assessing them.
There is the question of the information which is made available to the house. We have a very elaborate procedure set out in this legislation to guarantee that the house shall have full information; the annual report, the tabling of documents, and so on. If the government takes certain export insurance out of the ambit of this act, as was done in the case of the China wheat agreement, we have no information available to us. I asked a simple question when the minister gave the volume of the Chinese wheat contract sale. I asked him what rate of exchange he had used in computing the figures, because that makes a great difference as all hon. members will realize. I was not given that information, though it is information which is relevant.


Mr. Speaker:: I hope the hon. member will not mind my interrupting to point out that he is discussing a matter which comes under another department. Perhaps it is not fair to deal with that question now, particularly as it is not relevant.


George James McIlraith: I was not seeking to discuss the merits of the China wheat sale, but rather to discuss this bill which imposes on the Minister of Trade and Commerce, through this corporation, certain responsibilities. I was seeking to illustrate my contention that all government contracts of insurance insuring exporters against loss should be dealt with through this vehicle now before us. That is the point I was seeking to make. I was illustrating the type of information which is obtainable under this legislation but which is
Export Credits Insurance Act not available if the other type of legislation is used. I was not seeking to discuss the China wheat deal on its merits, because to do so would, I agree, be out of order.
There is another point which arises. Under this export credits insurance legislation, orders in council are required to be tabled and as a result we are able to examine the payments made and ascertain any default in payments. Indeed, some orders in council were tabled on June 9 dealing with that very point. There is one in relation to heavy equipment from the Dominion Steel and Coal Corporation. There is another having to do with readjustments which had to be made in the method of payment in a certain area.
All that information had to be provided to the House of Commons. In the China wheat deal a very different procedure was followed. We do not get that type of information, and if the rate of exchange drops, if there is a revaluation of sterling, sharp rearrangements may have to be made. Nevertheless members of the House of Commons cannot avail themselves of the provisions of the Export Credits Insurance Act in order to get information about these things. That is the point I wish to stress.
Perhaps I can leave this matter now and content myself with saying that I hope the amendments we are now dealing with, having to do with the financing of certain types of export sales of capital goods, will be of real assistance to exporters. I must say that in 1959 when the provision was first introduced I expected it would be used to a considerable extent. However, I think I am correct in saying that in the first year after the passing of the section there was no paper guaranteed or discounted under that section and that up to date it has amounted to a very small item. I believe there is now considerable activity, though, and it may become of real significance. As I say, I expected in 1959 that it would have been used a great deal right away. Apparently it was not, and if the minister has any explanation to give I should be interested to hear it.
Incidentally, I noticed that last night in referring to the financing under section 21 the minister gave a figure of $48 million. When the resolution was being discussed he indicated a different figure, if I understood him properly, the figure of $58 million. I shall ask him a further question about that when we reach the committee stage of this bill.


Mr. Erhart Regier (Burnaby-Coquitlam):: believe the government is to be heartily commended for having introduced this amendment to the Export Credits Insurance Act. I believe this is a means by which we have
6608	HOUSE OF
Export Credits Insurance Act actively assisted underdeveloped nations to acquire the capital goods they need. I feel the act has also been of benefit to our own national economy in that the production of the goods involved has meant increased employment for the Canadian people.
I should like to hear the minister tell us, either when he closes the debate on second reading or when he opens the discussion at the committee stage, which nations have received these goods and enjoyed the benefit of this legislation, and how much money was involved in the sales to each of the nations concerned. I should also like him to tell us whether importers in all the countries of the world are eligible to obtain the benefits of this legislation and, if not, which countries are deliberately excluded from the list of those importing goods under the terms of this act. I would also appreciate it if the minister could place on the record the main lines of commodities involved, together with the approximate valuation of each of these main lines of commodities and how many companies have taken advantage of this legislation.
It would also be interesting if the minister could give the house some indication of where these companies are located. For example, have any companies in British Columbia taken advantage of this measure? The last question I wish to ask is this. Can the minister tell us whether only capital goods are eligible under the terms of this act, or whether consumer goods can also be exported, payment being insured under this legislation?
We feel that in the main the act has worked to the benefit not only of Canadians but of other people in the world, and again I should like to commend the government for initiating this request for the large increase in the capital needed. The minister has already supplied us with statistics illustrating that the extra money is urgently required.


Hon. J. M. Macdonnell (Greenwood):: I rise in order to ask a question. I must admit that the hon. member for Burnaby-Coquitlam has largely covered the ground I had intended to cover. I should like also to say I was much interested in the thorough and knowledgeable manner in which the hon. member for Ottawa West reviewed this legislation.
My question is this. We all know the activity and energy which the minister has shown since taking over this department, and I think we all know he has been very keen in regard to the question of aid to underdeveloped countries. I should like to ask him whether the restrictive tests, inevitable under this act, as to the capacity for repayment of the purchasing countries, will exercise a very restricting influence on the amounts of credit


which will be available for the underdeveloped countries.
I do not intend to weary the house with my views regarding this subject, which I have expressed more than once, but I should like to remind hon. members that there are three arguments for aid. The first is humanitarian, the second is political-that is to say whether we want these countries, and let us say India, to slip into the communist field-and third, which is the argument we are now considering, our own economic interest in the matter. I have no doubt as to the desire of the minister, as I know he has done much already, but I should like to hear not only his detailed answer to the questions asked by the hon. member for Burnaby-Coquitlam but perhaps a broad reply to the whole question.
This is not a matter which interests us now; it has more or less been shoved under the rug, but I am just as convinced as I am that I stand here now that the time will come when hon. members of this house will realize that this is one of the most important questions which will face us.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. McGee in the chair.
On clause 1-Limit of liability under contracts.
Erhart Regier: Mr. Chairman, I believe the minister is awaiting the arrival of his advisers. Perhaps we could just wait a moment or two, because I understood that the minister intended to reply in detail to the questions which have been asked.


George Harris Hees: Mr. Chairman, the list of the countries to which sales were made and insured during the past year appears in the annual report of the Export Credits Insurance Corporation issued December 31, 1960. The list of the countries and the amounts for which sales were insured appear at pages 12 and 13. I will be glad to send the hon. member this copy if he is not in possession of one, as the list is quite lengthy.


Erhart Regier: Mr. Chairman, because of public interest in this matter I wonder whether the committee might agree that the table be inserted in Hansard at this stage? I am sure that Hansard readers will be pleased to find it there.


George Harris Hees: Mr. Chairman, I might say that this document was tabled in the house about six weeks ago. However, I shall be pleased to have this included in Hansard at this stage if the committee so desires.


The Chairman:: Is it agreed that this table shall be printed in Hansard at this point?


Some hon. Members:: Agreed.

Export Credits Insurance Act
Analysis, by Countries, of Actual Risks Underwritten During 1960
[Editor's note: The table above referred to is as follows:]



EXPORT CREDITS INSURANCE CORPORATION

[Stage Direction]
Amount at the	Amount
government's	at the
risk under	corporation's
section 21	risk
Commonwealth
Australia	
-	$ 6,041,054Bermuda	
-	231,619Borneo	
-	4,152British East Africa	
-	8,340British Guiana	
-	370,101British Honduras	
-	28,381British West Africa	
-	6,312British Oceania	
-	949Ceylon	
-	12,548Cyprus	
-	35Fiji	
-	3,050Ghana	
-	1,978,506Hong Kong	
-	75,309India	
-	503,708Malaya	
-	237,536M nltn	__ 1 (]4New Zealand..!! 1!!!!!!!!!!!!!!!!!!!!!!!!! 11! 111!!!!!!! 1!!!! 11	-	2,696,050Nigeria	
-	450,073Pakistan	
-	34,536Rhodesia and Nyasaland	
-	248,222South Africa	
-	674,664United Kingdom	
-	9,283,507West Indies Federation	
-	4,039,908Total commonwealth countries	
$26,928,664
Foreign
Arabia	
-	2,200Argentina	
-	395,003Austria	
-	123,920Bahrein Islands	
-	777Belgium	
-	1,650,720Bolivia	
-	80,343Brazil	
-	3,061,967Chile	
-	799,002«*'China (mainland)	
-	2,084,700Colombia	
-	1,787,320Congo	
-	386,495Costa Rica	
-	484,081Cuba	
-	2,044,866Denmark	
-	208,996Dominican Republic	
-	553,728Ecuador	
-	294,388El Salvador	
-	95,107Ethiopia	
-	2,195Finland	
-	122,154France	
-	2,035,804French Africa	
-	58,348French West Indies	
-	5,418Gabon Republic	
-	5,284German Federal Republic	
-	3,779,082Greece	
-	896,137Guatemala	
-	424,952Haiti	
-	23,444Honduras	
-	81,677Iceland	
-	2,486Indonesia	
-	249,416Iran	
-	132,584Iraq	
-	29,079Ireland	
-	307,007Israel	
-	10,512
Export Credits Insurance Act
EXPORT CREDITS INSURANCE CORPORATION- Concluded Analysis, by Countries, of Actual Risks Underwritten During 1960-Concluded
Country
Amount at the government's risk under section 21
Amount at the
corporation's
risk
Foreign-Concluded
Italy	
-	$	2,989,315Japan	
-	17,504Jordan	
-	4,167Kuwait	
-	2,475Lebanon	
-	65,687Liberia	
-	14,713Libya	,	
-	1,476Luxembourg	
-	266Malagasy Republic	
-	57Mexico	
$15,309,269	1,316,903Morocco	
-	21,576Netherlands	
-	1,460,974Netherlands Antilles	
-	116,590Nicaragua	
-	122,257Norway	
-	207,482Panama	
-	395,336Paraguay	
-	52,550Peru	
-	756,472Philippines	
-	3,057Poland	
11,307,427	384Portugal	
-	33,879Portuguese Africa	
-	5,287Puerto Rico	
-	624,343St. Pierre and Miquelon	
-	103,469Spain	
-	70,542Sudan	
-	6,213Surinam	
-	99,724Sweden	
-	1,090,610Switzerland	
-	1,031,868Syria	
-	33.516Thailand	
-	46,565United States of America	
11,602,693	1,146,141Uruguay	
-	24.788Venezuela	
-	2,443,284Total foreign countries	
$38,219,389	$	36,528,662Total all countries	
$38,219,389	$ 63,457,326
George Harris Hees: Mr. Chairman, the hon. member also asked how many companies have used the facilities made available by this legislation. I am now in a position to inform him that there were 268 companies. Perhaps I should give the provinces and the number of commitments that were made in each: New Brunswick, 1; Nova Scotia, 1; Quebec, 124; Ontario, 133; Manitoba, 4; Saskatchewan, 1 and British Columbia, 4, making a total of 268.
In regard to the question askedi as to whether all countries in the world are eligible for this type of consideration, the answer is yes. That answer will, of course, answer the question asked by the hon. member for Greenwood in respect to whether the provisions of this legislature are available to underdeveloped countries. I also have a list of the commodities and the amounts, cumulative
to 1960, and should be very pleased to include this in Hansard at this point with the consent of the committee.


George James McIlraith: The minister has said cumulative amounts; does he mean the amounts for which insurance is still outstanding?


George Harris Hees: No, the amounts in the past and to date in respect of these types of commodities.


George James McIlraith: That is, since the act came
into force?


George Harris Hees: Yes.


Jacques Flynn: Is it agreed that this list be printed at this point?


Some hon. Members:: Agreed.
[Editor's note: The list referred to above is as follows:]
tThe Chairman.]

Export Credits Insurance Act COMMODITY BREAKDOWN To December 31, 1960
Commodity No. Commodity	Amount 1960	Per cent to Total	Cumulative Total to Dec. 31, 1960	Per cent to Total101	Agricultural products (other)	
$ 32,258	% 1,909,946	102	Flour	
11,112,198	17.5	40,252,348	7.0103	Malt	
1,530,474	2.4	3,313,725	-101	Seeds	-	900,899	105	Tires and rubber products	
1,823,458	2.9	15,796,371	2.7106	Alcoholic beverages	
30,529	-	862,386	-201	Animal products (other)	
406,816	-	2,070,112	-202	Fish	
117,843	-	3,537,913	-203	Hides and skins	
182,656	-	5,868,635	-204	Leather and products	
249,279	-	4,181,565	-205	Milk and products	
54,213	-	11,053,021	1.9206	Tallow	-	3,167,665	-301	Fibres, textiles and products	
2,519,265	4.0	10,225,305	1.8302	Fish nets	
689,244	1.1	1,625,774	-401	Wood and wood products (other)	
496,409	-	1,383,789	-402	Paper and products	
113,593	-	3,319,870	-403	Unmanufactured wood	-	21,547,245	3.7404	Wood pulp	
8,575,039	13.5	32,300,748	5.6405	Newsprint	
1,179,969	1.9	3,153,283	-501	Iron and products (other)	
3,665,782	5.8	39,203,075	6.8502	Auto parts	
192,538	-	4,362,314	-503	Farm machinery	
2,387,506	3.8	127,996,250	22.3504	Needles	
1,226,962	1.9	7,223,869	1.3505	Steel	
12,463,712	19.6	106,827,639	18.6506	Iron ore	-	5,611,379	-601	Non-ferrous metals (other)	
213,875	-	4,120,229	-602	Aluminum and products	
45,394	-	6,231,799	-603	Copper and products	
3,221,163	5.1	11,649,981	-004	Electrical goods	
2,724,165	4.3	6,401,390	1.1605	Meters	
522,272	-	6,063,972	1.1701	Non-metallic minerals (others)	
292,260	-	2,910,682	-702	Asbestos products	
118,216	-	2,415,388	-703	Refractory products	
1,179,520	1.9	10,105,392	1.5801	Chemicals and products (other)	
590,559	-	3,597,795	-802	Chemicals	
1,875,058	3.0	11,733,391	2.0803	Fertilizers	
391	-	4,823,970	-804	Pharmaceuticals	
2,067,922	3.3	18,523,403	3.2901	Miscellaneous commodities	
1,556,788	2.5	28,381,064	4.963,457,326	574,653,582


Lester Bowles Pearson: Mr. Chairman, I should like to ask the minister whether it would be possible under this legislation to insure contracts which may be made under the arrangement with the Chinese government at Peking, providing the government decided to use this act? Is this act available for that purpose?


George Harris Hees: Mr. Chairman, I am advised that there is no reason why this legislation could not be used for that purpose. Of course the reason it was impossible to do so, as I explained in my opening remarks, is that there is available at the present time, until this measure is passed, as I hope it will be, only $14 million for use. The Chinese deal would have required much more than that.


Lester Bowles Pearson: Mr. Chairman, in respect to subsequent contracts which may be signed, based on this agreement with the government in Peking, this legislation, as the minister has said, could be used for insurance purposes. I take it if that were done then
any orders in council dealing with the matter of insurance on contracts to the government at Peking would be made public?


George Harris Hees: If this legislation is used for insuring future deals the orders in council will then be made public, yes.


George James McIlraith: Mr. Chairman, as I understand the Chinese wheat agreement it includes the requirement of keeping available the amount of wheat required over the term required, and that there are specific contracts dealing with precise numbers of bushels to be shipped within precise periods. As I recall the very limited information given in regard to this matter there is only one of the small contracts signed to date, and it would be the payment under these small contracts that would be insured. If I am correct in that recollection, it is then open to the authorities to have the payments on these small contracts insured under this act. Is it the intention of the government to do that?

Export Credits Insurance Act


George Harris Hees: Mr. Chairman, as the hon. member will realize, sales of wheat to China do not come under my department but under the Department of Agriculture. As to what will be the policy of handling future deals, this is something that the government as a whole will decide.


George James McIlraith: There are two answers to that. I must remind the minister that he is still a member of the government, at least that is the last intimation we have had.


George Harris Hees: I said the government as a whole.


George James McIlraith: We do have collective responsibility for the ministers, I think. As far as the committee is concerned the minister must answer for the government. But there is also another point. He is the minister responsible for administering this act. In his capacity as the minister responsible for administering this act I would like him to get information for the committee on whether the contracts dealing with specific shipments of wheat to China will be insured or dealt with under this legislation.


George Harris Hees: I must remind the hon. member that the outstanding wheat deals with China were not carried out by my department but by the wheat board, which now comes under the Department of Agriculture. As to how any future deals will be handled, this is something for the government as a whole to decide. I am afraid I cannot advise the committee how such future deals will be handled.


George James McIlraith: I must point out to the minister the arrangement for dealing with this sale of wheat to China. There was what was called a contract by the Minister of Agriculture dealing with the requirement to make available a certain number of bushels, and certain general things of that sort. It was alleged by other hon. members in the house that that was not a contract. Whether it was or not I was never able to find out because it just has not been before the house, and there is no way of finding out. In any event, it did become quite clear that whatever the arrangement was, provisions as to the amount to be shipped and the price to be paid for it came under the smaller contracts that were to be dealt with from time to time; I think the time indicated by the minister was every five months.
My question is addressed to those smaller, specific contracts that have to do with the payment and the quantities. Of course it is at that point that the insurance arises, but surely the government must have taken a decision on the methods of insuring or dealing with the risk involved in a sale of this magnitude, and that must be a decision on


government records by now. I ask the minister to get this information, because the committee is entitled to it and it is strictly relevant to the item now before us. I do not see any method by which the minister, with all his genial good nature, can escape that responsibility. It is a simple, direct responsibility, and it is a simple direct request from a member of the committee. It is proper information and it will be welcomed.


George Harris Hees: I acknowledge it is a simple, direct question, but I am afraid I am not in a position to answer it because all the details of the China wheat deal were handled by my colleague the Minister of Agriculture under whom the wheat board operates. I suggest to the hon. member that he satisfy his curiosity -a very understandable curiosity-about those deals by asking the Minister of Agriculture under whom they were carried out. They were not carried out by me or by my department, and I am afraid I am not in a position to answer the questions the hon. member has put to me.


George James McIlraith: I am very sorry. I can accept the minister's statement that he is not able to give us this information, but the situation is that I want to satisfy my curiosity about how this deal before us is to be administered before I can pass judgment on the propriety of the clause now before the committee. It is that curiosity that must be satisfied, and it must be satisfied by the Minister of Trade and Commerce. Therefore I can only suggest to the Minister of Trade and Commerce that he obtain from the government the decision that is relevant to this particular legislation and advise the committee what it was. The other details of the wheat agreement, of course, I am not able to obtain at this time, or under this legislation, but this information I am entitled to obtain.


George Harris Hees: As far as the operation of this act is concerned, the insurance aspects of it will operate exactly the same as the insurance aspects have operated in the past. As regards these new provisions that we are introducing today, I should like to read from the booklet called "Export Credits Insurance Corporation, what it is and how it operates", put out by the Exports Credits Corporation. At page 15 we find the following:
Financing for exports of capital goods where terms of payment extend beyond five years may be provided.
Then it goes on to say:
The guiding rules that determine the eligibility of transactions for financing are:
1.	that the extended credit terms are clearly necessary and justifiable;
2.	that the transaction in question gives promise of continuing export trade;

3.	that the Canadian content is of a higher order, in the range of 80 per cent or better;
4.	that there are demonstrable employment and industrial benefits for Canada deriving from the transaction;
5.	that the particular export transaction to be financed is substantial in value;
6.	that the foreign buyer and the country of purchase have a satisfactory credit standing.
The hon. member for Burnaby-Coquitlam asked me a question which I have not yet answered. His question was, are capital goods only eligible under this new legislation. The answer is yes; consumer goods are not covered under this new legislation.


George James McIlraith: The excerpt which the minister read from the booklet put out by the Export Credits Insurance Corporation deals with the provisions of section 21A of the act. We are now dealing with clause 1 which amends section 21, which is the insurance provision of the act. This is the clause under which all the wheat sales are insured. I could give the reference to some of the wheat sales, if it is desired, which are insured under section 21, which is the clause now before the committee. I do not think that is necessary. But if the minister will refer to order in council P.C. 1961/311, which was tabled on June 9, 1961, he will find that that insures the sale to Czechoslovakia of 200,000 tons of wheat valued at approximately $17 million. The excerpts the minister read from the booklet of the corporation have reference to the financing operations on capital goods which are governed by clause 2 of the bill before us and which have not yet been reached by the committee.


George Harris Hees: I can give the hon. member for Ottawa West the information he is asking for. Since the act first came into operation there have been total wheat sales of $188,446,819 insured. If he wishes I can give him a breakdown of the countries.


George James McIlraith: I do not require that.


George Harris Hees: These are the sales that have been insured since the coming into operation of the act and up to the present day. The sales to China have not yet been insured under this act.


Lester Bowles Pearson: Will this legislation cover insurance of sales contracts for which payment is to be received by the Canadian exporter in a currency other than Canadian dollars?


George Harris Hees: Yes, Mr. Chairman. We will insure in any convertible currency. Usually it is in Canadian dollars, United States dollars or sterling, but we will insure in any convertible currency.


Erhart Regier: What efforts are being made to let exporters in the Atlantic and western
90205-6-417
Export Credits Insurance Act provinces know of the availability of the benefits of this legislation? The minister mentioned that 268 companies had taken advantage of the legislation. Almost all of them are located in either Quebec or Ontario. Is a sufficient effort being made to let the exporters in the Atlantic and western provinces, and British Columbia in particular, know of the availability of the benefits?


George Harris Hees: I am very glad to be able to answer that question. In order that businessmen in every part of the country should be made familiar with the services which the Department of Trade and Commerce puts at their disposal, we have already held trade and industrial promotion conferences in four of the provinces, three of them in western Canada-British Columbia, Alberta and Manitoba-and one in eastern Canada, in Ontario.
I have advised all the provincial governments that my department is not only willing but is very anxious to go to any province that requests us to do so and to hold one of these trade promotion conferences. A representative of the Export Credits Insurance Corporation is present at each conference. He outlines specifically to the businessmen what services are available through the Export Credits Insurance Corporation both with regard to insuring the sale of goods and with regard to making long term capital available. The representative is there not only to outline what we can do but to answer all questions.
I might say that at all these conferences a great many questions have been directed to the representative of the corporation, the president or the vice president, and a great deal of interest has been shown by the businessmen who have attended. We hope that every province will invite us to hold a conference in the latter part of the year, because we feel the information we are able to give and the information we are able to gain from the businessmen attending is very considerable. I can assure the hon. member that the conference held in Vancouver, where we met the businessmen of his own province of British Columbia, was very well attended and a great deal of interest was shown in the facilities made available by the Export Credits Insurance Corporation.


Erhart Regier: Have any conferences been held in the Atlantic provinces? Are any planned there? It would seem to me that area would perhaps find this type of assistance more beneficial than any other part of Canada.


George Harris Hees: Yes, I have received a request from the premier of Prince Edward Island and am in the process of discussing with that province a conference to be held there. We are hopeful that conferences will be held

Export Credits Insurance Act in the other Atlantic provinces as well. I agree with the hon. member that this kind of information would be most useful to businessmen in the Atlantic provinces, and we are very eager to give it.


James MacKerras Macdonnell: Mr. Chairman, I wonder whether the minister's records would enable him to answer this question, which would throw a great deal of light on the question I asked him earlier. Would the minister's records show how much has been exported to India under this legislation, let us say in the last five years? If it were possible to give it year by year, so much the better. If we could have a significant figure it would be of assistance.


George Harris Hees: My officials believe the figure is approximately $12 million to India to date, but we will check the exact figure and send it to the hon. member for Greenwood as soon as it is available.


James MacKerras Macdonnell: What period would that figure cover?


George Harris Hees: The period since the act came into force.


Erhart Regier: One last question, Mr. Chairman. Would the minister explain why consumer goods are not eligible under the terms of this legislation? It would appear to me that Canadian employment might be enhanced if consumer goods were also eligible.


George Harris Hees: Consumer goods are sold on short term credits, and these short term credits are handled by the commercial banks.


George James McIlraith: Is it not correct to say that consumer goods are eligible under the clause of the bill now before us?


Erhart Regier: Wheat is consumer goods.


George James McIlraith: That is the point I was making a moment ago. Consumer goods are insured under clause 1, which is section 21 of the act. The minister's answer had relevance to clause 2 of the bill, which is section 2IA of the act and has to do with the discounting of paper. I wish to ask a question to clarify the question asked by the hon. member for Greenwood. In the 1960 annual report of the corporation it is indicated that at the end of the year the total amount of export credits insurance that had been granted in addition to contracts for shipment of goods to India was $503,000, roughly half a million dollars.


James MacKerras Macdonnell: For what period?


George James McIlraith: I take it, as of December 31, 1960.


George Harris Hees: Just for one year.


George James McIlraith: Yes, for one year. In connection with announcements in relation to Colombo plan shipments to India or Pakistan some reference was made to making credit available. Was that reference to making credit available under this act?


George Harris Hees: Yes, Mr. Chairman. If this legislation is passed it is my understanding that $20 million of capital goods credit will be made available to India.


Mr. McGee:: Mr. Chairman, I wonder whether the minister could give me a better idea of what he had in mind when outlining the rules governing the application of this act. He mentioned that one of the qualifications was that the deal involved be of a substantial size. I believe those were the words used. Could the minister give us a clear idea what is meant in practice by the words "substantial size"?


George Harris Hees: In the order of a minimum of $2 million.


Lester Bowles Pearson: Mr. Chairman, in reply to the point raised by the hon. member for Ottawa West the minister made reference to the $20 million additional credit extended to India under the arrangements made through a consortium to increase aid to India and Pakistan. That is all to the good, as far as it goes, but I wonder how far it goes in the light of the information we have just received about the operation of the legislation. If this additional aid is merely to cover ordinary commercial exports to India then it might not be as significant as we would like. Last year we had only half a million dollars worth of commercial exports to India, and I take it they would have been covered under the existing act.
In the light of what I have said is it not fair to say that this additional $20 million credit may not result in any great additional aid to India? I know the dilemma in this matter. Once you get into the position where most of your transactions with an underdeveloped country take the form of aid under an international scheme like the Colombo plan, that has a bearing on the development of commercial trade with that country because naturally the country would like to get the commodities under an assistance scheme if that can be done. Would it not be correct to say, therefore, that unless there is a very great increase in commercial exports to a country like India, then the $20 million capital goods credit may not mean as much in terms of assistance as all of us would like to see it mean?


George Harris Hees: Mr. Chairman, I can assure the Leader of the Opposition that we are very anxious to sell capital goods as well as goods of all other kinds to India and to every other

country. If India wishes to buy capital goods from us in the amount of $20 million, or a larger amount, I can assure the Leader of the Opposition that I will be the happiest person in the world. I will take great pleasure in coming to parliament again as soon as possible and asking for more money to enlarge the scope of this act, which I think is one of the most constructive acts we have on the statute books. It helps not only the countries to whom we export but it helps our manufacturing and producing industries in Canada to sell goods around the world.
We, of course, all agree that we want to expand our exports of every kind. It is now up to India to decide what capital goods she would like to buy in Canada, and we shall be very happy indeed to extend long term credits certainly up to $20 million. If it is more than that, or if any country wishes to buy large quantities of goods and it is considered creditworthy, I will have no hesitation in going to the government and coming to parliament and asking for more money in order to finance such transactions.


Lester Bowles Pearson: I agree entirely with what the minister has said about the value of this act. Of course there is no difference between us on that score. I agree that anything that can be done, as is being done now, to improve this act should receive, as it will, general support. All I am suggesting is that this particular form of asistance to India is an assistance in terms of easier credit so that India can purchase goods in Canada.


George Harris Hees: That is right.


Lester Bowles Pearson: It is not, as it was interpreted in some quarters when the announcement was made, another $20 million worth of aid to India. That is the only point I was trying to make.


George Harris Hees: We consider it in that category. It is in effect aid to India. There may be a difference of opinion there.


Frank Charles McGee: The $2 million limitation on the size of a proposition which is acceptable under this act leads me to ask this question. In the minister's travels to various trade conferences and groups across the country in recent months has he encountered any requests from the business community that this limit of $2 million be lowered in certain cases? It seems to me that a situation could arise in which, following the minister's enthusiastic urgings, people not previously vitally interested in exporting to certain areas might be interested in a trial proposition which may in the future lead to some very interesting increases in 90205-6-417i
Export Credits Insurance Act exports. I am wondering whether the application of this $2 million limitation would be so stringent as to restrict a proposition of that kind.


George Harris Hees: We have had no requests, I am advised, for long term financing, which is in access of five years, for amounts less than $2 million, to answer the hon. member's question. Smaller transactions are made but they are handled on a shorter term basis, that is up to five years. We handle a great many of those transactions, of course. Here we are talking about long term transactions for relatively large amounts.


Mr. Speakman:: I should like to ask the minister whether other commonwealth countries are contemplated in respect of assistance under this special provision. I am thinking particularly of those nations in Africa which are now commonwealth members or dependencies, which are so dependent upon agriculture and are carrying on this agriculture under very primitive conditions. Their requirement is extremely great, and this would be an excellent way to provide for more modern and up-to-date equipment so they could feed themselves far better with the use of more modern methods and equipment.


George Harris Hees: We are very happy to look at any requests from any country whatsoever in order to ascertain whether they meet the criteria under which we are permitted to make these transactions.


George James McIlraith: What is new about it is that the technique of calling insuring under this act "aid" is a new use of the language. That is really what bothers a great many people. We have announcements of aid, and mixed with the aid given to these countries and listed with it is the provision of insurance under this legislation. Formerly these countries were using the legislation but it was not called aid. For instance, if you look at the annual report you will see mentioned such countries as Rhodesia and Nyasaland. I am quite sure that was not called aid in this house. You will also see British East Africa and British West Africa, but it was not called aid. The new technique of referring to the provision of insurance under this act as aid is something that is quite new-I think it was adopted for the first time this year-in terminology, and having the amounts which they in fact pay but which are insured under this act added to the totals of what are really gifts to the countries. That is the new thing that has been done that is apparently causing confusion. I thought all hon. members in the house had spotted that when the announcement was made.

Export Credits Insurance Act


George Harris Hees: I have not at any time referred to insurance as aid or short term financing as aid.


George James McIlraith: The minister did not do so.


George Harris Hees: However, I have been referring to long term financing as aid.


George James McIlraith: The minister did not do so.
I must exempt him from that. However, there still is such a thing as cabinet solidarity. I must say that I find it rather perplexing this morning to see the minister not being answerable for his colleague the Minister of Agriculture and now not being answerable for the one who makes these announcements about the aid we are granting to all these countries and which, when you look at it or read the statement, you find is not really what it appears to be.


[Stage Direction]
Clause agreed to.
On clause 2-Definitions.
George James McIlraith: On clause 2 there was a question to which I made reference a few minutes ago. Yesterday in moving the motion for second reading the minister said this. I think perhaps I should quote him precisely. In referring to section 21A he made certain references that appear to be in conflict with similar references made at the resolution stage on the same point. Perhaps he could given an explanation.


George Harris Hees: At the time my remarks were written for the resolution stage the $58 million figure was correct. Since that time $10 million have expired, as they were not used.


[Stage Direction]
Clause agreed to.
On clause 3-Orders to be laid before parliament.
George James McIlraith: In the opening part of his remarks in moving second reading yesterday the minister was good enough to indicate that he proposed withdrawing clause 3 of the bill and substituting another one.


George Harris Hees: It is in there now.


George James McIlraith: Oh, the minister says it is in there now?


George Harris Hees: I am as surprised as the hon. member. The change is already incorporated in the bill.


George James McIlraith: I see it now.


George Harris Hees: That gives an example of the kind of action you are getting from this government.


George James McIlraith: I must apologize to the committee. However, I must explain that last night we were provided with a copy


of the bill on first reading and now, since 11 o'clock, we have obtained the copy of the bill for second reading and it contains the clause which I think is wholly desirable. I must say that I find it very difficult being expected to deal with these bills the day after they are first introduced in the house and when they are not printed until the day on which you have to deal with them; it does get a little bit rough. In any event, I commend the minister for putting the changed clause in the bill. I should like an opportunity to read it. I think the committee will see the importance of this clause and will see, when they read it, the desirability of having such contracts as those which are provided under the China wheat agreement brought under this act. The type of order in council that is tabled under section 21 has to do with all these very important transactions relating to major sales of wheat, aircraft, heavy equipment and so on, and they are very important in relation to the members of the House of Commons.
I am still a little confused about this. The copy of the bill with which I was provided after the committee started dealing with it this morning does not contain the new clause 21B.


George Harris Hees: That is right.


George James McIlraith: It is therefore not in accordance with the undertaking of the Minister of Trade and Commerce.


George Harris Hees: Mr. Chairman, I will ask my colleague the Minister of Transport to read the amendment to clause 3.


Léon Balcer: Mr. Chairman, I move that clause 3, which relates to section 21B, be deleted and replaced by a new section 2 IB which reads as follows:
21B. All orders in council made under sections 21 and 21A while parliament is in session shall be laid before parliament during such session within 30 days of the date of their making and, if made while parliament is not in session, shall be laid before parliament within 30 days after the commencement of the next ensuing session.


George James McIlraith: Mr. Chairman, am I correct in understanding that all orders in council which have already been passed under sections 21 and 21A have been tabled?


George Harris Hees: Yes, Mr. Chairman, I am advised that is correct.


Jacques Flynn: Shall clause 3 as amended carry?
Clause as amended agreed to.


[Stage Direction]
Title agreed to.
Bill reported, read the third time and passed.


Léon Balcer: the second reading of Bill No. C-lll, to amend1 the Railway Act.
He said: Mr. Speaker, I wonder whether the house would be agreeable to calling it one o'clock.


Mr. Deputy Speaker:: Is it agreed that I call it one o'clock?


Some hon. Members:: Agreed.
At one o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at 2.30 p.m.
Léon Balcer: The purpose of this bill is to apply to rapeseed the railway freight rates applicable to flaxseed under the Crowsnest pass agreement. At the present time subsections 6 and 7 of section 328 of the Railway Act read as follows:
(6)	Notwithstanding anything in subsection (5). rates on grain and flour shall, on and from the twenty-seventh day of June, 1925, be governed by the provisions of the agreement made pursuant to chapter 5 of the statutes of Canada 1897, but such rates shall apply to all such traffic moving from all points on all lines of railway west of Fort William to Fort William or Port Arthur over all lines now or hereafter constructed by any company subject to the jurisdiction of parliament.
(7)	The board shall not excuse any charge of unjust discrimination, whether practised against shippers, consignees, or localities or of undue or unreasonable preference respecting rates on grain and flour governed by the provisions of chapter 5 of the statutes of Canada 1897 and by the agreement made or entered into pursuant thereto within the territory referred to in subsection (6) on the ground that such discrimination or preference is justified or required by the said act or by the agreement made or entered into pursuant thereto.
Those two subsections set out the principles of the Crowsnest pass freight rate legislation. As the house knows, these rates have been in existence since 1897. At that time rapeseed was not listed, and it was not considered a grain because it was practically unknown, or at any rate it was not grown on the prairies. However, at the present time rapeseed is an important oilseed grain in western Canada. If hon. members would look at the figures they will see that they are very impressive. In 1960, 550,000 acres were seeded to this crop in Saskatchewan, 170,000 acres in Alberta and 36,000 acres in Manitoba.
Under the provisions of subsections 6 and 7 of section 328 of the Railway Act the rates on grain and flour from points west of Fort William and Port Arthur to those ports and
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to the Pacific coast are required to be governed by the provisions of the Crowsnest pass agreement.
Rapeseed is recognized as a grain within the accepted definition of that term and is classified as a grain under the Canada Grain Act. It has not, however, been recognized as a grain for the purpose of freight rates pursuant to the Crowsnest pass agreement.
On June 10, 1960 the board of transport commissioners rejected an application to have rapeseed classified as a grain under the Crowsnest pass agreement, but the board did not question that rapeseed was, in fact, a grain. Its ruling was based on the fact that rape-seed was not grown as a grain in western Canada at the time the Crowsnest pass agreement was reached. The purpose of the present bill is not to place rapeseed within the terms of the Crowsnest pass agreement but to apply to rapeseed the same rates as are applicable to flaxseed under the Crownest pass agreement.
The amendment provided by the present bill will add a new subsection 8 to section 328 of the Railway Act to provide that the reference to "grain" in subsections 6 and 7 shall include rapeseed, and that the rates applicable to rapeseed shall not exceed those applicable to flaxseed.
I think the effect of this legislation will be to make the growing of rapeseed more attractive to the farmers of western Canada and provide them with the possibility of an interesting return for the rapeseed grown. The great advantage of this will be that rapeseed will take the place, to a greater extent, of other cereals grown on the prairies, and this will have a tendency to reduce the acreage of cereal grains whose disposal is now presenting a considerable problem. The provision and consumption of domestic oil and meal should also assist the Canadian economy in a general way by reducing the volume of imports from other countries. Another effect of this reduction of freight rates on rapeseed will be, I think, to make it possible for this cereal to be sold as animal feed at a price attractive enough to realize a good market for this product.
As a member coming from the province of Quebec I think I have extended my knowledge of the grain situation on the prairies, and I hope my friends from that region have not detected too many bad errors in what I have said. I know the whole situation will be extremely well explained by the hon. member for Humboldt-Melfort-Tisdale (Mr. Rapp), who has been carrying on a tremendous campaign for the recognition of the importance of this grain ever since he has been in this house. I know this conscientious member will discuss this matter at some length, and

Railway Act
I should like to take the opportunity of congratulating him for his continuous backing of this important legislation. I think the farmers of Canada as a whole should be very proud in knowing that an hon. member who is wholeheartedly in support of a piece of legislation such as this can, by continuous effort, sell his idea to his colleagues in the house and accomplish the passage of that legislation, thereby rendering great service to the country and to his farmer friends on the prairie.
Mr. Speaker, I should also like to point out that later I will have one of my colleagues move an amendment to this bill adding the date upon which this legislation will come into effect. The intention of that amendment is to see that this measure will come into force on the 1st day of August, 1961, which is the beginning of the new crop year. This will give to our farmers in western Canada the opportunity of taking advantage of this piece of legislation.


Mr. Herridge:: Mr. Speaker, I should like to ask the minister a question in regard to a remark he made. The minister said rapeseed is used to feed animals, and I should like him to tell me what animals eat rapeseed.


Léon Balcer: Mr. Speaker, I should like to explain to my hon. friend just what I meant. I received a letter regarding this matter from the edible oil division of the Saskatchewan wheat pool, which, as my hon. friend will know, operates a plant manufacturing products from rapeseed in the form of edible oils. These edible oils are used in the manufacture of animal feed because of the high content of protein which is extremely beneficial to beef cattle. This type of animal feed is manufactured for shipment to eastern Canada and British Columbia. The importance of rapeseed lies in the fact that it contains this extremely beneficial edible oil, and with the increase in consumption and sale of margarine in Canada, the increased production of rapeseed will add to the general economy through the lowering of our imports of this product.


Mr. Lennard:: That was not so smart a question to ask after all.
(Translation):


Mr. Samuel Boulanger (Drummond-Ariha-baska):: Mr. Speaker, after the statement the Minister of Transport (Mr. Balcer) has just made, I only wish to add a few words in support of the bill now before us. In fact, we have always been in favour of a measure such as this, and we are pleased to support the request of the hon. member for Humboldt-Melfort (Mr. Rapp).

Ever since he came to this house, the hon. member has always advocated that freight rates applicable to flaxseed should also apply to rapeseed. We commend him for it and we can say that the tenacity he has shown in introducing this legislation has now produced concrete results.
In rising today to deal with this legislation, I should like to say that we endorse this measure because it will be particularly welcomed by Canadian farmers, and especially western farmers. It will contribute to increase the income of farmers and of rapeseed producers.
I should like to point out to the Minister of Agriculture (Mr. Hamilton) in passing that we never opposed bills introduced in the house for the benefit of western farmers. In fact, I am taking part in this debate today to support the bill and to prove in a special way to the Minister of Agriculture, that we are never against bills which are profitable to the western farmers. Both the eastern and the western farmers are in need of measures which will protect their income and especially the family farm.
Those are the only remarks I wanted to make. I wish to congratulate the Minister of Transport for having introduced this bill which we wholeheartedly support.
(Text):


Hazen Robert Argue: Mr. Speaker, we are pleased that the government has seen fit to introduce this bill, but we think it is long overdue. We feel the result it will have will be equality of treatment, as far as freight rates are concerned, to the producers of rapeseed.
This subject is not new in this house but has been discussed by members of parliament on many occasions in recent years. The former member for Humboldt-Melfort, Mr. Alexander Bryson, pioneered in this field, as hon. members who were here at that time I am sure will recall. I remember that very often when Mr. Bryson raised questions in regard to rape in this house many hon. members snickered because they were not certain just what he was referring to. However, the question of rape or rapeseed has been raised in this house on many occasions, along with requests that freight rates be applied to rape-seed in the same manner as applied to other grain under the Crowsnest pass agreement.
The bill now before the house has been brought in following requisitions made by farm organizations of this country which have recognized the present injustice as well as the growing importance of rapeseed within the agriculture industry. I should also like to say that on many occasions the present member for Humboldt-Melfort-Tisdale-perhaps one day this riding will also include the

name of Wadena-has presented a good case for this kind of adjustment in the freight rate regarding rapeseed, and we are pleased at this time that the bill is being given support by all sides of the house. I also want to congratulate the minister on his wide knowledge of this subject and on the informative manner in which he handled the introduction of this bill, and particularly on his comprehensive answer to the question posed by the hon. member for Kootenay West.
During this session the minister has been extending his knowledge into many fields and we appreciate the comprehensiveness of his remarks when he pointed out so well that while this will be of particular benefit to the producers of western Canada, none the less it will be of national benefit as well. It will be a potential benefit to livestock feeders outside the prairie provinces. While it is a small contribution to the over-all problem, it should at least in a minor way reduce our great dependence on imports of commodities from the United States. Therefore on all counts it is a measure which should commend itself to the house at this time.
It is particularly gratifying to me, Mr. Speaker, since it runs against the propaganda directed against the Crowsnest rates in recent years. The enemies of the Crowsnest rates have been attempting to destroy them. Far from being successful, we have an indication today that parliament is going to reaffirm those rates by providing their necessary and justifiable extension to rapeseed. With the passage of this legislation not only the rapeseed producers but western producers generally will take satisfaction from the fact that parliament is reaffirming and strengthening the argument in favour of the Crowsnest rates.
I do not think it would be appropriate for me to have the complete text of my remarks consist of approbation and compliments. I think I should make some constructive suggestions to the minister. The question of rapeseed is very important in many parts of western Canada, including the constituency of the hon. member for Humboldt-Melfort-Tisdale. Maybe he could get those three communities to agree to use just the initials from now on; if we could do so we might shorten the duration of the session. This, of course, could apply to the names of a great many constituencies in the house.
Rapeseed is important in the hon. member's riding and in a great many other constituencies. In the important and well known constituency of Assiniboia, where there are producers as efficient as producers in other ridings, we are getting into the production of another grain that in the days ahead may have a real economic importance. I refer to
Railway Act
the production of mustard seed. A great many farmers in that particular part of Saskatchewan sowed mustard this spring on a contract basis. Therefore it would be most appropriate if the minister would give the same kind of sympathetic consideration toward extending the rates to mustard seed that apply to rapeseed. I should think it would get the general approval of the house in the same way this bill is getting the approval of hon. members.
Western farmers have been advised to diversify their crops. They have never been short of advice, and they have never minded taking it so long as they could see some economic advantage in accepting it. The production of rapeseed will undoubtedly have increasing importance in the years ahead. I suggest that to further stimulate the diversification of crops on the prairies and to bring about equality of treatment in the freight rates applying to the various grains the minister should give consideration to the suggestion I make, so that the producers of mustard seed in my part of Canada will have the same well deserved advantages under the Crowsnest pass rates now to be enjoyed by the producers of rapeseed.


Mr. Reynold Rapp (Humboldi-Melforl-Tis-dale):: Mr. Speaker, I am delighted, and it gives me a great deal of pleasure, to support the proposed amendment to the Railway Act to apply to rapeseed the rates applicable to flaxseed by virtue of the Crowsnest pass agreement.
My first words should be to congratulate the Minister of Transport on bringing in this timely and very important bill so far as the western grain producers are concerned. I would also be remiss in my duties were I not anxious to give credit to those who have played such an important role in this historic event for our agricultural industry. I know only too well that had it not been for the keen interest of our Prime Minister in the welfare of agriculture and in particular his keen interest in the rapeseed producers, this legislation would never have come in. If it had not been for the hard working Minister of Agriculture, who has done everything possible to put agriculture on a sound economic basis, and if it had not been for the sympathetic understanding of the cabinet, this historic event would never have occurred.
Much credit must also go to my good friend the hon. member for Peace River (Mr. Baldwin). This learned gentleman, together with the hon. member for Bow River (Mr. Wool-liams), so ably presented the rapeseed case before the board of transport commissioners it is my belief that this actually laid the foundation for having rapeseed classified by

Railway Act
the board of transport commissioners as a grain. The decision of the board was unanimous. All these contributions were really important and instrumental in bringing in this bill. I would be remiss if I did not mention also the members from the three western provinces who appeared before the board of transport commissioners as witnesses and were anxious to take the witness stand and give evidence to the effect that rapeseed is a grain.
This is the day for which the rapeseed producers have been waiting for 18 years. This is the day when justice has been rendered after a long and relentless struggle by the western farmers to bring rapeseed under the Crowsnest pass agreement. This is the day when the name of John G. Diefenbaker will be inscribed in the hearts of the western farmers. Whatever else will be said, credit must go to the Prime Minister and the members of the treasury benches because they were the ones who brought about this legislation.
Let me also say, Mr. Speaker, that I would be less than fair were I not also to give credit to the opposition. Ever since I have had the opportunity of speaking in this house as a member of parliament on behalf of the rapeseed producers, of whom I have many in my constituency, the opposition have always supported me wholeheartedly in my presentations and have given me much appreciated assistance. They never disappointed me in this respect.
It would appear as though I knew this in advance, because if one refers to my maiden speech in this house on May 26, 1958 one finds that I expressed the following opinion of the opposition. Let me quote what I said at that time. After congratulating the Prime Minister on his overwhelming victory I said as recorded on page 477 of Hansard:
My heartiest congratulations go also to the ministers of the cabinet, to members of our party both senior and junior, and to all hon. members of either parties, too, who are here to serve Canada in whatever capacity they may be called upon to do so. We who are conscious of the merits of our democratic system will appreciate very much their constructive contributions so that we can all serve the Canadian people in this parliament to the best of our ability.
It has been very gratifying to me to find that the opposition has not disappointed me in this respect. I know my rapeseed producers in the west would want me to say these things about our cabinet, our Prime Minister and our opposition.
Before I deal with the bill itself I should like to let you, Mr. Speaker, into a well concealed secret. It concerns a person by the name of Mr. Rapeseed, who is a good friend of mine of long standing. He was born and

raised in the west. I could almost say that we grew up together in the prairie provinces. My friendship with Mr. Rapeseed is a long and intimate one. When I was elected to this house in 1958 Mr. Rapeseed told me that he was going to come down to Ottawa and sit beside me in the House of Commons. Of course I told him this was impossible; after all, only elected members are allowed to be in the House of Commons. However, he insisted and he assured me that he would remain invisible, thus doing me no harm.
After following me to Ottawa he followed me in the corridors and every place I went, constantly whispering in my ear "Don't forget to mention Mr. Rapeseed". He would come and sit beside me in the house. Every time I rose to speak he would whisper in my ear "Don't forget to mention Mr. Rapeseed". Being a good friend of mine, I had no alternative but to follow his advice. He even followed me into the caucus. Of course, Mr. Speaker, you do not expect that I would reveal anything that occurred in that holy place, except to say that he was very bold and he was very insistent that I mention his name continually. He was with me when I visited the ministers' offices. He would not miss, for anything, my visits to the Prime Minister. He really enjoyed those. He always sat beside me and said "Don't forget to mention Mr. Rapeseed".
On the last of such visits he insisted that I take a picture of the Prime Minister, myself and Mr. Rapeseed. Again, because he was a good friend of mine, I did take a picture. He was bold enough, too, to insist that I take a picture of the Minister of Agriculture, who he said was a very good friend of his of long standing. This picture turned out not too badly. Once he conceived the idea that a picture would serve him well and help him advertise his name, he became so bold as to suggest that pictures of Mr. Rapeseed and myself should be sent to every member of parliament, every member of the Senate and the members of the press gallery. If anyone wants to see a picture of Mr. Rapeseed, together with his biography, I shall be very pleased to show them. I received many replies to this document from the members of the other place, even from Mr. Speaker, who was very pleased to meet Mr. Rapeseed.
But something happened here today. When I came down to the House of Commons he stopped me again and said, "Mr. Rapp, I am very sorry but this is going to be my last trip to the house. I am a native of the prairie provinces, and I must go back to the place where I belong." Then he said, "Of course, times have changed now; I can travel much cheaper on the Canadian National and Canadian Pacific railways. I shall take advantage of that and go back to my own province."

He asked me what I would like him to say when he gets back to the prairie provinces. I told him that he should help the Canadian grain producers to reduce their acreages of wheat and be a good friend. This is the story of Mr. Rapeseed.
Now, speaking to the bill itself, I find that I have a good deal of material prepared on the subject of rapeseed. In looking over my files and in looking over the many speeches I have made here on the subject, I discovered that there is not one thing I have not said about rapeseed. Since there are so many of my good friends from Alberta, Saskatchewan, Manitoba, and I am sure some members of the opposition, who would like the opportunity to speak on this subject today, I thought it would be a waste of time to give you some of my old, warmed over speeches on rapeseed to which you have listened during the last three and a half years. I thought I should give other hon. members the opportunity to tell you the story of rapeseed. They are just as interested in the subject as I am, although in my constituency, as the hon. member for Assiniboia said, more rapeseed is grown than in any other place in western Canada.
I know that rapeseed has a great future. It will serve our purpose well, that is to take acreage out of wheat production. There is a tremendous export market available for rape-seed, especially if we take into consideration countries like China and India which produce only 15 million to 18 million acres of rape-seed. These countries cannot even begin to grow enough rapeseed to take care of the requirements of their populations for edible oils. We are now on the list as an exporter of wheat to China. I am looking forward to the time when this country will be able to supply China, India and Japan with much needed edible oilseeds so they will have enough edible fats to meet the needs of their populations. This is where the future of rapeseed lies.
We have never exported less than 90 per cent to 95 per cent of our rapeseed production. Since 1943, when I started producing it, I have never seen a time when we had to store on the farm one pound of rapeseed. We could take it away right from the combine to the elevator and sell it. It is all sold on the export market.
I have said, Mr. Speaker, that I do not wish to go into this story of rapeseed now. However, it is my pet subject and if I start talking about rapeseed I might be filibustering the bill. I think I had better leave to other hon. members the story of rapeseed.


Paul Joseph James Martin: Mr. Speaker, I rise to support this bill along the lines indicated by the hon. member for Drum-mond-Arthabaska. In doing so, of course, I
90205-6-418
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join with him and others in extending to the hon. gentleman who has just spoken our congratulations on the realization that now confronts the house. I am sure the hon. gentleman will realize the fact that he has not been alone in this effort; he in fact has done so. He has paid tribute, naturally, to his own colleagues who have supported him but, I think quite generously and characteristically of him, he has acknowledged the debt he owes to members of the opposition who have given him support in this matter.


Mr. Ricard:: The hon. member for Essex East.


Paul Joseph James Martin: I should not wish to be accused of being falsely modest if I did not note that I myself, over the course of the last two or three sessions, gave what I would hope was valuable support to the hon. member. I gave that support on the merits of the question and also because, I, like other hon. members in this house, find that the hon. gentleman is a man who deserves support in good causes.
I have told him privately and I repeat publicly that I will never forget his first speech in this house, when he said he stood in front of the monument of Sir Wilfrid Laurier and said to himself that, as an immigrant, he was proud of the fact that he was privileged to live in a free country in which a man born with his antecedents and in his particular circumstances was able to become a representative of the people in this parliament. That speech and the hon. member's conduct since then have won him many friends in this house. They are happy to support him today.
I was about to remark that when he stood in front of Sir Wilfrid Laurier's monument he possibly confessed some matters that he would not find it convenient to pubicly acknowledge in this house at the present time. I have always suspected that the hon. gentleman, while a member of the Conservative party, really was a misfit in that party. He obviously belongs to the Liberal party. No one could have his qualities and belong to any other party. I am glad that the hon. member for St. Hyacinthe-Bagot agrees with what I have said.


Mr. Mariineau:: Will the hon. member permit a question?


Paul Joseph James Martin: Certainly, in this very happy mood; in this pre-election, prebudget mood.


Paul Raymond Martineau: I should just like to know whether the hon. member had ever heard of rapeseed before the advent to this house of the hon. member for Humboldt-Melfort-Tis-dale.

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Paul Joseph James Martin: The hon. gentleman asks me an understandable question. However, if he knew the kind of county from which I come, namely the county of Essex where we grow soya beans, and if he understood the relationship between that oil bearing product and rapeseed, he would not have humiliated himself by asking that question.
What I was going on to say was that this bill now before the house, which was given first reading on June 17, followed the introduction of another bill, namely Bill No. C-90, on May 10 by the hon. member for Humboldt-Melfort-Tisdale. I have been looking at that bill as I listened to the Minister of Transport explain the provisions of Bill No. C-lll. I cannot understand why the government did not accept the bill of the hon. member for Humboldt-Melfort-Tisdale. In the first place it was the hon. member for Humboldt-Melfort-Tisdale and not the government who took the initiative in this matter. He having taken that initiative, I think he should have been accorded the honour of having his bill accepted and not one put forward in the name of the Minister of Transport.
I am not so sure that Bill No. C-lll is as good a bill as Bill No. C-90, notwithstanding the fact that they both deal with the same principle, namely to apply to rapeseed the freight rates on flaxseed that are applicable under the Crowsnest pass agreement. However, I suppose the government has reasons of its own for wanting to put forward bills which were first of all thought of and thought about by private members. Notwithstanding all of this, the Minister of Transport has recognized the contribution of the hon. member for Humboldt-Melfort-Tisdale.
As this is a day when we are trying, before the introduction of the budget, to treat one another with great fairness, I think we ought to recognize the fact that the hon. member for Assiniboia, who comes from western Canada, has put forward a proposal by way of an amendment to include mustard seed. Mustard seed is grown in very considerable quantities in the riding of Assiniboia as well as in other parts of Canada, and there are about the growing of mustard seed potential features that give it much of the hopefulness that attends the growing of rapeseed. I should like to see mustard seed included so as to assist the constituents of the hon. gentleman and the people of Saskatchewan generally. When the hon. member for Assiniboia returns to his constituency I know he will remind his constituents of the great support received this day by him from members of the Liberal party, who sought to join with him in the amendment which he has put forward on behalf of his constituents.


Hazen Robert Argue: Agreed.


Paul Joseph James Martin: Having said so much about rapeseed and so much about mustard seed, may I say a word about something which might well have been included in this bill, which is found in very considerable quantity in my own county of Essex and, which means so much to the farmers there. Soya beans, about which I have spoken on many occasions in this house with discernment, appreciation, conviction, and understanding are a matter of considerable importance to rapeseed because, as I say, they are both oil bearing. Whatever happens to rapeseed can have important consequences for the growing of soya beans. This bill undoubtedly is going to give an advantage to the rapeseed growers. It is going to give them an advantage in the freight rate structure that prevails in this country. I am sure we all appreciated the observations of the hon. member for Drummond-Arthabaska who said that those of us who come from eastern Canada are not on that account less appreciative of the problems that attend the western farmer; and perforce I would suggest that we may assume that all hon. members of this house are not less interested in the problems of eastern agriculture.
In my own county we are awaiting with great anxiety the further volumes of the report of the MacPherson royal commission. I do not know whether that commission is going to deal with the freight rate structure that attends the very special situations in Canada, but if there is justification by way of an act of parliament to provide the safeguard properly contained in this Bill No. C-lll, one could with justification argue that there should be safeguards and measures to protect farmers in other parts of Canada who find they are discriminated against in the existing freight rate structure.
When you consider, Mr. Speaker, that it is cheaper to ship corn from the city of Chicago to the city of Montreal than it is from Windsor to Montreal, you realize of course that we have a legitimate complaint with regard to the freight rates that prevail in our area in so far as they apply, inter alia, to farm products. I would hope that in giving the support we give willingly to the hon. member we can ask him, in the dying days of the life of this government, to persuade the latter to take steps, if they are not provided in the MacPherson report, to deal with the discriminatory freight rate structure that exists in southwestern Ontario, which freight rate structure suffers in comparison with freight rates that prevail in the Toronto area. That great distributing centre has advantages in freight rates that are not available to areas

such as Windsor, Sarnia, Chatham, London and the rural districts in that whole area. If there is justification, as I believe there is, for the step we are taking today, there is likewise justification for the royal commission, and if not the royal commission for parliament, to take steps along the lines taken today by the Minister of Transport to relieve freight rate discrimination in my county.
I say to the hon. member for Humboldt-Melfort-Tisdale that we are glad to help him in this particular. We also express our congratulations to him. We acknowledge his indebtedness, which he has mentioned today, to those of us in the opposition who have assisted him in this battle over the course of the last three years. We now ask him to use his obvious and undoubted influence with the Prime Minister-his idol; the man about whom he spoke so glowingly and so feelingly today- and to urge this further step upon the Prime Minister and the Minister of Agriculture, who sits there so serenely today listening to us. I am sure that if he brings the Prime Minister and the Minister of Agriculture together he will have no difficulty in persuading the Minister of Transport that not only the rape-seed grower in western Canada but the corn grower and the soybean grower in Essex county deserve similar consideration.


Mr. G. W. Baldwin (Peace River):: 
Mr. J. P. Deschalelels (Maisonneuve-Rose-mont):: Mr. Speaker, I had no intention to speak on this piece of legislation, but after listening to some of my colleagues, I thought I should put in a few words, first to pay a well deserved tribute to one of those responsible for the production of that fodder seed in Manitoba.
When we discussed the estimates of the Department of Agriculture on March 16, 1961, I mentioned that a businessman from Montreal, Mr. Gattuso, whose industry is dependent on imported products, had thought a few years ago of attempting in western Canada the cultivation of rapeseed. The project proved to be a tremendous success, so much so that, as I said in March, today there are co-operatives producing that seed from which is extracted vegetable oil.
I spoke on that occasion of the importance of research in agriculture and I said that it was an extraordinary feat to have succeeded in growing that seed to such an extent that today the possibility of exporting it was being mentioned.
But I am really amazed that such success did not come about through the efforts of the research council.
It is common knowledge that during and after the war, we had to do without a lot of imports. So, in my opinion, the research division ought to do its utmost so that we may produce in Canada such things as are absolutely necessary to us.
I should have liked, without taking away any of the credit due to the hon. member for Humboldt-Melfort (Mr. Rapp), to hear some members give credit to Mr. Gattuso, who is recognized as one of the promoters of this grain production in the west.
I have a word to say about the suggestions submitted by the hon. member for Essex East (Mr. Martin) asking the same freight advantages for soybean as are provided for flaxseed. The hon. member for Assiniboia (Mr. Argue) claimed the same thing for mustard seed. I see no reason for not extending to those other products the benefits which are provided in this bill for rapeseed.
In my remarks on the Department of Agriculture, I pointed out to the minister to what extent the departments of agriculture and trade and commerce are interdependent and how important it was that the national research council direct its effort towards
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producing in Canada all those things which we are lacking and which we have to buy abroad.
Rapeseed production has been remarkably successful. We are all very happy about it. I trust that the same methods will be applied in the research branch as were used by private individuals and industrialists, so that, in the west as elsewhere in this country, we may enjoy a variety of crops which would benefit all our producers and farmers.
We should not forget that farming ought to be considered on the national scale. There is no provincial boundary when it is a question of farming. We should have a national policy benefiting all farmers and producers in this country.
(Text):


Mr. H. M. Horner (Jasper-Edson):: Mr. Speaker, it gives me a great deal of pride to speak briefly in regard to this bill. I do not think any member of this house would wish to take anything away from the hon. member for Humboldt-Melfort-Tisdale (Mr. Rapp), because he has certainly shown the way in this field, and this bill, which is now before us, is the direct result of his efforts.
I feel also that we should congratulate the Prime Minister (Mr. Diefenbaker) and the Minister of Agriculture (Mr. Hamilton) for their efforts in this regard. By the passage of this present measure the promise made by the Minister of Agriculture in western Canada early this year will be fulfilled, and we congratulate him for that.
I have been particularly interested in the development and the use of oilseeds since I came to this house, and have worked with the hon. member for Humboldt-Melfort-Tisdale toward this end. As a matter of fact, there is an area in my constituency vitally interested in the growing of rapeseed, which we call our French Canadian area. There are quite a number of very fine farmers there now growing rapeseed in substantial quantities, and Alberta is rapidly approaching the time when it will be the major producer of rapeseed in western Canada. For that reason the passage of this bill will be very important to those farmers of western Canada.
We listened this afternoon to the hon. member for Assiniboia (Mr. Argue) refer to what the former member for Humboldt-Melfort had to say about rapeseed. I suggest that points out the disadvantage that the farmers of western Canada have been suffering for 20 years. Those individuals have been represented by splinter parties which could never sell this type of legislation to the government of that time. I suggest this bill now being

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before this house is an indication of the existence of competent, hard-working sincere members, such as the hon, member for Hum-boldt-Melfort-Tisdale, whose efforts are so beneficial to the people of western Canada.


Some hon. Members:: Hear, hear.


Hugh Macarthur Horner: I am sure that hon. members listened to the hon. member for Essex East (Mr. Martin) with a great deal of delight, and I hope that he was speaking on behalf of the Liberal party when he said there would be no opposition to the hon. member for Humboldt-Melfort-Tisdale during the next election. I am sure that hon. member appreciates that statement, although I am convinced that no one could be found to successfully stand against him.
Mr. Speaker, if I may just carry on for a moment or two, I should like to deal with one other important principle involved in this piece of legislation. The right hon. Prime Minister of this country is considered the champion of the rights of the farmers of western Canada. I suggest that the presence of this bill in this house is further evidence of that as well as a further indication that the Crowsnest pass freight rates are and will continue to be considered the magna carta of western agriculture.
The hon. member for Maisonneuve-Rose-mont (Mr. Deschatelets) put forward the suggestion that we should have a national policy regarding freight rates, and I agree with that suggestion 100 per cent. Over the past two or three years there has been a concerted attack upon these freight rates by individuals resident in several metropolitan areas of eastern Canada. I point out to that hon. member, and all individuals who entertain that belief, that the loss our railways suffer because of the operation of the commuter services in the city of Montreal is far greater than the unproven loss suggested in regard to the existence of the Crowsnest pass freight rates. Recent examinations of the position of the Canadian National Railways have indicated that the revenue has gone down, and that one of the major factors for this decrease has been the decrease in the amount of grain carried under the Crowsnest pass rates. This decrease has also resulted in a reduction in employment for railway workers in western Canada. I am sure this is evidenced by the minority report of the MacPherson commission of the member from the province of Quebec who, I suggest, had a very astute appreciation of the facts placed before him.
I should like to make a few remarks regarding Canada's position in the world in the production of oilseeds. I suggest that Canada leads the world in scientific knowledge and development of rapeseed plants and other oil

bearing plants. The Department of Agriculture and the minister should be congratulated for Canada's leadership in this regard. I should like to place on the record a statement made by the president of the edible oil institute of Canada made in a speech in Rome in May of this year. He suggested that western Canada is known for its ability to grow enormous quantities of wheat, but that it is not known that we are also today a large grower of oilseeds. He said he did not want to sound boastful but that it may be of interest to learn that in 1960 oilseeds were our fourth largest field crop and that we were the largest exporters of rapeseed in the world. That is the situation with regard to our position as an exporter of oil bearing seeds.
The president of the edible oil institute of Canada, Mr. Robert E. Merry, also said that we in Canada were leading the world in our scientific investigation of the various fatty acids which are contained in rapeseed and which are of vital importance in regard to its use as an edible oil and other consumer uses. He suggested that they examine their requirements in regard to the fatty acid composition so as to be able to inform us what composition would best suit their requirements, and that we in Canada could then breed a particular kind of rapeseed plant to meet that export market.
It is now generally known, as the hon. member for Peace River (Mr. Baldwin) has so ably put it, that the demand for oil bearing seed and edible oils in the world is increasing tremendously. There does exist an export market and this bill will allow our farmers to maintain and receive a stable portion of that export market.
Mr. Speaker, I could not resume my seat today without saying that we have seen the results of the efforts of the hon. member for Humboldt-Melfort-Tisdale, who is a leading example of the kind of Diefenbaker Conservative which the people of western Canada have elected to this house. He has given to his constituents that service and devotion which few of us are able to bring to the House of Commons.


Mr. G. R. Muir (Lisgar):: Mr. Speaker, as a western farmer and a member representing one of the rapeseed growing areas of Manitoba, it gives me a lot of pleasure to support the action of this government in introducing Bill No. C-lll, to amend the Railway Act designating rapeseed as a grain under the terms of the Railway Act. The fact that this important oilseed crop will enjoy the same freight rate as that now prevailing for flax will not only make it a more profitable alternative for wheat but will place farmers in a better competitive position in the export market.

I think this afternoon shows that most all hon. members are aware-and I think the producers of this crop should know-that it was largely through the persistent efforts of one of our western colleagues that the proposed amendment was brought before parliament. The logic of the argument used by the hon. member for Humboldt-Melfort-Tis-dale, not only as a witness before the board of transport commissioners but in pleading his case in this house, left no doubt in the mind of anyone that he was seeking for the producers of rapeseed only that consideration to which they were entitled.
The production of rapeseed in the prairie provinces has developed largely because the farmers in that area have found that it is an acceptable alternative to the growing of wheat. With a substantial export market it has become a very important cash crop. In recent years Italy, Japan, the Netherlands, France and West Germany have provided the most important markets, although at least seven other countries have consistently imported this grain from Canada. As a result, exports of rapeseed have risen roughly from 60 million pounds in 1956 to a high of 284 million pounds in 1958, a further 222 million pounds in 1959 and to 259,625,000 pounds in 1960. I have some interesting comparisons in our export business of rapeseed. In 1958, the Netherlands took 123,154,000 pounds but in 1959 Italy led with 100,939,000 pounds. Over those years these two countries have been a very important market for this product.
It is also interesting to note that rapeseed production in pounds has risen from 13,900,000 pounds in 1953 to 551 million pounds. In my own province of Manitoba in the same period the production was as follows: In 1953 we produced 4,300,000 pounds; in 196061, 26 million pounds.
Wide variations in the acreage sown to this crop in the past can be attributed to the price received by the producer. The adjustment in the freight rate to that prevailing for flax, while adding only a fraction of a cent a pound, will help to provide a suitable cash crop with approximately the same amount of earnings as from a similar acreage sown to wheat. This incentive to switch from wheat should help reduce our surplus of that grain. It is another step forward in bringing our farm production in line with our market requirements and in our ability to adjust to changing conditions.
Wheat acreage has remained fairly constant in recent years although there was a sharp reduction amounting to some 3 million acres from the period 1948 to 1952. The reduction has been mostly in those areas that have been able to find suitable alternative crops. The reduction of wheat acreage, however, has been
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more than paralleled by the increases in yield through better farming methods and improved types of seed. There is every reason to believe that the ultimate has not yet been reached in improved wheat yields. It is therefore going to be necessary to continue to encourage the production of other grains. Rapeseed is one of those grains that fit into this production picture exceedingly well.
This grain has a wide variety of uses and continued research in respect of this important product may well add further to its usefulness in the economy of the nation.
Just briefly, some of the uses are its importance in the making of margarine and cooking oil; its use as a marine engine lubricant. It is now being used experimentally as a component of lubricants for engines of cars and trucks.
The processing plants for this seed are located strategically in the production areas. In Manitoba the plant is at Altona. In Alberta it is at Lethbridge and in Saskatchewan at Saskatoon. I believe that the action of the government in introducing this bill and applying the Crowsnest rates to rapeseed should further reassure the farmers of western Canada, as mentioned by the hon. member for Jasper-Edson (Mr. Horner), that those rates will continue to apply to western grains as long as this government remains in office.
If any further reassurance had been needed, this bill placing rapeseed on the same freight rate basis as flax is this government's answer to those critics who have been implying that changes in the Crowsnest rates were under consideration.
I should like to commend the government for taking action at this time, action that will assure the producers the new rates for the coming year, which should add considerably to the income the farmer may expect from that crop in the fall. At the same time I should like to congratulate the hon. member for Humboldt-Melfort-Tisdale on the services he has rendered the western agricultural community. I am sure that not only will all farmers be pleased with his efforts but the farmers of his own riding, where such a large percentage of the rapeseed is grown, will be able to show their support for his action at the proper time.


Mr, H. W. Herridge (Kootenay West):: It
was not my intention to take part in this debate; I was quite content to leave it to those who have been particularly concerned with the need for this legislation and have a particular knowledge of that need.
First of all, I must say with other members that I heartily support this measure and without any hesitation at all give full credit to the good work done by the hon. member for

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his constituency which has a trinity of names. I give him full credit for his efforts in this respect. However, Mr. Speaker, I think the remarks of the hon. member for Jasper-Edson (Mr. Horner) were quite uncalled for and distinctly out of tune with the tenor of the debate up to the time he spoke. This is particularly the case after listening to the fair and generous remarks of the hon. member for Assiniboia (Mr. Argue), and those made by the distingushed member for Essex East (Mr. Martin), who has sponsored this cause quite frequently. I give him credit for that. Although we may differ on Occasion, I give him full credit for his work on behalf of the agricultural producers in his constituency and in the rest of Canada. I do feel his remarks were entirely uncalled for, and I presume arose from the youth of the hon. member for Jasper-Edson and his lack of experience and, in my opinion, a certain lack of good taste.
In speaking to this bill, he said, in effect, that in future the people of western Canada should make certain to elect hard-working, competent and sincere members. I rise to take strong exception to a statement like that and to protest what I consider to be a slur on members for western Canada who have been members of various parties. It is a slur on a succession of hard-working, competent and sincere members from the west, whom I have had the pleasure of knowing throughout the years, whether they were Liberals, C.C.F. or of some other stripe.
I suggest that the hon. member for Jasper-Edson has plenty of scope for his talents and his interest in public affairs, and opportunities to serve his constituents by dealing with questions of policy, questions of fact, having some regard for the usual practices and procedures of this house instead of rising and spoiling what otherwise was a very reasonable and fair speech by slurs upon the good names of those who have served western Canada in this parliament in the past but who are not now here to defend themselves.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Flynn in the chair.
On clause 1-Rapeseed.
Hazen Robert Argue: Before this clause carries, I should like once again to suggest to the minister that this excellent bill might be further improved by amending it to include mustard seed. As I said earlier, mustard seed is an important crop in western Canada. It is a crop of growing importance. I would suggest that every argument that applies in support of rapeseed being included in this bill also applies to mustard seed. I believe that the

producers of western Canada, welcoming this bill as they do, would find it even more acceptable with the inclusion of the very important crop of mustard seed.
I should like, therefore, Mr. Chairman, to move:
That clause 1 be amended by adding in line 8 alter the word "rapeseed" the words "mustard seed", and by adding in line 9 after the word "rapeseed" the words "mustard seed".
There have been many times in the past when amendments moved by the opposition have been accepted by the government and incorporated in government bills without any further discussion. There have been other occasions when the minister in charge has said he would accept the principle. Then, he refers it to the drafting officers of the crown to be placed in proper words and the amendment is introduced by his colleague. I am not at all concerned about the details as to whether or not the minister might accept this amendment of mine. I am not concerned about that at all.
I am, however, concerned that this important principle should be embodied in this bill. I would hope that the consultation I have seen going on amongst those young and important occupants of the front benches might lead to a decision that they would be prepared to recommend this measure to the house. I would remind the Minister of Transport that, over the years, he has seen many instances of new ideas being proposed in this house that have finally been accepted. He might find it in order at this time to show that this is a government of action by accepting the amendment without requiring the country to engage in a prolonged campaign or a prolonged debate to bring about an amendment which is fully justified.


Jacques Flynn: Before I put the amendment, I should like to know if any hon. member is willing to argue that this amendment could be accepted, that it is not outside the scope of the bill. It seems quite clear to me, but before making a final decision I shall hear the views of any hon. member who cares to express an opinion.


Hazen Robert Argue: This is a bill to amend the Railway Act and provides an amendment which would include in the interpretation of "grain" the word "rapeseed". I would suggest that this is a comprehensive amendment to the Railway Act which further defines the word "grain", and that the amendment is merely a further refinement of the definition of the word "grain". It is not, as might be suggested, an amendment outside the scope of this bill. After all, I do not believe this is a bill to provide for rapeseed. This is a bill to extend the definition of the word

"grain" to include rapeseed and to extend the definition to include a further seed is merely a further refinement of the definition. I would suggest, with all respect, that this is the kind of amendment that is very much in order.
I would suggest that if the government were thinking of moving such an amendment, no one would rise to a point of order. We would all agree that it was in order. I feel, with deference, that this is the kind of amendment to the bill which is not beyond the scope or principle of this bill, and it should be dealt with in the normal way, namely by putting the question to the committee rather than by suggesting that it is beyond the scope of a member to move.


Jacques Flynn: Is the hon. member going to speak to the amendment?


Gerald William Baldwin: To the point of order, Mr. Chairman; may I point out that there is a basis which led to the introduction of the amendment to include rapeseed in the definition of the word "grain". This is not just a question of the government coming along and saying arbitrarily that "grain" shall include rapeseed. It was first essential, as part of the process which led up to this amendment, to establish that rapeseed was now recognized amongst the agricultural community in western Canada as a grain; that it was exported in large quantities and, as such, was acceptable, by logic and by import, to come within the scope and receive the benefit of lower freight rates. It may well be that in the course of time the hon. member for Assiniboia may be able to establish that these qualities are attached to the word "mustard" or to the commodity mustard. However, by seeking to introduce an amendment in order to have mustard added to the interpretation of the word "grain" I submit he is introducing something that is entirely alien to the principle of the bill and that, as such, the amendment would be out of order.


Jacques Flynn: The purpose of the bill is very simple. The purpose of the bill, or of the amendment to the Railway Act is to apply to rapeseed the rates applicable to flaxseed. If we add something other than that to the amendment, I think it is clear that we are not relevant. Of course, the rule in committee is much stricter than it is on second reading. I think citation 203 of Beauchesne's which has been quoted several times, especially paragraph 3, would clearly dispose of the amendment. Paragraph 3 reads as follows:
An amendment setting forth a proposition dealing with a matter which is foreign to the proposition involved in the main motion is not relevant and cannot be moved.
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Otherwise hon. members will realize that they could add to and change the whole structure of freight rates simply by submitting amendments of the same kind as the one which is before the committee. I therefore regret that I am obliged to rule the amendment out of order.


Hazen Robert Argue: With great deference, Mr. Chairman, I appeal your ruling.
Mr. Speaker resumed the chair and the chairman of the committee made the following report:
In committee of the whole, when Bill No. C-lll, an act to amend the Railway Act was being considered, the hon. member for Assiniboia moved in amendment to clause 1 thereof as follows:
"That clause 1 be amended by adding in line 8 after the word rapeseed the words mustard seed and by adding in line 9 after the word rapeseed the words mustard seed."
I ruled the proposed amendment out of order in that it was not relevant to the provisions and exceeded the scope of the bill.
Whereupon the hon. member for Assiniboia appealed to the house from the decision of the Chair.
Mr. Speaker put the question as follows:
The question before the house is an appeal from a ruling given by the chairman of the committee of the whole as follows: when Bill No. C-lll, an act to amend the Railway Act was being considered the hon. member for Assiniboia moved in amendment to clause 1 thereof as follows:
"That clause 1 be amended by adding in line 8 after the word rapeseed the words mustard seed and by adding in line 9 after the word rapeseed the words mustard seed."
The chairman ruled the proposed amendment out of order on the grounds that it was not relevant to the provisions and exceeded the scope of the bill.
Whereupon the hon. member for Assiniboia appealed to the house from the decision of the Chair.


Mr. Brunsden:: I was paired with the hon. member for Fort William (Mr. Badanai). Had I voted, I would have voted for the chairman's ruling.
And the house having resumed in committee:


[Stage Direction]
Clause agreed to.
Léon Balcer: Mr. Chairman, as I said earlier, I will ask my colleague the Minister of Agriculture to move an amendment, the purpose of which is to set a date for this bill coming into force.


Mr. Hamilton (Qu'Appelle):: Mr. Chairman, in view of the remarks of the Minister of Transport concerning the advantages of having a definite date for the coming into force of this bill I should like to move an amendment. I move:
That Bill No. C-lll, an act to amend the Railway Act be amended by adding thereto the following clause:
2. This act shall come into force on the first day of August, 1961.


[Stage Direction]
Amendment agreed to.
Title agreed to.
Bill reported.
Mr. Speaker:: When shall the said bill as amended be read the third time? By leave, now?


Some hon. Members:: Agreed.


Léon Balcer: the third reading of the bill.
Motion agreed to and bill read the third time and passed.



NATIONAL ENERGY BOARD ACT

George Harris Hees: the second reading of Bill No. C-113, to amend the National Energy Board Act.
He said: Mr. Speaker, the national energy board has represented to me that as a result of the experience obtained in administering the National Energy Board Act for approximately 18 months, and following the consideration of various informal submissions received from the oil, gas and pipe line industries, it is considered necessary in the public interest to put forward a number of amendments to the act.
I suggest that as each amendment is put forward in committee, I will explain to the committee the need for and the effect of the amendment.


George James McIlraith: Mr. Speaker, I take it the minister's statement is an indication that no major question of principle is involved in the amendments, and

that the amendments deal only with different points arising from the experience of the administration of the act. I have no particular quarrel with the method of dealing with this bill suggested by the minister, although I must say that I feel some of the clauses of the bill involve questions of principle. For instance, the changed definition of gas and oil may involve questions of principle embodied in the present act, as well as that portion dealing with the import of oil and the bringing of the import of oil under the control by order in council instead of by act of parliament. However, perhaps it is preferable to deal with the bill on a clause by clause basis.
I should hope that the chairman, if we deal with the bill in this way, will not be too restrictive in interpreting the rules in respect to relevancy on particular clauses at any time. In view of the attitude taken by the minister I feel there can be no useful purpose served by my extending the debate at this stage.


Herbert Wilfred Herridge: Mr. Speaker, the creation of the national energy board was an indication of the development and changing circumstances of this country. In my opinion, this was also the beginning of a program of bringing order and regulation into the production and distribution of energy in this country. As I understand the amendments found in this measure they are the result of experience and changing circumstances and, in view of the fact there is no one principle involved, it is satisfactory to hon. members of this group to have the minister explain each amendment to the bill as it is presented to the house.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Flynn in the chair.
On clause 1-Gas.
Jacques Flynn: Shall clause 1 carry?


George Harris Hees: Mr. Chairman, this clause substitutes in section 2 of the act new and more practical definitions of gas and oil and deletes the definition of hydrocarbons, gas and oil. Gas and oil are redefined to bring the definition more closely in conformity with the accepted nomenclature used in the oil and gas industry and in existing provincial and other legislation.


George James McIlraith: I do hope the minister's explanations will not all be as sketchy as that one.


George Harris Hees: No, much more detailed.


George James McIlraith: The matter deserves a little more detail than that. In any event I wish to
National Energy Board Act ask whether the effect of the dropping of the definition of hydrocarbon from the act and the redefining of the definition of gas and of oil will be that of removing any pipe lines that are now under the control of the energy board from that control?


George Harris Hees: That is correct.


George James McIlraith: I asked if it had the effect of removing any of the pipe lines from control of the board?


George Harris Hees: No, it has not.


George James McIlraith: Would the minister clarify one point? At the time the national energy board legislation was before the house in 1959, in the subclause dealing with the definitions, there was a reference to a pipe line company then being incorporated, namely Foothills Pipe Lines. Some questions were asked as to what type of controls such a pipe line dealing would come under, whether under the gas section or under the provisions dealing with oil. Can the minister clarify that point for us now?


George Harris Hees: I am advised that for the export of propane or butane there would have to be an export licence because they would be defined as gas.


George James McIlraith: The point was never fully cleared up at the time the act was dealt with. Can the minister assure us that the dropping of the definition of hydrocarbon from the act does not in any way lessen the control over pipe lines generally?


George Harris Hees: I am glad to be able to assure the hon. member for Ottawa West that this is so.


[Stage Direction]
Clause agreed to.
On clause 2-Eligibility to be reappointed; retirement.
George Harris Hees: Mr. Chairman, this amendment makes it clear that the person who has been appointed as a member of the national energy board is eligible to be reappointed as such for a further term of seven years or less, or in other words a mutually acceptable appointment may be made for a term of less than seven years.


George James McIlraith: This clause gives me the opportunity to place on record something that I think ought properly to be placed there. I think the present Minister of Veterans Affairs will recall that at the time the original legislation was passed I raised some questions as to the appointments to be made to the national energy board, particularly the chairman of the board, and expressed the hope that the government would select the proper

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person for that high and very important position in our economy. I wish to place on record my view, for what it is worth, that the government of the day did make a very competent choice in the particular person it chose for chairman of this board. I think that ought properly to be recorded here because the subject matter over which the board has jurisdiction has such an important effect on the economy that nothing less than a very competent chairman is required in this position. I should like to record my view that the present chairman admirably meets those qualifications and requirements.


George Harris Hees: I appreciate the well justified compliment the hon. member for Ottawa West has paid to the chairman of the national energy board and I feel sure that hon. members, particularly those who have had dealings with the national energy board, will agree, and also members of the oil, gas and power industry of Canada will agree that Mr. McKinnon has done an excellent job in heading up the national energy board. I thank the hon. member for Ottawa West for his kindness in bringing this true matter to the attention of the committee.


George James McIlraith: Does clause 2 which is submitted to us provide for reappointment a second time?


George Harris Hees: Yes, it does.


[Stage Direction]
Clause agreed to.
Jacques Flynn: It being five o'clock and in order to permit the house to proceed to the consideration of public and private bills, pursuant to section 3 of standing order 15, it is my duty to rise, report progress and request leave to sit again later this day, or at the next sitting of the house, as the case may be.
Progress reported.


Mr. Speaker:: It being five o'clock, the house will now proceed to the consideration of public and private bills, the former having precedence, pursuant to order made on Friday, June 16 last.



CRIMINAL CODE


Mr. Frank Howard moved: the second reading of Bill No. C-34, to amend the Criminal Code (trading stamps).
He said: Mr. Speaker, this particular bill was before the house during last session for a rather lengthy debate. Perhaps it would not be well at this time to go into all the arguments pro and con in an attempt to reinforce or refute them. However, let me say

that some years ago the Criminal Code was amended to ban in effect the use and distribution of trading stamps. The Criminal Code now contains a definition of trading stamps, even though it is not in the same words as it was when originally enacted. The section contains a number of loopholes which allow the use of trading stamps in those provinces in which they are not banned by the provincial government, and allow trading stamps to be distributed even though the Criminal Code says this practice is illegal. The amending bill proposes to block these particular loopholes.
Since this matter was last debated in the house there have been a number of actions with regard to trading stamps, some in the courts and others by way of briefs presented to the government. A couple of well known and responsible organizations in this nation, notably the retail merchants association and the Canadian Association of Consumers, have made representations to the government calling for a ban on the use of trading stamps at the federal level. The government indicated tacit approval of the request made by these organizations, but as with so many other things, this government took no action but merely expressed sympathy. This bill before us provides an opportunity for something to be done and provides an opportunity for this government to do what it indicated it wanted to do.
The two organizations I have mentioned, as well as many others, consider that trading stamps are an insidious blight on our economy; that they tend to promote a monopoly and a concentration of power over the economy in the particular field in which trading stamps are used; that there is an air of dishonesty attached to them. These organizations feel that the use of stamps results in higher prices to the consumer. For these reasons, I think this house should give speedy passage to this bill, especially in view of the fact an extensive discussion took place on this subject last year.


Mr. Eldon M. Woolliams (Bow River):: am going to be brief in my references to these trading stamps. There has been a great deal of litigation about this type of thing. The use of trading stamps has been tested by the courts.
In dealing with the merits of the bill I would suggest that there is always a tendency-I say this is just a tendency-for some of us to wish to legislate the morality of the people. As a member from Alberta, I feel that I have enough faith in the individuality of the average Canadian to believe that he will take advantage of the freedom that exists in a democracy. If, as the hon.

member suggested, the use of trading stamps is bad, that they are in themselves practically immoral in the sense that they are an insidious thing in the economy, then I have enough faith in the Canadian people to believe that they will choose the right thing for themselves.
In discussing this subject one should keep in mind that the grocery business, in which trading stamps are used to the greatest extent, is a highly competitive business. Some people have suggested a monopoly exists in this field, but it is highly competitive. I recall reading an article recently to the effect that in certain states in the United States groceries are being sold at cost in order to attract people into the stores to buy other commodities. We only have to go into the chain stores in Canada to find that there is practically everything on the shelves from hardware right down to the various kinds of drugs. It seems to me that, because the grocery business is highly competitive, it will not be long before groceries will be sold at cost in Canada in order to attract people into the stores to buy other commodities.
The hon. member for Skeena (Mr. Howard) suggested that the grocery business is a field in which a monopoly exists. I say it is a highly competitive business. We only have to look around in our own province to appreciate the fact that it is a highly competitive business. The old style store we remember as boys, the corner grocery store, has been put out of business. When the corner store was in existence, everybody knew the clerk, and the clerk knew everybody. You went there to buy your groceries, and of course you received service. Today, there are about ten or 15 different chain stores in the city of Calgary. This is true of all cities. As I have said, this is a highly competitive business and it will not be long before the same conditions as prevail in the United States will prevail here and groceries will be sold at cost in order to attract people into the store to buy other commodities.
In so far as this particular amendment is concerned, I may say that the government of Alberta brought together the various companies on a voluntary basis and for a period of time trading stamps were eliminated. Everyone knows when you go to buy a package of cornflakes, you buy something else as well. If you get trading stamps, then indirectly you have to pay for them. If it is wrong to give trading stamps, then I think you have to look at the whole picture. If you buy a package of oatmeal, you find a cup and saucer in the package. What is the difference? In one case you save up the trading stamps and at the end of the month the children stick them in a book, you take them down to the store
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and get a prize. In the other case, you buy a package of oatmeal and you get a prize. If you are going to introduce a measure to outlaw the one form of attraction to get people into the store, then you have to outlaw the use of prizes in all these fields.
I have never been strongly in favour of legislating in the field of morality. I do not believe you can do that. I believe the people of this country are sufficiently well informed, and have enough individuality, that they will take advantage of the freedom which exists in this country to choose what they want. When you talk about the chain stores having a monopoly, you find that one store offers one kind of stamps and another offers another kind of stamp. In this way you have competition. This is basically my reason for taking a strict view of this legislation. I repeat that if you are going to outlaw the use of premiums in one form, then you have to outlaw them all. As I have said, I have enough confidence in the individuality of the Canadian people to believe that they will choose for themselves. We do not need to legislate to protect the morals of the Canadian people. After all, we are a Christian nation and we live under the free enterprise system. We are not children. We are 21 and we can go into a store and buy where we think we can get the best bargain. I believe the Canadian people will exercise their freedom with the proper discretion.


Mr. G. D. Clancy (Yorklon):: The subject matter of this bill has been discussed in the house on several occasions. Arguments have been presented both for and against the use of trading stamps, but in most cases the arguments have been in general terms. It would be interesting to review some of the points that have been made. The opponents of trading stamps make the blanket claim that the principle is basically wrong; that the cost is being passed on directly to the consumer. I think that this charge would be difficult to prove, although we will all admit that the cost will be passed on indirectly to the consumer.
As to the use of trading stamps, the argument used by the firms using them that 2 per cent of their gross revenue will take care of the problem of trading stamps is another point which could be carefully looked into. There is a limit to increased turnover. The discounts on quantity buying reach a definite level. Therefore I think there is no doubt that most consumers realize they are indirectly paying for this form of advertising. However, I think it is also true that they realize they are paying for all forms of advertising that are used. If you take one form of advertising and damn it or pass

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legislation to ban that form of advertising, then it should follow logically that all advertising should be banned. Whether you are paying for radio, television or newspaper space, the ultimate purpose is exactly the same as the principle behind trading stamps, namely to increase the amount of business you do.
I feel strongly about trading stamps in certain areas of business. For instance, I think of the use of bonuses or the giving of bonus numbers of trading stamps for certain purchases, particularly on, for example, the Saturday sales. If you take any newspaper and look at their Friday afternoon edition, you will see large firms advertising that if you purchase a jar of so and so you get five extra trading stamps. In that case I think the customer should be very wary. They are trying to use the trading stamps in order to move slow moving produce whereas in the normal procedure it would have meant that the price would have been cut to move it.
1	am certainly in favour of a price reduction rather than a stamp bonus.
Another sector where the stamps hurt in the retail trade is among the small businessmen. In a good many areas the volume that the smaller retailer can hope to achieve will not allow him to charge off at the rate of
2	per cent on his turnover. His turnover is not large enough. Therefore his cost of using this form of advertising grows progressively larger. Therefore he is in the position that he could not possibly use trading stamps without increasing his prices and therefore lessening his competitive position. It is a form of unfair trade practice. On the other hand, as was stated by the hon. member who spoke previously, we live in a free enterprise economy. He also made the point that if you put controls on one segment of business, it ultimately follows that controls must be extended further and further into the activities of the business field.
From reports I know that there are a great many consumers who believe that the trading stamp is a sound idea. They like it and feel that, if perhaps they are not getting something for nothing, they may be getting something for nearly nothing. I think the correct approach to the problem is not one of legislation. I think the correct approach to the problem is to make public the facts and to leave it to the consumer, when given the facts, to form his own opinion whether it benefits him to pay slightly more and receive trading stamps or whether he would prefer to have his trading stamp value in cash as a price reduction.


Mr. E. A. Winkler (Grey-Bruce):: Mr. Speaker, I have not had the privilege of participating in debate on this subject previ-

ously. I believe that today the need for this legislation is not as great as it was previously, although I certainly think that it would still serve a purpose and would be an advantage.
We heard the hon. member for Bow River (Mr. Woolliams) speak in the vein of the moral issue and give his views regarding the ability of bodies such as ours in legislating in these cases. However, this is probably a somewhat different matter, to a degree. In my own case, being what I would term a smaller businessman operating a small retail business, I feel that I have been able to see that. Although not in the business in which the practice of trading stamps has been used to a great degree, nevertheless I have watched this practice come into being and have watched it function, and I think I know a few of the matters in relation to it that are of serious consequence to the people who find themselves in this category in the business world.
As had been said previously, I believe that trading stamps when they were first brought into use were discriminatory as far as the smaller independent businessman was concerned in his relationship to the larger corporate chains. This may be a personal thing as far as the consuming public is concerned. Nevertheless, it was very real. The hon. member for Bow River mentioned the fact that there was a day when we could walk into the small corner grocery store and find that the grocer knew everybody and everybody knew the grocer. He thinks this situation has gone by the times, so to speak, but I do not believe this is the case. I believe that today the consuming public has come to the realization that trading stamps were discriminatory. There is no question that if you are in business and have such a plan presented to you, it is a cost, and you have to pay for it. There is no question about that matter. The next thing is this. Where does this cost come from? There is no question about that matter either. Therefore, as I say, I think this bill would have served an excellent purpose some time ago, perhaps more so than today.
I believe that the consuming public have become aware of this through practice and that they realize today that the small independent man who has been able to weather the storm and stay in business can sell his products more cheaply or at a lower cost than can some of the corporate chains. Anyone who does not believe this statement need only come with me to find proof. I can produce evidence that will show this to be so. In some cases, of course, it is not possible owing possibly to the buying policy. However, the argument with regard to stamps is quite clear in my mind. There is no question but

that they add to the cost of the article. The situation cannot be otherwise. Therefore such a measure as this one would eliminate that differential between the small man who feels it would be an impediment to his business and who, as I have said, having weathered some of this storm, finds himself now to be more efficient. They certainly have learned many lessons in efficiency and so on. However, they find themselves in a position to compete in many of the lines in which trading stamps apply.
The hon. member from Bow River also said that in the United States some stores are now selling grocery items at cost in order to bring the consuming public in so they may sell them other commodities upon which they make their profit. I am not taking great issue with the hon. member on this point. This may be so. Perhaps this would act well in reverse; I do not know. I have not yet heard of this particular practice, but I know that the great appeal being made to the consuming public for their dollar has been by big organizations which have had to eliminate a great deal of the personal service hitherto involved in doing business with the general public.
We can go through the discount store organizations, the organizations that use these trading stamps to a great degree, and find that a great many independent merchants are still surviving and doing quite well. I believe the reason for this is that the consuming public is going back slowly but surely to the desire for those services they received in the past. I think the glare and the lights of some of the big corporate outfits may be fading somewhat.
If the thinking of the hon. member for Bow River is correct, some of the arguments we hear in other fields do not apply. For instance, we hear agricultural people saying that if they received the profit on certain food items that the chain stores make, they would have all that was necessary; or even if they received only a percentage of that profit they would have all that was necessary. If the hon. member's thinking is correct, it would certainly eliminate that sort of argument, but I do not believe that is the case.
I certainly believe there is still a substantial margin of profit being made by many of the corporations on the basis of turnover and there is no question in my mind, as I said at the beginning of my remarks, that when these corporations introduce trading stamps to attract business there is only one person who pays, and that is the consumer.
Therefore I agree with the hon. member for Skeena (Mr. Howard)-although he may not have said this today-that there is a degree of deception in the use of trading stamps and I agree that they should be eliminated. As far as I am concerned, the economy of the
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country and the consuming public would be better served without this type of invitation to the public to spend their money at a given place. I certainly support the elimination of trading stamps.


Mr. Nicholas Mandziuk (Marquette):: Mr. Speaker, I have no intention of taking up a great deal of the time of this house. I am against controls as far as it is possible to prevent them. I am also a great believer in the principle that everyone should get value for their money. Hence I should like to take an objective view of this matter.
We have two sides to this question. On the one hand we have certain chain stores which adorn their windows with huge signs saying, "We give gold bond stamps", "green stamps", "blue stamps", "red stamps", and goodness knows what other kinds of stamps which are intended to induce customers to go in and buy the products they sell. On the other side we have from coast to coast about 150,000 retail stores both large and small, consumers organizations, trade unions and farm organizations which take serious objection to this method of enticing customers into stores.
I am not going into the question of whether or not a customer gets value for his money when buying from one of these stores offering trading stamps. I hope he does. It has still to be proved that he does not. I say the real measure of proof would be obtained in having an identical article, by the same manufacturer, of the same weight, the same quality and the same grade on sale in the store that does not give stamps. If it is offered at the same price as it is in the store that does give trading stamps, then I say the customer is not, in plain language, "gypped".
However, that does not bother me as much as the jurisdictional aspect of this matter. I have before me a statement made by the Minister of Justice (Mr. Fulton) dated November 3, 1959. It has relation to this point and perhaps I may be permitted to read a paragraph of the statement:
We have had the matter of trading stamps under observation continuously since assuming office,-
The statement goes on:
The result of these studies has been to convince me that an understanding of the nature and effect of trading stamp schemes is necessary to an understanding of where the responsibility and opportunity for controlling them may lie. In the first place,-
Mark this, Mr. Speaker:
-if a trading stamp scheme in its nature or operation comes within any of the fields which are proper for inclusion in the criminal law, it would be the responsibility of the dominion parliament to enact any necessary legislation to deal with the situation. In so far, however, as such schemes are

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merely merchandising devices, and relate exclusively to the terms and conditions upon which a customer buys and a merchant sells his goods, then their regulation or prohibition becomes a matter within the field of contract or detailed regulation of trade, which is within the exclusive jurisdiction of the provincial legislatures.
I think that is a very important point which has to be decided. Until the courts have decided that I think we are treading on dangerous ground when we ourselves try and control-and this is the intention of this bill -a transaction which between the seller and the buyer is within the field of contract and the exclusive jurisdiction of the province.
I am not saying that the thousands and thousands of people who object to trading stamp schemes are wrong. I think they have some merit in their objections. However, this is a serious matter and somebody must decide whether this parliament or each or all of the provincial legislatures of our dominion have the right to enact legislation banning trading stamps.
We do have provincial legislation on that matter. We have just such legislation in the province of British Columbia. Unfortunately I was not able at short notice to procure information as to the success or failure of this legislation, but I am satisfied it has not been challenged. The province of Alberta also has, or had, legislation prohibiting trading stamps. A charge was made under this legislation several years ago and the magistrates held it was ultra vires. Consequently the provincial government hit upon a scheme for the licensing of retail stores. This, I am informed, has put an end to the practice of various stores offering trading stamps as an inducement to customers. I am also advised that the province of Saskatchewan has legislation which prohibits retailers offering trading stamps as an inducement, and that this act is working successfully.
I can see some point in the proposition which the hon. member for Skeena has to amend the Criminal Code. As the law stands, it is not illegal for stores to offer trading stamps. I should like to refer hon. members to two cases which originated in my own province of Manitoba. These cases started out at magistrate's level, went to the court of appeal and ended up in the Supreme Court of Canada where they were decided on December 19, 1960. These two cases were dealt with as one by the supreme court and they are reported in Canadian Criminal Cases (Annotated) Volume 129, Part 2, page 223 under the heading: "Regina v. Loblaw Groceterias Co. and Regina v. Thomson (Niagara I.G.A. Grocery)". The faces in these two cases were identical. A city police officer by the name of William Hrycyk went into the Loblaw store on Main street, Winnipeg and

purchased a tin of sardines for ten cents. He was given a trading stamp. When he took this trading stamp to the manager of the store he was given two cup cakes in return. This same police officer went into the I.G.A. store in the same city and on purchasing a tin of sardines for ten cents he was also given a trading stamp, though of a different colour, and on presenting it at the proper desk he was presented with a safety pin. These two cases were treated as one, and Mr. Justice Kerwin wrote an elaborate judgment which I do not think it will be necessary for me to quote extensively. He held, and the other justices of the supreme court concurred, that under the law as it presently stands the offering of trading stamps by these various stores is not contrary to the provisions of the Criminal Code.
As I said before, Mr. Speaker, thousands of Canadians cannot be wrong. Regardless of my personal opinions as to controls I have very strong opinions about a person or a customer getting value for money. I am also a free enterpriser, but the anxiety of so many of these retail merchants leads me to believe that maybe they are hurt by this inducement. I for one would like to find a way of helping them even if it meant certain controls, but I want this to be put into legislation by a body which has undoubted jurisdiction to legislate. I have shown that several provinces are legislating on the matter. I have mentioned the cases which have been dismissed by the supreme court. I have quoted the opinion of the Minister of Justice (Mr. Fulton) that as we stand in Canada today there is still no definite decision as to whether this is a straight contractual liability or transaction or whether it is an offence against the state.
If this amendment were for the purpose of blocking up that void, if it were intended to bring back the wording of the code as it was before the 1953-54 amendment, I would go along with it but I am still not certain whether we have the jurisdiction to pass an enactment banning trading stamps. Once we ban that we would have to legislate with regard to other schemes which might be devised. Hon. members will have heard of the flower scheme, the scheme by which a customer buys a dozen tins of soup gets an extra tin free; the scheme whereby a pair of nylons is given free with every purchase of ten dol-ars or more. What about the patronage dividend in certain stores when at the end of the year the total amount spent on purchases is determined and a certain amount of money given back? Until some of these questions have been settled in my mind I should prefer to abstain from supporting this amendment.


Mr. R. A. Webb (Haslings-Fronienac):: Mr. Speaker, when speaking in regard to this bill on February 4, 1960 I pointed out that the issuing of trading stamps affected approximately 300,000 small businesses and also, conservatively estimated, one million workers. I believe that the allowing of large companies to give out these trading stamps defeats the very purpose of Bill No. C-40, passed by this house on November 30, 1960, which is an act respecting loans to proprietors of small business enterprises for the improvement and modernization of equipment and premises. I should like to say that exhaustive studies and inquiries have been carried out by the government of Alberta in regard to this question, following which legislation was passed, as published in the Alberta Gazette of November 14,	1959. Alberta regulation No.
379/59 appears at page 963 of that issue of the Gazette and reads as follows:
The licensing of trades and businesses act, general regulations respecting licences (ministerial order)
The honourable the minister of industry and development, by virtue of the power vested in him by section 5 of the licensing of trades and businesses act, is pleased to make a regulation amending the general regulations respecting licences in accordance with the schedule hereto.
Alberta regulation 239/57 under the licensing of trades and businesses act, being general regulations respecting licences, is hereby amended by the insertion of new sections 15, 16 and 17 as follows:
15.	No business licensed under the licensing of trades and businesses act shall secretly or otherwise give or offer to give any premium, free goods, or use coupons, coupon books, stamps, trading stamps or similar plans for the purpose of furthering the sale of any commodity or service.
16.	Opening day offers by a new business for a period of not more than seven days, including date business commenced, shall not be considered a violation of section 15 of this regulation.
17.	Nothing in this regulation applies to or affects prices or price discounts.
I say in conclusion, Mr. Speaker, that the Alberta government carried out a long investigation into this matter, and the courts there ruled that trading stamps should be disallowed.


Mr. Grant Campbell (Stormont):: Mr. Speaker, I think it is significant that the sponsor of this bill is not in his seat at the moment. I think the only observation I can make in this respect can be made by referring to the old Latin adage well known to lawyers, deminimis non curat lex. In other words, the law does not take cognizance of trifles. Apparently the sponsor of this bill has adopted the same attitude.
My position in respect to this business of trading stamps is similar to that of the hon. member for Bow River (Mr. Woolliams). I think it is a very salutary position to adopt in this house, that one cannot legislate virtue. We have a legacy of obsolete laws which are
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the results of misguided but well meaning efforts. I think it is very important to maintain a sense of proportion. The business of trading stamps is obviously a passing fad which will break down through its own asinin-ity and complexity. I think the observation of P. T. Barnum is a source of great solace when considering this type of problem. He observed:
It is true that you may fool all the people some of the time; you can even fool some of the people all the time; but you can't fool all of the people all the time.
That fact will ultimately bring about the demise of these trading stamps.
I think this whole trivial issue in respect to trading stamps brings to the fore a matter of considerable principle and substance. In this house we should of course endeavour to reduce the trivial and tentative to essentials, and to try to get at the principle, if there is any, inherent in our discussions.
How can a small independent grocer or operator exist in an age and time of colossal giants such as the cancerous growth of supermarkets which are exploding in all directions? This is similar to the very pertinent problem today; how can we maintain any individuality or any personality in an urbanized, synthesized, synthetic time and place? I think probably the most obvious and the easiest solution to this problem, but one which is doomed to failure in the end, is the bringing in of this legislation in an attempt to control this trend. However, I again say that you cannot legislate virtue, nor can you make things closer to the heart's desire by law. There is a limit to what the law can do.
I think the answer lies along lines of providing something in the way of a unique service which these great impersonal stores and organizations cannot provide. I know of the existence of several little butcher shops down here in the market at Ottawa which all the suburban and ex-urban housewives patronize largely because they have sawdust on the floors and salamis hanging from the ceiling, and if in addition to that they have a large chopping block with a cleaver stuck in it which is only used once or twice a year, so much the better, because they are able to sell their goods for twice as much. I suggest this is good sound psychology and the only way through this element of personality and individuality, and personal contact that the small individual in business can not only survive, but prosper alongside the giants of our society.
This problem is very relevant to the situation down in my own area of Stormont with the new harbour development that we anticipate in the v.ery near future. In fact, I expect construction to start in a matter of the

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next few weeks, thanks to the consideration, perception and good sense of the Minister of Public Works and of this government.
Another reason why this is a topical problem is because of Upper Canada village, which is to be opened on Saturday, June 24, and which I firmly believe will be the greatest single tourist attraction in this whole country within the next three years.
The problem which exists in Cornwall in my own constituency is that of finding ways of intercepting tourists which come in the thousands into our area. We must decide how we can provide them with genuine acceptable services while at the same time benefiting from their custom, particularly because this area is so destitute as a result of the seaway being on the United States side. How can we salvage something from the ruins, using our own customary enterprise, which the people of Stormont have always possessed?
I shall not go into this controversial problem regarding shopping malls, which I think has real relevance to Cornwall, because I think shopping malls have to be analysed on their merits. In some areas, such as Ottawa, their chief function is to attract the natives back from the suburbs to the centre of the city to prevent the centre from becoming atrophied and decayed. Whereas, in my area we must try to intercept the tourists passing through and to stop them over the noon hour or overnight, if at all possible. In order to do this the establishment of a shopping mall in our area might well be the solution. I hopefully anticipate that many tourists will stop because of the new harbour in order to see the tourist ships coming in there, as well as to see the St. Lawrence seaway and dam and the other new amenities that exist there.
In the east end of Cornwall what we have to do is to try to introduce some of the neat little expresso cafes such as they have in Montreal and even in Toronto today. You see there is a new sophistication, a new cosmopolitanism which has come to this country since the war which is probably one of the few things on the credit side that can be said for the terrible catastrophe of the last war. There has been a great influx of people from many countries and they have brought in a new awareness, a new sophistication and cosmopolitanism.


Mr. Speaker:: Order. I hope the hon. member can convince me that what he is saying is related to trading stamps.


Grant Campbell: Yes, Mr. Speaker.
[Mr. Campbell (Stormont).1


Mr. Speaker:: It seems to be in the general direction of trade and mostly tourist trade but I have not heard anything about stamps yet.


Grant Campbell: I believe the answer to this trading stamp problem is this unique, personalized little establishment. I think the expresso bar is the answer, certainly in Cornwall anyway, particularly in the east end. Furthermore, a cafe is the most practical, the simplest and cheapest sort of store to provide. If you want a genuine, unique atmosphere, all that is necessary to provide is a red checkered tablecloth, a few tables with empty chianti bottles in the centre with candles stuck in them. When the hot weather comes along you move the whole thing out to the sidewalk under a striped awning. You put a few plants in boxes around it and there you have a unique tourist attraction. Another alternative, another variation of the same thing, if you have no sidewalk in front of your store, as many of the storekeepers in Cornwall do not have, particularly in the east end, a congested area-they probably have a parking lot beside them-obviously is an adaptation of a German beer garden. Cover the area with gravel and then put your hedges around about it and your tables, and have your lanterns glowing in the night. Then serve whatever is at hand, gini if you have nothing better. I am sure in many cases this would be the answer, certainly in our own area, to house the small establishments with limited capital if they do not draw on the amenities provided by our government in the way of the industrial development bank and various other pieces of legislation. Obviously this is one way in which they could cope with those great supermarkets with all their complicated machinery of trading stamps and the like.
This is the answer to trading stamps plus the fact that people will become bored with this really silly performance. They will eventually realize that you cannot get anything for nothing and the stamps will disappear of their own inertia.


James Stanley Speakman: Mr. Speaker, this amendment, like so many others introduced by our friends in the corner, is another piecemeal attack on a problem. Of course, the hon. gentlemen would have us believe that this amendment would be the beginning of the destruction of all kinds of advertising, because after all this is what trading stamps are. They are a method used to attract additional trade to a particular business establishment.
As the hon. member for Bow River (Mr. Woolliams) mentioned, if we are going to carry through this amendment we should also ban the putting of cups and saucers in

cereals, towels and dishes in soaps, kitchen utensils in boxes of oatmeal, lapel buttons and cutouts in corn flakes.
The hon. member for Hastings-Frontenac (Mr. Webb) mentioned the order in council which was passed in the province of Alberta. For his information I should like to mention that this was not particularly popular with the buying public for the simple reason that it again was a piecemeal attack on what is after all a larger problem.
When we contemplate this type of legislation, Mr. Speaker, perhaps it might be well to have in mind the feeling and the thinking of the women who do the buying and, I might say, thinking of my own wife, doing it extremely well. They get value for their dollar; otherwise they do not spend it.
In speaking on a similar bill last year the hon. member for York-Humber (Miss Aitken) said, as reported at page 744 of Hansard of February 4, 1960:
I can only assume that nobody likes trading and discount stamps except the women who do the buying in this country.
I suggest that he would be a heroic husband who would endeavour to tell his wife that she must not buy at this store or at that establishment because they give trading stamps. He would probably end up by sleeping on the chesterfield or putting himself out at night and keeping the cat in.
Of course, the hon. member who introduced the bill made no mention of the fact that on television last night a gas installation firm in Ottawa offered a free portable 19-inch television set if you let them put a natural gas installation in your house. I presume the hon. member would approve of this because after all it is a rather substantial gimmick to get business. That is what trading stamps are; they are a gimmick to attract business. As has been said by hon. members who preceded me, give these things time and they die a natural death, as have other similar forms of advertisements over many years.
Will you call it six o'clock, Mr. Speaker?
At six o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at 7.30 p.m.


Hon. Donald M. Fleming (Minister of Finance) moved:: That Mr. Speaker do now leave the chair for the house to go into committee of ways and means.
The Budget-Hon. D. M. Fleming
He said: Mr. Speaker, normally 12 months transpire between budgets. Exactly six months ago this evening, I was delivering my last previous budget in this chamber. It was a supplementary to the 1960 budget. Tonight's is the second budget of the present session.
Four years ago tomorrow morning the present government was sworn into office. This is the fifth budget I have had the honour to submit to the house in these four years, not including the financial proposals introduced on December 6, 1957.
The circumstances attending each budget have differed from those associated with the others. Each was aimed to meet the financial and fiscal problems of its time. Tonight's budget is designed to meet Canada's present needs and difficulties. Flexibility has been the keynote of our financial policy in these four years. It will also characterize the approach revealed in tonight's budget.
(Translation):
Normally 12 months transpire between budgets. Exactly six months ago this evening I was delivering my last previous budget in this chamber. It was supplementary to the 1960 budget. Tonight's is the second budget of the present session.
Four years ago tomorrow morning the present government was sworn into office. This is the fifth budget I have had the honour to submit to the house in these fours years, not including the financial proposals introduced on December 6, 1957.
The circumstances attending each budget have differed from those associated with the others. Each was aimed to meet the financial and fiscal problems of its time. Tonight's budget is designed to meet Canada's present needs and difficulties. Flexibility has been the key note of our financial policy in these four years. It will also characterize the approach revealed in tonight's budget.
(Text):



GOVERNMENT ACCOUNTS 1960-61

[Stage Direction]
In structure my budget speech this evening will depart somewhat from past precedents. I shall begin by placing on the record a brief summary of the government's accounts for the year that ended last March 31. I shall not embark upon any detailed analysis because all the essential facts and figures have been included in the white paper which was tabled and published last Friday.
In my March, 1960 budget statement I recorded my expectation that our revenues for the 1960-61 fiscal year would be $5,892 million, our expenditures $5,880 million, and that the resulting surplus would be $12 million. Last December, in presenting to the house a supplementary budget, I explained
[Stage Direction]
The Budget-Hon. D. M. Fleming that the rate of economic expansion in Europe had shown some hesitation and that the economic outlook in the United States and Canada, which had been most encouraging at the beginning of 1960, had rather unexpectedly reversed itself, resulting in a disappointing slow down during the last three quarters of 1960. This inevitably affected our budgetary position and my revised estimates, after making provision for certain tax changes, were that revenues would be $5,694 million, expenditures $5,980 million and the deficit $286 million.
Our books of accounts for 1960-61 have not yet been closed, but subject to some minor adjustments our revenues for the past year were $5,616 million, our expenditures $5,961 million and our deficit $345 million. In other words our revenues were $78 million and our expenditures $19 million below my December forecast, and the deficit was therefore $59 million greater. As explained in the white paper, the main factor causing the rather large drop in revenues was the timing of the long Easter week end. This year Good Friday fell on March 31 and a considerable proportion of the tax payments due at the month end were in fact not put in the mail until April 3 or 4 and therefore could not be credited to our 1960-61 fiscal year revenues. Our March tax receipts showed an unexpected short-fall of nearly $40 million.
The government's over-all cash position for 1960-61, that is, including non-budgetary as well as budgetary cash receipts and disbursements, resulted in a total cash deficit of $294 million, since our non-budgetary cash receipts exceeded disbursements by $51 million. Thus our budget deficit of $345 million was financed by a net non-budgetary cash surplus of $51 million, a net increase of $223 million in our outstanding unmatured debt, and a reduction of $71 million in our cash balances.

[Stage Direction]
The white paper also contains a full account of the economic events of 1960. It includes an analysis of the more significant longer term developments in Canada and in the world as a whole as related to the Canadian situation. I commend this analysis to the careful study of hon. members. Tonight I shall not cover the ground in the same detail as in the white paper, but I should like to refer briefly to some of the principal features.
Last year we experienced a number of adjustments in our economy including some related to normal cyclical movements, and others of a temporary, special nature. These took place at a time when other longer term influences were also compelling the Canadian economy to adapt itself to a new world

environment. In these circumstances the year 1960 might have been one of serious economic maladjustment and recession. In the event, however, we achieved increases and reached new records in production, incomes, employment and trade, both domestic and foreign. At the same time price levels were more stable than they have been in the last five years.
By now, in mid-1961, we are coming to the end of those adjustments related to special and cyclical factors which, in 1960, were exercising a restraining influence on expansion. Those areas of the Canadian economy where declines took place last year are today showing signs of improvement. Capital investment, which declined in 1960, is expected to rise this year. Activity in housing, which fell off in the early part of 1960, responded well to government measures and other market forces in the latter half of the year and has been moving ahead this year. We may expect not only the housing industry, but other associated activities as well, to benefit from this improvement. The level of economic activity showed little change in the first quarter of this year, but increasing evidence of expansion is now appearing. Latest figures show that total employment has risen materially and the numbers of unemployed have begun to decline even after allowing for the normal seasonal movement. Other sectors where there was continued growth last year are showing further strength this year. In the United States informed observers consider that the recovery is now well under way. Expansion is expected to continue in western Europe and in our other important overseas markets. These welcome developments will make possible further increases in our exports, production, employment and incomes. Thus, an improvement in our situation could be expected to occur even if no further efforts were taken to stimulate our economy.
But this improvement, 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. It would be unlikely to induce the full utilization of our productive resources or to provide substantial improvement in the standard of living of our growing population. It would be unlikely to reduce the scale of unemployment to a more tolerable level.
What are the reasons for this apparent lack of resilience in our economy? Have there been new and abrupt changes in our environment which would explain our situation, or has there been a slow emergence of underlying forces which had their birth in an earlier period? Can we trace these influences to some indigenous development, or must we

look beyond our own borders? The answers to each of these questions must, I believe, be a qualified affirmative.
The important longer term developments which are at the root of our present day economic difficulties have been taking place slowly since the end of world war II and to some extent were hidden during the extended period of post-war shortages of goods and capital equipment, a period when inflationary forces were constantly in the ascendant. During this period of shortages and rising prices the economies of western Europe and Japan have been rebuilt with the newest plant and equipment and with a highly skilled labour force, and the underdeveloped countries of the world have tried strenuously to achieve self-sustaining economic growth.
Within the past two or three years direct controls on the movement of goods and capital in the free world have, to a large extent, been dismantled. The pace of scientific and technological development has been rapidly accelerated. The western world has grown more interdependent and the policies of governments and business groups have become more closely linked. In the face of all these changes, the competition in world markets has become much more intense and the need for greater efficiency has been forcefully underlined.
These changes have affected all western countries. But Canada has faced additional special problems. Our largest and most important foreign market, the United States, has experienced an inadequate rate of growth in recent years. This has affected not only our exports but also our general business psychology. Meanwhile, the growth of our own labour force has been unusually rapid and much higher than in other western countries. Our growth in employment has been higher-and I wish to stress this-our growth of employment has actually been higher than in other countries, including the United States; nevertheless we have been unable to absorb into employment all the entrants into our labour force. At the same time, many of those seeking employment have not had the benefit of adequate training to meet the needs of our increasingly specialized and technical industries.
Another special feature of the Canadian situation is that many of our industries have surplus capacity. To some degree this reflects the inadequate rate of growth in the United States market to which I have already referred. In part it also reflects the "lumpy" nature of much of our investment, which for physical and economic reasons must be installed in large units, sufficient to meet prospective as well as current needs. A great deal
The Budget-Hon. D. M. Fleming of the investment in the resource industries was of this type. But surplus capacity in our economy also reflects to some extent the unsustainably high levels of investment which were encouraged by the inflationary atmosphere of the mid-1950's. During this period of excessive pressure on our resources it was inevitable that some speculative investment was undertaken, not only in Canada but all over the world, with expectations of continued rising prices. These expectations proved wrong.
The normal growth of real demand can be expected to overtake capacity in the not too distant future. Meanwhile, the existence of surplus capacity acts as a drag on private investment. It necessitates some transfer of resources out of temporarily overexpanded industries; unfortunately, it also contributes to attitudes and conditions which make such transfers more difficult.
In some quarter the conclusion has been drawn that the disappointing levels of production, unemployment, and our balance of payments deficits, are the reflections of major structural maladjustments and inefficiency pervading our whole economy. We are told that Canada has relied too heavily on the development of her natural resources and that she is lagging in the field of industrial development. It is suggested that efforts be made to force our economy into different channels less dependent on world demand. We are urged to balance our external accounts not by expanding exports but by erecting barriers against imports.
The analysis which supports these proposals is in my judgment basically wrong; consequently the conclusions are also erroneous. Canadian economic development since the second world war has on the whole been sound. Investment has flowed into sectors where an abundance of natural resources gave us a decided natural advantage. It also has flowed into a great variety of manufacturing industries, especially into those related to the fast growing resource industries. It is sometimes suggested that the resource industries have been stimulated in Canada to such an extent that they have expanded at the expense of manufacturing. In this connection, the house should remember that employment in manufacturing industries in Canada, while less than we would like, has been better sustained than in the United States over the past seven years.
This is not to say that we would be complacent about the present state of our economy. Far from it. There is more unemployment and unused capacity in our industries
[Stage Direction]
The Budget-Hon. D. M. Fleming than we can possibly accept. Recent rates of economic growth have been lower than we need to absorb our rapidly growing labour force and the output of our expanding industrial capacity. Some of our industries have been stagnant in the face of strong world competition. Our technological development, the enterprise of our business community, and the skills and training of our people, great as they are, have not kept pace with the needs of a rapidly changing world. The deficit in our balance of payments, while declining, is still too high for our present economic circumstances. These are hard facts which must be faced squarely. This we propose to do.
We do not intend to let events take an unguided course in the hope that these problems will solve themselves. The government has introduced numerous measures during the past four years designed to overcome these and other difficulties. As a consequence our economic situation is very much better than it would otherwise have been. We will pursue this course with energy and determination until these difficulties are fully overcome.
Our objective will be, first and foremost, to provide fuller opportunities for the useful and profitable employment of all Canadians willing and able to work. We shall strive to attain a more rapid rate of stable and balanced growth for all sectors of our economy and all regions of our country. We shall seek to improve the technological efficiency of our industry, to heighten skills and capacities of our workers, and to stimulate the talents and initiative of our entrepreneurs. We shall endeavour to raise the levels of savings and investment by Canadians and reduce the balance of payments deficit. These, sir, are the purposes of this budget.
(Translation):
Our objective will be, first and foremost, to provide fuller opportunities for the useful and profitable employment of all Canadians willing to work. We shall strive to attain a more rapid rate of balanced growth for all sectors of our economy and all regions of our country. We shall seek to improve the technological efficiency of our industry, to heighten skills and capacities of our workers, and to stimulate the talents and initiative of our entrepreneurs. We shall endeavour to raise the levels of savings and investment by Canadians and reduce the balance of payments deficit. These are the purposes of this budget. We shall endeavour, through an appropriate mixture of fiscal, financial and commercial policies, to create more jobs, to stimulate production, and to improve the general state of our economy.

(Text):
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. 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. I shall have more to say about this subject later.
The budget which I bring down this evening is not an ordinary budget. In more than usual measure it is an economic budget. We shall endeavour, through an appropriate mixture of fiscal, financial and commercial policies to create more jobs, to stimulate production, and to improve the general state of our economy. I should like now to discuss the policies and measures which I propose that this house should endorse.

[Stage Direction]
While budget policy can play an important role in attaining the objectives that I have set out, it cannot accomplish the whole task. What we need, and what I shall be putting before the house this evening, is a balanced combination of both broad and specific economic and fiscal proposals. The government has already initiated during this session a number of constructive programs to encourage economic expansion; small business loans, housing development, urban renewal and rural development, greatly increased aids to technical education and training, measures to promote the expansion of exports, and in other ways. These are all parts of an integrated economic policy.
When there is a substantial degree of slackness in the economy, in the form of excess productive capacity and idle manpower, budget deficits can provide an important stimulus. By means of such a deficit the government, through its expenditures, places in the hands of the public substantially more purchasing power than it withdraws through taxation. If appropriately planned and timed, a substantial deficit can encourage higher levels of output, employment income and savings, without incurring risks of inflation. When employment and incomes have reached satisfactorily high levels and the rate of economic growth is strong, a sound budget and tax structure should generate sufficient revenues not only to cover current expenditures but also to provide funds for the orderly retirement of debt.
The present general pattern of our tax structure is, in my judgment, sound. While particular rates and particular applications

of tax legislation need to be adjusted from time to time, our present tax structure is such that, provided we do not embark upon large new types of spending, it will provide a balanced budget and some provision for debt repayments as soon as we re-enter the area of high employment and a renewed period of progressive growth.
There is, however, as hon. members know, a time lag of quite a few months between increases in the rate of growth of output and employment and the increased inflow of tax revenues. While I expect to see a significant and accelerating improvement in output, employment and incomes during the balance of this fiscal year, I cannot anticipate an equivalent increase in tax revenues in the same period. Much of the revenue benefits of economic expansion will not reach the treasury until after the end of this fiscal year.
In the circumstances confronting Canada today, it is appropriate, indeed desirable, that the federal government should, by incurring a sizeable deficit, help to stimulate the economy. This we propose to do. Accordingly, I shall not be introducing any increase in our general level of taxation. Indeed, 1 shall be proposing some significant tax reductions to accomplish certain specific economic objectives. This contribution in the field of fiscal policy taken together with the financial and other policy measures which have already been introduced or which I shall be announcing tonight, will bring about higher levels of production and employment, and a more satisfactory rate of growth.

[Stage Direction]
In addition to this fiscal contribution the government will be implementing other broad financial measures that will encourage general economic growth, as well as specific measures designed to encourage particular sectors or industries. These general measures are in the interrelated fields of capital flows, the deficit on international account, and the external value of the Canadian dollar.
Over the past five years we have experienced net inflows of foreign capital ranging from $1.1 billion up to $1.5 billion annually. These capital inflows have been matched by deficits on current international account, that is to say, by an excess of imports of goods and services over exports. When the economy was fully employed and expanding rapidly, and when inflationary pressures were active, such capital inflows, and the matching import surpluses of goods and services, were appropriate and beneficial. Under today's conditions they are not only unnecessary, but in some forms they can be harmful. Our excess
The Budget-Hon. D. M. Fleming imports of goods and services must be substantially reduced; our exports must be expanded. There are large quantities of goods and services that we are buying abroad that we can and should be producing at home at economic prices.
It was for these reasons that in my budget of March, 1960 I issued a serious warning to those Canadians, including provincial and municipal governments and business, who, it seemed to me, were over-ready to raise funds abroad, apparently regardless of the exchange risks they were running. In the December budget, as the house will recall, I took action in the field of taxation to remove certain special incentives to borrow abroad which had been built into our tax system in earlier years when there was an obvious need for foreign funds.
The public reactions to these warnings and measures have clearly been in the right direction. The capital inflow has been reduced, the exchange rate on our dollar has been reduced, the surplus imports of goods and services has been reduced; but they have not been reduced enough. Further measures must now be taken.
Accordingly, the government has reached certain policy conclusions relating to the flows of capital and terms of lending within Canada, the import of capital from abroad, the level of the Canadian dollar, and the deficit in our current international transactions. These conclusions may be set out as follows:
(a)	The current deficit in our balance of payments is in large measure inappropriate; with so much unused capacity in Canada, we should be exporting substantially more goods and services and importing much less.
(b)	An expansion in exports and a reduction in imports should not be brought about by export subsidies, or by higher tariff rates, or quotas, or other forms of government intervention or protection, but rather by encouraging our exchange rate to fall into a more appropriate relationship with our economic situation.
(c)	The appropriate method for relieving the exchange rate of undue and unwanted upward pressures is to take every practicable step to ensure that Canadians who might otherwise be raising funds abroad are, in future, satisfied from Canadian financial sources.
(d)	Since it will take time to divert demands for funds from foreign sources to Canadian sources, and since it is urgent to obtain relief from the resulting excess of imports of goods and services, the government has decided to use the exchange fund to neutralize, at least in some degree, the effects of the continuing capital inflows.
[Stage Direction]
The Budget-Hon. D. M. Fleming
The house will no doubt wish me to elaborate on these far-reaching decisions.
First, and of most immediate interest, is the decision relating to the adverse balance on goods and services account which has been running well in excess of $1 billion annually. It is the government's aim to reduce this deficit substantially in the near future and ultimately to achieve a position much closer to balance. The improvement should be brought about partly by increased exports and partly by diminished imports. Our purpose is to put Canadian producers in a position where, as a result of these policies, they will soon be selling, at home and abroad, many hundreds of millions of dollars worth of additional Canadian goods and services. This will yield substantial benefits, direct and indirect, in the form of more jobs, more production and more business opportunities for our industries.
These results will be achieved by encouraging our exchange rate to find a level in keeping with our economic circumstances. They are not to be achieved by subsidies, by government controls or restrictions. It has been urged on me from some quarters that there is a need for direct government intervention to deal with our economic problems. I reject this argument. The policy which I am placing before the house tonight is, in terms of real economic incentives, more significant, more powerful, and more pervasive than anything that could be implemented in the way of subsidies and controls. Moreover, it is free from the arbitrary decisions and the bureaucratic delays that always attend incursions by the government into the affairs of private industry.
The high level of our exchange rate has been impairing the competitive position of Canadian suppliers of goods and services in the home market and in foreign markets alike. An appropriate downward adjustment in the value of our dollar will bring them immediate relief and encouragement. On the export side one thinks of wheat and livestock, of petroleum, metals and minerals, of pulp and paper and lumber, and of the growing range of manufactures for which, since currency convertibility was restored, we are finding increasing markets abroad. On the import side our thoughts run first to industries whose growth rates have been less than satisfactory because of the imports that have, in effect, been carried into Canada as a result of a tide of unduly large capital inflows and a consequently unduly high value for our currency; household appliances, motor cars, a variety of consumer goods, and many types of industrial machinery. The exchange rate also affects service industries such as the tourist industry where we have been incurring heavy
[Stage Direction]

deficits because Canadians, at the current exchange rate, spend far more abroad than foreign visitors spend in Canada.
In all these situations a further reduction in the exchange rate will exercise a positive influence. And, as I have said, it is the government's intention so to redress our balance of payments that many more Canadians will be employed producing substantially more goods and services for the domestic market and to serve our markets abroad.
While decisions regarding the balance of payments and the exchange rate are of importance, there is a further decision which is, in a sense, basic to the others. This decision is a positive one; to encourage the supply of capital from Canadian sources, that is from Canadian savings, to meet Canadian requirements for expansion and modernization. The rate of Canadian savings has not been low. In fact it has been reasonably good. But it could be better. The flow of savings varies in response to other changes in the economic and financial system. And by far the most important influence on the flow of savings is the flow of incomes. Normally the more people earn, the more they save. By increasing the level of employment and the flow of incomes and profits, we shall automatically increase the flow of Canadian savings. The measures which I am proposing tonight will help to achieve these goals.
The objective that Canadian capital requirements be met as far as possible from within Canada, rather than from abroad, is based on economic grounds and with particular concern for our international deficit and the level of the exchange rate. At the same time the government welcomes, as the Canadian people will welcome, the fact that, over a period of time, this decision will result in greater Canadian ownership and control over Canadian industry and Canadian assets. For this purpose, Canadian savings must not only be increased, they must be mobilized and put to work in the most productive directions.
I wish to make it quite clear that we do not intend to penalize or discourage foreign capital that seeks constructive employment in this country. I am not proposing, in respect of capital inflows, any substantive further taxation measures. The interim budget of last December removed the unnecessary tax incentives. Nor am I proposing any restrictions on the movement of capital which have been advocated in certain quarters. Canada, even in present circumstances, derives great benefit from certain kinds of capital from abroad. This government remains firmly committed against direct controls on capital.

[Stage Direction]
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 is a field in which there are no quick or easy answers. The degree of success we can achieve will depend in part on the co-operation of our financial institutions.
Capital is not a homogeneous commodity; each borrower has his own peculiar needs and each lender his own preferences. However, despite the infinite variety of capital transactions, we can see our way toward certain broad measures that must be taken.
To begin with, 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. When Canada was in need of large and increasing supplies of capital from abroad, and when we could welcome the net inflow of goods and services that these capital imports generated, it was natural that our interest rates should be appreciably higher than those in the main capital markets from which we were attracting funds.
But today the situation is very different. We have no reason, in present circumstances, to be offering high interest rates in order to attract capital from abroad. On the contrary, the capital that is thus attracted simply pushes up our exchange rate and pushes up our trade deficit.
High interest rates are a double drag, at times like these, on our economic activity and expansion. Such rates traditionally are recognized as having some effect in restricting or postponing decisions to borrow and expand industrial operations and also the activities of governments and public bodies. And, much more important, with our floating rate of exchange, relatively high interest rates actually cause us to develop an import surplus of goods and services with adverse effects on employment.
Statistics indicating trends of interest rates in recent years in Canada and abroad are to be found in the white paper. These support the view that Canadian interest rates have grown out of harmony with those abroad and with our changing economic circumstances. An important step in the right direction was taken earlier this month; I refer to the reduction by the chartered banks of their prime rate 90205-6-419
20, 1961	6645
The Budget-Hon. D. M. Fleming on commercial loans. Further moves of this sort will be welcomed and encouraged by the government.
I am confident that the spreads between interest rates of various types in Canada and abroad can be reduced and brought into proper relationships, but I would not wish hon. members to expect that this can be accomplished by some simple or quick formula. 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. 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 accordance with the needs of the times.
While the level and structure of Canadian interest rates is an important influence on our balance of payments and our exchange rate, it is clear that much of the capital that comes in from abroad is not directly responsive to interest rates. For instance, last year more than $600 million of capital flowed in under the broad heading of "direct investment". Part of this inflow can contribute immediately and directly to the Canadian economy; not only does it create new jobs and new industrial opportunities in this country but it often carries with it new industrial technology and assured access to markets abroad. On the other hand, another part of this very large total constitutes the least desirable type of inflow; it involves the purchase by people abroad of established Canadian businesses. Many of these takeovers of Canadian firms do little or nothing for our economy and, at the time of purchase, they involve an upward pressure on the Canadian exchange rate and a consequent drag on Canadian production and employment. I shall have more to say on this subject later in connection with an important expansion in the activities and the role of the industrial development bank.
Some of the capital inflow originates in Canada with borrowers who seek funds abroad, not only in response to lower interest costs but for purely institutional reasons. Access to the New York capital market is almost a matter of habit; it is often simpler to raise money there than to search out equivalent possibilities in Canada. Certain aspects of our capital markets have not been adequately developed in Canada. This does not reflect in any way upon the sound and progressive financial institutions in our country,
[Stage Direction]
The Budget-Hon. D. M. Fleming which have been rendering an excellent service under present arrangements. But it does suggest that we must improve our institutional framework.
I have already held fruitful discussions with certain Canadian financial institutions looking toward a decline in interest rates and a reduction of the inflow of types of capital that can be met from Canadian sources. I intend to have further discussions along these lines in the near future.

[Stage Direction]
While the government will be calling for the co-operation of Canadian financial institutions in achieving our objectives regarding the supply and application of Canadian savings, we shall at the same time be taking certain positive steps ourselves. In this connection I have three important announcements to make relating to debt management.
I need not remind the house that the federal government and its agencies are by far the largest factor in the financial markets of this country. Their influence is particularly great in times such as these, when the private sector reduces its demand for capital and the federal government incurs substantial deficits as a measure to stimulate production and employment. The proper management of its financial affairs is therefore one of the most constructive contributions the federal government can make to the smooth functioning of Canadian capital markets.
Accordingly I wish to announce that in order to avoid congestion in the "long end" of the capital market, which is the part of the financial market upon which the provinces, municipalities and private business depend for much of their capital needs, I intend to confine new federal market issues for at least the next several months to the "short end" of the market.
The sale of new issues is not the only channel by which the impact of government financing is transmitted to the market. There are sizeable holdings of outstanding securities in government accounts; sales and purchases by these accounts have the same market effect as the issue of new securities or the redemption of old. One of the most important of these accounts, both in terms of size and in terms of volume of purchases and sales, is the unemployment insurance fund. The holdings of this fund have come to be regarded in some quarters as a threat to stability in the long end of the market. The government has therefore decided to remove any such threat.
The entire portfolio of the unemployment insurance fund will in due course be taken
[Stage Direction]

over by the treasury at book values, and in exchange the fund will acquire interest bearing but non-marketable bonds which may be redeemed by the government as required on 30 days' notice. The direct government of Canada bonds presently held by the fund will then be cancelled, and the government guaranteed bonds will in due course be traded to the Bank of Canada in exchange for equivalent government bonds which will thereupon be cancelled. This will remove the overhang of about $245 million mid and long term bonds which, as I have said, has had a psychologically disturbing effect on the market.
The third announcement I wish to make in the field of debt management concerns the establishment of a purchase fund for the orderly retirement of government debt. As hon. members know, there is at present a fund known as the securities investment account, which is used from time to time to purchase government of Canada securities, particularly those close to maturity. This fund has served a useful purpose in our management of the public debt. We have not, however, had at our disposal the regular flow of funds which is necessary for any steady retirement of debt. The experience of other governments and of private corporations suggests that the existence of such a fund through which purchases of securities are made can have a steadying effect on the market. Over a period of time it should contribute to a reduction of interest costs.
It has therefore been decided to establish a purchase fund to assist in the management of the public debt. Its initial size will be $100 million, to be used over the next twelve months for the purchase in the market of government of Canada mid and long term securities. Details, concerning the operation of the fund will be announced later.
The combination of the policies I have just outlined combined with others to be described later this evening and the indications I gave earlier concerning budget balance will have, I am confident, a salutary effect on the financial markets of this country. They represent a determined effort on our part to exert strong pressure on the level of interest rates and the exchange rate, in order to bring them more in line with our own requirements and with conditions prevailing in the world about us. The improvement in our capital markets which will flow from these measures will be of direct benefit to the provinces, municipalities, business and other borrowers.

[Stage Direction]
The next link in the financial chain that the government is forging relates to the industrial development bank. The scale of
[Stage Direction]
the bank's lending to small and medium sized businesses has been expanding rapidly. In its last fiscal year the bank made 740 loans amounting to $38 million, as compared with 221 totalling $17 million five years earlier. In its current fiscal year which began last October loan approvals have been more than 60 per cent greater than the record rate achieved in the same period a year ago.
The number of branch offices has been increased from four to 13 over the past five years, and further branches will be opened in the near future as suitable staff can be recruited and trained. This expansion has been very desirable and has had the full support of the government.
The predominant business of the bank has been, and will continue to be, the making of term loans to small and medium sized enterprises. However, the bank also has authority to purchase a portion of the equity in an enterprise with a view to resale to the owner or to others at a later date, and to enter into underwriting agreements. These powers will be put to increasingly active use.
In order to encourage continuing growth of the bank's operations, the government has decided to provide it with additional financing capacity, and wider responsibilities. For these purposes I shall be placing a bill before the house in the very near future. Without going into detail at this time, I may say that the bill will make provision for important changes. The types of businesses which the bank may assist will be enlarged. At present it is permitted to provide accommodation to certain specified classes of industry. These include manufacturing and processing, logging and construction, air transport and some service activities. In the future it is intended that all business enterprises in Canada shall be eligible. The bank would, of course, not expect to make loans where funds are available on reasonable terms from other sources and, in particular, where special provision has already been made by parliament, as in the Small Businesses Loans Act and the Farm Improvement Loans Act. It is intended that the financial resources available to the bank should be substantially increased. These resources are now $160 million; it is intended that they should be increased to about $400 million.
In facilitating the growth of the industrial development bank, the government has in mind several important objectives. The expanded operations of the bank will provide for greater employment. They will also assist in the development of a stronger, more productive and more flexible economy in the future. The bank was formed in order to meet a special need in the Canadian financial 90205-6-419J
20, 1961	6647
The Budget-Hon. D. M. Fleming structure. This gap exists because, while smaller and medium sized businesses have usually had access to short term credit from the chartered banks, and to long term mortgage credit from other institutions, their operations have not been of a size to enable them to sell securities in the market. To fill this gap the bank has supplied term loans for plant and equipment and also provides technical engineering, accounting and managerial advice where needed. Financial and other assistance of this kind will now be available for many businesses not previously included under the bank's operations.
While the primary purpose of the I.D.B. is to help in financing the establishment of new and the expansion of existing small and medium sized businesses, it has become increasingly apparent that it can also play a useful part in assisting with the problems arising from financial consolidation and changes in ownership.
In these days there are often pressures on the smaller firms from both domestic and foreign sources. If our economy is to grow and prosper we must help them to withstand these pressures. I have in mind, for example, the problems that face Canadian family firms. Often such a firm plays a central role in one of our smaller Canadian towns. In the life of such a firm, occasions sometimes arise when infusion of new management together with new capital becomes desirable. In the past this infusion has not infrequently come from abroad; and while foreign capital may be both desirable and helpful, I am sure that we would all be happier if such a firm had the opportunity to obtain the necessary capital and management in Canada. The
I.D.B. has already assisted in situations of this sort, and it is the government's desire that activity in this field be expanded.
Similarly, problems sometimes arise where the owner of a firm is facing or anticipating difficulties in connection with estate taxes. In such a situation the owner may feel driven to dispose of a firm, or a controlling interest in it, and often the most ready purchaser may be located outside of Canada. On such occasions the I.D.B. may have a constructive role to play. The I.D.B. has the power, as I have explained, not only to make term loans but also to purchase shares with a view to resale and to enter into underwriting agreements.
The existence of these powers, and of the willingness of the bank to use them, should be made more widely known. It must, of course, always operate with good business judgment. But within this framework I am confident that the industrial development bank will make an increasing contribution to
6648	HOUSE OF
The Budget-Hon. D. M. Fleming solving problems of the types I have described, to increasing Canadian productivity and improving our competitive position, and to helping retain in Canada the ownership and control of Canadian businesses.

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I should like at this point to comment on other important steps in the financial field which the government has announced in the recent past or will take in the near future.
I should like to remind the house of certain recent measures in the financial field that are designedly in harmony with the objectives I have announced tonight and, in particular, the objectives of lowering interest rates and ensuring that, as far as practicable, Canadian demands for capital should be met from Canadian sources.
First, I am glad to say that after a naturally slow beginning, the Small Businesses Loans Act is being put to increasingly good use. The latest figures show that guaranteed bank loans under this legislation are now being made at an annual rate of approximately $100 million to a wide variety of Canadian business enterprises.
Second, I should like to refer briefly to the arrangements which we are making for a secondary market in mortgages. As my colleague the Minister of Public Works has explained, there is no intention of dumping on the market large quantities of mortgages now held by the Central Mortgage and Housing Corporation. If and when the government is in need of funds there are more effective and cheaper means of meeting our requirements. On the contrary, it is our intention to feed out to the market fairly limited quantities, in a manner designed to encourage an active market in insured mortgages. Such a market will give an element of liquidity to these instruments, and as such will harmonize with our general program of broadening and deepening Canadian capital markets and of bringing interest rates in Canada more in line with those abroad.
I now turn to the future. It has become almost trite to say that the economic environment of the sixties will be different from that of the fifties. In no field, as far as Canada is concerned, is this statement more true than in the field of financial relationships, domestic and international. In tonight's budget, as on other occasions, the government has reached decisions on certain reforms and certain improvements that should be introduced. We have, however, become aware of the need for a broader, fuller survey than is possible under the pressures of day to day government decisions.
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Major Canadian financial institutions have developed over the years an enviable reputation for soundness, prudence and adaptability. Canada has been well served by them. In recent years there have been important changes in the institutions themselves and in the markets in which they function. Even greater changes may be in store as the Canadian economy matures and becomes more complex. So important are these institutions and markets to the smooth functioning of business and government that a careful review of them is necessary from time to time.
The last major study was made by the MacMillan commission in 1933. The Canada of that day was a much less mature country than the Canada of today, and the world in which she found herself was vastly different. Having in mind the length of time which has elapsed since this last review of our financial framework, and having in mind also the fact that the Bank Act must undergo its regular decennial review in 1964, the government has decided to appoint a royal commission to examine Canada's financial structure and institutions. The terms of reference and membership of the commission will be announced in due course.
Meanwhile, I say that the terms of reference will be broad, covering all aspects of money, banking, credit and finance. The financing of the Canadian economy will be one of the major areas of study. Such broad topics as the pattern and behaviour of interest rates, consumer credit and instalment financing, and the management of the public debt, will be included in the terms of reference. The commission will be asked to study existing financial institutions, such as the chartered banks, the Bank of Canada, and other institutions that perform banking and credit functions, and the various acts of parliament which govern their activities. The commission will also be asked to consider ways and means of encouraging the development of savings institutions. It would be our intention that the report of the commission should be available well in advance of the decennial review of the Bank Act.

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I now return to the exchange rate. As I have said it is the government's intention that our import surplus of goods and services, which has been running in recent years well over a billion dollars annually, should be reduced substantially, and that this should be brought about through an appropriate adjustment of the exchange rate rather than by direct government controls or subsidies, quotas or tariffs.
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No one can say today what the appropriate level of our exchange rate would be when our balance of payments is in a position better suited to our present economic circumstances. But the rate will certainly be lower than it has been of late, and it may well be appropriate for it to move to a significant discount. It will be government policy to facilitate such a movement.
Accordingly the exchange fund will be prepared, as and when necessary, to add substantial amounts to its holdings of United States dollars through purchases in the exchange market. This would have the effect of increasing the foreign exchange reserves available to Canada to be used in case of need. As many competent observers have pointed out, these reserves have not grown over the past decade in line with Canada's international transactions. Once an exchange rate more closely in line with Canada's economic position is achieved, the government will use the resources of the exchange fund to ensure that the rate is kept within a range appropriate to Canada's changing economic situation. The value of our currency must, of course, ultimately depend upon our pursuit of appropriate economic policies.
It has been suggested in certain quarters in this country that any reduction in our exchange rate is inflationary. 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, these will be minimal.
At this point I should like to issue a word of warning. A downward adjustment in the value of our dollar will open up new opportunities for Canadian industry both in our home market and abroad. The fiscal and financial measures which I have proposed or shall be proposing later in this speech should place Canadian industry in a better position to take advantage of these opportunities. But it would be a sad mistake if Canadians should thereby assume that nothing else needs to be done. Goods and services do not sell themselves. The world has become highly competitive for every type of goods and services which we produce. We must be prepared to intensify our efforts to compete in this new situation. We must work hard; all of us, not only the worker, but the entrepreneur and the business manager as well.
It is well known that adjustments in the exchange rate do not yield advantages that last forever. Recent history is full of examples
20,	1961	6649
The Budget-Hon. D. M. Fleming where such adjustments have proven to be an asset which has been dissipated before the fruits have been harvested. If industry should seek to obtain unwarranted price increases, or labour should seek wage adjustments not justified by improvements in productivity, the opportunity will certainly be lost. It would surely be the height of folly if these new opportunities were to be lost because of lack of self-discipline or failure to achieve effective co-operation between management and labour were to result in higher costs and prices and a deterioration in our competitive position. I have in mind that our competitors abroad, particularly in western Europe, have succeeded in achieving a degree of labour-management co-operation which we in North America have yet to attain. We will need a much fuller measure of such co-operation and self-discipline in respect of profits, prices and wages if we are to take full advantage of the new opportunities which will become available.
International financial policy has been the subject of recent consideration both in the international monetary fund and also in the new balance of payments subcommittee of the organization for economic co-operation and development. I believe I can say that, in both bodies, there is a good degree of understanding of the Canadian situation.
These two groups have been paying close attention to the problems associated with massive short term international capital movements; as the house will recall, both the President of the United States and the Prime Minister of the United Kingdom have recently called public attention to the problems that are involved. Over the years Canada's difficulties in deciding upon and pursuing an effective exchange rate policy have been entirely bound up with the problems of capital movements. If we can achieve a better international understanding of these problems, and devise new international techniques for dealing with them, we shall all benefit.
In summary, therefore, our objective is to achieve an exchange rate for the Canadian dollar which will contribute to a better balance in our current account position and to substantially higher rates of domestic production and employment. We will strive to attain this goal through a combination of financial and general economic policies which will encourage Canadians to meet their capital requirements more fully from domestic sources.
Experience over the past few years suggests that there is sufficient resiliency in Canadian industry, whether producing for export markets or for the domestic market, to bring about the necessary adjustments in our foreign
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The Budget-Hon. D. M. Fleming trade balance. This judgment is, I think, supported by the fact that although we are running a very heavy deficit in invisible transactions, we have been able, with variations from year to year, to move from a peak commodity deficit of $728 million in 1956 to less than $150 million in 1960. For the coming year we can foresee a possible surplus on external commodity account which, we believe, should be substantially enlarged through the policies we are pursuing.
We have the material means-the manpower, the resources and the industrial capacity-to obtain these results within a reasonable period of time. But the responsibility for attaining them does not rest with government alone. Indeed, they can only be reached if there is a maximum effort on the part of every segment of the Canadian community, from business and labour. We will have to produce the right goods at the right prices in competition with energetic and competent suppliers from every continent. I urge Canadian producers, encouraged and assisted by the policy measures which I am proposing in this budget, to respond fully to this compelling challenge. In this way we will attain expanded levels of efficient production and create new opportunities for the profitable employment of our growing labour force.

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I now turn to consider the main developments in our external trade relations. In perhaps no other field of our economic life are events moving more quickly or dramatically. With new regional trade groupings either established or in the process of being created, Canada is confronted with fresh challenges and the need to adjust to them. In the face of these developments, and against the background of the recent slow down in our rate of economic growth, the government has been urged from various quarters to alter radically and immediately our traditional commercial policy. In some quarters it has been advocated that we should move toward economic selfsufficiency supported by a highly restrictive trade policy. Others would have us alter our course sharply in the opposite direction by merging Canadian industry and agriculture in some regional economic grouping. In these circumstances it would seem timely to examine afresh the major tenets of our commercial policy objectives.
Let me say at the outset that I reject categorically these extreme positions which are being urged upon us. These are counsels of fear and even despair. Attempts to isolate ourselves from the trading world through the imposition of trade barriers would do irreparable damage to the Canadian economy.

It would mean a loss of markets and the stagnation of our most efficient export industries. Standards of living of the Canadian people would decline and our economy would atrophy. It would mean running counter to the whole trend of international economic policy in the major trading countries. It would lead to regional disunity at home and a weakened voice at international council tables.
Nor can I see any gain for Canada in abandoning our present broad trade relationships in favour of joining a regional trade grouping. 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.
Today our foreign trade and other economic ties link us to all parts of the world. With the attainment of convertibility and the removal of quota discrimination against our goods, there are increasing opportunities to extend our markets in many directions. I find it hard to see how, in our particular circumstances, a discriminatory alignment with individual countries or regional groups can help us to diversify and expand our foreign commerce, or fail to do damage to our trade relations with countries against whom we would be turning our backs. Nor have I been convinced that a sweeping elimination of our tariffs in relation to any existing trade grouping can be reconciled with a healthy secondary industry or the balanced growth of the Canadian economy.
I do not believe that the economic problems which confront Canada today require a drastic redirection of our trading relationships; or that these problems cannot be overcome by a vigorous pursuit of our present trading policies judiciously adjusted to meet changing world conditions.
What then are the commercial policies we intend to pursue? Our broad objectives in the trade field have been stated in unequivocal terms on earlier occasions. They are clear.
1.	To achieve expansion, diversification, better balance and greater stability in our over-all trade and in our trade with commonwealth and other countries.
2.	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.
3.	To recognize the legitimate needs of Canadian producers; to safeguard them against unfair trading practices; and to promote the balanced growth of all sectors of Canadian industry and agriculture.
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These have been the guiding principles and objectives in our foreign trade relations since this government took office four years ago. I believe that they are the right policies to pursue today.
Looking back I believe that we can derive considerable encouragement from the success we have had in moving toward these aims. Our exports in 1960 were the highest in our history. The deficit in our external commodity trade for the year 1960 was less than one quarter of the peak level of 1956. Imports are no higher than four years ago and, speaking broadly, our domestic industries are supplying a higher proportion of a growing domestic market. Our trade with individual countries is in better balance and we have enjoyed a gratifying measure of diversification in our export trade both in terms of products and destination.
Looking ahead I am confident that a continued and vigorous pursuit of these objectives will lead to further successes despite the difficulties and uncertainties that exist in several important areas of world trade. As the very high levels of business investment of recent years bear increasing fruit in the form of increased export and impert-displac-ing production, we can look to increasing surpluses in our external commodity trade accounts and reduced deficits in our current account balance of payments.
The movement to a better trade and payments balance will be substantially enhanced as we achieve an external value of the Canadian dollar more appropriate to our present economic situation.
We live in a country rich in many resources, natural and industrial, a country capable of producing many products in great quantity and at competitive prices. Our high standard of living has always depended in large measure upon our ability to sell in world markets the products in which we excel in exchange for those in which other nations have special advantages. It is self-evident that a country which depends on foreign trade for one quarter of its national income must seek to maintain the widest possible system of world trade and payments, a code of international practice to govern that system, and a reasonably diverse balance of interest among external markets.
For very good reasons, therefore, we have consistently supported the general agreement on tariffs and trade and the international monetary fund, and we shall continue to do so. This, of course, is not to say that we shall pursue a blind or inflexible adherence to the specific tariff bindings incorporated in the GATT agreements where the circumstances confronting particular Canadian industries
20, 1961
The Budget-Hon. D. M. Fleming require that they should be modified. The GATT makes provision for the renegotiation and modification of bound rates of duty and we have found it convenient from time to time to make use of this flexibility. In most cases these changes to bring our tariff up to date and adjust it to the changing needs of Canadian industry have followed comprehensive investigations and reports by the tariff board.
In the past several years we have introduced modernized tariffs for basic iron and steel, pipes and tubes, fresh fruit and vegetables, a large part of the textile schedule, as well as for other products. This evening I shall be proposing further changes affecting textile products, nails and several other items. We regard this task of modernizing the tariff as a continuing process and we have recently enlarged the tariff board to permit it to undertake more tasks and to handle its work more expeditiously. In every case where the tariff items in question were bound under the GATT agreements we have entered into negotiations with the interested countries and reached agreements satisfactory to both sides. We have endeavoured through this system of selective tariff adjustments to allocate the available protection to those products and industries which would improve the over-all efficiency of the economy and maximize production and employment in Canada. This, of course, has meant tariff decreases for some items to offset increases for others with no over-all increase in the incidence of protection.
We have pursued Canada's trade interests in the commonwealth through the commonwealth trade and economic conference and other commonwealth meetings, as well as through direct discussions with the United Kingdom and other commonwealth countries. We maintained a close contact with the previous United States administration in economic affairs and have already established an intimate and friendly working relationship with the new administration. We had a particularly valuable meeting of the joint ministerial committee on trade and economic affairs in March in Washington followed by visits to Ottawa of the United States secretaries of agriculture and the interior and then the visit of President Kennedy.
An important part of our success in achieving greater diversity and a better geographical distribution of our export trade has been associated with a substantial increase in our exports to the United Kingdom and continental Europe in recent years. Naturally we are intensely interested in the nature and direction of the regional trading arrangements in which these countries are participating.
The six continental countries comprising the European economic community have
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The Budget-Hon. D. M. Fleming agreed upon a common external tariff to be established in stages over the next ten years or so. In accordance with the GATT rules governing customs unions, these countries have had to renegotiate their previously bound tariff rates in order to maintain the balance of their trading arrangements with other members of the GATT. This renegotiation has now been substantially completed in the current tariff conference at Geneva. I can now report that as far as Canada is concerned good progress has been made in these renegotiations although discussions on certain important agricultural and other products are still continuing.
In mid-May the countries participating in the tariff conference decided that the renegotiations with the Six had proceeded far enough that a date could be set for the opening of the fresh round of general tariff negotiations in Geneva which were first proposed by the present secretary of the United States treasury and have thus become known as the Dillon negotiations. The general negotiations began on May 29th. Canada is participating in these negotiations. It is our hope that they will result in the further reduction of tariff barriers against Canadian exports. In particular, one would like to see the reduction of the tariffs of such powerful industrial areas as the United States and the European economic community where present levels of protection on many products are still, in our view, inappropriately high.
In earlier years when the countries of western Europe were reconstructing their war-torn economies, Canada extended to them the full benefits of tariff concessions and generous access to our markets despite the fact that these countries were applying discriminatory trade restrictions against our exports in order to conserve their limited exchange reserve. Restrictions and discriminations have now largely disappeared, at least in the industrial sector. Now that these countries have regained their economic and financial strength we would like to see the remaining restrictions removed, including the restraints in the agricultural sector. We would also regard it as especially appropriate for those countries which are in a strong competitive position to take advantage of their favourable trade and payments position to reduce their tariffs and provide fuller opportunities for an expansion of world trade.
The United Kingdom government is increasingly concerned about the dangers it sees in remaining outside the European economic community of the Six, and is actively engaged in seeking a basis upon which it could join this grouping. The United Kingdom has not yet taken a decision but has indicated that
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should a decision be taken to negotiate with the Six there would have to be arrangements to take into account the essential trading interests of commonwealth countries. For our part we have made it very clear that vital Canadian trade interests would be affected by such a move. Other commonwealth countries have expressed similar concern.
The Canadian government has kept in continuous contact with these developments in Europe. The time has now come when full consultations on a ministerial level are required. The United Kingdom has proposed that the secretary of state for commonwealth relations should come to Canada for this purpose and arrangements are being made for such a visit in the near future. The effectiveness of this consultation will depend, of course, on the extent to which the United Kingdom is able, in advance, to provide us with specific information. While such consultations on a bilateral basis are clearly essential the Canadian government is urging that there should also be full opportunity for joint consultations among all commonwealth countries.
A very high proportion of Canadian exports to the United Kingdom enters that market free of duty, many with the benefit of tariff preferences, some without. Free entry is accorded not only to industrial materials but to agricultural products and nearly all manufactured goods as well. This is of great importance for the volume, diversity, and geographical distribution of our exports.
Moreover, 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, but for political reasons as well, we would not wish to see this system abandoned.
We shall take every opportunity to ensure that the Canadian position is fully understood and our interests protected. We shall follow vigilantly the course of any discussions between the United Kingdom and the Six. Whatever may be the outcome we shall seek to preserve the most favourable terms of access to both these markets, and will pursue whatever policies may be required to achieve this end.
The new organization for economic cooperation and development may well have an important role to play at an appropriate stage in the further consideration of arrangements between the two trading groups in Europe. The house is well aware that the Canadian government has played a full and constructive part in the creation of the O.E.C.D., and we were pleased that Canada

was the first country to ratify the new convention. We look to it for increasingly close co-operation in all aspects of economic policy.
We do not believe the O.E.C.D. should detract from the strength and importance of the more broadly based organizations in world trade and international finance; the general agreement on tariffs and trade, the international monetary fund and the international bank for reconstruction and development. Moreover we do not forget that many important trading countries are not members of the O.E.C.D., for example Australia, India and Japan.
Canada's trade with Japan last year reached record heights in both directions. Japan is our third largest market, and our second largest for wheat. Japan is a very efficient producer of a wide range of manufactured products and can make these available in our market at very low prices. The Japanese, however, accept the principle that the growth of their exports of products which compete with our own production should be orderly and that they should avoid market disruption. Their method of applying this principle is through the maintenance of voluntary export restraints. We believe that this system is working reasonably well to permit an orderly expansion of two-way trade with Japan, while at the same time avoiding excessive penetration in sensitive sectors of our markets. Hon. members will recall the statement I made to the house on May 19 outlining the Japanese voluntary controls for 1961.
Other low cost producers, notably Hong Kong, have thus far not been willing or able to apply a similar system, and there have been some rapid increases in imports of a number of textile products. As I reported to the house on May 23, we are urgently seeking an equitable solution to this problem in cooperation with the United Kingdom and the United States. Failing this we shall, of course, have to adopt other methods in defence of the legitimate interests of Canadian producers.
The problem of market disruption or fear of market disruption, particularly in the field of textiles, is widespread throughout the industrial countries. The real difficulties for countries such as Canada and the United States which do not impose import restrictions are unduly aggravated by the maintenance of severe restrictions by many other countries, particularly in western Europe. We are now engaged with the United States and other countries in a co-operative international effort to achieve a more equitable sharing of the impact of the international movement of textiles.
90205-6-420
The Budget-Hon. D. M. Fleming

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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, and have been since 1947. This does not remove all possibility of change, but it does make upward adjustments difficult. A necessary preliminary is to renegotiate under GATT any bindings which are affected by the proposed changes. If tariff increases are proposed, it becomes necessary to find acceptable compensation to offer in exchange. This is no longer easy, as the Canadian tariff has been combed repeatedly for concessions to offer during the successive rounds of negotiations in which Canada has participated.
For that reason I am particularly glad to be able to announce tonight that we have substantially concluded renegotiations which will permit us to implement in this budget the recommendations which were made by the tariff board in the three reports on textiles which it submitted last year. These three reports covered hosiery and knitted goods; narrow fabrics and lace; and wool clothing and manufactures. We are also implementing the recommendations made by the board in its earlier report on record changers, and subject to a modification to which I shall refer later, the recommendations contained in the board's most recent report on nails.
The details of all the proposed changes arising from these tariff board reports are set out in the resolutions which I shall table tonight. In regard to them there are only two comments of a general nature which I wish to make at this time. The first is that if parliament approves these resolutions, the government will be in the position of having implemented, without major change, every tariff board report submitted from the day we assumed office right up to date. My second comment is that such departures from the tariff board's recommendations as have been made or are now proposed will provide, on balance, somewhat more protection for struggling sectors of the Canadian textile industry than they would otherwise have had.
When hon. members examine tonight's resolutions in detail, they will discover four departures from the recommendations made by the tariff board in the various reports on textiles to which I have referred. Two of these departures relate to the items covering hosiery and knitted goods. The tariff board recommended that the most favoured nation tariff on the main knitted goods item be reduced from 35 per cent to 32J per cent ad valorem, and that the specific component of the compound duty on non-woollen hosiery
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The Budget-Hon. D. M. Fleming be reduced from 75 cents per dozen pairs to 60 cents per dozen pairs. However, after reviewing the position of the Canadian hosiery and knit goods industry, the government decided that it would not be desirable to introduce these tariff reductions at this time.
The third departure relates to tapes, ribbons and other narrow fabrics of man-made fibres, which are now classified under several different items at various rates of duty. The board suggested a new item to cover them at rates of B.P. 22i 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 now classified under item 562a at higher rates of duty, I propose rates of B.P. 25 per cent and M.F.N. 27 J per cent.
The fourth departure involves a downward modification in a rate recommended by the board. This was introduced in the course of negotiations in order to meet a special problem in our trade with Italy. It involves applying a ceiling of 37£ per cent to the compound duty which the board proposed in respect of travel rugs, so as to avoid an unduly high rate on certain low priced rugs imported from Italy.
The next tariff board report to be considered relates to nails. The board recommended changes in two of the three nail items. These involved a reduction in the ad valorem M.F.N. duty applicable to tacks and small nails, and an increase in the specific M.F.N. duty on large nails, accompanied in the latter case by a smaller increase in the B.P. rate. Thus the board's recommendations, if adopted without change, would result in a small increase in the margin of preference in the one case, and a reduction in the other. The former would constitute a breach of the "no new preference rule" of the GATT. Accordingly we have decided to adopt the board's recommendations regarding the M.F.N. rates of duty, and in each case to introduce a corresponding alteration in the B.P. rate, so as to maintain each of the present margins of preference without change.
Thus far I have referred only to amendments arising from tariff board reports. These comprise the bulk of the tariff changes to be proposed at this time. There are others, and in most cases these too have been the subject of negotiations. They involve negotiated upward adjustments in the rates of duty on eviscerated chicken, paper twine, lawn rollers, hoes, forks and rakes, power lawn mowers, and filmed T.V. commercials. At the same time balance has been maintained in the over-all level of our GATT commitments and in the over-all level of the
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Canadian tariff by offering equivalent concessions on certain other items. These include pineapple juice, parts and engines for power lawn mowers, parts for cement blockmaking machinery, and motorcycles. The rate on live poultry is being equalized with that of the United States. It is expected that the effect of the proposed changes, both the increases and the decreases, will be to promote additional production and more jobs in Canada. It is hoped also that the proposed introduction of a minimum duty of five cents per pound on eviscerated chicken will materially assist the Canadian broiler industry, which has long complained of inequities between the Canadian and United States tariffs on its products.
There is also a miscellaneous group of other tariff changes to be found in the resolutions. These involve adjustments and clarifications which are not of general interest but nevertheless are important to those directly concerned. They include cabs on combines. I shall, of course, be glad to provide the house with a full explanation of these changes in the committee of ways and means.
I might add that at the committee stage I hope to be in a position to introduce a supplementary resolution relating to sodium hypochlorite laundry bleach. This product was reclassified in consequence of a recent supreme court decision. However it would seem appropriate to restore and maintain the former rates of duty pending a report by the tariff board on this and other products included in the chemical reference. Accordingly we have initiated negotiations on the matter under the "special circumstances" clause of the GATT, and I expect that these negotiations will be completed in the very near future.
As I mentioned earlier, a general round of tariff negotiations is now in progress in Geneva under the auspices of the general agreements on tariffs and trades and is expected to continue for several months. A number of the requests that I have received for reductions in Canadian tariffs are still under consideration in connection with these negotiations.

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During the past year we have held three dominion-provincial conferences for the purpose of reaching agreement with the provinces on the form of the financial arrangements which should exist after the expiry of the present federal-provincial tax-sharing arrangements on March 31, 1962. At the first of these conferences held July 25-27, 1960, the provincial premiers presented their views. I might add that the financial substance of their proposals could hardly be described as
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modest since in aggregate they would have resulted in additional federal costs in excess of $2 billion per annum. Despite their rather startling character, these provincial financial proposals were carefully studied and at the conference held October 26-28, 1960, the Prime Minister made certain suggestions.
It had become evident that the tax rental system had certain major defects. It placed the whole responsibility for levying these taxes on the federal government. The provinces took no responsibility for imposing the taxes upon which they depend for revenues nor had they any freedom whatever to amend tax rates in accordance with their current needs. Defects such as these are undesirable at any time, but in a period of rapidly increasing provincial demands and heavy federal responsibilities their effects have been particularly serious. The federal suggestion made at the October conference was that the provinces might consider again imposing their own taxes in the fields of personal income tax, corporation income tax, and succession duties. To facilitate this, the federal government was prepared to recommend to parliament that federal tax rates in the three shared tax fields be reduced at the termination of the present agreements by the existing standard rates. Under the present arrangements which refer to three standard taxes, the provinces receive 13 per cent of personal income tax collections, 9 per cent of the taxable income of corporations, and 50 per cent of succession duties or estate tax, and these standard rates are referred to in abbreviated form as the 13-9-50 formula. Coupled with this suggestion was provision for the continuation of equalization payments to the provinces.
On the basis of the discussion of these suggestions and further intensive consideration, the federal government advanced certain proposals at the dominion-provincial conference of February 23-24 this year. The Prime Minister's statement to the conference was tabled as an appendix to Hansard of February 28. It is not my intention therefore to review these proposals in detail at this time except in so far as they have immediate budgetary implications. The main proposals were that the tax rental system be discontinued, that the provinces should impose their own taxes, and that a fairer and more realistic system of equalization be introduced. At the same time the federal government undertook to reduce its income tax rates to a larger extent than was suggested at the October conference. In addition, the federal government is prepared to collect income taxes for any province which wishes to enter into an agreement to this end. In short, it was proposed 90205-6-420i
20, 1961
The Budget-Hon. D. M. Fleming that the provinces would reassume their constitutional rights and responsibilities to impose and vary their tax levies as they saw fit.
I have mentioned that the proposal made was that a fairer and more realistic system of equalization be introduced. It has always been the contention of this government that equalization payments to the provinces are absolutely essential. Without such payments it would be quite impossible for some of the less wealthy provinces to provide a reasonable standard of services without resorting to taxation far in excess of the national average. There is no question that to preserve reasonable equality in the provision of services across this country we must provide for some equalization of revenues. The proposed new arrangements have therefore been buttressed by an improved system of equalization and special payments which is more realistic and gives greater weight to fiscal need.
In the first place, the special fiscal circumstances of the Atlantic provinces have been recognized anew by the proposal to increase the Atlantic provinces adjustment grants by 40 per cent or from $25 million to $35 million for each of the five years of the new period. Second, it is proposed that the additional grant of $8 million per annum to Newfoundland be continued for a further five years. Third, it is proposed that the equalization formula be broadened to include, in addition to the yield of the three standard taxes, 50 per cent of the three year average of natural resource revenue and that the basis of equalization be changed from the average yield in the two provinces with the highest per capita yield to the national average. Variations as between provinces in resource revenues are a major factor in the financial position of the provinces and the inclusion of this factor in the equalization formula greatly improves the position of the less wealthy provinces. Equalization based on standard tax yields in the top two provinces led in some instances to larger payments than could be defended on the basis of fiscal need. The use of a national average formula as a basis for equalization payments will give adequate recognition to the principle of fiscal need without placing unnecessary demands on the federal treasury.
One further aspect of the federal proposals merits special reference at this time. From 1947 to 1957 under agreements, and since then from year to year without an agreement, the federal government has paid to the provinces half of the federal income tax collected in respect of income derived form the distribution to or generation for distribution to the public of electrical energy, gas or steam by corporations whose main business
[Stage Direction]
The Budget-Hon. D. M. Fleming is such distribution or generation. At the conference we proposed to continue these arrangements for another year. In compliance with the representations of the provinces it is now proposed that this sharing be continued throughout the next five years, that is, sir, during the period of the proposed arrangements. From a federal revenue standpoint, this proposal to continue sharing with the provinces on an equal basis the corporation tax from this source is equivalent to a reduction in federal tax. Under the arrangements now proposed, the provinces will be in a position to complement this federal action by policies which could benefit the industry and the consumers.
The government wishes to spare the provinces the expense of setting up separate tax collection machinery and to contribute as much as possible to simplicity, convenience and uniformity in the tax system. It therefore offered to collect on behalf of the provinces the provincially imposed personal income taxes and corporation income taxes free of charge provided the provincial tax base was identical with the federal tax base at all times. This offer could not be extended to the estate tax since the provinces do not have the constitutional power to levy an estate tax on the federal basis. The federal offer in this instance therefore was that any province not levying succession duties would receive half the yield of the federal estate tax while an abatement of 50 per cent of the federal estate tax would be granted as at present to provinces levying their own succession duties.
The federal offer to collect the provincial taxes free of charge obviously leaves the provinces with freedom and flexibility to impose their own rates of tax, a freedom they were denied under the rental system. At the same time it encourages them not to complicate the task of the taxpayer. At a later date, after the necessary legislation has been put before parliament and approved, it will be possible to work out the precise terms of tax collection agreements with those provinces which wish to avail themselves of the federal offer.
The proposal to return to the provinces the responsibility of levying taxes on the income of individuals and corporations was accompanied by a promise that the federal government would ask parliament to provide for reductions in the federal rates of tax. In the case of the corporation tax, the federal reduction is to equal the abatement of 9 per cent of taxable income now granted. In the case of the personal income tax, the reduction is to increase by one percentage point each year from 16 per cent of the level of federal tax which would otherwise prevail in the first year, to 20 per cent in the last year. The provincial share of the yield from the personal income tax will thus rise by the final year of the agreement to exactly double the level of 10 per cent in effect when the present government came into office in 1957. The provinces will of course be quite free under this system to reap higher yields by imposing higher rates of tax if they choose to do so.
I have spoken of the advantages to the provinces of the freedom and flexibility which the new arrangements can bring. From the federal standpoint there are also great advantages. It will mean that the federal government will no longer have to impose rates of tax high enough to meet the demands of provincial expenditure. The federal budget will no longer be inflated by what are essentially taxes for provincial purposes. It will mean very substantial reductions in the rates of federal tax.
I should like at this point, if I have the permission of the house, to insert in Hansard a table showing the amount of the federal contributions to or for the benefit of the provinces for the last five years together with the estimated amount for the year 1961-62.
Mr. Speaker:: As the minister advised, he has three tables which he wishes to have inserted. Perhaps the house will give its consent to the inclusion of all three without his having to mention the other two.


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

The Budget-Hon. D. M. Fleming



TABLE 1 FEDERAL CONTRIBUTIONS TO OR FOR THE BENEFIT OF THE PROVINCES

[Stage Direction]
(in millions of dollars)
	1956-57 1957-58		1958-59	1959-60	1960-61	1961-62
					(preliminary)	(estimated)
A. Unconditional payments-						
1. Statutory subsidies	22.8	22.0	21.6	21.4	21.0	23.12. Tax abatements (estimated).	157.3	275.6	275.1	313.8	303.7	323.53.	Tax rentals	' 4.	Equalization (including stabi-	365.9	213.9	249.0	279.7	288.7	298.8lization	J	139.5	149.1	180.7	191.2	191.65. 50 per cent share of income tax	on power utilities	6.6	7.4	8.7	4.8	4.2	6.06. Atlantic provinces adjustment	grants	-	-	25.0	25.0	25.0	25.07. Term 29 award (Newfound-	land)	-	-	13.6	7.3	7.7	8.0Sub total	552.6	658.4	742.1	832.7	841.5	876.0B. Conditional payments-	8. Agriculture	0.9	1.0	1.9	6.7	3.7	2.09. Health	36.4	34.6	45.9	46.0	48.0	45.410. Hospital insurance	-	-	54.7	150.6	189.4	274.511. Welfare	38.4	48.2	74.1	90.9	103.1	96.012. Vocational training, etc	4.7	4.8	8.1	8.4	8.8	27.313. Highways and transportation.	26.9	50.9	53.7	56.7	48.7	54.114. Resource development	2.7	4.3	8.7	15.3	17.9	21.215. Municipal winter works	-	-	0.2	6.6	8.9	26.916. Other	1.0	1.0	1.1	1.6	3.0	2.6Sub total	111.0	144.8	248.4	382.8	431.5	550.0C. Payments for the benefit of Pro-	vincial Institutions-	17.	University grants	
18.	Grants to municipalities in	16.0	16.6	25.5	26.1	19.0	19.4lieu of taxes on federal government property	9.7	17.5	21.9	22.6	24.5	24.7Sub total	25.7	34.1	47.4	48.7	43.5	44.1Total	689.3	837.3	1,037.9	1,264.2	1,316.5	1,470.1
Donald Methuen Fleming: The total of
these payments and abatements has risen from $689.3 million in 1956-57 to $1,470.1 million in 1961-62, or more than double. Included in this total is an estimated amount of $298.8 million for tax rentals in 1961-62. This amount includes $13.5 million for rental or succession duties which will not be eliminated under the proposed collection agreements, but even allowing for this and assuming a modest growth in tax yields, the change to a tax collection system will remove more than $300 million from the federal budget next year which will be the first year of the new five year period. I am accordingly submitting proposals tonight to reduce federal taxes effective January 1, 1962, by $300 million per annum.



INCOME TAX

[Stage Direction]
I shall proceed now with tax changes. I have already referred to the principal considerations of policy which motivate this budget. The general levels of taxes are not being altered at this time. I am bringing forward some important amendments, however. Aside from the reductions of income taxes connected with our undertakings to the provinces, with which I have already dealt, I am providing for tax reductions to the extent of about $100 million in a full year. I am also proposing several new measures pertaining to the structure of the tax laws. The various amendments are intended to improve the conditions of industry, to provide additional employment and to contribute to the general welfare. Some of them will further the efficiency and the equity of the tax system.
Reduction of the exchange rate will provide new and significant price advantages to goods made in Canada in comparison with those made in other countries. More than any other policy that could be adopted, a
[Stage Direction]
The Budget-Hon. D. M. Fleming lower exchange rate will be of signal assistance to all of our producers, both in primary and in secondary industries, to those who export as well as to those who sell at home. It is for Canadian industry now to make the most of the new opportunity which is theirs. As I have already explained, the benefits of a lower exchange rate take the form of price differentials and they tend in time to disappear. Thus these benefits are at a maximum during a limited period of time.
Many of our industries are at present competing in fields in which large portions of domestic needs are being supplied by imported goods. Frequently the Canadian manufacturer is capable of extending his market greatly with improved efficiency, with lower costs of production and with more competitive prices. This is as true of markets abroad as of those at home.
It is of the utmost importance that Canadian manufacturers should extend their markets. More than anything else, the government is concerned about employment. To secure a maximum increase in employment it is desirable, I should say essential, that every industry, every business and every labour organization should give renewed thought to the increase of productivity, the improvement of efficiency and the competitiveness of costs and prices. This is the constructive and effective way to deal with the problem of employment in our free enterprise economy.
Many of our major industries are well equipped, up to date and fully competitive with those of other countries. Huge capital investments have been directed to this end. Other industries are not at present as well able to compete for business at home and abroad. Probably every enterprise in the country is capable of doing more than at present and of doing it better.
Frequently, the most difficult aspect for an individual business to undertake unaided is the financing of expensive new capital installations, including machinery, equipment and buildings. The government has decided to give help at this point by introducing an allowance for re-equipment and modernization.
This special incentive will take the form of a 50 per cent increase in the first year in the rates of capital cost allowance applicable to new assets acquired for use in Canada from tonight until March 31, 1963. This special allowance will be available in respect of all depreciable assets which are eligible for depreciation by the diminishing balance method. A business will be permitted at its own option to take advantage of this substantial tax concession to the extent that its

investment during a taxation year on new depreciable assets for use in Canada is in excess of its expenditure on such assets in its last complete fiscal period that ended before tonight, or in excess of the average of its expenditures in that period and its two immediately preceding fiscal periods.
The purpose of this latter limitation is to provide the desirable incentive at a minimum cost. As any businessman would do, I am trying in this case to obtain a maximum result in return for treasury dollars. By applying the re-equipment and modernization allowance only to expenditures in excess of those in a recent base period, I am attempting to establish a rule by which to make this valuable concession available to those who are genuinely increasing the level of their investment in new depreciable assets but not to that large total of depreciable assets most of which would have been acquired in any event.
As far as new companies and new operations are concerned, it has been decided that the same formula should apply as in other cases. A new company, for example, will be able to claim the special allowance with respect to the whole of its investment in new depreciable assets for use in Canada since it has made no comparable investments in former years. On the other hand, the Department of National Revenue will be empowered to withhold the re-equipment and modernization allowance in cases where existing operations are split up into new ones merely for tax-defeating purposes. Capital cost allowances will continue as before to be limited in total by the cost of acquisition. They are not to exceed 100 per cent.
Hon. members are familiar with the new program which was inaugurated in the supplementary budget of December 20, 1960. Double depreciation for the first year or its equivalent in a later year was offered with respect to capital investments for products which are new to Canada as a whole or to designated areas of surplus manpower. As is usual with such matters, interested persons took some time to consider the possibilities in relation to their own affairs and their own plans. Following a time lag that was not unexpected, an increasing display of interest is being shown on the part of potential manufacturers of new products. Since the announcement of the regulations covering the plan, close to 300 inquiries had been received by the Department of Trade and Commerce by the end of May. Furthermore, interest in the program has increased in recent weeks as reflected by the fact that the number of applications received by the Department of

Trade and Commerce doubled in May, compared with March and April combined.
Applications for accelerated depreciation have been made by firms producing a wide variety of products. These include chemicals, steel, textiles, electronics, plastics, foods and other products. Thus, a representative cross section of Canadian secondary industry is seeking to take advantage of accelerated capital cost allowances under the December program. Some firms are establishing new plants, while others are enlarging their present facilities in order to make new products and thus diversify their output. These enquiries and applications have been made by firms located in many regions of Canada. The value of the assets covered by these applications exceeds $27 million. We anticipate that a steady increase will occur in the number of applications as businessmen develop a better understanding of the program.
Considering the fact that this program has been in effect a limited period of time, the government is pleased with its acceptance to date. The new projects resulting from the program will create additional employment in the industries supplying the new plants and facilities. Further, there will also be additional jobs for those working in the new plants. Another benefit is that new products are likely to be introduced which should make a useful contribution to further diversification of our secondary industries.
It is not intended to modify or amend this double depreciation program. Rather it is intended that the new re-equipment and modernization allowance can be claimed in addition by those who qualify for double depreciation in either the new product or the new designated area categories.
In the conditions that exist today, scientific research is to be assigned a top priority of urgency and importance. It must play an increasing and indispensable part in all sections of industry and in many aspects of every day life. Much has been done in the laboratories maintained by the government, both in basic and applied research and in development. In addition, the federal government has given greatly enlarged assistance to universities and private industry to stimulate scientific research and it will be giving more. If Canada is to maintain its due place in the world, advances must be made in these fields of science. I am proposing to extend the deductions now allowed to taxpayers in respect of expenditures on scientific research undertaken in Canada. These are already extensive but it now seems appropriate to take further steps in this direction as part of the government's program to assist Canadian business to be efficient and up to date.
The Budget-Hon. D. M. Fleming
Canadian industries, particularly the subsidiaries of foreign companies, are too dependent on research done abroad. The government believes that more industrial research should be done right here in Canada. The measures being introduced tonight are designed to stimulate industrial research in our own country.
The Income Tax Act now provides that expenditures of a capital nature made on scientific research in Canada may be fully written off in three years. I am proposing that henceforth taxpayers be allowed if they wish to deduct such expenditures in full in the year incurred.
The act now provides that amounts deducted under the provision dealing with scientific research shall be limited to 5 per cent of the taxpayer's previous year's taxable income unless the research program has been approved by the Minister of National Revenue with the advice of the national research council. Although in practice approval is normally given, I believe that a modification of this requirement will give encouragement and certainty to taxpayers who are planning to increase their scientific research programs. I am accordingly recommending removal of this limitation with respect to expenditures so far as it affects current expenditures.
Finally, I am proposing that taxpayers be permitted a deduction from income in respect of expenditures on scientific research made at one stage removed, that is, in respect of amounts paid to a foundation established for the purpose of expending all its resources on scientific research in Canada.
I turn now to some rather different problems that have attracted an increasing amount of interest and concern. It has been concluded that the next major step in the private pension field should be to use the resources of government to encourage and assist the more widespread expansion of private pension plans on a secure basis. It is desirable that those who have been employed throughout their working years should be able to retire without fear of want. Having in mind the extensive provision now available to meet these needs through private pension plans it is important to ensure that such plans are generally available and adequate. To these ends, action is required at the appropriate government levels to fulfil two objectives, namely to protect the solvency of private pension plans and to help promote the portability of pensions. The house will recall that on May 9 and on May 24, 1960, I drew attention to the fact that federal jurisdiction in this field is limited. While there is a confined area within which the federal government has powers there are wider areas of provincial jurisdiction.
6660	HOUSE OF
The Budget-Hon. D. M. Fleming
By the portability of a pension is meant the ability of a worker to accumulate a pension throughout his working lifetime even though he may change from one pensionable employment to another, perhaps on successive occasions. The government is concerned about persons who have worked with more than one employer but who on retirement can receive pensions based only on their service under the pension plan of their last employer. The income after retirement of those affected is a matter of great importance. In addition, the inability to carry pension rights away from a job, that is to say the absence of portability, may deter workers from transferring to more productive jobs. The portability of pensions may serve in a very constructive way as a stimulus to the productivity of the whole economy, by providing the individual worker with a wider range of free choice in seeking employment. In due course a contribution will be made by this means to increased employment.
In addition to these problems there is another which, fortunately, has seldom confronted us in recent years, namely the solvency of pension funds. The most important single requirement of a private pension plan is quite obviously that the requisite funds should be on hand when needed to pay the pensions. The insolvency of a pension fund could just as well prove to be disastrous to an employee who had spent all his working life with one employer as to another who changed his employment frequently.
The expansion of pension plans in the last 25 years has been phenomenal. In 1959 there were over 10,000 such plans in Canada of which 90 per cent were handled by insurance companies or the annuities branch of the Department of Labour. The remainder were trusteed plans where the contributions are deposited with a selected trustee for investment. Although constituting only 10 per cent of the number of plans, the trusteed plans in 1959 covered almost 1 million employees or 61 per cent of all employees under pension plans and their assets represented 64 per cent of the total.
As hon. members are aware, these pension plans are accorded valuable income tax concessions provided they are registered for this purpose with the Department of National Revenue. In general, tax deferral is granted during the period of accumulation and the pension benefits are taxed as personal income as and when they are received.
I doubt very much whether it is as well known as it should be that the federal government does not supervise or control the solvency of private pension funds; neither do the province, aside from establishing certain statutory responsibilities of trustees which
[Stage Direction]

pertain to only a small portion of this problem. These observations do not, of course, apply to pension plans whose detailed benefits are covered by a contract with an insurance company which guarantees the amount of pension to be paid in return for the contributions made by the employer and employees. There is, however, no governmental supervision to ensure that the assets of other plans are being accumulated at an appropriate rate to meet the future liabilities of those plans. Among these other plans I include both trusteed plans and those plans where an insurance company enters into a deposit administration contract and simply receives contributions on deposit without entering into a contract to pay specific amounts of annuity.
I should make clear at once that there is no necessity and no intention to cast doubts upon the vast majority of private pension plans which are efficiently and conscientiously administered by insurance companies and by personal or corporate trustees. What is projected is a degree of supervision of trusteed pension plans, in the public interest, comparable in some respects with the supervision traditionally exercised over insurance companies. Many people may be surprised to learn that no such supervision has existed in the past.
I warmly welcome the growing indications of provincial interest in this field. The governments of both Ontario and Saskatchewan have recently given evidence of their concern. The government of Ontario has indicated its desire to discuss this question with the other provincial governments and the federal government during the coming months. This interest of these provinces is particularly important because of the constitutional aspect of the problems.
This government shares the view that a joint federal-provincial approach should be made. To this end the government intends to arrange consultations with any interested provinces to give further definition to such a program and thus to provide encouragement for the more widespread establishment of pension plans. Accordingly, I am announcing at this time that the federal government has decided to seek the co-operation of the provinces in a program to deal with the solvency and portability of private pension plans.
Paul Joseph James Martin: Two years too late.


Donald Methuen Fleming: Better two than
22.
In the March, 1960 budget I announced the intention of the government to introduce legislation to incorporate a new approach to the taxation of employees' profit sharing plans. Hon. members will recall that a bill dealing with the taxation of deferred profit

sharing plans was given first reading only. This course was followed in order to give full opportunity to all interested citizens and organizations to study this complex issue.
The interest shown in the proposals introduced for study last year has been most gratifying. The briefs, letters and comments I have received have been of great assistance in preparing the legislation which I am now proposing. The substance of last year's draft bill will be brought forward, with several alterations and improvements, into this year's bill to amend the Income Tax Act. The legislation will provide that an employee will not be subject to income tax on amounts contributed to a profit sharing plan on his behalf by his employer until actually received as proceeds from the plan. As I stated last year, the improved facilities provided for employees' profit sharing plans will constitute an important piece of social legislation and provide fresh opportunities for labour and management to work out new forms of co-operation amongst themselves.
If parliament approves the recommendation for deferred profit sharing plans it will greatly increase the number of cases where an employee may receive a lump sum payment representing accumulated earnings which have not borne tax. If a taxpayer becomes a nonresident before receiving these payments there is at present no provision for levying a tax. This incentive to become a non-resident for a short time in order to gain a tax advantage should be removed. I am proposing that lump sum payments which represent deferred remuneration earned in Canada be regarded as income earned in Canada. This will apply only to lump sum payments. On the other hand, pensions paid to former Canadians who have become residents of other countries will continue to be free of Canadian tax.
There will be several amendments to the personal income tax designed to give relief. Last year this house approved a proposal to increase substantially the maximum amount of medical expenses for which a deduction may be claimed in arriving at taxable income. I believe that the amounts now deductible are sufficiently high to give full relief to most taxpayers who have incurred extraordinary medical expenses, but I am impressed with the intolerably heavy burden being borne by a small number of taxpayers whose expenses are in excess of the present limits. A single motor accident, for example, may cause a taxpayer more extraordinary medical expense in one year than another taxpayer would incur in a lifetime. Since the whole purpose of the deduction for medical expenses is to give relief to those taxpayers whose ability to pay income tax has been reduced by extraordinary expenses, it seems
The Budget-Hon. D. M. Fleming both logical and fair to remove the limits entirely, and I am so recommending. I am also proposing that the cost of an instrument which assists those who have suffered from cancer of the throat, an electronic larynx, be classed as a medical expense.
An intensive review is being made by the United States tax authorities of the treatment for tax purposes of contributions by residents of the United States to charitable institutions in other countries. During the past year there have been expressions of concern by Canadian universities and by their graduates and other supporters in the United States that the existing system might be changed to their detriment as a result of this review. In the past donations made through a United States corporation to a charitable institution in another country have been treated as deductible for purposes of taxes in the United States. There has never been a corresponding privilege in our income tax law, although there are, of course, residents of Canada who make contributions to universities and other charitable organizations in the United States. Because of the particularly close relations between Canada and the United States it is desirable and feasible to permit some exceptions to the general rule which denies a deduction in respect of donations to charitable organizations located outside Canada. Thus our income tax convention with the United States provides some limited exceptions and our estate tax convention with the United States recently approved by the house, contains a more general provision for ignoring the border as far as charitable organizations are concerned. We have accordingly notified the United States authorities that whenever they are ready, Canada is prepared to enter into negotiations to amend the provision of the income tax convention that deals with charitable donations. In the meantime, it is understood that the United States authorities are aware of the close relations between universities in one country and their graduates and friends residing in the other and are anxious to maintain and foster these traditional relationships.
In the 1960 budget speech I drew attention to another matter which was marked for special study during the year. This was the problem of the taxation of corporation surpluses and the designation of surplus under section 28(2) of the act. I appreciate the many carefully considered observations and suggestions that have been submitted in answer to my request. With the assistance of these submissions members of the Department of Finance and the Department of National Revenue have been engaged in a comprehensive study of these provisions of the income tax law. This study has not yet advanced to the stage where
6662	HOUSE OF
The Budget-Hon. D. M. Fleming I can place specific proposals before parliament. This subject will continue to receive close attention during the coming year.
I am proposing a comprehensive overhaul of the definition of a personal corporation and the rules for taxing shareholders of such corporations. A personal corporation is one used to hold the investments of the individual and persons related to him. All the income of such a corporation is deemed to be distributed to its shareholders each year. It has become apparent that this legislation contains some anomalies and some provisions which are lacking in clarity. I have reached the conclusion that the time has come for a revision of this complicated piece of legislation. Some of the proposed changes will be relieving. For example, I am proposing amendments concerning the right to carry forward losses and the option to compute tax in a special way on the recapture of capital cost allowances. These are introduced in response to requests that income received through a personal corporation should be granted the same tax treatment as income received directly. Other changes will be designed to prevent personal corporations being used to split income with members of a taxpayer's family and to thwart devices for postponing tax on income from investments.
Hon. members are aware of the many ways in which the income tax law provides incentives to taxpayers to develop our natural resources. At present, in addition to corporations whose principal business is mining or producing petroleum or natural gas, corporations whose principal business is processing mineral ores and metals recovered therefrom are allowed to deduct expenses incurred in exploring and drilling for minerals, oil and gas. I am proposing to extend these incentives by permitting companies whose principal business is fabricating metals to deduct such exploration expenses. In future, therefore, these companies will have a greater incentive to search for their own supplies of raw materials.
Other amendments proposed for natural resource industries will permit a mining, petroleum or natural gas company to deduct preproduction expenses incurred by a former subsidiary.
Our income tax law must be continually reviewed and adjusted not only to provide appropriate encouragement to the legitimate needs of taxpayers but also to achieve equity among them. The government has become increasingly concerned over the evidence of abuse by some taxpayers of the provisions for the deduction of amounts expended for the purpose of gaining income from a business. The question is to what extent amounts spent by a firm for the entertainment of its customers and the travelling expenses of its


employees are really required in order to gain income. Since ours is a free enterprise economy, our income tax law assumes that the businessman is the best judge of the extent to which he should incur expenses of this nature, and naturally the government has been reluctant to recommend, and parliament to impose, rules that would restrict him unduly in this respect. However, the government has no intention of allowing so-called "expense account living" to thrive and I am consequently serving notice that in future the allowance of expenses of this nature will be subject to more intensive scrutiny. I am hopeful that more stringent legislation will not prove to be necessary.
One of the most important factors affecting the income tax status of a person, either individual or corporate, is the determination of his country of residence. I am proposing that a corporation incorporated in Canada which is carrying on business in this country be deemed to be resident here. I am also proposing that the provision deeming an individual who is a member of the military or public services on duty outside of Canada to be a resident shall extend to his wife and dependent children so that they will have the same tax status.
Finally, I am proposing that volunteer firemen be relieved of income tax on amounts up to $300 per year paid to them to cover expenses they incur while engaged in firefighting duties.



SALES AND EXCISE TAXES

[Stage Direction]
I am proposing a number of changes in commodity taxes. The first of these concerns the structure of the tax on cigarettes imposed under the Excise Act. This tax is levied at the rate of $4 per thousand for cigarettes weighing not more than 2J pounds per thousand. If cigarettes weigh more than this limit the tax is $5 per thousand. I am recommending that this dividing point where the higher rate of tax commences to apply be raised so that in future cigarettes may be manufactured weighing as much as three pounds per thousand before becoming subject to the higher rate of tax. This will permit manufacturers to increase the amount of tobacco in each cigarette without becoming liable for a higher tax. I am assured that this will lead to a signifiant increase in the amount of tobacco used in the cigarette industry. This will bring substantial benefits to Canadian tobacco growers. In order to give all cigarette manufacturers time to make any necessary modifications in their equipment to take advantage of this change the amendment will not become effective until January 1, 1962.
[Stage Direction]
With the exception of the taxes on tobacco products and wines, most of the taxes imposed under the Excise Tax Act are on an ad valorem basis. A tax in this form at the rate of 10 per cent or 15 per cent amounts to a very small amount per article where the taxable items are manufactured or imported at a very low price per unit. I have reached the conclusion that greater uniformity in the amount of tax on a number of items is desirable, especially as between imported and Canadian manufactured commodities. For this reason I am proposing that the present 15 per cent ad valorem excise tax on electronic tubes for radios, television sets and record playing devices be modified to provide that the tax shall in no case be less than 10 cents per tube. Similarly I am proposing that the 15 per cent ad valorem tax on radios shall bear a minimum of $2 per radio and the 10 per cent ad valorem tax on mechanical lighters shall be not less than 10 cents.
Turning to the sales tax, I am proposing several technical changes for clarification and also a number of exemptions from tax. These new exemptions, which are intended to recognize new products and technological changes, include laminated timber for bridges purchased by municipalities, self-propelled forage wagons for farm use, a new kind of casing used for seismic tests in oil and gas exploration and propane tanks for use with furnaces.
In addition to taxes on commodities, the Excise Tax Act contains a provision for imposing a 10 per cent tax on insurance premiums when insurance is placed with nonauthorized insurers. There appears to be an increasing tendency on the part of nonresident corporations carrying on business in Canada, and also Canadian corporations which are controlled outside of Canada, to arrange their fire and casualty insurance in respect of risks in Canada either with insurers which are not authorized to transact the business of insurance in Canada or with insurers that are so authorized but through agents or brokers located outside Canada. Undoubtedly these practices stem from a desire to make all insurance arrangements at the head office of the corporation or at the head office of the parent corporation, as the case may be, rather than from any lack of adequate insurance facilities in Canada.
Since the practices referred to result in loss of insurance business that would otherwise be transacted in Canada and some loss in tax revenue otherwise payable to Canada, it is proposed as a first step to amend the provision of the Excise Tax Act which at present imposes a tax of 10 per cent of premiums paid by Canadian residents to unauthorized insurers in respect of insurance
20. 1961
The Budget-Hon. D. M. Fleming of property in Canada. The amendment will extend the tax to make it apply to all classes of insurance, whether of property or not, subject to certain exceptions. The exceptions proposed will be marine risks, as at present, life insurance, personal accident and sickness insurance and, to the extent that such insurance is not available in Canada, insurance against nuclear risks. The practice of arranging insurance of risks in Canada through non-resident agents and brokers is currently being studied and further steps, if found necessary, may be taken to curb this undesirable practice.

[Stage Direction]
I am not proposing any amendments to the Estate Tax Act this year. This act, originally passed in 1958 and amended last year, appears on the whole to be working satisfactorily. There have been a few representations suggesting changes, and these have been given careful study, but I believe that more experience with the law as it stands would be desirable before further amendments are made.

[Stage Direction]
Last August the government appointed Professor V. W. Bladen as a commissioner to inquire into the problems of the Canadian automotive industry. May I now, on behalf of the Prime Minister, and with the consent of the house, table copies of his report in French and English.
The most complex of the recommendations are those relating to the tariff rates on vehicles, and parts and components for assembly into vehicles. Hon. members will recall that the structure of our present automotive tariff schedule, which took shape a quarter of a century ago when Canada was a large exporter of vehicles, presents the following features. The rate against complete vehicles is 17-J per cent when imported from countries eligible for most favoured nation tariff rates, but free when imported from British countries. Most parts may also be imported free from British countries, although little use has been made of this provision. When parts are imported from M.F.N. countries they are subject to duties ranging from 17J per cent to 25 per cent; but many of these parts may nevertheless be imported duty free, even from M.F.N. countries, if they are not made in Canada and if the Canadian manufacturer uses them in producing vehicles that attain specified levels of commonwealth content.
Professor Bladen proposes that we should build upon, but substantially develop and
6664	HOUSE OF
The Budget-Hon. D. M. Fleming modify, this system. The essential features of his proposals in the tariff field are as follows. A tariff of 10 per cent should be imposed against imports of both parts and vehicles from British sources, while present tariff rates against vehicles and parts from M.F.N. countries, ranging from 17 £ per cent to 25 per cent, would remain in effect. However, a manufacturer could, under this system, "earn" free entry not only of parts but also of vehicles by achieving or arranging a sufficiently high volume of production in Canada; this production, which could be of completed vehicles or of parts, might be sold in Canada or abroad. For example, exports of particular parts or vehicles from Canada to other countries would earn, for a manufacturer, free entry for other parts or vehicles. Thus, it is argued, the Canadian industry would be more effectively integrated with industry abroad, and the economies of longer runs and greater output would be available here. The objectives would be higher production and more jobs in the Canadian automotive industry, combined with lower prices for Canadian consumers. These goals involve the general expansion, not restriction, of trade in motor vehicles and parts.
The government warmly approves these objectives, and it is grateful to Professor Bladen for the constructive and imaginative suggestions that are embodied in his report. Nevertheless, his recommendations relating to tariffs are complex and sweeping, and would require extensive readjustments in the industry. It is essential that those concerned, both management and unions, should have an opportunity to assess not merely the objectives but the desirability and practicability of the means by which these objectives are to be obtained. Accordingly the government, in releasing this report tonight, urges careful study of the tariff proposals by all those Canadian groups concerned:	the vehicle
manufacturers, the parts manufacturers, the labour unions, the municipalities, others who gave evidence before the Bladen commission, and the general public.
If, when the views of such groups have been received and analysed, it was decided to take action in the field of tariffs along the lines of the Bladen report, or along some similar lines, the government would fully respect Canada's commercial obligations and would thus protect Canada's trading interests. The government is fully aware of its various
[Stage Direction]

obligations under the GATT, including the undertakings most recently given to the United Kingdom at the time of the commonwealth trade and economic conference in 1958 to bind free entry for these items under the GATT. However, as I have already indicated, the consultations or renegotiations with governments abroad would not be undertaken unless and until the government had reached decisions to proceed in the national interest, taking into account the views of interested parties in Canada.
I proceed now to the recommendation that relates to valuation for purposes of the sales tax. According to the present law, sales tax on imported vehicles is levied on the price in the country of export plus Canadian tariff, if any. On the other hand, on vehicles of domestic manufacture it is levied on the price paid by dealers. As a result of his studies Professor Bladen has concluded that this system discriminates in favour of imported vehicles. In effect he recommends that imported vehicles should be valued on the basis of the selling price to the dealer. Along with the tariff recommendations, the government proposes to give careful study to this recommendation which touches upon a basic principle of the Excise Tax Act.
Professor Bladen's report contains a secondary and much less important recommendation which also relates to valuation. It is proposed that a "notional" valuation should be established, for tax purposes, as if there were a wholesale intermediary between the manufacturer and retailer. This recommendation also will be carefully studied.
Finally I come to the recommendation of far-reaching importance relating to the excise tax on passenger cars. This tax, which is now 7J per cent, constitutes according to Professor Bladen, a serious drag on sales of automobiles in Canada. He anticipates that the abolition of this tax will increase sales of automobiles substantially, and enlarge employment and production in the Canadian industry. Accordingly he recommends that this tax be abolished.
Paul Joseph James Martin: Hear, hear. We have been pushing this for years.


Donald Methuen Fleming: I am glad to announce that the government has decided to
implement this recommendation. This tax will be repealed effective midnight tonight.


Some hon. Members:: Hear, hear.


John Whitney Pickersgill: At last.


Donald Methuen Fleming: 
Paul Joseph James Martin: A victory for the opposition.


Donald Methuen Fleming: Mr. Speaker, I seem to hear a voice that says, "A victory for the opposition".


Paul Joseph James Martin: Hear, hear.


Donald Methuen Fleming: I recognize a voice which belonged to a former government that raised this tax, not lowered it.


Paul Joseph James Martin: The former government cut it 15 per cent.


Donald Methuen Fleming: This will relieve them of any loss resulting from the tax decrease. Dealers will apply for the refund through the automobile manufacturer. I expect, of course, that automobile producers and dealers will pass on to the consumers this tax saving in full.
After taking into account the increase in production which is expected to result, I estimate that the elimination of the per cent excise tax will result in a net loss in revenue for a full year in the order of $66 million. For the current fiscal year the loss in revenue, including refunds to dealers, will be about $55 million.



THE 1961-62 BALANCE OF WAYS AND MEANS

[Stage Direction]
I return now to a reassessment of our budgetary prospects for the current year in the light of the fiscal proposals and economic policies which I have put before the house.
In the opening sections of my speech this evening I said that in the absence of any changes in the current economic outlook or of any additional stimulus we might anticipate this year an increase of about 3 per cent in our levels of economic activity.
As a result of the policy statements and legislative proposals I have now made I would expect a significant improvement in our economic prospects. It is difficult, however, to be precise in forecasting the exact degree or timing of this acceleration, since it depends to a considerable extent on the co-operation and vigour of business and labour and of the financial markets and investment institutions.
The Budget-Hon. D. M. Fleming
To the extent that our expansion is accelerated there will be an increase in revenues, although, as I said earlier, the time lag in revenue receipts means that a considerable amount of the benefits of economic acceleration will not reach the treasury until after the end of this fiscal year. There will also be some reductions in expenditures as, for example, in unemployment assistance and unemployment insurance expenditures, and perhaps in the deficits of the C.N.R. and other crown companies.
As the expansion of output, employment and incomes accelerates, taxation revenues will in due course increase still more rapidly. On the basis of the present situation and anticipated trends it is not unreasonable to expect that the current flows of revenue and expenditures will be approaching a balance by the end of 1962. Indeed, as our economy reaches high levels of employment, it is essential that the budget should achieve a balance, and that provision should be made for an orderly retirement of debt.
I estimate that the effect of the income tax changes proposed, not including the reduction in personal and corporation income taxes which are part of the proposed fiscal arrangements with the provinces, will be about $35 million in a full year and $10 million in 1961-62. The effect of the proposed changes in sales and excise taxes will be $66 million in a full year and $55 million in 1961-62. The total tax reductions therefore will be about $100 million in a full year and $65 million in this fiscal year. As I have already indicated, the other federal tax reductions effective January 1, 1962 will amount to $300 million per annum.
With the stimulus imparted by these budget proposals to the levels of economic activity I would expect a general rise in our tax revenues between now and next March 31 to offset the particular tax reductions I have proposed. Assuming some consequential reductions in expenditures I would anticipate a budgetary deficit of the order of $650 million. May I remind hon. members that in as large and as complex an operation as our national government any forecast of revenues or expenditures is inevitably subject to variations. One per cent of our revenues or expenditures is approximately $60 million. Hence it would be more realistic to say that our prospective deficit is in the $600 million to $700 million range. I estimate that our non-budgetary cash
[Stage Direction]
The Budget-Hon. D. M. Fleming requirements, excluding the exchange fund, will be about $330 million. Thus our over-all cash requirements will be of the order of $1,000 million.
For the record, Mr. Speaker, may I have the consent of the house to insert here two tables indicating our revenues, expenditures and cash requirements for the past year and for the current year.

[Stage Direction]
Budgetary Revenues and Expenditures
(in millions	of dollars)	
	1960-61	1961-62
Revenues Income taxes	(Preliminary)	(Estimate)Personal 	. 1.711	1,815Corporate 	. 1,277	1,200Non-resident 	. 88	115Estate taxes 	. 85	90Customs duties	. 499	500Sales taxes 	. 721	785All other taxes	. 635	645- *	-Total taxes 	. 5,016	5,150Non-tax revenues	. 600	615. *Total revenues ...	. 5,616	5,765Expenditures 	. 5,961	6,415-	*Deficit 	. 345	650r * *	=

[Stage Direction]
Non-Budgetary Transactions and Net Cash Requirements (In millions of dollars)
1960-61	1961-62
(Preliminary) (Estimate)
Net Receipts Annuity, insurance and
pension accounts 	254	275Other 	94	-20Total 	348	255Net Loans, Investments and Advances C.N.R	-116	110Housing 	192	240Unemployment insurance	67	170Farm credit 	40	50Exchange fund 	64	-Other 	50	15Total 	297	585Net non-budgetary transactions 	+51	-330Budgetary deficit	345	650Net cash requirements	294	980

[Stage Direction]
It is necessary, in the light of recent events, that I say something tonight about relations between the government and the Bank of Canada. What I have to say relates in part to the past and in part to the future.
Let me begin with the past. On June 14, when I explained to the house the reasons why the government had been compelled to ask for the resignation of the governor of the bank, I said that Mr. Coyne's continuation in office "would stand in the way of the implementation of a comprehensive, sound and responsible economic program designed to raise the levels of employment and production in Canada". Such a program is contained in the budget that I have presented tonight.
No doubt there are some proposals in this budget with which Mr. Coyne may find it possible to agree. It is in the basic elements that the differences lie. This budget is built, as hon. members will have observed, on four foundation stones.
John Whitney Pickersgill: Rolling stones.


Donald Methuen Fleming: The hon. member for Bonavista-Twillingate had better look out that they do not roll over him.
Each sustains an element of economic policy which is central and indispensable. Yet not one of the four is compatible with statements, many times reiterated in various and sometimes extreme forms, by Mr. Coyne.
First, the government believes that Canada is, and for her prosperity must remain, a law-abiding member of the international financial and commercial community. The financial and commercial proposals that I am laying before the house tonight accord not only with Canadian interests, but also with Canadian international obligations. Mr. Coyne's speeches, on the other hand, exude ultra-protectionism and isolationism. The purposes and policies which they represent could not be carried out within the framework of the international institutions of which Canada is and must be a member. When he speaks of "living within our means" he really invites us to "live unto ourselves", in a private restrictionist world of our own. As a member of the government of one of the great trading nations of the world, I categorically reject any such invitation; the policies involved would be as damaging to our domestic prosperity as they would be to our international influence.
fMr. Fleming (Eglinton).]


John Whitney Pickersgill: Poor old R.B.


Donald Methuen Fleming: Poor old Bonavista-Twillingate.
Second, the government believes that flexibility in our structure of interest rates can often be, and is indeed in times like the present, of importance to the pace of economic expansion, and the level of employment, particularly through its influence on the balance of international payments; and the government also believes that the Bank of Canada has an important role to play in this connection. Mr. Coyne, on the other hand, in his last annual report and in many other statements, argues that interest rates have little influence on economic development and that the central bank has, in any case, little influence on interest rates and the balance of payments.
Third, the government believes that the exchange rate, like rates of interest, should be flexible and should move with the times; while a premium over the U.S. dollar may well have been appropriate and helpful to Canada's economic position some years ago, today a discount will be appropriate and helpful to agriculture and fisheries, to primary and secondary industry, to our exporters, our tourist industry, and to the community at large. Further, the government believes that monetary policy and interest rates in Canada have an important role to play in relation to a flexible exchange rate. Mr. Coyne, on the other hand, in frequent speeches and most recently before the Senate committee on manpower and employment on April 26, reserved his most extreme strictures for proposals for "depreciation of the international exchange value of the Canadian dollar" and for use of monetary policy in this connection.
Fourth, the government believes that, in times like the present, a substantial budget deficit can promote economic expansion, with more jobs and better living standards for many thousands of Canadians; and such a fiscal policy will be the more effective if it is accompanied by appropriate flexibility of interest rates and exchange rates. Mr. Coyne, on the other hand, has been preaching all across the country a far more austere and rigid doctrine. Government fiscal policies in general, and government deficits in particular, have received more of his broadside attacks than any other element in our economy.
Mr. Coyne has publicly and repeatedly rejected all the four foundation stones of this budget. Moreover, at both my meetings with the governor on March 18 and again on May
20. 1961
The Budget-Hon. D. M. Fleming 30, after I had told him of the harm done by his public speeches, he asserted firmly and emphatically that he took back nothing he had said in those speeches, that he had been right in what he had said, and withdrew nothing. How then could the government invite him to consider and support it? How could the government ask him to co-operate in its implementation? I can think of nothing more cynical or more insulting than to approach the governor of the Bank of Canada with a request that he should approve and implement policies with which he is known to be in fundamental disagreement. Accordingly, rather than allow Mr. Coyne to continue to stand in the way of constructive and expansionist measures of a kind which he had publicly opposed, the government asked him to resign. This budget and Mr. Coyne were simply not compatible.
Let it not be thought that this incompatibility was just another instance of the age-old battle which, so the historians tell us, has from time to time been waged between the bankers and the politicians, with the bankers attempting to "crucify mankind upon a cross of gold" and the politicians seeking to remedy every economic malady with a dose of inflation. It is nothing of the kind. Long before the government decided that it would have to ask for Mr. Coyne's resignation, leading Canadian bankers, were criticizing the policies and activities of the governor of the bank. These criticisms by presidents or general managers of the following chartered banks were made in prepared public speeches at their annual meetings last winter or subsequently: the Canadian Bank of Commerce, the Imperial Bank, the Bank of Montreal, the Bank of Nova Scotia, the Royal Bank of Canada, and the Toronto-Dominion Bank. The policies and activities about which the senior officers of these banks expressed their concern related to the level of Canadian interest rates, the level of the Canadian exchange rate, or to the manner in which central banking operations had been carried on. How could the government ask Mr. Coyne to share in the implementation of programs and policies in fields where he had already provoked an unprecedented round of protests from so many of our leading financial institutions?
When speaking in the house on June 14 I indicated that Mr. Coyne did not command the confidence of his board of directors or of the government. It is also clear that he has not been able to enlist the confidence of the financial community. This has emerged from their public statements. It has also emerged from their inability to interpret his activities

The Budget-Hon. D. M. Fleming in the purely monetary sphere. To my deep regret he has been unable to achieve any real meeting of minds with those with whom he should be in constant and confident contact. In these circumstances it became impossible for the government to rely on him to give the type of leadership which is expected at all times from the governor of a central bank and which will be particularly needed in the months ahead.
1 am quite aware that without consulting the governor I am tonight proposing policies, including those affecting interest rates, which extend into the area of influence and authority of the central bank. It was necessary to do so on this occasion only because Mr. Coyne refused to make way for a successor with whom, had he been appointed in time, I could and would have consulted. I make this explanation tonight, not only for the benefit of the many people, at home and abroad, who are naturally and properly concerned about the status and stature of our central bank, but also for the benefit of those who are naturally and properly concerned about the status and stature of the new governor.
It is the intention of the government that the position and prestige of the Bank of Canada should be restored. Let it be recalled that the first governor, who graced that office for 20 years, was appointed by a government headed by the late Right Hon. R. B. Bennett. It is the intention of this government to restore the active and intimate cooperation between the bank and the government, the bank and the public, which was maintained so effectively and continuously in earlier years.
It will remain the duty of successive governments and successive ministers of finance to protect the bank and its governor from the transient and irresponsible pressures to which those who manage our money supply will, in the nature of things, be subjected from time to time. But this does not and cannot mean that any government can continue to stand idly by when a governor is espousing policies which, in its best judgment, are not in conformity with the public interest and when he is also stating opinions that are in fundamental conflict with government policies outside the field of central banking. In such a situation it would always be the duty of the government to ask the governor to resign and, in the almost incredible event that he should refuse, to submit the matter to the ultimate high court of parliament.


CONCLUSION
[Stage Direction]
Mr. Speaker, I said at the outset that in more than usual measure this is an economic budget. In that respect it is a logical sequel
[Mr. Fleming (Eglinton).l
to the supplementary budget of last December. It proposes through an appropriate blending of fiscal, financial and commercial policies to impart an impetus to the economy, to enlarge production, to employ unused productive capacity, to stimulate growth, to increase trade, and thus to expand employment opportunities for our people. It seeks to raise the levels of savings and investment by Canadians and to make better use of Canadian capital in the development of our resources. It aims to achieve a more dynamic pace of growth and a balanced development for all regions of our country and all sectors of our economy. It offers credit, incentives and research aid to assist industry to gird itself to meet the challenge of new and vigorous competition. It brings a flexible program of action to bear upon the needs of this time and to serve the nation's long term interest. It challenges all people to hard work and self-discipline. It appeals for co-operation between business and labour.
It contemplates a large deficit and proposes to use that deficit as a means of stimulating the economy. It offers, notwithstanding, a reduction of $100 million in taxation where the reduction is most needed and can be fruitful in stimulating productive effort. It reminds the country that three years ago we faced the prospect of an even larger deficit during a recession when inflation also threatened, and that the country achieved recovery in that year.
(Translation):
Canada becomes an ever more mature nation, both politically and economically. Her growth in this past year has experienced a slackening and a pause, but there has been growth. From that experience she can draw renewed confidence, strength and fitness for the tasks and challenges ahead. These recent toils and trials Canada will transform to new triumphs.
(Text):
Canada becomes an ever more mature nation, both politically and economically. Her growth in this past year has experienced a slackening and a pause, but there has been growth. From that experience she can draw renewed confidence, strength and fitness for the tasks and challenges ahead. These recent toils and trials Canada will transform to new triumphs.

[Stage Direction]
Resolved that it is expedient to introduce a measure to amend the Income Tax Act and to provide among other things:

1.	That for the 1961 and subsequent taxation years the maximum annual rate at which a taxpayer carrying on business in Canada may deduct expenditures of a capital nature made by him in Canada in respect of scientific research shall be increased from 33J per cent to 100 per cent.
2.	That for the 1961 and subsequent taxation years the requirement that the amount deductible on account of expenditures in respect of scientific research shall not exceed 5 per cent of the taxable income of the taxpayer in the preceding year unless the research program has been approved be removed with respect to expenditures which are not of a capital nature.
3.	That for the 1961 and subsequent taxation years a non-profit corporation constituted exclusively for promoting or carrying on scientific research in Canada that expends all amounts received by it on such research shall be exempt from tax and amounts contributed to it shall be deductible as current expenditures in respect of scientific research.
4.	That for the 1961 and subsequent taxation years a corporation constituted exclusively for charitable purposes be permitted to include donations to Her Majesty in right of Canada, or a province or a Canadian municipality, in the amount such a corporation must expend each year in order to qualify for exemption from income tax.
5.	That for the 1961 and subsequent taxation years the present maximum limits on the amount deductible in computing taxable income on account of medical expenses be repealed.
6.	That amounts paid on and after January 1, 1961 for or in respect of a laryngeal speaking aid be included in the medical expenses that are deductible in computing taxable income.
7.	That for the 1961 and subsequent taxation years an amount paid by an individual in the year on account of legal expenses incurred to collect salary or wages owing to him by an employer be deductible in computing income. 8 9
8.	That for the 1958 and subsequent taxation years an amount not exceeding $300 received by an individual in the year from a municipality as an allowance for expenses incurred while carrying out the duties of a volunteer fireman be not included in computing income.
9.	That provision be made in respect of a new class of profit sharing plans under which
(a)	amounts allocated by the trustee shall not be included in the income of an individual who is a beneficiary under the plan until the year in which they are received,
The Budget-Resolutions
(b)	no tax shall be payable by the trustee under the plan on the taxable income of the trust, and
(c)	an employer may deduct in computing income for the year an amount which when added to his contribution, if any, under a registered pension fund or plan does not exceed $1500 per employee.
10.	That after June 20, 1961 any payment by a resident of Canada which is
(a)	a lump sum payment out of or pursuant to a superannuation or pension fund or plan,
(b)	a payment upon retirement of an employee in recognition of long service,
(c)	a payment to an employee or former employee in respect of loss of office or employment,
(d)	a payment under a profit sharing plan (to the extent that the amount thereof would be included in computing the payee's income for the year if the payee were a resident of Canada),
made to an individual who is a non-resident of Canada and who during the five years preceding the year of payment was a resident of, or employed in Canada, for a period or periods the aggregate of which was 36 months or more, shall be deemed to be income for the year from duties performed by him in Canada but nothing in this paragraph shall apply to a payment which can be established to be one of a series of payments to be continued at regular intervals during the life of the recipient.
11.	That for the 1961 and subsequent taxation years where an individual residing outside of Canada is deemed to be resident in Canada because he is an officer or servant of Canada or a province his wife residing with him (if she was previously resident in Canada) or his dependent child shall also be deemed to be resident in Canada.
12.	That for the 1962 and subsequent taxation years a corporation incorporated in Canada that is carrying on business in Canada shall be deemed to be resident in Canada.
13.	That for the 1961 and subsequent taxation years the deduction from income allowed to a corporation whose principal business is mining or producing petroleum or natural gas or processing mineral ores or metals recovered from mineral ores, in respect of expenses incurred in searching for minerals in Canada or exploring or drilling for
[Stage Direction]
The Budget-Resolutions petroleum or natural gas in Canada be extended to a corporation whose principal business is fabricating metals.
14.	That with respect to the taxation years of a personal corporation commencing on or after September 1, 1961 the manner of taxing shareholders of a personal corporation and the definition of a personal corporation be revised and in particular
(a)	that carrying on active business shall not disqualify a corporation from being a personal corporation unless the income from carrying on a business exceeds 50 per cent of the income of the corporation,
(b)	that a personal corporation may include a corporation controlled by any group of individuals resident in Canada all the members of which are related persons,
(c)	that a corporation controlled by one or more trusts or estates shall be a personal corporation if it otherwise qualifies,
(d)	that the income of a personal corporation for a year shall be deemed to have been distributed to its shareholders in proportion to their shareholdings instead of in proportion to amounts transferred to the corporation,
(e)	that where a taxpayer has transferred property to a personal corporation and he does not receive by way of dividends on shares in the corporation, or by way of interest on amounts owing to him by the corporation, an amount at least equal to 5 per cent per annum of the value of the property or unpaid balance, any amount deemed to have been received as a dividend by his spouse or child shall be deemed to have been received as income from property transferred from the taxpayer to the extent of the difference between the said 5 per cent and the amount he actually received.
(f)	that losses incurred in the previous five years that were not previously deductible shall be deductible in computing the amount of income of a personal corporation that is deemed to have been distributed to its shareholders in a year, and
(g)	that where an amount is included in the income of a personal corporation as a recapture of capital cost allowance by virtue of section 20 of the act a shareholder may elect to pay a special reduced tax on his portion of the recaptured capital cost allowance in the same manner as if he had received the recaptured amount directly.
[Mr. Fleming (Eglinton) .1
15.	That rates of income tax be reduced and related changes made in order to implement certain fiscal arrangements with the provinces commencing April 1, 1962 and that the act be amended as may be necessary to implement an offer of the government of Canada to enter into agreements for the collection of income taxes imposed by the provinces and in particular
(a)	that the income tax otherwise payable by an individual in respect of income earned in a province of Canada be reduced by
(i)	16% for the 1962 taxation year
(ii)	17% for the 1963 taxation year
(iii)	18% for the 1964 taxation year
(iv)	19% for the 1965 taxation year
(v)	20% for the 1966 taxation year,
(b)	that the rate of tax on the taxable income earned in a province of Canada by a corporation other than a non-resident-owned investment corporation or a corporation specified in schedule D to the Financial Administration Act that is an agent of Her Majesty be reduced by 9 percentage points in respect of taxable income earned after December 31, 1961 and before January 1, 1967.

[Stage Direction]
Resolved that it is expedient to introduce a measure to amend the Excise Tax Act and to provide among other things:
1.	That the excise tax of 7J per cent on automobiles adapted or adaptable for passenger use be repealed.
2. That the excise tax of 15 per cent on radio broadcasting receiving sets be changed to two dollars or 15 per cent per set, whichever is the greater.
3. That the excise tax of 15 per cent on tubes for phonographs, record-playing devices, radio broadcasting receiving sets, television receiving sets or any combination of the foregoing be changed to ten cents or 15 per cent per tube, whichever is the greater, and restricted to tubes the sale price of which does not exceed five dollars per tube, but without affecting picture tubes for television receiving sets the excise tax on which shall continue to be 15 per cent.
4.	That the excise tax of 10 per cent on devices commonly or commercially known as lighters be changed to ten cents or 10 per cent per lighter, whichever is the greater.
[Stage Direction]
5.	That laminated timber for bridges and materials used in the manufacture thereof be exempt from sales tax when sold or imported by municipalities for their own use and not for resale.
6.	That additives for fuel oil for heating
and	materials	used	in	the	manufacture
thereof be exempt from sales tax.
7.	That blowers used in warm air systems for heating buildings and materials used in the manufacture thereof be exempt from sales tax.
8.	That thermostats for use with permanent
heating systems for the heating of buildings and	materials	used	in	the	manufacture
thereof be exempt from sales tax.
9.	That propane bulk tanks for use with furnaces for the heating of buildings and directly connected to such furnaces and materials used in the manufacture thereof be exempt from sales tax.
10.	That the exemption from sales tax for "Ducts for warm air systems for heating "Building Materials" in schedule III, be comin their manufacture" be changed to read "Ducts for warm air and ventilation systems for buildings, but not including materials used in their manufacture".
11.	That precast concrete piles and materials used in the manufacture thereof be exempt from sales tax.
12.	That the exemption for "doors" and the exemption for "Door and window screens", now appearing under the heading "Building Materials" in schedule III, be combined and changed to read "Doors for buildings and door and window screens", and the exemption for "Prepared roofings", now appearing under the heading of "Building Materials" in schedule III, be changed to read "Prepared roofings for buildings".
13.	That prepared dry concrete mixes and materials used in the manufacture thereof be exempt from sales tax.
14.	That the exemption from sales tax for feeds "for fur-bearing animals whose pelts have commercial value" be amended by deleting the words "whose pelts have commercial value".
15.	That the exemption from sales tax for "Preparations, chemicals or poisons for pest control purposes in agriculture or horticulture, and materials for use exclusively in the manufacture thereof", be changed to read "Preparations, chemicals or poisons (other
20, 1961	6671
The Budget-Resolutions than pharmaceuticals) for pest control purposes in agriculture or horticulture, and materials for use exclusively in the manufacture thereof".
16.	That self-propelled, self-unloading forage wagons for off-highway use for farm purposes and materials used in the manufacture thereof be exempt from sales tax.
17.	That the exemption from sales tax for milk and cream bottles and milk and cream cans be extended to include milk and cream plastic bags.
18.	That seismic shot-hole casing and materials used in the manufacture thereof be exempt from sales tax.
19.	That the provisions of part II of the said act imposing an export duty on exports of electrical power be amended so that every person who exports electrical power from Canada by a line or wire or other conductor shall pay the duty on all electrical power so exported by him during any period specified pursuant to section 9 of the said act, less any such electrical power re-imported by him, or imported by him as a result of an international equichange transfer of electrical power on the same or connected circuits, during that period.
20.	That the tax of 10 per cent on net premiums in respect of insurance on property in Canada paid or payable by Canadian residents to an insurer not authorized under the laws of Canada or any province to transact the business of insurance, be extended to apply to net premiums in respect of all classes of insurance except life insurance, personal accident insurance, sickness insurance, insurance against marine risks and insurance against nuclear risks to the extent that such insurance against nuclear risks is not, in the opinion of the superintendent of insurance, available within Canada.
21.	That any enactment founded on paragraphs 1 to 18 of this resolution be deemed to have come into force on June 21, 1961, that any enactment founded on paragraph 19 of this resolution be applicable in respect of electrical power exported after August 31, 1961, and that any enactment founded on paragraph 20 of this resolution be applicable in respect of contracts of insurance effected or renewed after July 15, 1961.

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Resolved that it is expedient to introduce a measure to amend the Excise Act to provide:
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The Budget-Resolutions
1.	That the maximum weight for cigarettes subject to the excise duty of $4 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.

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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.

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, 538/, 538(7(1), 53802(7) 538h, 538j, 538k, 538m, 538n, 538p, 541 b, 542a, 542b, 545, 554d, 554e, 554/, 555, 556, 556a, 556b, 562a, 563a, 568, 568a(i), 568a(it), 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:
Rates in Effect Prior to Rates Proposed in this Budget
Tariff Item	-	British Preferential Tariff	Most- Favoured- Nation Tariff	General Tariff	British Preferential Tariff	Most- Favoured-N ation Tariff	General Tariff
522	Woven fabrics, wholly of cotton:						
(4) Composed of yarns of counts of one hundred or more, including all such fabrics in which the average of the count of warp and weft yarns is one hundred or more, not including labels or name-tapes	Free	25 p.c.	35 p.c.	Free	25 p.c.	35 p.c.528	White cotton bobbinet, plain, in the web	Free	12* p.c.	25 p.c.	Free	12* p.c.	25 p.c.532f	Woven billiard cloth composed wholly or in part of wool or hair; melton cloth for use in the manufacture of tennis balls	
and, per pound	Free	20 p.c. 25 cts.	40 p.c. 35 cts.	Free Free	20 p.c. 25 cts. 27* p.c. and 20 cts. per pound	40 p.c. 35 cts. 40 p.c. and 35 cts. per pound539.Q	Fabrics, coated or impregnated, composed wholly or in part of yarns of wool or hair, but not containing silk nor synthetic textile fibres or filaments, n.o.p	25 p.c.	27J p.c.	55 p.c.	25 p.c.	27* p.c.	40 p.c. and 35 cts. per pound533a	Clothing, wearing apparel and articles made from woven fabrics, and all textile manufactures, wholly or partially manufactured, composed wholly or in part of wool or hair, when the textile component thereof is not more than fifty per cent, by weight, of silk, n.o.p	25 p.c.	27* p.c.	55 p.c.	25 p.c. Various	27* p.c. Various	40 p.c. and 35 cts. per pound Various533b	Felt, pressed, in the web, wholly or in part of wool, not consisting of or in combination with any woven, knitted or other fabric or material	
and, per pound	12* p.c.	17* p.c. 12* cts.	25 p.c. 20 cts.	12J p.c. Free	17* p.c. 12* cts. 10 p.c.	25 p.c. 20 cts. 25 p.c.
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The Budget-Customs Tariff
Rates in Effect Prior to Rates Proposed in this Budget
Tariff 	
Item	British Preferential Tariff	Favoured- Nation Tariff	General Tariff	British Preferential Tariff	Most- Favoured-Nation Tariff	General Tariff5SJ,a	(1)	Household blankets of any material except wholly of cotton	
and, per pound (2)	Automobile rugs, steamer rugs, travel rugs and similar articles of any material except wholly of cotton. and, per pound The total duty leviable shall not be in excess of	20 p.c. 5 cts. 20 p.c. 5 cts.	20 p.c. 15 cts. 20 p.c. 15 cts. 37$ p.c.	40 p.c. 30 cts. 40 p.c. 30 cts.	20 p.c. 5 cts. 25 p.c.	25 p.c. 20 cts. 27$ p.c.	35 p.c. 30 cts. 40 p.c. 35 cts.SS4b	Press blankets or blanketing for use with printing presses and stereotypers' and typecasters' blankets or blanketing, of a class or kind not made in Canada...	Free	5 p.c.	10 p.c.	Free	5 p.c.	10 p.c.5S4c	Blankets, blanketing and lapping for use by textile manufacturers on machines used in the manufacture of textiles	Free	Free	Free	Free	Free	Free541b	Woven fabrics, wholly of jute, not exceeding twelve inches in width	15 p.c.	22$ p.c.	30 p.c.	15 p.c.	22$ p.c.	25 p.c.542a	Woven fabrics not exceeding twelve inches in width, wholly or in part of vegetable fibres, n.o.p., not to contain silk, synthetic textile fibres or filaments, nor wool	20 p.c.	25 p.c.	40 p.c.	20 p.c.	25 p.c.	35 p.c.562a	Woven fabrics, wholly or in part of man-made fibres or filaments or of glass fibres or filaments, not containing wool or hair, not including fabrics more than fifty per cent, by weight, of silk: (1) Exceeding twelve inches in width	30 p.c. 20 cts. 27$ p.c.	22$ p.c. 22$ p.c. Various	30 p.c. 20 cts. 25 p.c. Various	45 p.c. 40 cts. 35 p.c. Variousand, per pound (2) Not exceeding twelve inches in width	
Woven fabrics containing five per cent or less, by weight, of man-made fibres or filaments or of glass fibres or filaments shall not be dutiable under this item but shall be dutiable as though composed wholly of the remaining constituents.	25 p.c.	40 cts. 55 p.c.	mj	Bolting cloth for sifting flour in flour mills	Free	Free	45 p.c.	12$ p.c. 22$ p.c.	22$ p.c. 30 p.c. and 20 cts. per pound	45 p.c. 45 p.c. and 40 cts. per pound
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The Budget-Customs Tariff
565a Wick, braided or not, with or without core, processed or not, for use in the manufacture of wax candles or tapers or for use in oil-burning sanctuary lamps	
Free	Free565b Braids of all kinds, n.o.p	
20 p.c.	25 p.c.
566c Linen fire-hose, lined or unlined, with or without attached
couplings	 15 p.c.	30 p.c.
566d Seamless woven textile jackets, in tubular form, for use in the manufacture of fire-hose; fire-hose made from such jackets, with or without attached couplings:
(1)	The textile component of whichis wholly cotton. 20 p.c.	22$ p.c.
(2)	The textile component of which is other than wholly
cotton	 22$ p.c.	27$ p.c.
566a Fabrics, containing figured designs, woven in widths not exceeding twelve inches, lace, embroideries, emblems and medallions, for use in the manufacture of church
vestments	 10 p.c.	10 p.c.
566b Lace and netting, other than woven, bobbinet, embroideries, n.o.p.:
(!) Wholly of vegetable fibres	
10 p.c.	12$ p.c.(2) Wholly or in part of other textile fibres or filaments.	.	17$ p.c.	22$ p.c.568	(f) Knitted garments, knitted fabrics and knittedgoods, n.o.p	
20 p.c.	35 p.c.
(2) Knitted garments, women's and girls', wholly or in chief part by weight of wool or hair, valued at not less
than $9.00 per pound	 20 p.c.	32$ p.c.
568a Socks and stockings:
(1)	Wholly or in chief part, by weight, of wool. 20 p.c.	27$ p.c.and, per dozen pairs	30 cts.	$1.20(2)	N.o.p	
17$ p.c.	17$ p.c.and, per dozen pairs	
75 cts.
619 Rubber or gutta percha hose; rubber mats or matting
and rubber packing	
17$ p.c.	20 p.c.Free	Free	Free	Free40 p.c.	20 p.c.	25 p.c.	35 p.c.17$ p.c.	22$ p.c.	35 p.c.Various	Various	Various35 p.c.	15 p.c.	30 p.c.	35 p.c.40 p.c.	20 p.c.	25 p.c.	35 p.c.17$ p.c.	20 p.c.	35 p.c.45 p.c.	25 p.c.	25 p.c.	35 p.c. and 4 cts. per pound20 p.c.	27$ p.c.	50 p.c.22$ p.c.	30 p.c. and 20 cts. per pound	45 p.c. and 40 cts. per pound20 p.c.	10 p.c.	10 p.c.	20 p.c.25 p.c.	Various	Various	Various35 p.c.	17% p.c.	22% p.c.	35 p.c.55 p.c.	20 p.c.	35 p.c.	45 p.c. and 30 cts. per pound55 p.o	20 p.c.	35 p.c.	45 p.c. and 30 cts. per pound40 p.c.	20 p.c.	27% p.c.	35 p.c.$1.50	30 cts.	SI. 20	SI. 5035 p.c.	17$ p.c.	17$ p.c.	35 p.c.31.50	... 75 cts.	SI. 5035 p.c.	17$ p.c.	20 p.c.	35 p.c.
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The Budget-Customs Tariff
Rates in Effect Prior to Rates Proposed in this Budget
Most-	
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Preferential	Nation	General	Preferential	Favoured-Nation	GeneralItem	Tariff	Tariff	Tariff	Tariff	Tariff	Tariff
685 Pantagraphs and parts thereof, including diamond points, and engraving mills, for engraving copper
rollers used in printing textiles and wallpapers. Free	Free	Free	Free	Free	Free
3. Resolved,
that Schedule A to the Customs Tariff be amended by striking out tariff items 9, 9a, 96, 9c, 9e, 152(e), 187c, 197a, 198a, 199m, 202a, 409c(3), 425, 425a, 4256, 427e, 431, 4386, 445o(t), 445o(u), 44oo(Hi) and 658, 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:
9a	Live poultry, n.o.p	per pound	2 cts.	2 cts.	5 cts.	12} p.c.	12} p.c.	20 p.c.9b	Quails, partridges, and squabs, live or dead, n.o.p	10 p.c.	12} p.c.	30 p.c.	10 p.c.	20 p.c.	30 p.c.9c	Turkey poults, baby ducklings and baby goslings	12} p.c.	12} p.c.	20 p.c.	12} p.c.	12} p.c.	20 p.c.9e	Dead poultry, n.o.p	12} p.c.	12} p.c.	20 p.c.	12} p.c.	12} p.c.	20'p.c.9/	Eviscerated poultry, whether or not divided into portions and whether or not cooked	
but not less than, per pound or more than, per pound	12} p.c. 5 cts. 10 cts.	12} p.c. 5 cts. 10 cts.	35 p.c.	12} p.c. 12} p.c.	12} p.c. 12} p.c. not less than 5(1 per lb. or more than 10(1 per lb.	20 p.c. 20 p.c.9g	Game, n.o.p	12} p.c.	12} p.c.	20 p.c.	12} p.c.	12} p.c.	20 p.c.9h	Horse meat, tripe and other animal offal, ground or unground, unfit for human consumption; whale meat; feeds consisting wholly or in part of cereals but not including baked biscuits; all the foregoing when for use exclusively in the feeding of fur-bearing animals or in the manufacture of feeds for such purposes	Free	Free	Free	Free	Free	Free105k	Pineapples, mint flavoured, prepared, in air-tight cans or other air-tight containers, the weight of the containers to be included in the weight for duty	per pound	1 ct.	2 cts.	5 cts.	20 p.c.	25 p.c.	35 p.c.152	Fruit juices and fruit syrups, n.o.p., viz.:- (e) Pineapple juice	7} p.c.	7} p.c.	25 p.c.	10 p.c.	10 p.c.	25 p.c.
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The Budget-Customs Tariff
90205-6-421
187c Photographic dry plates	 10 p.c.
197a Super-calendered or machine finish grades of book paper, not coated, when used exclusively in the production of magazines, newspapers and periodicals, printed, published and issued at regular intervals, not less frequently than four times a year, and bearing dates of issue	 Free
197h Filter paper for use in the manufacture of vacuum cleaner
bags	 10 p.c.
198a Coated papers, when used exclusively in the production of magazines, newspapers and periodicals, printed, published and issued at regular intervals, not less frequently than four times a year, and bearing dates of issue. Free
199m Woven paper fabrics, open mesh, not less than nine feet
in width, for use in the manufacture of carpets.... 15 p.c.
202a	Twine or yarn of paper	
10 p.c.409c	(3) Lawn or garden rollers, n.o.p.; parts thereof	
Free
(5) Lawn or garden rollers, non-mechanical-, parts thereof 15 p.c.
425a (1) Power lawn mowers, self-propelled or not, whether or
not containing the power unit	 15 p.c.
(2) Gang-type lawn mowers designed to be drawn or pushed mechanically; parts thereof	 10 p.c.
(S) Lawn mowers, n.o.p	 10 p.c.
4256 (1) Air-cooled internal combustion engines of greater than one and one half horespower rating, and parts thereof; parts of power lawn mowers; all the foregoing for use in the manufacture or repair of power lawn mowers	 5p.c.
(2) Air-cooled internal combustion engines of not greater than one and one half horsepower rating, and parts thereof, when for use in the manufacture or repair of power lawn mowers	 Free
427e Automatic machines for making and packaging cigars and cigarettes, not to include tobacco-preparing machines; parts thereof	 Free
431	(1) Shovels and spades, of iron	or	steel, n.o.p., and axes. 10 p.c.
(2) Hoes, pronged forks, rakes, hand	 15 p.c.
17$ p.o.	30 p.c.	12$ p.c.	20 p.c.	30 p.c.Free	25 p.c.	Free	Free	25 p.c.10 p.c.	25 p.c.	12$ p.c.	20 p.c.	25 p.c.Free	35 p.c.	Free	Free	35 p.c.20 p.c.	35 p.c.	15 p.c.	22$ p.c.	35 p.c.10 p.c.	35 p.c.	Free	Free	FreeFree	Free	Free	Free	Free15 p.c.	15 p.c.	Free	Free	Free20 p.c.	32$ p.c.	10 p.c.	15 p.c.	32$ p.c.15 p.c.	32$ p.c.	10 p.c.	15 p.c.	32$ p.c.22$ p.c.	32; p.c.	10 p.c.	22$ p.c.	32$ p.c,10 p.c.	32$ p.c.	10 p.c.	15 p.c.	32$ p.c,10 p.c.	30 p.c.	Free	15 p.c.	30 p.c.7$ p.c.	35 p.c.	Free	10 p.c.	35 p.c.10 p.c.	22$ p.c.	35 p.c.15 p.c.	20 p.c.	10 p.c.	15 p.c.	20 p.c.15 p.c.	20 p.c.	Free	Free	Free
The Budget-Customs Tariff
Rates in Effect Prior to Rates Proposed in this Budget
Tariff Item	-	British Preferential Tariff	Favoured- Nation Tariff	General Tariff	British Preferential Tariff	Most- F avoured-N ation Tariff	General Tariff438A	(/) Motor cycles having an engine capacity of 250 c.c. or less, engines or side cars therefor; parts of the foregoing	Free	17* p.c.	30 p.c.	Free	17£ p.c.	30 p.c.(2) Motor cycles having an engine capacity of more than 250 c.c., engines or side cars therefor; parts of the foregoing.	Free	12* p.c.	30 p.c.	Free	17* p.c.	30 p.c.
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445o (1) Acid-free capacitor tissue and paper, plain and gummed;
Bias cells and holders;
Cones, spiders, spider suspensions, voice coils and voice coil dust covers, separate or assembled;
Frames, yokes, brackets, pole-pieces, gaskets and field covers, separate or assembled for use in speakers with mounting diameter not exceeding 6 3/8 inches;
Glass dial crystals and scales and metal dials or scales made by the silk-screen process;
High frequency circuit switches and essential components thereof;
High frequency coil forms and tubing having an outside diameter not exceeding one inch;
High frequency iron cores with or without inserts moulded therein;
Magnetic structures and parts thereof for permanent magnet speakers;
Metal cabinet escutcheons without crystals, plain or finished;
Metal cans, extruded, plated or unplated;
Motors and gears for automatic tuning;
Parts for pickups;
Radio frequency ceramics;
Raw low loss mica;
Sheets and punchings of low loss mica;
Tube shields and parts thereof;
Vibrators;
Vulcanized fibre in sheets, rods, strips or tubing;
For use in the manufacture or the repair of the goods
enumerated in tariff items 445d, 597a, and other apparatus using radio tubes, or for use in the manufacture
of parts therefor	 Free
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30 p.c.
Free
Free
30 p.c.
The Budget-Customs Tariff
90205-6-421J
7\ p.c.
(2) Automatic record changers	
(S) Alloy resistance wire having a diameter of less than .005 inch;
Automatic record-centering mechanisms with tone arm, not including motors or turntables;
Etched aluminum foil;
Metal cabinet escutcheons with crystals, plain or finished;
Metal powders;
Spring-drive motors for record turntables;
Textile fabrics, coated with aluminum;
When of a class or kind not made in Canada and for use in the manufacture or the repair of the goods enumerated in tariff items 445d, 597a, and other apparatus using radio tubes, or for use in the manufacture of parts therefor	 Free
U) Materials and parts, not including motors, for use by manufacturers of apparatus using radio tubes, or of parts therefor, in the manufacture, in their own factories, of the goods enumerated in tariff items 445o(l),
445o(2) and 445o(S)	 Free
46Sd Lenses, shutters, and parts thereof, for use in the manufacture of still and motion picture projectors	 Free
658 Motion picture film, of 16 millimetre width and over, and video tape, not including filmed or video taped television commercials, when imported by recognized processors of motion picture film or video tape having duly equipped laboratories for processing motion picture film or video tape in Canada, for the sole purpose of having reproductions made therefrom, and if the original film or video tape is re-exported within six months from the date of importation, under such regulations as the Minister may prescribe	per linear foot Free
658a Filmed or video taped television commercials	 15 p.c.
658b Video tape, n.o.p	 15 p.e.
7$ p.e.
30 p.c.
Free
Free
30 p.c.
Free	30 p.c.	Free	Free	30 p.c.	Ch a § MFree	30 p.c.	Free	Free	30 p.c.	to pM10 p.c.	35 p.c.	2i p.c. Free	15 p.c. 15 p.c.	30 p.c. 35 p.c.	CO CD *-*Free	3 cts.	Free	Free	3 cts.15 p.c.	20 p.c.	30 p.c.20 p.c.	30 p.c.	15 p.c.	20 p.c.	30 p.c.Free	Free	3 cts. per linear foot
20 p.c.	30 p.c.	15 p.c.	20 p.c.	30 p.c.
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The Budget-Customs Tariff
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4. Resolved,	S
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that Schedule A to the Customs Tariff be amended by striking out tariff items, 296g, 319,321,322,409d, 413a, 430c, 430e, 440d, 462i, 462t, 475c 505c 571a(2)
597d and 611a(4), 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:
Rates in Effect Prior to Rates Proposed in this Budget
Tariff 	
Item	British Preferential Tariff	Favoured- Nation Tariff	General Tariff	British Preferential Tariff	Most- Favoured-Nation Tariff	General Tariff133a	Trout, live, imported by commercial trout farms	Free	Free	25 p.c.	12} p.c.	17} p.c.	25 p.c.2960	Sodium calcium borate ore for use as a fire retardant.. On and after July 1, 1962	Free 15 p.c.	Free 20 p.c.	25 p.c. 25 p.c.	Free Free 15 p.c. 20 p.c. (On and after July 1, 1961)	25 p.c. 25 p.c.319	Plate glass, ground and polished on both surfaces, not further processed than cut into rectangles, and float glass not further processed than cut into rectangles	Free	5 p.c.	15 p.c.	Free	5 p.c.	15 p.c.321	Sheet glass, plate glass, cast glass, rolled glass and float glass, n.o.p	Free	7} p.c.	17i p.c.	Free	7} p.c.	17£ p.c.322	Laminated glass, of sheet glass, plate glass or float glass, or combinations thereof: (1)	Not further processed than cut into rectangles... (2)	N.o.p	5 p.e. 17} p.c.	12} p.c. 25 p.c.	22\ p.c. 35 p.c.	5 p.c. 17£ p.c.	12} p.c. 25 p.c.	22} p.c. 35 p.c.409d	Mowing machines, harvesters, either self-binding or without binders, binding attachments, reapers, harvesters in combination with threshing machine separators including the motive power incorporated therein; cabs and parts for the foregoing	Free	Free	Free	Free 10 p.c.	Free 22} p.c.	Free 35 p.c.413a	Machinery, of a class or kind not manufactured in Canada, and parts thereof, for use in the manufacture of nets or netting for the fisheries, but not for use in making nets or netting commonly used for sportsmen's purposes	Free	Free	10 p.c.	Free	5 p.c.	10 p.c.430c	Wire roofing nails of all sizes and wire nails one inch or more in length, of iron or steel, coated or not	
per one hundred pounds	85 cts.	$1.00	$1.50	40 cts.	55 cts.	60 cts.430e	Wire nails less than one inch in length, and nails or tacks of all kinds, n.o.p., of iron or steel, coated or not	10 p.c.	22} p.c.	30 p.c.	15 p.c.	27} p.c.	30 p.c.
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The Budget-Customs Tariff
44 Od
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475c
505c
571a
597d
611a
Anchors for vessels:
(1)	Weighing less than forty pounds	
15 p.c.(2)	Weighing forty pounds or over	
Free
Cinematograph and motion picture cameras for use by professional motion picture producers having studios in Canada equipped for motion picture production;
parts of the foregoing	 Free
On and after July 1, 196S Free
Optical sound equipment:
Dollies, or other mobile mounting units for motion picture cameras;
Booms, without wiring, for use with microphones;
Motion picture editing equipment, namely: film editing machines, film splicers, film synchronizers, film viewers, rewinds;
Parts of the foregoing;
All the foregoing when for use in the production of motion pictures by professional producers having studios in Canada equipped for motion picture production	 Free
(Expires 1st July, 1983)
Plates and electrotypes of metal and, positive and negative films, for printing music	 Free
Flooring of beech, birch, maple or oak, tongued or grooved, or jointed; floor tiles made of individual strips of beech, birch, maple or oak, joined together..	12$ p.c.
(2) Mats, rugs, carpeting and matting of cocoa fibre, n.o.p	per square yard 6} cts.
Musical instruments, namely:
Autoharps, clavichords, harpsichords, harps;
Bass viols, violas, violins, violoncellos;
Strings for the foregoing;
Recorders, xylophones;
Bassoons, clarinets, English horns, fifes, flutes, oboes,
piccolos, saxophones;
Parts of the foregoing	 Free
(4) Conductive shoes for use in hospitals	 Free
On and after July 1, 1962 20 p.c.
15 p.c.	25 p.c.	Free	Free	FreeFree	Free	Free	Free	FreeFree	15 p.c.	Free	Free	15 p.c.9 p.c.	15 p.c.	Free	9 p.c.	15 p.c.(On and after July 1, 1961)	Free	15 p.c.	Free	Free	15 p.c.(Expires 1st July, 1961)	Free	Free	Free	Free	Free10 p.c.	15 p.c.	20 p.c.12$ p.c.	25 p.c.	12$ p.c.	12$ p.c.	25 p.c.7 cts.	10 cts.	6$ cts.	7 cts.	10 cts.Free	30 p.c.	Free	Free	30 p.c.Free	40 p.c.	Free	Free	40 p.c.27$ p.c.	40 p.c.	20 p.c.	27$ p.c.	40 p.c.
(On and after July 1, 1961)
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5. Resolved,
that any enactment founded upon the foregoing resolutions shall be deemed to have come into force on the 21st day of June, 1961, and to have applied to all goods mentioned in the said resolutions imported or taken out of warehouse for consumption on or after that day, and to have applied to goods previously imported for which no entry for consumption was made before that day.	g>
(See also budget papers, pages 6687 to 6805)	[DOT]-
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Mr. Speaker:: Order. Before the hon. member for Kenora-Rainy River (Mr. Benidick-son) begins, may I have, for the record, the consent of the house to table the royal commission's report?


Some hon. Members:: Agreed.


Mr. W. M. Benidickson (Kenora-Rainy River):: Mr. Speaker, we have always known that the Minister of Finance (Mr. Fleming) abhors brevity but I think he exceeded himself tonight, because this is perhaps the longest budget speech on record. There is very little other than the massive amount of time involved which justifies the massive amount of words contained in this document. I think, after the stirring discussions and speculation concerning the budget during the last ten days there will be many who will wonder what this was all about, particularly when the minister, who has presented himself by his record in a role that he is not accustomed to, in the eyes of most of us, in these new robes described himself as an expansionist.
Mr. Speaker, I wonder whether the Minister of Finance has read, as so many of us have, Mr. J. K. Galbraith's book "The Liberal Hour". In view of the fact that he referred to himself last week as an expansionist, I had the feeling that he had perhaps read it. However, after hearing the phony hesitations in his budget proposals today, at this time of our sick economy, I rather doubt it. I should like to point out to the Minister of Finance that in that book Mr. Galbraith says that unction even buttressed by pomposity is no substitute for good evidence. I think as this debate proceeds we will discover who is an expansionist and who is not.
We end up with a great expansion program which is going to cost this government $100 million in income taxes through income tax reductions. That is the extent of tax reductions which are normally expected in a budget proposal. The minister says that more than anything else the government is concerned with employment. He was in charge of the treasury last year and has been in charge of it for the past four years, yet there was no statement last year that more than anything else the government was concerned about employment and unemployment.
I wish to quote from what the minister said a year ago when he was concentrating with great glee, from the point of view of economic planning most unfortunately, on the target of a balanced budget. In his speeches from January to June, 1960, which I have read, we find the following which is typical of the philosophy of his economic program in so far as the federal government is concerned. The big enemy was inflation. He did


not foresee the difficulties that the unemployed were going to be in and have been in to the extent of 700,000 during the past winter. They are still in that difficulty. We received a statement today that there are 38,000 more unemployed than there were a year ago when we had our last budget from the Minister of Finance. This is what he said:
The lesson we should draw from experience Is that in a period of economic expansion-
That is what he was planning for on March 31, and how wrong he was. I continue:
[DOT]-such as we are now enjoying in Canada we must all avoid doing those things which are likely to encourage a forced or excessive growth in spending. If we fail to act in this way we will be faced with the distortions and instabilities which cause economic recessions.
At the very time that he made that statement in January there were, according to the bureau of statistics, 504,000 out of work and seeking work. He did not change his views very rapidly with the change of the economic conditions. He held the same views almost six months later. This can be seen by looking at a speech he made in St. John's, Newfoundland, on June 29, 1960. He said:
The position we have now reached, with its sound prospect of a fully balanced budget-
This is not what he said tonight. He went on:
-represents the fruits of carefully designed policies; it is not something that just happened.
This is the way he was planning it. I do not know who he was listening to at that time, but I want to say that before he prepared his budget in March of last year the Canadian Press, an independent organization, had this dispatch on March 8 under the byline of Alan Donnelly. He saw the split between the economic views of the opposition, the needs that were felt on the part of the opposition, that should be satisfied at that time through fiscal measures as against the attitude of those on the government benches that all was well. Mr. Donnelly's opening statement in the article was written three weeks before the budget. He stated that a basic split had developed between government and opposition as to whether the Canadian economy is growing fast enough.
But that was not the view of the Minister of Finance. He had concentrated on one thing and one thing alone, namely a balanced budget. When I heard him say in the house the other day that he was now an expansionist, I knew very well that he had not been an expansionist in his four years on the treasury benches. He has not that reputation in the business community. In fact, they almost universally felt that he had-and in their opinion fortunately-taken over some

of the reins in connection with guiding economic policy which in their opinion was unduly led for political purposes by the Prime Minister. There was much rejoicing in the fall of 1959 and much praise was given to the minister and he preened himself on it, that he was now the strong man in connection with financial policy. It was not for expansionist ideas that he was getting the praise at that time. Therefore when I heard the minister last week describe himself as an expansionist tonight I was prepared to say that this budget represents Fleming's flip-flop. I think events prove that he still has to convince the country that he is living up to his word that his chief concern is employment when he is prepared to recommend changes in his financial resolutions which involve a sacrifice for the treasury in tax reductions of only $100 million. Still we are beginning to learn now why we have such a late budget.
We have known we have not been able to get policies advanced, except following unusual delay, because of the naked divisions with respect to economic policies on the part of this cabinet. We have it divided into Jeremiahs and Pollyannas, but unfortunately they do not stay in the same camp. I have great sympathy for the chairman of the cabinet in attempting to achieve government solidarity on those vital decisions which must be made. What we have here tonight is a report of a deficit between $600 million and $700 million. This is another form of insurance. The minister gives himself that leeway. He is getting a little frightened of his own forecasting as is indeed the country, because he gives himself a margin for which he normally does not ask. It is very much like his decision last year when estimating the gross national product to remove the traditional stipulations that the gross national product forecast would be based on stable prices, nothing untoward abroad and reasonable production in agriculture. But the minister has been wrong three years in a succession in estimating the G.N.P., upon which many economic plans are made. He was wrong three years ago to the extent of 50 per cent. He was 50 per cent wrong with respect to the increase. He was wrong two years ago to the same extent and in his white paper which was presented the other day we find the situation is getting worse. He was two thirds wrong. The increase was only one third of what he estimated last year might be the case. So we have an unplanned deficit of this proportion, by accident, by miscalculation or perhaps simply by arithmetical errors which have come from the minister in the past.
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The minister had some pious words in connection with what might be done in the bond market for the provinces and municipalities. He will give them a short term chance, he said, to get into the market on long terms. But what does this mean when it is stacked up against cash needs on the part of the federal government of $980 million compared with the $210 million which was in the minister's forecast last year?
The minister never makes any apology with respect to these very widespread miscalculations in his basic estimates. He always has somebody else to blame. It is never himself; it is never the government. I recall that in 1958 it was the Liberals who were to blame. In 1959 his miscalculations and difficulties were due to the United States. In the following year they were due to Europe; and, then of course prior to the presentation of this tremendous miscalculation and budget they are due to Mr. Coyne. Much more will be said about that in the course of this debate.
Again tonight the minister has informed us that we have a massive program to deal with the unemployed. That was his aim, he said, last December. In his baby budget he said that they had also proposed a number of major projects. He then referred to the Columbia power development, which this government has muffed. He referred to the Winnipeg flood control, and what progress has been made there to get jobs in these six or seven months. He referred to the Great Slave railway, and we have only received the resolution on that. It has never been dealt with.
These are some of the massive developments of a dynamic nature that were referred to tonight that we would hope are being pushed for the benefit of the unemployed.
The minister had some words to say very early in respect of housing. Well, the depth of the slough into which this industry got, at a time when we needed the employment in that industry was due, according to the Minister of Public Works (Mr. Walker), to the Minister of Finance (Mr. Fleming). The Minister of Public Works said in connection with mortgage lending that the tap was turned off at the behest of the minister. According to a press release the Minister of Public Works washed his hands of the situation when he said that the direct lending policy was restricted for fiscal reasons. In other words, the reason was the aim for a balanced budget; that was the sole target of the Minister of Finance and not unemployment about which he has spoken tonight.
I wish to deal with this question of just how expansionist the minister has been. I have examined the budget which I call the

The Budget-Customs Tariff Mark I budget. Most of us looked at it yesterday, and compared it with the Mark II budget presented by the Minister of Finance. I find that in almost all items it is not the governor of the bank who seems to be re-strictionist but it is the Minister of Finance whose program seems to fall short of the recommendations for expansion contained in the Mark I budget. I can substantiate this position very easily, but will not do so now. To the extent that the recommendations in this Mark I budget have been acted upon, it is certainly very obvious that in these respects the Minister of Finance seems to be reaping what he did not sow.
Last week the Minister of Finance told us that the governor of the Bank of Canada had not seen tonight's budget. It is quite clear when one reads so many of the items contained in this budget that if the governor did not see the minister's budget, then the Minister of Finance did see the proposals made by Mr. Coyne. Time after time, they seemed to be very close to the proposals that were in our hands yesterday. The public will judge who is expansionist and who is re-strictionist.
I did notice one particular item in which there was quite a differentiation. I refer to the minister's proposal which he outlined in these words, in effect, that it is desirable to provide income tax law incentives to taxpayers who develop our natural resources. He was prepared to extend benefits under the depletion allowance program to these industries. This, of course, was the most obvious conflict with the proposals of Mr. Coyne because Mr. Coyne said, in connection with his Canadian program, depletion allowances permitted in the field of mining and oil should be re-examined. These allowances are not related to the amount of capital invested and employed in the enterprise. He goes on to say that the granting of depletion allowances to large foreign companies or their subsidiaries enables them to take out of Canada tax free profits many times as large as any capital they put into Canada in the first place, in addition to normal profits subject to normal tax. It is here we perhaps have as radical a clash as any when we find similar proposals in the Mark I and Mark II budgets.
There are many items in the budget which of course will be welcome. I think particularly of the largest item of tax sacrifice, the reduction of the 7J per cent excise tax on automobiles. Perhaps to that extent, we can call this resolution the Essex East resolution. Here again, the government did not go as far as Mr. Coyne recommended for the automobile industry in what I call the Mark I


Paul Joseph James Martin: Because of the policies of this government.


Mr. Graffiey:: Do not forget Lesage.


William Moore Benidickson: In the light of the lavish publicity last week it would appear that the government, which has done very little in this field for four years, is trying to show the public, I think unconvincingly, that at long last it is going to start to be a ball of fire in economic matters. Unfortunately, I think most of us are persuaded that it has not been the economic charts that have stirred this government into action but it has been the unfavourable political polls. These have had a greater effect upon something more being done this year than was done last year.


An hon. Member:: What about the byelections?


William Moore Benidickson: The Liberal party got a larger percentage of the votes than did the Conservative party in those by-elections.
In conclusion, I suggest that the minister has not gone very far in this much heralded flip-flop. There has not been much progress revealed in so far as increased production and the provision of jobs is concerned. There was a flip-flop or deathbed repentance on the part of the Bennett leadership, and we found then that this did not get very much accord. The flop is more remembered in so far as that period of five years is concerned, than the flip which was so radical in 1935.
On motion of Mr. Benidickson the debate was adjourned.



BUSINESS OF THE HOUSE

Mr. Churchill:: The business of the house for tomorrow will be Bill No. C-113 relating to the national energy board which bill is in committee of the whole house, followed by the estimates of the departments of public works, forestry and transport.


John Whitney Pickersgill: Is it the intention to have budget debate on Thursday and Friday and estimates on Saturday?


Gordon Minto Churchill: Certainly on Thursday.

Business of the House


John Whitney Pickersgill: Could the minister indicate in order to determine what their wishes are the business, if possible, for the rest of the with respect to completing the business of week?	this session.


Gordon Minto Churchill: 


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I am waiting to consult with It being forty three minutes after ten the gentlemen on the other side of the house, o'clock the house adjourned, without question I have been waiting for two days to do that put, pursuant to special order.
90205-6-422
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Question

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The following answer, deposited with the Clerk of the house, is printed in the official report of debates pursuant to standing order 39:

Mr. Pickersgill: 1. How many men were furnished with winter
work in the Cape Breton Highlands national park
from each of districts 7A, 7B, 15, and 8 respectively of Victoria county?
2. How many men from each district were married at the time they were employed?
Answer by: Hon. W. G. Dinsdale (Minister of Northern Affairs and National Resources):
1.	District 7A, 36; District 7B, 77; District 15, 17; District 8, 4.
2.	District 7A, 34; District 7B, 70; District 15, 16; District 8, 4.

The Budget-Appendix



BUDGET PAPERS

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presented by
the Honourable Donald M. Fleming, M.P., for the information of Parliament in connection with the Budget of 1961-1962
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The Budget-Appendix

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The purpose of these Papers is twofold:
1.	to present a general economic review of I960, bringing together in one
place and in convenient form some of the more comprehensive indicators of economic conditions prepared by the Dominion Bureau of Statistics, the Bank of Canada and other Government Agencies, together with brief comments;
2.	to present a preliminary review of the Government Accounts for the
fiscal year ended March 31, 1961.

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Page
1.	National Accounts-*
National Income and Product	 6690
National Expenditure	 6697
Personal Income and Its Disposition	 6701
Source and Disposition of Saving	 6703
Investment and Capital Expenditure	 6706
Revenue and Expenditure of all Governments	 6709
2.	Employment and Earnings	
67143.	Price Trends	
67184.	Balance of International Payments	
67215.	Financial Developments	
6730
The tables in this Budget Paper are based upon estimates provided by the Dominion Bureau of Statistics, the Bank of Canada and other Government Agencies. Some of the figures appear for the first time; others have been published elsewhere. All 1960 estimates are preliminary and subject to revision.
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Appendix

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The year 1960 was, for the Canadian economy, one of special complexity. A high level of economic activity was continued; on the other hand there was also a high level of unused capacity, human and material. It is already apparent that there was an unusual conjuncture of economic forces, some of a special nature, others recognizably "cyclical", and still others of longer-term character.
It seems desirable that this year's "Economic Review" should be rather more extensive than those of past years. Since a broader perspective on current developments is particularly necessary, this Review pauses at many points to look back over past years and to compare trends in other countries.
Many of the broad developments in the world which affected us in Canada in 1960 have been widely discussed. A brief recital of them is sufficient to recall them and their impact upon the economy: the rebuilding with modern plant and equipment of the industrialized countries of Europe and Japan; the efforts of the underdeveloped countries of Asia, Africa and South America to achieve a sufficient rate of economic growth to support their rapidly expanding populations; the long-awaited dismantling of direct controls on the international movement of goods and capital; the rapid acceleration in the pace of scientific and technological advance, with all that that implies for nations and individuals, for economies and occupations; the emergence of more intense competition for markets and materials; the growing interdependence of the western world, expressing itself in closer integration of the policies of governments and business groups.
It is against such a broad and developing background that the following Review is presented.
THE NATIONAL ACCOUNTS National Income and Product
Economic expansion in Canada in 1960 experienced a number of adjustments including: the aftermath of the United States steel strike which led to declines in United States economic activity and in purchases from Canada; an inventory readjustment within Canada (and in the United States); and a lower level of housing starts. At the same time, exports to overseas countries rose sharply in response to strong demand. These developments all affected the rate of production throughout the year, and thus the levels of employment, income, savings and investment, and imports. The adjustments were of a temporary character, but happened to coincide with certain long-run economic developments within the Canadian economy. These were: a rapid growth in the labour force, the appearance of temporary excess capacity in certain raw material producing industries, and the continuation of further changes in industrial technology. These developments occurred at a time when competition, both domestic and foreign, was becoming more intense.
Gross National Product in Canada rose to $36.0 billion in 1960, 3.2 per cent above the level of 1959. Two-thirds of this gain represented an increase in actual production; the increase in prices moderated and was largely confined to certain services and to capital goods.

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As between the four quarters of the year, the first quarter showed some improvement; thereafter the economy hesitated until the latter part of the year when elements of increase more than offset those of decline. The rate of Gross National Product at the year-end was $36.4 billion, about 1 per cent above the average for 1960 as a whole.
1949	1950	1951	1952	1953	1954


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As between the various sectors of the economy, it is apparent that the output of the service-producing industries rose slightly more than that of the goods-producing industries in 1960. Indeed, all of the major service industries showed some further growth. The volume of trade, both retail and wholesale, continued to expand. The steady growth in the sales volume of food stores, along with a moderate increase in other lines, more than offset a slight decline in the volume of sales of motor vehicles (new and old) and their accessories and supplies, and a substantial reduction in sales by lumber and building material dealers, associated with the fall-off in housing activity. Activity in the transportation industries rose in spite of declines in railways and urban and interurban transit systems. Substantial increases took place in air transport, trucking, shipping and through-put of pipelines. These developments in transportation reflect gradual changes in the structure of the industry. Economic activity in the communication industries continued to expand significantly, along with finance, insurance and real estate. There was some decrease in the volume of personal services. However, all other service groups continued to grow including government service at the provincial and municipal levels, business, recreational and community services.
Economic conditions in the goods-producing sector were more varied, although there was a gain on balance. A larger and higher quality grain crop more than offset the decline in livestock and poultry production and the total volume of agricultural output rose by more than 3 per cent over 1959. The substantial increase in production in forestry largely reflected the recovery which followed the prolonged strike of 1959.
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For the year 1960 as a whole, output in mining was 1 per cent higher than 1959, although during the year the trend was slightly downward. The amount of exports, investment and profits attributable to mining all increased. The production of fuels and non-metals rose, while quarrying and metal mining declined. A 10 per cent drop in the output of iron ore, reflecting adjustments in United States demand following the steel strike, was a major contributing factor.
Since the end of World War II there has been heavy investment in mining and associated industries, and overall productivity has increased very substantially. Since 1949, output has risen by 153 per cent, while employment has increased by 20 per cent. Exports of minerals and their products have increased sharply. At the same time, a larger share of the expanding Canadian market has been met from domestic sources (e. g. petroleum).
Output and distribution of electric power and gas utilities rose by 11 per cent in 1960, with the latter rising by 24 per cent.


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-	1957	1958	1959	Prelim. 19601. Wages, salaries, and supplementary labour income	16,018	(Millions 16,524	of dollars) 17,761	18,5142. Military pay and allowances	476	491	496	5093. Corporation profits before taxes	2,581	2,518	2,907	2,7354. Rent, interest, and miscellaneous investment income	1,980	2,124	2,277	2,3625. Accrued net income of farm operators from farm production1	1,026	1,197	1,132	1,2076. Net income of non-farm unincorporated business..	2,008	2,125	2,218	2,1057. Inventory valuation adjustment2	-78	-35	-115	-578. National Income (1+2+3+4+5+6+7)	24,011	24,944	26,676	27,3759. Indirect taxes less subsidies	3,861	3,889	4,244	4,38910. Capital consumption allowances and miscellaneous valuation adjustments	4,009	3,930	4,143	4,29111. Residual error of estimate	28	104	-206	-9612. Gross National Product at Market Prices (8+9+10+11)	31,909	32,867	34,857	35,95913. Index of G.N.P. in Constant Dollars	100.0	101.1	104.3	106.51	Includes accrued earnings arising out of the operations of the Canadian Wheat Board.2	See footnote 2, Table 7.
The movements in manufacturing production were diverse both within various sectors as well as within the year. In total, the volume of manufacturing output declined by 0.3 per cent for the year, with non-durables rising by 1.4 per cent and durables falling by 2.4 per cent. Total manufacturing production reached a peak in January, 1960, and then declined. From this peak, manufacturing production of durable goods fell by about 10 per cent to mid-year and then recovered partially. The decline in non-durables during the same period was more modest, amounting to about 3 per cent. Some renewed strength in the fourth quarter of 1960 brought production of non-durable goods close to the levels of the early part of the year.
In terms of the average for the year, most of the non-durable industrial groups showed an increase in output. Tobacco products, foods and beverages, printing and publishing, paper products and petroleum products recorded small gains. Production of miscellaneous manufactures and chemical products rose

The Budget-Appendix
substantially. It is of special interest that the products of these two groups also showed sharp gains in export sales. The production of leather products, rubber products, clothing and textiles declined.
With the exception of non-ferrous metal products, all the durable manufactures group declined in terms of changes in yearly averages. However, there was a 7 per cent increase in production of motor vehicles which eased the decline in the transportation equipment group. Sales of new passenger vehicles rose, both for domestic and foreign-produced automobiles.
Construction activity in total was down 5 per cent for the year, although it was rising in the last half of the year. There was little change in non-residential building, while the volume of residential building fell by 17 per cent. Private investment construction was 9 per cent lower in 1960 and public investment construction was 2 per cent higher.
It is useful to set the movements during the year 1960 against the background of longer-run changes in the structure of the economy, as revealed by changes in the composition of Gross Domestic Product. The following table shows percentage shares by industry for selected years from 1926.

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GROSS DOMESTIC PRODUCT AT FACTOR COST: PERCENTAGE DISTRIBUTION >
Industry	1926-1928	1936-1938	1947-1949	1953-1954	1957-1959Agriculture	17.2	10.5	11.7	8.0	5.6Forestry	1.3	1.4	2.1	1.8	1 3Fishing and Trapping	.8	.5	.5	.4	.3Mining, quarrying, oil wells	3.2	6.6	3.8	3.8	4.2Manufacturing	22.0	24.2	28.5	28.6	26 8Construction	
Transportation, storage, communications, eleetric	4.2	3.1	5.0	6.0	6.8power and gas utilities	12.9	12.7	11.3	11.5	12.6Trade	12.1	13.3	14.1	13.7	14.0Finance, insurance and real estate	9.8	10.2	7.3	9 0	Q 4-Public administration and defence	3.4	5.0	4.8	6.3	7.1Service	13.1	12.4	10.9	10.9	11.9Total	100.0	100.0	100.0	100.0	100.0Total in billions of dollars	5.2	4.6	13.5	22.2	29.7
Note: Detail will not necessarily add to 100.0 due to rounding.
1 It should be remembered that the table depicts percentage shares so that, against a background of rising economic activity, a smaller share may represent increasing production.
Small changes over short periods of time are difficult to interpret, but over longer periods some rather broad movements can be observed. Over the entire period, the relative contribution to total production attributable to agriculture has declined substantially while other industries have generally increased or remained fairly stable. Despite the relative decline in agriculture, its actual volume of output has been rising as a result of substantial capital investment and the application of newer techniques developed through extensive research. At the same time, the agricultural labour force has declined, so that output per farm worker has risen by about 75 per cent from 1947-1949 to 1957-1959.
The shares of manufacturing, mining, construction, trade and public administration and defence rose from 1926-1928 to the immediate postwar period, and have remained relatively stable or increased slightly in the past ten years.
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The shifts in industrial structure and the accompanying changes in investment, output and productivity are reflected in changes in the per capita Gross National Product. In current dollar terms, the per capita G.N.P. in Canada more than trebled from 1929 to 1957-1959, as it did in the United States. It is interesting to note that the increase in Canada since the end of World War II has been considerably more rapid than in the United States, as shown in the following table (Canadian G.N.P. has been expressed in U.S. dollars for purposes of comparison):

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1929	1936-1938	1947-1949	1953-1955	1957-1959
		(U.S. dollars)			
Canada	607	457	1,134	1,713	2,026United States	857	669	1,697	2,311	2,611Ratio Canada/U.S	70.8	68.3	66.8	74.1	77.6
Turning to developments in the labour force, during 1960 average employment rose by 100,000 persons, or 1.7 per cent. This gain was more than accounted for by an increase of 117,000 in non-agricultural employment. The rise in employment was accompanied by a slightly shorter work week in manufacturing. Total output per man hour probably showed a slight increase for the year. At the same time that employment was rising by 1.7 per cent, the labour force jumped by 2.8 per cent, or 175,000 persons, and the average number of unemployed during the year increased by 75,000 to equal 7 per cent of the labour force. In I960, women accounted for the major part of the increase in the labour force, as job opportunities in the expanding service industries attracted an increasing percentage of the female population.
The extraordinary gains made in recent years in the civilian labour force call for comment. These gains have been extraordinary, not only in relation to previous periods of Canadian history, but also in contrast to more modest increases in other industrialized countries.

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CIVILIAN LABOUR FORCE 1958 1954 = 100
Canada	 112
Italy	 109
United States	 106
Germany	 106
Netherlands	 105
United Kingdom	 103
Norway	 102
Belgium	 101
France	 100
Source: OEEC Statistical Bulletin, May, 1960.
More recent data available only for Canada, United States and the United Kingdom show equally striking comparisons.

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1954=100		
Canada	U.S.A.	U.K.117	109	105
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The sharp gains in the Canadian labour force have been brought about by three main factors: the high birthrate since the mid-1940's; large-scale immigration in the postwar period; and rising rates of participation in the labour force by women, especially married women. The last factor is largely a reflection of the ability of married women to carry on their household duties in fewer hours due to major technological advances in the home, and of the increasing opportunities for women in the service industries where demands have been steadily growing. Immigration has not been as important in the past two years as it was earlier in the 1950's. More important to the present growth of the labour force are the large numbers of young Canadians, born in the mid-1940's and now seeking employment.
We turn now to the income flow in 1960. National income increased by 2.6 per cent, slightly less than the growth in Gross National Product. Labour income, investment income and farm income all rose more than national income, while corporation profits and unincorporated business income declined from 1959 levels.
Labour income reached $18.5 billion in 1960, 4.2 per cent higher than the previous year. The number of paid workers was 2.3 per cent higher; average hourly earnings in manufacturing were about 3 per cent higher and the average work week was fractionally shorter. Most of the increase in employment was among females in the relatively lower paid service industries and occupations. The rise in consumer prices was of the order of 1 per cent, and on a per capita basis there was a slight rise in real disposable income.
Preliminary estimates of corporation profits (after dividends paid abroad) amounted to $2,735 million, down by 6 per cent from 1959. During 1960, corporation profits fell from the first to the second quarter and for the remainder of the year were more or less stable. For the year as a whole, profits were lower in manufacturing, trade and in the transportation, communication and storage group. Within manufacturing, profits declined in iron and steel, wood products, electrical apparatus and supplies and the non-metallic minerals industries. There were moderate gains in the paper products and petroleum and coal products groups. Despite an increase in the value of trade, profits declined, as selling prices remained relatively stable while costs edged up. There were substantial gains in profits in the mining, quarrying and oil wells group, as exports increased and the exchange value of the U.S. dollar rose. There were also gains in the profits of financial services and of public utilities.
Rent, interest and miscellaneous investment income was 4 per cent higher than in 1959. Net rental income showed some decline as increased expenses more than offset some gain in gross rents.
Accrued net income of farm operators rose to $1,207 million, 7 per cent above 1959, while the numbers engaged in farming declined by 2 per cent. The number of people engaged in farming in 1960 was 37 per cent below the level of 1949 and the volume of farm output was 21 per cent higher.
Farm production increased in the year, the value of the grain crop rising by 11 per cent, more than offsetting some decline in the value of animal production. Farm cash income (excluding supplementary payments totalling $77 million) was about the same as in 1959. In contrast to 1959 when farm inventories were drawn down, there was a modest gain in holdings.
Net income of "other unincorporated business" declined by 5 per cent, with small increases in a number of industries failing to offset significant drops in construction and trade profits.
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The Budget

Appendix
National Expenditure
For 1960 as a whole and despite the adverse pressures referred to earlier, the economy was sustained by increases in demand by consumers, government and purchasers abroad. New investment in business fell slightly, outlays for new housing declined more, and the level of total inventories, including farm stocks, was almost unchanged. These rather broad movements obscure important developments within the year, which will be discussed presently.
The flow of incomes to individuals was increased during the year as a result of increases in wages, farm incomes, investment incomes and transfer payments from government, all of which provided support for higher consumer spending. Government spending on current goods and services and on capital investments also rose, while Canada's exports of goods and services once more rose to record levels. The value of housebuilding activity fell sharply during the first half of the year, although this trend was reversed by year-end when housing starts began to rise sharply in response to various governmental measures introduced in the latter part of the year. There wTas a slight decline in business investment in plant and equipment. All told, the combination of domestic and foreign demands for Canadian goods rose by $1.2 billion, which was met, on balance, from Canadian production. This is indicated by the fact that total imports of goods and services were almost unchanged from 1959. As a result, the proportion of total demand filled by imports was at about the lowest level of the past decade.

[Stage Direction]
(Millions of dollars)
-	I960 1959
	+927 +300 +281
	
	
	
	+1,608
Business Investment	
	-258 -24 +19
	
	
	
	-268
	
	+1,245 -(+33) -110
	
	
Gross National Expenditure		
	+1,102
	
During 1960, the increases and decreases in total production were reflected by changes in purchases for final use and in the levels of inventory holdings. In the early part of the year, final purchases slowed down but inventory stocks were being built up rapidly so that G.N.P. rose. During the second quarter, final purchases declined, particularly for export and housing, and the inventory buildup was smaller so that total economic activity declined. By the third quarter of the year, final purchases were rising again, but part of this increased demand was met by drawing down inventories so that the rise in current economic activity was not as great as it might otherwise have been. By the final quarter of

The Budget-Appendix
the year, both final purchases and inventory holdings were rising and Gross National Product rose by 1.7 per cent. Erratic patterns of purchasing throughout 1960 took place in all major sectors except government which rose steadily throughout the year and provided consistent additional strength to the economy.
Turning to particular sectors, consumer spending rose by 4.1 per cent for 1960 as a whole, the real increase being about 3 per cent. The gain in population was 2.1 per cent in 1960 so that the "average" consumer increased his real spending on goods and services by nearly 1 per cent. Spending on goods rose by 3.4 per cent, with most of the gain taking place in non-durables. The major gains_ in non-durable spending were in food, tobacco and alcoholic beverages, clothing, electricity and gas. In the durable goods sector there were declines in net purchases of second-hand cars and in purchases of furniture, household appliances and radios, the changes in the latter groups being related in part to lower levels of housing completions. On the other hand, as a result of a year-end spurt, purchases of new cars rose by 7 per cent. In 1960, the sales of British and European cars increased by 20 per cent and sales of North American models rose by 5 per cent, so that the overseas share of the Canadian car market continued to increase. However, in the last months of 1960, the increasing overseas share of total Canadian car sales appears to have slowed down, and in December, 1960, was below the proportion achieved one year earlier.
Spending on services continued its long-term rise, gaining 5.3 per cent over 1959. The largest gain was in hospital and medical care, which rose by 9 per cent. There were also substantial increases in payments for shelter, household operation (e.g. electricity, gas, repairs), recreation and personal care and service. Payments for user-operated transportation were almost unchanged.

[Stage Direction]
1.	Personal expenditure on consumer goods and
services	
2.	Government expenditure on goods and services...
current expenditure	
gross fixed capital formation	
3.	Business gross fixed capital formation1	
new residential construction	
new non-residential construction	
new machinery and equipment	
4.	Value of physical change in inventories-total2.
non-farm business inventories	
farm inventories	
grain in commercial channels	
5.	Exports of goods and services3	
6.	Imports of goods and services3	
7.	Residual error of estimate	
8.	Gross National Expenditure at Market Prices
(1+2+3+4+5+6+7)	
9.	Index of G.N.E. in Constant Dollars	
1957	1958	1959	Prelim.
			I960
	(Millions of dollars)		
20,072	21,240	22,482	23,4095,722	6,173	6,416	6,7164,340	4,784	4,893	5,1281,382	1,389	1,523	1,5887,335	6,975	6,894	6,6121,409	1,763	1,734	1,4763,103	2,811	2,589	2,5672,823	2,401	2,571	2,569231	-333	297	316305	-207	351	229-125	-93	-65	1751	-33	11	706,391	6,340	6,676	6,957-7,813	-7,423	-8,115	-8,148-29	-105	207	9731,909	32,867	34,857	35,959100.0	101.1	104.3	106.51	Includes private businesses and institutions, and publicly owned Business Enterprises.2	The book value of inventories is deflated to remove the effect of price changes and the derived "physical" change is then valued at average prices of the current period to obtain the value of physical change. The difference between this value of physical change and the change in book value is called the inventory valuation adjustment (see line 7, Table 1).3	Minor adjustments have been made to the figures of current receipts and payments shown in Table 35 and in "The Canadian Balance of International Payments, 1957 to I960", Dominion Bureau of Statistics, to achieve consistency with the other component series.
The Budget-Appendix In this connection, purchases of gas, oil, grease, and automobile parts were also unchanged, so that total operating costs of private automobiles did not rise in 1960, despite a larger number of vehicles on the road. This may be attributable in part to the increasing use of smaller cars.
Prices of consumer goods increased by 0.6 per cent in 1960, with nondurable items (mainly food) rising by 0.8 per cent and durable goods prices declining by 0.4 per cent. Thus, the volume of durable goods purchases was slightly higher than the fractional gain shown by the value figures. Prices of services, especially medical costs, rose, the average increase being 2.2 per cent, thereby continuing a long-term trend. From 1949 to 1960 prices of services rose by 53 per cent while prices of goods rose 19 per cent.
Expenditure on goods and services by all levels of government rose in 1960 by $300 million, or 4.7 per cent above 1959 to a level of $6,716 million. Of this total, capital expenditures amounted to $1,588 million, increasing by $65 million over the previous year. The gain in total expenditures on goods and services by governments was more than accounted for by provincial and municipal governments, which increased their purchases by $393 million. There was a decline in spending on goods and services by the federal government of some $93 million, all of it occurring in the non-defence area. Defence expenditures were virtually unchanged from the year before.
As previously noted, business fixed capital formation declined for the year 1960 as a whole by 4.1 per cent or $282 million and about 6 per cent in volume.
The value of new housing activity declined in 1960 to $1,476 million from $1,734 million in 1959. Housing starts fell by 23 per cent to 109,000 units in 1960 from 141,000 units in 1959. There was a good deal of evidence to indicate that the decline reflected, in part, a less pressing demand for accommodation resulting from the very large increase in the supply of housing achieved in previous years. The declines took place during the early part of the year, since by April housing starts had begun to improve moderately. In the fourth quarter of the year, starts were back to a seasonally adjusted annual rate of 131,000 units, and this improvement has carried forward into 1961. The improvement in housing in the last half of 1960 was associated with a greater availability of mortgage credit, as N.H.A. rates became more attractive to the lending institutions (other than the chartered banks which are not authorized to lend at rates in excess of 6 per cent) and as C.M.H.C. increased its direct lending. At the same time, a further liberalization of the N.H.A. regulations made it

[Stage Direction]
TOTAL MORTGAGE LOANS APPROVED (Dwelling Units)
-	1959	1960National Housing Act Mortgage Loans-	11,841 14,844 34,241	21,724 89 15,932
C.M.H.C. Loans			
		
	60, m 46,882	57,745 42,164
Conventional Mortgage Loans-		
		
	107,808	79,909
		

The Budget-Appendix
possible to acquire houses with smaller down payments and to obtain mortgage money for longer maturity periods.
The number of housing units actually completed declined less than the number of new starts, the comparative statistics are: 124,000 units in 1960 and 146,000 units in 1959. Completions in 1960 were below the level of the two previous record years but above the level of 1957.
Outlays for private non-residential construction amounted to $2,567 million, fractionally below the level of 1959. The price "deflator" rose by more than 2 per cent so that the implied decline in volume was about 3 per cent. There were some offsetting increases and declines. Construction outlays were slightly lower in manufacturing, trade and some business services and higher in mining, quarrying and oil wells.
Investment in new machinery and equipment was unchanged from 1960, amounting to $2,569 million. Actually, this figure has only been exceeded in the extraordinary years of 1956 and 1957. The 1960 level was 9 per cent below such levels. The absence of any change in the total level of new investment in machinery and equipment concealed a significant increase in investment in manufacturing and an offsetting decline in investment in utilities. Those affected were mainly electric power and railways, the latter reflecting the near-completion of the dieselization programme.
The accumulation of inventories in the economy in 1960 totalled $316 million, or very close to the 1959 total of $297 million.

[Stage Direction]
-	1959	1960Non-Farm Business Inventories	(Millions 351 -85 20 XI	of dollars) 229 3 14 70Farm Inventories: Farm Stocks of Grain	Livestock Inventories	Grain in Commercial Channels	Total Change in Inventories	297	316
However, changes during the course of the year were substantial, with large accumulations in the first half of the year being followed by a liquidation in the third quarter and a modest increase in the last quarter of the year. While the annual figures show virtually no net effect on production, the movements described were very large; from plus $752 million in the first quarter, adding to current production, to minus $132 million in the third quarter, depressing current production. The "swing" in inventories thus totalled $884 million, or equivalent to about 2§ per cent of the Gross National Product.
The buildup of manufacturing inventories in the first half of the year took place while shipments were declining and stock-sales ratios rising. The most significant increases took place in holdings of finished goods. This acted as a dampener on manufacturing production later in the year when increasing demands were met out of inventories rather than by means of new production. The liquidation of inventories in the last half of 1960 began with raw materials and goods in process, but in the final months of the year stocks of finished goods were also worked down. Although total liquidation of manufacturing stocks
[Stage Direction]
The Budget-Appendix

[Stage Direction]
1959 annual	1960 annual	1960 quarterly at annual rates	IQ	2Q	3Q	4Q(Millions of dollars)	Manufacturing	118	66	304	216	-188	-68Wholesale trade	85	15	88	36	-100	36Retail trade	125	174	248	112	220	11623	-26	8	-28	-108	24Total Non-Farm Business Inventories	S51	229	648	SS6	-176	108Farm Inventories and grain in commer-	cial channels	-54	87	104	88	44	112Total Inventory Change	297	316	752	424	-132	220
lessened in the final quarter of 1960, there was actually a heavier drawing down of durable goods inventories, particularly in the iron and steel industry, and an accumulation of some non-durable goods.
The shifts in inventories in 1960, while of major significance to the pace of total economic activity, were far less than in previous postwar periods. The shifts from the high point of accumulation to the low point of liquidation for non-farm business inventories are shown below, in relation to the level of Gross National Product.

[Stage Direction]
Period of Peak: Accumulation : Liquidation			(1) Peak Rate of Accumulation	(2) Peak Rate of Liquidation	(3)=Change Col. (1) to Col. (2)	(4) Gross National Product at Peak Liquidation	(5) = (3) + (4) Change in Inventories as a % of G.N.P.
				(Millions of dollars)			
2Q 1951	to	4Q 1951....	1,220	-372	-1,592	21,624	7.43Q 1953	to	2Q 1954....	516	-184	-700	24,588	2.8IQ 1956	to	IQ 1958....	1,124	-656	-1,780	32,000	5.6IQ 1960	to	3Q 1960....	648	-176	-824	35,840	2.3
The more moderate shift in inventories in 1960 reflects, in the main, changes in the basic economic environment. As compared with earlier periods, supplies were ample in 1960 and deliveries were quick. Businessmen did not expect significant price changes and were not tempted to speculate against price increases. There has been a greater concern for costs, and high inventory holdings impose additional interest costs and other costs on business. Finally, newer techniques of inventory control have made it easier to operate with lower levels of inventory stocks.
Exports of goods and services reached $6,957 million in I960, setting a new record, about 4 per cent above 1959. Imports of goods and services were little changed from 1959, and totalled $8,148 million. The balance of payments deficit amounted to $1,191 million (on a national accounts basis), $248 million or 17 per cent below the 1959 deficit of $1,439 million.
Looking at Canada's foreign trade over a longer period, from 1950 to 1960 when world trade was expanding rapidly, Canadian exports and imports of goods each increased by about three-fourths. From 1953 to 1960, Canadian

The Budget-Appendix
exports and imports of goods each rose by nearly one-third. From 1956 to 1960 a different picture emerges: exports of goods continued to rise by 12 per cent while imports of goods were almost unchanged. Thus, the import of goods by Canada in relation to the Gross National Product was 17.4 per cent in 1950, 16.8 per cent in 1953, 18.2 per cent in 1956 and only 15.4 per cent in 1960.

[Stage Direction]
-	Exports of Goods	Imports of Goods1950=100	175!	1771953 = 100	130	1321956=100	112	100
Likewise, the proportion of the total supply of Canadian goods and services (including imports), met by imported goods and services, was lower in 1960 than in earlier periods. For the four years 1950, 1953, 1956 and 1960 the percentages were respectively: 20.0; 18.9; 20.1; and 18.5.
Personal Income* and Its Disposition
Personal income rose to $27,442 million in 1960. All components, with the exception of non-farm unincorporated business income, showed increases, with the largest percentage increase coming from government transfer payments. The gain in personal income, 4.3 per cent above 1959, was greater than that of national income, which increased 2.6 per cent. One reason for this was the 13 per cent rise in government transfer payments to persons which do not appear in national income. Another reason was the enhanced flow of interest and dividend payments to persons which, along with net rental incomes, rose 5 per cent. Total corporation profits, which appear in national income and not in personal income, declined by 6 per cent. The increase in transfer payments consisted of a number of items including: higher family allowances and old age security payments resulting from a larger population; higher payments to farmers including the special payment to western grain producers; a larger flow of unemployment insurance benefits; increased provincial payments to hospitals under the Dominion-Provincial Hospitalization Scheme and in the form of grants; and higher provincial grants to universities and other non-profit organizations.
Personal direct tax yields increased by 13.2 per cent over 1959 to a total of $2,358 million. Personal income tax payments at the federal and provincial levels rose by 13.4 per cent, reflecting higher levels of personal income and a higher average rate of tax in 1960. In 1959, the new rates of federal taxation were applicable only to the latter half of the year, while in 1960 the new rates applied to the full year. Succession duty payments increased by 21.5 per cent, while miscellaneous taxes, including premiums under the hospital insurance scheme and licence fees for private automobiles, rose by 6.7 per cent.
After deducting direct taxes from personal income, the residual, personal disposable income, amounted to $25,084 million, 3.5 per cent above 1959.
* It should be noted that incomes of "persons" in the personal account include those of non-profit organizations and unincorporated businesses as well as of individuals.
[Stage Direction]
The Budget-Appendix

[Stage Direction]
-	1957	1958	1959	Prelim. 19601. Wages, salaries and supplementary labour income..	16,018	(Millions 16,524	3f dollars) 17,761	18,514Deduct: Employer and employee contributions to social insurance and government pension	-739funds	-590	-615	-649	2. Military pay and allowances	476	491	496	5093. Net income received by farm operators from farm	1,201production1	1,026	1,198	1,136	4. Net income of non-farm unincorporated business...	2,008	2,125	2,218	2,1055. Interest, dividends and net rental income of per-	sons2	2,141	2,288	2,559	2,6966. Transfer payments to persons-	2,758	3,116(a) from government (excluding interest)	2,076	2,653	(b) charitable contributions made by corpora-	40tions	36	38	40	7. Personal Income (1+24-3+4+5+6)	23,191	24,702	26,319	27,4421	Excludes undistributed profits of the Wheat Board and an inventory valuation adjustment on a calendar year basis for grain held by the Wheat Board.2	Includes all government debt interest paid to persons.

[Stage Direction]
BILLIONS OF DOLLARS	BILLIONS OF DOLLARS
1949	1950	1951	1952	1953	1954	1955	1956	1957	1958	1959	I960
"'seasonally adjusted at annual rates
Personal saving*, or disposable income less consumer spending, totalled $1,675 million in 1960 compared with $1,754 million in 1959. Personal saving as a percentage of disposable income was 6.7 per cent in 1960 and 7.2 per cent in 1959.
The ratio of personal saving to disposable income in Canada over the period 1949 to 1960 averaged 6.7 per cent. Over the same period in the United States
* Personal saving is represented by changes in assets and liabilities of persons and includes, for example, changes in liquid assets (cash, bonds and stocks), life insurance, consumer and mortgage debt and the value of inventory changes of unincorporated business and farmers.

The Budget-Appendix
the ratio was 7.2 per cent. This is of considerable interest, since over these twelve years the average per capita personal disposable income in the United States was $1,642 U.S., while in Canada it was $1,172 Canadian. That is to say, on an average income almost 30 per cent below his United States counterpart, the "average" Canadian saved nearly the same proportion of his income.

[Stage Direction]
-	1957	1958	1959	Prelim. 19C01. Personal direct taxes- (a) income taxes	1,693 126 98	(Millions 1,554 126 108	>f dollars) 1,744 130 209	1,977 158 223
1,917	1,788	2,083	2,358
2. Personal expenditure on consumer goods and services- Goods-				
	10,402 2,430 7,240	10,878 2,499 7,863	11,315 2,680 8,487	11,783 2,687 8,939
				
				
				
	20,072	21,240	22,482	23,409
3. Personal saving- (a) personal saving excluding farm inventories..				
	1,327 -125	1,767 -93	1,819 -65	1,658 17
				
	1,202	1,674	1,754	1,675
4. Personal Income (1+2+3)					
	23,191	24,702	26,319	27,442
				
Source and Disposition of Saving
Total saving in 1960 amounted to $5,834 million, about 2 per cent below the level of 1959. Business saving rose about 1 per cent offsetting for the most part the small decline in net personal saving to which reference was made above. On a national accounts basis, the combined deficit (i.e., negative saving) of all levels of government increased from $536 million in 1959 to $809 million in 1960. Almost five-sixths of the increase in the deficit was accounted for by provincial and municipal governments, their combined deficit rising from $174 million in 1959 to $398 million in 1960. The federal government deficit (on a national accounts basis) increased from $362 million to $411 million.
The accompanying tables on source and disposition of saving outline the major sources of saving in the economy, although the tables are not designed to show the flows of saving between sectors. For example, while the largest element in total saving in 1960 was accounted for by business saving, this was less than business investment, so that business as a whole would have been a net borrower. The government surplus or deficit is measured on a national accounts basis which is described in a subsequent section. It should be noted that government expenditure includes outlays of a capital nature. In terms of the sector accounts, a government surplus represents national saving and a government deficit represents dissaving.
The table dealing with the disposition of national saving shows the use of these savings both in terms of business capital investment (including inventories) and in net foreign investment.
[Stage Direction]
The Budget-Appendix

[Stage Direction]
-	1957	1958	1959	Prelim. 1960
		(Millions of dollars)		
Personal saving1	1,202	1,674	1,754	1,675Business gross saving-total	4,863	4,741	5,062	5,121(a) Undistributed corporation profits2	854	812	923	824(b) Capital consumption allowances and miscel-	laneous valuation adjustments	4,009	3,930	4,143	4,291-1	-4	6Inventory valuation adjustment	-78	-35	-115	-57Adjusted government surplus (+) or deficit (-)4	100	-1,030	-536	-809Residual error of estimate6	28	104	-206	-96Total	6,115	5,454	5,959	5,8341	See Table 14.
! See Table 17.
3	Accrued earnings arising out of operations of the Canadian Wheat Board.
4	See Table 26.
s See Tables 1 and 7.

[Stage Direction]
-	1957	1958	1959	Prelim. 1960Business gross fixed capital formation	7,335 231 -1,422 -29	(Millions 6,975 -333 -1,083 -105	:>f dollars) 6,894 297 -1,439 207	6,612 316 -1,191 97Surplus (+) or deficit (-) on current account with non-	
6,115	5,454	5,959	5,834
				
1 Minor adjustments have been made to the figures appearing in Table 35. 1 See Tables 1 and 7.
Business saving rose from $5,062 million to $5,121 million from 1959 to 1960 despite a 6 per cent decline in corporation profits. The decline in profits was partially offset by a decline in income tax liabilities, whereas dividend payments remained stable. Undistributed corporation profits were about $100 million lower in 1960 than in the preceding year, but depreciation and similar allowances of the entire business sector grew by $148 million, so that business gross saving increased.
Changes in total saving are naturally and closely related to changes in total income, which in its turn is a reflection of the total value of production. Table 18 lists year-to-year changes in the Gross National Product and in total savings. The accompanying chart traces quarterly movements of total national saving from 1950.

The Budget-Appendix

[Stage Direction]
-	1957	1958	1959	Prelim. 1960Corporation profits before taxes including dividends paid to non-residents1	
Deduct: corporation income tax liabilities	
Excess of tax liabilities over collections	
Tax collections	
Corporation profits after taxes	
Deduct dividends paid out2	
Undistributed corporation profits3	3,056 1,337 -213 1,550	(Millions 2,988 1,300 -36 1,336	of dollars) 3,401 1,541 101 1,440	3,200 1,449 -223 1,6721,719 865 854	1,688 876 812	1,860 937 923	1,751 927 8241	Includes depletion charges and is adjusted for losses, and for conversion to a calendar year basis.2	Includes charitable contributions made by corporations (See Table 13).3	See Table 15.

[Stage Direction]
Year	% Change in Gross National Product	% Change in National Saving1951/1950	+17.6 +13.3 + 4.3 - 0.6 + 9.1 + 12.7 + 4.3 + 3.0 + 6.1 + 3.2	+22.1 +11.2 + 1.2 -15.2 + 16.9 +28.6 -	3.9 -10.8 + 9.3 -	2.11952/1951	
1953/1952	1954/1953	1955/1954	1956/1955	1957/1956	1958/1957	1959/1958	1960/1959

[Stage Direction]
(Seasonally Adjusted at Annual Rates)
[Stage Direction]
The Budget-Appendix
Investment and Capital Expenditure
Private and public capital expenditure totalled $8,200 million in 1960, 2.6 per cent below the level of 1959. The decline was more than accounted for by reduced activity in housing which was lower by $263 million or 15 per cent. On balance, all other investment increased by $46 million. Capital expenditure was 22.8 per cent of the Gross National Product, below the levels of the period of extraordinary resource development in 1956 and 1957, but about the same as earlier years in the decade.
During the past decade, capital investment in Canada both public and private has continued at high levels. Indeed, the ratio of investment to Gross National Product has remained well over 20 per cent, one of the highest rates in the western world. This investment includes a wide variety of projects: resource development, manufacturing plant, transportation and communication facilities, fuel and power projects, trade, finance and commercial services, housing, hospitals, schools and government departmental expenditures.

[Stage Direction]
1Q48 	
20.4	1954	
23.0 1955	
23.01956	
26.3 1957	
27.3 1958	
25.4 1959	
24.1 1960	
22.8
The lower level of capital investment and smaller share of the G. N. P. in 1960 compared with 1956 and 1957 reflect, in the main, the completion of major resource developments. By nature, much of this type of investment requires a "bunching" of investment outlays. It is not physically possible, or economically feasible, to install small yearly increments in a project such as, for example, a hydro-electric power development. Once completed, these investments serve major needs for a number of years until the accumulation of gradually rising demands, both at home and abroad, impels a further expansion of facilities. Since the completion of the latest round of expansion in some major basic industries, there has been a shift to other types of capital including housing, social capital (e. g., schools, hospitals), government outlays (e. g., roads, highways, sewers, airports, docks and other engineering works) and service industries. These outlays have offset to a considerable extent the declines in investment which have taken place in industries such as mining and power. The following percentage distribution of capital investment shows the picture over the past five years.
Turning to 1960, new investment in agriculture, fishing and forestry rose modestly over 1959. In mining, quarrying and oil wells there was a sharp 12 per cent gain over the preceding year although both the level of new investment and its share of total investment were well below 1957.
Manufacturing investment in 1960 rose by 4 per cent over 1959; new construction declined by $24 million but investment in new machinery and equipment rose sharply by $72 million, or nearly 10 per cent. There were significant increases in iron and steel products, paper products and chemical products, where export sales grew rapidly in 1960, and smaller increases in food and beverages, rubber products, textile products, and non-ferrous metal products. There were declines in investment in a number of manufacturing industries including

The Budget-Appendix

[Stage Direction]
Sector	1956	1957	1958	1959	1960
Business Capital					
Forest and Mineral Products	14.8	14.2	8.5	8.6	10.0Fuel and Power	15.3	17.9	15.9	12.4	12.7Sub-total	S0.1	S2. t	U. 4	S1.0	22.7Trade, Finance and Commercial Services	7.6	7.9	8.4	9.9	9.6Transportation, Storage and Communication..	10.2	12.1	12.8	12.2	11.7Other	14.4	12.7	12.6	13.9	14.2Sub-total	62.3	64.8	58.2	57.0	58.2Housing and Social Capital	Housing	19.3	16.4	21.3	20.8	18.2Institutional Services	5.0	5.2	6.1	6.4	7.0Government Departments and Waterworks	13.4	13.6	14.4	15.8	16.6Sub-total	37.7	35.2	41.8	43.0	41.8Total Capital Expenditures	100.0	100.0	100.0	100.0	100.0
wood products, printing and publishing, transportation equipment, non-metallic mineral products and products of petroleum and coal.
New investment in utilities declined about 5 per cent in 1960. This group is defined as electric power, gas and waterworks, and transportation, storage and communication. Investments in this area are often huge and show sharper changes over the years compared with many other industries. There were declines in investment in electric power, gas distribution, railway transport (reflecting the near-completion of the dieselization programme and of rail lines to certain mining areas) and telegraphs, water and motor transport, and grain elevators. On the other hand, there were increases in urban transit, telephones, broadcasting, and in the group comprising air transport, warehousing, oil and gas pipelines and toll highways and bridges. The latter group showed a substantial increase of $42 million, and reflects the changing forms of transportation in Canada.
New investment in trade declined by $15 million, about 4 per cent. In the finance field, there was a decline of $18 million, more than accounted for by smaller outlays of real estate companies engaged in developing, owning and leasing properties.
In the service field, investment in commercial services declined by $13 million, but institutional services increased their outlays by $40 million, most of it in schools. Outlays for hospitals totalled $153 million, about $1 million higher than in 1959*. Almost all capital outlays for schools and a substantial share of outlays on hospitals are included under government expenditure on goods and services. Capital outlays by government departments rose to $1,277 million, 3 per cent above 1959. All of the gain took place at the provincial and municipal level; federal department outlays declined by $26 million.
* According to the Outlook for Private and Public Investment, 1961, capital outlays for hospitals are to rise by $112 million this year.
[Stage Direction]
The Budget-Appendix

[Stage Direction]
-	1957	1958	1959	Prelim. 1960Agriculture and fishing	434 48 606 1,479 949 1,359 158 690 454 1,430 1,110	(Millions 465 33 342 1,095 845 1,308 157 705 514 1,782 1,118	if dollars) 539 48 342 1,144 766 1,076 145 833 536 1,752 1,236	548 52 382 1,192 701 1,058 137 788 576 1,489 1,277Mining, quarrying and oil wells	Electric power, gas and water works	
Transportation, storage and communications	
Construction industry	_	
Trade, finance and commercial services	Government departments	
Total Capital Expenditure1	
Total Capital Expenditure as a percentage of Gross National Expenditure	
Index of total Capital Expenditure in Constant	8,717	8,364	8,417	8,20027.3	25.4	24.1	22.8100.0	94.0	92.3	88.0
1 For reconciliation with Business Gross Fixed Capital Formation in housing, plant and equipment
in Table 7, see below.	Prelim
Private and Public Capital Expenditure-Table 21	
Deduct:
Provincial hospitals and schools, and municipal schools..
Government housing excl. C.M.H.C. rental housing.
Direct government department outlays	
Other	
Business Gross Fixed Capital Formation in housing, Plant and Equipment-Table 7	
1957	1958	1959	19608,717	8,364	8,417	8,200-246 -21 -1,110 -5	-247 -19 -1,118 -5	-264 -18 -1,236 -5	-291 -13 -1,277 -77,335	6,975	6,894	6,612

[Stage Direction]
The Budget-Appendix
Revenue and Expenditure of all Governments
On the National Accounts basis, the combined deficit of all levels of government in 1960 was $809 million,* compared with $536 million in 1959. An increase in revenue during 1960 was more than offset by a larger increase in expenditures at all levels of government. The major portion of the increase in the deficit for 1960 occurred at the provincial and municipal levels since the deficit of the federal government was only moderately higher in 1960 than in 1959.

[Stage Direction]
REVENUE AND EXPENDITURE OF ALL GOVERNMENTS (National Accounts Basis)
	1959			1960		
	Revenue (Expenditure		Deficit	Revenue	Expenditure	Deficit
			(Millions of dollars)			
Federal	6,005	6,367	362	6,280	6,691	411Provincial-Municipal	4,648	4,822	174	5,017	5,415	398Total	10,653	11,189	536	11,297	12,106	809
To obtain a comparison, on a National Accounts basis, between government expenditures and the Gross National Expenditure, it is necessary to limit the comparison to government expenditures on goods and services (as distinct from transfer payments), since these are the only government outlays included in the Gross National Expenditure account. In 1960, expenditures on goods and services by the combined levels of government represented 18.7 per cent of Gross National Expenditure compared with a proportion of 18.4 per cent in 1959. In 1949, before the Korean war and the related rearmament programme, this proportion was 13 per cent. Largely as a result of the buildup in defence expenditures the proportion rose to approximately 18 per cent in 1952. In the years from 1952 to 1960, the rise in government expenditures on goods and services has been very slightly in excess of the growth in Gross National Expenditure.
Within the total, however, there have been considerable changes as between the shares attributable to different levels of government. As is evident from the table below, provincial and municipal government expenditures on goods and services have increased as a proportion of Gross National Expenditure, while the share of federal government expenditures is now lower than in 1952.

[Stage Direction]
-	1949	1952	1960
Expenditures by:			
Federal-Defence	2.2	7.5	4.3Non-defence	3.1	2.9	3.3Total Federal	5.8	10. i	7.6Provincial and Municipal	7.7	7.4	11.1All levels of Government	13.0	17.8	18.7
* The following section discusses only those government transactions relevant to the National Accounts. As a result, the figures used may not agree with those shown in other Public Accounts. Table 26 indicates the reconciliation between federal deficit or surplus for purposes of the National Accounts and the comparable figures appearing in the Public Accounts. In particular, federal corporate income taxes have been adjusted to an accrual basis. In 1959 this adjustment increased revenues by $101 million and in 1960 decreased revenues by $223 million.
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[Stage Direction]
The Budget-Appendix
Government expenditures on goods and services as recorded in the Gross National Expenditure account include expenditures not only on current administrative costs but also on construction and on machinery and equipment. These items are in the nature of capital investment, but are not treated as investment expenditures. Expenditures of this type made by all levels of government during the period from 1958 to 1960 are set out in the following table.

[Stage Direction]
-	Housing	Other Construction	Machinery and Equipment	Total1	% of Capital Outlays to Total Government Expenditures on Goods and Services
		(Millions of dollars)			
1958	19	1,237	133	1,389	221959	18	1,368	137	1,523	23I9602	13	1,431	144	1,588	241	These figures exclude investment expenditure by government business enterprises which is included in the national accounts item for business capital formation.2	Preliminary.
The expenditures on other construction cited in this table cover a great variety of projects. Final data are not yet available giving a detailed analysis of government outlays on new construction for either 1959 or 1960. While total expenditures for this purpose in 1960 were somewhat higher than in 1958, the general pattern of expenditure on various categories of construction can be illustrated by means of detailed data for 1958 in the table below.

[Stage Direction]
Category	Federal	Provincial	Municipal	Total
		(Millions of dollars)		
Office buildings	68	14	10	92Schools and educational buildings	13	21	175	209Hospitals, clinics, etc	8	27	-	35Other building construction	69	20	28	117Total Building Construction	158	82	213	453Marine engineering works	36	1	1	38Roads, roadwork and aerodromes	57	308	131	496Water, sanitation and utilities	13	14	82	109Other engineering construction	25	81	35	141Total Engineering Construction	
Total New Construction	131	404	249	784289	486	462	1,237
As has already been indicated, government expenditures on goods and services are the only government expenditures which form part of the Gross National Expenditure. However, to arrive at the figure for the combined government deficit which is cited above and which appears in the savings and investment

The Budget-Appendix

[Stage Direction]
-	Prelim. 1959	Prelim. 1960	Change
	(Millions of dollars)		
Government Revenue- Direct Taxes-Persons		2,083	2,358	+275
Income-			
Federal	1,692	1,917	+225Provincial and Municipal	52	60	+8Succession Duties-	Federal	76	97	+21Provincial	54	61	+7Miscellaneous-	Federal	2	2	Provincial and Municipal	207	221	+14Direct Taxes-Corporations	1,541	1,449	-92Income-	Federal	1,280	1,160	-120Provincial	261	289	+28Other Direct Taxes-	Withholding taxes-Federal	72	77	+5Indirect Taxes	4,442	4,623	+181Federal	2,131	2,181	+50Provincial and Municipal	2,311	2,442	+131Investment Income	993	1,060	+67Federal	339	354	+15Provincial and Municipal	654	706	+52Employer and Employee Contributions to Social Insurance and Government Pension Funds	649	739	+90Federal	413	492	+79Provincial and Municipal	236	247	+11Transfers from Other Governments-	Provincial and Municipal	873	991	+118Total Revenue	10,653	11,297	+644Federal	6,005	6,280	+275Provincial and Municipal	4,648	5,017	+369
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[Stage Direction]
The Budget-Appendix
TABLE 26-Concluded

[Stage Direction]
-	Prelim. 1959	Prelim. 1960	Change
	(Millions of dollars)		
Government Expenditure- Goods and Services		6,416	6,716	+300
Federal-			
Defence	1,560	1,561	+1Non-defence	1,272	1,178	-94Provincial and Municipal	3,584	3,977	+393Transfer Payments to Persons	2,758	3,116	+358Federal	1,795	1,983	+ 188Provincial and Municipal	963	1,133	+170Interest on Public Debt	944	1,049	+105Federal	678	756	+78Provincial and Municipal	266	293	+27198	234	+36Federal	189	222	+33Provincial and Municipal	9	12	+3Transfers to Other Governments-	Federal	873	991	+118Total Expenditure	11,189	12,106	+917Federal	6,367	6,691	+324Provincial and Municipal	4,822	5,415	+593Deficit (-) or Surplus (+)	-536	-809	+273Federal1	-362	-411	+49Provincial and Municipal	-174	-398	+224Total Expenditure minus deficit (or plus surplus)	10,653	11,297	+644Federal	6,005	6,280	+275Provincial and Municipal	4,648	5,017	+309
1 Reconciliation with Public Accounts Surplus or Deficit shown below.
Prelim. Prelim. 1959	1960
(Millions of dollars)
Federal Government calendar year surplus for national accounts purposes....	-362	-411
Adjustments:
Difference between calendar and fiscal year	
-34	-75Difference between corporation tax accruals and government receipts	
-101	+223Revenue items omitted	
+23	+17Reserves, write-offs and similar items omitted from expenditure	
-253	-62Shipment of military equipment to NATO countries less replacement	
+36	Extra-budgetary funds for pensions and social insurance (net)	
+37	-60Adjustment to place debt interest on a "due date" basis	
-55	+3Other adjustments	
+100	-48Federal surplus for fiscal year as per public accounts	
-609	-413
The Budget-Appendix
account, it is necessary to take into account certain other government outlays. After making this adjustment to the statistics, it appears that in 1960 the total of all government expenditures increased by $917 million, or 8 per cent, to an amount of $12,106 million. It should be noted that in terms of the impact of the government sector on the economy, this figure constitutes gross government expenditures since, in addition to direct expenditures on goods and services, it includes government outlays on transfers to persons, interest on the public debt, subsidies and transfers to other levels of government. These payments may in turn be used by the recipients for expenditures on goods and services. The table below indicates the percentage distribution of total government expenditures among these items in 1959 and 1960.

[Stage Direction]
-	1959	1960
	57.3	55.5
	24.6	25.7
	8.4	8.7
	1.8	1.9
Transfers to other Governments		7.8	8.2
	100.0	100.0
One of the outstanding features in the government sector over the past decade has been the very large growth in transfer payments to persons. These expenditures have not only increased in absolute terms but also as a proportion of total government outlays. While in 1953 transfer payments represented 22 per cent of all government expenditures, by 1960 the proportion had risen to almost 26 per cent. The sharpest growth in transfer payments has taken place in the years since 1956. This has been the result, at the federal level, of the increase in benefits payable such as family allowances, old age security and unemployment insurance and, at the combined provincial and municipal levels, of the growth of payments by the provinces under federal-provincial hospital insurance arrangements. In relative terms, the growth at the provincial-municipal level has been, as the following table indicates, rather larger than that at the federal level.

[Stage Direction]
INDEX OF TRANSFER PAYMENTS TO PERSONS (Excluding interest on the public debt)
1953 = 100
-	Federal1	Provincial- Municipal	Total1956	117	131	1211957	140	148	1421958	182	181	1821959	172	232	189I960	190	273	213
1 The federal portion of shared-cost programmes with provinces and municipalities is excluded from federal transfer payments to persons but is included in transfer payments to other governments. See Table 26.
[Stage Direction]
The Budget-Appendix

[Stage Direction]
Before examining the changes in employment in 1960 it may be helpful to review some of the trends in the labour market which have been observable in recent years. In the past decade a significant change has been taking place in the demand for labour in the Canadian economy, reflecting the various changes in the demand for products and services that have characterized the economy. In particular, the demand for services has steadily increased to the point where the service sector has become the largest employer in the country. In 1949, the goods-producing industries provided employment for 59 per cent of the employed population. By 1960 this proportion had declined to 48 per cent. A similar trend has been taking place in the United States.
Considering these changes in more detail, total employment in the goods-producing sector of the Canadian economy fell by 3 per cent during the period 1949 to 1960. This was the result of a 37 per cent decline in agricultural employment and, to a lesser extent, to a decrease in the number of persons engaged in fishing. In both these primary industries, as a result of increased investment in capital equipment, the decline in employment has been accompanied by increased output. Excluding these two primary industries, the number of people in the goods-producing sector rose by about 18 per cent between 1949 and 1960. In 1949, the goods-producing sector employed two-thirds of all working males and about one-third of all employed females. In 1960, the comparable proportions were 57 per cent and 24 per cent.


[Stage Direction]
These trends in employment in goods-producing industries have been significant and therefore a comparison of trends in employment in manufacturing industries in both Canada and the United States which appeared in a presentation to the Senate Committee on Manpower and Employment is of considerable interest. The comparison was made between the first half of 1953 and the first half of 1960. Over this period there were small declines in the indexes of manufacturing employment in both countries but the decline in the United States was

The Budget-Appendix
about double that in Canada.* In durable goods manufacturing there was a slightly larger decline in employment in Canada than in the United States. This difference arose from a much greater decline in employment in the aircraft, shipbuilding and railroad equipment industries in Canada and was probably related to defence procurement patterns and to timing differences in railroad dieselization programmes in the two countries. In other areas of decline, such as motor vehicles and parts, saw and planing mills and agricultural implements, the fall in employment was much more pronounced in the United States. In the primary iron and steel industry, employment increased in Canada compared with a decline in the United States, and in fabricated and structural steel there was a greater increase in Canada than in the United States.
On the other hand, employment in non-durable goods increased in Canada in contrast to a decline in the United States. This pattern appeared in the manufacture of meat products, beverages, tobacco, and in the petroleum refining industry. Employment in pulp and paper mills increased in both countries, but more rapidly in Canada. There were declines in employment in the manufacture of textile mill products in both countries, the decline in the United States being very much greater.
Turning to longer term developments in the service sector in Canada, all sections of the service industry have become increasingly important as a source of job opportunities as demands for services have increased. In 1960, employment in the service sector was 56 per cent higher than in 1949 and accounted for 52 per cent of total employment. It should be noted that services include business (e. g., accountancy), community (e. g., teaching), personal _(e. g., hairdressing), and government service, as well as trade, financial and similar services, and transportation, communication and storage.
Accompanying this trend, there has been a greater participation by women in the labour market since the greater growth in the service sector has, in the main, provided job opportunities particularly suited to women. In 1949, the participation rate (that is, the proportion of any group who work or seek work) of women in the labour force was 24 per cent and in 1953 was still unchanged. By 1960, however, the rate had risen to 28 per cent, and the rise was most notable for married women in the 25-64 age group. In the 45-64 age group, the female participation rate rose remarkably from 17 per cent to 28 per cent from 1953 to 1960. By contrast, the participation rate for men in 1949 was 85 per cent while in 1960 the rate had fallen to 81 per cent. The decline in the male participation rate was concentrated among the very young and the very old, probably reflecting in the first instance greater school attendance and in the second instance, earlier retirements.
In 1960, the total number of men with jobs was 13 per cent higher than in 1949 while total employment for women increased by 49 per cent. In more detail, there was a decline of 3 per cent in male employment in the goods-producing sector (including agriculture) and no change in the number of females. On the other hand, employment in the service industries was 45 per cent higher for men and 76 per cent higher for women.
The continuation of this trend is evident when averages for the year 1960 are compared with those of 1959. The average number of persons with jobs in 1960 rose by 100,000 or 1.7 per cent. The increase in employment in 1960 was entirely due to increased opportunities for work in the service sector. The
* In Canada the index of manufacturing employment measures employment in establishments having fifteen or more employees. Estimates of employment in all manufacturing establishments in Canada, including those employing less than fifteen workers, suggest that, over the period, total employment in manufacturing may have increased.
[Stage Direction]
The Budget-Appendix

[Stage Direction]
Annual Averages (Thousands of Persons)
-	1957	1958	1959	Prelim. 1960Civilian Labour Force	6,003	6,127	6,228	6,403Male	4,570	4,634	4,679	4,750Female	1,433	1,493	1,549	1,653Non-Agricultural	5,252	5,402	5,525	5,714Agricultural	751	725	703	689Unemployed	278	432	373	448Persons with jobs	5,725	5,695	5,856	5,955In Non-Agricultural Industries	4,981	4,983	5,163	5,280Paid Workers	
Employers, own account workers and	4,460	4,481	4,637	4,747unpaid family workers	521	502	526	533In Agriculture	744	712	692	675Paid Workers	
Employers, own account workers and	96	97	109	110unpaid family workers	648	615	583	565
service sector provided an additional 157,000 jobs in 1960 which more than offset a decline in goods-producing employment of 57,000 persons.
In the goods-producing sector in 1960, employment declined in agriculture, manufacturing, construction and public utilities, these reductions being only partially offset by small gains in the numbers employed in forestry, fishing and mining. It should be noted that even though employment declined in agriculture, manufacturing and public utilities, output increased. In the service sector, all groups except transportation, communication and storage added to the number of their employees. The greatest increase occurred in the sections of the service industry comprising business, community, personal and government services, where employment rose by 115,000 persons or 8.5 per cent.
Although employment in 1960 increased by 100,000, there was an even larger increase in the labour force. The increase was 175,000 or 2.8 per cent. This compares with increases of 1.6 per cent in 1959 and of 2.1 per cent in 1958. This more rapid increase in the labour force in 1960 was largely a matter of an increase in the participation rate of women. In 1960, it is estimated that the number of women in the labour market rose by 6.7 per cent while the increase in the number of men was only 1.5 per cent. In earlier years of the decade, immigration had been an important element in the growth of the labour force. In 1960, net immigration fell to about 30,000 persons, compared with an annual average of just over 100,000 for the decade.
The larger growth in the labour force as compared with the growth in employment was reflected in an increase in unemployment. For 1960 as a whole, an average of 448,000 persons were out of work, as compared with 373,000 in 1959 and 432,000 in 1958. Considering the sexes separately, there were 388,000 men without work in 1960 compared with 326,000 in 1959. At the same time, there were some 60,000 women unemployed as compared with 47,000 in the preceding year. The total unemployment ratio rose to an average of 7.0 per cent in 1960

The Budget-Appendix
compared with 6.0 per cent in 1959 and 7.1 per cent in 1958. The unemployment ratio for men rose from 7.0 per cent in 1959 to 8.2 per cent in 1960, while that for women rose to 3.6 per cent as compared with 3.0 per cent in the previous year.
A survey of registered applicants for employment with the National Employment Service carried out for the Senate Committee on Manpower and Employment revealed some significant characteristics of this group. It showed that there was a concentration of men seeking work in manufacturing and construction activity. The majority of women on the other hand sought employment in offices, stores and restaurants, though a sizeable number of women registered for jobs had been employed in manufacturing. The survey further revealed that 40 per cent of the total number of persons registered for employment possessed no specialized training or qualifications. That is to say, a substantial proportion of Canada's unemployed at the present time are unskilled or only semi-skilled. Employment opportunities for such people are necessarily limited in an economy increasingly calling for skilled workers. In this connection, it is apparent that in the decade of the 1950's Canada relied to a considerable degree on immigrants to meet her growing needs for skilled manpower. Over the period 1953-1959, net immigration accounted for 110,000 craft and technical workers. By comparison, the number of graduates from publicly-operated high school and post-high school technical courses in Canada accounted for only 21,000 technical workers. Of course, in addition to those graduates from Canadian technical schools, a considerable amount of technical training was received "on the job".
The same survey also pointed to the special problems of the 14 to 19 year-olds in the labour market. Such young people represented about 10 per cent of the total numbers registered for employment. Although the participation rate in the labour force for this group has declined during the past ten years, the ratio of unemployment of this group has been double the ratio for all age groups. For example, the participation rate for young people of both sexes between the ages of 14 and 19 fell from 47 per cent in 1949 to 38 per cent in 1960 while the unemployment ratio rose from 5.9 per cent in 1949 to 13.0 per cent in 1960. The unemployment ratio in 1960 was 16.3 per cent for males and 8.6 per cent for females.
It is apparent that the lack of adequate education or training among the unemployed in this lower age group provides an explanation of their difficulty in obtaining employment. Only 18.5 per cent of the total had completed high school or better, 47.2 per cent had had some high school education while as many as 34.3 per cent had finished only their primary school education, or even less. Similarly, only 11.5 per cent of the group were fully trained or qualified occupationally, 33.7 per cent were partially trained or qualified while 54.8 per cent had no technical training or qualifications whatsoever. Both academically and technically the girls in the group had higher educational levels than the boys.
Total labour income in 1960 increased by 4.2 per cent, compared with an increase of 7.5 per cent in 1959. Higher rates of pay and higher average levels of employment in 1960 contributed to the rise in total payments for salaries and wages. The number of paid workers in 1960 was 2.3 per cent higher than in 1959. The comparable increase in 1959 was 3.7 per cent. In manufacturing, average hourly earnings rose by 3.5 per cent, about the same as in 1959, while the average number of hours worked per week declined by nearly one per cent as compared with a rise of slightly more than one per cent in 1959. Per capita annual earnings in 1960 showed an increase of $70.00 or 1.9 per cent, compared with an increase of $133.00 or 3.7 per cent in 1959. After allowing for a small increase in the cost of living in 1960, there was a slight gain in real earnings per capita.
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All regions and all major industrial groups, except mining and construction, shared in the increase in total salary and wage payments. In the service sector, in line with improved employment opportunities, the growth in labour income as a whole was greater than in the goods-producing industries. Wages and salaries paid out in trade, transportation, storage and communication, government, finance and related groups rose by 5.7 per cent in 1960 compared with a gain of 8.1 per cent in 1959, and accounted for about three-quarters of the increase in total wage and salary payments. Earnings in the goods-producing industries rose by 1.9 per cent compared with 6.5 per cent in the previous year. Wages and salaries in the primary industries rose by 3.8 per cent, in manufacturing by 1.9 per cent and in public utilities by 3.4 per cent. Total wages and salaries in construction were at the same level as in 1959.

[Stage Direction]
Prices of goods and services produced in Canada rose in the aggregate about If per cent in 1960, compared with 1959. This was the smallest year-to-year increase in prices since 1955 and compares with an average annual price rise of nearly 2| per cent from the years 1954 to 1960. The increase, 1959 to 1960, was mild for consumer goods and for exports and imports. The gains were somewhat larger for services, capital goods and government expenditure.
The following table shows changes in price for the components of Gross National Expenditure:

[Stage Direction]
-	1959/1958	1960/1959
	+1.3 +0.5 +0.S + 1.7 +2.8 +3.0 +2.9 + 1.8 -0.2	+ 1.2 + 0.6 + 0.8 -0.5 +2.S +3.5 +2.2 +0.7 + 1.7
		
		
		
		
		
		
		
		
		
	+2.4	+1.7
		
1 Price indexes of these sectors are measured mainly by elements entering into costs (materials and labour purchased) rather than final selling prices, and generally it has not been possible to allow for changes in productivity. Over short periods of time, these cost indexes are not likely to vary to any extent from indexes of actual selling prices. Over longer periods, it may be that these cost deflators overstate price increases.
The consumer price index for 1960 averaged 128.0 compared with 126.5 in 1959, an increase of 1.2 per cent. The increase in consumer prices in 1960 compares with increases of 1.1 per cent in 1959 and 2.6 per cent in 1958.
The consumer price index fell in the first quarter of 1960 from 127.5 in January to 126.9 in March. In April the index came back to the January level where it remained, with minor fluctuations, until August when it rose to 127.9. Thereafter, successive monthly increases associated mainly with seasonal movements in food prices raised the index to 129.6 for November and December.
The moderate increase in the consumer price index for 1960 was mainly due to an increase in the services component. The index for total services rose 2.2 per cent while the index for total goods increased less than one per cent. An important element in the rise in the service index was a 2.5 per cent increase in

The Budget-Appendix
health care and a 1.9 per cent increase in shelter costs. Prices of durable goods declined slightly, and all other components of the commodities index showed only minor increases.
. In recent years, consumer prices in Canada have risen less than in most industrialized countries of the world.
TABLE 31 COST OF LIVING 1960	
-	1953=100
Switzerland		
Belgium-Luxembourg		
	
United States		
Germany		
	
	
	
Australia		
United Kingdom		
Netherlands		
Norway		
Denmark		
New Zealand		
	
	
	
Source: UN Monthly Bulletin of Statistics, March 1961.
In Canada, most of the increase in consumer prices which occurred since the war took place in the early post-war period when removal of wartime controls and subsidies and the special situation of the Korean war caused prices to rise rapidly. Since that time, the period of the most rapid increases occurred about the time of the inflationary resource boom of the mid 1950's.

[Stage Direction]
Period	Total Percentage Change over the Period
1940-1948		+25.1 + 6.1 + 13.2 -0.3 +2.5 +5.9 +2.3
1948-1950	 		
1950-1952	 		
1952-1954	 		
1954-1956	 		
1956-1958	 		
1958-1960	 		
	
The trend of consumer prices in 1960 with its greater increases for services than for commodities is typical of developments over the past ten years. The recently revised consumer price index, which provides additional information on the various classifications, shows that between 1949 and 1960 the cost of living increased by 28 per cent. The index for commodities, however, was up only 19 per cent with most component groups showing about the same rate of increase. The index for services, on the other hand, showed an increase of 53 per cent. Excluding shelter, the cost of other services rose by 59 per cent over the ten-year period.
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The changes in prices over the last decade can be seen in the following table.

[Stage Direction]
-	1960 1949
	+28.4
	+19.4
	+17.7
	+22.6
	+18.2
	+16.0
	+25.2
	+19.5
	+17.6
	+6.0
	+20.9
	+53.4
	+59.4
	
Although services represent only about one-quarter of total consumer spending, the much more rapid increase in service prices has accounted for nearly one-half of the total rise in consumer prices since 1949.
Since 1949, the greatest increases in Canadian prices have taken place in services and in capital outlays. The increase in service costs is due in part to the increasing demand for services and in part to the difficulties involved in raising technological productivity in many service industries. The increase in the prices of capital goods has also reflected conditions of strong demand. To a lesser degree, as has been noted, the price statistics probably overstate the extent of price increase for capital goods.
By contrast, there have been lesser increases in wholesale prices since 1949, and an actual decline in the total index from the peak in 1951. In contrast to retail prices, the wholesale price index is influenced much more by the movements in world commodity prices and much less by elements of service. Movements in wholesale prices over the past decade have reflected the greater availability of raw materials and industrial commodities. The general index of wholesale prices has been unchanged since the beginning of 1959.

[Stage Direction]
INDEXES OF SELECTED WHOLESALE PRICES 1949 = 100
-	1949	1951	1959	1960Raw and partly manufactured goods	
Fully and chiefly manufactured goods	100.0 100.0 100.0 100.0	120.7 121.7 135.8 125.4	107.0 121.3 110.2 140.0	106.2 121.5 110.3 141.2Iron and non-ferrous metals and products	
Total index of General Wholesale Prices	100.0	121.1	116.3	116.3
Note: Indexes have been mechanically converted from a 1935-1939 base.

The Budget-Appendix
CANADIAN WHOLESALE AND CONSUMER PRICE INDEXES index	1949 = '00

[Stage Direction]
Canada s international trade in 1960 reflected the divergent trends in economic activity in North America and other parts of the world. The industrial countries outside North America enjoyed a vigorous rate of economic growth in 1960 and Canadian exports to the United Kingdom, western Europe, Japan and some other overseas countries increased sharply. Exports to the United States declined.
Total Canadian merchandise exports rose by nearly 5 per cent in 1960. On the other hand, merchandise imports declined fractionally compared with an increase of about 10 per cent in the preceding year. Consequently, the trade

[Stage Direction]
The Budget-Appendix deficit in 1960 of $148 million was scarcely one-third as large as the $423 million deficit incurred in 1959. This improvement in the balance arising from commodity trade was more than sufficient to offset a further increase in the deficit on non-merchandise transactions which rose from $1,071 million in 1959 to $1,122 million in 1960. As a result, the total current account deficit declined from $1,494 million in 1959 to $1,270 million in 1960, a decline of $224 million, or 15 per cent.
The value of merchandise exports in 1960 amounted to $5,400 million as compared with $5,149 million in the previous year. Increases in commodity exports occurred in most of the major categories, with agricultural products constituting the principal exception. In agriculture, declines were fairly general. The most significant gains occurred in exports of copper, aluminum, newsprint, nickel, lumber and chemicals. Considerable increases also took place in exports of asbestos, crude petroleum, rolling mill products, non-farm machinery, wood-pulp, oil seeds and zinc. There were sizeable declines in exports of uranium, farm implements, wheat and other grains and in fishery products.

[Stage Direction]
INTERNATIONAL PAYMENTS: CURRENT ACCOUNT
Current Receipts-
Merchandise exports (adjusted)1....
Gold available for export	
Travel expenditures	
Interest and dividends	
Freight and shipping	
Inheritances and immigrants' funds, Other current receipts	
Total Current Receipts..
Current Payments-	_
Merchandise imports (adjusted) -
Travel expenditures	
Interest and dividends	
Freight and shipping	
Inheritances and emigrants' funds.. Other current payments	
Total Current Payments.
Balance on Merchandise Trade	
Balance on other Transactions	
Current Account Balance	
1957	1958	1959	1960
	(Millions of dollars)		
4,894	4,887	5,149	5,400147	160	148	161363	349	391	417154	168	183	175445	401	420	415124	97	109	102388	375	385	3896,515	6,437	6,785	7,0595,488	5,066	5,572	5,548525	542	598	632589	612	657	655515	460	525	526157	145	164	181696	743	763	7877,970	7,568	8,279	8,329-594	-179	-423	-148-861	-952	-1,071	-1,122-1,455	-1,131	-1,491	-1,270
1 Aid to NATO countries under Defense Appropriation Act has been excluded.
Estimated Geographical Distribution of the Net Balance on Current Account
-	1957	1958	1959	Prelim. 1960Between Canada and-	-1,579 + 118 +4 +67 -65	(Millions c -1,176 +104 +69 +41 -169	f Dollars) -1,241 +16 +2 -110 -161	-1,377 +152 +44 -12 -77
Other Countries					
	-1,455	-1,131	-1,494	-1,270
				

The Budget-Appendix
Turning to consider a rather longer period of recent history, it is clear that considerable changes in Canada's export trade have occurred over the last seven years. Since 1953, exports from Canada's resource industries have increased substantially and the capacity of these industries to meet the growing world demand has greatly expanded. The expansion of exports of the other fabricated products industries was on a somewhat smaller scale, though the expansion in chemical exports was impressive. Exports of farm products were unusually high during the period 1951-53. Since then they have been somewhat lower (but higher than in the immediate postwar period). The value of total domestic exports rose by 28 per cent during this period. Considerable diversification in export trade has taken place and is illustrated by the rising importance of a number of export commodities. The table which follows shows the changes among the important commodities.

[Stage Direction]
EXPORTS OF SELECTED ITEMS 1953 and 1960
-	1953	1960	Actual Change in $ millions 1900 1953	% 1960 1953
	(Millions of dollars)			
Farm Products-Total	1,135.7	880.7	-255.0	-22.5Wheat	567.9	410.5	-157.4	-27.7Wheat flour	102.2	62.2	-40.0	-39.1Barley	136.7	51.4	-85.3	-62.4Oats	60.4	5.8	-54.6	-90.4Oilseeds	15.0	68.3	+53.3	+355.3Animal products	137.1	182.5	+45.4	+33.1Other	116.4	100.0	-16.4	-14.1Fishery Products-Total	113.8	137.4	+23.6	+20.7Forest Products-Total	1,292.2	1,579.6	+287.4	+22.2Lumber	283.2	346.3	+63.1	+22.3Wood pulp	248.7	325.1	+76.4	+30.7Newsprint	619.0	757.9	+ 138.9	+22.4Other	141.3	150.3	+9.0	+6.4Primary and Semi-Processed Metals and Minerals	-Total	905.7	1,825.1	+919.4	+101.5Iron ore	30.8	155.5	+ 124.7	+404.9Primary and semi-finished steel	70.4	156.8	+86.4	+ 122.7Aluminum	177.9	269.4	+91.5	+51.4Copper	124.7	223.9	+99.2	+79.6Nickel	162.5	258.3	+95.8	+59.0Zinc	57.7	63.7	+6.0	+10.4Asbestos	84.6	121.1	+36.5	+43.1Uranium ores and concentrates	n.a.	263.5	indeterminate	Crude petroleum	6.2	94.5	+88.3	+1,424.218.1	+18.1	terminateOther	190.9	200.3	+9.4	+4.9Chemicals-Total	137.9	237.8	+99.9	+72.4Other Manufactured and Miscellaneous Goods-	Total	532.2	605.8	+73.6	+13.8Whiskey, spirits and beer	66.2	83.7	+17.5	+26.4Farm machinery and parts	74.3	85.4	+11.1	+14.9Other machinery and parts	37.3	67.1	+29.8	+79.9Trucks and automobiles	58.4	28.1	-30.3	-51.9Truck and automobile parts	17.0	23.8	+6.8	+40.0Electrical apparatus	37.7	47.3	+9.6	+25.5Other	241.3	270.4	+29.1	+12.1Total Domestic Exports	1,117.5	5,266.4	+1,148.9	+27.9
n.a.=not available.
[Stage Direction]
The Budget-Appendix
The value of merchandise imports in 1960 was $5,548 million, fractionally below the $5,572 million value in 1959. This is in sharp contrast with the strong growth in imports which has been characteristic of the past decade as a whole. The relative stability in total merchandise imports between 1959 and 1960 also contrasts with the increase in the Gross National Product; the ratio of imports of goods to G.N.P. was among the lowest in the postwar period. In general, increases and decreases in all categories of imports were small. The largest declines occurred in imports of petroleum products, machinery and rolling-mill products. The greatest increases took place in aircraft and automobile and parts.
As indicated above, there were some significant changes in Canada's pattern of trade in 1960. Exports to the United States declined by $150 million, nearly 5 per cent, while sales to all other countries grew by $401 million, or 20 per cent. On the other hand, imports were slightly lower, both from the United States and from all other countries taken as a group.
Canada's trade with countries other than the United States also displayed a changing pattern. Sales to the United Kingdom rose by $143 million while imports from that country were $9 million lower. Exports to other Commonwealth countries grew by $53 million, and imports by $20 million.
A major increase occurred in exports to western Europe where shipments increased by $144 million, or by one-third. Exports to "All Other Countries" rose by $57 million of which $38 million was to Japan. Imports from "All Other Countries" declined by $41 million.

[Stage Direction]
PERCENTAGE CHANGE IN MERCHANDISE TRADE 1960/1959
-	Exports	ImportsBetween Canada and- United States	-4.7 +18.3 +18.3 +33.0 +12.9	-0.2 -1.5 +7.6 +4.1 -6.8United Kingdom	Rest of the Sterling Area	Other O.E.E.C. Countries	All Other Countries	All Countries	+4.9	-0.4
As a result of these developments, there was an increase in the trade deficit with the United States, an increase in the trade surplus with the Commonwealth, including the United Kingdom, and the re-emergence of a substantial trade surplus with all other countries.
The proportion of total Canadian exports going to the United States declined in 1960 while all other areas increased their share. The proportions of total imports coming from the United States and the United Kingdom were almost unchanged from 1959. The rest of the sterling area and other O.E.E.C. countries increased their share of the Canadian market while the share of "All Other Countries" declined.
As mentioned earlier, the deficit on non-merchandise transactions totalled $1,122 million in 1960. This was an increase of $51 million, or 4.8 per cent, and was the smallest relative increase recorded since 1952. Over the last eight years, the average annual increase has been about 20 per cent.

The Budget-Appendix

[Stage Direction]
MERCHANDISE TRADE: PERCENTAGE DISTRIBUTION
	Exports		Imports	
1959	1960	1959	196061.9	56.3	66.9	67.015.2	17.1	11.1	11.05.6	6.3	4.7	5.18.7	n.i	6.5	6.88.6	9.2	10.8	10.1
100.0	100.0	100.0	100.0
				
All major components of the non-merchandise account, except gold production available for export, shared in the growth of the deficit on non-merchandise trade. Larger deficits occurred in freight and shipping services and migrants' funds and inheritances resulting from a decline in receipts combined with an increase in payments on such accounts. There was a greater growth in payments than in receipts for foreign travel and in the "miscellaneous" account (which includes payments for a variety of business services). There was also a greater reduction in receipts than in payments on income account arising out of the remittance of interest and dividends. All of these changes contributed to the further growth in the deficit on non-merchandise trade.

[Stage Direction]
Examining the non-merchandise items in more detail, the deficit on income account in 1960 amounted to $480 million, or 43 per cent of the total deficit on non-merchandise transactions. Interest receipts from abroad rose, but dividend receipts declined. Payments of interest abroad were |higher due mainly to sizeable net sales of provincial, municipal and corporate bonds in the United States in 1959 and the first half of 1960. On the other hand, dividend payments abroad declined.
[Stage Direction]
The Budget-Appendix
The deficit arising from government transactions other than official contributions rose by a substantial amount. This was the result of a decline in external receipts, due partly to a lower level of United States government defence expenditures in Canada, and to an increase in external payments, mainly attributable to larger Canadian defence expenditures abroad. Official contributions declined, due mainly to the absence in 1960 of relief wheat shipments to countries in South-East Asia which were sizeable in the two previous years.
Canada's international balance of payments includes very substantial capital transfers of many kinds and moving in both directions. Net capital transfers, including changes in private and official holdings of foreign exchange, are necessarily equal to the balance on current account. In recent years, the net capital movement has been strongly inward. Such balance has been achieved in recent years with relatively little change in official holdings of foreign exchange, largely through the fluctuations in the exchange value of the Canadian dollar in response to changes in the supply of and demand for currencies entering into Canada's external transactions.
The large net inflows of capital from abroad have been associated with the high rate of capital investment in Canada and reflect the favourable investment opportunities in this country, certain relative tax advantages, as well as comparative interest rates prevailing in Canada and abroad.
During the past five years, these inflows have varied between $1.1 billion and $1.5 billion annually. Although there have at times been large inflows of short-term capital, the major inflow has been of a long-term nature. Some of the long-term capital represents portfolio investment by foreigners, in the form of stocks and bonds and presumably reflects favourable rates of return, current and prospective, on this type of investment. The other important form of longterm capital inflow has been represented by direct investment in foreign-con-trolled enterprises. Direct investment may take the form of the establishment of new enterprises and part of the new plant facilities may be imported from abroad. Alternatively, it may be in the form of the acquisition of existing Canadian enterprises, thus freeing the financial resources of the previous owners. In many instances, direct investments are undertaken to provide commodities for general export or for the direct use of the non-resident parent company and thus lead to increased exports in subsequent years. In other cases, they are designed to exploit the domestic Canadian market and thus displace imports.
Such cases are strikingly illustrated in the example of petroleum, natural gas and mineral production where a large share of foreign direct investment has been placed. Exports of crude petroleum and iron-ore have increased dramatically since 1953. Imports of petroleum products have declined over this period while the growth of iron-ore imports has not been as large as the growth in Canadian consumption. Other mining products developed by external capital such as copper, nickel, aluminum and asbestos have also registered sharp increases in exports.
Portfolio investment from abroad is of a financial nature and is not connected directly with any compensating inflows of goods and services. Most short-term capital movements are also of a financial nature. The normal method by which the net inflow of financial capital is translated into a real movement of goods and services is through the operation of the exchange rate. Movements in the exchange rate may, under certain circumstances, induce changes in the flows of capital. Considered by themselves, however, inflows of financial capital tend to raise or maintain the exchange value of the Canadian currency. The high level of the Canadian dollar tends, in turn, to reduce the export and to increase the import of goods and services by an amount equivalent to the net inflow of capital.

The Budget-Appendix
Inflows of direct investment funds, on the other hand, sometimes take the form of the direct provision of goods and services. For example, a direct foreign investment in a mining property may involve the importation of machinery and technical services. To the extent that this occurs, the additional imports matching the capital imports come in without involving the exchange market or the exchange rate. But more frequently, the inflow of direct investment is not directly tied to the importation of goods and services, and the importation of a corresponding amount of goods and services takes place indirectly, as in the case of the inflow of other financial capital, through the mechanism of the exchange rate.
The net inflow of long-term capital, in the form of direct investment, portfolio stocks and bonds and official loans and other long-term investments, amounted to about $875 million in 1960, compared with $1,088 million in 1959.
Within the total of long-term capital, there was a change in composition in 1960. For the first time since 1956, when Canadian provincial, municipal and corporate new security issues sold abroad reached very large proportions, direct investment re-emerged as the principal source of long-term capital inflows. Net inflows for direct investment showed a substantial increase while net inflows from security transactions were less than one-third the average inflow for the preceding four years. Consequently, direct investment in 1960 accounted for about 69 per cent of the total long-term movement compared with 43 per cent in 1959 and about 37 per cent in the preceding three years.
About 85 per cent of the net long-term capital inflow during 1960 came from the United States compared with 79 per cent in 1959. The United Kingdom's share fell from 9 per cent to 7 per cent; withdrawals of portfolio capital more

[Stage Direction]
INTERNATIONAL PAYMENTS: CAPITAL MOVEMENTS
1957	1958	1959	Prelim. 1960
	(Millions c	f dollars)	
+514	+420	+550	+690-68	-48	-80	-85-45	+91	+7+137	+88	+110	+48+798	+677	+707	+397-133	-158	-258	-225+6	+3	-33	-9-34	-1	+50	+64	+34	+32-59	-3-35	+106	+13	+115+105	-109	+70	+39+126	+122	+350	+264+1,455	+1,131	+1,494	+1,270
Direct investment in Canada. Direct investment abroad...
Canadian securities-
Trade in outstanding bonds and debentures.
stocks___
New issues... Retirements.
Foreign securities.
Loans by Gov't of Canada-Drawings....
Repayments.
dollars	
Change in Canadian dollar holdings of foreigners.
(increase, - )	
Other capital movements.
Net capital movement	 +1,455
[Stage Direction]
The Budget-Appendix than offset an increase in direct investment inflows. The share originating in other overseas countries also fell, from 12 per cent to 8 per cent, with direct investment being higher and inflows from security transactions lower.
The movement of foreign capital into Canada for direct investment in foreign-controlled enterprises during 1960 totalled $690 million, $140 million higher than in 1959 and $100 million above the largest figure recorded previously. The petroleum and natural gas industry attracted the largest part of the net inflow for direct investment, probably more than one-third. Direct investment in mining concerns, especially iron-ore projects and ancillary facilities, showed an even greater growth, and also accounted for nearly one-third of total direct investment inflows. The largest part of the movement occurred in the early part of the year.
The net capital import through security transactions amounted to $218 million in 1960. This movement was much smaller than in the years 1956 to 1959 (when it ranged between $610 million and $763 million) but was larger than in all but two of the ten preceding years. As between the various types of security transactions, there were substantial reductions both in the sale of new Canadian issues to non-residents and in the net sale abroad of outstanding Canadian stocks and bonds. At the same time, the redemptions of foreign-held Canadian securities were somewhat below the level in 1959. As with direct investment, the largest part of the net inward movement in security transactions occurred early in the year. In the final quarter of the year, the movement was outward.
A large part of the smaller increase in portfolio investment was accounted for by a sharp drop in net sales to non-residents of new provincial government issues, which fell from $293 million in 1959 to $55 million in 1960. Total funds raised by provincial governments in both years, including bank loans, were almost unchanged, but in 1960 a far greater proportion was raised in Canada. This development may be attributable in part to the ability of the provinces to borrow at declining rates of interest in Canada during the first three quarters of 1960, at a time when United States interest rates were comparatively stable. In part, the heavier borrowing in Canada may have reflected a greater concern on the part of borrowers as to the exchange risks on foreign borrowings. The budget speeches of the Minister of Finance in March and December, 1960, stressed to borrowers the risks involved in undertaking commitments expressed in foreign currencies.
The inflow of long-term capital into Canada for 1960 was less than it had been in 1959, and fell during the course of the year. This decline in capital inflow relaxed the upward pressure on the exchange value of the Canadian dollar. The general downward movement in the exchange rate was to some extent offset by shorter-term capital movements particularly in the fourth quarter.
A sharp rise in holdings by foreigners of Canadian dollar balances and short-term paper occurred in the latter half of the year with increases of $45 million and $75 million in the third and fourth quarters respectively; the inflow for the year as a whole was $115 million. Larger holdings by residents of the United States and overseas countries other than the United Kingdom accounted for most of the increase. In 1960, non-resident holdings of Canadian treasury bills rose by $56 million. In explanation, it may be noted that in the latter half of 1960 treasury bill yields in Canada were considerably above those of the United States even after providing for the cost of exchange "hedging". Incidentally, the holdings of Canadian dollars and short-term paper by foreigners have risen in each of the past three years and now total over $600 million, including $120 million of treasury bills.

The Budget-Appendix

[Stage Direction]
1960				
	I | II | III | IV | Total				
	+195 +200	(Millio +150 +91	ns of dol +145 +6	ars) +115 -85	+605 +218
					
Sub-total						
+401	+m	+151	+S0	+823Official holdings of gold and foreign exchange	+11	+82 +7 +156	-40 -1 +28	-14 +23 +279	+39 +29 +379
Other capital movements (including changes in	-84				
					
	+328	+486	+138	+318	+1,270
					
The inflow of "all other" capital movements in 1960 totalled $264 million, an amount considerably smaller than in 1959. However, $204 million of this inflow occurred in the fourth quarter, representing a movement of almost record proportions.
It may be assumed that the sharp inflow of short-term capital in the fourth quarter of 1960 was associated with the existence of more attractive short-term interest rates in Canada relative to the United States, and with relatively less attractive rates in London. Some short-term capital may have entered Canada from countries suffering political disturbances. The role of expectations is difficult to gauge, but shifts in expectations about movements in the rate were probably a factor in the fourth quarter.
To complete the description of capital movements in 1960, there was a capital outflow of $3 million representing Canada's foreign exchange subscription to international financial organizations and capital inflows of $32 million resulting from repayments on intergovernmental loans. There was also a slight reduction in official holdings of gold and foreign exchange of $39 million. At December 31, 1960, Canada's official exchange reserves amounted to U.S. $1,829 million compared with U.S. $1,869 million at the end of 1959.

[Stage Direction]
1957	1958	1959	1960Exchange Fund Account and Bank of Canada- Gold 	1,100.3 697.5 30.5	(Millions of 1,078.1 800.0 61.0	U.S. Dollars 959.6 879.4 30.2	) 885.3 914.9 29.0U S. Dollars	
1,828.3	1,939.1	1,869.2	1,829.2
				
The exchange value of the Canadian dollar declined generally throughout 1960 apart from an increase at mid-year. In December it reached its lowest point since March, 1956. The average rate of exchange for the United States dollar, in terms of the Canadian dollar, at its low tinop in March, 1960 was
[Stage Direction]
The Budget-Appendix 94.94. In December, 1960 it rose to a high of 99.81 and closed the year at 99.66. For 1960 as a whole, the average noon rate was 96.97 compared with 95.90 in 1959.

[Stage Direction]
The financial environment in the western world is considerably different now from what it was a decade ago. To begin with, there has been a gradual reduction in the degree of financial liquidity accumulated during and just after World War II. At the same time, demands for capital by the underdeveloped countries of the world have continued to grow. The heavy capital requirements involved in replacing the social and industrial structure of western Europe had scarcely begun to diminish when the impetus of European integration took its place. A somewhat tardy recognition of the dangers of inflation related to the period of post-war material shortages invoked a rediscovery of monetary policy as an effective economic weapon. More recently, the removal of some of the barriers to the international movement of capital among the more industrialized countries of the western world has encouraged an increasing flow of funds across political boundaries to take advantage of investment opportunities wherever they might be found.
For a variety of reasons, these among them, interest rates in western countries have tended to rise: the spread between rates in different countries has narrowed, through a process of "evening up" rather than "evening down". The following table illustrates this development:

[Stage Direction]
-	1950	1953	1954	1955	1956	1957	1958	1959	19602.78	3.68	3.14	3.23	3.58	4.10	4.22	4.86	5.052.32	2.92	2.52	2.80	3.06	3.47	3.43	4.07	4.02U.K	3.54	4.08	3.75	4.17	4.73	4.98	4.98	4.82	5.43Germany	fi 9	fi R	France	6.52	5.41	5.38	5.21	5.28	5.92	5.68	5.27	5.16Netherlands	3.28	3.43	3.31	3.26	3.84	4.58	4.32	4.12	4.21Belgium	4.42	4.40	4.27	4.16	4.21	4.69	4.57	4.27	4.30Italy	5.73	6.06	6.06	6.20	6.74	6.81	6.61	5.43	5.24Sweden	3.11	3.27	3.24	3.70	3.75	4.33	4.33	4.28	4.56Australia	3.14	4.48	4.46	4.52	5.03	5.02	4.97	4.91	5.00
.. not available.
Source: International Financial Statistics, February, 1961.
The growing interdependence of world capital markets has made it increasingly difficult for individual countries to pursue completely independent fiscal and monetary policies, devised to suit purely internal domestic situations. For countries with fixed exchange rates the decline (as in the case of the U.S.) or accretion (as in the case of Germany) of exchange reserves requires the adaptation of national policies to the international environment.
In the case of Canada, our floating exchange rate cushions the pressure of external forces, but does not permit us to avoid adjusting our economy to the rest of the world. Movements in capital still take place in response to investment opportunities revealed in part in interest rate differentials, although they may display their force more through movements in the exchange rate than through changes in the level of exchange reserves.

The Budget-Appendix

[Stage Direction]
Turning now to developments in Canada in 1960, the total effective demand for new capital by all categories of borrowers, measured by the amounts they were able to raise through the banking system and on the capital markets, was down sharply from the level of 1959. The one important exception to this generalization concerned the provincial governments, which in total raised slightly more capital in 1960 than in 1959. The following table, while not complete in its coverage of all borrowing and lending of Canadians, does give a general outline of the activity which took place in the capital markets in 1960 as compared with 1959. It should be noted that the "sources of funds" include all net new issues of securities both in Canadian and foreign currencies, as well as the net change in bank loans to provincial and municipal governments, instalment finance companies, grain dealers, and in general loans and insured mortgage loans.
Funds raised by private borrowers in 1960, particularly those of business and industry, registered the greatest proportionate decreases from 1959. The slowing down of the rate of economic activity caused corporations to revise their investment plans downward and, after mid-year, to reduce inventories, while the total amount of business savings was somewhat higher in 1960 than in 1959.
While the total funds raised in 1960 from all sources declined from the level of the previous year, the volume of securities denominated in foreign currency
[Stage Direction]
The Budget-Appendix

[Stage Direction]
1959 Total			1960		
Total	IQ	2Q	3Q	4QRaised by: Government of Canada	1,058	669	(Millions c 265	f dollars) -81	-192	678of which: Net New Issues of Securities	726	612	176	-1S6	-64	6S7Net Disinvestments (+) in Government Accounts	+SS6	+57	+89	+55	-128	+41Provincial Governments	540	556	48	233	165	110Municipal Governments	340	301	147	22	53	79Private Borrowers	1,542	824	262	437	62	63of which: Business1	1,026	554	S47	248	S	-44Personal	516	270	-85	189	59	107Grand Total	3,481	2,350	722	611	87	930Raised from: Securities Markets	2,614	1,951	695	490	23	743Bank Loans	867	399	27	121	64	187
Note: Figures may not add due to rounding.
1 Contains a residual item to balance both sides of the account.
declined even more sharply to less than one-half of the 1959 total. As the table below indicates, the sharpest decline in borrowing abroad during 1960 occurred in provincial issues.

[Stage Direction]
1959 Total	1960				
		Total	IQ	2Q	3Q	4Q
		(Millions of Canadian dollars)				
Federal	-149	-i	-1	Provincial	239	20	21	30	9	-39Municipal	115	84	70	21	-2	-6Corporate (including corporate stocks)..	16	-1	20	7	-22	-6Total	221	103	112	58	-15	-51
Note: Figures may not add due to rounding.
Considering net new issues of securities in Canadian currency, it is evident from the table below that the net amount of new issues of bonds sold by the federal government, including the net disinvestment in government securities by various government accounts, was considerably lower in 1960 than in 1959. Securities issued in Canada by provincial and, to a lesser extent, municipal governments were, however, at a markedly higher level in 1960 than they were in 1959.
The increases in net new issues in Canada by provincial and municipal governments wTere offset by the decreases already noted in net foreign issues, so that the total of new security issues by these levels of government was considerably lower in 1960 than in 1959. Similarly, the increase in domestic corporate issues was offset by a slight decrease in the issue of corporate bonds denominated in foreign currency. More significant, hcwever, was the sharp drop in new corporate stock offerings in 1960. The net amount of $222 million issued during the year was just over one-half the 1959 figure of $404 million. Consequently,

The Budget-Appendix

[Stage Direction]
1959			1960		
	Total	Total	IQ	2Q	3Q	4Q
			(Millions of dollars)			
Market Issues- Government of Canada (Direct and Guaranteed): Net Disinvestment (+) in Govern-						
ment Accounts	335	57	89	55	-128	41Treasury Bills	582	-92	48	-160	-	20Other Market Issues	-28	323	197	108	-7	25Sub-total	889	288	SS4	3	-135	86Provincial Governments	331	446	48	201	147	50Municipal Governments	211	232	22	82	42	86Corporations and "Other"	105	269	153	121	45	-50Sub-total	647	947	223	404	234	86135	10	52	1	-44	1Corporate Stocks	404	222	43	107	41	30Total Market Issues	2,075	1,467	652	515	96	203Non-Market Issues-	Canada Savings Bonds	317	382	-69	-84	-57	592Grand Total	2,392	1,849	583	431	39	795
total funds raised in the Canadian securities market by corporations decreased from $493 million in 1959 to $471 million in 1960. Moreover, almost all of these funds were obtained in the first half of 1960. Since there was a net redemption of corporate bonds in the latter half of the year, the net funds raised in the market by corporations between July and December amounted to only $62 million.
Excluding the net disinvestment in government securities by government accounts, the federal government made net new issues of direct and guaranteed securities (including C.N.R.'s) in the Canadian market in the amount of $613 million, as compared with net issues of $817 million in 1959. Taking into account the net redemption of federal securities denominated in foreign currency, the net amount of new issues in 1960 increased the total of government direct and guaranteed securities outstanding to $17,747 million at December 31, 1961. Of this total, an amount of $16,881 million was held outside government accounts.
The total of federal government securities held outside government accounts increased from December 31, 1957 to December 31, 1960 by $3,083 million. Of this amount, somewhat more than one-half represents debt assumed by the federal government as the counterpart of loans, investments and debt guarantees made to various Crown corporations for commercial and quasi-commercial operations, particularly in the fields of transportation and housing. Reflecting this increase in assets, the net debt of the federal government (i.e., the difference between total liabilities and total assets) increased from March 31, 1957 to March 31, 1961 by only $1,434 million, to a level of $12,442 million.
To supplement the analysis of the demands on the Canadian capital market in 1960, the following table indicates changes in the volume of financing by various categories of borrowers through the medium of bank loans, excluding
[Stage Direction]
The Budget-Appendix

[Stage Direction]
1959 Total	1960				
		Total	IQ	2Q	3Q	4Q
			(Millions of dollars)			
Business:						
Under $1,000,000	200	136	121	113	-8	-90$1,000,000-$4,999,999	114	39	20	30	-2	-9$5,000,000 and over	38	-39	-75	-27	-11	74Sub-total	S5t	1SS	66	116	-SI	-25Personal and Mortgage	341	141	1	89	25	26Provincial	-30	89	-22	2	10	99Municipal	14	-14	54	-81	13	-Other	191	46	-72	-5	37	87Total	867	398	27	121	64	187
1 Includes insured residential mortgage loans and excludes day-to-day loans, call and short loans, and loans for the purchase of Canada Savings Bonds.
call and day loans and loans for the purchase of Canada Savings Bonds. The figures in this table are not exactly comparable with those in Table 43, due to the inclusion, as already noted, of a residual adjustment in that table. It will be noted that the increase in bank loans during 1960 was less than half that in 1959. However, the provincial governments, which had on balance repaid loans in
1959,	borrowed $89 million net in 1960 from the banking system.
From the above table it is apparent that, of the increase in bank loans during 1960, about one-third occurred in the business category, with increases in loans under $5 million being partially offset by decreases in loans in excess of this figure. Loans to public utilities and transportation increased, but much of this increase represented loans at the end of 1960 to major provincial utilities commissions in anticipation of the issue of bonds after the beginning of 1961. While loans to merchants and other businesses continued to increase during
1960,	the net new demand for funds by these borrowers was less than in 1959. Loans to most categories of industry decreased during the year. The increase in personal loans and insured residential mortgage loans which occurred in 1960 was almost wholly the result of a rise in personal unsecured loans, since there were equal offsetting movements in personal secured loans and home improvement loans. The chartered banks made only a negligible contribution to the funds supplied for residential mortgages in 1960. Loans to provincial governments were considerably greater in 1960 than in 1959, particularly in the latter half of the year, when demands on the long-term Canadian capital market by provincial governments as a group were smaller than normal, and when there was a net redemption of foreign-pay provincial securities. The increase shown under "other" loans was made up of increases in loans to farmers, grain dealers and institutions, partially offset by decreases in loans to instalment finance and small loan companies.
National income increased less in 1960 than in 1959. The rate of total saving declined, and the general public* increased its holdings of financial assets in 1960 by only $2,304 million as compared with $3,270 million in 1959. During 1960, there was a marked change in the relative liquidity of the financial assets acquired by the public. The following table indicates the net changes in public holdings of financial assets, segregated by the relative liquidity of these assets.
* General public is defined to include all holders other than Bank of Canada, chartered banks and government accounts. It includes, for example, corporations, financial institutions other than chartered banks, provincial and municipal government accounts and non-residents, as well as resident persons.

The Budget-Appendix

[Stage Direction]
(Differentiated as to Degree of Liquidity)
	1959 Total	1960				
		Total	IQ	2Q |	3Q |	4Q
			(Millions of dollars)			
More Liquid Assets:						
Treasury Bills	341	-207	-21	-143	-104	61Canada Savings Bonds	317	382	-69	-84	-57	592135	10	52	1	-44	1Currency and Bank Deposits	-138	615	-105	244	394	82Total	655	800	-143	18	189	736Less Liquid Assets:	Other Gov't, of Canada Market Issues.	1,100	178	336	55	-173	-40Provincial Bonds	640	489	65	232	179	13Municipal Bonds	316	313	96	106	37	74Corporate and Other Bonds	155	297	178	129	37	-47Corporate Stocks	406	227	44	109	43	31Total	2,617	1,504	719	631	123	31Grand Total	3,270	2,304	576	649	311	768
Note: Figures may not add due to rounding.
During the first half of 1960, the increase in financial assets was more than accounted for by increases in public holdings of federal government and other bonds and of corporate stocks, since there was a net decrease during this period in more liquid holdings. This situation was reversed in the latter half of the year, mainly as a result of the usual heavy purchases of Canada Savings Bonds in the fourth quarter, but also due to an increase in holdings of currency and bank deposits.
Broadly corresponding to the increases in deposits with chartered banks during 1960, there was an increase in total bank assets. Assets at December 31, 1960, totalled $12,800 million as compared with $12,047 million at the end of 1959, an increase of $753 million. Of this increase, $582 million occurred in the final quarter of 1960. As will be seen from Table 48, a rise in bank holdings of Government of Canada bonds and of general loans accounted for most of the total increase in assets. A comparison of year-end totals of liquid assets conceals a sharp movement during the year: there was a large increase in bank liquidity in the early part of the fourth quarter of 1960 partially offset by a decline during November and December as the banks transformed liquid assets into assets of higher yields.

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-	Dec. 31, 1959	Dec. 31, 1960	Change(M 2,028 1,827 6,003 968 1,221	illions of dolla 2,131 2,088 6,396 971 1,214	rs) +103 +261 +393 +3 -7
Canadian loans (ex. day-to-day and call)				
			
Total				
	12,047	12,800	+753
			
1 Comprising Bank of Canada notes and deposits, day-to-day loans and treasury bills.
[Stage Direction]
The Budget-Appendix
During the first three quarters of 1960, interest rates declined reflecting the generally lower demands on the capital market, and a parallel movement in interest rates in the U.S. After reaching a low point towards the end of the third quarter, rates rose fairly rapidly during the final quarter. The level at the end of 1960 was, however, below that a year earlier.
As usual, movements in the yields of three-month treasury bills during 1960 were considerably sharper than those of other interest rates. From a high of 5.14 per cent early in January, 1960, the three-month yield declined to 1.68 per cent late in September. In the subsequent nine-week period it increased rapidly, reaching a level of 3.95 per cent by the end of November, after which the rate dropped to 3.25 per cent by the end of December. The level has been generally maintained into 1961, and at March 30, 1961, the yield was 3.21 per cent. In addition to these major movements, however, there were during 1960 considerably more short-term swings in the three-month yield than in 1959.
While following the same general pattern, the changes in medium and longterm yields were more moderate. Medium-term yields decreased steadily until the end of September. During the final quarter of the year, this decline was reversed, but the yields at the end of the year were lower than in December, 1959. The yields on Government of Canada 2-3/4 per cent bonds due June 15, 1967-68, declined from 5.37 per cent at the end of 1959 to 4.09 per cent in September, then rose to 4.74 per cent in December. The yield on long-term maturities followed a similar but less pronounced movement. Government of Canada 3-3/4 per cent bonds of January 15, 1975-78, yielded 5.60 per cent at the end of 1959, 4.84 per cent in September, 1960 and 5.41 per cent at year-end.
Provincial, municipal and industrial bond yields followed a pattern during 1960 similar to that of other interest rates. The prime commercial lending rate of the chartered banks, which rose from 5-1/2 per cent to 5-3/4 per cent in April, 1959, remained at this level throughout the whole of 1960. Similarly, the interest rate on savings deposits in the chartered banks remained at 2-3/4 per cent throughout the year.

[Stage Direction]
End of1	Medium Bonds2	Long Bonds3	91-Day Treas. Bills	Canada	U.S.	Spread	Canada	U.S.	Spread	Canada	U.S.	Spread1959-	March	4.75	3.92	.83	4.88	3.95	.93	4.30	2.77	1.53June	4.83	4.33	.50	5.08	4.09	.99	5.11	3.16	1.95September	5.30	4.65	.65	5.61	4.12	1.49	5.50	4.19	1.31December	5.37	4.90	.47	5.60	4.41	1.19	5.12	4.52	.60I960-	March	5.17	4.22	.95	5.32	4.13	1.19	3.01	2.79	.22June	4.50	4.03	.47	5.08	3.83	1.25	3.07	2.40	.67September	4.09	3.55	.54	4.84	3.76	1.08	1.70	2.29	-.59December	4.74	3.72	1.02	5.41	3.80	1.61	3.25	2.15	1.101961-	March	4.68	3.72	.96	5.18	3.80	1.38	3.21	2.39	.82
1 Last Wednesday of the month.
1 For Canada, Government of Canada 2f% bonds due June 15,1967-68; for U.S., United States Government 2J% bonds due December 15, 1963-68.
s For Canada, Government of Canada 3f% bonds due January 15, 1975-78; for U.S., United States Government 3i% bonds due June 15, 1978-83.

The Budget-Appendix
During the first half of 1960, interest rates in the United States declined, responding to factors similar to those in Canada. However, rates did not rise as much in the United States during the latter part of 1960. Consequently, the spread between Canadian and United States interest rates, which had narrowed slightly in the early part of 1960, widened considerably during the remainder of the year. For medium and long-term yields, the spread at the end of 1960 was almost half again as great as it was at the end of 1959. In the case of treasury bills, while the sharper fluctuations in Canadian rates brought them below comparable yields in the United States at several points during 1960, the spread at the end of the year had again widened until it was greater than that on medium-term yields, although less than the differential on long yields.

The Budget-Appendix
Part II

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Table of Contents
Page
1.	Introduction	 6740
2.	Highlights of governmental financial operations during 1960-61. 6740
3.	Budgetary accounts	
6743A.	Revenues	
6744B.	Expenditures	
67514.	Summary of assets and liabilities as at March 31, 1961	
6773A.	Changes in principal liability classifications during 1960-61 6773B.	Changes in principal asset classifications during 1960-61...	6780C.	Increase in net debt	
67875.	The cash position	
67886.	The public debt	
67917.	Supplementary detailed tables	
6797
The Budget-Appendix
Part II

[Stage Direction]
A preliminary review of the accounts of the Government of Canada for the fiscal year 1960-61 is presented in this Part. The Government's fiscal year ended on March 31, but the books must remain open for some time after that date to take into account all payments up to and including April 30, originating in and properly chargeable to, the fiscal year 1960-61 and to record various adjusting and closing entries. Consequently the figures in this Part are preliminary and subject to revision, and the final figures when they become available next July or August may differ to some extent from those given in the following pages.
2. HIGHLIGHTS OF GOVERNMENTAL FINANCIAL OPERATIONS

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The financial operations of the Government for the fiscal year 1960-61 are summarized in the following table which indicates how the budgetary and non-budgetary transactions, including changes in unmatured debt, affected the Government's cash balances. More detailed explanations of these transactions are given in subsequent sections of this Part.

[Stage Direction]
(in millions of dollars)
Summary of Budgetary and Non-Budgetary Transactions and Changes in Cash Position
Budgetary transactions-
Revenues-
Tax	
Non-tax	
Expenditures-
Defence	
Non-defence....
Deficit (-)	
Non-budgetary transactions-	.
Receipts and credits (excluding unmatured debt transactions)-
Repayment of temporary loan to old age security fund...
Repayments of other loans, investments and working capital
advances	
Net government annuities account receipts	
Net insurance and pension accounts receipts	
Other non-budgetary receipts	
Disbursements and charges (excluding unmatured debt 1 actions)-
Temporary loan to old age security fund	
Other loans, investments and working capital advances... Other non-budgetary disbursements	
Net amount received from non-budgetary transactions	
decrease In cash balances	
Net increase in unmatured debt outstanding in the public	
Net decrease (-) in Receiver General bank balances.
Fiscal year ended March 31
1961 (preliminary)	1960
5,016	4,752
600	538
6,616	6,290
-1,539	-1,533
-4,422	-4,170
-5,961	-5,703
-345	-413
11	
193	358
42	51
349	211
95	211
690	831
	-28
-483	-730
-156	-35
-6S9	-793
51	38
-294	-375
223	334
-71	-41

The Budget-Appendix
Budgetary transactions
The revenues and expenditures as forecast in the budget speech of March 31, 1960 and revised on December 20, 1960 and the actual figures as now estimated are shown in the following table:

[Stage Direction]
(in millions of dollars)
Fiscal Year 1960-61	Budget forecast March 31, I960	Revised forecast December 20, 1960	Actual (preliminary)	Increase or decrease (-) compared with December 20, 1960 forecast	
				Amount	Per cent
	5,892.0 -5,880.0	5,694.0 -5,980.0	5,615.6 -5,961.1	-78.4 -18.9	-1.4 -0.3
					
					
	12.0	-286.0	-345.5	59.5	
					
Revenues
The revenues of the government for the fiscal year ended March 31, 1961, amounted to $5,616 million. This is $78 million or about one and two-fifths per cent less than the total of $5,694 million forecast in the supplementary budget of December 20, 1960, and $326 million or 6 per cent more than the total of $5,290 million collected in 1959-60.
The sharp drop in revenues from the December forecast was due largely to an unexpected drop in March receipts. This was caused chiefly by the incidence of the Easter week-end. This year March 31 was Good Friday, and a considerable proportion of tax payments that are usually received on or before the last day of the month were in fact not mailed until April 3 or 4 and therefore could not be credited to the 1960-61 fiscal year receipts. As a result, the March revenues were about $40 million below normal and the 1960-61 budgetary deficit was increased by the same amount.
Of the increase of $326 million over 1959-60 revenues, $264 million was due to tax revenue and $62 million to non-tax revenue. Higher income tax collections accounted for nearly all of the increase in tax revenue. Personal income tax receipts were $145 million more than in the preceding year, reflecting the higher level of incomes during the year and the yield for a full year of the increase in tax rates that became effective July 1, 1959. Corporation income tax collections were $134 million higher, notwithstanding the fact that 1960 profits were lower than in 1959, reflecting the collection in the fiscal year of substantial amounts for taxes on 1959 profits and also the effect for a full year of the rate increase effective January 1, 1959.
The increase of $62 million in non-tax revenue was due principally to an increase of $44 million in return on investments.
Expenditures
Government expenditures amounted to $5,961 million and were three-tenths of one per cent less than forecast on December 20, 1960, and $258 million or about 5 per cent more than total expenditures in 1959-60.
90205-6-425
[Stage Direction]
The Budget-Appendix
Expenditures for defence again constituted the largest item, amounting to $1,539 million or 26 per cent of the total expenditures, compared with $1,532 million or 27 per cent in 1959-60.
Civil or non-defence expenditures amounted to $4,422 million, an increase of $251 million over the corresponding total for the previous fiscal year. There were increases of $69 million in expenditures of the Department of National Health and Welfare (including an increase of $39 million in the government's contribution under the Hospital Insurance and Diagnostic Services Act), $38 million in expenditures of the Department of Agriculture (due to $41 million for payments to western grain producers), $41 million in expenditures of the Department of Transport (including $24 million for the increase in the deficit of the Canadian National Railways), and $39 million in the expenditures of the Department of Finance (including $19 million for increased payments to the provinces and $14 million for higher public debt charges).
More detailed explanations of budgetary revenues by source and expenditures by classification and department are given in Section 3 of this Part.
Deficit
On the basis of these preliminary figures the deficit for the fiscal year was $345 million compared with the deficit of $286 million as forecast on December 20,
1960,	and the deficit of $413 million in 1959-60.
Non-budgetary transactions
A net amount of $51 million was available during the fiscal year from nonbudgetary transactions. Non-budgetary disbursements and charges totalled $639 million. Sums totalling $483 million were required for loans, investments and working capital advances, and $156 million for other non-budgetary purposes. On the other hand, a total of $690 million was available from various non-budgetary receipts and credits. Of this amount, $204 million was available from the repayment of loans, investments and working capital advances, $391 million from the net receipts from various government annuity, insurance and pension accounts, and $95 million from other non-budgetary sources.
Old age security fund
During 1960-61 pension payments from the old age security fund totalled $592 million and tax receipts credited to the fund amounted to $603 million. The excess of $11 million of receipts over payments was applied to reduce the temporary loans made by the Minister of Finance to the fund. These loans amounted to $28 million as at March 31, 1960, and to $17 million as at March 31,
1961.
The transactions in the account during 1960-61 compared with those for the previous fiscal year were as follows:
Fiscal year ended March 31 1961	1960
(preliminary)
(in millions of dollars)
Pension payments	
592	575Tax receipts	
603	547Excess of receipts over payments applied to the repayment of temporary loans from the Minister of Finance, or excess of payments over receipts (-) covered by temporary loans from the	Minister of Finance	
11	-28Temporary loans outstanding	at	the	fiscal	year-end	
17	28
The Budget-Appendix
Debt transactions
During 1960-61 the government issued securities amounting to $2,531 million (excluding the refunding of treasury bills which mature weekly) and redeemed or converted issues in the amount of $2,353 million, resulting in an increase of $178 million in unmatured debt. As other liabilities increased by $437 million the government's gross public debt increased by $615 million to $21,601 million at March 31, 1961. During the same period the government's net assets increased by $262 million to $9,159 million. As a result, the government's net debt at March 31, 1961, was $12,442 million compared with $12,089 million at March 31, 1960. The increase of $353 million reflected the budgetary deficit of $345 million plus an adjustment of $8 million in respect of prior years' transactions.
Cash position
Receiver General balances were $71 million less at the end of the fiscal year than they were at the beginning. The budgetary deficit of $345 million was financed by the net amount of $51 million available from non-budgetary transactions, the increase of $223 million in unmatured debt outstanding in the hands of the public (after taking into account transactions in the securities investment account and the sinking fund account) and the decrease of $71 million in cash balances.
3.	THE BUDGETARY ACCOUNTS
Total revenues amounting to $5,616 million for 1960-61 were $326 million more than the total for the previous year. Total expenditures were $5,961 million, an increase of $258 million over the total for 1959-60. The deficit for the fiscal year was $345 million compared with $413 million for the previous year.
7000
BUDGETARY REVENUES AND EXPENDITURES Fiscal Years Ended March 31 Millions of Dollars
90205-6-4251
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The Budget-Appendix

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Budgetary Revenues, Expenditures and Surplus or Deficit (in millions of dollars)
Fiscal year ended March 31	Budgetary revenues	Budgetary expenditures	Surplus or deficit (-)1957	5,106.5	4,849.0	257.51958	5,048.8	5,087.4	-38.61959	4,754.7	5,364.0	-609.3I960	5,289.8	5,702.9	-413.11961 (preliminary)	5,615.6	5,961.1	-345.5

[Stage Direction]
Fiscal Years Ended March 31
A. Revenues
Budgetary revenues were $5,616 million in the fiscal year 1960-61 compared with $5,290 million in the previous year, an increase of $326 million or 6 per cent. Of the total for the year, $5,016 million or 89 per cent was derived from taxes and $600 million or 11 per cent from other sources.

The Budget-Appendix
BUDGETARY REVENUES BY SOURCE Fiscal Years Ended March 31 Millions of Dollars
5000-
3000
1000
1954	1955	1956	1957	1958	1959	I960	1961*	1961*
Preliminary

[Stage Direction]
- TOTAL REVENUE FROM TAXES 89% _

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5000
- 3000
- 1000
Budgetary Revenues by Major Sources (in millions of dollars)
	Fiscal year ended March 31				Increase	
Source	1961 (preliminary)	1960	or decrease (-)	Amount	Per cent	Amount	Per cent	Amount	Per centTax revenues- Income tax-	Personal(l)	1,711.2	30.5	1,566.6	29.6	144.6	9.2Corporation^)	
On dividends, interest, etc. going	1,276.6	22.7	1,142.9	21.6	133.7	11.7abroad	
Excise taxes-	88.2	1.6	73.3	1.4	14.9	20.3Sales(1)	720.6	12.8	732.7	13.9	-12.1	-1.7Other	290.7	5.2	287.5	5.4	3.2	1.1Customs import duties	498.7	8.9	525.7	9.9	-27.0	-5.1Excise duties	344.9	6.1	335.2	6.3	9.7	2.9Estate tax(2)	84.9 (3)	1.5	88.4 (3)	1.7	-3.5 (3)	-4.0Non-tax revenues-	6,015.8	89.3	4,753.3	89.8	268.5	5.5Return on investments	284.0	5.1	239.7	4.5	44.3	18.5Post office	173.6	3.1	167.6	3.2	6.0	3.6Other non-tax revenues	142.2	2.5	130.2	2.5	12.0	9.2599.8	10.7	537.5	10.2	62.8	11.6Total revenues	5,615.6	100.0	5,289.8	100.0	325.8	6.2
(D Excluding tax credited to the old age security fund-
Personal income tax	
Corporation income tax	
Sales tax	
Includes duties levied under the Succession Duty Act. Less than $50,000.
1960-61	1959-60
eliminary)	
229.4	185.6
103.5	91.3
270.2	270.0
603.1	546.9
[Stage Direction]
The Budget-Appendix
(1) TAX REVENUES
Tax on personal incomes
The personal income tax was again in 1960-61 the largest source of government revenue. The yield (excluding the old age security tax) was $1,711 million or 31 per cent of all revenue. The increase of $144 million or 9 per cent over the 1959-60 collections was due partly to the higher level of incomes during the year and partly to the increase in rates which took effect on July 1,1959. The 1959-60 receipts did not include a full year's return at the increased rates.
In addition the tax on personal incomes levied under the Old Age Security Act yielded $229 million. This revenue was credited to the old age security fund.
Corporation income tax
The corporation income tax (excluding the old age security tax) yielded $1,277 million and was the second largest source of revenue. The 1960-61 collections showed an increase of $134 million over the previous year despite the fact that 1960 profits were lower than in 1959. The increase in collections was due to the fact that substantial amounts were collected in 1960-61 on account of 1959 profits and also to the increase in rates effective January 1, 1959. The 1959-60 collections did not reflect a full year's return at the higher rate.
In addition the tax on the income of corporations levied under the Old Age Security Act yielded $104 million and was credited to the old age security fund.
Taxes on dividends, interest, etc. going abroad
Revenue included in this category is derived from taxes withheld on payments of interest, dividends, rents, royalties, alimony and income from estates and trusts made to non-residents. The 1960-61 collections were $88 million, an increase of $15 million over the previous year's total.
Excise taxes
Included under this heading are the revenues from the general sales tax and other special excise taxes.
From a revenue standpoint the most important tax levied under the Excise Tax Act is the sales tax. Receipts from this tax (excluding the old age security tax) were $12 million or 2 per cent lower than the previous year. This decline is believed to be due to the fact that some remittances of tax, which would normally have been received on March 31, were delayed until April because March 31 fell in the Easter holiday week-end.
The tax on sales, levied under the Old Age Security Act, yielded $270 million, approximately the same as in 1959-60. This revenue was credited to the old age security fund.
Other excise taxes yielded a total of $291 million, compared with $288 million in 1959-60. The increase of $3 million was due mainly to an increase of $8 million in receipts from the tax on tobacco products offset partly by decreases in other categories.
Customs import duties
Customs import duties yielded $499 million in 1960-61 compared with $526 million in 1959-60, a decrease of $27 million.

The Budget-Appendix
Excise duties
Excise duties are levied only on alcoholic beverages and tobacco products. (Additional taxes on tobacco products are levied under the Excise Tax Act referred to above.)
Collections in 1960-61 were $345 million, an increase of $10 million over the 1959-60 total. Gross receipts in 1960-61 from the taxes on alcoholic beverages were $200 million and from the taxes on tobacco products were $150 million, compared with $193 million and $146 million respectively in the previous year.

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1954	55	50	57	58	59

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400 -0 .
1954	55	50	57	58	59	00	01*
0
Estate tax
The revenue from this source amounted to $85 million, a decrease of $3 million from the 1959-60 total.
Other taxes
Revenue under this heading amounted to less than $50 thousand in 1960-61, approximately the same as in 1959-60.
(2) NON-TAX REVENUES
Non-tax revenues for 1960-61 were $600 million, $62 million or 12 per cent more than the 1959-60 total of $538 million.
[Stage Direction]
The Budget-Appendix

[Stage Direction]
(in millions of dollars)
Non-Tax Revenues	Fiscal year ended March 31	Increase or decrease (-)	1961 (preliminary)	1960	Amount	Per centReturn on investments	284.0	239.7	44.3	18.5Post office	173.6	167.6	6.0	3.6Refunds of previous years' expenditures	40.3	40.6	-0.3	-0.7Services and service fees	35.4	31.3	4.1	13.1Proceeds from sales	24.0	21.9	2.1	9.6Privileges, licences and permits	27.1	25.0	2.1	8.4Bullion and coinage	8.3	5.4	2.9	53.7Other	7.1	6.0	1.1	18.3599.8	537.5	62.3	11.6
Return on investments
Receipts in this category amounted to $284 million compared with $240 million in 1959-60.
Payments from Crown corporations were $194 million, an increase of $41 million over the previous year's total. Increases of $16 million in receipts from the Bank of Canada, $16 million from Central Mortgage and Housing Corporation, $8 million from The St. Lawrence Seaway Authority and other smaller increases amounting to $7 million were offset partly by a decrease of $6 million from the Canadian National Railways.

[Stage Direction]
(in millions of dollars)
Return on Investments	Fiscal year ended March 31	Increase1961 (preliminary)	1960	decrease (-)Loans to, and investments in, Crown corporations- Bank of Canada profits	90.2	74.0	16 2Canadian National Railways	5.0	11.1	-6.1Canadian National (West Indies) Steamships Limited..	2.8	(i)	2.8Central Mortgage and Housing Corporation	59.5	43.8	15.7Eldorado Mining and Refining Limited	5.0	4.2	0.8Farm Credit Corporation	4.2	2.8	1 4National Harbours Board	3.9	3.3	0 6Northern Ontario Pipe Line Crown Corporation	4.3	4.1	0.2Polymer Corporation Limited	3.0	3.0	The St. Lawrence Seaway Authority	13.1	5.0	8.1Miscellaneous	3.2	1.5	1.7Other loans and investments-	194.2	152.8	41-4United Kingdom	22.2	22.5	-0.3Other national governments	9.7	10.2	-0.5Provincial governments	1.9	2.0	-0.1Soldier and general land settlement loans and veterans land act advances	5.3	5.0	0 3Exchange fund account	32.5	25.5	7.0Securities investment account	4.4	3.5	0.9Sinking fund and other investments held for retirement of unmatured debt	2.5	2 5	Interest-bearing deposits with chartered banks	6.5	10.5	-4.0Unemployment Insurance Commission	0.2	1 5	- 1 3Miscellaneous	4.6	3.7	0.989.8	86.9	2.9284.0	239.7	44.3
(1) Less than $50,000.

The Budget-Appendix
Other loans and investments yielded $90 million compared with $87 million in 1959-60. The main items of note were an increase of $7 million in the profits of the exchange fund account and a decrease of $4 million in interest on Receiver General deposits with the chartered banks.
Post office
Gross post office receipts totalled $202 million in 1960-61 but authorized disbursements from revenue for salaries and rent allowances at semi-staff and revenue offices, commissions at sub-offices, transit charges on Canadian mail forwarded through or delivered in foreign countries, etc., amounting to $28 million brought net revenue to $174 million. Last year gross receipts were $194 million and authorized disbursements totalled $26 million.
As costs of operating the Post Office Department during 1960-61 (excluding the $28 million charged to revenue) were $178 million, net expenditure exceeded net revenue by $4 million. However, in making the comparison, it is to be noted that the total shown for post office revenue does not reflect any payment for the franking privileges covering parliamentary and departmental mail or for certain miscellaneous services provided for other government departments and agencies, nor does the total shown for operating expenses reflect any charges for premises occupied by the Post Office Department or for certain accounting and miscellaneous services provided by other departments.
Refunds of previous years' expenditures
Refunds in 1960-61 of expenditures made in prior years totalled $40 million compared with the 1959-60 total of $41 million. These refunds included $22 million received by the Department of National Defence of which $9 million was in respect of contracts with the United States Government for the supply of engines, aircraft and other defence equipment under an arrangement that when Canada places contracts with the Government of the United States, payments of the estimated costs are made to the United States Treasury and if these estimated costs are revised, or if there are reductions in the contracts, the United States Government refunds the overpayments. Also included were $5 million received by the Department of Transport, mainly in respect of the Canso Causeway and $4 million received by the Department of Finance, of which $3 million was a repayment by the Province of Ontario in connection with succession duty payments under the tax-rental agreements. In addition, the unexpended balance of parliamentary grants as at March 31, 1960, amounting to $4 million, was refunded by the Canadian Broadcasting Corporation.
Services and service fees
Collections for services and service fees by various government departments were $35 million, $4 million more than was collected in 1959-60.
Revenue in this category included $10 million received by the Royal Canadian Mounted Police, mainly for police services to provinces and municipalities; $10 million received by the Department of Transport, mainly for wharfage and other canal and marine service fees, steamship inspection, air-ground radio at
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airports, and government telegraph and telephone services; and $6 million received by the Department of Trade and Commerce, mainly for services in connection with the inspection, weighing, storage and elevation of grain and for electricity, gas and weights and measures inspection services.
Proceeds from sales
Receipts from this source were $24 million compared with $22 million in the previous year.
These receipts included $9 million from Crown Assets Disposal Corporation representing amounts realized from the disposal of surplus Crown assets (after deducting certain agency fees and transfers), $4 million under agreements of sale of Crown assets and $5 million from Central Mortgage and Housing Corporation representing the proceeds from the sale of wartime housing properties and including amounts available as the result of the reversal of the provision for depreciation set aside by the corporation in previous years on properties that have now been sold.
Privileges, licences and permits
Revenue of $27 million was received during the fiscal year on account of privileges, licences and permits, $2 million more than was received in 1959-60.
Included in this revenue was $13 million collected by the Department of Transport, mainly on account of aircraft landing fees, rentals of hangar accommodation and other miscellaneous rental charges, and $4 million collected by the Department of Northern Affairs and National Resources, mainly in connection with oil leases in the Northwest Territories.
Bullion and coinage
Revenues of $8 million under this heading were derived from the operations of the Royal Canadian Mint and included a net gain of $7 million on coinage. Gold refining, storage and handling charges and gain in gold refining amounted to $1 million (of which half was in respect of handling charges).
Other non-tax revenues
Revenue in this category amounted to $7 million in 1960-61, $1 million more than the 1959-60 total.﻿JUNE 20, 1961	6751
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B. Expenditures
Budgetary expenditures for 1960-61 amounted to $5,961 million, an increase of $258 million over the 1959-60 total of $5,703 million.

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Statement of Budgetary Expenditures by Departments and Major Classifications
(in millions of dollars)
	Fiscal year ended March 31				Increase or decrease (-)	
-	1961 (preliminary)	1960	Amount	Per cent	Amount	Per cent	Amount	Per centDefence expenditures- National Defence	1,519.0	25.5	1,514.9	23.6	4.1	0.3Defence Production	20.4	0.3	17.6	0.3	2.8	15.91,589.4	25.8	1,538.6	26.9	6.9	0.5Non-defence expenditures- Agriculture	265.0	4.4	227.5	4.0	37.5	16.5Atomic Energy	38.9	0.7	30.1	0.5	8.8	29.2Canadian Broadcasting Corporation.,.	67.2	1.1	64.0	1.1	3.2	5.0Citizenship and Immigration	60.6	1.0	54.9	1.0	5.7	10.4External Affairs	103.1	1.7	97.2	1.7	5.9	6.1Finance- Public debt charges	797.2	13.4	783.5	13.7	13.7	1.7Tax-sharing, subsidy and other payments to provinces	537.8	9.0	518.9	9.1	18.9	3.6Government's contribution to the public service superannuation account	41.4	0.7	40.0	0.7	1.4	3.5Other	83.2	1.4	77.8	1.4	5.4	6.91,459.6	94.5	1,420.2	24.9	89.4	2.8Fisheries	19.3	0.3	19.9	0.3	-0.6	-3.0Forestry	10.1	0.2	0)9.9	0.2	0.2	2.0Justice	8.6	0.2	8.1	0.1	0.5	6.2Office of the Commissioner of Penitentiaries	19.1	0.3	19.7	0.4	-0.6	-3.027.7	0.5	27.8	0.5	-0.1	-0.4Labour	24.3	0.4	21.3	0.4	3.0	14.1Unemployment Insurance Act administration and government's contribution	97.2	1.6	81.6	1.4	15.6	19.1121.5	9.0	102.9	1.8	18.6	18.1Mines and Technical Surveys	59.0	1.0	54.4	1.0	4.6	8.5National Health and Welfare- Family allowances	506.2	8.5	491.2	8.6	15.0	3.1Government's contributions under the Hospital and Diagnostic Services Act	189.4	3.2	150.6	2.7	38.8	25.8Other	191.6	3.2	176.6	3.0	15.0	8.5S87.2	14-9	818.4	14.S	68.8	8.4National Research Council	34.5	0.6	31.5	0.6	3.0	9.5National Revenue	73.3	1.2	68.7	1.2	4.6	6.7Northern Affairs and National Resources	74.5	1.2	74.3	1.3	0.2	0.3Post Office	178.4	3.0	165.8	2.9	12.6	7.6Public Works	200.9	3.4	217.9	3.8	-17.0	-7.8Royal Canadian Mounted Police	56.0	0.9	52.4	0.9	3.6	6.9Trade and Commerce	21.7	0.4	17.9	0.3	3.8	21.2Transport	337.7	5.7	296.5	5.2	41.2	13.9Veterans Affairs	292.3	4.9	288.3	5.1	4.0	1.4Other Departments	33.2	0.6	29.9	0.5	3.3	11.05.421.7	74.2	4,170.4	73.1	251.S	6.0Total budgetary expenditures	5,961.1	100.0	5,702.9	100.0	258.2	4.5
<*>
Expenditures for divisions which are now included in the Department of Forestry and which were previously reported under the Department of Agriculture and the Department of Northern Affairs and National Resources.
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PRINCIPAL CLASSES OF BUDGETARY EXPENDITURES Fiscal Years Ended March 31
56
59
56
1.	The unshaded areas of the columns In the chart for health, welfare and social security represent pension payments out of the old age security fund not charged to budgetary expenditures in the year in which they were paid.
2.	Does not include those payments made to provincial and municipal governments for specific purposes.
Preliminary
Defence expenditures
Defence expenditures which consist of expenditures of the Departments of National Defence and Defence Production were again the largest category of government budgetary expenditures. The total of $1,539 million for 1960-61 was approximately 26 per cent of the aggregate budgetary expenditures of the government for that year and was $7 million more than the total of $1,532 million for 1959-60. In 1959-60 civil defence expenditures were shown as a separate classification under defence expenditures whereas in 1960-61 they have been included in relevant departmental expenditures. For purposes of comparison the 1959-60 amounts have been adjusted accordingly.

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(in millions of dollars)
Defence Expenditures	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Department of National Defence- Army services	400.1	400.8	-0.7Naval services	248.6	255.8	-7.2Air services	749.6	728.4	21.21,398.3	1,385.0	IS.3Defence research and development	44.2	39.2	5.0Mutual aid to NATO countries including contributions towards military costs of NATO	15.5	18.4	-2.9Government's contribution to the Canadian forces superannuation account	40.6	51.8	-11.2Administration and general	20.4	20.5	-0.1Department of Defence Production-	1,519.0	1,514.9	4.1Production capacity and capital assistance	1.8	2.6	-0.8Technological capability	2.9	1.9	1.0Administration and general	15.7	13.1	2.620.4	17.6	2.81,539.4	1,532.5	6.9
The Budget-Appendix
National Defence
Expenditures of the Department of National Defence were $1,519 million. In 1959-60 expenditures were $1,515 million.
Expenditures for army, naval and air services totalled $1,398 million, $13 million more than the 1959-60 total. The increase of $21 million in the outlay for air services was offset in part by decreases of $7 million and $1 million in the outlays for naval services and army services respectively.
Direct charges to mutual aid in 1960-61 of $15 million compared with $18 million for 1959-60 and consisted of procurement of equipment for mutual aid and Canada's share of NATO military budgets and infra-structure costs.
Expenditures for defence research and development were $44 million compared with $39 million in 1959-60.
The government's contribution to the Canadian forces superannuation account of an amount equal to If times the contributions by permanent services personnel was $41 million, a decrease of $11 million from the total for the previous year.
Administration and general costs were $20 million in 1960-61, approximately the same as the 1959-60 total.
Defence Production
The total expenditure of $20 million for the Department of Defence Production was $3 million more than in 1959-60, due mainly to increased administration and general costs. Outlays of $3 million in connection with the government program instituted in 1959-60 of supporting selected defence development programs in order to sustain technological capability in Canadian industry were $1 million more than in 1959-60. Expenditures of $2 million for the programs under which assistance for the establishment of production capacity and capital assistance is given to private contractors, Crown plants operated on a management-fee basis and Crown corporations undertaking contracts essential to the defence program were approximately $1 million less than expenditures in the previous fiscal year.
Cash outlays
Section 11 of the National Defence Act provides that materiel, not immediately required for the use of the Canadian defence forces or the Defence Research Board, may be sold to such countries and upon such terms as the Governor in Council may determine. The proceeds of such sales in 1960-61 amounting to $6 million were credited to a special account to be used for the procurement of materiel. Cash outlays from this account during 1960-61 were $3 million leaving a balance of $7 million at March 31, 1961.
The Department of Defence Production also makes cash disbursements for the procurement of materials for use in the manufacture of defence equipment which are not recorded as budgetary expenditures. For purposes of accounting and control, these amounts are charged to the defence production revolving fund and are treated as assets on the books of the government until they are billed to the Department of National Defence or sold to defence contractors for use in the manufacture of defence equipment. As a result of the transactions during 1960-61 proceeds from sales exceeded purchases by $5 million and the assets of the fund were reduced by an equivalent amount leaving a balance of $16 million in the account at March 31, 1961.
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The following table summarizes the cash outlays for defence for the past two fiscal years:

[Stage Direction]
(in millions of dollars)
Cash Outlays for Defence	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Budgetary expenditures- Department of National Defence	1,519.0	1,514.9	4.1Department of Defence Production	20.4	17.6	2.81.BS9.4	1,532.5	6.9Receipts from (-) or disbursements for- Replacement of materiel account-sec. 11, National Defence Act (net)	-3.0	10.2	-13.2Defence production revolving fund (net)	-5.0	-9.5	4.5-8.0	0.7	-8.7Net cash outlay for defence	1,531.4	1,533.2	-1.8
Agriculture
Expenditures of the Department of Agriculture totalled $265 million for 1960-61 compared with $228 million for 1959-60.

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(in millions of dollars)
Agriculture	Fiscal year ended March 31	Increase1961 (preliminary)	1960	decrease (-)53.4	57.7	-4.348.2	42.3	5.96.3	6.1	0.29.2	12.5	-3.3Production and marketing branch- Contributions to Alberta, Saskatchewan and Manitoba-	1.4	4.7	-3.319.2	23.8	-4.613.4	10.9	2.540.5	40.5Premium on hog carcasses including administrative costs.	6.6 15.9	8.2 14.5	-1.6 1.497.0 20.3	62.1 17.6	Si. 9 2.726.2	25.6	0.64.4	3.6	0.8
265.0	227.5	37.5
Payments of $41 million to western grain producers for which there was no comparable charge in 1959-60, and increases of $6 million for assistance re storage costs of grain and $3 million in outlays for rehabilitation and reclamation projects were offset partly by decreases of $3 million in contributions in respect of unharvested crops, $5 million in freight assistance on western feed grains, $3 million in the deficit of the prairie farm emergency fund and $4 million in the net operating loss of the agricultural stabilization board.

The Budget-Appendix
In 1960-61 expenditures in respect of the assistance re storage costs of grain and the Board of Grain Commissioners and payments in connection with the Prairie Grain Advance Payments Act were transferred to this department from the Department of Trade and Commerce under the authority of the Transfer of Duties Act. On August 1, 1960 Royal Assent was given to an act creating the Department of Forestry, comprising former divisions of the Department of Agriculture and the Department of Northern Affairs and National Resources relating to forestry. For purposes of comparison adjustments have been made for these items in the preceding table.
The 1960-61 net operating loss of the agricultural stabilization board was $53 million compared with $57 million in 1959-60.
Under the authority of Vote 576 of Appropriation Act No. 6, 1960, amounts totalling $41 million were paid to western grain producers as a higher return for wheat used for human consumption in Canada, and distributed on the basis of $1.00 per cultivated acre up to a maximum of 200 acres per farm in accordance with regulations of the Governor in Council. There was no expenditure for this purpose in 1959-60.
Advances of $9 million made by the Minister of Finance to the prairie farm emergency fund to cover the year's deficit were charged to budgetary expenditures. The comparable amount in 1959-60 was $13 million.
Atomic Energy
Expenditures of the Atomic Energy Control Board and payments to Atomic Energy of Canada Limited totalled $39 million compared with $30 million in 1959-60, an increase of $9 million.
Administration expenses of the Atomic Energy Control Board and grants for research and investigations with respect to atomic energy totalled $1 million, approximately the same as for the previous fiscal year.
During the year under review $38 million was paid to Atomic Energy of Canada Limited for its research program, $9 million more than in the previous year. Of the total, $23 million was for current operations and maintenance and $15 million for the construction and acquisition of buildings, land, works and equipment including $11 million for the construction of the nuclear power demonstration reactor.
TABLE 11 (in millions of dollars)
Atomic Energy	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Atomic Energy Control Board-	0.6	0.6	
	0.1	0.1	
Atomic Energy of Canada Limited-	0.7	0.7	Research program- Current operations and maintenance	23.1	18.6	4.5Construction and acquisition of buildings, works, land and equipment	15.1	10.8	4.3S3.2	29. i	8.838.9	30.1	8.8
The Budget-Appendix
In addition, loans in the amount of $2 million were made to Atomic Energy of Canada Limited during the year. This brought the total of advances covered, or to be covered, by obligations or shares of the company to $61 million at March 31,1961.
Canadian Broadcasting Corporation
Payments of $67 million were made by the government to the Canadian Broadcasting Corporation during 1960-61, an increase of $3 million over the total for 1959-60. However, it must be noted, that, of the $64 million paid to the corporation in 1959-60, $4 million was refunded to the government in 1960-61.
Grants for radio broadcasting and television services increased by $3 million over the corresponding total for 1959-60, while expenditures for the international shortwave broadcasting service remained at approximately $2 million.
TABLE 12 (in millions of dollars)
Canadian Broadcasting Corporation	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Grants to the Canadian Broadcasting Corporation by the Government of Canada- Radio and television services- Net operating requirements	60.0	54.8	5.2Capital requirements	5.3	7.2	-1.965. S	62.0	S.SInternational shortwave broadcasting service	1.9	2.0	-0.167.2	64.0	3.2
In addition, during the fiscal year 1960-61 loans totalling $3 million were made to the Canadian Broadcasting Corporation for working capital requirements.
Citizenship and Immigration
Expenditures of the Department of Citizenship and Immigration were $61 million in 1960-61, an increase of $6 million over the total for 1959-60.
Outlays for the Indian affairs branch increased by $5 million during 1960-61, due principally to increases of $3 million in expenditures for Indian education and $1 million for Indian welfare. Expenditures of the immigration branch were approximately $1 million more than the comparable figure for the previous fiscal year.
TABLE 13 (in millions of dollars)
Citizenship and Immigration	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Citizenship and citizenship registration	1.5	1.4	0.1Immigration	12.2	11.7	0.5Indian affairs	46.0	41.1	4.9Administration and general	0.9	0.7	0.260.6	54.9	5.7
The Budget

Appendix
External Affairs
Expenditures of the Department of External Affairs totalled $103 million in 1960-61, an increase of $6 million over the previous year.
The principal changes in expenditure were increases of $10 million in contributions to international organizations, $2 million in costs of representation abroad and $1 million in administration and general, offset partly by a decrease of $7 million in assistance to other countries.
Contributions to international organizations increased by $10 million during the year due mainly to outlays of $6 million for the purchase and transfer of wheat flour to assist in the establishment of strategic stock piles of food supplies in member states of NATO, $2 million representing Canada's contribution to the United Nations Fund for the Congo and Canada's assessment for the United Nations Congo Ad Hoc Account, 1960, and $1 million for Canada's assessment towards the financing of the United Nations emergency force. There were no expenditures for these items in 1959-60.
In 1960-61 expenditures of the International Economic and Technical Co-operation Branch were transferred to this department from the Department of Trade and Commerce under authority of the Transfer of Duties Act. The expenditures for 1960-61 and 1959-60 fiscal years are included in administration and general costs in the following table.
TABLE 14 (in millions of dollars)
External Affairs	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
6.7	13.8	-7.1Canada's assessment for membership in international (in-	4.6	4.1	0.522.1	12.2	9.950.0	50.0	11.6	10.3	1.58.1	7.0	i.i
103.1	97.2	5.9
Finance
Expenditures of the Department of Finance amounted to $1,460 million in 1960-61 an increase of $40 million over the corresponding total of $1,420 million in 1959-60.
Increases of $19 million in tax-sharing, subsidy and other payments to provinces, $14 million in public debt charges, $6 million in the government's share of medical-surgical insurance premiums for its own employees (there was no comparable amount in 1959-60), $3 million in administration and general costs, $2 million in grants to municipalities in lieu of taxes on federal property and $2 million in the administrative costs of the Office of the Comptroller of the Treasury were offset partly by the decrease of $7 million in payments to the Canadian Universities Foundation, for the purpose of making grants to institutions of higher learning, due to the Province of Quebec levying a special tax instead of accepting a grant through the Foundation.
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TABLE 15 (in millions of dollars)
Finance	Fiscal year ended March 31	Increase1961 (preliminary)	1960	decrease (-)Public debt charges	797.2	783.5	13.7Tax-sharing, subsidy and other payments to provinces	
Government's contribution to the public service superannua-	537.8	518.9	18.9tion account	41.4	40.0	1.4Grants to municipalities in lieu of taxes on federal property.. Grants to universities-	24.5	22.5	2.0Payments to the Canadian Universities Foundation	
Government's contribution as an employer to the unemploy-	19.0	26.1	-7.1ment insurance fund	1.0	0.8	0.2Government's share of medical-surgical insurance premiums. Office of the Comptroller of the Treasury-administration	6.0	6.0expenses	19.9	18.2	1.7Administration and general	12.8	10.2	2.61,459.6	1,420.2	39.4
Public debt charges
In 1960-61 public debt charges were again the second largest item of budgetary expenditure. These charges, which consist of interest on public debt, the annual amortization of bond discounts and commissions, the cost of issuing new loans and other costs incurred in servicing the public debt, amounted to $797 million in 1960-61 or 13 percent of all budgetary expenditure compared with $783 million or 14 per cent in 1959-60.
TABLE 16 (in millions of dollars)
Interest and Other Public Debt Charges	Fiscal year ended March 31	Increase1961 (preliminary)	1960	decrease (-)Interest on public debt- Unmatured debt including treasury bills- Payable in Canada	606.0	595.3	10.7Payable in London	1.4	1.5	-0.1Payable in New York	4.0	4.1	-0.1611.4	600.9	10.6Other liabilities-	3.6	3.6	Annuity, insurance and pension accounts	141.3	131.1	10.2144-9	134.7	10.2Total interest on public debt	756.3	735.6	20.7Other public debt charges-	45.4	-6.5Annual amortization of bond discounts and commissions	38.9	Cost of issuing new loans	1.3	1.9	-0.6Servicing of public debt	0.7	0.6	0.140.9	47.9	-7.0797.2	783.5	13.7
Interest on public debt was $756 million in 1960-61, an increase of $21 million over the 1959-60 total of $735 million. Interest of $611 million on unmatured debt was $11 million higher due mainly to an increase in unmatured

The Budget-Appendix
debt; interest of $145 million on other liabilities was $10 million higher due mainly to increases of $5 million in respect of the Canadian forces superannuation account, $4 million in respect of the public service superannuation account and $1 million in respect of the government annuities account.
Other public debt charges amounted to $41 million compared with $48 million in 1959-60. The decrease of $7 million was due mainly to reductions of $6 million in the costs of annual amortization of bond discounts and commissions and $1 million in the cost of issuing new loans.
When considering the magnitude of these public debt charges and the burden they place upon the public treasury, it must be borne in mind that a substantial portion of the debt is attributable to, or is invested in, productive or earning assets. Therefore, in calculating the net burden of the government's annual interest charges, the income derived from loans, investments and other productive assets must be taken into account. For 1960-61 this income was $284 million as shown in the non-tax revenue section under the heading "Return on investments". This amount deducted from the gross total of $756 million for interest as shown in the above table leaves a net amount of $472 million compared with a net of $496 million in 1959-60. Measured as a percentage of the net debt the burden of the net annual interest charges was 3.79 per cent in 1960-61 compared with 4.10 per cent in 1959-60.
Tax-sharing, subsidy and other payments to provinces
Payments to the provinces during 1960-61 for statutory subsidies, payments under the Federal-Provincial Tax-Sharing Arrangements Act, the transitional and additional grants to Newfoundland, and the transfer of a portion of income tax receipts from certain public utility companies amounted to $538 million compared with $519 million in 1959-60.
Charges to budgetary expenditures in 1960-61 under the federal-provincial tax-sharing arrangements, including adjustments made on account of previous years, were $19 million more than in 1959-60. The increase was due to higher personal income tax collections for the 1960 taxation year and to adjustments necessitated in the final calculation of the tax-sharing arrangements payments for 1959-60 which were required to be made by December 31, 1960.
TABLE 17 (in millions of dollars)
Tax-Sharing, Subsidy and Other Payments to	Fiscal year ended March 31	Increase or decrease (-)Provinces	1961 (preliminary)	1960	Payments under Federal-Provincial Tax-Sharing Arrange-	504.9	485.4	19.520.7	20.7	0.3	0.7	-0.47.7	7.3	0.44.2	4.8	-0.6
537.8	518.9	18.9
Payments of $505 million to the provinces under the federal-provincial tax-sharing arrangements in 1960-61 were adjusted by deducting a total of $1 million from the tax-sharing entitlements of Newfoundland, Prince Edward Island, New Brunswick, Manitoba and Saskatchewan, making a net disbursement to the provinces of $504 million. These deductions represented recovery
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The Budget-Appendix of one-fifth of the overpayments made to those provinces under the 1952 tax-rental agreements on account of an over-estimation of their population as revealed by the 1956 census. By Memoranda of Agreement with the provinces concerned, the 1952 tax-rental agreements were amended to authorize the recovery of the overpayments in equal monthly deductions from the tax-sharing payments to those provinces over the five-year life of the new arrangements.
Statutory subsidies at $21 million in 1960-61 were unchanged from the previous year.
A summary of payments, by provinces, during 1960-61 is given in the following table:
TABLE 18 (in millions of dollars)
	Fiscal year ended March 31, 1961 (preliminary)				
Tax-sharing, Subsidy and Other Payments to Provinces	Statutory subsidies	Payments under tax-sharing arrangements	Transitional and additional grants	Transfer of certain public utility tax receipts	Total1.5	28.0	8.0	0.1	37.62.1	39.7	0.3	42.10.6	7.3	(i)	7.91.7	34.2	0.1	36.03.3	70.4	1.2	74.93.6	113.8	0.6	118.02.1	40.1	U)	42.22.1	40.6	0.1	42.82.4	57.1	1.5	61.01.3	73.7	0.3	75.3
20.7	504.9	8.0	4.2	537.8
t1) Less than $50,000.
The amount of public utility tax receipts transferred to the Provinces in 1960-61 was $4 million, representing a decrease of $1 million from the 1959-60 total. The 1960-61 payment represents the transferable portion of the income tax received from corporations whose main business was the distribution to, or the generation for distribution to, the public of electrical energy, gas or steam for the taxation year 1958. The payment was authorized by Vote 115 of Appropriation Act No. 6, 1960.
Fisheries
Expenditures of the Department of Fisheries amounted to $19 million in 1960-61, $1 million less than in 1959-60.
TABLE 19 (in millions of dollars)
Fisheries	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Field services	9.9	10.1	-0.2Canada's share of the costs of international commissions....	0.9	0.8	0.14.8	4.8	Administration and general	3.7	4.2	-0.519.3	19.9	-0.6
The Budget-Appendix
Forestry
On August 1,1960 Royal Assent was given to an act creating the Department of Forestry, comprising former divisions of the Department of Agriculture and the Department of Northern Affairs and National Resources relating to forestry. Expenditures were $10 million for 1960-61. The following table shows the total expenditures for 1960-61 with the corresponding expenditures of the Department of Agriculture and the Department of Northern Affairs and National Resources for 1959-60.
TABLE 20 (in millions of dollars)
Forestry	Fiscal year ended March 31	Increase1961 (preliminary)	1960	decrease (-)5.2	4.7	0.5Contributions to the provinces for assistance in forest	2.3	2.2	0.10.6	1.6	-1.02.0	1.4	0.6
10.1	9.9	0.2
Justice
Expenditures of the Department of Justice amounted to $28 million for 1960-61, approximately the same as for the previous fiscal year.
TABLE 21 (in millions of dollars)
Justice	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Judges' salaries and travelling allowances	5.0	4.9	0.1Administration and general	3.6	3.2	0.48.6	8.1	0.5Office of the Commissioner of Penitentiaries-	Operation and maintenance of penitentiaries	15.3	13.2	2.1Construction, improvements and equipment	3.1	5.9	-2.8Administration	0.7	0.6	0.119.1	19.7	-0.627.7	27.8	-0.1
Labour
Expenditures of the Department of Labour amounted to $122 million during 1960-61, an increase of $19 million over the 1959-60 total of $103 million. Increases of $9 million in the government's contribution to the unemployment insurance fund, $6 million in administration and general expenditures of the Unemployment Insurance Commission and $2 million in payments to provinces for assistance to municipalities for winter work projects were the main factors contributing to this increase.
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Payments to provinces and in respect of Indian bands by the Government of Canada during 1960 -61 of amounts not exceeding one-half of the cost of labour incurred on winter work projects were $9 million compared with $7 million in 1959-60.
TABLE 22 (in millions of dollars)
Labour	Fiscal year ended March 31	Increase or1961 (preliminary)	1960	decrease (-)Payments to provinces authorized by Vocational Training Co-ordination Act	8.5	8.2	0.3Municipal winter works program	8.9	6.6	2.3Administration and general	6.9	6.5	0.4SJf.S	21.S	S.OUnemployment Insurance Commission- Administration and general	42.2	35.9	6.3Government's contribution to the fund	55.0	45.7	9.397.2	81.6	15.6121.5	102.9	18.6
Unemployment Insurance Act administration and government's contribution
Expenditures in 1960-61 relating to the Act (excluding the government's payment as an employer which is included in the expenditures of the Department of Finance) amounted to $97 million compared with $82 million in 1959-60.
Unemployment insurance benefit payments are not charged to budgetary expenditures but are paid from the unemployment insurance fund which is financed by equal contributions from employees and employers, by interest earned on investments, and by the government's contribution of an amount equal to one-fifth of the combined employee-employer contributions. Further information in regard to the Unemployment Insurance Commission is given in section 4 under the liability category "Annuity, insurance and pension accounts".
The government's contribution to the fund for 1960-61 was $55 million and administrative costs were $42 million; the corresponding amounts for 1959-60 were $46 million and $36 million respectively. The increase in the government's contribution was due partly to a full year's effect of the increase in rates of employee-employer contributions effective September 27, 1959.
Mines and Technical Surveys
Expenditures of the Department of Mines and Technical Surveys totalled $59 million for 1960-61, an increase of $5 million over the total for 1959-60.
TABLE 23 (in millions of dollars)
Mines and Technical Surveys	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Emergency gold mining assistance	12.1	13.1	-1.0Dominion Coal Board	19.1	17.6	1.515.0	13.0	2.04.5	3.9	0.6Geological survey of Canada	4.3	3.6	0.74.0	3.2	0.8
59.0	54.4	4.6

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Increases of $2 million in expenditures for surveys and mapping, $2 million in expenditures of the Dominion Coal Board, SI million in expenses of the geological survey of Canada and SI million in administrative and general costs were offset partly by a decrease of SI million in payments under the Emergency Gold Mining Assistance Act.
National Health and Welfare
Expenditures for the Department of National Health and Welfare during 1960-61 amounted to $887 million, an increase of $69 million over the total for the previous fiscal year.
Outlays for the national health branch totalled $270 million in 1960-61, reflecting an increase of $43 million over the previous year's total due mainly to increases of S39 million in government contributions under the Hospital Insurance and Diagnostic Services Act, $2 million in general health grants to provinces and $2 million in expenditures for Indian and northern health services.
During 1960-61 expenditures of the welfare branch increased by $27 million over the comparable figure for 1959-60, due mainly to increases of $15 million in payments for family allowances and $11 million for unemployment assistance.
TABLE 24 (in millions of dollars)
National Health and Welfaee	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
National health branch- Government's contributions under the Hospital Insurance and Diagnostic Services Act	189.4	150.6	38.8General health grants to provinces	48.0	46.0	2.0Indian and northern health services	23.0	21.5	1.5Other	9.4	9.1	0.3269.8	227.2	42.6Welfare branch- Family allowances	506.2	491.2	15.0Unemployment assistance	51.6	40.2	11.4Old age assistance	30.7	30.3	0.4Disabled persons allowances	16.4	16.1	0.34.2	4.2	Other	3.3	3.0	0.3612.4	686.0	27.4Administration and general	5.0	6.2	-1.2887.2	818.4	68.8
Hospital insurance and diagnostic services
The Hospital Insurance and Diagnostic Services Act, Statutes of 1957, authorized contributions by Canada in respect of programs administered by the provinces, providing hospital insurance and laboratory and other services in aid of diagnosis. Payments for 1960-61 amounted to $189 million compared with $150 million in 1959-60. The increase of $39 million was due partly to the fact that during the previous fiscal year seven provinces had participated in the plan for a full fiscal year and two provinces for a partial year, whereas in the current fiscal year all provinces and territories participated under the agreements for a full year with the exception of the Yukon Territory and the Province of Quebec whose dates of entry under the plan were July 1, 1960 and January 1, 1961 respectively.
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The effective date of each agreement is as follows:-July 1, 1958 for Newfoundland, Manitoba, Saskatchewan, Alberta and British Columbia; January 1, 1959 for Nova Scotia and Ontario; July 1, 1959 for New Brunswick; October 1, 1959 for Prince Edward Island; April 1, 1960 for the Northwest Territories; July 1, 1960 for the Yukon Territory; and January 1, 1961 for Quebec.
TABLE 25 (in millions of dollars)
Hospital Insurance and Diagnostic Services	Fiscal year ended March 31		Increase
	1961 (preliminary)	1960	
5.1	4.7	0.49.6	8.2	1.41.0	0.4	0.67.9	4.6	3.313.9	13.984.5	71.9	12.613.1	11.3	1.814.5	13.4	i.i16.9	15.7	1.222.5	20.4	2.10.4	0.4
189.4	150.6	38.8
General health grants to provinces
General health grants to provinces for assistance in hospital construction, general health services and the control of diseases amounted to $48 million in 1960-61, an increase of $2 million over the 1959-60 total of $46 million.
TABLE 26 (in millions of dollars)
General Health Grants	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
0.9	1.1	-0.22.9	1.5	1.40.3	0.4	-0.11.8	1.3	0.513.9	15.1	-1.215.9	15.1	0.82.6	2.3	0.32.4	2.2	0.23.0	2.9	0.14.2	4.0	0.20.1	0.1	
48.0	46.0	2.0
Family allowances
Family allowances are payable in respect of all children under sixteen years of age, resident in Canada, with minor exceptions such as in the case of children of immigrants who must reside in Canada a year before an allowance is payable. The monthly allowance is $6 if the child is under 10 years and $8

The Budget-Appendix
in the age group 10 to 15. Children of immigrants receive family assistance of $5 per month during their first year of residence in Canada from the Department of Citizenship and Immigration if during that period they are under sixteen years of age.
Family allowance payments in 1960-61 amounted to $506 million and represented 8 per cent of total expenditures. The increase of $15 million over the previous year reflected the increase in the number of children in the eligible age groups.

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(in millions of dollars)
Family Allowance Payments	Fiscal year ended March 31		Increase
	mi (preliminary)	1960	
Newfoundland	16.0	15.6	0.4Nova Scotia	21.2	20.9	0.3Prince Edward Island	3.1	3.1	New Brunswick	18.9	18.6	0.3Quebec	154.2	15ft 5	3 7Ontario	162.6	156.7	5.9Manitoba	24.4	23.7	0.7Saskatchewan	25.8	25.3	0.5Alberta	37.4	35.7	1.7British Columbia	41.4	40.0	1.4Northwest and Yukon Territories	1.2	1.1	0.1506.2	491.2	15.0
Old, age assistance, disabled persons allowances, blind persons allowances and unemployment assistance
Under the Old Age Assistance Act, the federal government reimburses the provinces by paying 50 per cent of the lesser of $55 monthly or the amount of assistance given by the provinces in the form of monthly pensions to eligible persons in need who are in the age group 65 to 69. (Under the Old Age Security Act, all persons 70 years and over who satisfy the residence requirements of the Act may receive a pension of $55 per month from the federal government out of the old age security fund.) Similarly, the federal government reimburses the provinces under the Blind Persons Act for allowances of not more than $55 per month to blind persons in need 18 years of age or over by paying 75 per cent of the total payments, and under the Disabled Persons Act by paying 50 per cent of not more than $55 per month for allowances to disabled persons in need 18 years of age or over. In 1960-61 payments of $16 million in respect of disabled persons allowances, $4 million for blind persons allowances and $31 million for old age assistance were approximately the same as in 1959-60.
Under the Unemployment Assistance Act the federal government contributes up to 50 per cent of the cost of unemployment assistance paid by the provinces, subject to certain deductions as set out in the Act. All provinces have signed agreements with the federal government. There was an increase of $11 million in these contributions over those for the previous year.
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(in millions of dollars)
Federal Share of Old Age Assistance, Disabled Persons Allowances, Blind Persons Allowances and Unemployment Assistance	Fiscal year	ended March 31, 1961 (preliminary)	Old age assistance	Disabled persons allowances	Blind persons allowances	Unem- ployment assistanceNewfoundland	1.7	0.4	0.2	2.8Nova Scotia	1.6	0.8	0.4	1.6Prince Edward Island	0.2	0.2	(1)	0.1New Brunswick	1.8	0.6	0.4	1.4Quebec	10.8	8.5	1.5	14.2Ontario	6.7	3.9	0.8	13.3Manitoba	1.6	0.4	0.2	3.0Saskatchewan	1.8	0.4	0.2	2.2Alberta	2.0	0.6	0.2	2.6British Columbia	2.4	0.6	0.3	10.3Northwest and Yukon Territories	0.1	(1)	(1)	0.130.7	16.4	4.2	51.6
<0 Less than $50,000.
National Research Council
Expenditures of the National Research Council amounted to $35 million in 1960-61, $3 million higher than for 1959-60. Increases of $1 million in scholarships and grants in aid of research, $1 million in construction or acquisition of buildings, works, land and equipment, and $1 million in administration and general expenses were the main factors contributing to this increase.

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(in millions of dollars)
National Research Council	Fiscal year ended March 31	Increase1961 (preliminary)	1960	decrease (-)Construction or acquisition of buildings, works, land and equipment	5.3	4.3	1.0Scholarships and grants in aid of research	10.4	9.4	1.0Administration and general	18.8	17.8	1.034.5	31.5	3.0
National Revenue
Expenditures of the Department of National Revenue totalled $73 million in 1960-61, $5 million more than in 1959-60.
Increases of $3 million in expenditures of the taxation division and $2 million in outlays of the customs and excise divisions were responsible for the increase.

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(in millions of dollars)
National Revenue	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Customs and excise divisions	39.0	36.9	2.1Taxation division	34.1	31.6	2.50.2	0.2	73.3	68.7	4.6
Northern Affairs and National Resources
Expenditures of the Department of Northern Affairs and National Resources in the fiscal year 1960-61 were $74 million, approximately the same as the total for 1959-60.
Decreases of $1 million in expenditures of the northern administration branch and $2 million in outlays of the national parks branch were offset by the increase of $3 million in contributions to the provinces to assist in the development of roads leading to resources.
On August 1, 1960 Royal Assent was given to an act creating the Department of Forestry, comprising former divisions of the Department of Agriculture and the Department of Northern Affairs and National Resources relating to forestry. For purposes of comparison adjustments have been made for these items in the following table.
TABLE 31 (in millions of dollars)
Northern Affairs and National Resources	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Canadian government travel bureau		2.7	2.3	0.4
Contributions to the provinces to assist in the development			
of roads leading to resources	12.0	9.0	3.0National parks branch	24.0	26.0	-2.0Northern administration branch	29.3	30.7	-1.42.0	2.2	-0.2Administration and general	4.5	4.1	0.474.5	74.3	0.2
Post Office
Gross expenditures of the Post Office Department for 1960-61 were $207 million, an increase of $15 million over the 1959-60 outlay of $192 million.
Remuneration of postmasters and staffs at revenue and semi-staff offices, commissions at sub-offices and certain other authorized disbursements are paid from revenue. These payments, included in the total of $207 million, amounted to $28 million in 1960-61, an increase of $2 million over the comparable total for 1959-60.
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TABLE 32 (in millions of dollars)
Post Office	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Charged to budgetary expenditure- Operations-salaries and other expenses of staff post offices, district offices and railway mail services; and supplies and equipment and other items for revenue post offices	111.0	101.3	9.7Transportation-movement of mail by land, air and water	62.2	59.8	2.4Financial services	3.1	2.9	0.2Administration and general	2.1	1.8	0.3178.4	165.8	12.6Charged to revenue- Operations-salaries of postmasters and staffs at revenue and semi-staff offices, commissions paid at sub-offices and other disbursements	28.4	26.0	2.4206.8	191.8	15.0
Public Works
Expenditures of the Department of Public Works for 1960-61 amounted to $201 million compared with $218 million in 1959-60, a decrease of $17 million.
TABLE 33 (in millions of dollars)
Public Works	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Public buildings-construction and services- Acquisition, construction and improvements of public buildings-			-7.9
Ottawa	8.4	16.3	Other centres in Canada	18.3	27.8	-9.5Outside Canada	4.3	0.5	3.8Maintenance and operation	43.4	41.5	1.9Furniture and furnishings	2.6	2.5	0.10.2	0.2	77.2	88.8	-11.6Harbours and rivers engineering services- Acquisition, construction and improvements of harbour	and river works	29.9	31.6	-1.7Dredging	6.1	4.8	1.3General	0.9	0.8	0.1S6.9	S7.2	-0.8Development engineering services- Trans-Canada highway division- Contributions to the provinces under the terms of	the Trans-Canada Highway Act	48.7	53.2	-4.5Contribution to the Province of New Brunswick-	0.1	-0.1Construction through national parks	9.2	12.0	-2.8General	4.5	4.1	0.462.4	69.4	-7.0Housing	3.7	2.4	1.3National Capital Commission	6.3	6.2	0.1Administration and general	14.4	13.9	0.5200.9	217.9	-17.0
The Budget-Appendix
Decreases of $12 million in public buildings-construction and services, and $7 million in development engineering services were offset partly by the increase of $1 million in payments to Central Mortgage and Housing Corporation in respect of defence housing administration, housing research and the clearance, replanning, rehabilitation and modernization of blighted or substandard areas and reimbursement of losses sustained as a result of the operation of federal-provincial housing projects.
The decline of $12 million in outlays for public buildings-construction and services during 1960-61 was due mainly to a reduction of $8 million in expenditures for the acquisition, construction and improvement of public buildings in Ottawa and $9 million in other centres in Canada offset partly by an increase of $4 million for similar expenditures in localities outside of Canada.
The decrease of $7 million in the expenditures of the development engineering services was due mainly to decreases of $4 million in contributions to provinces under the terms of the Trans-Canada Highway Act and $3 million in costs of construction of the Trans-Canada highway through national parks.
Royal Canadian Mounted Police
Expenditures for the Royal Canadian Mounted Police amounted to $56 million for 1960-61, $4 million more than the total spent in 1959-60.
Payments as shown in the table represent gross expenditures; payments received from the provinces for police services amounting to $10 million were credited to revenue.
Increased expenditures of $1 million for the land, air and training divisions, $1 million for higher costs of headquarters administration and national police services and the increase of $1 million in the government's contribution to the Royal Canadian Mounted Police superannuation account, were the main factors contributing to the overall increase of $4 million in departmental expenditures.
Effective April 1, 1960, by an Act of Parliament, the Royal Canadian Mounted Police pension account was renamed the Royal Canadian Mounted Police superannuation account. Under the new Act the government's contribution is based on the total amount paid into the account by contributors during the preceding quarter while under the old Act the government's contribution was based on the total amount paid into the account by contributors during the previous fiscal year. Consequently, the government contributed to the fund in 1960-61 an amount based on payments by contributors during 1959-60 and an amount based on payments by contributors for the period April to December, 1960, inclusive.
TABLE 34 (in millions of dollars)
Royal Canadian Mounted Police	Fiscal year ended March 31	Increase or1961 (preliminary)	1960	decrease (-)Land, air and training divisions	41.4	40.1	1.3Marine services	1.7	1.9	-0.2Government's contributions to Royal Canadian Mounted Police superannuation account	2.9	1.5	1.4Pensions and other benefits	3.2	2.9	0.3Headquarters administration and national police services. ..	6.8	6.0	0.856.0	52.4	3.6
The Budget

Appendix Trade and Commerce
Expenditures of the Department of Trade and Commerce totalled $22 million for 1960-61, an increase of $4 million over the previous year.
The more significant factors responsible for this increase were increases of $2 million in expenditures of the Dominion Bureau of Statistics, $1 million in outlays for the trade commissioner service and $1 million for administration and general.
In 1960-61 under the authority of the Transfer of Duties Act, expenditures in respect of assistance re storage costs of grain, Board of Grain Commissioners and Prairie Grain Advance Payments Act were transferred to the Department of Agriculture and expenditures of the international economic and technical co-operation branch were transferred to the Department of External Affairs. For purposes of comparison the 1959-60 amounts covering these items have been reported under the respective departments.
TABLE 35 (in millions of dollars)
Trade and Commerce	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Dominion Bureau of Statistics	10.4	8.4	2.0National Energy Board	0.4	0.2	0.2Standards branch	2.5	2.4	0.1Trade commissioner service	4.5	3.7	0.8Administration and general	3.9	3.2	0.721.7	17.9	3.8
Transport
Expenditures of the Department of Transport amounted to $338 million in 1960-61, an increase of $41 million over the total of $297 million in 1959-60.
The increase of $11 million in outlays for air services was attributable primarily to expanded services for aviation and consisted for the most part of increases of $6 million in outlays of the civil aviation branch and $3 million in costs of the meteorological branch.
Canal services expenditures increased by $1 million in 1960-61 while outlays for marine services declined by $10 million due to a decrease in expenditures for construction or acquisition of marine service steamers.
Expenditures for railway and steamship services increased by $15 million due to an increase of $13 million in payments under the Freight Rates Reduction Act and the increase of nearly $3 million in construction and acquisition of auto-ferries.
The payment in respect of the Canadian National Railway deficit for the calendar year 1960 was $67 million, $24 million more than for 1959 and the payment in respect of the Trans-Canada Air Lines deficit for the calendar year 1960 was $3 million. In 1959 the air lines had a small surplus. Nonactive advances to the National Harbours Board were $1 million less than in the previous fiscal year.

The Budget-Appendix
TABLE 36 (in millions of dollars)
Transport	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Air services- Civil aviation branch	83.5	77.4	6.1Meteorological branch	16.6	13.3	3.3Telecommunications branch	30.0	29.3	0.7Administration	4.8	4.2	0.6184.9	124.2	10.7Canal services	6.4	5.8	0.6Marine services	42.8	53.3	-10.5Railway and steamship services- Maritime Freight Rates Act- Difference between tariff and normal tolls	14.1	14.3	-0.2Freight Rates Reduction Act	20.4	7.8	12.6Construction and acquisition of auto-ferries	5.3	2.4	2.9Other	1.0	1.3	-0.340.8	25.8	15.0Board of Transport Commissioners-	7.0	7.0	15.0	15.0	1.2	1.2	28.2	22.2	Canadian Maritime Commission	6.9	6.7	0.2Crown corporations- Deficits- Canadian National Railways	67.5	43.6	23.92.6	2.6Other	8.2	8.6	-0.4Non-active advances-National Harbours Board	0.6	1.9	-1.378.9	54.1	24.8Administration and general	3.8	3.4	0.4337.7	296.5	41.2
Veterans Affairs
Expenditures of the Department of Veterans Affairs amounted to $292 million in 1960-61, an increase of $4 million over the 1959-60 total.
Increases of $2 million in outlays for treatment and welfare services, $2 million in war veterans allowances and other benefits and $1 million in pensions for disability or death were the main factors responsible for the increase.
TABLE 37 (in millions of dollars)
Veterans Affairs	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Pensions for disability or death	150.7	149.7	1.0Treatment and welfare services	58.7	57.1	1.6War veterans allowances and other benefits	64.7	63.2	1.5War service gratuities and re-establishment credits	
Soldier Settlement and Veterans Land Acts-	2.9	2.9	Administration and general	
Provision for reserve for conditional benefits, Veterans	5.1	5.2	-0.1Land Act	3.5	3.8	-0.3Departmental administration and miscellaneous payments..	6.7	6.4	0.3292.3	288.3	4.0
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All Other Departments
Expenditures of the departments not dealt with in preceding sections amounted to $33 million, an increase of $3 million over the total for 1959-60.
TABLE 38 (in millions of dollars)
All Other Departments	Fiscal year ended March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
	0.9	0.9	
0.3	0.2	0.10.6	0.3	0.34.2	3.6	0.60.4	0.4	1.3	1.2	0.18.5	7.7	0.84.9	4.6	0.3National Gallery of Canada	1.0	0.7	0.3Privy Council	1.9	1.4	0.50.8	0.7	0.13.5	3.5	4.9	4.7	0.2
33.2	29.9	3.3

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4.	SUMMARY OF ASSETS AND LIABILITIES OF CANADA AS AT MARCH 31, 1961
A condensed statement of the assets and liabilities of the Government of Canada at March 31, 1961, the comparable balances at March 31, 1960, and the changes in each category during 1960-61, is shown in the following table.

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Summary of Assets and Liabilities of Canada (in millions of dollars)
Liabilities
Current and demand liabilities	
Deposit and trust accounts	
Annuity, insurance and pension accounts	
Undisbursed balances of appropriations to special accounts...
Deferred credits	
Suspense accounts	
Unmatured debt	
Total liabilities	
Assets
Current assets	
Advances to the exchange fund account	
Sinking fund and other investments held for retirement of
unmatured debt	
Loans to, and investments in, Crown corporations	
Loans to national governments	
Other loans and investments	
Securities held in trust	
Deferred charges	
Unamortized portion of actuarial deficiencies-
Canadian forces superannuation account	
Public service superannuation account	
Suspense accounts	
Capital assets	
Inactive loans and investments	
Total assets	
Less: reserve for losses on realization of assets	
Net assets	
Net debt represented by excess of liabilities over assets.
Balance at March 31		Increase
1961 (preliminary)		or
	1960	decrease (-)
1,148.7	1,099.1	49.6236.3	242.7	-6.43,953.8	3,565.4	388.4104.6	96.6	8.079.3	84.0	-4.710.6	8.5	2.116,067.9	15,890.1	177.821,601.2	20,986.4	614.8771.2	862.2	-91.02,024.0	1,960.0	64.016.7	85.3	-68.63,629.5	3,446.7	182.81,378.4	1,414.5	-36.11,022.6	934.5	88.134.4	30.6	3.8130.8	151.0	-20.2326.3	326.3	276.7	139.0	137.7Cl)	CD	(2)	(2)	94.8	93.5	1.39,705.4 -546.4	9,443.6 -546.4	261.89,159.0	8,897.2	261.812,442.2	12,089.2	«>353.0
W Less than $50,000.
W Shown at nominal value of $1.
W Reflecting the budgetary deficit of $345.5 million plus an adjustment of $7.5 million in respect of 'prior years' transactions.
A. Changes in Principal Liability Classifications During 1960-61
The gross liabilities of the government increased by $615 million during the fiscal year. The main changes were increases of $388 million in annuity, insurance and pension account balances, $178 million in unmatured debt and $50 million in current and demand liabilities.
90205-6-427
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The Budget-Appendix
20000
TOTAL LIABILITIES Fiscal Years Ended March 31
-20000
- 10000
1954	1955	1956	1957	1958	1959	I960	1961*
1. Alto Includes treasury notes for the fiscal years ended 1954-58 Inclusive. [DOT] Preliminary
1961*
Current and demand liabilities
This category consists of obligations of the government payable currently or on demand. The principal changes were increases of $16 million in accrued interest, $13 million in interest due and outstanding, $12 million in matured debt, $10 million in the revaluation adjustment of the Canadian dollar balance in the international monetary fund and $6 million in outstanding treasury cheques and a decrease of $9 million in accounts payable.
TABLE 40 (in millions of dollars)
	Balance at March 31		Increase
Current and Demand Liabilities	1961 (preliminary)	1960	or decrease (-)235.1	228.8	6.3235.8	245.1	-9.3Non-interest bearing notes payable to the international monetary fund and the international bank for reconstruction	383.7	381.8	1.932.3	20.1	12.270.4	57.7	12.7154.0	137.6	16.422.6	22.5	0.14.5	5.4	-0.9International monetary fund-revaluation adjustment of	10.1	10.10.2	0.1	0.1
1,148.7	1,099.1	49.6
W Payments made in April in accordance with section 35 of the Financial Administration Act but which are applicable to the previous fiscal year.
Deposit and trust accounts
In these accounts are recorded sundry funds deposited with, or held in trust by, the Receiver General of Canada for various purposes.
The principal changes during the year were an increase of $7 million in Crown corporation deposits and a decrease of $5 million in contractors securities.

The Budget-Appendix
TABLE 41 (in millions of dollars)
	Balance at March 31		Increase
Deposit and Trust Accounts	1961 (preliminary)	1960	or decrease (-)6.5	6.9	-0.4Canadian Pension Commission-administration trust fund...	11.1 16.8	10.3 17.4	0.8 -0.6Contractors securities-sundry departments-	9.4	14.1	-4.711.8	11.9	-0.11.3	1.7	-0.422.5	*7.7	-5.219.4	12.6	6.81.4	2.3	-0.9Guarantee deposits-	4.4	6.1	-1.79.0	8.3	0.728.5	29.2	-0.716.1	16.1	5.1	6.6	-1.528.8	29.4	-0.6Soldier settlement and veterans land acts trust account-	2.5	3.2	-0.732.9	33.9	-1.01.1	3.0	-1.911.3	10.3	1.018.9	19.4	-0.5
236.3	242.7	-6.4
Annuity, insurance and pension accounts
In this category are recorded the amounts to the credit of the various annuity, insurance and pension accounts.

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(in millions of dollars)
Annuity, Insurance and Pension Accounts	Balance at March 31	Increase1961 (preliminary)	1960	or decrease (-)U>
267.6	377.3	-109.7-247.6	-354.5	106.920.0	22.8	-2.81.198.7 1.467.7	1,156.9 1,229.6	41.8238.11,155.4	1,053.0 103.1	102.4112.0	8.9
3,953.8	3,565.4	388.4
Includes loan of $67 million from the Minister of Finance.
Unemployment insurance fund
There was a decrease of $3 million in the uninvested funds of the Unemployment Insurance Commission on deposit with the government. During the year there was a decrease of $110 million in the unemployment insurance fund. The balance at March 31, 1961, including loans from the Minister of Finance amounting to $67 million was $267 million compared with $377 million at
90205-6-4271
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The Budget-Appendix March 31,1960. Expenditures from the fund were $518 million consisting mainly of benefit payments of $510 million, losses of $7 million on sales of investments and a small amount of interest on loans from the Minister of Finance. Receipts were $408 million, consisting of contributions by employers and employees of $276 million, government contributions of $55 million, income of $10 million from investments, and loans from the Minister of Finance of $67 million. Benefit payments were $95 million higher than the $415 million paid out in 1959-60.
Government annuities account
The government annuities account increased by $42 million during the year reflecting the amount by which premium receipts of $48 million and interest of $44 million credited to the account by the government exceeded payments of $50 million to annuitants and beneficiaries.
Public service superannuation account
The increase of $238 million in the public service superannuation account was due mainly to a credit of $138 million (to bring the balance in the account into line with an actuarial evaluation as at December 31, 1957 as calculated by the Department of Insurance), the government's contribution of $41 million (equal to the estimated current and prior service payments of individuals in 1959-60), and interest of $51 million credited to the account. The remainder of the increase was due to the excess of employees' current and prior service contributions of $48 million and miscellaneous receipts of $2 million over benefit payments of $42 million.
Canadian forces superannuation account
The Canadian forces superannuation account increased by $102 million. The increase reflected the government's contribution of $41 million which is made at the rate of one and two-thirds times the current and prior service contributions, interest of $43 million credited to the account, and contributions of $32 million by permanent services personnel for current and prior years' service less benefit payments of $14 million from the account.
Old age security fund
Under the Old Age Security Act pensions of $55 per month are paid, without a means test, from the old age security fund to all eligible persons seventy years of age or over. Payments from the fund during 1960-61, were $592 million while credits to the fund from the 3 per cent tax on personal incomes (maximum tax $90), the 3 per cent tax on corporation profits and the 3 per cent sales tax totalled $603 million leaving a net credit of $11 million. In 1959-60 payments were $575 million, receipts were $547 million and the deficit in the fund covered by temporary loans from the Minister of Finance was $28 million.
In the Budget Speech of April 9, 1959, the Minister stated that, since provision was being made for the necessary revenues (by increases in the old age security tax rates) to bring the fund into balance over the next two or three years, he did not propose to treat the 1959-60 deficit as a budgetary charge in that year but to carry it forward to 1960-61.
In accordance therewith the $11 million excess of receipts over payments in 1960-61 was applied to reduce the temporary loans made in 1959-60 leaving a balance of $17 million in the temporary loan account as at March 31, 1961.

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(in millions of dollars)
Old Age Security Fund	Fiscal year ended March 31				
	1957	1958	1959	I960	1961 (preliminary)
Tax receipts-					
Sales tax	179.3	175.8	173.6	270.0	270.2Personal income tax	125.0	135.0	146.4	185.6	229.4Corporation income tax	67.3	60.7	55.3	91.3	103.5Total tax receipts	371.6	371.5	375.3	546.9	603.1Pension payments	-379.1	- 473.9	-559.3	-574.9	-592.4Excess of receipts over payments	-7.5	-102.4	-184.0	-28.0	10.7-50.0	-1.5	-28.0Appropriation by Parliament-	56.0	103.9	184.0	Temporary loan from the Minister of Finance	to cover deficit in fund	1.5	28.0	17.3
A distribution by provinces of pension payments from the old age security fund for the last two years is shown in the following table:
TABLE 44 (in millions of dollars)
Old Age Security Payments	Fiscal year ended March 31	Increase1961 (preliminary)	1960	decrease (-)11.4	11.1	0.327.6	27.0	0.64.9	4.8	0.120.4	19.9	0.5124.3	120.3	4.0214.6	208.6	6.036.1	35.1	1.037.5	36.3	1.239.7	38.2	1.575.5	73.2	2.30.4	0.4	
592.4	574.9	17.5
Undisbursed balances of appropriations to special accounts
This category records the undisbursed balances of appropriations to special accounts for which moneys have been appropriated by Parliament and from which disbursements may be made for authorized purposes in periods subsequent to that in which the appropriation was made. There was a net increase of $8 million in this category during the year bringing the balance at March 31, 1961 to $105 million.
In 1960-61 an amount of $50 million was credited to the Colombo plan fund and charged to budgetary expenditure and disbursements charged to the account were $45 million. The balance at March 31, 1961 was $68 million.
The increase of $1 million in the national capital fund represented the amount by which the $3 million credited to the fund and charged to budgetary expenditure exceeded disbursements from the fund.
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The increase of $3 million in the railway grade crossing fund represented the amount by which the credit of $15 million to the fund and charged to budgetary expenditure exceeded disbursements from the fund.
TABLE 45 (in millions of dollars)
Undisbursed Balances of Appropriations to Special Accounts	Balance at March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Colombo plan fund	67.5	63.0	4.5National capital fund	2.8	2.3	0.5Railway grade crossing fund	34.2	31.2	3.0Other	0.1	0 1	104.6	96.6	8.0
Deferred credits
Recorded in this category are the amounts of deferred interest on loans and advances to certain Crown corporations and national governments and other deferred payments due the government. These are contra accounts to corresponding items under "Cash in blocked currencies", "Loans to, and investments in, Crown corporations", "Loans to national governments", and "Other loans and investments".
TABLE 46 (in millions of dollars)
Deferred Credits	Balance at March 31	Increase1961 (preliminary)	1960	or decrease (-)Agreements of sale of Crown assets	10.0	13.6 5.6 19.4	-3.6 -0.5Crown Assets Disposal Corporation	5.1	Deferred interest- The St. Lawrence Seaway Authority	19.4	United Kingdom Financial Agreement Act. 1946	44.2	44.2	Other	0.6	1.2	-0.6
79.3	84.0	-4.7
Balances receivable under agreements of sale of Crown assets are set up as contra accounts to corresponding items under "Other loans and investments". The net decrease of $4 million during the year was due to payments received on outstanding agreements.
The government's equity in the agency account of Crown Assets Disposal Corporation is a contra account to a corresponding item under "Other loans and investments". The balance at March 31,1961 was $5 million, approximately the same as at March 31, 1960.
There was no change during the year in deferred interest of $44 million on loans made under the United Kingdom Financial Agreement Act, 1946, and of $19 million on loans made to The St. Lawrence Seaway Authority. These are contra accounts to corresponding items under "Loans to national governments" and "Loans to, and investments in, Crown corporations" resoectively.

The Budget-Appendix
Suspense accounts
These consist of balances where some uncertainty as to disposition exists.
TABLE 47 (in millions of dollars)
	Balance at March 31		Increase
Suspense Accounts	1961 (preliminary)	1960	or decrease (-)Replacement of materiel, sec. 11, National Defence Act	6.6 1.4	3.6 1.4	3.02.6	3.5	-0.9
10.6	8.5	2.1
The replacement of materiel account, established by section 11 of the National Defence Act, is credited with amounts realized from the sale of materiel that has not been declared surplus to requirements but has been authorized by the Governor in Council to be sold to other countries. The account is debited with disbursements representing amounts paid for the procurement of replacement materiel. During 1960-61 credits exceeded disbursements by $3 million.
The unclaimed cheques account is credited with the amount of treasury cheques (except those drawn on open accounts) which remain undelivered for certain specified periods subsequent to date of issue, pending claims therefor.
Unmatured debt
The unmatured debt of Canada at the close of the 1960-61 fiscal year amounted to $16,068 million, an increase of $178 million over the previous fiscal year total of $15,890 million. Debt payable in Canada increased by $250 million offset in part by decreases of debt payable in London of $20 million and in New York of $52 million. The decrease in debt payable in London and New York was due to the cancellation under authority of Order in Council P.C. 1961-460 dated March 30, 1961 of a portion of the loans that were being held for the retirement of unmatured debt.

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(in millions of dollars)
Unmatched Debt	Balance at March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Payable in Canada-	3,555.5 10,447.2 14,002.7 1,935.0	3,136.5 10,426.8 IS,563.S 2,125.0	419.0 20.4 4S9.4 -190.0
			
			
			
	15,937.7 32.0 98.2	15,688.3 51.8 150.0	249.4 -19.8 -51.8
			
			
	16,067.9	15,890.1	177.8

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The Budget-Appendix
_ The details of the various loan issues, redemptions and conversions resulting in the net increase are described more fully in section 6, "The Public Debt".
In the year under review, unmatured debt obligations payable in London have been stated in Canadian dollars converted at the rate of $2.80 for the pound sterling and that payable in New York at par for the U.S. dollar.
B. Changes in Peincipal Asset Classifications dueing 1960-61
The total assets increased during 1960-61 by $262 million. The principal changes were increases of $183 million in loans to, and investments in, Crown corporations, $138 million in the unamortized portion of the actuarial deficiency in the public service superannuation account, $88 million in other loans and investments, $64 million in advances to the exchange fund account and decreases of $91 million in current assets, $69 million in sinking fund and other investments, $36 million in loans to national governments and $20 million in deferred charges.

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1954	1955	1956	1957	1958	1959	I960
Preliminary

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8000
4000
10000
Fiscal Years Ended March 31 Millions of Dollars
Current assets
The total of this category at March 31, 1961 was $771 million compared with $862 million at March 31, 1960. The main items of note were decreases of $71 million in cash in current and special deposits, $25 million in departmental working capital advances and revolving funds and an increase of $24 million in the securities investment account.
The decrease of $25 million in departmental working capital advances and revolving funds was due to decreases of $31 million in the agricultural commodities stabilization account and $5 million in the defence production revolving fund offset partly by increases of $3 million in miscellaneous departmental imprest and advance accounts and $8 million in other accounts.

The Budget-Appendix
TABLE 49 (in millions of dollars)
	Balance at March 31		Increase
Current Assets	1961 (preliminary)	1960	or decrease (-)360.8	432.0	-71.2126.0	133.4	-7.4Departmental working capital advances and revolving funds-	90.2	120.7	-30.515.7	20.7	-5.0Miscellaneous departmental imprest and advance	25.0	22.4	2.640.0	32.2	7.8170.9	196.0	-95.1101.5	77.9	23.6Moneys received after March 31 but applicable to the current	10.0	18.0	-8.0International monetary fund-revaluation adjustment of	3.1	-3.12.0	1.8	0.2
771.2	862.2	-91.0
Advances to the exchange fund account
Advances during the year to the exchange fund account to finance the purchase of gold and foreign exchange amounted to $388 million and repayments were $324 million, increasing outstanding advances to $2,024 million at March 31, 1961.
Sinking fund and other investments held for retirement of unmatured debt
There was a decrease of $69 million in this category during the year bringing the balance to $17 million at March 31, 1961. The decrease was due to the cancellation under authority of Order in Council P.C. 1961-460 dated March 30, 1961, of a portion of the bonds held for the retirement of unmatured debt.

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(in millions of dollars)
Sinking Fund and Other Investments Held for Retirement of Unmatured Debt	Balance at March 31	Increase1961 (preliminary)	1960	or decrease (-)Sinking fund invested in-	Newfoundland guaranteed stock, 1933/34-43/63, 3 per cent	12.7 '	12.7	United Kingdom conversion stock, 1963, 4f per cent	4.0	3.3	0.716.7	16.0	0.7Account N funds invested in*1)-	Newfoundland guaranteed stock, 1933/34-43/63, 3 per cent	18.8	-18.8Other investments^1^-	Newfoundland guaranteed stock, 1933/34-43/63,3 per cent	1.0	-1.038.5	-38.50.1	-0.110.9	-10.9(2)	(2)50.5	-50.516.7	85.3	-68.6
<0 Cancelled under authority of Order in Council P.C. 1961-460 dated March 30, 1961. Less than $50,000.
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The Budget-Appendix Loans to, and investments, in Crown corporations
These loans and investments increased by $183 million during 1960-61. The balance at March 31, 1961 was $3,630 million.
TABLE 51 (in millions of doEars)
	Balance at March 31		Increase
Loans to, and Investments in, Crown Corporations	1961 (preliminary)	1960	or decrease (-)Atomic Energy of Canada Limited	60.9	59.4	1.55.9	5.9	7.5	7.5	3.0	3.0Canadian Commercial Corporation	7.0	6.0	1.0Canadian National Railways	1,087.8	1,204.3	-116.5Canadian National (West Indies) Steamships Limited	1.6	2.6	-1.0Canadian Overseas Telecommunication Corporation	31.9	22.6	9.3Central Mortgage and Housing Corporation	1,510.5	1,318.7	191.88.2	8.2	10.0	10.0	Farm Credit Corporation	155.7	115.7	40.0National Capital Commission	26.0	17.8	8.2National Harbours Board	172.8	161.4	11.4Northern Canada Power Commission	39.7	34.6	5.1Northern Ontario Pipe Line Crown Corporation	125.0	121.5	3.530.0	30.0	The St. Lawrence Seaway Authority- Loans	320.5	296.5	24.019.4	19.4	Trans-Canada Air Lines	4.8	3.5	1.3Other Crown Corporations	1.3	1.1	0.23,629.5	3,446.7	182.8
Advances to Atomic Energy of Canada Limited, to be covered by obligations or shares of the company, were $61 million at March 31, 1961, an increase of $2 million during the year.
Loans during the year to Central Mortgage and Housing Corporation amounted to $235 million, of which $222 million was for direct loans by the corporation and $13 million in respect of loans for federal-provincial housing projects. Repayments totalled $43 million, of which $38 million was in respect of direct loans, $2 million in respect of loans for federal-provincial housing projects and $3 million in respect of loans for housing projects. The net increase of $192 million for the year brought the total loans to $1,511 million at March 31, 1961.
Loans to the Farm Credit Corporation amounted to $40 million and investment in the capital of the corporation amounted to $1 million during the year. Repayments by the corporation of $1 million, brought the outstanding advances to $156 million at March 31, 1961.
Advances to The St. Lawrence Seaway Authority during the year were $24 million bringing the total loans to $321 million. In addition, deferred interest on these loans was $19 million at the year-end, unchanged from the total at March 31, 1960. A contra item for this deferred interest is included in the liability category "Deferred credits".
In the fiscal year ended March 31, 1961, the government advanced to the Canadian National Railway Company $108 million for capital purposes and retirement of debt in the hands of the public. Of this amount $4 million was

The Budget-Appendix
advanced for the company's purchase fund which is operated under the terms of Canadian National Railway Company bonds, guaranteed by the Government of Canada, issued on May 15, 1959, December 15, 1959, January 1, 1960 and October 1, 1960 and $1 million was advanced to the company under the Refunding Act, 1955 for the refunding of various trust certificates. During the fiscal year ended March 31, 1961, repayment of current and prior years' advances totalled $225 million, of which $221 million was from the proceeds of the sale of Canadian National Railway Company bonds dated October 1, 1960.
In addition, to assist the company to finance further capital expenditure during the fiscal year, the government purchased $21 million of four per cent preferred stock of the Canadian National Railway Company. This stock is issued under the authority of the Canadian National Railways Capital Revision Act, 1952, in an amount equal to three per cent of the gross revenue of the company.
Further, in the year ended March 31, 1961, the government provided the company with temporary loans of $56 million in respect of its 1960 income deficit. This amount plus temporary loans of $14 million made on the same account in the previous fiscal year, less a repayment of $3 million representing advances not required by the company brought the total loans on account of the 1960 deficit to $67 million which was charged to budgetary expenditure in 1960-61. Also, in 1960-61, an accounting adjustment was made transferring to net debt $8 million in respect of the company's 1958 income deficit, under authority of Vote 565 of Appropriation Act No. 6, 1960.
In addition, temporary loans of $2 million were made in February 1961 to the company in respect of its 1961 income deficit.
In summary, the total amount made available to the company during the year was $184 million and repayments amounted to $300 million. The amount of advances to the company outstanding at March 31, 1961 was thus reduced by $116 million.
TABLE 52 (in millions of dollars)
Advances to, and Repayments by, the Canadian National Railways During the Fiscal Year 1960-61	Fiscal year ended March 31	Increase1961 (preliminary)	1960	decrease (-)Advances-	For the refunding of debt	1.0	5.3	-4.3For capital expenditures	102.6	149.2	-46.6For purchase fund	4.0	7.5	-3.5For interim financing of income deficits	55.5	41.0	14.5les.i	tos.o	-S9.9Repayments-	Advances for capital and refunding purposes	-225.1	-445.7	220.6Advances for interim financing of income deficits	-75.0	-41.0	-34.0son. i	-J,86.7	186.6Excess of advances over repayments or repayments over	advances (-)	-137.0	-283.7	146.7Purchase of 4 per cent preferred stock (C.N.R. Capital	Revision Act, 1952)	20.5	22.3	-1.8Net increase or decrease (-) during the fiscal year in the government's advances to, and investments in, the	Canadian National Railways	-116.5	-261.4	144.9
At March 31, 1960, temporary loans of $4 million were outstanding to the Trans-Canada Air Lines in respect of its 1960 income deficit. During 1960-61
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The Budget-Appendix further advances totalling $2 million were made for this purpose. The total amount of $6 million was repaid or credited during the year. However, the government made advances of $5 million on account of the air line's 1961 income deficit and this amount was outstanding at March 31, 1961.
Other changes in this category included increases of $9 million in advances to the Canadian Overseas Telecommunication Corporation, $11 million in loans to the National Harbours Board, $8 million in loans to the National Capital Commission and $5 million in advances to the Northern Canada Power Commission.
Loans to national governments
These loans totalled $1,378 million at March 31, 1961, a decrease of $36 million during the fiscal year.
TABLE 53 (in millions of dollars)
Loans to National Governments	Balance at March 31	Increase1961 (preliminary)	1960	decrease (-)Loans to United Kingdom- The United Kingdom Financial Agreement Act, 1946....	1,047.3 44.2	1,064.1 44.2	-16.81,091.5	1,108.S	-16.8Loans under the Export Credits Insurance Act, Part II-	36.9	39.2	-2.3142.3	150.6	-8.373.4	78.0	-4.6252.6	267.8	-15.2Special loans to Colombo Plan countries to finance the purchase of wheat and flour from Canada-	2.0	2.0	29.5	33.0	-3.5SI.5	S5.0	-S.5Miscellaneous loans and advances-[DOT]	1.4	1.5	-0.1Netherlands-military relief and currency credits	0.6	i.i	-0.50.8	0.8	2.8	S.i	-0.61,378.4	1,414.5	-36.1
The United Kingdom government repaid $17 million on the $1,185 million loan made under the $1,250 million credit authorized by the United Kingdom Financial Agreement Act, 1946, reducing the principal outstanding at March 31, 1961 to $1,047 million.
Repayments of advances under Part II of the Export Credits Insurance Act to certain foreign countries to assist them in purchasing goods and services in Canada amounted to $15 million during 1960-61 reducing the balance at March 31, 1961 to $253 million.
Special loans to Colombo Plan countries to finance the purchase of wheat and flour from Canada were $32 million at March 31, 1961, $3 million less than the balance at March 31, 1960.
Miscellaneous loans and advances to foreign governments totalled $3 million at March 31, 1961, about $1 million less than the previous year-end balance.

The Budget-Appendix
Other loans and investments
There was an increase of $88 million in this category during the year bringing the balance at March 31, 1961 to $1,023 million.
TABLE 54 (in millions of dollars)
Other Loans and Investments	Balance at March 31		Increase or decrease (-)
	1961 (preliminary)	1960	
Subscriptions to capital of, working capital advances and			
loans to, international organizations-			
Canada's subscription to capital of-			
International monetary fund		543.7	528.7	15.0
International bank for reconstruction and develop-			
ment		73.7	70.9	2.8
	3.5	3.5	
	8.5		8.5
Working capital advances and loans to international			
organizations	1.8	2.1	-0.36S1.2	605.2	26.0Loans to provincial governments-	Alberta	8.0	8.4	-0.4British Columbia	15.5	16.3	-0.8Manitoba	13.2	13.8	-0.6New Brunswick	22.9	26.3	-3.40.1	-0.10.1	-0.1Saskatchewan	24.6	23.3	1.384.2	88.3	-4.1Overpayments to provinces arising out of 1952 tax-rental	agreements-	Manitoba	0.2	0.4	-0.2New Brunswick	0.2	0.4	-0.2Newfoundland	0.1	0.2	-0.1Prince Edward Island	0.2	0.5	-0.3Saskatchewan	0.3	0.6	-0.31.0	2.1	-1.1Veterans Land Act advances	199.6	188.9	10.7Less reserve for conditional benefits-	Veterans Land Act, 1942	-33.7	-37.3	3.6165.9	151.6	14.3M iscellaneous-	Assisted passage scheme (section 69, Immigration Act,	R.S. 1952)	3.5	3.7	-0.2Balances receivable under agreements of sale of Crown	assets	12.1	16.0	-3.9Construction of dock and rail facilities for Steep Rock	Iron Mines Limited	1.8	1.9	-0.1Crown Assets Disposal Corporation-Government	equity in agency account	5.1	5.6	-0.55.7	5.7	Housing projects for Canadian forces	4.9	4.6	0.3Land development of the Cornwall Navigation System	1.7	1.7	Municipal Improvements Assistance Act, 1938	1.6	1.8	-0.2New Westminster Harbour Commission	2.3	2.4	-0.1Old age security fund-temporary loans	17.3	28.0	-10.7Town of Oromocto, New Brunswick	4.2	3.9	0.31.0	1.0	67.0	67.0Yukon Territory	2.1	2.3	-0.2Northwest Territories	0.7	0.8	-0.1City of Montreal-	1.2	1.2	Atwater Tunnel	1.9	2.0	-0.1Other	6.2	4.7	1.5lift.3	87.8	53.01,022.6	934.5	88.1
Canada's subscription to the capital of international organizations increased ny $26 million during the year due mainly to revaluation adjustments of $15 million in the Canadian dollar balance in the international monetary fund and
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The Budget-Appendix a subscription of $9 million made by Canada to the international development association in accordance with section 4 of the International Development Association Act which was assented to on July 7, 1960.
Loans to provincial governments decreased by $4 million and overpayments to certain provinces arising out of the 1952 tax-rental agreements decreased by $1 million during the year.
Advances under the Veterans Land Act increased by $11 million. The reserve for conditional benefits under the Act decreased by $3 million and consequently the total increase in this account was $14 million.
Miscellaneous loans and advances increased by $53 million during the year due mainly to loans of $67 million to the Unemployment Insurance Commission which were outstanding at March 31, 1961 (there were no loans outstanding at March 31, 1960) offset partly by a decrease of $11 million in loans to the old age security fund.
Securities held in trust
This category records the security holdings of various deposit and trust, and annuity, insurance and pension accounts. Bonds and certified cheques held in connection with contractors' securities included in the deposit and trust category are also recorded under this heading. The balance at March 31, 1961 was $34 million, $4 million higher than the previous year-end balance.
Deferred charges
In this category are recorded the residual balances of discounts, commissions, redemption bonuses and conversion premiums on loan flotations that have not been charged to expenditures. There was a decrease of $20 million in this category during the year, bringing the balance at March 31, 1961 to $131 million.
TABLE 55 (in millions of dollars)
Fiscal year ended March 31
Unamortized Bond Discounts and Commissions	1961 (preliminary)	1960Balance at beginning of fiscal year	151.0	147.4New flotation costs to be amortized-	4% Canada savings bonds, 1960, series 15	7.3	51% loan, issued Apr. 1,1960, maturing Apr. 1, 1963	0.7	5|% loan, issued Apr. 1, 1960, maturing Apr. 1, 1969	2.3	4i% loan, issued June 1,1960, maturing Dec. 1, 1962	0.1	3% loan, issued Dec. 15, I960, maturing June 15, 1962	3.4	4% loan, issued Dec. 15,1960, maturing Dec. 15, 1963	3.4	4% loan, issued Feb. 1, 1961, maturing May 1, 1964	3.6	31% loan, issued Mar. 15, 1961, maturing Dec. 15, 1962	1.2	Treasury bills (discount on bills issued)	11.3	15.44-4|% Canada savings bonds, 1959, series 14	0.8	15.72f% loan, issued July 1,1959, maturing Apr. 1, 1960	3.03% loan, issued July 1, 1959, maturing Dec. 15, 1960	3.6h%% loan, issued Oct. 1, 1959, maturing Oct. 1, 1960	1.53% loan, issued Oct. 1, 1959, maturing May 1, 1961	6.75?% loan, issued Oct. 1, 1959, maturing Oct. i, 1962	6.65i% loan, issued Feb. 15, 1960, maturing Oct. 1, 1962	1.0£>2% loan, issued Feb. 15, 1960, maturing Apr. 1, 1963	2.53§-4i% Canada savings bonds, 1958, series 13	0.3SJ.f	66. SLess amortization applicable to fiscal year-	Canada savings bonds and general loans	-38.9	-45.4Discount on treasury bills charged to interest on public debt	-15.4	- 7.3-Bi.S	-6S.7Increase or decrease (-) during year	-20.2	3.6Balance at end of fiscal year	130.8	151.0
The Budget-Appendix
Costs of new loans issued during 1960-61 and charged to the account were $34 million, of which $11 million was in respect of treasury bill discounts which will be charged to interest on public debt in 1961-62. Credits to the account amounted to $54 million of which $39 million was charged to annual amortization costs and $15 million, representing discount on treasury bills sold in 1959-60, was charged to interest on public debt in the 1960-61 budgetary expenditure accounts.
Unamortized portion of actuarial deficiencies
This category records the unamortized portions of the actuarial deficiencies in the public service and the Canadian forces superannuation accounts which have been set up as deferred charges to be written off to budgetary expenditure upon parliamentary approval.
During the year, $138 million was credited to the public service superannuation account in accordance with an actuarial evaluation as at December 31, 1957 and an equivalent amount was set up in this account as a contra item.
The deficiency in the Canadian forces superannuation account was based on the actuarial valuation made as at March 31, 1958.
Suspense accounts
The only item in this category is the cheque adjustment suspense account which reflects unadjusted balances resulting from the reconciliation of payments for redemption of paid cheques with the amount of those cheques as subsequently determined in adjustment of the outstanding cheque account.
Capital assets
Assets of the government such as land, buildings, works and equipment, etc., that are charged to budgetary expenditure at the time of acquisition or construction, are included in this category and are shown on the statement of assets and liabilities at a nominal value of $1.
Inactive loans and investments
Loans and investments which are not currently revenue-producing or realizable are recorded in this category. Included are the loan of $49 million to China under the Export Credits Insurance Act, loans of $24 million and $7 million made to Roumania and Greece in 1919-20 and 1920-21 and advances of $15 million in respect of the implementation of guarantees (Ming Sung Industrial Company Limited).
Reserve for losses on realization of assets
There was no change in this reserve during the year. The balance at March 31, 1961 remained at $546 million.
C. Increase in Net Debt
At March 31, 1961 the net debt of Canada amounted to $12,442 million compared with $12,089 million at March 31, 1960.
The budgetary deficit of $345 million for the fiscal year 1960-61 plus an accounting adjustment of $8 million in respect of prior years' transactions in connection with the Canadian National Railways 1958 deficit resulted in an increase of $353 million in the net debt of Canada during the fiscal year.
[Stage Direction]
The Budget-Appendix
5.	THE CASH POSITION
The government's cash position is affected not only by the budgetary transactions but also by changes in the government's outstanding unmatured debt and other non-budgetary transactions. In 1960-61, although there was a budgetary deficit of $345 million the government's bank balances decreased by only $71 million during the same period. This decrease was the net result of the budgetary deficit being offset by an increase of $223 million in outstanding unmatured debt (after taking into account transactions in the securities investment and sinking fund accounts) and the net receipts of $51 million from other non-budgetary transactions.
Non-budgetary receipts and disbursements relate to transactions which result in increases or decreases in the government's assets and liabilities and do not appear in what might be called the government's income account for the fiscal year nor do they enter into the calculation of the annual budgetary surplus or deficit. However, in considering the full scope of the government's financial operations and in measuring their effect on the government's cash position and their impact on the economy, non-budgetary as well as budgetary transactions must be taken into account.
The increases or decreases in the government's assets and liabilities have been described in detail in the section entitled "Statement of Assets and Liabilities of Canada". On the assets side the non-budgetary transactions consist, for the most part, of loans and advances to, and repayments by, Crown corporations and other government agencies and funds (including the old age security fund), national, provincial and municipal governments, international organizations, veterans and other borrowers. On the liabilities side they relate mainly to receipts and payments in connection with the many deposit and trust accounts, and annuity, insurance and pension funds held or administered by the government.
The following statement summarizes both the budgetary and non-budgetary transactions for 1960-61 and indicates how they affect the government's cash position. For purposes of comparison the corresponding figures for 1959-60 are also shown.

The Budget-Appendix
TABLE 56 (in millions of dollars)
Changes in Cash Position
Budgetary transactions-
Revenue	
Expenditure	
1. Budgetary deficit (-)..
Non-budgetary transactions (excluding unmatured debt transactions)- Receipts and credits-
Repayments of loans, investments and working capital advances (net)-Agricultural commodities stabilization account	
Canadian National Railways.	...
Defence production revolving fund	
New Brunswick (Beechwood Power Project)	
Old age security fund (temporary loan)	
United Kingdom (1946 loan)	
Other national governments (Export Credits Insurance Act). Other	
Net government annuities account receipts- Premium receipts less payments to beneficiaries. Government contributions to maintain reserve... Interest paid by government	
Net insurance and pension accounts receipts-
Employee contributions less payments to beneficiaries	
Government contributions	
Actuarial deficiency in the public service superannuation account. Interest paid by government	
Net receipts in special defence account	
Net increase in current and demand liabilities	
Net decrease in unamortized loan flotation costs	
Net decrease of cash in hands of collectors and in transit. Net receipts in sundry other accounts	
Disbursements and charges-
Loans, investments, and working capital advances (net)-
Canadian Broadcasting Corporation	
Canadian Overseas Telecommunication Corporation...
Central Mortgage and Housing Corporation	
Exchange fund account	
Farm Credit Corporation	
National Capital Commission	
National Harbours Board	
Northern Canada Power Commission	
Northern Ontario Pipe Line Crown Corporation	
The St. Lawrence Seaway Authority	
International monetary fund (subscription to capital).
International development association	
Unemployment Insurance Commission	
Other	
Net disbursements on account of United States of America	
Unamortized portion of actuarial deficiency in public service superannuation account	
Other	
2 .Net amount received from non-budgetary transactions (excluding unmatured debt transactions)	
3.	Overall cash requirement (-) to be financed by increase in debt or
decrease in cash balances (1+2)	
4.	Net increase in unmatured debt outstanding in the hands of the
public-
Unmatured debt-
Bonds	
Treasury bills	
Securities investment account	
Sinking fund and other investments	
Fiscal year ended March 31
1961 (preliminary)	1960
5,615.6	5,289.8
5,961.1	5,702.9
-345.5	-413.1
30.5	-53.6
116.5	261.4
5.0	9.5
3.4	3.2
10.7	-28.0
16.8	16.4
15.2	17.9
6.4	14.2
204.5	241-0
-2.2	8.1
	0.2
44.0	42.8
41.8	51.1
27.2	27.1
88.5	95.3
137.7	
96.0	88.3
849.4	210.7
3.0	-10.2
49.6	146.5
20.2	-3.6
7.4	33.6
14.6	31.2
690.5	700.3
3.0	
9.3	9.6
191.8	315.1
64.0	-35.0
40.0	28.5
8.2	10.7
11.4	15.8
5.1	12.9
3.5	8.0
24.0	33.1
15.0	235.4
8.5	
67.0	
32.6	7.3
483.4	641.4
1.0	8.3
137.7	
16.9	13.0
639.0	662.7
51.5	37.6
-294.0	-375.5
367.8	-214.0
-190.0	530.0
-23.6	20.1
68.6	-2.1
222.8	334.0
-71.2	-41.5
5. Net decrease (-) in Receiver General bank balances (3+4)
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The Budget-Appendix
As the table shows, non-budgetary receipts and credits for 1960-61 (excluding unmatured debt transactions) totalled $690 million while non-budgetary disbursements and charges (also excluding unmatured debt transactions) amounted to $639 million, resulting in a net receipt of $51 million from non-budgetary transactions. As there was a budgetary deficit of $345 million, $294 million required financing by an increase in unmatured debt or a decrease in cash balances. In 1959-60 there was a net receipt of $38 million from non-budgetary transactions and for the same period there was a budgetary deficit of $413 million resulting in $375 million having to be financed by an increase in unmatured debt or a decrease in cash balances.
Non-budgetary receipts and credits, as already indicated, totalled $690 million in 1960-61. Repayments of loans, investments and working capital advances were $204 million and included $30 million in respect of the agricultural commodities stabilization account, $116 million from the Canadian National Railways, $11 million in respect of temporary loans to the old age security fund, $17 million from the United Kingdom government on account of the Financial Agreement Act, 1946 and $15 million from other national governments on loans made under Part II of the Export Credits Insurance Act. Net government annuities account receipts were $42 million and net insurance and pension accounts receipts were $349 million (including an accounting adjustment of $138 million with respect to the actuarial deficiency in the public service superannuation account). Net receipts and credits in various other accounts amounted to $95 million.
Non-budgetary disbursements and charges amounted to $639 million. Loans, investments and working capital advances were $483 million and included $9 million to the Canadian Overseas Telecommunication Corporation for investment in various cable projects, $192 million to the Central Mortgage and Housing Corporation for the purpose of making housing loans, $40 million to the Farm Credit Corporation for the purpose of making loans to farmers, $64 million to the exchange fund account, $8 million to the National Capital Commission for the purpose of acquiring land in the national capital area not required for immediate use, $11 million to the National Harbours Board for construction and capital expenditures, $24 million to The St. Lawrence Seaway Authority for costs in connection with the construction of the seaway, $24 million in respect of subscriptions to the international monetary fund and the international development association, and $67 million to the Unemployment Insurance Commission to finance the requirements of the unemployment insurance fund not otherwise financed by the sale of the fund's investments. Other non-budgetary disbursements and charges amounted to $156 million, including an accounting adjustment of $138 million in respect of the unamortized portion of the actuarial deficiency in the public service superannuation account.
In summary, as budgetary and non-budgetary transactions during 1960-61 required financing in the amount of $294 million, and unmatured debt outstanding in the hands of the public (after taking into account transactions in the securities investment and sinking fund accounts) increased by $223 million, cash balances on deposit with the banks decreased by $71 million.

The Budget-Appendix
6.	THE PUBLIC DEBT
Gross and net debt
During the fiscal year ended March 31, 1961, the gross public debt increased by $615 million to $21,601 million. This increase was made up of increases of $178 million in unmatured debt and $437 million in other liabilities. During the year the government's recorded net assets increased by $262 million. The net debt increased by $353 million to $12,442 million, reflecting the budgetary deficit of $345 million plus an adjustment of $8 million in respect of prior years' transactions.


[Stage Direction]
Statement of Public Debt, Unmatured Debt, Recorded Net Assets and Net Debt of Canada
(in millions of dollars)
As at March 31	Gross Public Debt	Less recorded net assets	Net debt	Increase or decrease (-) in net debt during fiscal yearUnmatured debt	Other liabilities	Total	1957	14,368.4	3,967.3	18,335.7	7,328.0	11,007.7	-272.71958	14,245.1	4,173.4	18,418.5	7,372.2	11,046.3	38.61959	15,574.1	4,675.8	20,249.9	8,571.5	11,678.4	632.11960	15,890.1	5,096.3	20,986.4	8,897.2	12,089.2	410.81961 (preliminary)	16,067.9	5,533.3	21,601.2	9,159.0	12,442.2	353.0
The Budget-Appendix Unmatured debt
The total unmatured debt of Canada at March 31, 1961 was $16,068 million. This was $178 million more than the total at the end of the previous fiscal year. During the fiscal year the government's holdings of its own securities in the sinking fund and in the securities investment account showed a net decrease of $45 million. The net increase in the amount of outstanding unmatured debt in the hands of the public was $223 million.
Summary of security issues and maturities or redemptions during the
year
During the year ended March 31, 1961, the government issued securities payable in Canadian dollars in the principal amount of $2,531 million (excluding the refunding of treasury bills which mature weekly), redeemed or converted issues payable in Canada in the amount of $2,181 million and cancelled issues (under authority of Orders in Council P.C. 1961-116 dated January 30, 1961 and P.C. 1961-460 dated March 30, 1961) in the amount of $172 million of which $100 million was payable in Canada, $20 million in London and $52 million in New York.
The following is a summarized table of changes in unmatured debt for the last two years:

[Stage Direction]
(in millions of dollars)
Unmatured Debt	Fiscal year ended March 31	
	1961 (preliminary)	1960
	15,890	15,574 30 1,408
New issues- For cash-		
	64 851 200	
		
		100 343 1,881 948 187 1,235
		
By renewals and conversions-	1,116 1,416	
		
Less-	1,416	
	2,531	3,016
	-998 -497 -496 -190 -3, 181 -172	-415 -1,135 -1,150
		
		
		
		-S, 700
		
	-2,353	-2,700
	178	316
		
	16,068	15,890
		
At March 31, 1961, the outstanding unmatured debt payable in U.S. dollars was $98 million, and the amount payable in sterling was $32 million.
Net sales of Canada savings bonds, 1960 series, as at March 31, 1961 amounted to $851 million and additional sales of Canada savings bonds, 1959

The Budget-Appendix
series, during the year were $64 million. Redemptions of Canada savings bonds series 5 to 14 (of which series 5 matured on November 1, 1960) were $496 million. The net increase during the year for all series was $419 million and the amount unmatured at March 31, 1961 was $3,556 million.
The amount of treasury bills outstanding decreased by $190 million during the fiscal year and the balance at March 31, 1961 was $1,935 million, consisting of $1,235 million in three-month bills, $650 million in six-month bills and $50 million in special one-year bills (due June 2, 1961). The March 31, 1960 balance of $2,125 million consisted of $1,375 million in three-month bills, $510 million in six-month bills, $200 million in special one-year bills and $40 million in special 253 day bills.

[Stage Direction]
Debt Matured or Redeemed During the Fiscal Year Ended March 31, 1961 (preliminary)
-	Interest rate	Where payable	Amount
	per cent		$
April 1, 1960, loans of 1958 and 1959	2!	Canada	329,000,000June 1, 1900, sixth victory loan	3	Canada	46,588,650October 1, 1960, loan of 1959(1)	5*	Canada	134,998,000December 15, 1960, loans of 1957 and 1959	3	Canada	609,000,000February 1 and March 15, 1961, loans of 1958 and 1959(2)	3	Canada	225,000,000December 15, 1960 and March 15, 1961, conversion loan of 1961(3)	3	Canada	250,000,000Loan of October 1, 1959 (partial conversion)	5$	Canada	221,000Loans of February 15, 1960 and April 1, 1960 (partial conversion)	Canada	702,000January 1, 1961, loan of 1933/34 (Newfoundland stock) <4>	3	London	19,822,389March 1, 1961, loan of September 1, 1949<4)	2f	New York	39,794,000March 15, 1961, loan of September 15, 1950(4)	2f	New York	12,031,000Canada savings bonds, S5 to 14	various	Canada	495,559,600Treasury bills-net decrease	various	Canada	190,000,0002,352,716,639
W $121,030,000 converted to loan of October 1, 1960-October 1,1975, 52%. Balance of $13,968,000 charged to matured debt.
<2) $50,000,000 exchanged for loan of February 1, 1961-May 1, 1964, 4%; $75,000,000 exchanged for loan of March 15, 1961-December 15, 1962, 3J%; and $100,000,000 cancelled under authority of Order in Council P.C. 1961-116 dated January 30, 1961, leaving a balance of $300,000,000 in the loan.
(3) $110,000,000 exchanged for loan of December 15,1960-December 15,1963,4%; $90,000,000 exchanged for loan of December 15, 1960-June 15, 1962, 3%; and $50,000,000 exchanged for loan of March 15, 1961- May 1, 1964, 4%, leaving a balance of $770,514,000 in the loan.
Cancelled under authority of Order in Council P.C. 1961-460 dated March 30, 1961.
[Stage Direction]
The Budget-Appendix

[Stage Direction]
New Securities Issued During Year Ended March 31, 1961 (preliminary)
Description	Price to govern- ment	Yield at price to government	Total amount issued	Renewals or conversions included in amount issued	Amount issued for cash$	$	$Issued to general public-	Marketable bonds-	«April 1, 1960-April 1, 1963, 5)%...	99.40	5.72	249,000,000	249,000,000	«April 1, 1960-April 1, 1969, 5|%...	97.00	5.94	80,000,000	80,000,000	WJune 1, 1960-December 1, 1962,	4J%	99.91	4.29	140,000,000	140,000,000	(4)October 1, 1959-October 1, 1975,	5j%	121,251,000	121,251,000	December 15, 1960-June 15, 1962,	3%	98.60	3.97	300,000,000	300,000,000	December 15, 1960-December 15,	1963, 4%	98.40	4.58	300,000,000	300,000,000	February 1, 1961-May 1, 1964, 4%	98.25	4.58	150,000,000	50j000'000	100,000,000March 15, 1961-December 15,	1962 , 3}%	99.20	3.98	175,000,000	75,000,000	100,000,000<'>March 15', 1961-May 1, 1964, 4%..	98.75	4.43	100,000,000	100,000,000	(tt)February 15, 1960-April 1, 1976,	5*%	702,000	702,000	Canada savings bonds-	November 1, 1959-November 1,	1968, 4-5%	98.75	63,700,000	63,700,000November 1, 1960-November 1,	1970, 4-5% (net)	99.00	850,826,750	850,826,7502,530,479,750	1,415,953,000	1,114,526,750
0) Of the public offering, $75,880,000 was sold at the above price. An additional amount of $44,120,000 was offered at competitive tender resulting in an average price to the government of 100.23. Bonds are exchangeable, on or before December 31, 1962, into an equal par value of b\% non-callable bonds due April 1, 1976.
Of the public offering, $74,875,000 was sold at the above price. An additional amount of $5,125,000 was offered at competitive tender resulting in an average price to the government of 98.25.
(s) Offered at competitive tender. Price and yield are the resulting average of successful tenders.
(4) In exchange for $121,030,000 5|% non-callable bonds due October 1, 1960 and $221,000 5§% noncallable bonds due October 1, 1962.
Sold to Bank of Canada in exchange for an equal par value of $50,000,000 of treasury bills due June 2, 1961 and $50,000,000 of 3% bonds due December 1, 1961.
(8) In exchange for an equal par value of 5s% non-callable bonds due April 1, 1963.
Interest rates
The average interest rate on the government's unmatured debt at March 31, 1961 was 3.91 per cent compared with 3.98 per cent at the end of the previous fiscal year, reflecting lower treasury bill yields offset partly by a fractional increase in interest rates of marketable bonds.
The yield on the three-month treasury bills at tender on March 31, 1960 was 3.01 per cent. After declining to 1.68 per cent in September 1960, the yield had risen by December 1, 1960 to a high for the fiscal year of 3.95 per cent and was 3.21 per cent at tender on March 29, 1961.
The yield on six-month treasury bills was 3.23 per cent at tender on March 31, 1960. Six-month yields declined during the first half of the year to a level of 1.99 per cent in September and then rose to a level of 4.07 per cent on December 1, 1960. At tender on March 29, 1961 the rate was 3.37 per cent. The yield on one-year treasury bills issued on June 1, 1960 was 3.39 per cent.

The Budget-Appendix
The following table shows the high and low yields together with the yield on the last issue of three-month bills for the fiscal years ended March 31, 1957 to 1961 inclusive, and for six-month bills for the fiscal years 1959-60 and 1960-61:

[Stage Direction]
Treasury Bill Yields at Tender
Fiscal Year Ended March 31
Three-month bills-
1957		
1958		
1959		
1960		
1961		
Six-month bills-
1960		
1961		
High	Low	Last issueper cent	per cent	per cent3.81	2.40	3.704.08	2.27	2.274.30	0.87	4.306.16	3.01	3.013.95	1.68	3.216.87	3.23	3.234.07	1.99	3.37

[Stage Direction]
As At March 31
Indirect debt or contingent liabilities
In addition to the direct debt set out in the statement of assets and liabilities the government has assumed certain indirect or contingent obligations. These consist of securities of the Canadian National Railways, guaranteed as to principal and interest or as to interest only, and a number of miscellaneous guarantees, the chief of which are the guarantee of insured loans made by chartered banks and other approved lending institutions under the National Housing Act, 1954, deposits maintained by the chartered banks in the Bank of Canada, bank advances to the Canadian Wheat Board, advances under the Export Credits Insurance Act and bank loans under the Farm Improvement Loans Act.
[Stage Direction]
The Budget-Appendix
The government's liability under its guarantee of insured loans under the National Housing Act, 1954 was $3,025 million at December 31, 1960 compared with $2,678 million at December 31, 1959.

[Stage Direction]
Summary or Indirect Debt or Contingent Liabilities as at March 31, 1961
Amount outstanding March 31, 1961 (preliminary)
[Stage Direction]
Bonds and debenture stock guaranteed by the government-
Railway securities guaranteed as to principal and interest-
Canadian Northern Ontario 3|% due May 19, 1961..
Grand Trunk Pacific 3% due January 1, 1962	
Grand Trunk Pacific 4% due January 1, 1962	
Canadian National 23% due February 1, 1963	
Canadian National 5|% due December 15, 1964C1>..
Canadian National 3% due January 3, 1966	
Canadian National 2 j% due January 2, 1967	
Canadian National 4|% due April 1, 1967V)	
Canadian National 5% due May 15, 1968V)	
Canadian National 2 due September 15, 1969	
Canadian National 2|% due January 16, 1971	
Canadian National 3j% due February 1, 1974	
Canadian National 25% due June 15, 1975	
Canadian National 5% due May 15, 1977V)	
Canadian National 4% due February 1, 1981	
Canadian National 5-3% due January 1, 1985(1>...
Canadian National 5% due October 1, 1987V)	
Railway securities guaranteed as to interest only-
Grand Trunk 5% debenture stock, perpetual	
Grand Trunk 4% debenture stock, perpetual	
2,069,805
26,405,130
7,999,074
250.000.	000
199.000.	000
35.000.	000
50.000.	000
72.750.000
56.400.000
70.000.	000
40.000.	000
200.000.	000 6,000,000
85.950.000 300,000,000
99.500.000 171,500,000
1,672,63If, 009
51,190 5,054 56, m
1,672,690,253
Other outstanding guarantees and contingent liabilities-
Deposits maintained by the chartered banks in the Bank of Canada	_	
Loans maintained by approved lending institutions under National Housing Acts
prior to 1954 Act	_	
Loans made by lenders under Part IV of the National Housing Act, 1954, for home
extensions and improvements	_	
Insured loans made by approved lenders under the National Housing Act, 1954....
Guarantees to owners of returns from moderate rental housing projects	
Guarantees under Export Credits Insurance Act, Part I	
Loans made by chartered banks under the Farm Improvement Loans Act	
Loans made by chartered banks under the Veterans' Business and Professional Loans
Act	[DOT][DOT][DOT][DOT][DOT]	
Loans made by chartered banks and credit unions under the Fisheries Improvement
Loans Act	
Loans made by chartered banks under the Prairie Grain Producers' Interim Financing Act, 1956	
Loans made by chartered banks under the Prairie Grain Loans Act	
Loans made by chartered banks under the Small Business Loans Act	
Loans made by chartered banks to Canadian Wheat Board	
Loans made by chartered banks to Canadian Wheat Board pursuant to the Prairie
Grain Provisional Payments Act	
Loans made by chartered banks under the Prairie Grain Advance Payments Act
[Stage Direction]
656,295,000
Indeterminate
7,526,556
3,017,404,029
Indeterminate
104,164,661
45,426,489
209,136
146,747
92,374 6,661 49,390 125,560,000
31,000
35,830,000
3,992,742,043
[Stage Direction]
5,665,432,296
V) The original amounts issued were as follows: 1964 maturity $200,000,000; 1967 maturity $75,000,000; 1968 maturity $60,000,000; 1977 maturity $90,000,000; 1985 maturity $100,000,000; 1987 maturity $175,000,000; as at March 31, 1961 these amounts were reduced by $1,000,000, $2,250,000, $3,600,000, $4,050,000, $500,000 and $3,500,000 respectively through the operation of the Company's Purchase Fund.

The Budget-Appendix
7. SUPPLEMENTARY DETAILED TABLES
Revenues
Expenditures
Annual Changes in Loans and Investments Unmatured Debt

The Budget-Appendix
STATEMENT OF REVENUES FOR LAST FIVE FISCAL YEARS (in millions of dollars)
-	1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61$	$	$	$	$Tax Revenues-	Income tax-	Personal **)	1,400.5	1,499.8	1,353.5	1,566.6	1,711.2Corporation*1)	1,268.3	1,234.8	1,020.6	1,142.9	1,276.6On dividends, interest, etc., going	abroad	76.4	64.3	61.2	73.3	88.22,745.2	2,798.9	2,435.3	2,782.8	3,076.0Excise taxes-	Sales tax<*) <*>	717.1	703.2	694.5	732.7	720.6Other excise taxes-	Automobiles	79.7	72.3	59.3	64.3	59.6Beverages (soft drinks)	9.0	0.6	Candy and chewing gum	9.8	0.7	Cigarettes, cigars and tobacco	132.3	142.4	148.0	185.5	193.8Electric power export	1.6	1.4	1.2	1.4	1.6Jewellery, watches, ornaments, etc.	6.1	5.3	5.6	5.6	5.9Matches and lighters	0.8	0.9	0.9	0.9	0.9Television sets, radios, tubes and	phonographs	19.0	16.9	17.8	17.8	16.0Toilet preparations	6.1	6.3	6.8	7.6	8.4Wines	2.6	2.7	3.1	3.0	3.2Sundry commodities	2.3	1.4	1.2	1.2	1.0Licences, interest and miscellaneous	0.5	0.6	0.5	0.6	1.3Less refunds	-1.1	-0.7	-2.6	-0.4	-1.0268.7	250.8	241.8	287.5	290.7Customs import duties	549.1	498.1	486.5	525.7	498.7Excise duties-	Spirits	70.3	83.7	96.5	102.4	108.5Beer	83.1	88.2	83.1	90.7	91.0Cigarettes, cigars and tobacco	121.1	131.7	141.2	146.2	150.3Licences	(3)	(3)	(3)	(3)	(3)Less refunds	-3.1	-3.5	-4.1	-4.1	-4.9271. U	S00.1	S16.7	SS5.2	344.9Estate tax*4)	79.7	71.6	72.6	88.4	84.9Miscellaneous tax revenue	16.7	0.1	(3)	(3)	(3)Total tax revenues	4,647.9	4,622.8	4,247.4	4,752.3	5,015.8Non-Tax Revenues-	Post office-net postal revenue	145.8	152.9	157.5	167.6	173.6Return on investments	206.6	169.4	221.2	239.7	284.0Other	106.2	103.7	128.6	130.2	142.2Total non-tax revenues	458.6	426.0	507.3	537.5	599.8Total Revenues	5,106.5	5,048.8	4,754.7	5,289.8	5,615.6
<*)Excluding tax credited to the old age security fund-
1956-57	1957-58	1958-59
Preliminary 1959-60	1960-61
Personal income tax	
125.0	135.0	146.4	185.6	229.4Corporation income tax	
67.3	60.7	55.3	91.3	103.5Sales tax	
179.3	175.8	173.6	270.0	270.2
(,)Net after deduction of refunds and drawbacks as well as transfers to the old age security fund. <')Less than $50,000.
M>Includes duties levied under the Succession Duty Act.
[Stage Direction]
The Budget-Appendix

[Stage Direction]
(in millions of dollars)
-	1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61$	$	$	$	$Agriculture-	2.3	2.6	3.6	3.6	4.4Agricultural commodities stabilization	53.45.0	6.0	15.0	57.7	Assistance re storage costs of grain....	31.8	33.3	38.4	42.3	48.25.9	6.3	6.1	6.1	6.35.9	17.0	12.5	9.217.9	20.3	23.2	25.4	29.3Contributions to Alberta, Saskatch-	ewan and Manitoba-unharvested	4.7	1.441.3	40.5Freight assistance on western feed	17.5	17.5	20.0	23.8	19.2Premium on hog carcasses suitable	for export to United Kingdom....	5.7	5.5	6.9	8.2	6.6Rehabilitation and reclamation pro-	20.313.6	12.5	13.5	17.6	20.4	22.0	23.6	25.6	26.2120.1	181.9	208.6	227.5	265.021.9	21.6	26.1	30.1	38.90.7	0.8	0.8	0.9	0.90.1	0.2	0.3Canadian Broadcasting Corporation-	Grants toward the anticipated operat-	ing deficit and capital expenditures of the radio broadcasting and tele-	65.318.3	24.4	50.3	61.9	1.7	1.8	1.9	2.0	1.9Payment from the consolidated rev-	enue fund of amounts equal to taxes collected under the Excise Tax Act in respect of radio and television sets	19.3	16.8	9.8	S9.S	43.0	62.0	6S.9	67.2Office of the Chief Electoral Officer	0.2	13.6	3.2	0.3	0.6Citizenship and Immigration-	1.8	1.9	2.1	2.1	2.418.6	22.1	14.4	11.7	12.223.7	27.8	36.4	41.1	46.044-1	51.8	62.9	54-9	60.62.7	3.2	3.5	3.7	4.2Defence Production-	10.5	10.2	12.1	15.0	18.6Production capacity and capital assist-	2.6	1.810.0	4.8	1.8	20.5	15.0	IS.9	17.6	20.414.5	15.7	17.0	16.9	19.4Contributions to international economic	66.937.4	38.0	40.0	57.2	Other payments to international or-	16.88.5	6.7	18.8	23.1	60.4	60.4	75.8	97.2	10S.1Finance-	8.0	7.6	10.2	10.8	19.8Office of the Comptroller of the Treas-	19.916.0	17.5	17.9	18.2	100.0	Grants to municipalities in lieu of taxes	24.59.5	17.5	21.9	22.5	Grants to universities	16.0	16.6	25.5	26.1	19.0
The Budget-Appendix

[Stage Direction]
FOR THE LAST FIVE FISCAL YEARS-Continued
(in millions of dollars)
-	1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61$	$	$	%	$Finance-concluded	Government's contributions with res-	pect to the superannuation account-	General	31.6	33.8	37.7	40.0	41.4Special	40.8	44.3	Payments to provinces-	Subsidies	20.6	20.6	20.6	20.8	20.7Tax-rental agreements, 1952 act	365.9	Tax-sharing arrangements, 1956 act..	353.3	423.1	485.4	504.9Transfer of certain public utility tax	receipts	6.6	7.4	8.7	4.8	4.2Transitional grant to Newfoundland.	2.3	1.4	1.0	0.7	0.3Additional grants to Newfoundland.	13.6	7 3	7.7Premium, discount and exchange	1.4	0.2	Provision for reserve for losses on reali-	zation of assets	50.0	Public debt charges-	Interest on public debt	520.2	539.2	606.6	735.6	756.3Cost of issuing new loans and annual	amortization of bond discounts and	commissions	13.4	27.7	40.8	47.3	40.2Servicing of public debt	0.5	0.5	0.6	0.5	0.7Reduction in actuarial deficiency in the	superannuation account	50.0	1,152.8	1,187.4	1,228.2	1,420.2	1,459.6Fisheries	13.8	16.4	17.5	19.9	19.3Forestry	6.7	9.6	9.8	9.9	10.1Governor General and Lieutenant-	Governors	0.4	0.4	0.4	0.4	0.4Insurance	0.5	1.2	1.2	1.2	1.3Justice	7.0	7.2	7.6	8.1	8.6Office of the Commissioner of Peni-	tentiaries	12.0	12.7	16.7	19.7	19.119.0	19.9	24. S	27.8	27.7Labour	9.5	10.2	14.2	21.1	24.3Government annuities-amount re-	quired to maintain reserve	1.2	0.2	0.2	Unemployment Insurance Act, 1940-	Administration and general	29.0	32.5	35.3	35.9	42.2Government's contribution	37.4	37.8	37.1	45.7	55.075.9	81.7	86.8	102.9	121.6Legislation-	House of Commons	5.4	5.0	5.6	5.6	6.3Library of Parliament	0.3	0.3	0.3	0.3	0.3Senate	1.5	1.5	1.7	1.8	1.97.2	6.8	7.6	7.7	8.6Mines and Technical Surveys	17.5	18.7	22.7	23.7	27.8Dominion Coal Board	9.7	8.8	11.3	17.6	19.1Emergency gold mining assistance	8.7	8.6	9.8	13.1	12.1S5.9	S6.1	4S.8	54-4	69.0National Defence-	Defence forces. Army, Naval and Air	1,504.1	i 415 n	1 9,9,9, 7	Defence research and development....	69.3	78.7	' 74.4	' 39.2	44.2Government's contributions with re-	spect to Canadian forces superan-	nuation account	46.3	49.7	49.5	51.8	40.6Mutual aid to NATO countries	133.6	118.5	70.7	18.4	15.5Pensions-payments under Defence	Services Pension Act	5.6	5.8	6.0	6.3	6.8Other	0.5	0.8	1.4	2.1	4.01,759.4	1,668.6	1,424.7	1,514.9	1,519.0
The Budget-Appendix

[Stage Direction]
FOR THE LAST FIVE FISCAL YEARS- Continued
(in millions of dollars)
-	1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61$	$	$	$	$5.0	4.0	4.3	4.6	4.90.4	0.6	0.6	0.7	1.0National Health and Welfare-	5.2	5.5	5.6	6.2	5.0National health branch-	36.3	34.6	45.9	46.0	48.0Government'scontributionsunderthe Hospital Insurance and Diagnostic	54.7	150.6	189.425.5	29.8	31.2	30.6	32.4Welfare branch-	397.5	437.9	474.8	491.2	506.2Old age assistance, blind persons and	30.4	39.7	49.7	50.6	51.356.0	103.9	184.0	7.9	8.2	23.9	40.2	51.62.9	3.1	3.1	3.0	3.3661.7	662.7	872.9	818.4	887.219.0	21.6	25.4	31.5	34.561.8	67.7	68.8	68.7	73.3Northern Affairs and National Re-	32.5	41.9	58.0	74.3	74.5140.0	153.3	157.8	165.8	178.4Privy Council including Prime Min-	0.5	0.6	1.1	1.4	1.9Public Archives and National Library	0.6	0.7	0.7	0.7	0.83.2	3.3	3.5	3.5	3.5140.5	156.6	170.1	158.5	145.93.4	3.3	4.9	6.2	6.3Trans-Canada highway contributions	24.8 168.7	49.4 209. S	51.1 226.1	53.2 217.9	48.7 200.9Royal Canadian Mounted Police	43.4	47.4	51.7	52.4	56.03.5	4.0	4.4	4.7	4.917.5	17.1	19.9	17.7	21.30.2	0.417.6	17.1	19.9	17.9	21.7Transport-	3.3	3.7	4.0	4.6	5.070.5	90.3	115.4	124.1	134.95.0	5.2	5.9	6.7	6.98.2	8.6	9.7	5.8	6.426.9	32.8	51.8	53.3	42.8Non-active assets-	4.1	4.8	4.3	2.0	0.68.2	5.7	1.8	3.7	6.3Deficits-	22.1	51.6	43.6	67.5Canadian National (West Indies)	0.6	1.2	North Sydney-Port-aux-Basques	5.4	6.0	5.8	5.8	5.4Prince Edward Island car ferry	1.8	2.0	2.0	2.6	2.6Yarmouth-Bar Harbour ferry.... Freight Rates Reduction Act	0.3	0.3	0.2	0.2 7.8	0.2 20.4
The Budget-Appendix

[Stage Direction]
FOR THE LAST FIVE FISCAL YEARS-Concluded
(in millions of dollars)
-	1956-57	1957-58	1958-59	1959-60	Preliminary 1960-61Transport-concluded	$	%	S	$	*Railway and steamship services- concluded	Maintenance of trackage	7.0	7.0	7.0	7.0	7.0Maritime Freight Rates Act	12.5	12.6	13.1	14.3	14.1Railway grade crossing fund	
Trans-Canada Air Lines-deficit	5.0	5.0	15.0	15.0	15.0 2.6 SS7.7168.8	806.7	888.8	896.6	Veterans Affairs-	Administration and general	5.4	6.2	6.3	6.4	6.7Hospital accommodation, additions,	alterations and improvements	4.6	3.3	3.3	4.5	6.0Pensions	130.3	145.6	150.7	149.7	150.7Provision for reserve for conditional	benefits	6.8	5.2	4.4	3.8	3.5Soldier settlement and veterans land	acts	5.4	5.6	5.4	5.2	5.1Treatment and welfare services	50.8	56.4	56.1	52.6	52.7Veterans allowances, treatment allow-	ances and other benefits	45.8	53.1	60.4	63.2	64.7War service gratuities and re-estab-	lishment credits	2.4	1.8	2.2	2.9	2.9851.5	877.8	888.8	888. S	898.3Total Expenditures	4,849.0	5,087.4	5,364.0	5,702.9	5,961.1
The Budget-Appendix

[Stage Direction]
(in millions of dollars)
1957-58
1959-60
Preliminary
Loans to, and investments in, Crown corporations-
Atomic Energy of Canada Limited.... Canadian Broadcasting Corporation...
Canadian Commercial Corporation___
Canadian National Railways	
Canadian National (West Indies)
Steamships Limited	
Canadian Overseas Telecommunication Corporation	
Central Mortgage and Housing Corporation	
Farm Credit Corporation	
National Capital Commission	
National Harbours Board	
Northern Canada Power Commission. Northern Ontario Pipe Line Crown
Corporation	:	
The St. Lawrence Seaway Authority..
Trans-Canada Air Lines	
Other	
Fi-
Loans to national governments-
United Kingdom-
The War Appropriation (U.K.
nancing) Act, 1942	
The United Kingdom Financial
Agreement Act, 1946...
Export Credits Insurance Act Special loans to Colombo plan countries to finance the purchase of wheat and
flour from Canada	
Other	
Other loans and investments- Subscriptions to capital of, working capital advances and loans to, international organizations- Canada's subscription to capital of-
International monetary fund	
International finance corporation.. International bank for reconstruction and development	
International development association	
Working capital advances and loans to international organizations.... Loans to provincial governments.... Balances receivable under agreements
of sale of Crown assets	
Old age security fund	
Unemployment Insurance Commission
Veterans land act advances	
Other	
9.1
-0.1
-2.0
172.1
-0.3
4.3
-4.1
9.3
7.2
0.3
0.3
56.0
-0.1
262.0
-30.0
-15.5
-21.9
-3.8
-71.2
-8.8
3.5
3.2
-0.3
2.7
-27.0
0.6
-10.7
-0.2
0.3
107.5
14.3
2.1
11.1
6.7
70.5
<*>99.2
0.1

[Stage Direction]
«>44.2
-19.9
16.2
-1.1
9.4
5.0
199.5 -0.3
0.3
335.6
22.0
5.0
20.2
7.3
42.8 <*>106.1 2.5
716.7
-22.5
-16.1
-17.9
18.3
-0.8
-S9.0
-2.6
0.8
-3.4
7.8
-48.5
-0.2
C>1.0
-4.4
-1.5
025.5
-2.9
Sinking fund and other investments held for retirement of unmatured debt.
-3.8
2.8
-49.6
-3.2
9.4
6.1
0.9
-3.0
3.4
so.4
-128.5
Net total of changes in loans and investments	
2.0
-261.4
-0.2
9.6
315.1
28.5
10.7
15.8
12.9
8.0
<*>33.1
1.0
-0.1
176.6
-16.4
-17.9
0.5
-0.6
-S4.4
235.4
-0.1
-6.0
-3.1
28.0
0.6
-3.4
251.4
2.0
1.5
3.0
1.0
-116.5
-1.0
9.3
191.8
40.0
8.2
11.4
5.1
3.5
24.0
1.3 0.2
182.8
-16.8
-15.2
-3.5
-0.6
-S6.1
15.0
2.8
8.5
-0.3
-5.2
-3.9
-10.7
67.0 14.3
0.6
88.1
-68.6
131.2
320.2
569.6
394.6
166.2
<*>
Includes deferred interest.
<!>
Deferred interest.
<3>
$4 million in overpayments to provinces arising out of 1952 tax-rental agreements offset in part by repayments of {3 million.
<4>
Loan of $29.5 million to New Brunswick in respect of the Beechwood Power Project offset in part by repayments of $4 million.

The Budget-Appendix

[Stage Direction]
Date of	Rate	Amount	Annual interest chargesmaturity	per cent	of loan	Payable in Canada-	$	$Loan of 1958 and 1959	
T.23	1961 May	1	3	300,000,000	9,000,000Conversion loan of 1958	
T.26	Dec.	1	3	770,514,000	23,115,420Seventh victory loan	
P. 3	1962 Feb.	1	3	53,473,150	1,604,195Loan of 1960	
T.41	June	15	3	300,000,000	9,000,000Canada savings bonds 1951	
S. 6	Aug.	1	3J	0)29,976,400	1,049,174Loan of 1959	
T.35	Oct.	1	5*	349,741,000	19,235,755Loan of 1960	
T.40	Dec.	1	4i	140,000,000	5,950,000Loan of 1961	
AT.2	1962 Dec.	15	3*	175,000,000	6,125,000Loan of 1959	
T.33	1963 Jan.	1	4	100,000,000	4,000,000Loan of 1960	
T.37	Apr.	1	5|	448,298,000	24,656,390Canada savings bonds 1952	
S. 7	Aug.	1	3J	0)32,310,950	1,211,660Eighth victory loan	
P. 5	Oct.	1	3	223,020,200	6,690,606Loan of 1960	
T.42	Dec.	15	4	300,000,000	12,000,000Loan of 1961	
AT.l	1964 May	1	4	250,000,000	10,000,000Conversion loan of 1958	
T.27	1965 Sept.	1	3}	1,266,723,100	47,502,116Canada savings bonds 1953	
S. 8	Nov.	1	3 i	(«113,126,300	4,242,236Ninth victory loan	
P. 7	1966 Sept.	1	3	245,202,200	7,356,066Canada savings bonds 1954	
S. 9	Nov.	1	3i	(1)66,930,450	2,175,239Canada savings bonds 1955	
S.10	1967 Nov.	1	3i	(1)65,193,300	2,118,782Refunding loan of 1950	
P. 9	1968 June	15	2i	350,000,000	9,625,000Canada savings bonds 1959	
S.14	Nov.	1	41	0)1,236,537,000	52,552,822Loan of 1960	
T.39	1969 Apr.	1	5§	80,000,000	4,400,000Canada savings bonds 1956	
S.ll	May	1	31	(1)111,950,650	3,918,272Loan of 1958	
T.24	1970 May	1	31	200,000,000	7,000,000Canada savings bonds 1957	
S.12	Nov.	1	4!	0)709,784,050	33,714,742Canada savings bonds 1960	
S.15	Nov.	1	4	(1)850,826,750	34,033,070Conversion loan of 1958	
T.28	1972 Sept.	1	41	1,366,733,800	58,086,187Canada savings bonds 1958	
S.13	1973 Nov.	1	41	d)338,867,C00	14,401,873Loan of 1959	
T.36	1975 Oct.	1	51	121,291,000	6,671,005Loan of 1960	
T.38	1976 April	1	51	702,000	38,610Loan of 1954	
T.ll	June	1	31	300,000,000	9,750,000Loan of 1953 and 1958	
T. 5	1978 Jan.	15	31	250,000,000	9,375,000Loan of 1954	
T.13	1979 Oct.	1	31	400,000,000	13,000,000Conversion loan of 1958	
T.29	1983 Sept.	1	41	2,151,548,950	96,819,703Conversion loan of 1956	
T.15	1998 Mar.	15	31	250,000,000	9,375,000Loan of 1936	
P. 1	Perpetual	3	55,000,000	1,650,000<2>3.21	1,235,000,000 650,000,000	39,643,500 21,905,000 1,695,000<2>3.37	<«3.39	50,000,000	
15,937,750,850	624,687,423
Payable in London-						
		1963 July July	1	3	W30,010,702 (01,978,362	900,321 64,297
			1	31		
						
					31,989,064	964,618
Payable in New York-						
		1974	Sept. 1975	Sept.	1	21 21	<'>60,206,000 <'>37,969,000	1,655,665 1,044,148
			15			
						
					98,175,000	2,699,813
					16,067,914,914	628,351,854
Note.-Where various rates of interest are applicable during the term of a loan the interest rate in effect at March 31, 1961 has been used.
(*>
Preliminary.
<2>
Rate of discount at tender on March 29, 1961.
<3>
Rate of discount.
<4>
Conversion rate $2.80= £1.
([DOT]>
Conversion rate $1 Can. = $l U.S.
90205-6-429
[Stage Direction]

Wednesday, June 21, 1961

[Stage Direction]
Fourth report of standing committee on public accounts-Mr. Macnaughton.