1964-05-19

Mr. Speaker:: I have the honour to present, in English and in French, the fifth report of the special committee on procedure and organization.


Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, may I give notice, on behalf of the committee, that concurrence in this report will be moved on Thursday. All it does is propose that certain rules and recommendations now in effect be continued for a further trial period.



FOOD AND DRUGS


[Stage Direction]
Mr. H. C. Harley (Halton) presented the second report of the special committee on food and drugs, and moved that the report be concurred in.
Motion agreed to.


Hon. Paul  Marlin@Secretary of Stale for External Affairs: the first reading of Bill No. S-17 (from the Senate), respecting the territorial sea and fishing zones of Canada.
Motion agreed to and bill read the first time.



CANADA COUNCIL


[Stage Direction]
On the order: Government notice of motion:
May 14-The Secretary of State-The following proposed motion:-That the reports of the Canada Council for the fiscal years ended March 31, 1962 and March 31, 1963, tabled on October 10, 1962 and on July 11, 1963 respectively, be referred to the standing committee on public accounts in order to provide for a review thereof pursuant to section 23 of the Canada Council Act.
Mr. Speaker:: Pursuant to section 2 of standing order 21 this government notice of motion is transferred to and ordered for consideration under government orders at the next sitting of the house.



PUBLIC ACCOUNTS


[Stage Direction]
On the order: Government notice of motion:
May 14-The Minister of Finance-The following proposed motion:-That the public accounts, volumes I, II and III for the fiscal years ended March 31, 1962 and March 31, 1963, and the reports of the Auditor General thereon, tabled on January 21, 1963 and on February 19, 1964 respectively, together with the financial statements of the Canada Council for the fiscal years ended March 31, 1962 and March 31, 1963 and the reports of the Auditor General thereon, tabled on October 10, 1962 and on July 11, 1963 respectively, be referred to the standing committee on public accounts.
Mr. Speaker:: Pursuant to section 2 of standing order 21 this government notice of motion is transferred to and ordered for consideration under government orders at the next sitting of the house.



LABOUR CONDITIONS


[Stage Direction]
On the order: Government notices of motion:
May 14-The Minister of Labour-The following proposed motion:-That it is expedient that the houses of parliament do approve of convention No. Ill concerning discrimination in respect of employment and occupation, which was adopted by the international labour conference on the 25th of June, 1958, and that this house do approve the same.
Mr. Speaker:: Pursuant to section 2 of standing order 21 this government notice of motion is transferred to and ordered for consideration under government orders at the next sitting of the house.



THE SENATE


Hon. J. Watson MacNaughl (for the Minister of Justice) moved: that the house go into committee of the whole at the next sitting to consider the following resolution, which has been recommended to the house by His Excellency:
That it is expedient to introduce a measure to provide for the retirement, upon attaining the age of seventy five years, of any person appointed to the Senate after the coming into force of the said measure: to extend the provisions of the Members of Parliament Retiring Allowances Act to such persons; to provide for the granting of an annuity to any person appointed to the Senate

Inquiries of the Ministry before the coming into force of the said measure who resigns his place in the Senate after having attained the age of 75 years or having become afflicted with a permanent infirmity disabling him from the performance of his duties; and to provide further for the granting of an annuity to the widow of a person who was granted such an annuity upon resigning his place in the Senate.


[Stage Direction]
Motion agreed to.


[Stage Direction]
On the orders of the day:
Right Hon. J. G. Diefenbaker (Leader of the Opposition):: Mr. Speaker, I would like to ask the Prime Minister, now that he has returned to Ottawa from the fields of prophecy, whether he would tell the house why the announcement as to the alternative designs he had in mind was not made in the House of Commons. Second, are these designs his own particular persuasion or have they been submitted to the cabinet? There are other questions that naturally arise, but I will commence with those two.


Right Hon. L. B. Pearson (Prime Minister):: Mr. Speaker, in my statement to the Royal Canadian Legion on Sunday night the only reference I made to the design of a Canadian flag was as follows:
I believe most sincerely It is time now for Canadians to unfurl a flag that is truly distinctive and truly national in character-


Some hon. Members:: Hear, hear.


Lester Bowles Pearson: -and as Canadian as the maple leaf which should be its dominant design.
How the maple leaf is to be reflected in the design, which will be brought before parliament in due course, remains for decision.


John George Diefenbaker: Now may I refer to the press conference which was to explain what up to that moment had been inexplicable. I ask the Prime Minister this. Did he place before the press conference two designs? Did he express a preference for one or the other and, if so, has either of those designs been considered by the cabinet, or are they simply an emanation of his own desire to bring about an even greater disunity in Canada than he has succeeded in doing thus far.


Some hon. Members:: Oh, oh.


Lester Bowles Pearson: My purpose in the pursuit of this policy, contrary to what the right hon. gentleman has said, is to bring about a greater degree of unity in Canada.


Some hon. Members:: Hear, hear.
(Mr. MacNaught).]


Lester Bowles Pearson: In that objective I hope-I am sure-I will get the support of the right hon. gentleman and of every other hon. member of the house, though we may differ as to the means by which that objective can be achieved.
As far as the press conference is concerned, the press asked me whether we had made any decision about this maple leaf design and I said no final decision had been made. I showed the press some of the great many designs which have been submitted to the government, especially three to which I was attracted, but no decision has been made as to the design which will be put before the house. The cabinet has been discussing the matter this morning and as soon as a decision has been made, and it is possible to do so, we shall put our policy in all its details in the form of a resolution and submit it to the House of Commons.


John George Diefenbaker: With the objective which the right hon. gentleman says he has in mind I am in agreement. But I am certainly in disagreement when he says that what he is doing will do other than work division.


Some hon. Members:: Order.


John George Diefenbaker: I now ask this. Will the Prime Minister table these several designs which he placed before the press conference, or referred to there, in order that parliament may have at least as much information on this matter as outsiders have?


Lester Bowles Pearson: As I believe I have stated, a great many designs have been received. In a short time-in a very short time-I hope the government will have made a decision with regard to a particular design, and this design will be placed before parliament for the decision of parliament in this matter.


John George Diefenbaker: The question I asked was whether these three designs would be tabled-


Some hon. Members:: Order.


John George Diefenbaker: Is there not a degree of unity across the way yet as to which it should be? They cannot agree among themselves, and I can understand why they cannot agree anywhere else. I ask the Prime Minister this. How is the design which is ultimately determined upon to be presented to the house? Will it be by resolution or by bill, or does the same degree of disunity in the thinking of the government exist in this regard as in so many other matters?


Some hon. Members:: Listen.


Lester Bowles Pearson: I am happy to inform the right hon. gentleman that there is a very great degree of unity in the party I have

the honour to lead. For the sake of the country I hope there will be the same degree of unity among hon. gentlemen opposite. I have received, personally, dozens and dozens of designs. I do not think it would be appropriate or desirable to table one or two of those designs. In due course, and it will not be long now, the design the government has agreed on will be submitted to the House of Commons for decision.


John George Diefenbaker: May I point out that the Winnipeg Tribune shows two designs and states-


Some hon. Members:: Order.


John George Diefenbaker: -that the blue border flag was the favourite of the Prime Minister. I ask him, will he place on the table of the house these two flags, the designs of which he put before the press conference; or is he going to continue to deny parliament its rights?


Lester Bowles Pearson: Mr. Speaker, I do not intend to deny parliament its rights. This is the first time, in Canadian parliamentary history, I believe, that a matter of this kind has not been decided by order in council.


Some hon. Members:: Hear, hear.


Lester Bowles Pearson: That is accurate, Mr. Speaker. We are going to refer to this parliament for its decision a design which the government, discharging its own responsibility, has seen fit to put before parliament as a design suitable for submission and, we hope, for decision.


Hon. George C. Nowlan (Digby-Annapolis-Kings):: Mr. Speaker, does the statement of the right hon. Prime Minister mean that the government will accept responsibility for the design which it is going to bring before parliament?


Lester Bowles Pearson: Yes, Mr. Speaker; as the government has accepted now for a good many months-indeed, for two years-the policy
which will be embodied in that design.


George Clyde Nowlan: I was not speaking of the policy; I was speaking of the design. Let us not evade the question any longer. We are now told that the government is going to put a design before parliament. Does the government accept responsibility for it?


Lester Bowles Pearson: I do not intend to evade the question, Mr. Speaker. The government will indeed take responsibility for the design which it submits to the House of Commons.


Mr. T. C. Douglas (Burnaby-Coquitlam):: Mr. Speaker, may I ask the Prime Minister how he reconciles his statement to the house on Friday, that the matter of the design of the flag would be open to a free vote, with his statement to the press conference in Winnipeg that
Inquiries of the Ministry the government would resign if the proposal it made to parliament was turned down?


Mr. Monfeith:: Answer that.


Thomas Clement (Tommy) Douglas: I want to ask the Prime Minister whether he considers a free vote to be one in which the members have an election pointed at their heads like a gun.


Lester Bowles Pearson: Mr. Speaker, the members have had an election pointed at their heads like a gun in respect of every decision that has been made in this house on policy matters since we took over the government. I have pointed out, and I think I should make it quite clear, that when the government submits to parliament a matter of policy-and this is certainly a matter of policy-the government must stand or fall on the result of the decision of the house. But we have gone out of our way, and I have gone out of my way personally, to let the members of this party know that in a question so personal, so close to their conscience, so deep in their emotions, as a flag, a member of the Liberal party, in voting against the design submitted by the government, would not be read out of the party for so doing.


Thomas Clement (Tommy) Douglas: I take it, Mr. Speaker, we are not to have a free vote.


An hon. Member:: That's right.


Thomas Clement (Tommy) Douglas: Could I ask the Prime Minister whether he would agree that it would be common courtesy to parliament, instead of peddling various designs around the country, if these designs were submitted to a parliamentary committee-


Some hon. Members:: Oh, oh.


Thomas Clement (Tommy) Douglas: -where they could be given full examination.


Lester Bowles Pearson: Mr. Speaker, I do not accept
the suggestion that designs have been peddled around the country, and I would remind my hon. friend that when this issue was before parliament some years ago designs were submitted to a committee, some 1,700 were received, and no action of any kind was taken.


John George Diefenbaker: An order in council was made.


Hon. Michael Siarr (Ontario):: A supplementary question, Mr. Speaker-


Thomas Clement (Tommy) Douglas: I have a supplementary question, Mr. Speaker. I had not finished the point I was making.


Mr. Speaker:: Order, please. The hon. member for Ontario was on his feet for at least a minute before the hon. member for Burnaby-Coquitlam.

Inquiries of the Ministry


Michael Starr: A supplementary question to the Prime Minister, Mr. Speaker. In view of what he has said, and in view of the howling from the Liberal benches today to questions on this matter, is it the intention of the government to pick a design and then ram it down the throat of parliament and the people of this country?


Some hon. Members:: Shame.


Thomas Clement (Tommy) Douglas: Mr. Speaker, I want to ask the Prime Minister whether it is not true that the committee to which he referred, which was chaired by the Secretary of State for External Affairs, did make a recommendation and that the government of that day, which was a Liberal government, did not act upon it?


Lester Bowles Pearson: Mr. Speaker, it took that committee a very long time indeed to come to any decision in regard to a design because of the number of designs submitted. If we set up a committee for this particular purpose I am afraid that action would be postponed indefinitely, and we desire to take our responsibility in this matter as a government, which we indicated in two election campaigns we would be happy to be able to do.


Mr. H. A. Olson (Medicine Hat):: A supplementary question to the Prime Minister. I wonder whether the Prime Minister could indicate to parliament some of the dates he has in mind. That is to say, would he like to comment on whether he could accomplish all the steps which are needed to be able to submit a design to parliament before July 1?


Lester Bowles Pearson: Mr. Speaker, I think it would be very difficult to do this on the orders of the day, but we could have a supply motion next Monday, and if hon. gentlemen opposite are critical of the procedure of the government in this matter they could move a vote of no confidence on this question and that would give the house an opportunity to debate it fully.


John George Diefenbaker: Would there be a free vote on that too?


Lester Bowles Pearson: I hope my right hon. friend, who feels so deeply in this matter, will take advantage of the opportunity of a supply motion next week.


John George Diefenbaker: In view of the fact that the Prime Minister has decided to bring in a red herring, may I ask him this. Will this motion on Monday next, this amendment, be a free vote?


Lester Bowles Pearson: Mr. Speaker, I cannot, of course, tell my hon. friend the form of the motion that he should produce; but if he

produces a motion condemning the action of the government in this matter he can draw his own conclusions.


Mr. Marcel Lessard (Lake St. John):: Mr. Speaker, may I put a question to the Prime Minister?
Does the Prime Minister not think it would be a good thing for the government to invite Her Majesty Queen Elizabeth, during her visit to Canada, to come and raise on the mast of the parliament buildings the flag which the Canadian people will give itself this coming summer, in order to dampen the extremist ideas of both groups?


Lester Bowles Pearson: Well, Mr. Speaker, the present plans for the royal visit to Canada include a visit to Charlottetown and Quebec. I do not think it would be desirable to change those plans at this time; nor do I think it would be possible to do so even for the purpose to which my hon. friend refers.


John George Diefenbaker: Mr. Speaker, as the Prime Minister has brought up this question in answer to a question, may I ask him this. Is it not a fact that under our parliamentary system of government, whatever the Prime Minister recommends to the crown or to the representative of the crown in Canada must be accepted?


Lester Bowles Pearson: Mr. Speaker, I am not a constitutional expert like my hon. friend-


John George Diefenbaker: I appreciate that.


Lester Bowles Pearson: -but I think his statement is strictly accurate. I do agree, and I am sure he will too, that there are certain royal prerogatives which even as a matter of courtesy should be taken into consideration in these matters.


John George Diefenbaker: But does the Prime Minister realize that this is not one of the royal prerogatives which still remains unused, even though usable?


Lester Bowles Pearson: I agree with my right hon. friend that this is not one of the active royal prerogatives; I was talking of taking royal prerogatives into consideration as a matter of courtesy in these matters.


Mr. Barry Malher (New Westminster):: Mr. Speaker, I have a supplementary question for the Prime Minister. I should like to ask him whether, in line with the current public interest in the flag question, the government would consider, before bringing in a design to parliament, first of all giving the people of Canada a free vote on this question through a plebiscite at the next federal election,

worked along the lines: "Do you favour the red ensign or a distinctive Canadian flag?"


Lester Bowles Pearson: Mr. Speaker, I am grateful to my hon. friend for having given me notice of his question, and I realize its importance. In a sense every election is a free vote, and in a sense this particular policy was part of the last two election campaigns. It certainly was part of the policy of the party which now forms the government. But I do not think it would serve any useful purpose to have a national referendum at an indeterminate date on this matter. I think it would be better for the government to take its responsibility in the matter by submitting a particular proposal to parliament and then letting the members of parliament, as the representatives of the people, decide it.


Mr. Maurice Cote (Chicoutimi):: Mr. Speaker, I should like to direct a question to the Prime Minister. Could the Prime Minister inform the house whether the government intends to tie in the anthem "O Canada" with the bill concerning the adoption of a distinctive flag, so that this anthem may get official recognition at the same time as the distinctive flag?


Lester Bowles Pearson: Mr. Speaker, this government is also committed to the policy of asking parliament to approve officially of "O Canada" as the national anthem and I think it should be done during this session of parliament.


Mr. Harold E. Winch (Vancouver East):: Mr. Speaker, in all temerity and humility may I address a question to the Prime Minister, and perhaps through him to all members. Important as the flag issue may be, are not the conditions of the people and the country over which that flag flies more important? As the matter of the flag will come up for debate officially at a future time, can we not now get down to the bread and butter business of the people, the business of parliament?



THE CANADIAN ECONOMY


[Stage Direction]
On the orders of the day:
Mr. G. H. Aiken (Parry Sound-Muskoka):: Mr. Speaker, I have a question for the Prime Minister which is closely related to the previous question. My question arises from the dominion bureau of statistics release on Friday last indicating that the cost of living in Canada has gone up 2.7 points in the 20220-212
Inquiries of the Ministry last year. Has the government taken action to deal with this alarming increase, the greatest in five years?


Mr. Speaker:: Order. Would the hon. member put that question on the order paper.


Gordon Harvey Aiken: Mr. Speaker, may I give notice that I wish to debate this matter at ten o'clock tonight.



PASSAMAQUODDY


[Stage Direction]
On the orders of the day:
Mr. Thomas M. Bell (Saint John-Alberl):: Mr. Speaker, my question is also for the Prime Minister but on a different subject. Does the Prime Minister favour the proposal that a summit meeting on the Passamaquoddy project be held at Campobello in June between himself and the President of the United States? If so, will he say whether the government will initiate such a meeting?


Lester Bowles Pearson: Mr. Speaker, this is the first time this matter has been brought to my attention in the terms referred to by my hon. friend. I will be glad to take this matter under consideration.



VETERANS AFFAIRS


[Stage Direction]
On the orders of the day:
Mr. Reynold Rapp (Humboldt-Melfort-Tisdale):: Mr. Speaker, my question is also to the Prime Minister but it is not of a provocative character. With reference to my previous question pertaining to the naming of the veterans home in Saskatoon after the late Harry F. Jones, can the Prime Minister now inform the house whether a decision has been made on this matter and, if so, what will be the official designation of this veterans home


Lester Bowles Pearson: Mr. Speaker, we have been in touch with the mayor and municipal council of Saskatoon, and after receiving a report from them confirming a previous somewhat informal approach, the Minister of Veterans Affairs and I discussed the matter and decided it would be, we thought, a well deserved and worthy tribute to the late member for Saskatoon if the veterans home in Saskatoon were named after him and called the Harry F. Jones memorial veterans hospital. Although I speak subject to correction, I think a notice has gone to Saskatoon from the minister to that effect.

Inquiries of the Ministry



POSSIBLE TRANSFER OF HOSPITALS FROM FEDERAL CONTROL

[Stage Direction]
On the orders of the day:
Mr. J. Chester MacRae (York-Sunbury):: Mr. Speaker, my question is for the Minister of Veterans Affairs but in his absence I will direct it to the Prime Minister. It concerns the statement made yesterday at the Royal Canadian Legion convention in Winnipeg by the Minister of Veterans Affairs that before any veterans hospitals are transferred from federal to provincial or local control there will be consultation with the veterans organizations. Will the Prime Minister assure the more than one million veterans of this country that if the veterans organizations do not concur following consultation with them, no transfers of veterans hospitals will be made?


Lester Bowles Pearson: Mr. Speaker, I will be glad to discuss that question with the minister and give the hon. gentleman a reply. I think the minister will be back tomorrow.



EXTERNAL AFFAIRS


[Stage Direction]
On the orders of the day:
Mr. Andrew Brewin (Greenwood):: Mr. Speaker, as the Secretary of State for External Affairs has returned from his trip to the NATO council meeting at The Hague I should like to ask him whether any decisions or developments took place at that meeting which would affect Canada's military or political contribution in NATO.


Hon. Paul  Marlin@Secretary of Stale for External Affairs: Mr. Speaker, the answer to that question as phrased is yes. I would propose that an opportunity be given at the earliest possible moment when a full report on this meeting might be made to the house. The acting house leader is arranging with the other parties, I believe, for discussion of the external affairs estimates on Friday, when I would hope to have the opportunity of making the report in which my hon. friend is interested.


Thomas Clement (Tommy) Douglas: supplementary question, Mr. Speaker. I should like to ask the Secretary of State for External Affairs whether any decision was reached with reference to a multilateral nuclear force, and whether Canada made any commitment in this regard.


Mr. Martin (Essex East):: There were no decisions with regard to the multilateral force, which is a proposal made not by NATO

but by the United States. There was no discussion of this particular project as such.


Thomas Clement (Tommy) Douglas: A further supplementary
question, Mr. Speaker. Are any of the NATO countries supplying weapons to Portugal for use in Angola, where I understand wholesale massacres are taking place; and are any Canadian weapons being supplied to Portugal which could be used for this lamentable purpose?


Mr.   Marlin@Essex East: Mr. Speaker, Portugal is a member of NATO, and whatever assistance is given to that country by Canada is only in respect of her obligations as a member of NATO. Whatever assistance is given is on the distinct understanding that it is not for the kind of venture to which my hon. friend directs my attention.


REQUEST FOR STATEMENT ON SITUATION
[Stage Direction]
On the orders of the day:
Mr. Heath Macquarrie (Queens):: Mr. Speaker, I have a question for the Secretary of State for External Affairs. Is he in a position to indicate in any way the government's attitude or actions in respect of the situation in Laos, where there is considerable Canadian involvement?


Hon. Paul  Marlin@Secretary of Stale for External Affairs: Mr. Speaker, the situation in Laos has taken a serious turn. Over the week end there have been discussions among the countries represented on the truce commission, Canada, Poland and India, and there have been discussions with the United States and the United Kingdom.
I can only say that I regret to tell the house that in respect of the functions of the commission, the Polish delegate has not cooperated in the endeavours of the commission in recent weeks. I have therefore made representations to the Polish government urging it to assist in the maintenance of stability in Laos by fulfilling the obligations which they, together with Canada and India, undertook when the Geneva agreements were signed in 1962.


John George Diefenbaker: In what particular has the situation deteriorated in Laos as a result of the failure of Poland to discharge its share of the duties of the commission?


Paul Joseph James Martin: Mr. Speaker, I do not believe I said the situation had deteriorated because of the reluctance of the Polish member of the commission. The situation has deteriorated because the neutralists and the forces of the right are being actively pursued by the Pathet Lao. The refusal of the Polish delegate to agree to inspection in

certain areas of Laos constitutes, in the judgment of the Canadian government, a failure to fully comply with the undertaking given in the agreement of 1962.


John George Diefenbaker: If there had been compliance on the part of the Polish representative, what has the minister to say as to whether the present condition would be as it is?


Paul Joseph James Martin: I do not believe I can answer that, Mr. Speaker.



THE VATICAN


[Stage Direction]
On the orders of the day:
Mr. L. J. Pigeon (Jolielte-L'Assomplion-Montcalm):: Mr. Speaker, I should like to direct a question to the Prime Minister.
In view of the fact that, during the week end the Knights of Columbus gathered at a convention requested that Canada appoint an ambassador to the Vatican, is it the government's intention to consider that matter so that this year an ambassador be appointed to the Vatican?


Lester Bowles Pearson: This matter has been under consideration during the last year, and it was under consideration for the five years previous.


Louis-Joseph Pigeon: Yes, and the flag was, too.



NORTHERN AFFAIRS


[Stage Direction]
On the orders of the day:
Mr. Gilles Gregoire (Lapointe):: Mr. Speaker, I should like to put a question to the Minister of Northern Affairs and National Resources.
Could he tell us whether discussions are still going on between his department and Quebec authorities with a view to handing over the administration of Eskimo affairs to the Quebec government?
Could he also tell us what progress has been made in the negotiations and when will the administration of Eskimo affairs be transferred to Quebec authorities?


Mr. Speaker:: Order. This question, while very important, requires a detailed answer. May I suggest that it be put on the order paper.


Gilles Grégoire: Mr. Speaker, may I give notice that I wish to discuss this matter on adjournment tonight?
20220-212i
Inquiries of the Ministry



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Mr. Arnold Webster (Vancouver-Kingsway):: I have a question for the Minister of National Defence. Has the minister recently conferred in Ottawa with the mayor of Vancouver regarding the early transfer to his city of land now occupied by the army at Jericho Beach? If so, what were the results of the discussions?


Mr. Speaker:: May I suggest that this is a question for the order paper.



FINANCE


[Stage Direction]
On the orders of the day:
Gordon Harvey Aiken: I had a question for the Minister of Justice, but perhaps I may direct it to the Minister of Finance. My question arises from a recent release indicating that 3,678 businesses in Canada went bankrupt last year, an increase of 15 per cent. Has the minister caused inquiries to be made as to the causes for this increase in bankruptcies?


Hon. Walter L. Gordon (Minister of Finance):: I shall be glad to consult with the Minister of Justice on his return tomorrow or the next day.



CANADIAN NATIONAL RAILWAYS


[Stage Direction]
On the orders of the day:
Mr. H. Russell MacEwan (Pictou):: I should like to ask the Minister of Transport if he has received a telegram from the mayor of the town of Westville requesting his support in connection with the proposed removal of the Canadian National agent from the station in that community, thus placing it on a caretaker basis. If so, would the minister request the board of transport commissioners to postpone such action until the legislation standing on the order paper in the name of the minister is passed by this house?


Mr. Speaker:: Would the hon. member put this question on the order paper.


Howard Russell MacEwan: I give notice I wish to debate this matter at ten o'clock.



NATIONAL PARKS


[Stage Direction]
On the orders of the day:
Hon. W. G. Dinsdale (Brandon-Souris):: have a question for the Minister of Northern

Income Tax Act
Affairs and National Resources, Mr. Speaker. In view of the urgent demands arising from *Canada's expanding tourist industry and the increasing recreational needs of our own people, can the minister inform the house when action will be taken to implement the recreational parks program endorsed by the house last June 26?


Mr. Speaker:: It seems to me that this is certainly a question for the order paper.



EARTHQUAKE DAMAGE


[Stage Direction]
On the orders of the day:
Mr. T. S. Barnett (Comox-Albemi):: I
should like to address a question to the Prime Minister on a subject which, I assure him, is much more important in the minds of the people of the Alberni valley at the moment than the question of a new Canadian flag.
I should like to ask the minister whether, in the course of his meditations during his quiet week end, he was able to give reconsideration to the question of the size of the federal government's grant to the disaster fund and to come up with a suitable answer to that question.


Lester Bowles Pearson: Mr. Speaker, it seems to me and to the government, having regard to the measure of the damage-and I do not depreciate that- and having regard to the responsibilities of the provincial government and the resources of the provincial government, that the federal contribution of a quarter of a million dollars is fair in the circumstances, and is in accord with the principles which have been followed in the past.



INCOME TAX ACT

[Stage Direction]
The house resumed, from Thursday, May 14, consideration in committee of Bill No. C-91, to amend the Income Tax Act-Mr. Gordon-Mr. Lamoureux in the chair.
On clause 8.
Walter Lockhart Gordon: Mr. Chairman, it was suggested by some hon. members last year, and particularly I think by the hon. member for Edmonton West, that this particular provision should be made a permanent part of the act instead of an annual enactment in the bill from year to year. I wish to assure hon. members that this suggestion was very carefully considered. However, other legislation affecting special allowances for children will be proposed this year, and until it is put in final form it would not be known exactly how a permanent provision for this act should

be drafted, or whether such a provision will be necessary after 1964.
In these circumstances it seemed better to continue the annual provision in its usual form for at least one more year. I wish to assure hon. members of the committee that this matter has been very carefully considered, and I for one think as soon as the time is appropriate it should be incorporated in the act permanently.


Jay Waldo Monteith: The other day the minister announced that he was withdrawing two or three of the sections having to do with family allowances. Is he proposing to give reconsideration to this particular annual re-enactment at that time, or a year hence?


Walter Lockhart Gordon: The provision dealing with the extension of the principle of family allowances will be incorporated in a special bill to be presented, I hope, in the very near future. I am suggesting it would be better to extend this particular provision for one year, and I hope by that time we can incorporate it in the act finally.


[Stage Direction]
Clause agreed to.
On clause 9.
George Clyde Nowlan: Is the minister going to make a further statement with regard to clause 9, which increases the abatement by the additional 2 per cent? He intimated, I think during his budget speech, what this might cost the treasury, and I wondered if he could amplify the situation with regard to this proposal at this time.


Walter Lockhart Gordon: In the full calendar year 1965, including equalization, the extra two percentage points will amount to somewhere around $65 million.


Mr. More:: Mr. Chairman, the other night I posed a question to the minister, and I think this is the proper clause on which to mention it again. Under the abatements arrangements some provinces have different charges from others, and I am wondering what the minister's reaction is to my question.


Walter Lockhart Gordon: I can assure my hon. friend that I did not overlook it. I have not examined all its implications with my officials, and I would like to defer taking any action on what, on the face of it, is a very interesting and sensible proposal until the full question has been investigated.


George Clyde Nowlan: Following the dominion-provincial conference the Prime Minister announced that a committee was being set up, representative of the ten provinces and the federal government, to deal with the reapportionment of tax revenues vis-a-vis the

Canadian government and the provinces. Following that announcement we now have this legislation brought before us, which increases the abatement given to provinces over a period of two successive years. I am not quarreling with this at the moment, although it is a matter which could be debated one way or the other. However, I am wondering whether the committee has been constituted and what it will be doing in this connection.
Further, in view of the fact that the Carter commission has been working for a long time on the matter of taxation, and that the minister hopes it will be reporting before the end of the year, it is desirable to discuss what action should be taken in this direction at this time. It may be that neither the minister nor anyone else knows what the royal commission will recommend, but that commission may be making extensive recommendations vis-avis changes in the Income Tax Act. I would like the minister to speak for a moment or two on the situation respecting the committee which was announced by the Prime Minister.
Has the committee been constituted? Is it carrying on an investigation at the moment? What is expected to flow therefrom? Following the announcement regarding the setting up of this committee, why has this rather drastic action been taken of making a change in the middle of the golf course?


Walter Lockhart Gordon: I am not sure about the simile about making changes in the middle of the golf course.


Mr. Baldwin:: In the bunker.


Walter Lockhart Gordon: I don't think anybody found themselves in a bunker or even lost their ball in the rough. As hon. members know, this proposal to increase the abatement to the provinces was made at the time agreement was reached upon a uniform Canada pension plan. At the time this announcement was made the so-called tax structure committee was proposed. I do not know if that is the name which will eventually be used for it, but it is the name that has been used so far. The committee has not yet been set up, although it is the intention of the government to go ahead with the idea.
The committee will include representatives of the provincial governments and of the federal government, and I mean representatives at the cabinet level. It will review the whole question of tax fields and the shares that are available to the federal and provincial governments respectively. I think my hon. friends will agree that this does not come within the terms of reference of the royal commission on taxation.
It was understood, when this tax structure committee was being discussed, that its
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members, before they reached any final conclusions, would have the benefit of the reports of the royal commission on taxation, as well as the reports of certain provincial royal commissions on taxation, especially the ones in Ontario, Quebec and one of the prairie provinces.
Major changes that might be contemplated in the tax structure of the country will obviously be taken into account by the tax structure committee in trying to arrive at suitable divisions of responsibility, suitable divisions of tax fields as between the federal and provincial governments. In the meantime this proposal that is incorporated in clause 9 has been very well received by the provinces.


George Clyde Nowlan: Naturally. Did you ever see anybody kick about getting money?


Walter Lockhart Gordon: I can only repeat that it seems to have been very well received not only by the provinces, but enthusiastically by hon. gentlemen opposite. I certainly did not notice any objection to this.


George Clyde Nowlan: Was it as enthusiastically received by the Minister of Finance?


Walter Lockhart Gordon: I will let that question pass, Mr. Chairman. I have nothing more to say.


Jay Waldo Monteith: As I understand it, the 21 per cent of the basic tax in respect of the 1965 tax year applies to the calendar year.


Walter Lockhart Gordon: That is right.


Jay Waldo Monteith: I also understand this first increase from 19 per cent to 21 per cent is going to cost something like $65 million, and the increase from 20 per cent to 24 per cent in the 1966 tax year is going to cost something like an additional $135 million, so that in round figures by the 1966 tax year the provinces will be receiving something like an extra $200 million. Can the minister give us any breakdown as to how this will affect the government's fiscal period? In other words, what is going to be the extra amounts for the years ending March 31, 1965 and March 31, 1966? How much additional money will have to be raised in taxes, or by how much will this increase the deficit?


Walter Lockhart Gordon: This year's figures, for the year ending March 31, 1965, will be affected by approximately $6 million because while it is $60 million to $65 million for a full 12 months, the dates when the collections are received make a big difference as to the amount which will fall into this calendar year. The calendar year 1965-66 will be affected, as closely as can be estimated, by about $68 million and the calendar year 1966-67-and here the calculation becomes

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much more difficult-would be affected to the extent of about $145 million or $150 million.


George Clyde Nowlan: Since the minister is dealing with estimates, 1 should like to ask him a question which will certainly require an estimate. He has referred to the fact that these abatements have been part and parcel of arrangements made vis-a-vis the proposed pension plan. Is the hon. gentleman in a position to say what will be the effect of a pension act on the floor upon which national revenue taxes are imposed? I presume that contributions made to the pension scheme will be deductible for income tax purposes. Millions of Canadian taxpayers will, I take it, be making contributions to the scheme and as a result the tax base will be reduced by so many millions of dollars. The minister has just told us how the abatements will affect his revenue. I wonder if the hon. gentleman is now in a position to advise the committee what the impact of the pension scheme is likely to be upon income tax collections? I realize this is likely to be difficult, but at the same time I assume intensive studies are being made in this field by officials in the Department of Finance and in the Department of National Revenue, whose ability in these matters is well known to me.


Walter Lockhart Gordon: I will do my best to answer this question. As the hon. gentleman knows, officials in both the Department of Finance and the Department of National Revenue are very loath to speculate in the unknown fields of the future. Unquestionably these contributions will be deductible for tax purposes, so on the face of it tax revenues receivable will be reduced correspondingly. On the other hand, the funds paid into the Canada pension plan will be invested and those investments will be put to productive use. This in turn will generate greater activity in the economy, so it is quite possible that in the long run revenues will be increased rather than diminished.
I am not in a position to give a specific answer to the hon. gentleman today. In any case, it will depend on the date on which deductions are to begin. The government is anxious that this should take place as soon as possible in order that the pension plan may go into operation at the earliest possible date, but we have to wait until the legislation is before the house; until it has been passed by the house. In the meantime I think it would be unwise, even if it were possible, to speculate about the exact effects upon any one year's budgetary receipts.


Gilles Grégoire: Mr. Chairman, section 8 of the legislation now before us, contains-


The Chairman:: Order.


Gilles Grégoire: I am sorry; section 9 which is now under consideration contains an amendment which, it seems to us, is of great consequence. I am not speaking of the amendment made but of the provisions which are not changed.
Hon. members will remember that approximately 13 months ago, the Quebec government delivered an official ultimatum to the federal government, claiming 25 per cent of the individual income tax, 25 per cent of the corporation tax and 100 per cent of the estate tax. Since then, there has been some change concerning the estate tax. The provinces now get 75 per cent of such revenues instead of the 100 per cent which were requested. However, nothing has been done yet with respect to corporation income tax.
Under section 9, the federal government will give the provinces 21 per cent of the tax in 1965, that is one year from now, and 24 per cent in 1966, two years hence, whereas Quebec asked for a minimum of 25 per cent immediately. Therefore, the federal government is taking a heavy responsibility upon itself by retaining those taxation fields which the provinces want and are entitled to.
It must not be forgotten that direct taxation was the prerogative of the provinces and that the latter rented and lent those fields to the federal government so that it could cope with the emergency situation which arose during the last war. Now, the war has been over for 20 years and the federal government still controls direct sources of taxation which, in effect, should come under each provincial government.
In view of the restlessness existing in the province of Quebec, as well as in other provinces which also insist on their rights, a small 2 per cent increase was granted, bringing the abatement to 21 per cent in 1965 and 24 per cent in 1966. Mr. Speaker, I contend that it is not enough, that the requests from the ten Canadian provinces or, at least, from several provinces, insisting on an immediate 25 per cent, should have been granted immediately. Furthermore, the income tax percentage should be raised still higher, within a short time, and brought up to 100 per cent.
Mr. Chairman, clause 9 which is now under discussion is the main problem. It also touches a sore point, because the claims put forward by the provinces and by the Quebec citizens, indeed create a difficult problem.
Over the week end, there was great excitement everywhere especially in Winnipeg- and I want to commend the Prime Minister for his courageous stand on that occasion, when he was not afraid clearly to present

the case for a distinctive national flag for Canada. While there was much excitement in Winnipeg, the same situation prevailed in various places in the province of Quebec, in Montreal, St. Lazare and other localities. A bomb was even placed under Victoria bridge.
Everything hinges on the following point: should the federal government centralize everything or award a greater autonomy, or even full autonomy, to the provinces? That is the core of the matter, which summarizes everything. What the province of Quebec wants is fully and completely to recover all its direct taxation sources. Quebec has begun to express its views strongly, and I can assure you that the adoption of a distinctive national flag will not be enough to satisfy Quebec.
A distinctive flag is only an outward sign. The roots of the evil lie deeper; they are to be found in the fact that French Canadians want an autonomous state which will be able to administer itself and, therefore Quebec must recover its sources of taxation. And when Quebec has recovered its sources of taxation, it will be possible to have an agreement between the governments of Ottawa and Quebec. But as long as that is not a fact, and more particularly, as long as the taxation sources are not handed back to the province, the agitation will continue, and the province of Quebec will never be satisfied.
What is needed is amend clause 9 of the bill before us in order to give back to Quebec 100 per cent of what it has been claiming for a long time. That is the main problem at this time.
Shall we simply go on making fine speeches about national unity? Shall we go on making fine speeches on Canadian nationalism in the face of the clear requirements of Quebec in matters of fiscal autonomy?
Mr. Chairman, as we are now dealing with the taxation field, I shall refrain from mentioning other clauses and only discuss fiscal autonomy, as this is the point under consideration.
Quebec wants to recover its taxation sources, and I think that the federal government would be well advised to adopt a plan which would give back to the province of Quebec the sources of revenue it needs to develop from a cultural, political, economical and social point of view before it is too late.
Quebec needs its sources of revenue, and the central government should work out a plan to remit to the province 25 per cent of its direct and indirect taxation sources this year, 50 per cent next year, 75 per cent in two years, and 100 per cent in 1967. There, Mr. Chairman, is one of the formulas which
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might make it possible for the agreement to survive in Canada. When what divides us is divided, we shall be better able to agree wherever agreement is possible.
The problem of fiscal distribution is a continual source of division between the federal and the provincial governments. Therefore, why not remit to the province of Quebec the sources of revenue to which it is entitled under the 1867 constitution? It is because the latter has been violated too many times that it is less acceptable today. It is because the provisions, too often, were broken-


Lucien Lamoureux: Order. I venture to interrupt the hon. member to point out that while the comments he is making are extremely interesting, they are not quite relevant to the clause under discussion. I do not think that under the circumstances, he is free to make general statements on national unity or fiscal autonomy to which he made reference.
The hon. member knows that at the committee stage, we must strictly limit our remarks to the clause under discussion, and I suggest that he should limit his observations to the very specific points now before us.


Mr. Mariineau:: On the point of order, Mr. Chairman, I think that when the right hon. Prime Minister (Mr. Pearson) introduced the amendments in the house, he said they were for the purpose of strengthening national unity, and that is why I think the remarks of the hon. member for Lapointe are quite to the point.


Lucien Lamoureux: Without wishing to enter into a discussion with the hon. member for Pontiac-Temiseamingue, even if the right hon. Prime Minister made those comments, I am sure he did not intend to encourage the members of the committee to make speeches dealing with policy statements on every clause submitted to the committee.
Such comments might be relevant on clause 1, but I doubt that they are on clause 9 which is now under discussion.


Gilles Grégoire: Mr. Chairman, I thank you for having said that my remarks were very interesting. I am sure they will be interesting indeed for the future.
However, I am surprised that you should call me to order on that, because the previous legislation provided that 19 per cent of the basic tax would be turned over to Quebec in 1965 and 21 per cent in 1966. And now, that is being changed to 21 and 24 per cent. Why? Surely, we must analyze the reasons why that is being done. It is because Quebec requested it. Once the reason is known, the problem can be studied. And now we know the reason for those changes. They are the

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result of the continuous and strong requests not only of the provincial government but also and especially of the Quebec members who sit in this house, as well as those of the Quebec people. We now know the whys and wherefores. And why are those changes to clause 9 substituted for the amendment which had been provided in I960, I believe? Why will 21 per cent of the basic tax be deducted in 1965, instead of 19 per cent, and 24 per cent instead of 21 per cent in 1966? It is in order to try to give to the provinces a larger source of revenue, so that they may be in a better position to develop from the economic and cultural standpoints.
It is also because it has been recognized that the provinces have priority requirements. If the act as it existed before has been amended, it is because it was recognized that Quebec has priority needs. By this change, it is recognized that provincial governments have priority needs, and the federal government states that these needs-


Mr. Pepin:: Order.


Gilles Grégoire: Mr. Chairman, I do not understand at all the interruptions of the hon. member for Drummond-Arthabaska (Mr. Pepin). If he has something to say or a question to put, let him stand up and I will be pleased to answer him. But he is too far for me to hear what he has to say at this time.
So, Mr. Chairman, if changes were made, it is because one thing became clear; this amendment to the act acknowledges the priority needs of the provinces, and especially those of the province of Quebec.
However, Mr. Chairman, I must add that the changes made at this time are not sufficient. It is too little, and much too little. What should be done, is to give back 100 per cent of direct taxation sources to the provinces. If the other provinces do not want them, they only have to leave them to Ottawa. But Quebec wants them. A stop should be put to the violation of the 1867 constitution, as it is violated now, and Quebec should get back 100 per cent of its sources of revenues, as it requests it.
Mr. Chairman, I can assure you that the fact of amending clause 9 and changing the rates 21 per cent and 24 per cent to 25, 50, 75 and 100 per cent, in order to give back to Quebec, by 1967, its sources of taxation, that will be much more important for national unity than any speech the Prime Minister can make before the Canadian Legion in Winnipeg.
I do admire the action taken by the Prime Minister but, unfortunately, it came too late. As this matter has been dragging for years, it comes too late; it will not be enough to satisfy the claims from Quebec. In my

opinion, it is still time, today, to amend this clause 9 and provide that by 1967 the provinces will be handed back 100 per cent of their indirect and direct sources of taxation.


Jean-Luc Pepin: You are sick.


Gilles Grégoire: Mr. Chairman, once more,
I did not catch a single word of the jabbering from the hon. member for Drummond-Arthabaska. If he wishes to ask a question, let him rise and ask it.


Jean-Luc Pepin: I simply say that you are mad. Mr. Chairman, if you allow me, I shall ask the member for Lapointe this question. If the central government gives to the provinces 100 per cent of the taxation powers, what will remain for it? How will the central government continue living?


An hon. Member:: It is very easy to answer that.


Gilles Grégoire: Mr. Chairman, it is very easy to answer that question. But before so doing, if I am not mistaken, the hon. member for Drummond-Arthabaska said I was mad. Now,
I want to assure him I am of dangerously sound mind, and I think that the mad people are those who change their opinions or ideas as soon as they move from one side of the house to the other. One can see then that their ideas are not sound, which is an indication that they are not of sound mind.


Jean-Luc Pepin: I never changed sides. I have always been on this side.


Paul Raymond Martineau: You changed your mind.


Gilles Grégoire: Mr. Chairman, to change sides or change one's mind outside the house and in the house is even more serious. To say something before the election and something else afterwards, is still more serious.


Jean-Luc Pepin: Mr. Chairman, I ask the hon. member for Lapointe to withdraw his remarks.


Lucien Lamoureux: I do not believe that the hon. member for Lapointe made any unparliamentary remarks. I understood the hon. member for Lapointe to say that a certain member might change his mind. I do not feel it is unparliamentary to say that a member might change his mind.


Jean-Luc Pepin: Mr. Chairman, I wish to point out that I changed my mind to get a better view of things.


Gilles Grégoire: Mr. Chairman, it is not difficult to answer the hon. member, because it is known that he does not speak in the same way in the house as outside the house. In fact, it is known that the hon. member makes fine statements outside the

house and when he is given a dressing down by his leaders, he sits down and does not say a word.


Lucien Lamoureux: Order. I ask hon. members to come back to the section now under consideration.


Gilles Grégoire: Very well, Mr. Chairman. The hon. member for Drummond-Arthabaska asked that question which, by the way, is quite fair and logical: if we give back to the provinces the entire field of tax resources, what is the federal government going to do?
At the moment, Mr. Chairman, I am entirely in order, because I intend to bring in an amendment to section 9, and I want to justify my amendment.
What is the federal government going to do if we give back the taxation resources to the provinces? Well, it will take care of its own business. It will withdraw from the fields of education, road construction, hospitalization, agriculture, forestry, and all those joint programs which all encroach on the provincial field.
It is clear enough, Mr. Chairman, and I wonder why the hon. member for Drummond-Arthabaska is opposed to the federal government's withdrawing from the fields of education, hospitalization, roads, etc., since they are provincial fields that should come solely under the provinces' jurisdiction.
But no, true to the Liberal party's policy, the federal government persist in levying more and more taxes and entering all other fields, even those which, under the constitution, belong to the Quebec government. We would like the federal government to mind its own business and stop interfering in fields which come under the provincial government. It is quite simple. Deprive the federal government of its sources of revenue, and it will have to mind its own business.


Mr. Choqueiie:: Well, let the province of Quebec withdraw from confederation.


Gilles Grégoire: Mr. Chairman, the hon.
member for Lotbiniere (Mr. Choquette) is suggesting that Quebec withdraw from confederation. He may be a fanatic extremist for wanting to get Quebec out of confederation, but I will be more logical and more intelligent than he is: I suggest that confederation be rebuilt so that it will be made up of two associate states, each staying within its own sphere and leaving to the other the fields which come under its jurisdiction.


Lucien Lamoureux: Order. I am sorry to interrupt the hon. member for Lapointe once again, but it seems to me that he is wandering still further from the matter under consideration.
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Gilles Grégoire: Mr. Chairman, I thank you for calling me to order and I will thank you even more when you call the backbenchers to order-I have not found another word to describe them more vividly-who keep interrupting me. Their interjections are taking us away from the subject. I do not mind at all wandering from the subject, but I must say it is the interruptions from those few hon. members sitting almost in the curtains-


Auguste Choquette: At least we are in office. I would rather be in office and sit in the rear-


Lucien Lamoureux: Order.


Gilles Grégoire: The hon. member for Lotbiniere says he would rather be in office. That sentence might help the committee on privileges and elections to realize what advantage there is in being with the party in office. It would seem that the hon. member for Lotbiniere has a fair idea.


Louis-Joseph Pigeon: He belongs to the government of Her Majesty the Queen.


Lucien Lamoureux: Order. I would remind hon. members on both sides of the house that we are now examining a very serious matter.


Gilles Grégoire: Thank you, Mr. Chairman. If the hon. member for Lotbiniere persists in interrupting, I would ask that he be expelled because, many times, since the beginning of my remarks, he disregarded your rulings to keep quiet. Mr. Chairman, if you are unable to reduce him to silence, I would give you some advice: go and get his whip; he knows how to keep him quiet.
Mr. Chairman, to conclude, I would like to make a suggestion to the federal government. At the present time the government seems to direct its efforts towards unity or at least towards good will and harmony in our country. My suggestion is precisely that we take advantage of section 9 of the bill which we are considering at present to make arrangements for giving back to the provinces 100 per cent of the taxation fields before 1967.
Consequently, supported by the hon. member for Roberval (Mr. Gauthier), I move:
That, for 1964, the words "25 per cent" be substituted for the words "21 per cent" in section 9 which deals with subparagraph (iv) of the act, and that in subparagraph (v), the words "50 per cent" in 1965, "75 per cent" in 1966 and "100 per cent" in 1967 be substituted for the words "24 per cent".


An hon. Member:: Question.


Lucien Lamoureux: Unless members of the committee wish to make some comments on the merits of the amendment moved by the hon. member-


Auguste Choquette: It is out of order.

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Lucien Lamoureux: I am ready to give a ruling on that point. In my opinion, there is absolutely no question but that the interesting amendment moved by the hon. member tor Lapointe is out of order, since it constitutes a new proposal which only a minister of the crown can introduce.


Mr. Lambert:: Mr. Chairman, continuing the line of questioning which has been put by my colleague the hon. member for Digby-Annap-olis-Kings, is the minister satisfied that between now and 1967 there will not be any further erosion so far as the abatement is concerned? In other words, is this amendment to be the final one? We have seen a change last year; further concessions were made, if I recall aright, last autumn. Then the same thing happened in March, or subsequent to March, of this year. I am wondering whether the minister can tell us that there is to be finality, or is this again subject to future conferences between now and January 1, 1967?


Walter Lockhart Gordon: Well, Mr. Chairman, in the first place perhaps I should point out that despite the eloquence, or I should say the misdirected eloquence, of the hon. member for Lapointe the proposals in this section apply to all of Canada and not to any particular province. I might also be permitted to remark, before I answer my hon. friend, that under the Canadian constitution the federal government has the power to levy any kind of taxes, including direct taxes; and the federal government was in the field of direct income taxes long before any of the provinces. I can assure my hon. friend that the federal government has no intention of abdicating its responsibilities, as I suspect it would have to do if it were to follow the suggestion of turning all these tax fields over to the provinces.
In reply to the direct question of the hon. member for Edmonton West as to whether there will be any other changes between now and 1967, I can only say that there are no changes at present in contemplation. But in the affairs of men changes do occur from time to time, as he very well knows.


Paul Raymond Martineau: Mr. Chairman, could the Minister of Finance tell the house what direct connection there is between provisions of section 9 and the agreement reached in respect of pensions, for one is collateral to the other?
Since the minister was directly concerned in the discussion which were held, it would be interesting for the committee to obtain further information in this matter.
As I understood the logical argument put forward by the minister when he brought down his budget, he had reached a certain
[Mr. Choquette.l
conclusion on the income tax abatement which should be granted to the provinces, that is what should be shared between the federal government and the provinces.
The minister should tell us at this point why he changed his mind in this regard.
I should also like him to tell us-and I think this matter is most relevant-whether, as suggested by the hon. member for Edmonton West (Mr. Lambert), we should expect further claims from the provinces, especially from the Quebec, premier, since concessions granted do not meet with his minimum requirements. I think the minister should tell us today if further abatements will be considered and if he is prepared to comment on the possible status of associate state for the province of Quebec, at least in the taxation field.
Finally, I would like the minister to tell us what kind of activities the federal government will engage in to make up for the decrease in revenues resulting from the last agreement; because, as everyone knows, with the increased abatement, the minister will be compelled to choose one of the following alternatives: either the government will withdraw from certain activities, thereby reducing its expenditures; or else, it will impose new taxes to make up for the loss in revenue.
Before this item is carried, it is very important for the committee to know which of these alternatives the minister prefers at this time. I, therefore, resume my seat so that he may answer these few questions.


Walter Lockhart Gordon: I will be glad to answer as best I can, Mr. Chairman. I think that all those who attended the federal-provincial conference in Quebec on the 31st of March came away feeling depressed and disappointed. At that conference we had not reached agreement either on a uniform pension plan for Canada as a whole or on the means of financing the very urgent requirements of all the provinces, especially in the field of education. I say that I think there was a general feeling of disappointment that agreement had not been reached on these broad questions.
So, as my hon. friend knows, the government made one last final attempt to reach agreement with the provinces on these two very important questions and the attempt was successful. I suppose that in recent times no decision has been so well received as the agreement with the provinces, which was worked out subsequent to the conference, that we would have a uniform pension plan for the whole country-


Paul Raymond Martineau: May I-


Walter Lockhart Gordon: If you will let me finish-the benefits of which will be the same across the country, which will be fully portable throughout the country and which, following agreement upon a constitutional amendment, will provide for survivor benefits.
I also think that the other agreements reached at the same time, including the decision to increase the tax abatements provided for in this clause for the years 1965 and 1966, met with general approval across Canada. On the second question-


Paul Raymond Martineau: Before the minister goes on to the second question, may I ask him a supplementary question? Did the agreement on pensions hinge on agreement in regard to greater tax abatements in the income tax field?


Walter Lockhart Gordon: As I have said, these were the important matters that were discussed at the conference. Subsequently agreement was reached on both of them. I cannot go further than that. We succeeded in arriving at a solution which solved both of these problems at least to a very large degree.
Second, my hon. friend asked me whether the reduction in federal revenues that will follow these changes will result in the federal government either retiring from certain present programs and reducing its expenditures to that extent or, failing that, what the effect on the government's revenues and budgetary position will be. I am not in a position to indicate the budgetary position for the year 1965-66 or for the year 1966-67 at this time. When decisions of this importance, which are obviously decisions of government policy, have been arrived at, they will be announced in the house in the ordinary way.


Paul Raymond Martineau: Mr. Chairman, it is all very well for the minister to say that decisions on these matters of policy will be announced in due course, but we are now studying a specific amendment to the Income Tax Act and we want to know the motives for the change. The minister says the motives will be announced in due course. I know he cannot discuss his budgetary dispositions for future years, but at this stage he certainly can discuss the policy of the government if it pertains to the particular clause we are studying. I think the minister should give us an answer.


Walter Lockhart Gordon: There is nothing further I can add. The proposal in this clause is to make certain additional abatements in the personal income taxes available to the provinces. The amount of these abatements I have estimated and have supplied to the committee. As I see it, that is the only question before the committee in discussing this particular
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clause. If it is the wish of the committee to approve the proposals of the government in this respect, that is one thing; if it is the wish of the committee to oppose them, that is another.


Paul Raymond Martineau: That is arrogance.


Walter Lockhart Gordon: But I suggest it would be quite impossible for any minister of finance in introducing amendments, even important amendments, to the Income Tax Act to go on and give an indication of how the budgetary problems of next year or the year after will be dealt with. Quite obviously no one can estimate what the total expenditures and revenues will be, beginning a year from now, until there has been an assessment of the condition of the country and the prospects for the immediate future. That cannot be done very accurately a year or two years ahead of time.
Second, when these estimates have been prepared the government, as a matter of policy, will be confronted with three choices. The first one was referred to by the Prime Minister when he first announced these proposed changes. He pointed out that if the federal government makes certain additional tax fields available to the provinces, and if the federal government's revenues are reduced by a proportionate amount, then the government will have to consider when the time comes to prepare the next budget whether it will, in the interests of the country impose more taxes and obtain in this way some other source of revenue.
The second choice, and one that I can assure my hon. friends the government is engaged upon now, is another review of all government expenditures and all the various programs that are under way to ascertain if there are any items of expenditure that can be eliminated or reduced without damaging either the Canadian economy or the welfare of the Canadian people.
The third choice, obviously, is to consider, in the light of the fact that additional revenues are being made available to the provinces and therefore that their deficits would be reduced below what they otherwise would be, whether in these circumstances a higher federal deficit may be justified. This is something no one can tell until the economic conditions a year from now are known. I cannot, therefore, answer my hon. friend's question any more specifically.


Paul Raymond Martineau: I thank the minister for making this additional effort. He certainly has proven he could have gone farther than he did at the outset. I am thankful for the statement because it does give some indication of the problems that are involved in this change in the rate of federal abatement.

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I do not see why the minister should be so coy because he has already stated publicly, in other forums, that the government necessarily will have to raise more taxes to make up for these revenues that are being lost. If that is the minister's intention, I do not believe he is revealing any of the secrets of future budgets by so declaring. At least we know that the government is studying some of these things. I am satisfied he has gone as far as he can go under the circumstances.
I do not know if the minister can answer this question, but according to a speech he delivered in Winnipeg, I believe, the other day he seemed to think the only way to make up the lost revenue would be to impose additional taxes. I am wondering if he is still of that opinion.


Walter Lockhart Gordon: I did not give that impression, I believe, in a speech I made in Vancouver, not Winnipeg. I gave the three choices that I have just outlined to my hon. friend and I think, I can almost say I am certain, that I did not indicate which of these the government was following.


Paul Raymond Martineau: Perhaps once again, he has been misquoted by the press.


Walter Lockhart Gordon: I do not think so.


Louis-Joseph Pigeon: Mr. Chairman, just a word to say that there is dissatisfaction at the present time among Canadian provinces, since they need further financial resources in order to provide for their educational, economic and social services. I would even say that Canada is now experiencing a political crisis, and I am asking the minister whether he agrees with Messrs. Levesque, Gerin-Lajoie and Pierre Laporte, ministers of the province of Quebec, who hope and advocate that in the near future Quebec will become an associate state. If those responsible ministers use such terms, it is surely because they are not satisfied with the policy of the federal government towards the provinces, and more especially toward the province of Quebec.
I therefore ask the minister whether he thinks it would be in Canada's interest that the province of Quebec become an associate state, as advocated by those three ministers?


Lucien Lamoureux: Order.


Louis-Joseph Pigeon: I would be very pleased to know the opinion of the Minister of Finance on this matter.


Lucien Lamoureux: The minister may give his opinion on the subject, but I am afraid that the question, as asked, even though the hon. member for Pontiac-Temiscamingue (Mr. Martineau) seems on the point of expressing

an opposite view, goes beyond the limits of the item now under discussion.


Paul Raymond Martineau: I was going to suggest that if the Minister of Finance is unwilling to answer, the hon. member for Drummond-Arthabaska (Mr. Pepin) might give a reply.


Louis-Joseph Pigeon: I have asked that question because there is unrest at the present time within the provinces and more particularly in the province of Quebec as regards the taxation basis sharing plan, as the provinces are not satisfied. Taxes are constantly increasing. The sales tax has reached 6 per cent and it is levied on a uniform basis in the province of Quebec. The provinces need sources of income. As far as the province of Quebec is concerned, when responsible ministers of the provincial government, friends of the Minister of Finance, speak about an associate state, it means that they are not satisfied-


Lucien Lamoureux: I presume that the hon. member for Joliette-L'Assomption-Montcalm rose on a point of order. I realize that perhaps the Minister of Finance is ready to give an answer to the original question.


Louis-Joseph Pigeon: He was ready to answer my question.


Walter Lockhart Gordon: I am not quite clear as to the connection between certain alleged statements by certain provincial ministers and this particular clause. Perhaps there is a tenuous connection, I do not know. In any event, I am not prepared to comment on what the ministers of another government, even the government of Quebec, might have said on some other occasion.


[Stage Direction]
Clause agreed to.
Clauses 10 and 11 agreed to.
On clause 12-Special tax rate.
Norman Platt Lambert: I know that at the resolution stage and on second reading, Mr. Chairman, I raised some question about the motivation for this return to the 15 per cent. Actually I would call this amendment the yo-yo amendment because in 1962 the rate was 15 per cent. Last year, over the protests-of members on this side of the house and many other people, it was increased to 20' per cent. Now, we are back to 15 per cent. Perhaps the minister could give us an explanation as to why the rate is now being, returned to 15 per cent.


Walter Lockhart Gordon: This is a consequential amendment, of course, Mr. Chairman. If my hon. friend recalls, this tax rate was increased from 5 per cent to 15 per cent in December

of 1960, I think it was. It has remained at 15 per cent ever since. It was proposed that if the rates of withholding tax on dividends in general went to 20 per cent, as it was at one time contemplated would take place on January 2, 1965, then in the interests of uniformity and common sense, if I may say so, this tax rate should also go to 20 per cent. The intention is that it should be the same as the rate of the withholding tax which applies generally. As I indicated in the budget speech, if as a result of certain proposed reductions in the rates of United States tax, it is no longer considered necessary to increase the withholding tax to 20 per cent in January, 1965. then the tax on N.R.O. companies should be brought into line. It also did not come into effect.


Norman Platt Lambert: This is all very fine but, as my colleague indicated, this is in the nature of a bedtime story because it was a very convenient action by the United States government which allowed the minister this out. This is part of the big stick that was waved last year.


Paul Raymond Martineau: Could the minister tell us how successfully this 20 per cent was in operation or whether, in practice, it was applicable?


Walter Lockhart Gordon: Is my hon. friend referring to clause 12 which we are now considering?


Paul Raymond Martineau: Yes.


Walter Lockhart Gordon: It was never in effect.


[Stage Direction]
Clause agreed to.
On clause 13-Manufacturing or processing business.
Norman Platt Lambert: Mr. Chairman, may I remind you of the procedure we had the other night, that while we do not pass the subclauses, yet we discuss them in order. I have nothing to add so far as the definition of manufacturing or processing business is concerned, but I would like to refer to subclause (3). I have made my comments with regard to subclause (2) as to the extension of time, but I am wondering why this change was introduced concerning "owned" as against "leased"? As it is, paragraph (a) referred to leased buildings and machinery, and I am asking why this concept of ownership is introduced at this particular time? Would there not have been, on the other hand, a particular paragraph dealing with properties and which were owned, because in the ordinary contemplation of drafting and the making of regulations one considers that assets are owned rather than leased? This is a minor amendment but to some degree it is enlarging the concept. Why was the change made?
Income Tax Act


Walter Lockhart Gordon: I was confused in my own mind too when I first saw the way this was presented with the words "owned or" underlined. The reason I am given for underlining these words is that they did not appear in exactly that form in the original section, but I should make it clear that the purpose of this is not to make any change between properties that are owned or leased. The purpose is quite different. It is in the qualifying test. It is to take into account the current value of properties rather than their written down book value. This is just to plug up a loophole that has been foreseen, and in the addition of the words "owned or leased" there is no significance at all.


Norman Platt Lambert: Then this raises the further question I had raised on second reading. With regard to the machinery and equipment, if it is to be 95 per cent new, why then do you have to introduce this distinction between fair market value and its actual capital cost? We are not considering goods that may be written down in value because they then will not be new, nor can buildings be new if they have already been subject to some write-offs for depreciation purposes. It may be a very narrow area.


Walter Lockhart Gordon: It is. I will see if I can give a capsule explanation and, if I cannot, I will read the full explanation that I have here. It is to avoid a situation where most of the machinery or equipment was old machinery or equipment written down to, say, a dollar on the books of the parent company, and then the new manufacturing or processing business would go out and buy a few typewriters and desks and perhaps an automobile or two, or some relatively small amount of new assets, and because the great bulk of the assets were written down to a dollar, 95 per cent of the book value would be represented by the price of the new typewriters and the new desks, and this, that or the other thing. It is just to see, in that kind of test, that the assets written down to a dollar in the books would be taken into account at fair market value.


Norman Platt Lambert: In order to arrive at 95 per cent for new machinery and equipment?


Walter Lockhart Gordon: That is right.


Mr. Hales:: On this point of owned or leased buildings, equipment and machinery, in the starting up of an industry in a designated or depressed area I am wondering why we want to put in "leased." It is conceivable that a company could lease a building, could lease some machinery, go into a designated area and get the incentives now spread over a period of three years and, at the end of three

Income Tax Act
years, it could pull out and, because everything was leased, there would not be the same interest or same amount ot capital at stake.
In fairness to the promotion of a designated area I think they should own their property, their buildings and equipment, rather than be allowed to lease them.


Walter Lockhart Gordon: That is a point of view, Mr. Chairman. However, I think that from the standpoint of getting a new business going in the lower St. Lawrence region, on the Gaspe coast, or some place like that which badly needs something new, it does not make very much difference in an economic sense whether the people who are embarking on that new enterprise succeed in raising all the capital they need to finance a new building, or whether they finance it under some leasing arrangement. The building will be there. It is something that is physical and, in drafting this, we did not think we should make it more difficult for some moderate sized concern to get under way in some of these designated areas. That is the only purpose of the words "or leased", because in quite a number of cases this is a normal way of financing.


Paul Raymond Martineau: 
Walter Lockhart Gordon: If there is a difference between the French and English texts they should obviously be brought into line. I was just consulting my favourite translator here, to see what might be done. I am not yet clear as to the difference which the hon. gentleman has pointed out.


Paul Raymond Martineau: The difference is between ownership and possession. The French text would enable a company "possessing" 95 per
[Mr. Hales.l
cent of the equipment to benefit from the provision, but I think the intention is that the company owning or leasing it should benefit.


Walter Lockhart Gordon: I am grateful to the hon. member for bringing this to our attention and we shall see that the change is made.


Lucien Lamoureux: Do I understand it is the intention to let this stand while we go on to the other matters dealt with in this particular clause?


Walter Lockhart Gordon: I wonder if we could carry on with the English text, which does reflect what is intended. Then we might ask the translation service to make sure that the French text is corrected so as to be on all fours with the English text.


Paul Raymond Martineau: The minister is not suggesting that the English version is more official than the French version, is he?


Walter Lockhart Gordon: No, it simply implies that with my limited abilities in this field it is the only one I am sure about.


Jay Waldo Monteith: Before we leave the subject of designated areas, may I ask whether the allowance extends beyond the three year period, that is, the allowance applicable to a designated area?


Walter Lockhart Gordon: All new businesses establishing themselves in designated areas must come into commercial production within the three year period, that is, the period before March 31, 1967. The benefits they receive apply to a three year period from the time they come into commercial production. So the benefits would apply either from March 31, 1967, for three years, or-if a company had come into operation a year earlier-from March 31, 1966.


Jay Waldo Monteith: Would the fact that a certain area which had been considered a designated area was no longer included in that category affect the situation?


Walter Lockhart Gordon: This amendment in subclause (5) is intended to take care of the situation to which the hon. member has just referred. If a designated area is-I almost said "desegregated"-if an area ceases to be designated, companies could be left high and dry. This provision provides a formula under which their interests and rights are protected.


Jay Waldo Monteith: For the three year period.


Walter Lockhart Gordon: Yes. But if they had only said they intended to establish a business in the

area and had not got on with the job before the cessation of designation, they would lose their right to benefit.


Lucien Lamoureux: Is it agreed that the French text should be revised?


Paul Raymond Martineau: I can point out that the words "etaient possedes" appear several times in the text, and if a revision is made, they should be changed every time they are used. "Were owned" has been translated by "avaient ete possedes". I recommend that the words "qui avaient appartenu" be substituted for the words "qui avaient ete possedes".


Lucien Lamoureux: Is that agreed?


Walter Lockhart Gordon: Yes, and again I thank the hon. member for the close way in which he is watching these amendments.
Clause 13 agreed to.


George Clyde Nowlan: I do not know whether any other members of the committee wish to speak on clause 14. The hon. member for Edmonton West was called to the telephone a few moments ago. I know he wished to speak briefly on it and I wonder whether we could pass it by for a minute or so and then return to it.


The Deputy Chairman:: Shall we defer consideration of clause 14 for the time being?


Some hon. Members:: Agreed.
On clause 15.


Jay Waldo Monteith: I want to ask one question about this. I am assuming that a pension plan which becomes adjusted at the time old age security benefits become payable cannot be registered now; is that so?


Walter Lockhart Gordon: It could as far as old age security is concerned but, of course, it cannot be registered as far as the Canada pension plan is concerned.


Jay Waldo Monteith: Well, the explanation reads:
The new rule will permit registration of a retirement savings plan which provides for the annuity payable under the plan to be reduced by an amount not in excess of payments under the Old Age Security Act.
So I am assuming this applies to old age security benefits which amount at present to $75. I know that certain plans have, in the past, provided for the reduction of benefits once a recipient is eligible to receive old age security payments. I gather, from the wording of the explanation, that these are only now being allowed to register.


Walter Lockhart Gordon: Prior to this provision being made a plan could be registered, but the
Income Tax Act
amount of the reduction in the payment from the plan had to be exactly the amount the recipient received in old age security benefits. There was no flexibility attached to it. Now it can be reduced by any sum up to that amount.


Jay Waldo Monteith: I see.


[Stage Direction]
Clause agreed to.
George Clyde Nowlan: Perhaps we could go back, now, to consideration of clause 14. I see my hon. friend is in his place again.
On clause 14.


Norman Platt Lambert: The other day I raised the subject of allowances for research in a number of questions which I put to the minister, and what prompted me to do so was the emphasis placed here on the year 1962. Moreover, I am wondering if we are not doing something which, in effect, undoes the incentives which were provided in years past. This applies primarily to work done outside the country. The main motivation for increasing the incentives in respect of research done within Canada has been provided in briefs submitted by the Canadian Manufacturers' Association, research groups, universities and others interested.
This was in an effort not only to develop research in this country but to try to retain so many highly trained research personnel who were, frankly, finding no outlet and no encouragement for their abilities here in Canada. For that reason we were placing the emphasis on the encouragement of research facilities in Canada. I remember the former minister of finance, Mr. Fleming, placing a great deal of emphasis on the encouragement of research facilities in this country even going to the point of granting a 150 per cent allowance in this regard. I fully subscribe to that. Also, I subscribe to incentives being granted to a firm in Canada which has to go outside the country to do some rather specialized research because facilities do not exist in Canada. The research involved may be in connection with a field so narrow that it is not possible to set up laboratories and obtain the personnel for this work. I agree that we should grant such firms incentives in this regard; perhaps not to the same extent, but at least to the extent of 100 per cent.
However, why at this stage do we say that for the taxation year 1962 and onwards we are going to make allowances for research for the benefit of the business of the taxpayer, whether the research is carried out in Canada or elsewhere? I frankly confess some difficulty in understanding this provision and am just wondering whether it is not to

Income Tax Act
benefit some particularly narrow class of taxpayers, and whether they are being given some form of retroactive bonus in this regard because they have made specific representations to the minister. I would like as much detail as possible in this regard.


Walter Lockhart Gordon: Mr. Chairman, I think the hon. member has raised two questions. First, why go back to 1962, and second there is the question of whether expenditures made by a business in Canada for research outside Canada should be allowed as a deduction for income tax purposes. When the amendment was introduced it applied to the year 1962 and subsequent years. It provided that if research expenditures were made in Canada, the taxpayer could claim 150 per cent of those expenditures in computing his taxable income. I do not know what went on in the minds of the then ministers, but I am quite sure from what I have heard from my hon. friend for Edmonton West and my hon. friend for Digby-Annapolis-Kings over the past year that there was no thought of using the carrot and the stick approach; that the only approach my hon. friends would have indulged in was the carrot approach and there was no idea at all of penalizing people who for one reason or another were making expenditures in another country for research which they felt was of very great value to their own businesses.
I suggest that inadvertently the wording of the section was such as to preclude altogether any deduction of any kind for expenditures on research except those made in Canada. Have I made myself clear to the hon. member?


Norman Platt Lambert: Yes.


Walter Lockhart Gordon: Since the amendment was passed by the then government Canadian businesses have had the advantage of a 150 per cent deduction for any expenditures made in Canada, but because-and I understand it was by inadvertence-of the wording of the amendment, since 1962 they have been penalized or have not obtained any benefit in computing their taxable income for expenditures on research in other countries, some of which research they have been carrying on for many, many years. Representations to this effect have been made, to my knowledge not by any particular taxpayer, not by any particular class of taxpayer, but by people like the tax foundation and the joint committee of accountants and lawyers, who have been saying that they think there is an anomaly here; they think there is a mistake here; they think something was done by inadvertence that was not intended. I do not know if that is true, but they think there was no intention

to wield a big stick; that there was certainly no intention on the part of hon. gentlemen then in the government to penalize these firms for carrying on in the way they had always carried on. In fact, they think a mistake was made.
Therefore, in assessing these representations the present government came to the conclusion that the incentive introduced in 1962 of granting a 150 per cent deduction for any research expenditures made in Canada, over a certain base, should stand, but that companies which for one reason or another get very valuable research assistance in other countries should not be penalized. In some cases it would be impossible to get the same facilities in Canada. I am sure there are examples of where these arrangements have been entered into under contract, and in many cases Canadian industry benefits to a very considerable extent from the access that it has to research in the United States, Great Britain, European countries, and so on, and is prepared to pay for them.
It is not suggested that these payments should be allowed as a deduction to the extent of 150 per cent. It is suggested that, like other expenditures that are laid out for the purpose of earning income, they should be allowed to the extent of the amounts paid; that is to say, there should be no incentive, but it should be just to the extent of the amounts paid. If we do not do this, what we would be doing in effect would be saying, "If you carry out your research in Canada, fine; you will get a bonus to the extent of a 150 per cent write-off. But if you cannot, and you take advantage of research facilities in other countries, then, while we will allow you any other type of expense that is necessary for the purpose of earning income, we will not allow you this particular item of expense". Those who have made representations, the lawyers, accountants and professional people of that kind, thought this was an anomaly; they thought it was a mistake. They convinced the government that it should be corrected or, if it was not a mistake, that it should be changed. I think it was perhaps done inadvertently.
When the hon. member says, why do we go back to 1962, the answer is very simple. The amendment applied to the years 1962 and thereafter. Those years have not yet been finally assessed, and it was thought that the fair thing to do would be to go back to the date when the change was made in the first place.


Norman Platt Lambert: Mr. Chairman, I realize what the minister is trying to get at but I am not too sure that he is altogether correct in his assessment of the situation. I would ask, how

can he deal with the following situation? We know that this applies generally across Canada, where we have so many subsidiaries of foreign firms operating in this country. How can he guarantee that there is not an overloading on to the books of the Canadian subsidiary of the cost of research conducted by the organization as a whole? Let us assume, for argument's sake, that there are five plants or subsidiaries in the United States and one or perhaps two in Canada, and that they have research facilities. The cost should be apportioned out over the whole organization, but because of the various profit positions of the company a business decision is made that because the Canadian operations have been highly successful a higher proportion of the cost of research for that year shall be charged on the books, which means merely making a bookkeeping entry; whether it be a branch or a controlled subsidiary it is a matter of book entries, and therefore flexible.
I agree with the minister that a taxpayer in Canada who is deriving benefit from research should pay his fair share and regard it as an expense of doing business. But what control has he-this may be a matter for the Department of National Revenue-over seeing that what is being charged for is a fair price for research properly attributable to the operations of a Canadian subsidiary?


Walter Lockhart Gordon: Of course, Mr. Chairman, this is a broad question which applies to a lot of other charges made by parents to subsidiaries, quite apart from the question of charges for research. It makes the problems of the Department of National Revenue that much more difficult, as my hon. friend from Digby-Annap-olis-Kings knows very well. There is the difficulty of knowing whether the subsidiary company is paying too much for the goods it buys. There is also the question of all kinds of intercompany charges that the officials of the Department of National Revenue have to examine very carefully. In the last analysis the assessors of the Department of National Revenue must be satisfied that charges of all kinds-and there are many other charges which are made besides those for research- made by parent companies to their subsidiaries are reasonable and that they are not being used to transfer profits, free of withholding tax and free of income tax in Canada, from such subsidiaries to the parents.
I think the article in the Canada-United States reciprocal tax convention dealing with this matter is article IV which deals with "diversion of profits to a parent corporation." It is one of the things which the assessors must look into company by company and case by case; but I can assure my hon. friend that as far as I know there is no more difficulty in
Income Tax Act
doing this in the case of research expenditures than in a wide variety of other intercompany charges.


[Stage Direction]
Clause agreed to.
On clause 16-Sale of accounts receivable.
George Clyde Nowlan: Would the minister explain what is the reason for clause 16? It simply amends the former section to include the sale of obligations in the money lending business. Was there some particular case which arose which made this clause necessary. What is the background to it?


Walter Lockhart Gordon: This was one of those things which was taken pretty seriously by the joint committee of the Canadian Bar Association and the Canadian Chartered Accountants Association. They thought there was a loophole here, or if not a loophole then an omission, and they felt very strongly that it should be coopered up. I was convinced that there was something in it; it did not seem too serious so we thought we should go along with it.


[Stage Direction]
Clause agreed to.
Clauses 17 and 18 agreed to.
On clause 19.
George Clyde Nowlan: Would the minister just explain the meaning of clause 19?


Walter Lockhart Gordon: The provision being repealed provided a special 5 per cent tax on increased dividends to prevent companies which did not intend to acquire a degree of Canadian ownership paying extra dividends before the end of 1964 in anticipation of the coming into force of the 20 per cent non-resident withholding tax on January 1, 1965. Any company which may have paid the tax imposed under part IID will be eligible for a refund.


Jay Waldo Monteith: I am assuming that the minister admits that he was not correct in bringing forward the increase to 20 per cent in last year's income tax amendment.


Walter Lockhart Gordon: On the contrary, Mr. Chairman. As I explained before, the only reason for reducing the amount from 20 per cent to 15 per cent is the changes in the rates of tax in the United States. After all, we are all agreed now, I think, that this carrot and stick business introduced some time ago by my hon. friend opposite in connection with research charges is something for the past.


Paul Raymond Martineau: Does that mean, Mr. Chairman, that the fiscal policy of the government will depend in large measure on what is being done below the border?


Walter Lockhart Gordon: Certainly not, Mr. Chairman.

Bank of Canada Act


Herman Maxwell Batten: Shall clause 19 carry?


Paul Raymond Martineau: May I call it five o'clock?


Herman Maxwell Batten: Order. It being five o'clock and in order that the house may proceed to the consideration of private members' business, it is now my duty to leave the chair.


The Acting Speaker (Mr. Batten):: Order. It being five o'clock the house will now proceed to the consideration of private members' business as listed on today's order paper, namely public bills.



BANK OF CANADA ACT


Maurice Côté: the second reading of Bill No. C-26, to amend the Bank of Canada Act (form and material of notes).

He said: Mr. Speaker, in introducing Bill No. C-26, an act to amend the material of notes issued by the Bank of Canada, I simply wish to change the obsolete wording on our bank notes. For that purpose, I propose that subsection 4 of section 21 of the Bank of Canada Act be hereby repealed and the following substituted therefor:
The form and material of notes shall be subject to approval by the minister, but such notes shall not contain any wording which is misleading or which might deceive the public as to the true nature thereof, or of the obligations incurred by the bank in issuing them and all notes shall be printed in both the English and the French languages.
As stated therein, the purpose of this bill is to provide that bank notes shall not be inaccurate and misleading as they are at the present time because they bear the words:
"Will pay to the bearer on demand".
These Bank of Canada notes being legal tender, such words printed on them are misleading. To replace those words, I suggest that the following words be printed: Legal value. It will be more consistent with the facts.
Why are the words "Will pay to the bearer on demand" inaccurate and misleading? Precisely because at one time, our notes were secured on a gold reserve amounting to 25 per cent of the value of notes in circulation. And if a Canadian wanted to exchange his notes against gold coins, he could legally do it. In fact, it almost never happened.
However, since 1940 there has been no gold in the Bank of Canada to guarantee legal Canadian currency. In fact, to a question I

asked the Minister of Finance in October 1962, I got the following reply:
The Bank of Canada maintains no gold reserve whatever.
Here is what we find at page 1089 of the Canada Year Book, 1962, and I quote:
This requirement was suspended in 1940 when, under the terms of the exchange fund order the bank's gold holdings were transferred to the exchange fund account to form part of Canada's official gold and United States dollar reserves.
At the time of the motion preceding the first reading of this bill, I noticed that the Minister of Finance (Mr. Gordon) showed his agreement by a nod. I believe it is not presumptuous to conclude that the Minister of Finance unreservedly approves this bill.
Moreover, the Ottawa newspaper the Citizen, under date of December 5, 1963, published a short news item concerning this bill, which I shall quote in the original language.

M.P. Reads His Money, Wants Words Changed.
A Social Credit M.P. maintains that Canadian paper money is "inaccurate and misleading" because it bears the words "Bank of Canada will pay to the bearer on demand" (the value of the bill). Maurice Cot6, a follower of Socred leader Robert Thompson, from Chicoutimi, Quebec, introduced a private members bill in the Commons Wednesday which would replace the words with the simple statement: "Legal value". C6t6 said the old words are now misleading and inaccurate because money is no longer guaranteed by gold. A Bank of Canada official asked what the bank would give a "bearer" who presented a dollar bill and demanded a dollar for it replied: "Another dollar". He agreed with Mr. Cote that the words were a hangover from the days when you could get payment in gold or other metallic substance for your money. Nowadays they just meant you could trade old notes in for new.

We must consider that the value of our bank notes proceeds nowadays from a social fact, that is the purchasing power given to it by the members of the social group by virtue of a practice of long date. That value comes from an act of faith, a collective trust, the assurance that 100 monetary units, called dollars, enable and will enable to pay taxes, merchandise, services, debts up to 100 monetary units, whatever the material support of these units may be.
We must also consider the fact that if our Canadian currency could be converted into gold during many years, this same currency has not been convertible since 1940 and that it never ceased to have the confidence of all Canadians.
As for me, Mr. Speaker, when I have in my pocket a nice $20 note, I am very pleased because I know I can buy Canadian products anywhere in Canada.
The bond which linked our notes to the gold standard gradually lost its importance.

Nowadays, the bank note or dollar bill is evidence of indebtedness which has a value of its own independent of that of the metal on which it was secured in days past.
That is why our bank notes have become a true currency. They play the characteristic functions of currency in that they are an instrument of barter, a standard by themselves and a reserve of value for the future.
Consequently, the words "will pay to the bearer on demand" have become useless and are misleading for the public. Indeed, the man in the street never bothers about them. I must say that nowadays millions of Canadians seldom see the colour of money, because they have none on account of our debt-ridden financial system.
On the other hand, 98 per cent of the money in circulation is credit money, issued or created by chartered banks; it is bank money, account or figure money, because 2 per cent of the cash deposited is sufficient for banking institutions to pay unforeseen withdrawals.
Nevertheless, Mr. Speaker, I think it is most important that the 2,220 million bank notes in circulation on May 6, 1964 reflect faithfully the truth. I hope that all members realize the legitimacy of this bill and that they will gladly support it.


Mr. Lloyd Francis (Carleton):: Mr. Speaker, I have listened with a good deal of interest to the remarks of the hon. member for Chicoutimi (Mr. Cote), the proposer of the bill, and I must commend him on the background material he has introduced relating to the operation of the gold standard and the circumstances under which Canada suspended operations under the gold standard and the conversion of its currency into gold. It also seems to me that his remarks concerning the factors that really determine the value of a currency are eminently sensible and I would not disagree with them. I am concerned about some aspects of the bill because I think the bill as drafted makes some assertions which I for one find difficult to accept. I quote from the wording of the proposed bill:
-such notes shall not contain any wording which is misleading or which might deceive the public as to the true nature thereof, or of the obligations incurred by the bank in issuing them-
With his scrupulous and literal regard for the truth, the hon. member proposing the bill felt that the words should be changed. The words to which the hon. member objects are that the Bank of Canada will pay the bearer on demand. I do not know whether there is any significance, but it seems to me that every time there is a reprinting of these notes these words appear a little
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smaller. Certainly they were more conspicuous on the notes that were in circulation during the forties.
It seems to me that if the intention of the hon. member is to correct an injustice, then he has not proven anyone has been deceived or that there is any injustice to be rectified. He himself said that he is quite happy to receive the currency of the realm and his only regret is that he cannot have more of it in his pocket, a regret which I am sure all of us share. If the hon. member is thinking in terms of reform legislation, he should go much farther than he does. I have before me selections from the recommendations of the royal commission on banking and finance which deal indirectly with this matter.
The commission recommends:
For example, sections 22 and 23, which provide for the redemption of Bank of Canada notes in gold and the maintenance of a gold ratio, have both been suspended for many years and should be removed from the act.
In other words, the commissioners would go farther than the proposer of this bill in clearing up this wording that some people might perhaps regard as an anachronism that serves no useful purpose.
The commissioners go on to say:
The basic integrity of our currency does not depend on gold but on the skill and wisdom with which it is managed.
This, of course, is in line with modern thinking, and I am sure very few hon. members of the house would disagree. The basic problem here, it seems to me is, what are we trying to do? Are we concerned about the wording? Does any hon. member really believe that anyone who accepts our currency is deceived or misled? Does anyone who receives his pay at the end of a week worry about the soundness of the currency or does he feel that this fine print somehow or other deceives him? It seems to me it is the very heart of our constitutional usage of our democratic traditions, that we in parliament go through certain legal fictions. While the form is maintained, the content changes. In this way we maintain a certain continuity in our institutions, which has a very beneficial purpose. This continuity which is contained here by a reference to the gold standard does not really bother me, Mr. Speaker, to the extent that it appears to bother the hon. member, who feels he has to introduce a piece of legislation to correct it.
I should like to call the attention of the house, Mr. Speaker, to a few instances in which we have maintained certain forms and traditions and where the wording, while maintaining a certain semblance of continuity with what has gone before, does not conform any more than the wording to

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which the hon. member refers calls to mind the actual situation. When we are discussing measures there are certain forms that you, Mr. Speaker, and the chairman of committees follow. I note that on April 17, at the end of the debate in committee on redistribution, the form used by the chairman was, "Shall the committee rise and report progress?" It is eminently clear to those who examine the report of that debate that there was no substantial progress to report as a result of that debate. The hon. member for Churchill (Mr. Simpson) referred to the fact that, perhaps, with the passage of time the members of the press gallery may develop a more objective style of reporting. This is a certain term which does no particular harm, and it is one with which I would not disagree.
I offer these as illustrations of certain fictions in the forms connected with our procedures in this house and the other place which we have maintained over a long period. This suggestion that someone is somehow deceived or misled or injured when we use such language or such forms is one which it is very difficult for me to accept as a member of this house. There are many other examples of the way in which the use of language has been traditionally carried over from situations that have prevailed for long periods of time. There is the message that the Governor General himself delivers in the name of Her Majesty at the opening of a session. There are certain legal fictions in connection with the passage of legislation through parliament. Certainly the role of those who have responsibility for giving advice is played down in our procedure in connection with the action that is taken in the name of the sovereign by the Governor General. This deceives no one in terms of literal meaning, but it preserves a certain form and meaning in our institution, and should not be taken literally the way the hon. member who is proposing this bill apparently takes this matter.
I recall another exercise in semantics not very long ago of a slightly different nature in this house. We had a private member's bill before us to change the name from the Old Age Security Act and Old Age Assistance Act, and the hon. member proposing the bill wanted to substitute the euphemism of the senior citizens security act and the senior citizens assistance act. One hon. member quite rightly pointed out that a mere change in name, a mere change in form, does not make anyone a day younger, does not change the content of what we are doing or trying to do. I would submit that the same kind of consideration has to be borne in mind. We have preserved certain wordings on our bills

of exchange. This wording is now hallowed by usage. It has been continued for many decades in Canada.
There is, I submit, no harm in this language. No one is deceived, no one is injured. There is no one who believes that our currency is any worse because of the language which is printed upon it. So far as I know, Mr. Speaker, there is no one who really feels there is an obligation on this parliament to give precedence to measures which deal largely in a semantic way with the problems with which we are trying to deal.
As one member of this house, I have tried to argue that the wording of this bill, which has been so well developed by the proposer of the bill itself, is related to the days in which we had a currency that was convertible into gold. This was suspended in 1928 and there followed the measures which were adopted during depression years, the foreign exchange control board in the war years, all of which brought about a usage which was, on the face of it, at variance with the wording which was preserved on the currency. However, in this period the management of our currency compared very favourably with that of any other nation in the world. In this-period there was the development of the Bank of Canada, the practices of the Department of Finance in working out the instruments of monetary and fiscal policy in Canada, which brought about certain practices which, in turn, have modified the original framework within which the legislation was drafted.
If we are to make changes we should not do it piecemeal and in this way. We should look at the entire context of the legislation which will be before the house when the recommendations of the Porter royal commission are implemented by the government. At that time we should look at those sections of the Bank of Canada Act and the legislation dealing with foreign exchange, and remove those particular sections which perhaps no longer are in keeping with our modern philosophy of monetary management.
But I think there is no great urgency to change the wording regarding the paper currency, which has been accepted as legal tender in Canada for some considerable time. If, at the time of revision of the act, it is the decision of the authorities to change it then I for one would be the last to oppose them, but I do not believe it is a good principle for hon. members of this house to propose legislation which is couched only in terms of semantics, which deals only in terms of wording, and which does not deal with policy and substance. For these reasons I hope the

house will not give favourable consideration to the hon. member's bill.


Francis Andrew Brewin: I rise on this occasion, Mr. Speaker, to support my deskmate, the estimable member for Chicoutimi (Mr. Cote). I do not regard this bill as the most earth-shaking one that has been before this parliament, and 1 must say I was impressed by the moving plea from the hon. member for Carleton (Mr. Francis) to retain legal fictions no matter whether they are couched in a misleading form or not. He said, as any true and trusted Tory lawyer might well have said, "Let us retain these legal fictions," but I suggest that the hon. member for Chicoutimi has made a good case for his bill.
The hon. member has pointed to words on this currency which are misleading, and it is no help for the hon. member for Carleton to say that well informed persons are not likely to be misled, because after all this currency comes into many hands. There is already enough confusion and difficulty about matters of currency without the parliament of Canada perpetuating what is clearly a misleading statement, especially when the hon. member for Chicoutimi has given us an opportunity to express ourselves to the contrary.
Nobody believes for a minute that if he went to the Bank of Canada and asked to be paid gold coins for the money he presented, or asked to be paid anything for the money he presented, that he would be treated as anything but mildly erratic.


Mr. Chretien:: Mr. Speaker, I rise on a point of order. Could the member for Greenwood (Mr. Brewin) not table the document to which he has just referred?


Francis Andrew Brewin: The document which I was looking at and reminding myself about is a purely personal document which I would prefer to retain. Mr. Speaker, I do not wish any members of the house to be misled. Much as I admire, and much as I enjoy the friendship of my deskmate, I do not mean to suggest that by supporting this particular bill I have been persuaded to adopt all of the economic and political theories which he espouses. I am trying, of course, to persuade him to adopt some of the economic and political theories that I espouse, but so far I do not know that either of us has been able to make much progress in that direction.
But even if this bill is a little one, let us deal with it. Let us not adopt this futile and unsatisfactory procedure of talking it out. If the hon. member for Carleton and other hon. members feel that this bill is unnecessary,
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then let us vote against it and throw it out. If, on the other hand, we are persuaded by what to me were the very cogent reasons advanced by the introducer of the bill, then let us pass it and not condemn ourselves to the continued futility of a debating chamber that never arrives at a solution on any particular problem.
The hon. member for St. Maurice-Lafleche (Mr. Chretien), speaking from the government side, gained a great deal of well deserved credit for a bill he presented which was purely semantic in nature. The hon. member for Carleton seems to think this house should not deal with such matters; yet we dealt with them then, and in my experience that is the only bill that has passed through in the private members' hour.
Let us have the courage of our convictions. Let us either support this bill or throw it out. For myself, I hope that before long we will change the procedure in this house which requires members to spend hour after hour, day after day, week after week debating motions that everyone knows will not be passed. I doubt if a high school debating society would tolerate the continuance of such a futile and senseless procedure. I hope our committee on procedure will work out something whereby, if a private member's bill comes before the house, it will be dealt with.
Let the government of the day do one of three or four things. Let it say, "We do not want to support the bill." Then the bill will probably be defeated. Or let it refer the bill to a committee, in which case it can be looked into by other members of the house. Or let it say, "We accept the bill because we think it is a sound bill and we want to see it pass." But let us not go on month after month, year after year, with this futile procedure known as talking out bills. I am told this has a useful value in that it enables certain backbenchers on the government side to exhibit their rhetorical skill, but I doubt if that in itself is adequate reason to take up the time of the house.


Auguste Choquette: The hon. gentleman is
making recommendations to amend procedure. He is not talking about the bill.


Francis Andrew Brewin: I am not talking about the bill, but I am urging the house to change the procedure as a whole to deal with this bill in a manner consistent with the statements I am making. I say this is a little bill. It is not a very important bill. It is a semantic bill, but it is one which should commend itself to all those who prefer to call a spade a spade, and prefer not to say that money will be paid to the bearer when in fact there is no intention of paying money to the bearer.

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I urge that instead of expanding this de-oate we proceed to vote on the bill. If we do, I know some of my colleagues will disagree with me. I speak for myself in this matter, and I for one am delighted to support the bill introduced by my friend and neighbour.


Joseph Jacques Jean Chrétien: Mr. Speaker, first, 1 want to congratulate my hon. friend from Chicoutimi for having introduced this bill. In reply to the comment made by the previous speaker, the N.D.P. member sitting next to the hon. member for Chicoutimi (Mr. Cote), I entirely agree with him that our standing orders should be changed so that, from time to time, an acceptable bill could be passed.
There is one I had the opportunity to introduce and to have approved; I feel we took a step forward there. But, as regards the bill put forward by the hon. member for Chicoutimi, I should like to make a few comments and to point out to him that, even if I agree with the principle of his bill, it is clear that there is no possibility whatever at the present time, even if it is written on the dominion bank notes, "will pay to the bearer on demand", to go and exchange them for gold- even if this could be so prior to 1934. In spite of that, I think it is perhaps useless to change the wording which now appears on the dollars themselves.
On the other hand, I take the liberty of suggesting to my hon. friend not to put that bill aside because there are, in the report of the federal commission on banking and finance, that is the Porter commission, recommendations of that nature, particularly in chapter 22. Therefore, I think we should wait before studying that bill as well as all the other recommendations made by the Porter commission.
I am surprised, however, that while we are talking about the Bank of Canada, the hon. members for Lapointe (Mr. Gregoire) and Villeneuve (Mr. Caouette), who should make it their duty to be here, are absent.


Mr. Belanger:: Mr. Speaker, on a point of order. I would like to point out that the hon. member for Villeneuve is absent because he is in the hospital.


Joseph Jacques Jean Chrétien: I am sorry, Mr. Speaker-


Louis-Joseph Pigeon: The other one, the hon. member for Lapointe?


Joseph Jacques Jean Chrétien: I realize that there are only three members of the Ralliement Credi-tiste to discuss such an important matter.


Louis-Philippe-Antoine Bélanger: Three against 12 Liberal members.


Joseph Jacques Jean Chrétien: Of course, Mr. Speaker, I think that we should associate ourselves with the hon. member for Chicoutimi, but, under the circumstances, I would ask the hon. member to be kind enough to withdraw his bill until the recommendations of the Porter commission are discussed.
To come back to what the hon. member for Carleton (Mr. Francis), said to the effect that it was unimportant if changes were made in the wording of legislation, I think that, in some cases, it is necessary. And I would like to point out, Mr. Speaker, that we had a bill concerning a change of name from Trans-Canada Air Lines to Air Canada.
In view of the unanimous approval of that bill, I think that it was a step towards Canadian unity. I am saying this today, because, ever since the members of the house passed it, about two months ago, I had no opportunity to express my satisfaction in this house.
What surprised me most was to see the pleased comments in the press following the passing of that bill. That is why I do not intend to delay the business of the house any longer and I would like to give other members an opportunity of airing their views. I would not like to be accused of trying to kill this bill, to use a popular expression in this house, since I am in full agreement with it.


Harold Edward Winch: Perhaps it is advisable and necessary once in a while to pass an hour just as we are passing this one. However, I am not being facetious when I say that, to me, it seems extraordinary we should be spending one hour tonight to discuss the changing of some words on our currency which 99.999999 per cent of the people of Canada do not even know about-words that do not make any difference.
Until the next House of Commons pay day I have three bills in my pocket.


An hon. Member:: Will you table those documents?


Harold Edward Winch: One is a five dollar bill issued by the Bank of Canada. The second is a ten dollar bill issued by the Bank of Canada and the third is a twenty dollar bill issued by the Bank of Canada.


An hon. Member:: A lot of money.


Harold Edward Winch: In the course of his remarks, the hon. member for Chicoutimi (Mr. Cote) made some statement about currency being printed in French and English. The bills I have in my hand are all in French and English. We are, now, at $12,511 an hour, discussing this subject. With my very powerful glasses I can now find in a little comer,

under "Bank of Canada" the following words: "Will pay to the bearer on demand". What is the importance of what that means? I am amazed that anyone who maintains he knows the principles of social credit and banking should ask that a change be made now. It appears that if you give five dollars to the Bank of Canada they will give you five dollars back. Well, turn a five-dollar bill in, and they will give you the five dollars back if you want it.
What is the importance of money? It is a medium of exchange and, as such, it is based on trust and confidence in our country. It means that if you give a service and are paid something, whether in paper or in metal, you can use it to buy shoes or pay rent, to buy clothing and to buy food. Money is not a question of infinitesimal words such as "payable on demand". It represents the trust felt by people that, having given a service and received something in paper or metal, they can turn round and get services or commodities back with it. Whether it is backed by gold here or in Fort Knox or in England or in Russia means nothing. Everything depends upon the confidence of the people in the paper they are given. Therefore, to make a change in infinitesimal words to the effect that if I turn in five dollars I get five dollars back does not mean a thing when it comes to the economics of Canada. Immediately the trust of the people fails, then, no matter what the wording is, our currency falls and deflation appears. Currency is based upon trust in our country, in its resources and in ourselves. The actual wording on a piece of paper, be it one dollar or five dollars or a hundred dollars or a thousand dollars, means nothing. If our country were to collapse you could have all the wording you wanted on the currency and it would still be gone. It is the stability of our country, of its economy and of its people, which means everything. This is why I rose this afternoon. I could not understand a member of the Social Credit party thinking that a change made in infinitesimal words would make any difference to the currency or banking situation of our country.
Of course, what really brought me to my feet was that my colleague from Greenwood (Mr. Brewin) should have risen to support such an asinine proposition.


Some hon. Members:: Oh, oh.


Harold Edward Winch: Currency is not a matter of wording. Currency is trust. That is the basis of currency, whether it is gold or paper, or wampum as it used to be in British Columbia many years ago, or shells, as it was until a few years ago in Africa. What counts is the basis of trust in your exchange; it is not the wording, especially when you cannot even
Bank of Canada Act
read the wording without the aid of a magnifying glass. Therefore, Mr. Speaker, I hope that as a result of the study that was made in the past two or three years by the royal commission on banking and finance, and as a result of studies which I know will be made by either special committees of the House of Commons or the Senate or, I hope, by a joint committee, that we will in the not too distant future get down to a real understanding of the meaning of money. I repeat, it is not gold taken out of one hole and buried in another; it is not infinitesimal wording on paper, but it is the confidence of the people in their country, its resources and, God help me, their government. That is the security of currency.
Under the previous government our money was completely devaluated with regard to international exchange, and it has been maintained at the same devaluation by the present government. But, sir, the wording of our currency, so infinitesimal, did not result in the people of Canada losing trust in their own money. I know I am repeating myself, but I do want to say that money, exchange, currency valuation does not depend on whether it is backed by gold or by silver; the valuation of money is trust in one's own country, its resources, and oneself. Therefore I cannot understand why a Social Crediter thinks he can change the world or change Canada by infinitesimal wording which, I say again, sir, 99.99 per cent of the people of Canada do not know is on the paper; because when they receive a dollar for their services, they anticipate a dollar's return-and that is the only true meaning of money.


Louis-Joseph Pigeon: Mr. Speaker, I want to support without any reservation the biff introduced by the hon. member for Chicoutimi (Mr. Cote), and I believe it should be passed by this house right away. We should not wait for the government to take measures following the report of the Porter commission, because it does not have to accept a commission's recommendations.
What the hon. member for Chicoutimi means is that if we go to a bank, it is impossible to get gold pieces, and I think that, in principle, he is right, and that these words on our currency should be removed.
However, this does not mean that I agree with-


Harold Edward Winch: Mr. Speaker, may I ask the hon. member where on a bank note does he find that you can get gold; and if he cannot get it, why does he want it?

Bank of Canada Act [Translation]


Louis-Joseph Pigeon: Mr. Speaker, when the first hank notes appeared or were put in circulation in Canada, many years ago, if they carried such an inscription, it is precisely because it was possible to obtain bank notes in exchange for gold or vice-versa. But today it is impossible to get gold in exchange for bank notes upon request. Consequently, I feel that the hon. member for Chicoutimi is right in principle.
However, that does not mean I agree with the hon. member for Vancouver East (Mr. Winch) when he says that to delete those words could be harmful to our dollar and be interpreted as a lack of confidence in its soundness.
Mr. Speaker, our dollar is sound at home and it is recognized as a strong currency internationally. It was devaluated last year when we were in office, and the present government has maintained that devaluation which proved to be profitable for the Canadian economy, because when an European comes to America to buy products he will pay a dollar in the United States, but in Canada he will pay only some 96.5 cents for his purchases.
I think that the hon. member for Chicoutimi is right. However, we should not wait for the government to take action in line with the Porter commission recommendations, since the government can ignore that commission's suggestions, as I said earlier. But if the government does not want to take immediate action, it should at least show some responsibility and accept that this bill be referred to the committee on banking and commerce for consideration.


Louis-Philippe-Antoine Bélanger: Mr. Speaker, I shall be brief, precisely because I do not want to be accused of trying to kill the bill. However, I cannot do otherwise than stand up and say that I support the bill now before the house.
At the very beginning of my remarks, I should like to mention the observations made by the member for St. Maurice-Lafleche (Mr. Chretien) merely to tell him that, at the present time, about 8 per cent of Liberal members are present in the house, when my party has 25 per cent.
And to revert to the matter under study may I mention that the main argument of those who are against the bill is that even if the words "shall pay to the bearer on demand" are in very small print, even if the type is very small, that is unimportant.
Mr. Speaker, when a lie is small, it remains a lie all the same. In fact, a lie remains a lie everywhere there is one. Furthermore, I call the attention of those who are against


the bill to the fact that germs are very small, but sometimes also very dangerous.
Mr. Speaker, I feel that the hon. member for Chicoutimi (Mr. Cote) is quite right in claiming the cancellation of those words on our bank notes because, in the final analysis, they are a lie, which may become big, for I am convinced that if the hon. member for Carleton (Mr. Francis) became suddenly a bank clerk and was asked a dollar in gold for the dollar somebody would present him, because the bank said it would pay it to the bearer on demand, he would be rather confused and would really not know what to do. Of course, he could always propose, as suggested by the hon. member for Vancouver East (Mr. Winch) a while ago, to exchange a dollar against another dollar; but the dollar he would give in exchange would still be marked "will pay to the bearer on demand", and this could go on indefinitely.
Mr. Speaker, this inscription on our banknotes is nonsense. Moreover, I would like to tell the house that this incorrect writing on our bank notes probably reflected the out and out falsity of our present monetary system, and that is perhaps the reason why the public does not understand it. At least, in a general way, the public at large does not understand the monetary system, no more than it understands the writing on our bank notes.
The purpose of this bill is to point out something wrong on our bank notes. Whether or not the public understands does not change anything. The principle is there; it deserves to be pointed out.
The hon. member for Carleton stated that this should be left on our bank notes, in order not to break with tradition.
I think that, during the past few years, we have been breaking with traditions. Now, that one is absolutely useless from a point of view of efficiency and simply misleads the public generally, at least those who ponder on the matter.
That is why I heartily congratulate the member for Chicoutimi (Mr. Cote) for having raised the question. Even if someone tried a while ago to make us believe that the hon. member was a true Social Crediter and that we were not, I can tell the one who made that insinuation that ours is a Social Credit group, just as much as the other one.


Auguste Choquette: Mr
Speaker, I wish to congratulate the hon. member for Chicoutimi (Mr. Cote) on his excellent idea of submitting such an amendment to the house. However, if the bill comes to a vote, I must admit that I shall vote against it, not because of the principle on which it is based, but on account of the rather disquieting wording of the amendment. After due reflection, one realizes that it does not

convey the meaning intended by the hon. member. It reads as follows:
The.form and material of notes shall be subject to approval by the minister, but such notes shall not contain any wording which is misleading or which might deceive the public-
This might give the impression that the Minister of Finance is a counterfeiter. It is said that the notes shall be subject to his approval, but inasmuch as they do not contain any misleading wording.
I am convinced that the wording of this bill is rather disrespectful towards any minister of finance and I am sure that the hon. member for Chicoutimi did not intend, for nothing in the world, to show disrespect towards authority.
In my opinion, this wording is ambiguous and confusing and, for that reason I will not accept the bill as worded.
However, Mr. Speaker, I wish to point out that the idea embodied in this proposed amendment is excellent. The bill goes on to say:
-which might deceive the public as to the true nature thereof, or of the obligations incurred by the bank in issuing them and all notes shall be printed in both the English and the French language.
The intent is quite generous; in fact, it is in accordance with the policy of the present government which has become the great advocate of bilingualism and biculturalism throughout Canada. Indeed, I should like to point out to the hon. member for Chicoutimi that it was under a Liberal administration, that of Mackenzie King, that currency became truly bilingual-


Louis-Joseph Pigeon: No.


Auguste Choquette: I see the hon. member for Joliette-L'Assomption-Montcalm (Mr. Pigeon) getting up. We will again have droppings from the pigeon. I wish to prevent him from rising on a point of order, because he is going to say that it is Bennett who approved the principle of bilingual currency. Yet, it was Mackenzie King who gave us bilingual bank notes. Under Bennett, there were two kinds of currency, one English and one French, which was more or less a hiatus. But Mackenzie King rectified the situation, so that we have a currency which is truly and essentially bilingual.


Louis-Joseph Pigeon: It is the principle which was hard to get accepted.


Auguste Choquette: Especially when you are a Conservative and an imperialist, the application is difficult, Mr. Speaker. What I want-


Louis-Joseph Pigeon: Mr. Speaker, I rise on a question of privilege.


Mr. Speaker:: Order.
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Louis-Joseph Pigeon: The Bennett government accepted the principle of bilingualism for our currency. Once bilingualism is accepted in principle, it is easy to apply.


Auguste Choquette: Mr. Speaker, I should like to go on with my observations, since I only have a few minutes left. I wish to draw the attention of the house to the fact that we are now intensively considering the matter of a distinctive Canadian flag and I think the great majority of the Canadian people agree-


Louis-Philippe-Antoine Bélanger: Mr. Speaker, 1 rise on a point of order.


Mr. Speaker:: Order.


Auguste Choquette: -on money-


Mr. Speaker:: Order. Is the hon. member for Charlevoix rising on a question of privilege or on a point of order?


Louis-Philippe-Antoine Bélanger: I rise on a point of order, Mr. Speaker. I wish to point out that the hon. member for Lotbiniere is now discussing the matter of a national flag which is in no way related to the subject now under consideration.


Louis-Joseph Pigeon: He is often off the track.


Auguste Choquette: I am simply making a comparison. I am coming back to money. I do not want to hurt anyone's feelings. 1 respect traditions, whether they come from our English speaking or our French speaking friends. On the other hand, I have always had the deep conviction that, living in Canada, we want to be Canadians everywhere, in practice as well as in theory. That is why I think that with regard to our Canadian money, another form of bank notes could be found, according to the principle stated by the hon. member for Chicoutimi, and without offending Her Majesty. Why should we not have money that is fundamentally Canadian in substance and form? That is what I wanted to say in the debate on that very interesting bill, to which I cannot agree, however, because of its crushing phraseology.


Mr. J. E. Lloyd (Halifax):: Mr. Speaker, I think it is appropriate for a member to draw attention to the wording of Canada's currency as issued by the Bank of Canada.


Stanley Howard Knowles: Will you table that?


John Edward Lloyd: There is no question whatsoever that the particular wording is in need of revision. Indeed, the royal commission on banking and finance says so.
Because of the time factor I should like to explain why I think this bill should not pass. It refers to amending section 21 of the Bank of Canada Act, whereas at page 556 of the

Income Tax Act
report of the royal commission on banking and finance we find these words:
There are a number of points in the Bank of Canada Act which call for amendment besides those noted earlier in this chapter. For example, sections 22 and 23, which provide for the redemption of Bank of Canada notes in gold and the maintenance of a gold ratio, have both been suspended for many years and should be removed from the act.


Mr. Deputy Speaker:: Order. I regret to interrupt the hon. member but the hour appointed for the consideration of private members' business has now expired.



BUSINESS OF THE HOUSE

Mr. Deputy Speaker:: It is my duty, pursuant to provisional standing order 39A, to inform the house that the questions to be raised at ten o'clock this day are as follows:

The hon. member for Lotbiniere: impending closing down of radar stations.
The hon. member for Nicolet-Yamaska: request made by the cheesemakers of central Quebec.

The hon. member for Parry Sound-Mus-koka, action taken by the government to deal with the increase in the cost of living.
The house will now resume the business which was interrupted at five o'clock.



INCOME TAX ACT

[Stage Direction]
The house resumed consideration in committee of Bill No. C-91, to amend the Income Tax Act-Mr. Gordon-Mr. Lamoureux in the chair.
Lucien Lamoureux: It being six o'clock I do now leave the chair.
At six o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 8 p.m.
Lucien Lamoureux: Order. When the committee adjourned at five o'clock we were considering clause 19.


Walter Lockhart Gordon: Mr. Chairman, I have had an opportunity during the recess to consult with the law clerk about the very interesting point that the hon. member for Pontiac-Temiscamingue raised concerning the differences between the English and French texts. The law clerk agrees that there was an error in the translation and if the committee will agree he will undertake to see that this is corrected before the bill is reprinted for
IMr. Lloyd.]
third reading. I think that might be a satisfactory way to deal with it.


Paul Raymond Martineau: I think that the suggestion made by the minister is quite acceptable.


Lucien Lamoureux: Is that agreed?


Some hon. Members:: Agreed.


Lucien Lamoureux: Shall clause 19 carry?


Paul Raymond Martineau: Mr. Chairman, with respect to clause 19 the minister said this afternoon that the reason why part IID of the act is being repealed is that the situation in the United States has changed because of the tax reduction assented to by the United States congress which will come into effect on the 1st of January next. I was a bit perturbed about the line of reasoning of the minister because I think it is dealing rather loosely with the situation when legislation adopted by this parliament depends on legislation being adopted in another jurisdiction, which legislation, of course, is subject to change without notice.
I do not understand how the minister can use the excuse of a tax reduction in the United States to justify his retreat from the withholding tax provision. Last year he increased the withholding tax from 15 per cent to 20 per cent for those corporations not meeting the minimum requirement of Canadian participation or equity ownership. That same situation exists today. If the minister still wishes to encourage greater Canadian participation, and he still does according to what he says, I do not know how he can hinge that objective upon the fact that lower taxes are being paid by United States corporations. I think the real reason for his dropping the provision, and he was well advised to do so, was simply that he found it was unworkable in every way. It was a provision that had not been thought out at all.
He mentioned carrots and sticks before supper. In the minister's heyday, when he was just assuming the responsibility which he now exercises with considerably greater sober second thought, he thought that by waving a big stick at the United States they would dutifully respond to his desires and give equivalent tax concessions. But things have not worked out that way and today we seem to have to depend on what is being done south of the border to know what sort of imposition we will adopt here.
Already thoughtful people have pointed to the real danger lurking in such an attitude, and which can only defeat the minister's own objectives. Perhaps the minister has already read the article by Peter Newman, who I understand is a good friend of those on that side of the house, in MacLean's of May 16, 1964. Mr. Newman had this to say:

During a Commons question period last summer, opposition leader John Diefenbaker thundered that as a result of the events of July 18-21-
Which he described as the great money panic and which, incidentally, was provoked in part by the action taken by the minister himself in his budget of June 13 last year.
-the U.S. "now has a veto with regard to the expansion of Canada's economy, which is something not in keeping with the sovereignty of this nation."
He went on to say that this certainly could well be the fact. If so it has sprung in no small way from the unconsidered action of the minister in shaking the big stick.


Walter Lockhart Gordon: I wonder whether the hon. member would permit me to say something. I am sure he would not want to give an incorrect impression. He must know that the secretary of the treasury of the United States made it very clear on more than one occasion that the announcement of the proposed equalization tax had nothing to do with anything that the Canadian government might or might not have done.


Paul Raymond Martineau: The secretary of the treasury was certainly perfectly right in saying what he wanted to say, just as we are also perfectly within our rights in interpreting events, both national and international, according to the way in which we see them.
There remains the fact that the President of the United States has the right to exempt new Canadian securities from the application of the equalization of interest act. However, the act does not say he has to do so. The health of Canadian money markets will depend greatly on how he exercises this power. Certainly, in my opinion, Mr. Chairman, this is a very disturbing situation.
Here we have the minister backing up from a provision which was considered in his judgment to be one of the major elements of his program to win back for Canada ownership of its own industry, a provision which was introduced with a great deal of fanfare last year. This is bad enough, Mr. Chairman, but the minister goes further and attempts to justify that withdrawal by stating that events in the United States, which are completely beyond his control, led him to adopt this attitude. I am asking the minister, will we have to change our fiscal policy every time the United States government adopts a certain policy? I should like the minister to come out very frankly and tell us, if such is the case, that this withholding tax has proven to be impractical and has been withdrawn for that reason.
We can understand this because, from the outset, we urged the government to abandon the policy. During the short time this tax 20220-213J
Income Tax Act
was in force, I should like the minister to tell us exactly how it worked, and whether the minister's officials were able to administer that tax. These are the basic factors in an examination of the clause to which we are directing our attention.


Walter Lockhart Gordon: I think my hon. friend is overlooking one or two points. In the first place, the tax to which he refers does not come into effect until January 1, 1965, which is still some time ahead, so that the department had no difficulty in administering it. I think perhaps that is the simple way to explain the difficulty my hon. friend seems to have been up against.


Paul Raymond Martineau: Surely the officials of the department must have made some provision for the administration of the tax. They must have received inquiries from Canadian subsidiaries, and that would certainly be an administrative matter.


Walter Lockhart Gordon: The tax would have been administered very simply and very easily. Instead of deducting 15 per cent as a withholding tax, there would have been a deduction of 20 per cent.


Jay Waldo Monteith: And we would not have had a recriminatory withholding tax of 30 per cent imposed by the United States?


Walter Lockhart Gordon: My hon. friend is thinking in terms of the treaty which, under certain circumstances, would have lapsed, and in which case we would have had a new set of circumstances. We are getting hypothetical.


Paul Raymond Martineau: May I ask the minister if, in his negotiations at Washington to which he went in such haste when the equalization of interest act was introduced, there was any mention of this withholding tax? Was any agreement made to exempt Canada on the say so of the president, provided we took certain actions regarding the withholding tax?


Walter Lockhart Gordon: No, there was no discussion at that time at all and no conditions were made. I think it became clear to the United States authorities that they had overlooked the effect their rather startling action would have on money markets in Canada. I believe that they were probably as upset- perhaps "shocked" would not be too strong a word-as we were to learn that within 24 hours of the announcement of the proposed tax, which incidentally has not yet become law and which some people believe never will become law, there was a greater withdrawal from the Canadian foreign exchange reserve than in any similar period, even during the difficult days of the spring of 1962.

Income Tax Act


Paul Raymond Martineau: Would the minister have preferred to have an exemption clause as part of the act rather than have it left to the discretion of the United States president?


Lucien Lamoureux: Shall clause 19 carry?


Paul Raymond Martineau: I have asked the minister a question.


Gilles Grégoire: Mr. Chairman, I would have a few questions to ask on clause 20.


Lucien Lamoureux: I am sorry, but we still are on clause 19.


Paul Raymond Martineau: I think the minister wanted to give an answer.


Walter Lockhart Gordon: I was asked about certain negotiations in July, 1963 with the secretary of the treasury respecting the proposed interest equalization tax. I have answered my hon. friend's question, that the question of the Canadian withholding tax, to my knowledge, did not come up at the time. He then asked whether Canada would have preferred complete exemption from the proposed interest equalization tax, rather than leaving the question to the discretion of the President. Of course, we would have preferred it. Here, we were confronted with a situation, as was the United States treasury, where a detailed proposal had been made to congress that a bill should be passed along certain lines. The secretary of the treasury, Mr. Dillon, after consultation with the President, decided that the best thing they could do over that week end, a very difficult week end, would be to say that they would recommend this exemption for Canada within the discretion of the President. It seemed to us at the time that since that was as far as they thought they could go, that would allay the fears in Canadian financial markets. Of course, when the announcement was made, those fears were allayed and Canadian markets have progressed to greater heights.
I can assure my hon. friend that, to my knowledge, there has seldom been more confidence in Canadian markets than there is at the present time. I am sure he will be delighted with this.


Paul Raymond Martineau: I thank the minister for his information. I understand that in the haste of that memorable week end, that was all the Canadian government could obtain in the way of concessions. I wonder if since that time there have been further attempts made to have the exemption form part of the act?


Walter Lockhart Gordon: I do not know whether I can usefully pursue this line of questioning much

farther, Mr. Chairman. Obviously, as my hon. friend knows, the Canadian government, particularly myself as Minister of Finance, are in touch with the United States treasury officials. My great concern at the moment is to find out what is going to happen to this proposed interest equalization tax. I have been trying to find out, ever since it was first announced, when, if ever, it is going to be passed, so we will know where we stand and Canada will not be up against the uncertainties with which we have been living for the last nine months.


Jay Waldo Monteith: Ever since June, 1963.


Walter Lockhart Gordon: Oh, I would not go back that far; just nine months. In another field, of course, at the end of that period of time there is usually a solution of one kind or another. But we are still faced with a situation where we do not know whether this proposed tax will be passed by the United States senate before it adjourns for the elections that will be held some time next fall.
When I last spoke to him about two or three weeks ago, the secretary of the treasury was confident that this proposed tax would be dealt with by the senate before it adjourned in July. I cannot say anything more about it. I would remind my hon. friend that this particular clause 19 merely deals with the rescinding of a tax that has never been applied, and that becomes unnecessary because of the reduction in the rate of withholding tax that otherwise would have been increased next January.


Gilles Grégoire: Mr. Chairman-


George Clyde Nowlan: Could I ask the minister this-


Lucien Lamoureux: Order, please. [Translation]
Order. Is the hon. member rising to deal with clause 19?


Gilles Grégoire: Yes, Mr. Chairman, that is with both clause 19 and clause 20, since there is surely an indirect connection between the two.
I merely wish to ask the Minister of Finance a question concerning the special taxes on profits and dividends of non-residents which were decreed during the last year, to encourage Canadians to invest more and more in order to take over part of their economy, or a percentage at least of the shares of companies established in Canada. Could the minister tell us if, in addition to the special tax imposed to achieve his objective, he took other steps to have Canadian investments replace

the American investments which were being indirectly discouraged by special taxes for non-residents?


Lucien Lamoureux: The minister may want to reply to this question, but it seems to me it goes beyond the scope of clause 19 which, as was pointed out a moment ago, deals exclusively with the rescinding of a specific tax which actually was never applied.


Gilles Grégoire: Mr. Chairman, with regard to that clause or the other one, there is a very close relationship between the two, since they both deal with special taxes applied to non-residents, and I am of the opinion that the answer can be given with regard to one clause or the other, in view of the fact that I informed the minister that it was related to clauses 19 and 20 both. Therefore, the answer can be more elaborate.
But, in any case, I am ready to wait until the next clause to get an answer from the minister, although I think it is not in order.


Lucien Lamoureux: I think it would be better to wait until we are dealing with clause 20 before the minister answers.


[Stage Direction]
Clause agreed to.
On clause 20.
Walter Lockhart Gordon: I shall be glad to answer my hon. friend on that. In the first place I should explain that if a withholding tax is levied on dividends payable by a Canadian company to a United States parent company, a large proportion of the withholding tax, or at least a substantial proportion, is allowed as a deduction from the taxes payable by the United States parent to the United States treasury.
While the amounts vary considerably, depending on the total amount of profit earned by the United States parent, and the total amount earned by the Canadian company, and whether the United States parent has other overseas subsidiaries in other countries, and with the amount of taxes payable by them. It is a fair generalization, however, to say that a withholding tax at the rate of 15 per cent has about the same net effect, when the top United States corporation income tax is about 48 per cent, as would a Canadian withholding tax of 20 per cent when the top United States rate is 52 per cent.
There are some minor variations, but that is essentially it. Therefore when the United States congress-as I explained in the budget speech-reduced their rates of tax, effective
Income Tax Act
for 1964 and 1965, we concluded that the effect we had wished to achieve would be achieved with a 15 per cent Canadian tax, once the United States rate becomes 48 per cent, which will be on January 1, 1965, it would have about the same effect as would a 20 per cent tax in Canada when the United States rate was considerably higher.


Gilles Grégoire: Another question, Mr. Chairman, to obtain further particulars.
The Minister of Finance can perhaps try to make us believe that a 15 per cent tax is equal to a 20 per cent tax, but there is just the same a mathematical factor involved and 15 per cent is less than 20 per cent, since there is a difference of 5 per cent.
And now, Mr. Chairman, I would like to know if, while reducing by 5 per cent the tax levied on non-residents last year, the Minister of Finance is taking at the same time some measures which would enable Canadians to regain control of their economy, of their industries, of their manufactures and of their natural resources to a greater extent than at the present time?
I therefore ask the Minister of Finance whether he can tell us what are those measures taken by his department to compensate for the tax reductions appearing in his budget this year.


Walter Lockhart Gordon: I think we may be straying a little off the subject but, as I said in the budget speech, the government intends to introduce amendments to the Insurance Companies Act, designed to encourage those great accumulators of the savings of the Canadian people to place a greater proportion of those accumulations into investments in the equities and natural resources of the country.
I have been working with my officials on the form of these amendments which will be presented in due course and, while it would be improper for me to indicate in advance what the proposed changes will be, I thinir they will have the effect that I have indicated, over a period of years.
I might say that since beginning to work on this, the royal commission on banking and finance has brought down its report, and has supported the views of the government that the present restrictions on the kind of investments that insurance companies may make should be eased. That will be done when the amendments to the act are presented to the house.


Gilles Grégoire: Mr. Chairman, I have another question for the Minister of Finance. Does he intend to consider the advisability of having

Income Tax Act
the Bank of Canada finance the constant deficits of the Canadian government, so that they would no longer he financed by the investments of the Canadian people? It is a known fact, at the present time, that the government issues bonds or obtains loans to finance its deficits and that the savings of Canadians are directed towards the national debt, whereas they would serve a much better purpose if used for the expansion of the country and the development of industries, so that the aim-


Lucien Lamoureux: Order. I regret to interrupt the hon. member, but it seems to me that in discussing the matter of deficits and of the Bank of Canada, he is straying to a certain extent from the section now under study.


Gilles Grégoire: Think about it, Mr. Chairman, and you will realize that I am not getting away from the clause under consideration. In this section, we are asked to reduce from 20 to 15 per cent the special tax on non-resident which was levied specifically to give an advantage to Canadians who wish to invest their savings. The Minister of Finance now wishes to repeal that tax and we are at present discussing the provisions which will replace it.
I feel my remarks are quite relevant, Mr. Chairman; perhaps they may seem out of order to a layman or to one who is not too familiar with the question, but the idea expressed is quite relevant.
As the Minister of Finance stated a while ago, the purpose of the tax established last year was to help Canadians achieve greater control of their economy. Now, this year, hardly a year later, the Minister of Finance makes amendments.
We wish to suggest to the Minister of Finance some systems, means and solutions in order to enable Canadians to obtain exactly what was anticipated by the objective set by the Minister of Finance last year, from which he is retreating this year.
That is why I am asking the Minister of Finance whether, in order to enable Canadians to regain control of their economy, to do what he himself proposed last year through the levying of a new special tax, he intends to facilitate for Canadians the taking over of their economy by directing their savings and investments toward industry and the development of the country's economy and balancing the deficits of the federal government through the Bank of Canada rather than through the savings and investments of Canadians, thus enabling them to get back control of their economy, such objective having been set last year by the Minister of Finance himself.


Lucien Lamoureux: Order. I wish to point out to my hon. friend from Lapointe that even if
[Mr. Grdgoire.l
I am only a humble layman, I listened to him with attention and I consider, despite the observations he made, that what he has said during these last few minutes refers the effects of the tax under discussion but is not directly related to the tax itself.
On the other hand, if the Minister of Finance wishes to make a brief answer to the argument presented, I am sure the committee will agree.


Some hon. Members:: Agreed.


Lucien Lamoureux: Shall the clause carry?


[Stage Direction]
Clause agreed to.
On clause 21-Tax non-payable by nonresident person.
Gilles Grégoire: Since the Minister of Finance did not want to answer my question concerning the non-resident special tax, I must conclude that on the matter of the nonresident special tax he is retreating, and he is not bringing any solution to the existing situation: he is retreating on this point and has no solution to offer so as to place the economy under Canadian control.
I believe that the silence of the minister in this respect is most significant.


[Stage Direction]
Clause agreed to.
Clauses 22 and 23 agreed to.
On clause 24-Child qualified [or family allowance.
Walter Lockhart Gordon: On this clause, clause 24, I shall ask my colleague the President of the Privy Council to move, seconded by the Solicitor General:
That the said bill be further amended by striking out subclause (1) of clause 24, by renumbering subclause (2) of clause 24 as subclause (1) thereof, and by striking out subclause (3) of clause 24 and substituting therefor the following subclause :
(2) This section is applicable to the 1964 and subsequent taxation years.


Mr. Mcllraith:: I so move.


[Stage Direction]
Amendment agreed to.
Clause as amended agreed to.
On clause 25.
George Clyde Nowlan: This clause is so long as to be unspeakable. There is nothing one can say about it except to point out that it covers pages 19, 20, 21, 22, 23, and 24 of the bill and continues halfway down page 25. All the lawyers and all the accountants are looking forward to the enactment of this clause with the highest degree of anticipation because,

this time, the minister has done the reverse of what he usually does; instead of relying upon a general amendment he has become so specific that he has provided holes wide enough to drive a good many horses through. We could spend a whole evening on this clause but I do not think that would be advisable. It is something the courts will have to interpret. I think, frankly, that the clause is altogether too long; that it goes into altogether too much detail, and that it is likely to necessitate a good deal of interpretation by the courts. This, after all, is the policy of the government, and I simply say in passing that I do not think this clause is in keeping with the practice which should be followed by parliament. However, the minister is putting it forward and I do not intend to spend any more time in the committee tonight dealing with it.


Norman Platt Lambert: As my hon. friend from Digby-Annapolis-Kings has just said, this clause is an extremely long one. Frankly it amounts to locking a number of doors after so many horses have been stolen. I am concerned because, the ingenuity of man being what it is, by next year we may be faced with a similar problem.
The minister is trying to block certain loopholes in connection with the concept of Canadian ownership put forward in accordance with what I felt last year was a somewhat dubious plan fraught with all kinds of difficulties. One can readily understand what the hon. gentleman is trying to do. What we should do, I suppose, is ask the minister to explain this clause carefully to us-and I am sure it would take him half an hour to do so. However, since there are so many matters which should be dealt with, I shall limit my questions to subclause 4 and when we get to that subclause I will ask my questions.


Lucien Lamoureux: Is there any discussion on subclause 1?


Gilles Grégoire: Mr. Chairman, following the remark of the hon. member for Digby-Annap-olis-Kings (Mr. Nowlan), I think I should also like to mention that this clause 25 contains a sentence worth pointing out. This sentence, which begins on page 19, fills all of page 20 and ends at the bottom of page 21.
The Americans may detain some world records, but to our Minister of Finance (Mr. Gordon) goes the honour of having made the longest sentence in the world, filling two pages and a half without a single full stop.
I believe that this is a thing worth stopping for, and commending the Minister of Finance and his experts. I think that to build up a sentence two pages and a half long without
Income Tax Act
a single period, needs men of genius, men of talent, experts in the art of syntax, and more particularly in the art of confusing others.
This is not the first time that we blame the Department of Finance for its somewhat overpowering phraseology. I admit that the Minister of Finance is not here to write poems or novels, but this is certainly worthy of the stream-novel, when there are sentences two and a half pages long.
I wonder whether the Minister of Finance -he was asked to do so last year, and we are asking him again this year-whether in future he might not ask his experts, writers or legislators to try expressing themselves in normal, more simple sentences and not to consider the taxpayer a mere nonentity, in brief not to write legislative texts only for the legislator himself, leaving the taxpayer entirely out of the picture, since he will never understand anyway.
Imagine the companies which will have to pay accountants or lawyers to interpret this sentence two and a half pages long. I think the minister should look after that.
That sentence contains many sections and subsections. The Minister of Finance should at least try to insert a period at the end of each section or subsection. It would then be easier ^ to understand. The more so that we sometimes receive from departmental officials letters concerning income tax and referring to section 1, subsection 2 of paragraph (a) of subparagraph I.
Then, part of the sentence is missing. Suppose paragraph A is missing, and we do not have the other part of the sentence. Mr. Chairman, I do not think I have to insist on that. I think the Minister of Finance should realize that it does not make sense to have such long sentences and that the wording used should be Improved in order that the act may be better understood, since the taxpayers have a hard enough time as it is to understand it. Those who draw up the bills should be reminded to write sentences in such a way that legal texts may be understood, and not to write such incomprehensible sentences.


Walter Lockhart Gordon: Mr. Chairman, I think my hon. friend paid me a compliment for this effort in the art of long sentences and fooling others. Coming from my hon. friend, I recognize this comes from an expert-


Some hon. Members:: Oh, oh.


Walter Lockhart Gordon: -and I thank him for his intended compliment. He asked me a few minutes ago, on another clause, whether the government had in mind doing anything to

Income Tax Act
encourage Canadians to acquire a greater interest in the resources and the companies of our country. While I am sure he would not expect me to give him a detailed reply on all the things that are being done in this field, I can assure him that this is very much in the mind of the government. When this new piece of legislation was introduced last year-it was not passed until December 4 or 5, if I recall correctly-the government invited the lawyers and the accountants who practise in the tax field to assist, with their suggestions, the staffs of the departments of finance, justice and national revenue in making sure that certain loopholes which had developed, and which could not have been foreseen, I would suggest, would be dealt with in an amendment as soon as possible.
The amendments in this clause which my hon. friend questions on the ground that they are very complicated-and they are-are the result not only of the deliberations of the staffs of the government's own departments, but also of the suggestions made by many, many tax practitioners. The government is in considerable debt to these gentlemen for the way in which they tackled this very difficult problem and for coming forward with suggestions for closing these loopholes. I do not pretend to be, and I know my hon. friend does not believe that I am, the draftsman of this legislation. I think it would be wrong for any minister to try and draft his own legislation. I think it is up to me, as the Minister of Finance, to ask the officials of the government, coupled with any other help I can get, to see that the section is drafted so that people cannot get around it.
While I am not suggesting for a minute that this provision is absolutely foolproof, I do suggest that to my best knowledge quite a considerable number of people who practise in this field feel it will now do the job that we want it to do. While I agree that it is very complex legislation, I would remind my hon. friend that this is not one of those sections in which the ordinary member of the public has any great interest. Corporate finance and corporate organization nowadays is getting more and more complex, and understandably, and necessarily I suppose, any tax laws that one wants to be foolproof are necessarily rather complex too. This clause will be used, or noticed, by a relatively few people in this country-the skilled tax practitioners. They are the ones who will be using this clause; they will be the ones who I hope will be advising their clients that this is the kind of legislation that they cannot get around.
I would like to take this opportunity to say that the intention of this clause, complicated though it is, is to prevent companies

controlled outside of Canada from receiving very substantial benefits indeed unless they comply with certain conditions, and one of the conditions is that they make at least 25 per cent of their equity stock available to Canadians.
Subclause 1 agreed to.
Subclauses 2 and 3 agreed to.
On subclause 4.


Norman Platt Lambert: Mr. Chairman, the hon. member for Perth and I are intrigued with subclause 4 as to why, in line 45, the figure 8 per cent is used. We are wondering whether this is an arbitrary figure, or what is the explanation for the use of 8 per cent? On page 24, line 8, the figure 10 per cent is used.
I note that there is a classification of interest here, but why these two figures?


Walter Lockhart Gordon: Mr. Chairman, I can assure my hon. friend that I am delighted if at any time I can intrigue him and my hon. friend the member for Perth. This has made my evening. As to the questions, certainly these amounts are arbitrary. The figure of 8 per cent which was used in the first place was relatively high; I cannot think of many rates on a preferred share in excess of 8 per cent. With regard to the other example put by my hon. friend, this is the percentage which would apply in the form of a premium on a winding up, and I think there are examples where it could go to 10 per cent. Perhaps some would go higher, but I think they should be excluded.


Lucien Lamoureux: We will now go to subclause 5.


Mr. Thomas:: Mr. Chairman, with regard to the 8 and 10 per cent, what relation have these figures, if any, to the 10 per cent mentioned under (B) near the top of page 24? That is the 10 per cent; I follow. Then 8 per cent is mentioned again on page 25 under (A) and (B).


Walter Lockhart Gordon: That is the same. It is the highest rate which would be allowed on a preferred dividend.


Lucien Lamoureux: Shall we go to subclause 6?


Some hon. Members:: Carried.


Lucien Lamoureux: Subclause 7?


Some hon. Members:: Carried.


Lucien Lamoureux: Subclause 8?


Stanley Howard Knowles: Mr. Chairman, because this is the last subclause in the bill I wonder whether the minister, either now, on the title or on third reading, would answer the question I put to him when we were on second reading. He will recall that I asked

him what had become of his consideration of the proposal to extend the provision regarding trade union dues.


Walter Lockhart Gordon: Mr. Chairman, I did answer that question the other day. I said that I had been impressed last year and again this year during discussion of these income tax bills by the points raised by hon. members with regard to permitting deductions for logging equipment, some forms of farm equipment, such items as union dues and other expenses from income before arriving at the income which was subject to tax. I said that I felt that unless a complete examination were made of the whole problem, including all the different items of expenditure which should be considered in any serious examination of this question. I was afraid that if we dealt with one item, such as union dues, or one of the other items which other hon. members have mentioned, such as the cost of logging equipment or, in the case of a university professor, the cost of books, we would end up finding that we had done a rather cursory job. Therefore I felt that before recommending what should be done in this whole field I should like the benefit of the research which has been going on for the past two years under the auspices of the royal commission on taxation. For that reason I was not prepared to recommend a change at this time.


Stanley Howard Knowles: Then we might hope for something next year.


Gilles Grégoire: Mr. Chairman, before completing third reading of this bill, I would like to ask the Minister of Finance if he would see to it that the Income Tax Act, like any other legislation, be applied as such, and not according to the good pleasure or the will of some income tax inspectors who violate the law as voted by this house and as proposed by the Minister of Finance.


Walter Lockhart Gordon: Mr. Chairman, I cannot accept the allegation which has just been made by my hon. friend. I think that anyone who has anything to do with the Canadian civil service would not believe that the assessors of the income tax department would administer the law on the basis of caprice. It is a very difficult act to administer. I think all of the officials of the Department of National Revenue and the minister do their very best to apply the act fairly. I think that if the hon. member has anything further to say on this subject he might better raise it when the estimates of the Department of National Revenue are under review.
Bank Act


Gilles Grégoire: I merely want to refer to a comment the minister just made. He said the act was a very difficult one to administer. Then, since we are dealing with Bill No. C-91, to amend the Income Tax Act, why does the minister not consider this to be the proper time to make it easier for those who have to look after the administration of this Income Tax Act, so that the tax inspectors-and I am not talking about the civil service as a whole, as the Minister of Finance would have us believe-who do as they please (and I challenge even the minister to investigate) could have their task made easier?
It may well be that the act is difficult to administer, but then it is up to the minister to make an effort to have the act amended so it could be made easier to administer, and thereby prevent the officials responsible for its administration from being able to act to the prejudice of the people rather than to the satisfaction of the Canadian people who, in the end, are paying the taxes and suffering the vexations of the income tax. Maybe the act was poorly prepared. All the minister has to do, then, is to amend the act to eliminate those vexations suffered by the people.


[Stage Direction]
Clause agreed to.
Title agreed to.
Bill reported.
Mr. Deputy Speaker:: When shall the said bill be read a third time? Now, by leave?


George Clyde Nowlan: Mr. Speaker, I had understood that there was some discussion this afternoon vis-a-vis some difference between the English and French translations, and I thought that was to be reconciled on third reading of the
bin.


Mr. Deputy Speaker:: Next sitting of the house? Agreed.



BANK ACT-QUEBEC SAVINGS BANKS ACT EXTENSION FOR ONE YEAR OF AUTHORITY TO CARRY ON BUSINESS

Walter Lockhart Gordon: that the house go into committee to consider the following resolution: That it is expedient to introduce a measure to amend the Bank Act and the Quebec Savings Banks Act to extend by one year the authority to carry on business for the banks to which these acts apply.
Motion agreed to and the house went into committee, Mr. Lamoureux in the chair.


Walter Lockhart Gordon: Mr. Chairman, I do not need to remind hon. members of the importance of

Bank Act
the decennial revision of the Bank Act and the Quebec Savings Banks Act. This provides members of parliament with an opportunity to review the whole financial machinery and structure of the country. It is one of the very important tasks which we face and which we are preparing to deal with.
As I have stated on another occasion, the government did not believe it would make sense or be helpful to consider the revisions of these two acts prior to the publication of the report of the royal commission on banking and finance which has been studying for the past two years the financial machinery of Canada, its workings, its strengths and its weaknesses. The report of that commission was published on April 24. It is detailed and lengthy and its recommendations cover a wide field and go to the very heart of the financial system of the country.


Mr. Fisher:: Do you mean it is pretty good?


Walter Lockhart Gordon: The hon. member is trying to hurry me.


Stanley Howard Knowles: He has written a column about it.


Walter Lockhart Gordon: He may have written a column about it but I cannot help him with his moonlighting operations on a matter of this importance.


Douglas Mason Fisher: You already have.


Walter Lockhart Gordon: A report of the very great importance of this royal commission requires a great deal of careful study and thought on the part of the government and, indeed, on the part of all hon. members. Undoubtedly the government will be receiving representations from interested parties respecting the recommendations of the commission. But apart from that the government itself is giving the most careful consideration to the recommendations. We have already begun to hold meetings preparatory to reaching conclusions as to the kind of revisions that the government will wish to introduce. Much work has already been done in the Department of Finance and this will proceed during the summer months. Following this the government will be in a position to determine the kind of revisions to the Bank Act and the Quebec Savings Banks Act it wishes to present to parliament.
I am hoping these revisions can be made in time to be incorporated in bills which would be presented to the house some time next fall. I would hope and expect that the bills would be referred to the banking and commerce committee. If this course is adopted the banking and commerce committee will be in a position to hear witnesses and to

consider the proposed bills in detail. I would hope that following such public hearings the bills would be referred back to the house and passed by parliament at its next session.
There will, of course, be ample opportunities, when the resolutions preparatory to the revision of these two acts are introduced, in the committee and after the committee makes its report, for hon. members to express their views upon the adequacy or otherwise of our banking system and ways in which in their opinion it may be improved to meet the needs of the Canadian people. If I may say so, I think it would be premature to embark on that kind of discussion until we have had the opportunity to study the royal commission report and until the necessary work has been done. In the meantime the banking business of the country must be continued.
It is therefore suggested that the Bank Act and the Quebec Savings Banks Act be amended to extend by one year the authority to carry on the business of the banks to which these acts apply. That is the whole purpose of this resolution. Without such an extension, of course, the chartered banks and the Quebec savings banks would have to cease operations by July 1 of this year. As I say, the extension proposed is for one year only.
I could go on to mention that there are precedents for this kind of action, the extension of the provisions of these two acts for a period of a year. This was done in 1911, 1912 and 1933 and there was another extension of three months, I think, in 1944. I think that is all I need to say, Mr. Chairman. It is a very simple resolution. The purpose is merely to extend these acts for one year from July 1, 1964.


George Clyde Nowlan: Mr. Chairman, I know the committee has listened with interest to the statement of the Minister of Finance, and I can say that in so far as we in the opposition are concerned we are in entire agreement with him that some such action must be taken. Otherwise the banks would all have to cease operations on July 1, and that might be a matter of inconvenience to some hon. members at least and to a great many other people in the country as well.
We have a decennial revision of the Bank Act, but on this occasion a royal commission was appointed to consider the banking and financial problems of the country generally. That commission reported only a few weeks ago. I think it has made a very exhaustive study of the financial problems confronting this nation. Frankly I am not in a position, and I doubt that anybody else is, to comment on its recommendations at the moment. Those of us who have seen the report know that it is a very heavy legal tome of about 500

pages and that it requires a great deal of study. Obviously this could not be done in time for parliament to deal adequately with all the problems between now and July 1.
Therefore I think it is perfectly satisfactory that this resolution should be adopted and that a year's extension should be given. As the minister said, possibly by next fall we can enact the necessary legislation. Quite properly he is allowing some cushion there for discussion and debate, so that we have a year in which this matter can be dealt with by parliament. After all, the Macmillan commission in the early 30's was the last one to make a really thorough and intensive study of the problems of the banks of this country, and it is high time that we gave careful consideration to their problems again. This is what is proposed by the minister, and as far as we in the opposition are concerned we approve entirely of the procedure he has set forth.


Mr. Cameron (Nanaimo-Cowichan-The Islands):: Mr. Chairman, we in this party also heartily approve of the action of the minister in extending the time, because it is obviously necessary that it should be done. In considering the decennial revisions of the Bank Act it is interesting, as one looks back, to note the differing themes of each decennial revision indicating each time, I think, an increase in the knowledge of the operations of our monetary and banking system, and it is perhaps to be hoped that we shall also improve our knowledge this time. On the occasion when I had the privilege of taking part in the revision of the Bank Act some 10 years ago the proceedings almost took the form of a seminar in monetary and banking matters, which I know was extremely educative to me and I think to many other members of the committee. I am hoping it will be that way again.
There are some questions I would have liked to ask the minister. There are three bank charters that either have been before one section of parliament or are on the way, we are told, and I wonder whether the government has considered not granting any new charters until the decennial revision is completed. There are some very interesting developments there which will bear watching. There is the question of the position of a provincial government with regard to banking. I, myself, think it is rather a good development. My only misgiving is that it comes from my own province and I have some doubts about the personalities that will be involved.
I suspect that this type of decentralized banking, if it is agreed to by the government, will not stop with the province of British
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Columbia. It may well be that if it is established on a sound basis, and if these banks are supervised as carefully as the present chartered banks are by the inspectorate, they may very well make a great contribution to the country at this time. They may perhaps help to solve some of the financial problems that provincial governments have today, because they are struggling to get a larger share of the tax revenues, as we heard this afternoon. They will at least have this effect, that the deposits made by the citizens of the various provinces, particularly the western provinces, will then be available as a basis for extending credit for economic development in those provinces rather than, as has been the case, forming the basis for extending credit in the highly industrialized central part of Canada. This, I think, is a very useful role for them to play. It would be interesting to know whether the government is going to put all these applications on ice until the revision has taken place or whether they will consider going ahead with granting the new charters.
There are two other new charters for which application will be made. One is a private group seeking a bank charter in western Canada. The other is a strange application to transfer a small loan company into a chartered bank, or at least have it associated with a chartered bank. This is a proposition I find very intriguing, and I should like to know just what is behind it.
In so far as the Porter commission report is concerned I, like every member of the house, glanced at that heavy tome and staggered back, and have only been able to deal with a very small portion of it. I have come across some rather disturbing suggestions which I hope the minister will view with some alarm and misgiving, such as taking the lid off interest rates on bank loans and the suggestion that trust companies and other financial institutions that do not now enjoy the privileges of chartered banks be accorded bank status. This seems to be, in effect, the recommendation. Perhaps this might be a little confusing, and I hope these suggestions would receive very serious consideration before being accepted by the government of the day.
I believe that is all I have to say at this time, Mr. Chairman, on this extension of the time limit for chartered banks and for the bank of Quebec. Like many other members in this house, I hope to be a member of that committee. I am looking forward with great interest to the hearings before the committee on the revision of the Bank Act.

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Mr. Thompson:: Mr. Chairman, the proposal which the minister has placed before us concerns the renewal of the necessary authority for our banks to carry on their business for the next year. It is our intention for several reasons to support this recommendation by the government. First of all, as has already been mentioned, the Porter commission has dealt in much detail with banking and finance, and it is only fair that we should have the fullest opportunity to study the report of this commission. It is only fair, likewise, that there should be an opportunity for extended debate on those parts of the report the government intends to implement. Obviously, this cannot be done in a matter of weeks, and that is all the time that is left before the authority of the banks runs out.
However, Mr. Chairman, this whole question of the banks and the basis upon which our banks operate, is not just as simple as the few words which we have before us in this resolution tonight would lead one to believe. We have many economic problems to face in Canada. In fact, I think that the greatest problem we have to face in this house relates to the place of banking, so far as the economy is concerned. It is one of the most important aspects of the work of this house, and at this particular time, as this ten-year period in which the bank charters are valid comes to an end. I am convinced that the whole problem within our economy is closely related to this question of banking.
I will just mention three points that I think are fundamental in this regard, because it is our intention to carry this debate to greater lengths at the second reading stage. Our first problem, I think, is this problem of a continually mounting debt. This applies not only to personal debt but also to corporation and governmental debt as well. It comes back to this basic issue, that we operate under a debt system. In fact, the only money that we use today, apart from the change which might happen to be in our pockets, is money which comes into existence because someone incurred a debt. This is closely related to the functions of banks as they carry on the business of banking as we understand it today. We, in the Social Credit party, are not opposed to private banks in any way. We believe they perform a very important function in dealing with money. It is far more efficient, and certainly desirable, that private enter-' prise continue to carry on this very important function as it relates to distribution. On the other hand, we believe that there are very serious flaws in our system today that need to be adjusted and which relate to this whole question of debt, to the structure of our economy as it is related to debt.

The second problem we have in Canada that is tied very closely to this question of banking is the matter of international exchange and our economic relations with the outside world. This relates to foreign ownership in, and control of, our industry as well as the associated problems of our trade balance not only with the United States but with other countries. This question, therefore, enters into the whole picture of banking and into this whole picture of money as well. Unless this problem is solved, Canada is going to be placed in a most serious situation. Negotiations, such as those conducted at the conference that took place at Geneva during the past few weeks, are never going to deal with the matter in an effective way.
The third problem in our economy which relates definitely to this question of banking is based on this whole problem of automation and which is associated with the question of unemployment. These questions are now recognized as the most serious challenge to our present economic system and also to our banking system.
So, Mr. Chairman, not to delay the debate at this resolution stage I would say it is our intention to deal with these problems as they relate to the question of banking on the second reading of the bill, not because we want to delay this matter of renewing for one year, on a temporary basis, the licence under which the banks operate but because we regard it as very basic to these three problems I have outlined. Thus we are very happy to let the resolution pass on this understanding, again emphasizing the very great importance that the banking system plays in our general economy.


Gilles Grégoire: Mr. Chairman, I would be inclined to succumb to the temptation of preventing the passing of any resolution or bill that would allow the study of or amendments to the Bank Act to be extended or delayed for a year so that, as indicated by the Minister of Finance (Mr. Gordon), the chartered bank operations or banking operations would be stopped as of July 1. I am strongly tempted to do that, because I anticipated that would happen then.
If the Minister of Finance would stop and think about it, he might come to the conclusion that it would not be such a bad thing to suspend all banking operations after July 1, not necessarily for an undetermined or indefinite period, but for a specified length of time.
Suppose that, this evening, the house votes against this resolution or still later votes against the bill, what would happen?

Unavoidably, those who have money in the bank would hasten to withdraw their deposit. If you had $500, $1,000 or $1,500 in the bank, you would withdraw it. But as concerns the individual who would owe the bank, who would have a note which would become due in three, four or six months, the bank would not be entitled to claim its payment immediately.
When banking operations would stop on July 1, if a note was due on July 5 or 10, the bank having ended its banking operations would not be able to claim the note from the borrower. What would happen then?
What would happen would be very simple: All Canadians with savings would become panic-stricken. They would say: After July 1, since there will no longer be any banking operations, I shall withdraw my savings.
There are supposed to be savings of about $12 billion in bank accounts. When I say $12 billion, I do not take into account the day to day operations, the clearing, or any cheques that might be deposited one day to be withdrawn from another account two days later. Therefore, there would be $12 billion deposited in bank accounts, and the Canadian people as well as companies, panic-stricken due to the fact that banking operations would stop on July 1, would hurry to withdraw their savings.
That is where the situation would become odd. Since there are only $2,300 million in currency and that, out of this amount, banks have only a reserve of about $900 million, it is obvious that when 8 per cent of the depositors would have withdrawn their savings, the other 92 per cent would come up against closed wickets, because there would be no more money in the banks. Such is the situation that would be created.
Since the passing of the Bank Act, in 1934, the federal government committed itself to supply chartered banks with monetary reserves needed to face urgent situations. Then, as soon as 8 per cent of Canadian depositors will have withdrawn their savings in banks, chartered banks, under their chart, would be entitled on July 1 to compel the Canadian government or the Bank of Canada to supply them all with the required reserves in legal currency to refund all depositors besides the first 8 per cent who would like to withdraw their deposits.
What would happen then? The Bank of Canada would have to supply reserves of legal currency to chartered banks. But it would do so by advancing its reserve, by lending to them or gradually paying off the debt of Canada against a remittance of the reserves in legal currency to chartered banks.
In this way the Canadian government would be in a position to pay about 70 or 75
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per cent of its debt. We are aware that the debt of the Canadian government is the burden of this government, which has to pay $1 billion and almost $100 million interest on its debt this year. If we could get rid of 70 or 75 per cent of our debt, the government would have in its budget additional liquid assets of about $550 million, since it could pay back about three quarters of its debt.
Now, some will say: Yes, but at this time, since there will be a lot more money in circulation, a lot more currency, it might cause inflation.
To this I shall answer that there would be maybe more legal money in circulation, but the money supply in circulation would not be. increased since, instead of having money from credit, we would have legal money. Since banking operations would not be allowed, the chartered banks could not multiply by 11 or 12 the legal money put in circulation by the Bank of Canada, so as to allow the chartered banks to meet the demands of their depositors.
At that time, there would not be any inflation and the depositors would not lose anything since the Bank of Canada would guarantee the deposits.
That is the absurdity of the present banking system; the chartered banks pay high interest rates but the Bank of Canada guarantees the deposits.
Should such a situation arise, the Canadian government would be able to decrease its debt by 75 per cent. That would increase the cash reserves but would not increase the money supply by one cent, because bank credit would be replaced by legal currency and the chartered banks would not have the right to multiply those amounts of money by 12, because there would not be any banking operations, unable to operate the banks, would also be unable to create new credit.
Under such circumstances, who should be pitied? The depositor? No. The depositor cannot lose a penny, because deposits made in chartered banks are guaranteed by the Bank of Canada.
Who would be the loser? Those who borrow from the banks? Not at all. We would only have to delay procedure until after July 1, and a great many people deeply involved in debts would at last be over the hump in their businesses.
You will tell me that someone, on the other end, will lose by it, but who? How many companies are forced to shut down, because the chartered banks stop supplying funds. How many firms go bankrupt because chartered banks too suddenly demand reimbursement of the loans incurred by those companies? Will the borrowers from the chartered


Harold Edward Winch: Don't you lose your train of thought when you talk so much?


Gilles Grégoire: Better to talk too much than not at all.

There is one who asks me whether I shall not lose my point by talking too much. There are some people who are slow learners and

to whom the same thing must be repeated over and over again. Finally, there are others who will never understand. It is useless to sow carrots on a rocky soil, because they will never grow.
We repeat the same ideas, because we hope that among the authorities in Canada, there are some who have enough logic to understand that our monetary system is illogical and defective and who have enough determination to organize and reform that system and provide us with a better one.
Mr. Chairman, at this time, we are asked to accept a piece of legislation extending for a year of banking operations. It seems to me that this legislation will be passed with or without our help, since in this house the majority approves those banking operations as they exist at the present time.
Now, a one year extension will allow us to scrutinize our system in order to make the necessary reforms.
The Minister of Finance was talking about referring the whole matter to the committee on banking and commerce. I should like the minister to tell us when that committee on banking and commerce will convene to study and analyse the documentation that will be submitted to it, among which the Porter report and other documents, in order to make a serious and detailed examination of our monetary system, so as to improve it as much as possible to meet the wishes of the Canadian people.
It would therefore be a good thing to know when that committee will meet, to try and finish the work on time, so that next year we shall not be faced with another request to delay the matter for one more year, because this has got to be done as quickly as possible. We, of the Ralliement Creditistes, have very timely and logical suggestions to make to that committee, for the overhauling, the reform of the Bank Act, so that the government might regain the control of what is perhaps the most important thing in Canada, because it includes everything else, that is the control of credit, which is the sign of the national wealth of our production and our work.
Mr. Chairman, we shall wait and see the text of the bill which will follow the passing of the motion for second reading, and I am asking the Minister of Finance to see to it that the sentences are not longer than a page if possible. Two pages and a half for a single sentence is really too long. One page would be an improvement, and if the minister could succeed in making his sentences half a page long, he would be congratulated; this would be something that would be unusual. When
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this bill would come up for consideration, we could more easily make our suggestions.
Mr. Chairman, by concurring in the resolution or the bill which will follow, it is realized that chartered banks are given an extension of a year, because if the bill were not concurred in, the chartered banks would cease to operate on July 1, and this would mean losses for certain big capitalists.
But if we said: "All right, you will be allowed to go on for a year, but Social Creditors ask that you keep 100 per cent liquid assets. That makes sense maybe. In the year allowed to you, we will not go as far as 100 per cent, as required by Social Crediters, but try to keep 25 per cent of liquid assets. It would only be a quarter of what they ask, but try to do it".
Then, the Bank of Canada could make up the difference between 8 and 25 per cent, that is 17 per cent. The Bank of Canada would take the place of chartered banks and, rather than going out of business, they would be glad to continue their banking operations with only 75 per cent of their privileges, instead of 92 per cent, as at present.
Consequently, if the Minister of Finance wants to allow the banks to carry on their banking operations for a year, I suggest to him that he should impose certain conditions which would be to the advantage of the Canadian government, letting the Bank of Canada perform certain duties which are discharged at the present time by the chartered banks.
As an illustration, I could point out the financing without interest of public developments, the building of schools, of universities, hospitals, bridges and roads.
And during that extension of one year granted to the chartered banks, the Bank of Canada might be able to take over and to finance without interest those public works, because its objectives would be to make a profit like the chartered banks.
When the time comes to pass the bill in its final form, it is impossible then that the tests we are suggesting will have shown themselves very beneficial to the Canadian people and will have made it possible to save not only the Canadian economy but also the Department of Finance which is getting bogged down in debt it will never be able to repay under the present system, a debt on which the interests keep piling up and which must give an unremitting headache to the Minister of Finance, since the interest on the national debt is much higher than the budget deficits and hurts our country's expansion.
Mr. Chairman, I ask the minister to take my remarks into consideration before introducing the motion preceding the second read-

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ing of his bill to give a year's delay to the chartered banks. In fact, they are given a year's grace. Instead of closing them down completely, we give them a year's grace. Before granting them a new charter, and after close consideration, we should make some tests that might benefit the Canadian people.


Horace Andrew (Bud) Olson: Mr. Chairman, the resolution before the committee tonight is to grant an extension of one year to the charters of the chartered banks in Canada. This house has been led to believe that the reason for this extension is that the Minister of Finance, together with other members of this house, wants to take into consideration the findings and recommendations of the royal commission on banking and finance before we review and amend the Bank Act. I want to say to the Minister of Finance at this resolution stage that the report of the royal commission on banking and finance has some recommendations and suggestions in it that are completely unacceptable to this party. I want him to know, also, that there are a number of suggestions in the report that are in fact new, that we have not seen before and that we think would be of advantage to the country if adopted.
I think it is therefore valid for members of the committee to centre their remarks around what is contained in this report, because up to this point at least the reason the bank charters are being extended at all is that the Minister of Finance and others wish to have time to give consideration to what is contained in the report. On page 8 of the report the commissioners say this:
A creative financial system is one which does not just passively accommodate the usual-instead, it is one in which active and inventive efforts are constantly being made to meet the sound requirements of lenders and borrowers, regardless of how untried and unusual such needs may be.
They go on to say:
A spirit of vigorous, restless innovation in the financial system-of devising new ways to do new things rather than of justifying why they should never be done at all-can ordinarily best be achieved in conditions under which the participants are not prevented from responding to changed opportunities, in which price and other competition is too intensive to be comfortable, in which there is relative ease of entry for honest men with ideas and imagination, and in which different classes of institution can compete with each other on an equitable and open basis.
That is, I suggest, rather multiple, but at the same time I am happy to see that the commissioners who inquired into the financial and monetary system of Canada have at last come back to parliament and recommended at least, if nothing else, an idea that will allow this country to use the physical limits

of its resources as the basis of our standard of living and prosperity, rather than using the old, worn out, antiquated financial system that has consistently tried to tell us why we cannot do certain things. So it is refreshing, if nothing else, to see that the commission have come back to parliament and recommended, if I may quote again:
A spirit of vigorous, restless innovation in the financial system-of devising new ways to do new things rather than of justifying why they should never be done at all-[DOT]
In the view of those in the Social Credit party, Mr. Chairman, this is a new departure that ought to be considered by this parliament and ought to be promoted, particularly when we think of Canada and know that it is a country with perhaps more natural resources per capita than any other country or any other area in the world. I said that while there are some good suggestions in this report I think I should draw to the attention of the Minister of Finance that one or two other suggestions that have been made-and recommendations, I may add-would lead a reader to believe that perhaps the commissioners have not gotten out of the age that has gone by. However, Mr. Chairman, before coming to that point I would point out that the commission also argues that the pattern of government regulation in relation to the banking and monetary system is no longer well suited to the country's needs. I could not agree more.
So that the Minister of Finance will be familiar with those matters that we are going to raise at a later stage when the bill is before us, I would like him to-


Lucien Lamoureux: Order. I hesitate at this point to interrupt the hon. member for just one moment. The question I have in mind now is whether the hon. member at this point, by going into the details of the royal commission report, is not anticipating future debate. To my mind what we are now considering is simply the extension of the Bank Act for a period of one year, and it seems to me we are going beyond the terms of that act when we study in detail the report to which the hon. member has alluded. I quite agree with him that there is nothing wrong in making some references to this report. However, I do not think it is relevant at this stage in any event, or perhaps not even at a later stage, to go into the details of the report of the royal commission.


Horace Andrew (Bud) Olson: On the point of order you have raised, Mr. Chairman, I would remind you that this resolution would not need to be before parliament had the government taken its responsibility to review and amend the Bank Act within the mandatory 10 year

period. The reason we have been given by the Minister of Finance and the other members of the government-I am not suggesting it is not a valid one-is that they were waiting for the report of the royal commission on banking and finance, which commission was appointed, I believe, on October 18, 1961. Therefore the whole basis of the resolution before us tonight arises from what is in the report and the desirability, if I might call it that, for members of parliament to consider what is in the report. I would bow to your ruling but I think there is nothing more central to the basis of the debate than what is in the report.


Lucien Lamoureux: I am inclined to disagree with the hon. member to some extent. Perhaps it is not necessarily because of the report that we have delay. It is because there is a report which has been made which 1 assume the government wants to study. I feel, and my opinion has not changed, that if at this stage we went into the details of the report and if all hon. members chose to study the details and recommendations of the report in the course of debate, such procedure would be irrelevant so far as the resolution before the committee is concerned.


Horace Andrew (Bud) Olson: Mr. Chairman, I hope I will not be prevented from drawing to the attention of the minister some of the findings and recommendations contained in the report, those with which we agree and those with which we diametrically disagree. Whether we do this in this debate or at a later stage, I cannot help feeling that the whole reason for having the debate at all is because the report is before us. If we are not going to use the report as the basis for this debate, then I think it is almost senseless to extend the bank charters for one year. Because if we were now prepared to go ahead on the basis of reviewing the bank charters and amending the Bank Act without taking this report into consideration, we could probably get on with it and we would not need this delay at all. Our party has agreed not to prolong the debate at this stage. However, we intend to go into this matter more deeply at the second reading stage. I will not go further into the report at this stage, but I should like to have it made perfectly clear that for the reasons I have outlined the members of this party will not be prevented from making reference at a later stage and I might add detailed reference, to some of the findings and recommendations in the report.


Lucien Lamoureux: Perhaps the hon. member will agree with me that I can deal only with what is before me and before the committee at the moment, and that is a particular resolution. I cannot give him the blanket under-
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taking or commitment that he will be allowed to discuss anything he chooses when we reach second reading stage of the bill.


Gilles Grégoire: Mr. Chairman, will your ruling out of order any reference to the Porter report at this stage be used as a precedent when we come to the motion for second reading of the bill to be introduced following this resolution?
If that is the case, I feel it would be worthwhile to discuss the whole matter to determine whether it is connected to the motion for second reading of the bill because we also intend to quote from the report on second reading, considering that that will facilitate the suggestions we wish to make concerning the amendments to the act.


Lucien Lamoureux: I can only repeat what I have just said to the hon. member for Medicine Hat (Mr. Olson), that I can only make a ruling on the subject under consideration.
We are now dealing with a resolution to amend the Bank Act and the Chair cannot rule on anything which may happen later, in the house or in committee. At this time, the Chair can only rule on present proceedings.


Thomas Clement (Tommy) Douglas: Mr. Chairman, on the point of order I hope you will think this matter over before we get to second reading of the bill and the committee stage. It seems to me that the suggestion you have made is completely untenable. If I understood the Chair correctly, you suggested that the royal commission report on banking and finance is something about which the government will probably be bringing down legislation at a later date, and the whole report can be discussed at that time. That is an assumption which is not warranted. This committee is concerned only with the matter before it, which has to do with extending the present bank charters. In discussing that question the whole matter of banking is surely open for debate. Certainly the Porter commission report, which is a public document, can be quoted by members and discussed by members in reviewing the whole question of banking legislation. I hope Your Honour will not cling to this as a ruling, because I think it will become a much more extended matter when we get into the legislation itself.


Lucien Lamoureux: If I were to make a ruling at this moment with regard to something which was to come up for consideration at a later stage, that ruling would have no validity. The only thing the Chair can do is to rule on something before the committee

Business of the House
at the moment, and the ruling I was attempting to make was simply that at this particular stage we should consider, by virtue of standing order 59(2), strictly what is before the committee. My opinion was that at this stage, without committing the Chair as to what might be decided or ruled upon later, we should try not to go into detailed study of the report.


Horace Andrew (Bud) Olson: Well, Mr. Chairman, as I stated we had agreed to allow the resolution stage to go through tonight, but apparently there is some controversy as to whether the scope and latitude allowed in subsequent stages of this debate will be broad enough so that we can dicuss the Porter report. Therefore on the basis of that I should like to call it ten o'clock, because at least on resolution stage one has a wider latitude than when discussing the bill. Therefore I should like to call it ten o'clock.


Lucien Lamoureux: It being ten o'clock, shall I rise, report progress and request leave to sit again at the next sitting of the house?


Some hon. Members:: Agreed.
Progress reported.



BUSINESS OF THE HOUSE

Mr. Churchill:: Mr. Speaker, I should like to ask the acting house leader for an outline of the business for the next three days.


John Watson MacNaught: Mr. Speaker, tomorrow we will take second reading of Bill No. S-17, an act respecting the territorial seas and fishing zones of Canada. Then we will take the resolution preceding a bill to amend the National Housing Act. On Thursday we will consider interim supply. When the consideration of interim supply is completed we will go on with the items not concluded tomorrow. Then we will consider the resolution preceding a bill to amend the Export Credits Insurance Act and the resolution preceding a bill to amend the Farm Credit Act. On Friday we will take up the estimates of the Department of External Affairs.


Gilles Grégoire: Mr. Speaker, I had a question to ask. Does that mean that we will not start tomorrow-


John Watson MacNaught: There is one exception. Tomorrow we will start with the resolution we were on this evening.


Gordon Minto Churchill: And the third reading of the bill to amend the Income Tax Act.


John Watson MacNaught: And the third reading of the bill to amend the Income Tax Act.
[The Chairman.]



PROCEEDINGS ON ADJOURNMENT MOTION

[Stage Direction]
(Subject matter of questions debated under adjournment motion).
A motion to adjourn the house under provisional standing order 39A deemed to have been moved:

Auguste Choquette: Mr. Speaker, a few years ago, the federal government established a radar station in the riding of Lotbiniere, in St. Sylvestre, to be more exact. I wish to commend the present government for having decided to cut defence expenditures because, as everybody agreed, they were excessive and needed to be drastically reduced.
Under the new policy of the Department of National Defence, which is based on Canada's new needs, several radar stations have been closed down and among them is the station at St. Sylvestre, in the riding I have the honour to represent here.


Gilles Grégoire: There is also the station at Parent.


Auguste Choquette: Mr. Speaker, I-


Louis-Joseph Pigeon: Mr. Speaker, may I be allowed to put a question to the hon. member for Lotbiniere?


Auguste Choquette: Mr. Speaker, when I am through with my statement, I will be glad to give an answer to the hon. member.


Louis-Joseph Pigeon: Is it true that the Prime Minister has forbidden the hon. member for Lotbiniere to deal with this question?


The Deputy Speaker:: Order.


Auguste Choquette: Mr. Speaker, the hon. member for Joliette-L'Assomption-Montcalm has for some time made all kinds of assertions without any definite source of information.


Gilles Grégoire: That is true.


Auguste Choquette: He builds his assertions on idle hypotheses and I should like to ask him to be more serious and to show himself worthy of his title of member of parliament.


Louis-Joseph Pigeon: My source of information is accurate.


Gilles Grégoire: The member for Joliette-L'Assomption-Montcalm is talking through his hat.


Auguste Choquette: I have never received orders from anyone and much less from the Prime Minister, for if there is a man in this

country who respects democratic liberties, he is none other than the Prime Minister, who asks that everyone should express their views frankly and clearly.


Louis-Joseph Pigeon: God save the Queen.


Auguste Choquette: Yes, I agree perfectly with the hon. member for Joliette-L'Assomption-Montcalm: God save the Queen, also, God save Canada as essentially Canadian and not as colonialist, Mr. Speaker.
Now, here is what I want to say concerning the St. Sylvestre's radar station that has been closed-


Gilles Grégoire: And also the one in Parent.


Auguste Choquette: -following the decision of the Department of National Defence. Consequently-


Gilles Grégoire: Do not forget the radar station in Parent.


Auguste Choquette: Mr. Speaker, would you, please, call to order the hon. member for Lapointe who always makes futile and unfruitful remarks which lead nowhere. I should like to make myself heard in a peaceful atmosphere.


Gilles Grégoire: Mr. Speaker, I just want to remind the hon. member for Lotbiniere that it is also proposed to close the radar station in Parent-


Mr. Deputy Speaker:: Order. If the hon. member for Lotbiniere wants to go on with his remarks I would suggest him to make them right away, because he has only seven minutes left.


An hon. Member:: Long live the Queen.


Auguste Choquette: Mr. Speaker, I see there are strong partisans of Her Majesty the Queen in the house.
The radar station of St. Sylvestre, as in the case of other stations in the country-


Gilles Grégoire: Now what.


Auguste Choquette: -following a decision made by the Department of National Defence, will be closed presently.
That radar station in Lotbiniere county no doubt revitalized local economy and favoured local prosperity. And now, after ten years of a relative prosperity resulting from the establishment of that radar station which had attracted many outsiders to settle down in St. Sylvestre thus contributing to the local economy, pursuant to a warranted decision, I will admit, because military expenditures have to be cut down, the local economy of St. Sylvestre will be greatly affected-


Louis-Joseph Pigeon: Mr. Speaker, I should like to ask the hon. member a question.
19, 1964	3381
Proceedings on Adjournment Motion


Auguste Choquette: -I feel it is my duty to intervene on behalf of my constituents to ask the Minister of Industry-


Louis-Joseph Pigeon: Mr. Speaker, may I now put a question to the hon. member for Lotbiniere?


Norman Platt Lambert: Let him come to the point.


Auguste Choquette: I would ask the Minister of Industry whether he has a special policy to announce concerning the people of those localities which had benefited tremendously from the radar stations installed there.
In our election platform, as well as during the election campaign, we strongly advocated the industrialization of rural areas both in Quebec and in Canada as a whole-


Douglas Mason Fisher: And Ontario too.


Auguste Choquette: -and particularly the province of Quebec. We must industrialize them.
As a representative of a rural constituency, I am in a position to see the crying need to restore our agriculture and to stimulate the economy of our rural areas.
Consequently, Mr. Speaker, I ask-


Louis-Joseph Pigeon: Mr. Speaker, I should like to ask the hon. member for Lotbiniere-


Mr. Deputy Speaker:: The hon. member for Lotbiniere has the floor and he should not be interrupted.


Auguste Choquette: -consequently, Mr. Speaker, I believe that if we have a Department of Industry that has actually been set up by this government, and for which it deserves warm congratulations, and if it is in a position, as I am sure it is, on account of the ability and great experience of the man who is heading it I think that the federal Deparment of Industry-


Mr. Deputy Speaker:: Order. I regret to interrupt the hon. member but the time allotted to him is now up.


Auguste Choquette: Mr. Speaker, I rise on a point of order. I do not think that I spoke seven minutes, because I was constantly interrupted-


Mr. Deputy Speaker:: I regret, but the time allotted to the hon. member is now up.


Auguste Choquette: I wonder whether, with the unanimous consent of the house, I could proceed with my remarks for two minutes.


Gilles Grégoire: Mr. Speaker, we are pleased to allow the hon. member for Lotbiniere to go on heaping praise on the Minister of Industry, because he deserves it. We agree, Mr. Speaker.


Louis-Joseph Pigeon: On condition that the hon. member for Lotbiniere will allow me a question.


Gilles Grégoire: No, no questions allowed.

Proceedings on Adjournment Motion


Auguste Choquette: Mr. Speaker, il the hon. member for Joliette-L'Assomption-Montcalm wants to ask me a question about a distinctive flag for Canada, X shall allow him to do so later.


Louis-Joseph Pigeon: It is about the Queen.


Mr. Deputy Speaker:: Order. Would the hon. member for Joliette-L'Assomption-Montcalm please resume his seat? Would the hon. member for Lotbiniere do likewise? I must remind hon. members that during this debate, the length of their remarks is strictly limited. If we were to allow an extension of the speeches and the remarks made in the house either by the members who have questions to ask or by the ministers who answer them, in my opinion, we would go against the very substance of this debate.
I think that the hon. member for Lotbiniere has used up the seven minutes granted to him under the provisional order and I would now ask the Minister of Industry to rise.


Auguste Choquette: Mr. Speaker, I asked for the unanimous consent of the house.


Gilles Grégoire: Granted.


Louis-Joseph Pigeon: Granted.


Mr. Deputy Speaker:: I am sorry but the hon. member did not get the unanimous consent of the house.


Auguste Choquette: But nobody objects to it, Mr. Speaker.


Louis-Joseph Pigeon: Only the Queen is against it.


Mr. Deputy Speaker:: I can say to the hon. member that I hear dissenting voices near me.


Auguste Choquette: I do not think there were any, Mr. Speaker, I have the impression-


Mr. Deputy Speaker:: Order.


Auguste Choquette: -that the acoustics are bad, because there were not any dissenting voices.


Mr.   Speaker-Mr. Deputy Speaker@: I would ask the hon. members to resume their seats. It was suggested that the hon. member could continue if he had the unanimous consent of the house; he did not get it and I must now ask the Minister of Industry to reply to the hon. member.


Hon. C. M. Drury (Minister of Industry):: Mr. Speaker, the hon. member for Lotbiniere (Mr. Choquette) has drawn the attention of the house to what in the view of the government is a very important question. As all hon. members are aware, a considerable number of large installations are in the

process of being closed down by the Department of National Defence.
With a view to ensuring that the transition from national defence operations to some other useful purpose is as rapid and smooth as possible, the government has charged the area development agency, which comes under the jurisdiction of the Department of Industry, with the responsibility of canvassing all the possibilities there might be of making effective use, in the national interest, of these installations which are being closed down.
The radar station at St. Sylvestre is one of these to which the area development agency has, since it learned the Department of National Defence was closing it down- and I add parenthetically it has not been closed yet-directed its attention to exploring the best possible uses to which it can be put.
To this end a canvass is made of all the federal government departments. Subsequently a canvass is made of all the relevant provincial government departments. Third, a canvass is made of municipal efforts or municipal organizations, and finally private industry. In the case of St. Sylvestre it has been determined to date that there is no federal government utilization that could be made of these facilities.
Discussions have been under way for some two weeks with the government of the province of Quebec with a view to canvassing the possibilities of using the radar station at St. Sylvestre for institutional or other purposes. I am glad to tell the hon. member that we have not yet exhausted all these possibilities.
Finally there does remain a possibility, which the area development agency is exploring, of making use of these facilities by private individuals, or a private organization, for recreational purposes in the general interest.


Mr. Deputy Speaker:: I have to interrupt the minister to tell him his time has expired. The hon. member for Nicolet-Yamaska.



AGRICULTURE


Mr. Clement Vincent (Nicolet-Yamaska):: Mr. Speaker, last Thursday I asked the Minister of Agriculture the following question:


Clément Vincent: Could the Minister ol Agriculture tell us whether he has received a request signed by the cheese producers of central Quebec areas regarding that new policy he announced to the house on April 29 of this year? If so, has the minister any comments to make?
The new policy was announced by the Minister of Agriculture last April 29 and it

came into force a few hours later. As I stated last Friday, it should have been announced at least 15 days before the new year. Following that announcement, Canadian producers, especially those of the eastern part of the country, had to send petitions and requests to the Minister of Agriculture in connection with the new policy. That request, which deserved the immediate attention of the federal authorities, was signed by producers who sell a total of 3,202,884 pounds of cheese on the local market.
Because of the new policy, they had to raise the retail price of cheese by 4 cents a pound on the local market; this constitutes an increase of $128,155.36 for consumers.
The following people signed the request:
Marcel Descoteau, of St. Gregoire de Nico-let, Paul-Emile Dionne, the farm co-operative society of St. Germain, Drummond county, Marcel Lemaire, of St. Cyrille, Drummond county, Francois Richard, of Kingsey Falls, Gerard Grenier, of Victoriaville, Henri Pro-vencher, of Princeville, and Felicien Lemaire of Ste. Perpetue, who have sold, as I said, a total of 3,202,884 pounds of cheese on the local market. Allow me to read this request:


Mr.   Minister@: We are all cheese producers of the central part of the province of Quebec, more particularly in the counties of Nicolet-Yamaska, Drummond-Artha-baska and St. Maurice-Lafleche.
We are informed of the new policy concerning the subsidy on the production of cheese.
We submit that in order to conform with the regulations established on May 1, 1964, while at the same time providing consumers with the fresh cheese they are looking for, we would necessarily have to increase the price of cheese by 4 cents a pound or reduce by 30 cents per cwt. the price paid to farmers.
In each case, there would be an obvious prejudice which could entail very serious effects on our economy.
Consequently, we ask you to reconsider the matter in order to find a fair solution. In fact, we add that this problem is really urgent, which is quite evident.
Yours truly.
In my opinion, the Department of Agriculture should give favourable consideration to this request. I do not intend to refer to all the points I brought up last Friday, but I should like the Department of Agriculture to announce officially that the request has been received, considered and that the department will allow cheese producers who sell their products on the local market to benefit from a subsidy of 3.6 cents per pound with respect to first class cheese.
At present, these producers have to keep the cheese for a period of eight to ten days then send a piece of about 20 pounds for grading in Montreal. If they were allowed
19, 1964	3383
Proceedings on Adjournment Motion to sell this cheese immediately, while it is fresh, provided they kept a 20-pound piece in storage for a period of ten days, to be sent later for grading, I think it would be possible to do so. This would also enable those producers to benefit from this 3.6 cents a pound subsidy on grade "A" cheese and they would not be forced to raise by 4 cents a pound the retail price of cheese because efforts should tend to increase and not to discourage consumption.
Mr. Speaker, it is in this aspect of the new government policy that I am particularly interested and that is why I am asking the parliamentary secretary to the Minister of Agriculture (Mr. Beer), to answer my question tonight, as I know that this question has been carefully examined by the department's authorities. Therefore, I hope that this answer will favour the producers-manufacturers of my constituency.


Mr. B. S. Beer (Parliamentary Secretary to Minister of Agriculture):: Mr. Speaker, I wish to thank the hon. member for his question, which I think might be divided into two parts: First of all, did the Minister of Agriculture receive a request from certain manufacturers of cheese in the province of Quebec, and second the hon. member asked for some clarification of policy. This petition was received by the Minister of Agriculture and was appropriately-


Clément Vincent: Discarded.


Bruce Silas Beer: -discussed and dealt with. I think it is necessary, Mr. Speaker, to clarify the fact that we are dealing with cheese made from pasteurized milk, where the policy is that the cheese must be held for eight days; it is then graded, and if it grades 94 a premium of two cents is available; if it grades 93 a premium of one cent is available. The question, of course, has to do with the sale of fresh, or green cheese. If the manufacturer of cheese wants to dispose of his cheese prior to the eight days, of course he immediately forfeits the premiums that are available. But arrangements have been made whereby if an amount of cheese is held by the manufacturer until a grader arrives, then all the milk from which the cheese was made will be eligible for the 3.6 cents per pound assistance. I believe that is a clarification of the policy which the hon. member wished, and I think it is probably a tribute to the alertness of the department officials that this matter was taken into consideration even before the petition was received.

Proceedings on Adjournment Motion



THE CANADIAN ECONOMY


Gordon Harvey Aiken: Mr. Speaker, the question I wish to raise concerns the alarming increase in the cost of living index as indicated in a dominion bureau of statistics release of last Friday, May 15. I want to begin by urging that we must not get too involved in emotional issues, such as the flag, to notice what is happening to our national economy. The bulletin that was issued last week indicates that within the last year there has been an alarming increase in the cost of living index.
To go back over the last five years, there has been a gradual increase in the cost of living. Perhaps I may give these figures briefly, Mr. Speaker. In April, 1959 the cost of living index was 125.4 points up .2 point over the previous year; in 1960 it increased 2.1 points; in 1961 it increased 1.6 points; in 1962, 1.2 points; and in April, 1963, 2.0 points. The current increase is 2.7 points, all based on the 1949 index. This is the greatest increase during the last five years. There were two previous indexes, in the years 1956 and 1957 which were slightly higher. The figure for 1956 showed an increase of 4.3 points over that of the previous year, and in 1957 the increase was also 4.3 points over the previous year. Before that there had been an increase in the cost of living index as high as 10.5 points in 1951 and 5.1 points in 1952. There has been a gradual increase, but this year it is rather alarming and I think the government should be, and probably is, quite concerned about this very great increase.
The anomaly of this situation is that in the very release which indicates that the food index has increased-that is, the cost to the householder-the price index for farm products is down. The farmer got less for his product but the householder paid more. For example, the price of beef given in the current release shows that it went up .5 points, or half a point, in one month, from March to April 1964, but in the same period the price paid to farmers for beef went down 1.3 points. This is a recurrence of the great complaint we had in 1955 and 1956 of a price spread between the farmer and consumer, and we certainly hope this is not a return of this problem which during the years of the previous government diminished so rapidly.
I do not want to make comparisons, but it is a fact that this increase has been brought about by the inflationary policies of the government and the expansion of the money supply at a greater rate than the gross national product has increased. There are a lot of other forces at work here. I think the large spending program for non-productive activities that the government has undertaken in the last year has contributed to the inflation.
In concluding, Mr. Speaker, I have in my hand a clipping from the Toronto Telegram of December 12, 1963, the heading of which is: "Bold plan by P.M. hits living costs". We should like to hear of this bold plan, because if it hit the living costs it certainly c|id not hit very hard. In December of last year the cost of living index was 134 and it is now 135. It has gone up one point, which is almost as much as it went up during a whole year in previous years. I should like the assurance that the government is giving very serious consideration to this problem of the cost of living, and general inflationary policies.


Mr. E. J. Benson (Parliamentary Secretary to Minister of Finance):: Mr. Speaker, I
will reply rather briefly to the hon. member for Parry Sound-Muskoka who raised this question about the increase in the cost of living. The government is, of course, always concerned at increases in the cost of living. However I should like to point out that while in the years 1957 to 1960 the cost of living did not increase, during the same period unemployment increased in this country rather tragically.
There are three main points I should like to make in reply to the hon. member for Parry Sound-Muskoka. First of all, increases in consumer prices have been moderate and in line with the experience of the past few years. Second, they are only fractionally higher than those of the United States, even though the Canadian economy has been absorbing the effects of devaluation of the Canadian dollar. Third, the moderate increases in Canadian consumer prices are well below those of most European countries and Japan, which have been experiencing substantial price increases. Consequently, Canada's international position has not deteriorated; if anything it is improving, and this has been proved by the strengthening of our trade balance.
Motion agreed to and the house adjourned at 10.32 p.m.



END OF VOLUME III