1966-03-29

HOUSE OF COMMONS DEBATES


[Stage Direction]
Roger Duhamel, f.r.s.c.
queen's printer and controller of stationery OTTAWA, 1966
23033-21U
[Stage Direction]
Tuesday, March 29, 1966


Hon. G. J. Mcllrailh (Minister of Public Works):: I should like once again, Mr. Speaker, to ask for unanimous consent to move for an order of the house that today order No. 66, under private members' notices of motion, should take precedence over both government orders and private members' orders until seven o'clock. I request unanimous consent for that motion.


Some hon. Members:: Agreed.


Mr. Speaker:: Is there unanimous consent? The Chair could not hear the hon. member for York-Humber.


Mr. Cowan:: I object to unanimous consent being granted.


EXTERNAL AFFAIRS
[Stage Direction]
On the orders of the day:
Right Hon. J. G. Diefenbaker (Leader of the Opposition):: I should like to direct a question to the Secretary of State for External Affairs, Mr. Speaker, with regard to the announcement made over the week end by the President of the United States that further massive steps are going to be taken to provide economic aid to India because of the serious and constantly growing need of that country.
While there has been some increase in the amount of aid Canada has granted to India, has the government given consideration during the last few days to further assistance to meet a situation which, according to those who have been recently there, is serious? I discussed the matter with Mr. Stursberg, who has been in India for the last month or so, and he pointed out how serious the economic situation is, and how dangerous and potentially fearful is the situation brought about through the shortage of food.


Hon. Paul Martin (Secretary of Slate for External Affairs):: I agree with the right hon. gentleman, Mr. Speaker, that the situation in India, in the terms that he mentioned, is critical. We announced earlier this year a program to a total of $25 million. Last Friday or it may have been Thursday, I forget which, I announced a further assistance program to India in the amount of some $56 million. Therefore our total food assistance program in India, involving one million tons of wheat, will amount to a contribution of some $70 million for the current calendar year.
The High Commissioner for India told me within the last hour that this represents a very substantial form of assistance which his country gratefully acknowledges, and I think my right hon. friend will appreciate from the amounts I have mentioned that this does represent a very substantial contribution to this serious situation.


John George Diefenbaker: Mr. Speaker, the minister mentioned that the assistance will consist, among other things, of one million tons of wheat. Will the freight on that wheat be paid by Canada? Because if it is not, the contribution will not be very helpful to India.


Paul Joseph James Martin: Mr. Speaker, I have noted this observation, and before giving a definite commitment perhaps I might look into the matter.


Mr. T. C. Douglas (Burnaby-Coquitlam):: supplementary question. Could I ask the Secretary of State for External Affairs whether the increased assistance to India announced last week was the result of any representations made by the government of the United States during the meetings which Canadian ministers had a short time ago with members of the United States cabinet?


Mr. Martin (Essex Easi):: Mr. Speaker, Canada's decision to make a further grant by way of assistance to India was announced in this house by the Prime Minister the day before the Canada-United States meeting. I may say that both Canada and the United States have been urging other potential donor countries to recognize the serious situation in India.
March 29, 196S

Inquiries of the Ministry


Thomas Clement (Tommy) Douglas: Mr. Speaker, may I ask a further supplementary question. The minister did not answer my question. I am wondering if the minister would say whether the press reports are correct, indicating that the Canadian government only agreed to give increased aid to India as a result of pressure from the United States government.


Paul Joseph James Martin: Mr. Speaker, I thought I had answered that question by indicating that before the meeting with the United States authorities, the Prime Minister of Canada had announced in this house Canada's intention to make available this further assistance. I may say categorically that it was not as a result of any pressure brought on Canada but was a recognition by Canada of its responsibilities to assist that commonwealth country.


Mr. Ron Basford (Vancouver-Burrard):: Mr. Speaker, may I direct a supplementary question to the Secretary of State for External Affairs relative to food aid to India. As a long term solution will the government consider giving to India technical and financial assistance for population studies and control if the same is requested by the government of India?


Mr. Speaker:: This seems to be a hypothetical question. It cannot be accepted.


Stanley Ronald Basford: Ten o'clock, Mr. Speaker.



FINANCE


[Stage Direction]
On the orders of the day:
Paul Joseph James Martin: Mr. Speaker, I should like to table the text of our representations of January 14 to the United States government regarding the proposed S.E.C. regulations on securities traded over the counter in the United States, as they may affect Canadian companies.
Since then we have had further discussions with United States authorities on this matter. There was a thorough exchange of views on this question at the meeting of the joint Canada-United States ministerial committee earlier this month. On that occasion the United States secretaries assured us that the most careful consideration would be given to working out mutually satisfactory arrangements. In the meantime I understand that the United States authorities do not expect Canadian companies to register.

I should like to table the aide memoire, Mr. Speaker.


Mr. Speaker:: Does the minister have leave to table the document to which he has just referred?


Some hon. Members:: Agreed.



HEALTH AND WELFARE


[Stage Direction]
On the orders of the day:
Mr. Real Caouetie (Villeneuve):: I should like to direct a question to the Minister of National Health and Welfare. Would he be in a position today to tell the house whether the federal government investigators have finally discovered what beer company or brewery is responsible for the deaths of hundreds of people in the cities of Quebec and Trois-Rivieres?
LEnglish1


Hon. A. J. MacEachen (Minister of National Health and Welfare):: Mr. Speaker, the investigation is still continuing into what is alleged to be the relationship between the consumption of beer and an obscure heart disorder. At present the investigation has been unable to establish a direct relationship between the consumption of the suspected beer and the cases of heart failure which have been established. Other factors not yet identified may be involved in these cases, and under these circumstances I should not be justified in directly associating these cases with the consumption of beer, and I should certainly not be justified in naming the firm responsible for the production of the suspected beer until further investigation is completed.


David Réal Caouette: Mr. Speaker, I wish to put a supplementary question to the minister. Will he inform the house as soon as he receives a report from his investigators who are now in Quebec?
[English1


Allan Joseph MacEachen: Yes, Mr. Speaker.


Mr. Gilles Gregoire (Lapointe):: Mr. Speaker, may I ask the Minister of National Health and Welfare a supplementary question? Could he tell us whether the inspectors
March 29, 1966	COMMONS
of his department in Quebec city have ordered that the beer sold by that company be withdrawn from the market in order to prevent the tragedy from becoming more serious?
[English1


Allan Joseph MacEachen: Mr. Speaker, in the absence of any firm indication that there is this direct relationship it is an action that would not be taken by the food and drug directorate because there may be other factors not yet identified responsible for these cases.


EXTERNAL AFFAIRS
[Stage Direction]
On the orders of the day:
Mr. H. A. Olson (Medicine Hat):: Mr. Speaker, I should like to address a question to the Secretary of State for External Affairs, arising out of certain reports that the Canadian contribution to the air lift into Zambia will be discontinued at the end of April because it is no longer required. The question I should like to ask the Secretary of State for External Affairs is this. If this has been an ineffective exercise, and if it is no longer required, why then do we keep it on until the end of April at a cost of $1J million?


Hon. Paul  Marlin@Secrelary of Stale for External Affairs: Because I do not think it has been as ineffective as my hon. friend suggests.


John George Diefenbaker: A supplementary question in that connection. Is the minister now in a position to say whether the air lift is or is not effective? It is generally agreed that the possibility of bringing down the government of Rhodesia by economic sanctions has been postponed by at least six months.


Paul Joseph James Martin: Mr. Speaker, I think it would be impossible to measure with precision the effectiveness of the sanctions. As the Prime Minister indicated the other day, their effectiveness has not been according to schedule. However, this does not mean that the sanctions program will not be effective. No one can speak with any certainty in matters of this sort, but it is sincerely to be hoped that the program supported by all the commonwealth countries, and by so many other countries, will be effective in bringing this illegal regime to an end.
DEBATES	3331
Inquiries of the Ministry


John George Diefenbaker: In that connection, was it not the view of the minister on behalf of the government of Canada that the sanctions would be so effective that by April 1 the government of Rhodesia would have been brought down. Was that view not expressed?


Mr. Speaker:: Order, please. The hon. member for Oxford.


Mr. Nesbiti:: Mr. Speaker-


John George Diefenbaker: Surely I have the right to ask whether the minister has changed his mind. I ask the right to ask certain questions.


Mr. Speaker:: The right hon. Leader of the Opposition asked a question in a very specific form. He said, is it not the view of the minister that such and such is so, and whether that was his view some time ago. With respect, this is certainly not a proper question.


John George Diefenbaker: I asked whether there had been a change in the viewpoint on the part of the government; and with great deference to you, Mr. Speaker, I do not see any reason why that question should not be allowed. Parliament was asked to give support to a plan on the basis of certain anticipations. It was on this ground that I asked my question.


Mr. Speaker:: The question which the
Leader of the Opposition now asks is different from the one he asked in the first instance.


Paul Joseph James Martin: In answer to the right hon. gentleman I would say this. I do not think I said the sanctions program would become completely effective on April 1. My recollection is that I said it was hoped that by June the program would reach the kind of effectiveness which was anticipated, and that a sanctions committee had been established to examine and note the progress being made. I cannot believe the right hon. gentleman is correct in saying I said the program would definitely be effective on a particular date. If I did I was certainly in error.


Wallace Bickford (Wally) Nesbitt: Is the government planning any additional economic or perhaps military measures at the present time?


Paul Joseph James Martin: The government is not planning any military measures whatsoever. I clearly indicated our position with regard to the use of force during the course
3332	COMMONS
Inquiries of the Ministry of our debate on this subject. And it would not be possible to plan any further economic measures, because our embargo is complete.


Horace Andrew (Bud) Olson: Has the Canadian government attempted to find out, or has it, in fact, ascertained how much oil is getting into Rhodesia from Mozambique, South Africa or any other sources?


Paul Joseph James Martin: The Prime Minister responded to a question of this kind the other day. He indicated that we were aware, as a result of information passed on to us, of the extent to which there were arrangements contrary to the economic sanctions which have been imposed.


Wallace Bickford (Wally) Nesbitt: Is the government planning any economic measures against Portugal or her possessions such as Mozambique and Angola, in view of the apparent lack of success of these economic sanctions?


Mr.   Marlin@Essex East: There are no such measures now under contemplation.


Thomas Clement (Tommy) Douglas: Mr. Speaker, I should like to ask the Secretary of State for External Affairs a further question with regard to the discontinuance of the air lift to Zambia. Was this decision taken on the recommendation of the commonwealth sanctions committee, and can the minister satisfy the house that the oil needs of Zambia will be met in some other way?


Paul Joseph James Martin: Mr. Speaker, the decision to carry on the Zambian airlift was a Canadian decision. The decision was that it would be carried on until the end of April.


Thomas Clement (Tommy) Douglas: Mr. Speaker, I have a supplementary question. Can the minister assure the house that in spite of the discontinuance of the airlift the oil needs of Zambia will be taken care of, or has some factor intervened which makes the airlift no longer necessary?


Paul Joseph James Martin: This whole question of course will be reviewed at the end of April. We will have to examine the situation.



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Mr. Maurice Allard (Sherbrooke):: Mr. Speaker, I would like to put a question to the

DEBATES	March 29, 19G6
hon. Minister of Citizenship and Immigration, the eventual minister of manpower.
Is he acquainted with and does he accept the accusations made last night at Three Rivers by the Quebec Minister of Labour, to the effect that Ottawa does not acknowledge the special status of the Quebec labour force, that it proceeds unilaterally, and that before creating a federal department of manpower, a policy on federal-provincial consultations should be formulated?


Mr. Speaker:: Order. I believe this question is out of order.


Maurice Allard: Mr. Speaker, may I put a question to the Minister of Citizenship and Immigration?
Does the minister propose, before the Department of Manpower is set up to convene provincial Ministers of Labour to discuss the whole legislation pertaining to manpower?


Hon. Jean Marchand (Minister of Citizenship and Immigration):: Mr. Speaker, the only new manpower policies adopted by the Department of Citizenship and Immigration were adopted after consultation with the provinces and during the federal-provincial conference held in January. There have been no others.



TELEVISION


[Stage Direction]
On the orders of the day:
Mr. Gerard Laprise (Chapleau):: Mr. Speaker, I should like to direct a question to the Secretary of State.
Has she received and, if so, does she propose to follow up immediately the offer made by Compagnie de telephone du Nord du Quebec Ltee to use its microwave network so as to provide television services to the people of Chibougamau-Chapais, from Rouyn or lake St. John?


Mr. Speaker:: Order. I think this question should be placed on the order paper.


Gérard Laprise: Mr. Speaker, I wish to discuss this matter later, at ten o'clock.



WINTER WORKS


[Stage Direction]
On the orders of the day:
Hon. Martial Asselin (Charlevoix):: Mr. Speaker, I should like to direct a question to the Minister of Citizenship and Immigration.
March 29, 1966	COMMONS
Could he tell the house whether he has decided to extend the winter works program now in progress?


Jean Marchand: No, Mr. Speaker.


Martial Asselin: A supplementary question, Mr. Speaker.
Could the minister tell us when he will be in a position to inform us about the government's policy in this matter?


Jean Marchand: Mr. Speaker, the government's policy in this regard is already known. If changes are made, they will be announced in due course.


Gilles Grégoire: Mr. Speaker, I would also like to put a supplementary question to the minister.
Seeing that the government has, in the past, changed its attitude with respect to areas where the winter was severe, could the minister start even now to consider as was done in former years, extending the period allowed for winter works in those areas where the winter was particularly severe?


Jean Marchand: Mr. Speaker, I believe that very same question was put to me last week; the answer is therefore the same.
The problem is constantly being reviewed. If a dangerous or unfair situation arises, we will attempt to remedy it and advise the house accordingly.
[English1



ADMINISTRATION OF JUSTICE


[Stage Direction]
On the orders of the day:
Mr. R. E. McKinley (Huron):: Mr. Speaker, I wish to direct a question to the Solicitor General. In view of the petition which I presented to him, and the many letters and phone calls I am receiving, could the minister give the house any indication of when he can announce that there will be an inquiry into the Steven Truscott case?


Hon. L. T. Pennell (Solicitor General):: Mr. Speaker, allow me to say I am deeply sensible of my duty in this matter, which is being diligently pursued, and I shall report as soon as possible.
DEBATES	3333
Inquiries of the Ministry SEAFARERS INTERNATIONAL UNION-PROSECUTION OF MEMBERS
On the orders of the day:


Mr. H. W. Herridge (Kooienay Wesi):: Mr. Speaker, I wish to address a question to the Solicitor General. I hope he will reply to this doctrinaire old firebrand who has not yet burned out. Has the minister anything to report to the house with regard to the examination of the documents seized from the Seafarers International Union by the R.C.M.P?


Lawrence T. Pennell: have nothing further, Mr. Speaker, except to assure the member that it is being pursued vigorously.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Mr. G. L. Chalierlon (Esquimali-Saanich):: Mr. Speaker, I wish to direct a question to the Minister of National Defence. Can the minister say whether the government is considering additional re-enlistment bonuses for pilots in the R.C.A.F.?


Hon. Paul Hellyer (Minisler of National Defence):: Not re-enlistment bonuses, Mr. Speaker. The government has been giving consideration to the aircrew allowance, and I expect an announcement will be made in that regard shortly.


George Louis Chatterton: As a supplementary question, will this apply to all aircrew, if it is put into effect?


Paul Theodore Hellyer: No, Mr. Speaker.



SHIPPING


[Stage Direction]
On the orders of the day:
Mr. D. R. Gundlock (Lethbridge):: Mr. Speaker, I wish to direct a question to the Minister of Finance, particularly in view of the fact that this morning's paper advises us that the minister has his facts and figures at his finger tips. Could the minister tell the house what is the cost or charge for demurrage per day for a boat waiting in a Canadian port to be loaded with grain for export?


Mr. Speaker:: Order, please.
3334	COMMONS
Inquiries of the Ministry INQUIRIES OF THE MINISTRY
On the orders of the day:


Mr. Robert McCleave (Halifax):: Mr. Speaker, I wish to direct a question to the Minister of National Health and Welfare. Noting that both Clay and Chuvalo are overweight and jumbo sized for their fight tonight, would the minister send them whatever pamphlets are available on physical fitness?


Mr. Speaker:: Order, please.


Mr. Heward Grafftey (Brome-Missisquoi):: Mr. Speaker, may I ask the Minister of Finance whether, in preparation for his budget speech this evening, he has had an opportunity to read the latest book to be published by the hon. member for Davenport (Mr. Gordon).


Hon. Milchell Sharp (Minister of Finance):: No, Mr. Speaker, but I am sure I would have benefited, as would all members of this house.



FISHERIES


[Stage Direction]
On the orders of the day:
Mr. J. R. Keays (Gaspe):: Mr. Speaker, I wish to direct a question to the Minister of Fisheries. In view of the fact that a number of inshore fishermen are not aware of the program announced by the minister on December 3 and January 15, to provide assistance to those who experienced serious catch failures in 1965, would the minister ensure that the eligibility date for application for this assistance be extended to April 30?


Hon. H. J. Robichaud (Minister of Fisheries):: Mr. Speaker, when the assistance program for fishermen was introduced in January it was not a matter of extending the time of payment but rather of setting a maximum amount of assistance to compensate fishermen who had failed to qualify for unemployment insurance benefits. The assistance was set at $350 for married persons and $200 for persons without dependants, which is in line with the average amount received by fishermen as unemployment insurance benefit.


James Russell Keays: As a supplementary question, does the minister still insist that the final date for application be March 26?

DEBATES	March 29, 1966


Hédard-J. Robichaud: Mr. Speaker, as the announcement was made early in January and was well advertised, it was hoped that all applications would be received before the end of March, and it would be very difficult at this time to extend the period.



CAPITAL PUNISHMENT


[Stage Direction]
On the orders of the day:
Mr. Auguste Choquelle (Lolbiniere):: Mr. Speaker, I wanted to put my question to the house leader, but in his absence-I am sorry I have not given notice of it-I might put it to the Prime Minister.
Since we are in a deadlock regarding the debate on capital punishment, would it be possible to work out a procedure so that the vote may be taken without delay? If it is not taken this year, will the commutation system be maintained by the government?
[English1


Mr. Churchill:: Have you spoken?


Right Hon. L. B. Pearson (Prime Minister):: Mr. Speaker, I do not think we have reached an impasse yet; at least I hope we have not.


Some hon. Members:: Hear, hear.



AIRPORTS


[Stage Direction]
On the orders of the day:
Mr. Barry Mather (New Westminster):: Mr. Speaker, I wish to direct a question to the Minister of Transport. Having in mind the threatened work stoppage by air traffic controllers at Vancouver international airport, would the minister indicate whether he would give consideration to their request for an impartial inquiry into their working conditions, since these men have taken a strike poll which is 96 per cent in favour of strike action within the next few days?


Hon. J. W. Pickersgill (Minister of Transport):: Mr. Speaker, I do not think the situation is as immediately alarming as the hon. gentleman's question would seem to suggest, but of course the minister will take into consideration any request of this nature.
March 29, 1966



AGRICULTURE


[Stage Direction]
On the orders of the day:
Mr. E. Nasserden (Roslhern):: Mr. Speaker, I have a question for the Minister of Agriculture. A week or ten days ago I asked the minister whether he would issue a statement regarding an outline of the goals for grain production in western Canada. Is the minister now prepared to do this?


Hon. J. J. Greene (Minisier of Agriculture):: Mr. Speaker, I believe this question properly should go to the Minister of Finance, who is responsible for the Canadian Wheat Board. However, I would point out that the farmers can be relied upon pretty well to make their own intelligent decisions in this regard. This I think is shown in the statement of planting intentions issued by the Dominion Bureau of Statistics for March 16, which indicates that western farmers intend to seed 29.1 million acres of wheat in 1966 as compared to 27.7 million acres in 1965, together with an increase of 26 per cent in fertilizer used this year and a 6 per cent cut-back in summer fallow.
If weather conditions are suitable and these intentions are carried out I would expect that we should harvest a crop which would adequately meet our commercial as well as our aid requirements.


Edward Nasserden: Mr. Speaker, I thought perhaps the minister might have a reply of his own as well.


Mr. W. H. Jorgenson (Provencher):: Is it not
true, Mr. Speaker, that during the election campaign the members of the government indicated they were going to provide such forecasts on which farmers would be able to base their estimates?


Mr. Speaker:: Order, please.



NORTHERN AFFAIRS


[Stage Direction]
On the orders of the day:
Mr. Robert Simpson (Churchill):: Mr. Speaker, I should like to address a question to the right hon. Prime Minister, with reference to the statement he is reported to have made in Quebec city on Saturday. He is reported to have said that the federal government in the future will not opt into matters within the provincial jurisdiction. Will the 23033-2121
Inquiries of the Ministry Prime Minister say whether this means that the government does not intend to re-establish the roads to resources program?


Lester Bowles Pearson: No, Mr. Speaker.



CANADA ASSISTANCE PLAN


[Stage Direction]
On the orders of the day:
Mr. S. J. Enns (Portage-Neepawa):: Mr. Speaker, I would like to ask the Minister of National Health and Welfare whether he could give some indication to the house as to how soon legislation will be brought forward to implement the Canada assistance plan.


Allan Joseph MacEachen: Mr. Speaker, it is intended to introduce the legislation at the earliest possible moment when there is an indication of when it can be dealt with.


Hon. Michael Starr (Ontario):: Mr. Speaker, in view of the fact that this matter is very important, would it not be advisable to put it on the order paper before Easter so we can study this legislation over the Easter recess?


Allan Joseph MacEachen: Mr. Speaker, we will
make every effort to provide an appropriate study period for this and other legislation, but I cannot give an assurance at the moment that it will be on the order paper before the Easter recess.


Mr. Eric A. Winkler (Grey-Bruce):: Mr. Speaker, I would like to put a supplementary request to the Minister of National Health and Welfare. Is there anything that we on this side of the house can do to assist him in bringing forward this legislation?


Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, I have a supplementary question. May I ask the Prime Minister whether he is yet in a position to answer my question of a few days as to whether the Canada assistance plan, pension legislation and medicare will be on the order paper before Easter.


Lester Bowles Pearson: Mr. Speaker, I think I said they would be on the order paper shortly.


George Louis Chatterton: Mr. Speaker, may I ask a supplementary question of the Minister of National Health and Welfare. Can the minister say whether it is the intention of the government to refer

March 29, 1966
Inquiries of the Ministry this legislation to a standing or special committee of the house.


Allan Joseph MacEachen: No, Mr. Speaker, but that possibility will be considered when the bill is before us.



INDIAN AFFAIRS


[Stage Direction]
On the orders of the day:
Mr. L. M. Brand (Saskatoon):: Mr. Speaker, I should like to direct a question to the Minister of Agriculture. When I asked a question regarding the Mistaseni shrine and a meeting with the P.F.R.A., the minister said that he hoped to have an answer within a few days. I am wondering whether the few days which have passed have been sufficient to allow him to prepare an answer.


John James Greene: Mr. Speaker, with regard to the question of the hon. member, I might point out that questions 172 and 576 on the order paper in this regard were answered on January 21 and February 10 respectively.
I might point out further-and I believe the right hon. Leader of the Opposition also is concerned in this matter-that there have been meetings between the P.F.R.A. officials and the concerned parties. One of the fears of the hon. member with regard to the time element in this matter is ill founded, in that this work can well be carried out next February, when at that time the water is lowered by the dam. So there is no imminent danger of flooding, precluding the work being done as the hon. member feared.
The P.F.R.A. officials and the local officials are working together to find some method whereby this very valuable and important shrine can be preserved at some reasonably economic cost. I think this is the problem.



SHIPBUILDING


[Stage Direction]
On the orders of the day:
Stanley Ronald Basford: Mr. Speaker, my question is for the Minister of Transport. Now that the minister has had an opportunity to read Hansard for last Friday afternoon, when he was unavoidably absent, I wonder whether he is now in a position to announce a change in the shipbuilding subsidy program to include provincially owned ferry services.


John Whitney Pickersgill: Not at the moment, sir.


Stanley Ronald Basford: When does the minister expect to be in a position to answer?


John Whitney Pickersgill: I hesitate to forecast, sir. [Translation]



CROWN CORPORATIONS


[Stage Direction]
On the orders of the day:
Gilles Grégoire: Mr. Speaker, may I put a question to the Minister of Citizenship and Immigration?
Can the minister tell the house now when he will be in a position to picket the headquarters of the Polymer Corporation?


Mr. Speaker:: Order, please.



NATIONAL DEFENCE

[Stage Direction]
McGILL university research project On the orders of the day:
Mr. David Orlikow (Winnipeg North):: Mr. Speaker, I should like to direct a question to the Minister of Industry and ask whether he has met recently with representatives of McGill University regarding the federal government contribution to the financing of the HARP project; and if he has, whether any decision has yet been made by the government on this matter.


Hon. C. M. Drury (Minister of Industry):: Yes, I have met with representatives of McGill University regarding the high altitude research project, at which meeting important supplemental information was obtained from the McGill University authorities. This is now being studied as a matter of urgency.



ADMINISTRATION OF JUSTICE


[Stage Direction]
On the orders of the day:
Martial Asselin: Mr. Speaker, may I direct a question to the Minister of Justice?
The Quebec Minister of Justice recently announced that he was considering setting up, alone if necessary, an investigation on organized crime. Has the minister considered joining the Quebec Minister of Justice to set up such an investigation during his holidays?
March 29, 1966	COMMONS


Hon. Lucien Cardin (Minister of Justice):: Mr. Speaker, Attorneys General were recently convened to discuss the matter of organized crime and, up to now, I personally see no reason why the invitation of the Quebec Minister of Justice should be accepted.



INQUIRY FOR RETURN

[Stage Direction]
On the orders of the day:
Mr. Raymond Langlois (Meganlic):: Mr. Speaker, I should like to put a question to the Minister of Finance. I shall not refer in any way to his budget speech scheduled for tonight. It is about a question of mine which was made into an order for return in January 1965. I rose on a question of privilege concerning that order for return which sought to obtain all the names of those who received 1965 sets of Canadian coins when their requests, submitted before January 1965, were complied with within two days. Mr. Speaker,
I have been waiting for those names for a year and a half. Can the minister assure me that he will inquire and tell me on approximately what date I can expect to get those names?
IEnglish]


Mitchell William Sharp: I shall be very happy to do so, Mr. Speaker.



EDUCATION


[Stage Direction]
On the orders of the day:
Mitchell William Sharp: Mr. Speaker, I should like to answer a question that was asked of me on March 17 by the hon. member for Bruce (Mr. Loney). The hon. member asked about the Canada student means survey. When the survey of student means now being conducted by the Canadian Union of Students has been completed, the federal government's direct and indirect contribution will have constituted more than half the total expenditures likely to be incurred by the C.U.S. The government has not been requested by this organization to make an additional contribution, and none is contemplated.



CANADIAN NATIONAL RAILWAYS


[Stage Direction]
On the orders of the day:
James Russell Keays: Mr. Speaker, I wish to direct a question to the Minister of Transport. Has the minister been successful
DEBATES	3337
Inquiries of the Ministry in getting information as to the possibility of an inquiry into the passenger service on our go-go train in the Baie des Chaleurs?


John Whitney Pickersgill: As a matter of fact, Mr. Speaker, yesterday I was discussing air service in the Gaspe rather than rail service.


James Russell Keays: A supplementary question, Mr. Speaker. We appreciate that, but I think we should get back to natural things and get one train going.



VETERANS AFFAIRS


[Stage Direction]
On the orders of the day:
Stanley Howard Knowles: Mr. Speaker, may I direct a question to the Associate Minister of National Defence relating to a matter that was under discussion when the departmental estimates were before us a few weeks ago. Has a decision been made on the allowing of wartime service for pension purposes in the case of permanent force personnel?


Hon. Leo Cadieux (Associate Minister of National Defence):: Not yet, Mr. Speaker.


Stanley Howard Knowles: As a supplementary question, Mr. Speaker, can the minister say whether this decision will be made soon?


Léo Alphonse Joseph Cadieux: I think very soon, Mr. Speaker.



MINES AND TECHNICAL SURVEYS


[Stage Direction]
On the orders of the day:
David Réal Caouette: Mr. Speaker, I should like to direct a question to the Minister of Mines and Technical Surveys. Has he had discussions in the past week with the Minister of Mines of the province of Quebec or with his officials on the gold mines of northwestern Quebec and what were the results of these discussions?


Hon. Jean Luc Pepin (Minister of Mines and Technical Surveys):: Mr. Speaker, I have been away for four days and the minister of the provincial government to whom I phoned has not returned my call. Nevertheless, I shall try again this very afternoon.

March 29. 1966
Yukon Act



CANADIAN CITIZENSHIP


[Stage Direction]
On the orders of the day:
Mr. K. H. More (Regina City):: Mr. Speaker,
I wish to direct a question to the Secretary of State. I wonder whether the hon. lady could indicate if a date has been finalized for the opening of a citizenship court in Regina.


Hon. Judy V. LaMarsh (Secretary of State):: Not to my knowledge, Mr. Speaker. As my hon. friend realizes, I do not yet have formal responsibility for citizenship. I share this responsibility with my hon. friend the Minister of Citizenship and Immigration.



YUKON ACT


Hon. Arthur Laing (Minister of Northern Affairs and National Resources) moved: the second reading of Bill No. C-147, to amend the Yukon Act.


George James McIlraith: That the house do now proceed to the order appearing under private members' notice of motion No. 66 on today's order paper, resuming debate on the private members' motion proposed by Messrs. Byrne, Nugent, Scott (Danforth) and Stanbury, and the proposed amendment thereto of Mr. Gauthier.


Some hon. Members:: Agreed.


Ralph Bronson Cowan: Mr. Speaker, I understand that this action is being taken under Standing Order No. 44, of course, and I can see no reason for detouring from Ottawa to the Yukon and then back in order to discuss a matter on the floor of this house. I believe Bill No. C-147 is worthy of consideration at this time and that we should proceed to the discussion of it.


An hon. Member:: It is too late.


Mr. Speaker:: Order, please. A motion has been made by the Minister of Public Works (Mr. Mcllraith). While the hon. member may feel this way, if he opposes the motion he can vote against it. The motion is now before the house.


Gilles Grégoire: Mr. Speaker, you have not indicated whether or not this motion was in order. I have no objection to a discussion on the death penalty, but I suggest we are now setting a
[Mr. Pepin.1
dangerous precedent in this house. How is this motion in order?


Mr. Speaker:: Order, please. If any hon.
members feel there is some difficulty about the motion they can certainly bring it to the attention of the Chair, and I will be glad to take their views into consideration. The hon. member for Lapointe.
[DOT] (3:20 p.m.)


Gilles Grégoire: Mr. Speaker, once again, I have no objection to our discussing today and tomorrow that resolution about the abolition of the death penalty, but I find that we are creating a precedent by calling upon standing order 44 of the House of Commons which stipulates:
When a question is under debate, no motion is received unless to amend it; to postpone it to a day certain; for the previous question; for reading the orders of the day; for proceeding to another order-
It is under that standing order 44 that we are proceeding to another order and that we are asking to come back to that resolution dealing with the death penalty.
But, there is also standing order 18 which stipulates:
All items standing on the orders of the day, except government orders, shall be taken up according to the precedence assigned to each on the Order Paper.
That is according to the respective priority assigned to them on the order paper.
If I refer to today's order paper, resolution No. 66 is at the bottom. In my copy of Hansard, there is a page missing; the pages are mixed. Mr. Speaker, I apologize but there are five pages missing in my copy of the order paper.
Today, resolution No. 66 is at the very bottom of the private members' notices of motions.
I am speaking here as a private member who, at any time, can have a motion under the private members' notices of motions. Today, I am not trying to avoid a dangerous precedent; it will be possible at any time, at five o'clock or at five to five, to act in such a way as to avoid discussing a notice of motion or a private member's public bill and disregard standing order 18 by having us study bills and notices of motions other than those which should be studied according to the said standing order.
March 29, 1966

Mr. Speaker, the motion moved by the Minister of Public Works is out of order, because if the minister wants to make us take up another item of the orders of the day, he must at that time refer us to the private member's notice of motion, and if all motions preceding the last, that is resolution No. 66, stand, we shall come to resolution No. 66. But we cannot just leap over the others because it would be contrary to Standing Order 18-
{.English1


Mr. Baldwin:: I rise on a point of order, Mr. Speaker.


Mr. Speaker:: The hon. member is now on a point of order.


Gerald William Baldwin: I was about to ask if the hon. member was on a point of order.


Mr. Speaker:: Yes, the hon. member is not debating the motion; it is not debatable. He is speaking to a point of order and suggesting that perhaps the motion could not be made at all.


Gerald William Baldwin: This is the point I wanted cleared up, Mr. Speaker.


Gilles Grégoire: Mr. Speaker, under the circumstances, the minister sets aside standing order 18 which I read a moment ago and which says:
All items standing on the orders of the day, except government orders, shall be taken up according to the precedence assigned to each on the order paper.
This means that, according to our standing orders, the intention was to protect the private members' business and avoid that the government or a minister could decide which of the private members' business will come first, second or last. The intention was to respect certain members' privileges, namely their right to discuss any of their public bills or notices of motion.
It is this privilege of members which is protected by Standing Order 18.
If the minister forgets it, or if you forget it, this would set a dangerous precedent, because one of the main privileges of the members would be affected and in the future, it would always be possible to deny under any circumstances, a member the right to present a motion or at least to have it considered, even if it stands at the top of the list, in order to discuss a motion moved by a minister, such as the one presented by the Minister of Public Works.
Yukon Act
Mr. Speaker, I say that if the minister finds a way for a discussion of capital punishment, well and good, but it must not be at the expense of the private member's privileges.
If you rule in favour of this motion, without any consideration for standing order 18, I say that the private members' privileges will be affected because, in the future, it will not be necessary to take into consideration their notices of motion or their public bills, and the discussion of the said bills and notices of motion could be set aside.
This is what must be avoided at all costs and the responsibility for the safeguard of private members privileges rests with the Speaker. For this reason, Mr. Speaker, aware of your sense of justice toward the private members, I should like to refer to this standing order and ask that you rule the motion moved by the Minister of Public Works out of order.
Obviously, if all members who have notices of motions on the order paper wish them to stand, we would then agree to discuss resolution No. 66, but not before such a request is made.
[English1


Hon. Marcel Lambert (Edmonton West):: Mr. Speaker, this is a rather novel procedure which the government has adopted under the circumstances. I share with many hon. members the desire to come to a conclusion on the question that was being discussed yesterday. However, I do not feel we should adopt something that is fundamentally wrong under our rules to extricate those directing this motion from the difficulty into which they got themselves by having a limited order which expired last night at ten o'clock and by not taking the precaution of putting a proper notice on Friday's Order Paper.
I agree entirely with what has been said by the hon. member for Lapointe (Mr. Gregoire) that we are put in perhaps a novel situation, but I support him totally in this instance because what is proposed by the government house leader is something that could work but which must also work in reverse. Frankly, Mr. Speaker, if this motion is deemed to be legal it makes utter nonsense of our Standing Orders and of our rules laying down the order of business. The rules could then be thrown into the wastebasket because all that would have to be done in the future would be for the Clerk of the house to call an order and then a member of the government could propose that we move to another item.

March 29, 1966
Yukon Act
The item could be a private member's public bill, it could be a private member's notice of motion, it could be anything. Conversely, if that could be done it would be within the power of a member of the government to stand up during private members' hour and move that we return to an item of government business. This procedure would not be permissible under Standing Order 18 and would not be permissible under the traditions of this house. This procedure is not permissible under any number of the rules of this house, but I shall not go through the Standing Orders one by one.
Notwithstanding the circumstances of this case and the importance of the matter we had under discussion, I would say this procedure would create a terrible precedent if we were to accede to the illegality of such a motion as the one proposed by the government house leader and say it was in order. On those grounds I ask Your Honour to reject the motion.


George James McIlraith: Mr. Speaker, I am somewhat amazed to find the hon. member for Edmonton West (Mr. Lambert) arguing in effect that notwithstanding the legality of the motion Your Honour should rule it out of order. I am rather amazed at that position.


An hon. Member:: He did not say that.


George James McIlraith: The motion is made under Standing Order 44 which reads as follows:
When a question is under debate no motion is received unless to amend it;-
Then I leave out a few words and continue quoting:
-for proceeding to another order;
Since this Standing Order was put in the rules it must surely have been intended for some purpose. Incidentally, this Standing Order received the attention of the house as late as June 11, 1965, and it has been used from time to time since. If it means anything, surely it means what it says, that when a question is under debate no motion is received unless-I leave out the other exceptions-for proceeding to another order.
[DOT] (3:30 p.m.)
It is quite true that Standing Orders 15 and 18 do set out the normal course of business. Standing Order 15 sets out the order in which the Order Paper is printed and Standing Order 18 sets out the right of the government to call government orders in any sequence it

wishes. The resolution respecting capital punishment is not a government order and that is where the difficulty arises. When we request that government time be made available for private members' notices of motions-because that is what this is-we are prevented from using Standing Order 18.
There is a very good precedent which can be applied to the other order, namely, the case on January 13, 1881, when the then prime minister of Canada, Sir John A. Macdonald, used this same procedure. Different terminology was used in dealing with different parts of the Order Paper in that day, but he did precisely what we are doing here.


John George Diefenbaker: Were the rules the same then? Was standing order 18 (1) one of the rules?


George James McIlraith: The point is the same and the rule has bearing on the point. Different terminology was used regarding the other rules setting up the Order Paper. In that case there was precisely the same point, and the motion of course carried.
Incidentally, it is interesting to note that Sir John A. Macdonald explained why he was using this procedure. The reason for taking this course was that it was of the very greatest importance that the matter be disposed of one way or the other without any delay. That is just an interesting sidelight.


Mr. Ricard:: This all stems from one of your members.


George James McIlraith: The whole point is that Standing Order 44 must surely be taken to mean precisely what it says, particularly when we reinforce it with a precedent of such validity as this.


Mr.  R. Gordon L. Fairweaiher@Royal: Mr. Speaker, I should like to refer you to two citations, one of which will support the contention of the house leader. The first is citation 88 (2) on page 82 of Beauchesne's fourth edition, which reads as follows:
All motions referring to the business of the house should be introduced by the leader of the house.
Second, may I refer to citation 189 to be found at page 160 of the same volume. This paragraph concerns the requirement of notice. It is interesting to note that the government house leader used the words "normal proceedings", and I think that is the key to the matter. We must be within the rules but we must have some flexibility.
March 29. 1966

It interests me, Mr. Speaker, that the country is wondering how this institution can adapt itself to the day by day proceedings which are before it. If we are to be frustrated by what I might refer to as wilful men with wilful opinions, then this institution can be validly criticized by the public who do not understand-


Mr. Speaker:: Order, please.


Mr. Fairweather:: I had better keep quiet, Mr. Speaker, and leave you with the rules which are clearly there to meet the situation which the house leader sees.


Stanley Howard Knowles: Mr. Speaker, I should like to say a few words on this point. I believe weight should be given to the suggestion made by the house leader. Standing Order 44 is in the book and provides, in this circumstance, for a motion to proceed to another order. I recognize that any such motion should not run afoul of any other Standing Order, and I shall deal with that in just a moment.
First of all may I point out, as has the hon. member for Royal (Mr. Fairweather), that citation 189 of Beauchesne's fourth edition lists motions which can be made without notice. One of them is for proceeding to another order.
May I also draw attention to citation 195 of Beauchesne's fourth edition, which deals at some length with superseding motions of various kinds. This paragraph is relevant and reads as follows:
Dilatory motions are designed to dispose of the original question either for the time being or permanently. They are the following: "That consideration of the Question he postponed to ...
(date)." "That the orders of the day be read." "That the house proceed to (name another order): or that the house proceed to the next business." "That the debate be now adjourned." "That this meeting be now adjourned." Adjourned motions are in this class because they may sometimes be used to stop a debate which will never be resumed.
I have read the whole paragraph, Mr. Speaker, but the relevant part indicates that there is provision for a motion to proceed to another order of business. The motion made by the government house leader is in those terms.
However, Mr. Speaker, the hon. member for Lapointe (Mr. Gregoire) has quite properly drawn our attention to Standing Order 18 (1) and he has been supported by the hon. member for Edmonton West (Mr. Lambert) and perhaps by one or two others. I think one has to look carefully at Standing Order 18 (1).
Yukon Act
What Standing Order 18 (1) does is to provide the order of private members' business within private members' hour.
The hon. member for Lapointe is perfectly correct in drawing attention to this rule. If this were private members' hour, if we were now between six and seven o'clock, it certainly would not be in order to move and to decide by a majority vote that the first 65 items be passed by, whether or not their sponsors wanted them to be passed by, and that we take item No. 66. But we are not in private members' hour, Mr. Speaker; we are in government time.
I submit that if the government wishes through one of its own ministers to ask the house to supersede government business for a private member's motion, then that is quite a different story from seeking to sit one private member's motion against all the others within private members' time. I would say, Mr. Speaker, that if this motion is accepted and passed it has effect only up until six o'clock. At six o'clock the question would then arise: What do we do in private members' hour? At that juncture I would support the point made by the hon. member for Lapointe, supported in turn by the hon. member for Edmonton West.
However, at this point it seems to me that we are in government time, and if the government wishes to make a proposal which does not infringe on private members' rights but in fact gives something which private members do not have then that is not in violation of Standing Order 18 (1). Therefore, Mr. Speaker, I think consideration should be given to the legality of the motion moved by the house leader as being operative for the period from now until six o'clock.


Gordon Minto Churchill: I think this is a most unusual occurrence, Mr. Speaker, and has the danger of setting a very bad precedent. I suggest, sir, that the government is attempting to encroach upon the order of private members' business with no request on the part of private members. It is attempting to select from private members' orders a certain numbered motion which the government says must be discussed now. I think this encroachment should not be allowed.
If Your Honour declares that the motion is in order, then I suggest it would be subject to amendment. It would be proper for us to amend it by striking out "Order No. 66" and putting in "Order No. 1", which would put us back to supply and into the supplementary

March 29, 1966
Yukon Act
estimates with which we should be dealing today.
[DOT] (3:40 p.m.)
I should like the government house leader to consider this point because it involves a concession of government time. Is he prepared to give government time for the discussion of private members' motions, including No. 66, up to the extent that it might be required by private members of the house? I doubt very much that he will find available government time for that purpose. Yet I am told that there are as many hon. members yet to speak on No. 66, the capital punishment debate, as have already spoken, which means that another three days would be taken up. I do not know whether it is advisable to try to squeeze them in now and attempt to reach a decision today. That means putting pressure on private members to refrain from making speeches which they were promised an opportunity to make, and it is taking unfair advantage of the house.
I conclude by saying that I think the hon. member for Lapointe (Mr. Gregoire) deserves credit for drawing Standing Order 18 to the attention of the Chair and the house. I think it would take precedence over Standing Order 44. However, should Your Honour, on the contrary, incline to the view that the motion is in order I reserve the right to move an amendment such as I have suggested.


Marcel Joseph Aimé Lambert: I rise on a point of information, Mr. Speaker. Did the minister mention that the debate would continue until seven o'clock or until six o'clock?


An hon. Member:: Seven.


George James McIlraith: No, I did not give any time. I shall read the motion again. I move:
That the House do now proceed to the Order appearing under Private Members' Notices ot Motion No. 66 on today's Order Paper, resuming debate on the Private Members' motion proposed by Messrs. Byrne, Nugent, Scott (Danforth) and Stanbury, and the proposed amendment thereto of Mr. Gauthier.


Marcel Joseph Aimé Lambert: Until what time, Mr. Speaker?


Horace Andrew (Bud) Olson: Mr. Speaker, I should like to ask whether the house leader has authority under Standing Order 44 to make the motion he has made. I think you should take into consideration what is now being done under the provisions of Standing Order 44. I believe that the purpose is one for which it was never intended to be used. I say that, Mr. Speaker, with great

sympathy for the problem the house leader has because of the procedural impasse we are in as a result of the manner in which the capital punishment resolution was brought before the house.
In so far as the argument advanced by the hon. member for Winnipeg North Centre (Mr. Knowles) is concerned and his reference to citation 195 dealing with dilatory motions, I think he only took out of it that part which was useful in achieving the end he wants to achieve. The same paragraph says that dilatory motions are designed to dispose of the original question. If we are going to rely on that, then surely this procedure is designed to do away with the consideration of the bill to amend the Yukon Act. It would raise a problem in that regard.


Stanley Howard Knowles: On a question of privilege, Mr. Speaker, the hon. member for Medicine Hat is accusing me of reading only part of a paragraph. Now he is reading only part of the sentence I quoted.


Horace Andrew (Bud) Olson: I am reading the rest of the paragraph which the hon. member for Winnipeg North Centre did not read.


Stanley Howard Knowles: On a question of privilege, Mr. Speaker, I read the entire paragraph. The hon. member is now reading only part of a sentence taken out of that paragraph.


Horace Andrew (Bud) Olson: I am giving the proper weight to the words that precede the rest of the subclause where the words are in quotation marks. I think we should be very careful about this matter because if we set a precedent whereby the government can, at any time it feels it wants to, move a motion under Standing Order 44 to get away from ordinary government business and into private members' resolutions and bills and so on, we shall in fact be doing something that was never intended under Standing Order 44.
Standing Order 18 says very clearly in paragraph 2:
Except as provided in Standing Order 56, government orders may be called in such sequence as the government may think fit.
I do not disagree with that. What we are now doing under the aegis of Standing Order 44 is to attempt to get around the hard and fast provisions of other Standing Orders, namely, Nos. 15 and 18. It is very clear in the Standing Orders that hon. members are entitled to notice of such a motion. This is for the protection of those members who want to be
March 29, 1966

present when the matter covered by the motion is before the house.
I hope, Mr. Speaker, that there can be unanimous consent to go on with the capital punishment debate and perhaps take the sense of the house on the question inasmuch as the debate has so far taken three days. I hope that may be done. However, Mr. Speaker, I am apprehensive about using Standing Order 44 to ride roughshod, if I may use such extreme words, over hard and fast provisions that protect hon. members against the government or anyone else. They protect hon. members from being faced with a subject matter of which they have had no notice.
I say that because I believe the government had some indication yesterday and even last Thursday that there was going to be a procedural problem in carrying on this debate with unanimous consent to its conclusion. What happened on Wednesday and Thursday of last week and on Monday of this week-I think no one denies this-was in fact done through an order of the house by unanimous consent. In doing that there was no superseding or circumventing of those Standing Orders that protect the rights of individual members.


Mr. Speaker:: Order, please. I wonder whether any point can be served by going into the matter further. It seems to me that all possible arguments have been made for and against. I do not want to question the right of hon. members to contribute to the discussion on the point of order, but I can assure hon. members that I have heard enough. My mind is made up. Nothing that can now be said is going to change my mind.


Gerald William Baldwin: May I ask a question of the house leader? It involves a matter that disturbs me and my inclination to support the motion depends on the answer. Has there been any suggestion that the motion is one which would place a limit on this debate, or is it intended to provide time so that all hon. members can have the opportunity to take part in the debate?


Lester Bowles Pearson: Perhaps I can answer that by saying that there is no intention on the part of the government to place a limit on the debate of the motion. There is every intention to find enough time so that the debate can proceed to a conclusion at the earliest possible date.


John George Diefenbaker: I should like to say a word, Mr. Speaker, before you make your
Yukon Act
ruling. Having listened to the Prime Minister and having had assurance as to time, could it also be recognized that what we are doing here shall not constitute a precedent for the future? I think what the Prime Minister has said meets the situation generally. There is no endeavour on the part of the government, if that is what the answer means, to limit the discussion in the house. However, I think we should also have the further assurance I have requested. Having listened to the argument, I have my own idea about the matter and it would take quite a bit to convince me that I should accept a proposition such as the one before us as a precedent. However, in order to get on with the business and in view of the words just spoken by the Prime Minister, I suggest that the house agree that acceptance of this motion will not create a precedent.
[DOT] (3:50 p.m.)


Gilles Grégoire: Mr. Speaker, there has been a new development. The Leader of the Opposition (Mr. Diefenbaker) asks that it be not a precedent-


Mr. Speaker:: Order. A while ago I mentioned to the hon. member for Lapointe that, having heard the excellent arguments which he submitted to the Chair as well as those put forward by other hon. members, I am ready to give a ruling on the question raised by the hon. member for Lapointe.
[English1
I take into account, of course, the comment made by the Leader of the Opposition. What he is suggesting now is that once the point of order has been disposed of there may be a disposition on the part of the house to proceed by unanimous consent. This is something we can consider after the ruling is given.
We have before us a motion proposed by the Minister of Public Works under Standing Order 44. He proposes to us a superseding motion. The argument put forward by some hon. members is that if this Standing Order means anything it means that we can move from one area of business to another. My answer is that this type of motion is intended to enable the house to move from one order to another within the same type of order, from one order of private members' business to another order of private members' business or from one government order to another government order.
This Standing Order, as is the case with others, has to be read in the light of a number of Standing Orders dealing with the

March 29. 1966
Yukon Act
same subject. We have Standing Order 15 which sets out the daily order of business and Standing Order 18 which sets out the precedence of business. What we would be doing now by accepting this motion would to my mind be changing this precedence. We would in effect be acting in contravention of Standing Orders 15 and 18. It is a motion which attempts to suspend the normal course of business and in my view it is a substantive motion which requires notice.
I would call the attention of the house to Standing Order 32(1) referring to motions which are debatable. Standing Order 32(l)(m) refers to the management of the business of the house and the arrangement of its proceedings. Perhaps this motion might be classified as a disarrangement of the business of the house, if not an arrangement.
I would also refer hon. members to citation 10 of Beauchesne's fourth edition to the following effect:
Standing Orders may be suspended for a particular case without prejudice to their continued validity, for the House possesses the inherent power to destroy the self-imposed barriers and fetters of its own regulations. It may even pass an order prescribing a course of procedure inconsistent with the Standing Orders. A motion for such temporary suspension requires notice under Standing Order 41-
For all these reasons I suggest to hon. members that there is no possible course open to the Chair but to refuse the motion as it has been presented by the Minister of Public Works.
To return to what I said at the outset, there may be a disposition on the part of the house to agree to a debate on this particular subject this afternoon. This, of course, would have to be by agreement, by unanimous consent of hon. members. Is this agreed?


Some hon. Members:: Agreed.


Mr. Speaker:: The hon. member for York-Humber (Mr. Cowan) rose but it was impossible for the Chair to know what he has in mind.


Some hon. Members:: Oh, oh.


Ralph Bronson Cowan: There is not unanimous consent.


Mr. Speaker:: The hon. member refuses his consent.


Stanley Howard Knowles: May I ask the leader of the house a question? In view of what has happened, will the government consider placing the necessary notice on the Order Paper so

that we can have time to debate this matter in the future without this kind of difficulty?


George James McIlraith: I will consider that suggestion carefully. It is becoming apparent that there would be lengthy debate on such a motion. We would have to consider the whole matter very thoroughly. Perhaps it would be better if I did not pursue this subject now because it is not before the house at the moment.


Stanley Howard Knowles: Perhaps the hon. gentleman would call a meeting of the house leaders to see whether we can reach agreement.


George James McIlraith: The last one was 100 per cent unsuccessful, but I am always an optimist. I will consider another meeting this afternoon to see whether an agreement can be reached. It will be readily appreciated that all house leaders sometimes find difficulty in speaking for all the members of their parties.


Michael Starr: Mr. Speaker, I rise reluctantly to say at this point that after taking account of the mess the government has created with respect to this situation-we have wasted almost an hour and a half discussing it-I believe we should proceed with the business and pass the supplementary estimates and get the bills through before the afternoon runs out.


Mr. Speaker:: I should like to call the attention of the house to the fact that there is before us now second reading of a bill moved by the Minister of Northern Affairs and National Resources. It was moved by Mr. Laing that Bill No. C-147, an act to amend the Yukon Act, be now read the second time.


George James McIlraith: In the light of what has transpired I am wondering whether the opposition house leader and the others leaders would agree that we adjourn the debate on the bill now before the house and proceed to consideration of the final supplementary estimates.


Michael Starr: Would you repeat that, please?


George James McIlraith: I was suggesting that we should proceed immediately to consideration of the supplementary estimates.


Mr. Winch:: Would the leader of the house check with the hon. member for York-Humber to see whether that is in order?


George James McIlraith: I am sorry if my remarks were not clear. I asked for unanimous consent to have the debate on the Yukon Act
March 29, 1966

amendment adjourned in order that we might proceed to discuss final supplementary estimates.


Michael Starr: Agreed.


Mr. Speaker:: By unanimous consent,
agreed.

The house in committee of supply, Mr. Batten in the chair.



DEPARTMENT OF PUBLIC WORKS

[Stage Direction]
le. General administration, including grants as detailed in the estimates, $44,500.
Mr. Barnett:: Mr. Chairman, it is not my intention to indulge in lengthy remarks on the final supplementary estimates at this stage. Coming from a constituency where the application of the Navigable Waters Protection Act is a matter of great concern, I have been quite interested in the problem raised by the hon. member for York-Humber with respect to certain developments on lake Ontario. The issues which he has raised are ones which go beyond the immediate area he has discussed and I feel we should have some clarification or statement from the government with respect to the act while this item is under consideration.
[DOT] (4:00 p.m.)
According to my recollection the hon. member for York-Humber raised this matter during earlier discussion of the estimates, but i do not recall any statement from the government dealing properly with the issues raised by him. He has stated that there has been a complete flaunting of the provisions of the act.
If the act is one which cannot be enforced, if it is something which can be defied at will by anyone who chooses to ignore it, then we should be so informed and told what steps are being taken either to repeal or amend it. The legislation falls within the jurisdiction of the federal government under the British North America Act. The federal government has the responsibility for controlling navigation on the navigable waters of Canada, both inland and coastal, and it must ensure proper control over structures that are erected in navigable waters so that they can be recorded and charted for the benefit of those navigating the waters.
I have no direct knowledge of the situation on lake Ontario but, so far as I am aware, up until now there seems to have been little objection on the part of my province of
Supply-Public Works
British Columbia to complying generally with the requirements of the act. But if the provisions of the act can be blindly ignored in one part of the country there will be a tendency to ignore them in other parts of the country, and thus it becomes an important national issue.
The only suggestion I have heard from B.C. that the act has been ignored has been in connection with the construction of a dam on the Peace river. Questions were asked whether an application was made under the act by the premier or government of B.C. Regardless of the status of any particular piece of property or any particular waterlot, I feel that the question raised by the hon. member for York-Humber is one which requires an answer so that all hon members may know what the situation is with respect to the act.


Mr. Benson:: Mr. Chairman, the practice in dealing with final supplementary estimates has been that not all of the ministers attend because usually there are only one or two items from each department involved and they are carried by the Minister of Finance or some other minister. I, of course, am not in a position to answer the specific questions raised by the hon. member for York-Humber, but what I can do is give him an assurance that I will draw to the attention of the Minister of Public Works everything he said in his learned presentation on Friday last and ask the minister to communicate directly with the hon. member.


Mr. Nielsen:: Under Public Works on page 15 there are two items for contributions toward the construction of schools in the Yukon Territory. Should not those items come under Northern Affairs, vote 45e on page 13, where there are three similar items for the construction of schools in the Yukon Territory?


Edgar John Benson: Mr. Chairman, I have an explanation for these particular items which may be satisfactory to the hon. member. Treasury Board Order No. 650428 dated February 3, 1966, authorized the payment of a grant toward the capital cost of territorial schools in the Yukon territory based on an amount equivalent to the percentage of pupils to be accommodated, who are children of departmental employees living in tax-exempt premises.


Erik Nielsen: I am not questioning any thing except the possibility of a printing error or an error in the compilation of the

March 29, 1966
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supplementary estimates. I believe these two items on page 15 should not be under the Department of Public Works but under the Department of Northern Affairs as on page 13.


Mr, Benson:: The explanation I was reading will cover this matter. Prior to the take-over of the North-west highway system by the Department of Public Works, capital contributions were made by Citizenship and Immigration, Northern Affairs and National Resources and the Department of National Defence. As a result of taking over the highway system the Department of Public Works became responsible for the commitment made by the Department of National Defence. Specifically the grants are to be made with respect to these particular schools, but it became a matter for the Department of Public Works following the takeover. These were commitments by the Department of National Defence with respect to the highway system and when the highway system was turned over to the Department of Public Works it assumed these responsibilities.


Herbert Wilfred Herridge: Mr. Chairman, I have listened on several occasions with a great deal of interest to the complaints of the hon. member for York-Humber regarding buildings on waterlots and I think there is a lot of merit in the case he has made. I believe he has told the committee an amazing tale.
In British Columbia the riparian owner or the person who has title to the land owns the land to the mean high water level or to the edge of vegetation. Then there can be water-lots from that point into a lake, which are used for mooring grounds, launching ramps and so on. In my experience I never remember the government of B.C. giving permission for the building of any structure on such lots without the prior approval of owners adjacent to it or without a properly drawn agreement. I can give an illustration.
[DOT] (4:10 p.m.)
On one occasion a lumber company in my constituency had applied for the right to erect certain piles or booming grounds and to do other work on such a lot. It became impatient waiting for a decision from Ottawa so it went ahead and erected the pilings, docks and things of that sort. Later they were ordered by Ottawa to take the pilings and booms down because they had no right to interfere with the riparian rights of the owners adjacent to the lake in question. In my opinion, Mr. Chairman, the Minister of Public

Works should allow this item to stand and obtain a legal opinion in respect of this matter. I can speak from my personal and quite lengthy experience with the development of foreshore property and water lots on rivers and lakes and on an international river in British Columbia. It seems to me that the minister should allow this item to stand so he can obtain a legal opinion before the item is carried by the house.


Edgar John Benson: If I might interject, as I said, I heard the case put forward by the hon. member for York-Humber and I said I would see that the case was brought to the attention of the Minister of Public Works. However, I think we should remember we are not here considering the estimates of the department for the whole year but rather what we are considering at this particular time is permission for the government to complete the expenditures for the fiscal year 1965-66 which comes to an end tomorrow.
The money required in these supplementary estimates is to clear up these bills. There will be other supply motions and there will be a full consideration of the estimates for the whole of the coming year. I believe that the hon. member for York-Humber will have every opportunity to bring up this particular matter when the estimates are being considered by the house and, indeed, he could bring the matter up on a supply motion or on interim supply.


Herbert Wilfred Herridge: In view of the circumstances, would the minister take action with regard to the holding up of this development at this point until the committee has an opportunity to examine the circumstances?


Edgar John Benson: Mr. Chairman, I cannot give such an undertaking because I really do not know what the circumstances are. I am not the Minister of Public Works and therefore do not know what the circumstances are in connection with the particular matter raised by the hon. member for York-Humber. All I know is what the hon. member for York-Humber has said. He certainly has every right to bring up this matter and pursue it to the fullest. All I am questioning is whether this is the point at which to do it when what we are trying to do is to get the final supplementary estimates through in order to pay our bills for the year.


Mr. Peters:: Mr. Chairman, I have listened very carefully to the minister and I sympathize with him with relation to this. matter.
March 29, 1966

When the hon. member started out he thought there really was no point in discussing this subject again as he had done so a number of times previously. This raises a matter which goes beyond this particular problem. I listened very carefully to the problem he raised. I think it was explained well enough and the departmental officials must have known about it for at least a year and perhaps longer because the hon. member brought up the matter on a number of occasions.
Personally I am of the opinion that the problem raised is one affecting an individual riding and therefore it is the hon. member's responsibility as a member to bring it up on behalf of his constituents. This is not something that should be put off; rather, a reasonable answer should be provided.
It may well be that the Navigable Waters Protection Act is out of date. I know it has not been applied in many cases where it should have been applied. I have read the act because I represent an area in which there is a large body of interprovincial water. Several other acts are involved including one going back to the time of Queen Victoria. I have read many of the sections and they are very specific in terms of building wharves, docks or obstructions of any type.
I had hoped the minister would say he would stand the item and ask the departmental officials to give some consideration to the argument made by the hon. member. I believe that it should not pass until a decision is made one way or another. I think we have an obligation and I feel I have an obligation to help the hon. member obtain some logical explanation in respect of the problem he has raised which concerns a large number of his constituents.
If we as individual members raise problems which affect our constituencies during the consideration of the estimates and cannot count on immediate attention by the departmental officials in respect of these problems, then I think it behooves other members to support any such member in seeking a decision. I do not wish to go into the ramifications of this particular member's problem. It is a very simple matter. He is raising a question in respect of building on waterlots, which obviously comes within the terms of the Navigable Waters Protection Act for which the Minister of Public Works is responsible. No decision has been made in this case. No permit was issued for the work, although the operation is taking place, nor
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was a permit refused on the ground that this type of work could not be done.
I do not know how the other members from Toronto feel about the matter but it seems to me that every member from the city of Toronto should be interested. I know Toronto to be a very homogeneous city where workers work in one section and live in another and the Toronto members represent a conglomeration of people. I would think there would be some joint responsibility for the waterfront of the city and that it would behoove all members from that city to take collective action in this matter which seems to affect not only Etobicoke but also Long Branch, Toronto Island Airport and many other areas on the waterfront.
I do not like to ask the Minister of National Revenue to make any commitment because I think he has made as much of a commitment as he can. He is not responsible for the department. However, I do know that the departmental officials are aware that in a very short time these accounts will appear in the public accounts but in the meantime they are going to be held up.
I would suggest it is in the interest of all members of the Department of Public works to clean up this matter. I suggest that this item is not going to pass today and so far as I am concerned it is not going to pass for some time. I am quite prepared to help the hon. member carry on a filibuster for a number of days if necessary to see that he gets an answer. This may be quite unreasonable, Mr. Chairman, but I have listened to the same argument a number of times and have heard no logical explanation why the Navigable Waters Protection Act has not been enforced and why an answer is not given.
Frankly I could not care much less whether we have changed the policy and are now going to allow the filling in of waterfront lots and thereby obtain new land. We are doing this in Montreal where we are building Expo on that type of site. As a matter of principle I am not objecting to the filling in of waterfront lots. But I do think the act is very specific in respect of the responsibility belonging to the Minister of Public Works, and to slough off the matter as has been done in a number of discussions is not in the interest of the operation of parliament and certainly is not giving a fair deal to the people of the riding concerned.

March 29. 1966
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[DOT] (4:20 p.m.)
If estimates serve any purpose they serve the purpose of allowing the individual member to obtain a reasonable answer in regard to a problem he raises, particularly when the problem is directly related to his riding. For this reason I am of the opinion that an answer must be given before this item is passed. I think I speak for four of five members in my party who are also convinced that the Navigable Waters Protection Act is not being complied with in this case. The law is not being observed and people who are complaining about these things are not receiving adequate consideration. Until there is some indication why action has not been taken in this regard, this item will not be passed.
I suggest to the minister that he ask for the withdrawal of this item of the estimates of the Department of Public Works and that we go on with the other items. We intend to wait until a decision is reached with regard to this matter. If a decision is not made I am prepared to help to hold up also all the other estimates, and I do not think this would be in our interest.


Edgar John Benson: Mr. Chairman, I am endeavouring to obtain additional information on this question. I am not the Minister of Public Works and am not personally informed on this matter. Might I suggest to the committee that we stand this particular item? I have sent an inquiry concerning it to the Minister of Public Works. I would suggest that we proceed with other items and return to this one later.


Ralph Bronson Cowan: Mr. Chairman, I am quite prepared to stand this item after I have made some comments with regard to the illegal fill in lake Ontario. I regret that I was not able to complete my remarks on Friday afternoon. The facts that I gave the House of Commons last Friday are easily verifiable, and they are facts. I now come to the realm of plans and purposes in the Toronto area, which are unbelievable and unable to be grasped in a mental picture. If I ask a question of the Minister of the Minister of Public Works, who is not here now, he says, of course the Department of Public Works is seized of the facts. He immediately says, oh yes, he knows all about it and is giving the matter immediate consideration. But I wonder whether the federal government or the Minister of Public Works know what metropolitan Toronto is planning in this regard. They are planning to

build a four-lane highway about 700 yards out in lake Ontario running from Scarborough clear over to Etobicoke Creek, a distance of about 20 miles. This is a plan that has been talked about in the Toronto papers and at public meetings for months and months and months.
I have in my hand a copy of the New Toronto Advertiser of recent date. It carries a heading that can be seen throughout the house. Right across the top is the heading "Waterfront Plan Rapped. Rats-Stench and Dead Fish". This paper is published in the riding of York West and circulates in York-Humber. It contains comments by various people along the Mimico shore with regard to the plans of metropolitan Toronto to build a highway out in lake Ontario a couple of hundred feet off the shore. The people are arguing: If they build a highway out in lake Ontario a couple of hundred feet in front of our landlots, we will have rats and the stench from dead fish caught in that channel. A meeting was held in New Toronto just a few weeks ago at which the people asked that the highway be built farther out in the lake.
In the name of heaven, does the Department of Public Works never consider what can or cannot be done under the Navigable Waters Protection Act? I took the matter up with a very highly placed official in metropolitan Toronto. I said to this engineering man-and I am prepared to call him a genius -"Have you ever had these plans for a highway out in the lake, off the shore from Etobicoke, Mimico, New Toronto and Long Branch, approved by the Department of Public Works?" He said, "Oh, we cannot submit the idea to the Department of Public Works until we have a plan to show them." They are spending tens of thousands of dollars on engineering details and plans to build a highway in Lake Ontario off the shore of metropolitan Toronto; yet nobody in the Department of Public Works is consulted and nobody in that department asks what the plans are.
The Minister of Mines and Technical Surveys-I am very sorry he is not in his place-has made a number of speeches and I applaud him for so doing. He has said they are going to take every possible action against pollution. Oh yes, we are against pollution; we have to keep the water clear; we have to keep the water clean; we cannot stand for pollution. But does the Minister of Mines and Technical Surveys know that in Toronto they are talking about building a
March 29. 1966

great big dike enclosing 600 to 700 acres off the Scarborough shore in the east end and filling the area with garbage in order to save a long haul for Scarborough garbage disposal? They want to dump it behind a concrete dike out in lake Ontario off the shore of Scarborough. And that is not all; they want to do the same thing opposite Etobicoke and Long Branch.
You may think I am dreaming. I told you the mind of man could hardly conceive of the idea that these planners have in mind. What does the Department of Public Works know about it or, much less, do about it? I attended a meeting in the town of Mimico during the recess. This was in January before we were called back. I sat on the platform there with Mr. Bousfield. Mr. Bousfield is an engineer in the firm of Proctor, Redfern, Bousfield and Bacon, consulting engineers and town planners. I have in my hand the conceptual plan showing that they are going to build a four-lane highway, golf courses and public parks out in lake Ontario. What does the Navigable Waters Protection Act matter to these boys? They intend doing this in metropolitan Toronto, and somebody in the Department of Public Works is going to say that a golf course does not substantially interfere with navigation any more than two 18-storey apartment blocks interfere with navigation.
At that meeting Mr. Bousfield was asked a number of questions from the floor. I was a newspaper reporter for about eight years before I went into the business side of newspapers. When he was asked about building this highway and these islands out there, the golf course and all the other amenities of life with which they are trying to sell the idea to the lakefront property owners in my area, he said that the idea was based on a massive lake filling plan using all kinds of filling material. Mr. Bousfield said that "all kinds" included clean fill, refuse, hydro ash, and dredge material, from the bottom of the lake, I presume. In answer to a question, "How do you control pollution from the garbage fill", I wrote down that Mr. Bousfield said they would build dikes and-get this-would put sanitary fill there which would be covered nightly. He said there would be pumps behind the dikes to lift the liquids from the fill to keep them from leaking into lake Ontario and to pump the liquids from the fill up to the Mimico sewer system on the mainland.
This is what they are talking about. These are the plans they have drawn. And what does the Department of Public Works do
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about it? Not a thing. We have public meetings with 300 or 400 people in attendance in this area of Toronto where the people are protesting these plans. Meetings are held with the metropolitan Toronto planning committee. There are two advisory committees, the technical waterfront advisory committee and the lakefront advisory committee, I believe it is called.
I have here conceptual plan No. 2 dated in January. People are busy, nobody is stopping them working, but the Department of Public Works has no interest at all in this matter. I also have here conceptual plan No. 3. This one is for bigger golf courses, bigger highways, bigger playgrounds for children and bigger hotels. I also have here protests from the property owners in the town of Mimico who want to know whether anybody will stop the building of highways out in lake Ontario. Is there nothing that can be done to stop the filling in from the land side which will obstruct the properties of private land owners? These property owners are on a mile and a half of shore and they are protesting these plans.
What happens when people go to the public works department in Toronto? They are told, "We haven't a big enough staff to police the area or check it." In the name of heaven, haven't they men who can go down and see what I can see with my own eyes?
It is now half past four. Forty-eight hours ago I was walking over 70 acres of new fill in lake Ontario in my own riding of York-Humber, which was put into lake Ontario south of the shore without any permission from the Department of Public Works as required by the Navigable Waters Protection Act.
[DOT] (4:30 p.m.)
I may say that I have been riding this horse for years and getting nowhere. The Minister of National Revenue, for whom I have nothing but the greatest affection and whom I hold in the highest regard, asks if I will be satisfied if he takes note of what I am saying and conveys it to the appropriate minister. Well, I have taken this matter up with all three ministers of public works since this party came into power. I have taken it up with other members of the cabinet. I have even gone to other ministers whom I would not like to mention now and told them about it. Still, nothing has been done.
I can say that no prior consent has been granted, and I quote Mr. G. Roy McWilliam,

March 29, 1966
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former parliamentary secretary to the former minister of public works, who on June 1, 1965, answered my question. I quote from page 1866 of Hansard:
Mr. Speaker, the question of the hon. member for York-Humber (Mr. Cowan) was raised during the oral question period last Thursday. He asked whether the minister could advise the house if any individual or company which has dumped thousands of tons of fill into Lake Ontario between the Humber River and Etobicoke Creek in the past few years received permission in advance as required by the Navigable Waters Protection Act. The short answer to this question is no, Mr. Speaker.
As recently as last July 19 I saw trucks dumping fill into lake Ontario off the shore of Etobicoke. I sent a wire to a certain cabinet minister in Ottawa and asked him if he would send me a wire informing me when permission had been granted to continue filling the lake because we had been told, under date of January 21, 1965, that one developer had to stop filling. I never got an answer to my telegram last July and I have not had an answer to that telegram to this day. I will admit that they stopped filling that afternoon.
I followed the trucks to ascertain where they were getting the fill. I thought that in this case they were getting the fill from the Toronto subway. I was interested to find a basement was being excavated for a Dominion store at the corner of Dufferin and King Streets. There was a line-up of trucks getting fill. They would go about two miles over to Etobicoke, dump the fill into lake Ontario without any permission from the Department of Public Works and return to the corner of Dufferin and King Streets. I followed these trucks in my own car so I know what I am talking about. I was interested in the fact that my wire stopped this procedure, but I have never received an answer to that wire.
What is going on up there is beyond belief. We have the case of Mr. McCallum, the solicitor for the firm that is trying to build the two twin towers, who says that the question of whether the fill is there or not is not of the greatest concern. The reeve of the village of Long Branch, Mr. Thomas Berry, wants this fill put in, and the reeve of this small village of 8,000 population says that the fill is in now and it will not be taken out. "Do not underestimate the power of the developers." This is the reeve of a small village in the province of Ontario advising the government how things are conducted in the village of Long Branch.

I should like to read you two different letters bearing on this matter. After considerable protest from the residents of Long Branch, Mimico, New Toronto, Etobicoke and on my own part,' a letter was written by an engineer in the Toronto office of the federal Department of Public Works. I have sat across the desk from this man and talked tc him on several occasions. Here is the letter under date of January 21, 1965:
The Director,
Millgate Investments,
2788 Bathurst Street,
Toronto, Ontario.
This department has on a number of occasions received complaints concerning filling operations carried out by you during the last two years at the above mentioned location. At the time these complaints were investigated and reported upon by our engineers, it was revealed that none of the complaints related to possible interference to navigation.
It has been brought to my attention recently that not only has this fill been placed without prior approval of the Department of Works, pursuant to the Navigable Waters Protection Act, but then in addition thereto the fill was left unprotected and consequently caused erosion under the wave action of the lake. I further understand that the eroded material has been deposited along the shore to such an extent that a storm sewer outfall adjacent to the fill is now 150 feet from the shore line, a true indication that the material is being deposited in navigable waters with a possible detrimental effect on navigation.
I was further informed that as of December 1, 1984, the fill extended 470 feet into Lake Ontario with an average width of 300 feet.
May I interject here to say that is about two and a half acres. This land has been valued at either $100,000 or $150,000 per acre and there are over 70 acres of filled land along the shore now. You can see that the people who are playing fast and loose with the Department of Public Works are playing a game worth millions of dollars. This fill extended 470 feet into Lake Ontario in December, 1964. I continue quoting from the letter:
Our engineers-
This is under date of January 21, 1965.
-recommend that adequate steps be taken immediately-
Remember that word "immediately" because I am going to show you how long immediately is.
-to remedy the existing situation to prevent erosion of the fill. It would be appreciated if you could inform us of the method you wish to take to prevent this erosion prior to carrying out this work.
As you are aware, Part I of the Navigable Waters Protection Act generally requires that approval by the Department of Public Works of any work that is to be built in navigable waters.
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Furthermore, our engineers recommend that lights be installed at the outer ends of the filled area.
If they want to instal lights at the outer ends of the filled area, you know this is a menace to navigation.
Consequently, pursuant to Section 2(5) of the works in navigable waters regulations made by Order in Council P.C. 1956-1960 dated August 15, 1956, you are hereby required to provide and maintain lights at the outer ends of the filled area throughout the navigation season.
I like the next sentence.
On the assumption that you should immediately comply-
Can the government of this nation not state, you will comply? No, they write as follows:
On the assumption that you should immediately comply with the above instructions and requirements, you are requested pursuant to Section 5(2) (b) of the said act for the purpose of rendering the total existing fill lawful, to apply for approval of the said existing fill five years after its completion.
I cannot believe that any man in the employ of the Department of Public Works would write that sentence without having been told what to put in it. I want to read this five year clause. This earth has been dumped off Long Branch without the permission of the Department of Public Works. We just let it lie for five years and then apply for permission under the five year clause in the Navigable Waters Protection Act.
Section 5, subsection 2, of the Navigable Waters Protection Act reads:
The minister may, subject to deposit and advertisement as in the case of a proposed work, approve of the plans and site of a work after construction thereof has commenced...
(b) if five years have elapsed since completion of construction of the work;
Now, notice the wording here:
The minister may, subject to deposit and advertisement as in the case of a proposed work, approve of the plans and site of a work after construction thereof has commenced...
(b) if five years have elapsed since completion of construction of the work;
The attention of the Department of Public Works was drawn to the fact that fill was being deposited. This thing had not been completed; they were working on it when these facts were drawn to the attention of the Department of Public Works. Then the devel-lopers are told, we will look on this as though it were completed five years ago and then we can give you approval under section 5 (2)(b) of the act. The letter says that for the purpose of rendering the total existing fill
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lawful they should apply for approval five years after its completion.
Let it lie in the lake; let the mud go up and down the shore under the wave action. Let the beaches that have been built up for generations be ruined. Then five years later we will say that it has been five years since you did that so we will give you permission. We could not give you permission now because you did not request permission in advance.
I continue quoting from the letter:
Should you fall to adhere to my instructions, consideration will be given for the complete removal of the fill, at your expense, pursuant to Section 5 of the Navigable Waters Protection Act.
Rest assured that it is not my desire to be forced to such radical measures as the forcible removal of the fill placed by you at your expense, and I should be pleased if you would co-operate with me by complying with the requirements outlined above at your earliest possible convenience.
District Engineer, H. & R.
Toronto, Ontario.
[DOT] (4:40 p.m.)
That was on January 21, 1965.
In March, 1965, at a public meeting in the village of Long Branch Mr. James McCallum, the solicitor for the firm of real estate developers, admitted that the letter of January 21 had never been brought to the attention of the directors of Millgate Investments until March 4. According to this copy of the New Toronto Advertiser which I hold in my hand, the letter was mislaid. The paper says:
Millgate director Sam Muller who attended the meeting said that he was unaware of the federal government's edict.
Reeve Tom Berry, Monday, read a letter written by Millgate counsel, J. F. McCallum, to Mr. Muller in which the lawyer assumed that the Ottawa warning had been passed on from Mr. Muller's "fellow directors" to Mr. Muller.
Mr. McCallum said it was his mistake that Mr. Muller was not informed about the Ottawa letter. The lawyer's letter was forwarded by Mr. Muller to the reeve, to explain why he was not aware of the Ottawa letter.
So the period from January 21 to March 4 elapsed. From January 21 to March 4 I can assure this house that fill kept on being dumped at the property. I saw that happening with my own eyes on numerous occasions. By March 4 the ground had been built level and was some 470 feet from the shoreline. That was why they wanted this fill put in right away. Then suddenly the letter dated January 21 is found on March 4.
I have here the New Toronto Advertiser for March 18, 1965, which says:
Lawyer McCallum advised Mr. Muller that Mill-gate will ask Ottawa for approval of the fill that was dumped and now sits on the lake.

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Mr. Scoti (Danforth):: Would the hon.
member permit a question. Is he asserting by the suggestion he has made that Mr. McCallum deliberately withheld communication of that letter until that time?


Ralph Bronson Cowan: I am not responsible for the deductions any hon. members may make from facts which I put forward. I am reading from the New Toronto Advertiser, and this has never been denied.


Reid Scott: I suggest that that is a slur against Mr. McCallum. My hon. friend should either make a specific charge or withdraw the slanderous insinuation he has just made. He should make that statement outside the house, not inside.


Ralph Bronson Cowan: My hon. friend is welcome to his own opinions. I should now like to read a letter, Mr. Chairman, dated June 28, 1965, sent by the Department of Public Works. The house was adjourned on June 30. This letter is with regard to fill going on the property of Millgate Park Investments. The Minister of Public Works writes regarding fill in lake Ontario to the secretary of the Long Branch Lakeshore Property Owners Association:
I wish to acknowledge your letter of June 3, 1965, and also refer to your letter of June 7, 1965, addressed to the Prime Minister.
I do realize what a vexing and frustrating problem you have in your area created by the dumping of fill into Lake Ontario, and the construction of high rise buildings which mar the skyline. I also realize that sympathy does not help to solve your problem.
The construction of high rise buildings comes under the jurisdiction and is the responsibility of local government who issue the building permit and enforce local bylaws. The federal government has no authority in this particular field.


An hon. Member:: Hear, hear.


Ralph Bronson Cowan: They never asked for that information; it was given to them gratuitously. The letter continues:
The Department of Public Works, as administrator of the Navigable Waters Protection Act, can be concerned with Millgate Park Investments Limited proposed development only in so far as it relates to navigation. It is the opinion of the officials of this department that once Millgate Park Investments Limited construct a retaining wall to contain the fill and place navigation lights, the project will not substantially interfere with navigation.
You can see from the letter, Mr. Chairman, dated January 21 that an employee of the department is instructing them to take immediate steps to correct the situation and to report to him what they are doing or he will order removal of the fill at the expense of the

people who put the fill in there. On June 28 the Minister of Public Works himself says:
It is the opinion of the officials of this department that once Millgate Park Investments Limited construct a retaining wall to contain the fill and place navigation lights, the project will not substantially interefere with navigation.
Despite the fact that in answer to one of my questions one of the ministers said that this fill does not interfere with navigation, the minister turns around and under date of June 28 says they should put up lights. The letter continues:
Millgate Park Investments Limited have requested a delay in submitting their plans for the retaining wall as the type of wall will depend on the kind of buildings to be constructed. This request has been granted.
I want you to note, Mr. Chairman, the word "immediately" in the letter under date of January 21, because in the letter under date of June 28 the minister himself writes:
Millgate Park Investments Limited have requested a delay in submitting their plans for the retaining wall as the type of wall will depend on the kind of buildings to be constructed. This request has been granted.
I understand that Millgate Park Investments Limited are negotiating at the present time with the local authorities as to the type of building to be constructed on their site.
I wish to assure you that this department does not consider your problem to be a small one, and as requested you will be advised when a definite decision on the Millgate Park Investments Limited project is made by this department.
And now, Mr. Chairman, this problem of Millgate is further made interesting by the fact that the deed to the waterlot granted by the province of Ontario to a Mr. Thomas J. Wilkie in 1889 has in it a clause seldom found in a land grant from the Crown. This matter was discussed in detail with two of the highest officials in the Department of Lands and Forests of the province of Ontario, who were amazed to find a handwritten clause in the body of the deed. As I say, it is handwritten and says in the last paragraph:
This grant is accepted by the grantee upon the condition and understanding that should any claim be made or preferred to the above premises or any part thereof by the government of Canada or its grantee, or otherwise as to the validity of this grant, the grantee hereof shall not be entitled to claim compensation from Her Majesty or the government of this Province by reason thereof.
The title to the land is in jeopardy, and it is so stated here on the title. But no effort has ever been made to prove title. It has been allowed to be transferred to Millgate Park Investments and they are filling in a waterlot which the ablest lawyers we have been able
March 29, 1966

to engage-and they are able lawyers indeed -tell us cannot be filled in because waterlot privileges only exist for tying up of boats. In answer to my questions I was told that waterlots can be filled in, and that answer was given by the highest officials of the Department of Public Works.
I have in my hand a real estate development blueprint given me by the township of Etobicoke showing a waterlot granted in 1891 to Mr. C. Nurse, which takes in the mouth of the Humber river. Looking at this plan and realizing that waterlots used to be sold by the provincial Crown to men on the shore, it appears that the lots were purchased so boats could be tied up at night and at week ends. Mr. Nurse's waterlot is in the mouth of the Humber river and extends into lake Ontario. Depending on where the wind was, he could tie up his boats either in lake Ontario or in the Humber river, and he would not cause offence to anyone.
Now, according to the way the Department of Public Works administers the act, the man who gets legal title to Mr. Nurse's waterlot at the mouth of the Humber river can fill in the river if he wants. And nobody can stop him because the Department of Public Works say that you can fill in waterlots. That is why Millgate has been allowed to do this. That is why all these waterlots from the mouth of the Humber west toward New Toronto have been filled in.
If you can fill in waterlots, then the man who has the title to Mr. C. Nurse's waterlot granted in 1891 can fill in the mouth of the Humber river. I do not think the people of that part of Ontario will stand for that for one moment. Neither do I think the taxpayers of Canada will stand for having river mouths filled in by real estate developers, who build along the shores of lakes and look for places where they can build high rise apartments or hotels, knowing that the Department of Public Works will give them its blessing to build up this free land which, in the case of metropolitan Toronto, is worth as much as $150,000 an acre.
If a precedent of that sort is allowed to remain, then these lots will be extended from where I live along to the city of Hamilton and to the city of St. Catharines.
People say that the provinces do not sell waterlots any more, that their policy has changed. Policies change overnight. The province may not be selling waterlots today, but what is to stop the state of New York selling waterlots along the south shore out to the
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international border? Then the developers could put land fill in them. They would also be able to say that that does not interfere much with navigation. All a boat has to do is get in on the Canadian side of lake Ontario and get by the land fill projecting from the U.S. side.
[DOT] (4:50 p.m.)
It seems as if the province of Ontario can sell waterlots on the south shore of Norfolk county out to the international boundary. The waterlot owner could fill it in and if somebody complains that there is an interference with navigation, then they could be asked to go around to the American side to get around this land fill. The Department of Public Works rules that land fill, once the province has been persuaded to sell a waterlot, is all right. I submit that waterlots cannot be filled.
The hon. member for Timiskaming a moment ago used the word "filibuster". I regret that. I am not attempting anything like that. All I am asking is that the government direct a reference on this matter to the Supreme Court of Canada to determine what are the legal rights of the owners of waterlots in the Dominion of Canada. Can they fill them in and thereby cause an obstruction to navigation? The Navigable Waters Protection Act refers to navigation; it does not say substantial navigation, because navigation can be in a canoe. The act does not say that it applies to commercial navigation. As I say, a canoe can be included under the act. It does not say that it applies to the Queen Mary. In fact, it does not state the size of the ship. As much as anything else, under the act a canoe can be classified as navigation. It refers to anything that interferes in any way with navigation. I am again asking for about the tenth time for a reference to the Supreme Court of Canada as to what are the legal rights of owners of waterlots.
There are some who say, "Oh, yes. Surely the hon. member for York-Humber will ask the minister responsible to carry this inquiry to the cabinet; the cabinet will consider it, there will be a decision and then the minister will be in a position to answer him". By that time Millgate Investments will have completed its project. By that time it will be too late for the answer, "We have looked into this matter and we have decided it was not legal," to be effective.
I say, get the ruling now. I read a letter last Friday in which it was said that approval of the retaining wall is being held up during these discussions. I said then, why could the

March 29, 1966
Supply-Public Works
department not have written, "We are considering the request for a retaining wall?" I beg your pardon. The wording of the letter, as found on page 3218 of Hansard, is as follows:
Approval of this application is being delayed pending full investigation and report of complaints received against approval of the sea wall.
Millgate has submitted plans for a retaining wall consisting of eight by eight piles. What is interesting is that fill in the lake now is at the 470 foot mark. According to the letters of the Department of Public Works, the application to the Department of Public Works for the retaining wall shows in the plans that this will run out into the lake for 540 feet, not only containing the fill but also extending the area to 540 feet, with no restrictive action taken by the Department of Public Works.
When I brought this up first I was told to speak on the estimates. When I tried to speak on this question on the main estimates for the Department of Public Works for this year, I was jockeyed out of it while having supper.
I do not want to make any comments, but I will not be jockeyed out the second time, I can tell you.
Then I was told, "Bring this matter up on the main estimates for 1966-67". I asked the Minister of Public Works when his 1966-67 estimates would be up and he informed me that the opposition chose the departments which would be referred to committees for study. I must say this: I am a dumb bunny from Toronto; I am not very smart; I am not a lawyer, but I know something. I know that it is not the opposition which chooses the estimates of the departments to be taken up in committee discussion. That is why I am speaking on the 1965-66 supplementary estimates and I can tell you, Mr. Chairman, that I am looking for some satisfaction in this matter. I am looking for some satisfaction to find out who is persuading the federal government to turn two blind eyes on this matter. Land worth $150,000 an acre is being built in Lake Ontario, a public waterway which comes under the Navigable Waters Protection Act and even under the International Boundaries Treaty of 1909-


The Chairman:: Order, please.


Ralph Bronson Cowan: I want action. I do not want more promises.


Herman Maxwell Batten: Order, please. I must advise the hon. member that the time allotted to him has expired. Shall the item carry?


William Arnold Peters: Mr. Chairman, I believe we had an agreement with the minister to stand item 1 temporarily.


Edgar John Benson: That was agreed, Mr. Chairman. It was agreed that we stand item 1 of the Department of Public Works so that the minister might comment on what the hon. member has said. I have been in touch with the minister to this end.


Herman Maxwell Batten: Order. Is it agreed that item le stand?


Some hon. Members:: Stand.
Item stands.
1967 World Exhibition-
57e. Toward federal government's share of the cost of construction of an ice control structure, $800,000.


Mr. Howard:: Mr. Chairman, this is an item seeking approval to spend $800,000 toward the federal government's share of the cost of construction of an ice control structure at Expo '67. Earlier, when the estimates of the Department of Trade and Commerce were before the house, we were told it was estimated that the government of Canada or the public treasury of Canada would need to provide something in the neighbourhood of $60 million to balance the books of Expo '67 after it had wound up its affairs.
Here we have another $800,000 toward the cost of constructing an ice control structure which I assume arises out of the building of a superfluous island. I wonder whether the minister can tell me what is the total cost of the ice control structure, what is Canada's share, and whether the ice control structure was occasioned partly by the building of the additional island?


Edgar John Benson: Mr. Chairman, in order to counteract the effect of the construction of the world fair site in the St. Lawrence River at Montreal it was necessary to construct an ice dam located upstream from the Champlain bridge in the Laprairie basin. The ice dam is required to protect efficiently the existing and proposed installations at the world fair site, to assist in the prevention of ice fields in the Verdun and Lachine areas, and to assist to maintain the proper water level in Montreal harbour.
The estimated cost is $16,308,000 of which expenditure $6,258,000 was previously approved in 1964-65. Provided in the main estimates of 1965-66 was $6,750,000. Montreal's share is $1,318,000. The balance required
March 29, 1966

to complete the work is $1,182,000 and the
amount which is still required to be voted is the $800,000 requested.


Frank Howard: The figures came fast and furious and I am sure I have them incorrectly. Do I understand that the total cost of the structure is $16,308,000?


Edgar John Benson: Correct.


Frank Howard: And of this the city of Montreal contributes $1,318,000 and the government of Canada contributes the rest?


Edgar John Benson: Yes.


Frank Howard: The taxpayer of Canada contributes the difference between $1,318,000 and $16,308,000? Is that correct?


Edgar John Benson: Yes, that is right.


Frank Howard: If this is correct, I must say that it is an extremely high price for Canada to have to pay merely for the statue of Mayor Drapeau of Montreal. If the engineers of Expo '67 in the first place had built on one of the islands already existing in the river instead of making this artificial one, perhaps we should not be searching for $15 million or $16 million to pay for the cost.


Herman Maxwell Batten: Shall the item carry?


[Stage Direction]
Item agreed to.
[DOT] (5:00 p.m.)
Herman Maxwell Batten: This completes the estimates of the Department of Public Works except for item le. The next item will be vote 15e of the Department of Citizenship and Immigration.
DEPARTMENT OF CITIZENSHIP AND IMMIGRATION Indian Affairs-
15e. Administration, operation and maintenance- to extend the purposes of citizenship and immigration vote 15 of the main estimates for 1965-66 to authorize special payments in respect of social assistance to persons other than Indians residing on Indian reserves and to authorize special payments in respect of the education in Indian schools of children other than Indian children and to provide a further amount of, $1,000,000.


Gerald William Baldwin: I have a brief observation to make about this item. Like subsequent items, it has to do with a program to make housing available to Indians.
Several months ago in my constituency there was a march by a number of Indians from the reserve in the Hay lakes area of Edmonton. The principal cause of their complaint was an acute shortage of any type of housing. I had been in the district a short
Supply-Citizenship and Immigration time earlier. Winter was approaching and it was obvious that the Indians who had moved into this area to take advantage of school facilities would have to face a very difficult problem. Although I made some representations, nothing was done, and what happened was a natural consequence.
I cannot discuss this subject intelligently without making reference to the statement made by the Minister of Northern Affairs and National Resources the other day. I give the government full credit for the program which was announced at that time even though I believe it is not enough. I am not blaming this particular government, but I think this program has come 30 years too late. No doubt we shall have an opportunity in the standing committee to discuss this matter. I am afraid that the government and the officials of the department may well formulate a program without regard to some of the surrounding circumstances which are most important, especially in the far northern areas of our country.
In those areas difficulties connected with economic circumstances will have a lot to do with the selection of suitable housing sites. In earlier days, when housing was of a rude kind, it was all very well to establish settlements of a temporary nature. When economic conditions changed or education became an issue the Indians could move on. However, when the government establishes a community complete with plumbing and all the facilities we expect today in our part of the country, it sets up something much more permanent. At the present time in the north the patterns of social and economic advance are being established. One of the great difficulties encountered by Indian children is their inability to pursue a course of study in the later grades. They are unable to do their homework properly in the houses they occupy. This may seem a picayune matter, but one of the great problems facing the Indian people today is their lack of education which in turn prevents them from taking their place in society.
Before the officials of the Indian Affairs Branch proceed to establish these housing areas where communities are to be established it is important that they should obtain from those concerned, the Indian people who live in the areas, and from the provincial authorities complete information so that we do not create a situation where in four or five years many of these houses will be abandoned as the Indians move on to other places
3356	COMMONS
Supply-Citizenship and Immigration in search of economic advantage or schools for their children. The officials should proceed with the utmost caution so as to ensure that this plan will conform with the needs of the Indian people in the areas where the houses are to be built.


Mr.   Barnell@: Could the minister give us a little information about this item? As I read it, it is one of those legislative items inasmuch as its purpose, in addition to the provision of money for Indian education, is to extend the purposes of vote 15 of the main estimates in respect of certain payments of social assistance to persons other than Indians residing on Indian reserves, and also to make some provision for the education of non-Indian children in schools on the reserves. Is this part of reciprocal arrangements which are being worked out with the provinces in these fields of social assistance and education?


Edgar John Benson: In brief, I can tell the hon. member this. A cabinet decision of January 5, 1966, authorized the Citizenship Branch to make annual grants to the Canadian Association for Adult Education and l'lnstitut Canadien d'Education des Adultes during the five year period from 1965-66 to 1970-71 in amounts equivalent to the lesser of $30,000 or one third of each agency's annual expenses exclusive of expenditures incurred for projects already subsidized by a federal agency. An amount of $10,000 had been included in the main estimates to provide for the annual grants to these organizations as in previous years. Total additional requirements amount to $40,000.


Thomas Speakman Barnett: I did not hear the beginning of the minister's remarks but I understand this item arises out of arrangements with the Canadian Association for Adult Education and the equivalent organization in Quebec. I have one other question and it concerns the $300,000 item for travel by Indian pupils. Why is this additional sum required? Is this an ancillary vote related to the other item for $700,000 which has to do with the education and maintenance of Indians? In other words, is it an additional travelling expense necessitated by placing an increasing number of Indian children in schools operated under the public school systems of the provinces or has it to do with additional travel by Indian pupils to and from their regular schools?


Edgar John Benson: Perhaps I can read the explanation I have. The Auditor General in his

DEBATES	March 29, 1966
report to the House of Commons for the fiscal year ended March 31, 1965, questioned the authority of the branch to make education expenditures on behalf of non-Indians other than on a recoverable basis. Our legal adviser contends that the wording of vote 15, "grants, contributions and special payments, including those specified in the subvote titles in the estimates", authorizes us to make the expenditures. It is his opinion that while the payments in question are not specified in the subvote title in the estimates, the words "including those specified" indicate that the subvote titles are not exclusive and the "Mowat ruling" would be applicable in this instance and the payments would be properly made.
[DOT] (5:10 p.m.)
However, in order to obviate the necessity of further comments by the Auditor General it is proposed to change the vote wording and include the words "special payments in respect of the education in Indian schools of children other than Indian children". The reason for including that is simply so that where there is someone else on a reserve, such as an Indian agent, his children may also go to school without a comment from the Auditor General. The amount of money which is required is $700,000 for the tuition and maintenance of Indians in non-federal schools and $300,000 for the travel of Indian children to and from schools.


Thomas Speakman Barnett: To and from non-federal
schools?


Edgar John Benson: Yes.


Ralph Bronson Cowan: The minister read a very learned legal opinion on this Indian affairs matter and he got the opinion very quickly. Could the Department of Public Works not get a legal opinion from the Supreme Court of Canada that fast with regard to water lots?


Edgar John Benson: It was not quite that fast. I have had this in my hand ever since the estimates were first submitted.


[Stage Direction]
Item agreed to.
20e. Construction or acquisition of buildings, works, land and equipment, $500,000.
Thomas Speakman Barnett: Could the minister tell us whether this is in effect an advance appropriation under the program which the Minister of Northern Affairs announced recently with regard to the construction or acquisition of building, works and land? Is this in effect an initial payment in order to get that program under way?
March 29, 1966	COMMONS


Edgar John Benson: I do not think this item is specifically attached to that program. There was an acceleration started last summer in the building of Indian residences and so on. One million dollars was provided in the previous estimates during the year for this purpose and this is the provision of an additional $500,000.


[Stage Direction]
Item agreed to.

[Stage Direction]
5e. Contributions to the provinces, pursuant to agreements entered into with the approval of the Governor in Council by Canada with the provinces, to assist in the development of roads leading to resources, $600,000.
Frank Howard: 
William Arnold Peters: Mr. Chairman, when the original estimates were before the committee I asked for a designation of the various projects going on in northern Ontario and the minister agreed to provide me with that. However, I have not received it yet. I suppose I could insist on the designation now, but if there are projects going on in northern Ontario I would appreciate it if a list were sent to my office.


Edgar John Benson: I shall undertake to bring this to the minister's attention.


[Stage Direction]
Item agreed to.
The Deputy Chairman:: May I ask the
minister if we are also to approve the remaining items under Northern Affairs and National Resources?


Edgar John Benson: Yes.
lOe. Contributions to the provinces, pursuant to agreements entered into with the approval of the Governor in Council by Canada with the provinces, of amounts equal to one-half of the amounts confirmed by the provinces as having been spent by them for campground and picnic area developments, $100,000.
[DOT] (5:20 p.m.)


Herbert Wilfred Herridge: What is done by the federal government to check the work that is done by the provinces? I ask this question because
March 29, 1966

Supply-Northern Affairs on one occasion I became aware of an inventory agreement arranged with the government of B.C., and I may say I also know something about cruising timber. On that occasion I found out that the federal government had not made any check on the claim by the provincial government with respect to an inventory survey in a certain area. What is done to satisfy the federal government that this money is being expended properly as a result of the agreement?


Edgar John Benson: Mr. Chairman, I of course would have to take this up with the Minister of Mines and Technical Surveys to obtain a detailed answer. I would be glad to do so and before the money is paid I will undertake to obtain a memorandum from the Minister of Mines and Technical Surveys concerning this item.


[Stage Direction]
Item agreed to.
32e. Subventions under agreements entered into pursuant to the Atlantic Provinces Power Development Act in respect ol electric power generated from eastern coal during the fiscal year 1965-66, $700,000.
William Arnold Peters: Mr. Chairman, is this the total of the subventions we have paid under this item for the year?


Edgar John Benson: No. The total amount required was $2,500,000 of which $1,800,000 had been provided in previous estimates. This is to provide for the balance.


[Stage Direction]
Item agreed to.
45e. Administration, operation and maintenance including grants and contributions as detailed in the estimates, $1,400,001.
Frank Howard: Mr. Chairman, there is an item of $18,600 here as a contribution to the Northwest Territories government toward the cost of construction of a water line to the Yellowknife jail. What is the total cost of constructing the water line and what is the federal government's contribution to it?


Edgar John Benson: The total amount required from the federal government is $72,000 of which $53,400 had previously been provided. The sum of $18,600 is being provided in this particular item.


Frank Howard: What is the total cost?


Edgar John Benson: Again the reference I have is $72,000. I just do not have the information here. The lowest tender for the construction required a contribution of $72,000. An additional item of $18,600 is required to pay the territorial government for the balance of our contribution of $72,000. I do not have the

total cost but I will be glad to supply the information to the hon. member.


Frank Howard: It seems to me that a water line to the jail at Yellowknife costing a minimum of $72,000 must be quite a water line.


[Stage Direction]
Item agreed to.
Maurice Rinfret: This concludes the supplementary estimates of the Department of Northern Affairs and National Resources. We will now consider the supplementary estimates of the Department of Agriculture.
DEPARTMENT OF AGRICULTURE Production and marketinglie. Grants, contributions and subsidies in the amounts and subject to the terms specified in the subvote titles listed in the details of the estimates, $42,439,500.


Frank Howard: Mr. Chairman, it seems to me that everything happens at Skeena all at the same time. One thing happened in the last few days which I feel I must mention here under this item. It involves the proposal to build an addition to the grain elevator in the city of Prince Rupert. Initially the grain elevator was built in 1926 or thereabouts. At that time it was designed so that its structure could be duplicated on the other side, thus doubling the capacity of the elevator. For the last six years at least there has been a rather concerted campaign by interested organizations and groups in Prince Rupert and by myself to get the elevator extended, especially in view of the large grain shipments which are being made through western ports to China and we hope to other nations as well.
We were pleased when the Minister of Northern Affairs and National Resources, who presumably makes all announcements about things in British Columbia, announced that the government was going to proceed to construct the addition to the grain elevator, but we were not so pleased last Friday when a decision was made not to proceed with the construction because of what were claimed to be inordinately high tenders.
I would like to submit two points for consideration of the department. First, I think that the department itself or the Board of Grain Commissioners, whichever one did it, underestimated the potential cost of adding to the grain elevator. I believe that by underestimating they were able to look at the final bids which were submitted and say they were inordinately high and construction could not be proceeded with. If one looks casually
March 29. 1966

at the estimated cost of the construction of the grain elevator, one will see that the estimated cost of the addition has been static for the last four or five years. Obviously no account has been taken of economic pressures and the increase in construction costs which has taken place.
The Minister of Agriculture answered a question of mine yesterday by saying that the government was going to wait until construction costs declined before building the extension to the grain elevator. This means in effect that the minister is not going to proceed at all with the construction of the elevator. Everyone, including the government itself, is predicting that costs will go higher and higher, is predicting an increase in the gross national product in the years ahead, and increase in the money supply in the years ahead and an increase in economic activity in the years ahead. All these things cannot take place without construction costs also being higher.
Therefore, Mr. Chairman, if the Minister of Agriculture is going to wait until construction costs decline before he proceeds with the addition to the grain elevator at Prince Rupert he is going to wait for a depression because that is the time when the costs might come down to a level which he might consider to be correct. We cannot afford to wait that length of time. I submit that we have waited long enough in Prince Rupert for a recommendation in respect of a new port and agreement from the government to the idea of the grain elevator being extended. It is very discouraging now to have the government say that they cannot carry out that proposal because of an underestimate in respect of the initial cost of the project on the part of the government and, second, its inability to see that when tenders were called they would result in higher bids than normally would be the case because of the expansion and the boom in the economy. I think this casts a very serious reflection upon the government.
The judgment of the Minister of Agriculture and the department, when they decided not to proceed with letting contracts for the construction of the grain elevator in Prince Rupert, is a slap in the face to the people of Prince Rupert. It means in so far as the government is concerned that it would rather, one way or the other, directly or indirectly, build up Canada's grain shipping facilities in the Vancouver area and continue to look on
Supply-Agriculture
Prince Rupert as being sort of an orphan in respect of the shipment of grain in Canada.
I wish to put these ideas on the record now because of the decision made last Friday not to proceed with the construction of the grain elevator which I think was a grave error, and I urge the Minister of Agriculture to reconsider and look upon this matter with some favour.
[DOT] (5:30 p.m.)


Herbert Wilfred Herridge: Mr. Chairman, there are two items, $40,700,000 and $1,663,000 representing payments to the Agricultural Stabilization Board account and the Agricultural Products Board account. Could the minister tell the committee the total amount paid out during the year under these two items?


Edgar John Benson: Mr. Chairman, the $40,700,000 is the estimated amount required to recoup the agricultural commodities stabilization account to cover the net operating loss of the Agricultural Stabilization Board to March 31, 1966. To go through the individual items of payments would take a great deal of time. They involve payments on the purchase and sale of butter oil, for example.


Herbert Wilfred Herridge: I would not ask the minister to do that now. I asked the question because I was not sure whether this was the total to cover the net loss.


Edgar John Benson: Yes, it is.


Mr. Rapp:: Mr. Chairman, with regard to the $40,700,000 to cover the operating loss of the Agricultural Stabilization Board, was that loss incurred in regard to deficiency payments on butter and cream or to what commodities does it apply?


Edgar John Benson: Mr. Chairman, I could show the hon. member the breakdown I have here. It involves a great many commodites including butter oil, butterfat, milk, wool, eggs and sugar beets, for example.


Reynold Rapp: The breakdown is available?


Edgar John Benson: Yes, it is available and I would be pleased to show it to the hon. member.


[Stage Direction]
Item agreed to.
Plant and plant products-
35e. Grants, contributions and subsidies as detailed in the estimates, $20,900.
William Arnold Peters: Mr. Chairman, I notice there are only two grants enumerated here but I
3360

March 29, 1966
Supp ly-A griculture
know other provinces, including the province of Ontario, have received grants in similar circumstances. The province of Quebec recently made available approximately $9 million in additional aid to the farmers of the Lake St. John area which had an excessive amount of rain in 1964 and 1965. Is the minister in a position to tell us whether that $9 million has been implemented under the 1964 program that is dealt with here or will it be included in the new estimates?


Edgar John Benson: As I understand this particular item, the $550,000 is to finish up the payment with respect to the amount agreed to be paid to the province of Quebec. The federal government contributed on a 50-50 basis to payments made to farmers in drought areas. This is the balance to clear up those payments. A similar program was carried out in Ontario, as the hon. member will no doubt recall, and I think also in British Columbia.


William Arnold Peters: I raised the question because in the Throne Speech in the legislature of the province of Quebec it was stated that an additional $9 million, I believe, would be made available for the Lake St. John farmers. I presume, and I am only guessing, that this payment will be made under the joint program under which the provincial government makes a contribution on a 50-50 basis with the federal government.
I raise this matter because the province of Ontario has been very lax in their agreements with regard to the farmers and the assistance they have provided to them. While it may not be the responsibility of the federal Minister of Agriculture to extend the program, I would point out that many farmers in northern Ontario have suffered several years of crop failure because of adverse weather conditions and are not receiving the degree of assistance that is apparently available elsewhere. I thought that perhaps the minister was aware from the figures which have been presented whether the additional $9 million being provided by the province of Quebec had already been applied or would be included in the forthcoming estimates.


Edgar John Benson: Mr. Chairman, I really am not familiar with the matter concerning this $9 million. I will bring the comments of the hon. member to the attention of the Minister of Agriculture who is very familiar with this program, and I will ask him to inform the hon. member.


[Stage Direction]
Item agreed to.

Health of Animals-
40e. Administration, operation and maintenance, $216,000.
Reynold Rapp: Mr. Chairman, I would like to ask the minister whether this $216,000 for the construction or acquisition of buildings, works and land is for the new veterinary college in Saskatchewan or is it for repairs or something of that sort?


Edgar John Benson: This particular item of $216,000 represents the extra construction costs of the quarantine building at Grosse He, Quebec.


Reynold Rapp: Is it the intention of the government to go on with the construction of the new veterinary college which has been approved?


Edgar John Benson: I would have to raise this matter with the Minister of Agriculture.


[Stage Direction]
Item agreed to.
Farm Credit Corporation-
90e. Estimated amount required to provide for the operating loss of the Farm Credit Corporation for the fiscal year ending March 31, 1966, $1,160,000.
Herbert Wilfred Herridge: I have just a brief question, Mr. Chairman. This item covers the estimated amount required to provide for the operating loss of the Farm Credit Corporation for the fiscal year ending March 31, 1966, and the amount is $1,160,000. We have always considered this to be a very sound operation. Could the minister explain why there was an operating loss shown for this corporation last year?


Edgar John Benson: Mr. Chairman, the purpose of this supplementary estimate is to obtain a parliamentary appropriation to compensate the Farm Credit Corporation for its anticipated net operating loss for the fiscal year ending March 31, 1966, and thus enable the corporation to hold its reserve account of $1,644,527 as of March 31, 1965, as security against the risk of capital loss inherent in any credit corporation.


[Stage Direction]
Item agreed to.
95e. Payment to the Farm Credit Corporation for carrying out the purposes of the Farm Machinery Syndicates Credit Act, $75,000.
Reynold Rapp: I have a short question, Mr. Chairman. Is this $75,000 to cover the operating loss of the farm machinery syndicates under the Farm Credit Corporation or is it just an advance to establish farm machinery
March 29, 1966

syndicates, which was approved last year under the previous minister of agriculture?


Edgar John Benson: The Farm Machinery Syndicates Credit Act was proclaimed on December 11, 1964. At that time an advance of $50,000 was obtained by the Farm Credit Corporation under section 82 of the Financial Administration Act to provide current operating funds for the purpose of administering the Farm Machinery Syndicates Credit Act. Funds were appropriated to this end by parliament in the 1964-65 final supplementary estimates. A further advance of $75,000 was obtained in July, 1965. This advance was to be repaid at such times as parliament appropriates funds for such purposes. Here we are appropriating funds so they can repay the $75,000.


Reynold Rapp: It is not an operating loss?
[DOT] (5:40 p.m.)


Edgar John Benson: No. I am told there are only estimated figures at this time with regard to the financial results for the entire year.


William Arnold Peters: Does the minister have before him the figures for the amount that has been lent for farm machinery syndicates and the number of farmers involved?


Edgar John Benson: I do not have the number of farmers involved but business for the 1966-67 fiscal year is forecast at $3 million.


Mr. Alkenbrack:: Is the minister of the opinion that the farm machinery syndicates will continue to operate? According to reports last year and answers to questions I asked, it was not a success. Would the minister be able to tell us whether it will carry on in the coming year?


Edgar John Benson: All I can say is that according to the notes I have been given by the Department of Agriculture it is forecast it will do $3 million worth of business in 1966-67 so presumably it is going to continue.


Almonte Douglas Alkenbrack: According to answers to questions I put on the Order Paper last autumn, about 75 per cent of these loans were going to the province of Alberta. Would the minister be able to clarify the reasons for that?


Edgar John Benson: I really could not do that. I do not have an analysis of the operation, which is the responsibility of the Minister of Agriculture. I am sure that if the question is brought up when the estimates of the Department of Agriculture are being considered either in the committee or in the house, which
Supply-Defence Production should be in the very near future, the minister will have the officials of the operation give a full explanation.


Almonte Douglas Alkenbrack: Could the minister forecast, now that the Minister of Agriculture comes from a different province than Alberta, that the loans might be more fairly distributed across the dominion than they were last year?


Edgar John Benson: Mr. Chairman, I could not really let that comment go without an answer. I sincerely believe that the fact the Minister of Agriculture was from Alberta would not in any way affect the granting of loans in Alberta, knowing the former minister as a person.


Mr.   Kindi@: In view of the fact that the question of loans in Alberta has been raised, it would be fine if the minister could obtain the amount of the loans made in Alberta. The minister has said this information is not available at the moment but I do not feel we should pass this item without an answer to that question.


Edgar John Benson: As I mentioned previously, we are dealing here with the final supplementary estimates. We are not dealing with the main estimates for the year. I have undertaken to get the information. I do not have it here, I would have to get it from the Minister 'of Agriculture. The corporation is not going out of existence; it is going to continue. Hon. members will have every opportunity to question its operation fully, I am sure.


[Stage Direction]
Item agreed to.

[Stage Direction]
lie. Reimbursement of Queen's Printer's advance account for the value of stores which have become obsolete or unserviceable, $44,477.
['Agreed.\nResolutions adopted in committee of supply this day reported and concurred in.']
Mr. Irvine:: I should like to ask the minister if he has information available on what stores of the Queen's Printer are covered by this particular item?


Edgar John Benson: Yes, I have the details here. This is a reimbursement of the Queen's Printer's advance account for the value of stores which have become surplus, obsolete or unserviceable and were declared to Crown Assets Disposal Corporation for disposal. The material is as follows: Equipment maintenance stores-this item consists of spare parts for letter press-surplus; miscellaneous maintenance supplies-surplus and obsolete;
3362	COMMONS
Supply-External Affairs tools and component parts-surplus and obsolete; electrical supplies-obsolete; equipment parts-obsolete. This totals $24,941.98.
Printing materials-obsolete, $18,209.60; paper stock-obsolete due to damage, $167.15. Then there is residue dross metal from skimming melting pots. Metal which has impurities cannot be used in the composition process. It is skimmed from melting pots and salvaged, then declared surplus, priced at scrap value and sold as scrap metal. This amounts to $398.63.
Residue gold foil, $759.64; residue gold foil in inventory when the printing bureau ceased the gold foil bindery operation. It was declared surplus to Crown Assets Disposal Corporation and sold by Crown Assets Disposal Corporation to the Royal Canadian Mint. This makes a total of $44,477.


[Stage Direction]
Item agreed to.

[Stage Direction]
le. Administration, operation and maintenance including grants as detailed in the estimates, $474,100.
Herbert Wilfred Herridge: I just have one question to ask. I have noticed that in recent years the government has been giving a free, all expense paid tour to the editors of the weekly newspapers in Canada. I think on one occasion they went to the United States and they are in Europe now. Can the minister inform the house which department pays for the expenses? Does it come under external affairs?


Edgar John Benson: I am not familiar with the particular matter about which the hon. member is speaking. I do not believe it comes under external affairs. However, I will look into it and see if the government is paying for such tours and, if they are, which department is paying for them or which crown corporation if it is a crown corporation. I will supply my hon. friend with the information.


[Stage Direction]
Item agreed to.
department of industry
15e. To provide that the amount appropriated by section 5(1) of the Area Development Incentives Act may be credited to the area development account from time to time as required; notwithstanding section 5(3) of the Act, to authorize payments out of the consolidated revenue fund up to the amounts credited to the account; and to authorize total commitments in respect of development grants under the act in the current and subsequent fiscal years not exceeding $100,000,000, $1.

DEBATES	March 29, 1966
[DOT] (5:50 p.m.)
William Arnold Peters: I have several hours of discussion I should like to undertake concerning the Department of Industry. I cannot think of any better place to undertake it than on this dollar item because I think that is about the value of the Department of Industry in the field about which I am concerned, namely, designated areas. As we are ending the fiscal year 1965-66 I feel I must raise this point owing to the many statements made in the recent election campaign by the Prime Minister, particularly in my area and in other points in northern Ontario, regarding the problem which has developed in terms of the area development incentive program.
We in northern Ontario were shocked, after the house had discussed for some time the criteria to be applied, to find that the criteria were being bastardized by the Prime Minister and the premiers of some provinces. I think members from British Columbia would be surprised to find that only one area has been designated in British Columbia and that is within the premier's own riding. This is also true in the province of Ontario where the riding of the Prime Minister has more designated areas than any other riding.
I suggest that this sort of designation takes no consideration of the terms of the criteria decided upon by the house. These designations were political manipulations by the premiers of the provinces in conjunction with the Prime Minister and were arrived at at the joint federal-provincial conference. I think it is a disgrace that such is the case, particularly in view of areas like mine which do not meet the criteria but are in a position to take immediate advantage of the opportunity offered if they were designated.
In my opinion this was a very worth-while program. It had the potential of helping many areas to help themselves in changing from primary industry to secondary industry as a result of the aid provided by the incentives. I think it is a shame that the result of the program has been far less promising than anticipated by all members of the house when the program was initially established.
The political implications of these designations are certainly not to be desired and in my opinion should not be extended. This program should be re-examined by the house. Particular consideration should be given to all of northern Ontario, though I speak only for the area I represent, and all districts in Ontario. It is not to our advantage to have a community situated in the Prime Minister's
March 29, 1966

riding compete with other areas which have not been designated. Areas should be designated in a way which removes competition, in this case very unfair competition, so that full advantage can be taken of natural development in industrial areas.
One company in my area applied for designation under the old criteria and they were informed they would be considered as being adjacent to a designated area under the terms of the act. But that consideration has not been given. The community involved wished to apply to the Prime Minister personally and spend 15 to 20 minutes with him at a meeting he is going to hold in his own riding this coming week. The Prime Minister refused an invitation to communities who wished to be represented so they could discuss this problem, though they were invited to a social reception followed by a dance and party. As the reeve of my municipality indicated to me, he was very interested in meeting the Prime Minister to discuss this question but was not particularly interested in the social aspect of the occasion.
I do not intend to go into the matter now. To do so would be unfair to the minister who is really being abused by having to handle so many other departments in the absence of their ministers. It would also be unfair to my constituents, in fact to the people of northern Ontario in general. Regular meetings are being held by the northeastern development organizations, the northwestern organizations and the mayors and reeves of the municipalities in northern Ontario, all of whom have endorsed the idea of designating all of northern Ontario. All are aware that this is the only way to assist municipalities in northern Ontario.
We have received feelers from a number of companies interested in industrial development but we are awaiting the final decision of the government regarding the criteria and their implementation. Many areas in northern Ontario will never meet the unemployment criterion because in northern Ontario it only means transferring people to Toronto where employment is available and the problem is solved.
We are not really interested, Mr. Chairman, in relocating our population. We are interested in relocating industry and expanding secondary industry. This can only come about through a re-examination of the criteria and of those areas already designated, particular-
Supply-Industry
ly those areas designated through a federal-provincial conference of the premiers and Prime Minister of this country.
This is only a $1 item and it is therefore statutory in effect. I presume that if I moved to remove this $1 item I might accomplish the removal of the whole program. If that were possible I would be prepared to so move because then we could start all over again and avoid many of the pitfalls we have experienced in the past. The minister of the department is very lax in his duty and has really not paid any attention to area development incentives. He has not given the leadership to the provinces he should have given, and in most areas of Canada the program has not got started. I hope there will be a change in this regard and that the act will be revitalized.
I am prepared if necessary, Mr. Chairman, to sponsor delegations from northern Ontario who wish to meet with officials of the department. However, I feel that the minister is aware of the wishes of the municipalities and the people of northern Ontario in regard to designation of their areas. He is also aware of the fact that so far in most areas designation has been totally unsuccessful. I know of only one case where it was highly successful, a case where in fact the area represented to the government that it did not want to be designated.
While I will not say anything more on this question I did not want the minister to think I would let this opportunity go by without saying something on the matter. I give him the assurance that I will pursue this question until a more favourable conclusion has been arrived at than has been the case in the past.


Mr. Johnston:: Mr. Chairman, just as a matter of interest may I point out one error in the remarks of the previous speaker concerning designated areas in British Columbia. In fact the areas designated in that province include at least three constituencies other than that of the premier. We would be very happy to see more such areas in British Columbia. If there were no such areas designated then this would be just one other federal program which stopped at the Rockies. In such an event I do not think the people of British Columbia would be very interested in bailing out northern Ontario a part of that wealthy Province, with no return at all to British Columbia.
[DOT] (6:00 p.m.)


Mr.   Kindi@: Mr. Chairman, I have only a word or two to say. Since I believe that the

March 29, 1966
Supply-Industry
largest designated area west of the Great Lakes is in my constituency, the Crowsnest Pass area, I should like to know if the government will concentrate on the establishment of new industries there. There have been two or three which have gone into the Crowsnest Pass area purely as a result of my efforts during the last two or three years. The government in the last election claimed all the credit for the establishment of these industries and I had quite a job trying to tell the people how the industries actually got there. If the government in its efforts to get new industries into this area would leave politics out, the result would be a much better program.


Eric Alfred Winkler: Mr. Chairman, I rise on a point of order at this stage while we are still in committee. I had a couple of contributions to make in the course of the debate. Now I want to make a plea to the committee to proceed with the business before us, and I will explain why.
Today in the question period I participated in a series of questions. One of my contributions was an inquiry made of the Minister of National Health and Welfare in regard to the recipients of old age security. At that particular time the Prime Minister suggested to us that he would proceed with this measure if there was a little more activity in the business of the house. We know that some debate is redundant and while I agree in large part with what the hon. member for Timiskaming said about designated areas I suggest that the committee pass the balance of the supplementary estimates. I am sure that the government is interested in coming forth with legislation to increase old age security pensions. I would ask the co-operation of the committee at this stage to agree to pass the balance of the supplementary estimates so that we can get a little closer to that goal.


Maurice Rinfret: Shall the item carry?


David Réal Caouette: Mr. Chairman, about vote 15e.
To provide that the amount appropriated by section 5(1) of the Area Development Incentives Act may be credited to the area development account from time to time-
I wish to call the minister's attention to that vote. The region which I represent here, that of northwestern Quebec, urgently needs help, incentives to develop industry.

As a matter of fact, in Malartic and Val-d'Or, mines will have to close their doors eventually. Two or three have already done so in the last year and 1966 does not look much more promising for the gold mines in the region.
The time has come, I think, for the government and the department to offer an incentive to encourage secondary industries to settle in that region in order to protect our people and prevent them from moving to other regions or further north or east or anywhere else. We want to keep our people and our cities.
Cities like Malartic and Val-d'Or will have to face, in a few months, economic conditions that are absolutely intolerable.
I call the minister's attention to the fact that industries must be encouraged to settle in northwestern Quebec. That would stimulate not only our region's economy but the economy of the province of Quebec and the whole of Canada.
[English1


Maurice Rinfret: Shall the item carry?


[Stage Direction]
Item agreed to.
Maurice Rinfret: The estimates for the Department of Industry are now completed. We shall now take the Department of Justice.
DEPARTMENT OF JUSTICE Legal and Other Servicesle. Administration, $35,500


Stanley Howard Knowles: Mr. Chairman, I do not object to what we are doing but I think it should be by understanding or arrangement and not by inadvertence. It is after six o'clock. I think the suggestion of the hon. member for Grey-Bruce that we might finish the supplementary estimates, has merit, but should it not be understood that we will rise not later than seven o'clock?


Some hon. Members:: Hear, hear.


Edgar John Benson: If it is agreeable to the house I would request that we do this. The Minister of Public Works is here, as I have indicated. We can get through the other estimates and he may have something to say about item le of the Department of Public Works.


Stanley Howard Knowles: Is it clear, Mr. Chairman, that there is a house order that we suspend sitting between seven and eight o'clock?
March 29. 1966


Some hon. Members:: Agreed.


Maurice Rinfret: Is it agreed by hon. members that we do not see the clock?


Some hon. Members:: Agreed.


Stanley Howard Knowles: But that we see it at seven o'clock?


[Stage Direction]
Item agreed to.
Maurice Rinfret: The estimates of the Department of Justice are concluded. Next we shall take legislation.


[Stage Direction]
The Senate-
Vote 7e.-To deem, for the purpose of enabling the Governor in Council to grant an annuity under section 16 of an act to make provision for the retirement of members of the Senate, that Senator J. W. Comeau was, at the time of his death, a person who had been granted an annuity under section 15 of the said Act, $1.
Herbert Wilfred Herridge: This is a very interesting item, Mr. Chairman. It reads:
[DOT]-for the purpose of enabling the Governor in Council to grant an annuity under section 16 of an act to make provision for the retirement of members of the Senate, that Senator J. W. Comeau was, at the time of his death, a person who had been granted an annuity under section 15 of the said act.
Could the minister explain that?


Edgar John Benson: I shall be very pleased to explain it. Senator Comeau some two or three weeks before his death wrote a letter to the Clerk of the Senate saying that he was resigning. Unfortunately he was then informed that he could not resign by sending a letter to the Clerk of the Senate. The day before his death, when this information got back to him, he wrote a letter to the Governor General resigning as a senator. This could not be accepted by the time he died the next day. As his widow would have been deprived of the pension which is granted to retiring senators' wives, this item is to correct the very unfortunate situation which happened. The resignation was in the mail and had not been acted upon because he died the very day it arrived.


Maurice Rinfret: Shall the item
carry?


[Stage Direction]
Item agreed to.
House of Commons
[Stage Direction]
20e. General administration, $220,000.
Herbert Wilfred Herridge: I have one comment. For certain aesthetic reasons, I am informed, the protective staff in the basement will not let 23033-214
Supply-Mines and Technical Surveys anyone through the doors. What I really wish to say, Mr. Chairman, is that there is very little ventilation down there and it is a stuffy place. I understand that in the first instance six or seven years ago members of the protective staff were put there on a temporary basis. I ask the minister if he would not draw this to the attention of those concerned to see if the protective staff cannot be located in a more desirable place.


Edgar John Benson: I should be very pleased to bring this to the attention of the minister.


Maurice Rinfret: Shall the item carry?


David Réal Caouette: When the minister deals with the matter just raised by the previous speaker, could he not inquire about a very small thing related to the messengers of the House of Commons who are located on the first floor also? The messengers do not even have a telephone to call home or outside the House of Commons and they cannot get telephone calls either. If someone falls sick at home, either their wives or a young child, it is impossible to reach the messenger concerned in the House of Commons. Could not the minister see to it that a telephone is installed in the messengers' office for their use?
[DOT] (6:10 p.m.)


Edgar John Benson: It is amazing what one has to do to get estimates through the house. However, I will undertake to look into this situation.


[Stage Direction]
Item agreed to.
Maurice Rinfret: We shall now proceed to the estimates of the Department of Mines and Technical Surveys.


[Stage Direction]
Mining and Metallurgical Investigations and Research-
35e. Administration, operation and maintenance- to increase to $70,000 the grants in aid of mining and mineral processing research in Canadian universities, $1.
Frank Howard: Could the minister explain this vote to me? I notice the amount is $1. There were grants in aid of mining and mineral processing research in the amount of $20,000 and there are funds available in the main estimates for 1965-66 to the extent of $19,999. These people engaged in research do not need just an extra dollar, do they?

March 29. 1966

Supply-Health and Welfare


Edgar John Benson: As I understand it, this is merely a matter of changing the wording so that a grant can be made. There was approval by Treasury Board of a grant of $20,000 to Queen's University in aid of mining research. I am happy about that. This grant is to support the research side of Queen's participation in the tri-university project in mining engineering, a graduate program of teaching and research developed jointly by Queen's and Laval universities and the University of British Columbia to arrest the serious fall-off in availability to Canada of mining engineers and scientists.
The department had intended that the $20,000 grant to Queen's be charged to an item to be included in supplementary estimates E, 1965-66. It has now been found possible for the grant to be made from funds already available and for the relevant item in the supplementary estimates to be reduced to $1.


Frank Howard: I see.


Robert Gordon Lee Fairweather: Would the minister do his best to see that the impossible word "fall-off" is not used again? It is gobbledegook.


George James McIlraith: Hear, hear.


[Stage Direction]
Item agreed to.
Maurice Rinfret: This concludes the study of the supplementary estimates of the Department of Mines and Technical Surveys. We shall now proceed to the estimates of the Department of National Health and Welfare.


[Stage Direction]
Medical Services-
20e. Administration, operation and maintenance, $500,000.
Mrs. Maclnnis (Vancouver-Kingsway):: I
should like to draw the minister's attention to a question having to do with the Canada Pension Plan, I have been told that Canadian employees of foreign embassies in Canada are not eligible for coverage under the Canada Pension Plan. One of these employees approached me to inquire why he and others like him could not enter the plan as selfemployed persons paying the whole assessment. I am speaking of Canadians who are employed here in Canada in foreign embassies.


Edgar John Benson: I believe this particular question was discussed during the committee hearings when the plan was considered, though I am not sure of this. However, my

own department, the Department of National Revenue, which has to collect the funds for this pension plan, must act within the law as it stands. I doubt that we could deem somebody who is employed by someone else to be self-employed. I believe any change in the position of people working at the embassies would require a change in the statute rather than a ruling.


Winona Grace MacInnis: The
person who approached me was well aware that this would be the case. He asked me why a change could not be made so as to permit Canadians working for foreign embassies to enter the plan providing they paid the whole amount. Why could a change not be made in the statute to this effect?


Edgar John Benson: I suppose any change to deem anyone to be anything could be made in the act as such. But the plan only came into effect on January 1 and in the initial period situations will doubless arise which will ultimately call for changes in the legislation. I would assure the hon. lady that the particular matter she has raised will be considered when amendments to the act are being prepared some time in the future.


Thomas Speakman Barnett: As the minister has said, this matter was considered when the plan was going through the house and the committee, but I am sure that not many members realized we were dealing with Canadian nationals employed at embassies

I did not-when we made provision that the act should not apply to these people. It was not our intention to make Canadians ineligible.


Edgar John Benson: As I have said, I believe a change in the act would be necessary in order to include them now. However, I undertake to look into the matter and see whether there is anything that can be done by my department administratively under the law as it now stands.


Herbert Wilfred Herridge: Would the minister inform his colleague, the Minister of National Health and Welfare, that the hon. member for Kootenay West wholeheartedly supports the request of the British Columbia Hospital Association for an increase in the federal grant from the present figure of $2,000 to an amount which would meet the increased cost of operation?


Edgar John Benson: Yes, Mr. Chairman.


Thomas Speakman Barnett: I was looking into this matter just the other day in consequence of a letter I received from a hospital in my own area.
March 29, 1966

According to the investigation I carried out, the last statement on this subject was made by the Prime Minister who indicated that certain provinces were objecting to an increase in hospital construction grants. This was somewhat incomprehensible to me. He further indicated that this was a matter of discussion between the federal government and the provinces. Is there any later report which the minister can give the committee so that we may know where this question stands? The responsible minister in British Columbia told me he hoped we could look forward to an increase in this grant. Could the minister bring us up to date?


Edgar John Benson: I am afraid I cannot do that. I would have to take this matter up with the Minister of National Health and Welfare within whose ambit it rests. I will undertake to do this and give the hon. member a reply as to the present situation.


Thomas Speakman Barnett: Since this is a matter of great interest to those concerned, would the hon. gentleman suggest to the Minister of National Health and Welfare that he make an early statement to the house on motions or in some other appropriate way?


Edgar John Benson: I will be pleased to bring that suggestion to the attention of the minister.


Eric Alfred Winkler: I want to say that I take serious and grave exception to the type of letter which is going out from supporters of the government with regard to the representations being made to members of the government for increases in old age security benefits. I have before me a copy of a letter from the hon. member for Peterborough who is blaming the opposition, particularly the Leader of the Opposition, for preventing the accomplishment of this object in legislative form. I take exception to this and ask that my protest be noted.


[Stage Direction]
Item agreed to.
Herman Maxwell Batten: That completes the supplementary estimates of the Department of National Health and Welfare.
[DOT] (6:20 p.m.)


[Stage Direction]
15e. Expenses of the royal commissions listed in the details of the estimates, $150,000.
Frank Howard: Can the minister give us some indication what is happening with respect to the royal commission investigating Post Office Department grievances?
23033-214J
Supply-Public Works


Edgar John Benson: This is the one with respect to conditions of employment and I believe the Postmaster General said in the house the other day that the report was expected by June 30.


Frank Howard: Though the minister may not be able to answer this directly, I ask the question to indicate interest on our part and notice of our intention to proceed further with it. Many moons ago a royal commission on pilotage was appointed and we have been waiting with bated breath what presumably is going to be a voluminous and detailed report by that commission. Is that commission still in existence and when can we expect its report?


Edgar John Benson: I know it is still in existence but I cannot indicate when it is expected to report. I can ask the Minister of Transport about it.


Frank Howard: Then could this by-play between the minister and myself be taken as notice that I wish to follow this up with a question on Orders of the Day to the Minister of Transport?


[Stage Direction]
Item agreed to.
[Stage Direction]
le. General administration, including grants as detailed in the estimates, $44,500.
George James McIlraith: Mr. Chairman, last Friday when these estimates were being discussed some questions were raised about the problem created by the practice of fill being put in waterlots along a long stretch of the shore of lake Ontario. The same matter was raised again today. I think I should explain where the responsibility of this parliament lies and how the situation is somewhat complicated by a division of jurisdiction.
The provinces own the land under the water, in other words, these waterlots, and it can be transferred by them to private owners, as is the case in the situation presently under discussion. When private owners acquire the waterlots the federal government cannot interfere with that in any way. Then the municipal affairs department of the province and the governments of the municipalities have jurisdiction in the ordinary way over building permits and that sort of thing. The federal authority has jurisdiction over the subject of navigation, and it is only in that connection that it is able to have any legislative responsibility and can take legislative action as set out in the Navigable Waters

March 29, 1966
Supply-Public Works Protection Act. The difficulty in this particular case-and I am very quick to admit it is a real difficulty-is that of a person owning the lot getting a building permit from the municipality in the usual way.
For the purposes of this discussion I think I shall limit my remarks to the particular waterlots mentioned, but I do not want to suggest that there are not other aspects of the problem with respect to other waters in other parts of the country. The difficulty in this particular case arose when the people concerned put the fill in the lake. The legislation provides for the Department of Public Works to grant a works permit when they put a superstructure on it. But that jurisdictional right only arises if there is interference with navigation and, in the ordinary sense, if this were carefully done there would not be interference with navigation because of the width of lake Ontario. You can argue a great deal about the matter of judgment with regard to whether of not the fill interferes with navigation and how much fill has to be put in before it interferes with navigation. That is the primary problem in this connection.
Again going from the general to the particular, as I think the hon. member who raised the matter intended to use it, for the purpose of demonstrating how the difficulty arose, in this particular case the people involved did not get approval to implement the proposed works. Indeed, there was a question whether putting the fill in was a work within the meaning of the act. There is a difficult problem there, but in any event they put in the large amount of fill to which reference has been made.
They did not take the usual steps to put in protection to contain the fill, protection that is normal or proper in such cases if a permit were granted. There was an erosion of the fill and undoubtedly other debris also came into the water. This created a hazard to navigation. Whatever the argument may be with regard to whether the federal authority had jurisdiction from then on because that was a clear hazard to navigation, something which could be well established.
Following that they filed their application for approval of the works project, together with the usual plans, and an examination has been made of them. These include the appropriate design steps for the containing or retaining wall and, in the view of the engineers and the other authorities concerned, that work will be satisfactory if carried out to its full completion in accordance with the
[Mr. Mcllraith.l
plans filed. If that is done we propose to issue the permit indicated in the previous speeches in the ordinary way.
I admit at once that there is a very unsatisfactory situation arising out of the divided jurisdiction that exists between the federal, provincial and local authorities. Recognizing that, we have taken steps to start discussions with the Ontario provincial authorities in order to get an improved method of control, so that the action of one authority will be consistent with the actions of the other authorities. As it is now it is certainly confusing to the rest of the public, and it is unsatisfactory to have one authority granting one permit without reference to another authority, and so on.
[DOT] (6:30 p.m.)
That matter is under discussion at the present time between the federal and provincial authorities in an effort to establish a better procedure. Possibly in the light of the discussion and study further action can be taken to include the whole state of the law on this subject. I hope my remarks have answered at least some of the points raised in the earlier discussion. I have tried to make this relatively brief but also have tried to deal with the points raised.


Frank Howard: Mr. Chairman, an analogous situation existed within the government service in the Department of Fisheries that may give some comfort and guidance to the Minister of Public Works in making a determination about this question of divided jurisdiction. As I recall it, when we raised the matter of local companies on the west coast dredging the gravel out of salmon spawning streams and using that gravel for road building purposes we pointed out that this was injurious to the salmon spawning grounds because it destroyed them and created havoc with the spawning beds.
We thought that the Department of Fisheries should be able to step in and prohibit logging companies, construction companies or anybody else digging up the river beds in salmon spawning streams and thus destroying the spawning beds. The representation made to us in response thereto was that there was a divided jurisdiction involved and that while it was correct that the federal government through the Department of Fisheries had jurisdiction over fisheries matters, the provincial government, by the constitution, had jurisdiction over the matter of land and the land at the bottom of the river in fact belonged to the province and therefore the
March 29, 1366

federal Department of Fisheries could not issue any prohibition against the use of that area.
As I understand it, this matter was resolved by the legal officials-whether in the Department of Fisheries, the Department of Justice or where, I do not know-and it was determined that the federal government did have jurisdiction and that it could exercise its authority to protect and conserve fisheries and therefore had the jurisdiction to issue these prohibitions. I understand that is the situation which exists at the moment. While I may have oversimplified it, this is the understanding I have concerning the situation. If it is a correct understanding, then I think that the minister may find some guidance there in dealing with this matter in a way different from that which he has so far outlined.


Ralph Bronson Cowan: Mr. Chairman, I simply hope the Minister of Public Works likes the explanation he has given because certainly I do not. We are told that this is a very difficult question. I thought I had dealt with this matter last Friday but here we have it again on Tuesday and are told it is a difficult question.
Why is it that all the public bodies which are going to erect some project make application in advance and file plans with the department and the department considers them seriously and then may or may not grant permission to erect such structures as the ones I outlined such as the spits of rock being placed east of Toronto Island by the Toronto Harbour Commissioners in order to enlarge Toronto harbour; or why did the Ontario Hydro file detailed plans and ask for approval before erecting their coal unloading dock at Lakeview on the west side of Etobicoke Creek? This dock is a help to navigation. They should not have had to ask for a permit from the Department of Public Works because the dock would aid ships. But they were erecting something in a navigable stream and the lawyers of Ontario Hydro knew they had to file plans in advance and get prior approval before construction. Then I gave the case of the municipality of metropolitan Toronto with two million people. They filed plans in advance about a little bridge with hon. Mr. Deschatelets and the matter was given several months consideration before the plan finally was approved. Then metropolitan Toronto went ahead and built the bridge. But not the private developers. They back their trucks up to the lake,
Supply-Public Works pull their pins, dump their loads and away they go. Nobody asks for prior consent there.
Is Ontario Hydro dumb; is the metropolitan Toronto council dumb? They know the law and they follow the letter of the law. Yet in the case of the private developers this is not so. I would appreciate it very much if the Minister of Public Works would name a couple of cases where a municipality has granted a building permit to build in a navigable stream before clearance was given by the Department of Public Works. I would like to have a couple of cases rather than simply the answer that municipalities have allowed firms to build in a navigable stream. It is not as simple as that. If this Millgate fill is not an interference with navigation, why are they instructed by the Department of Public Works to put navigation lights at the end of the spit of land during the navigation season? Nobody asks me to put navigation lights on my half mile of shorelines on Georgian Bay; but when Millgate runs a spit of land out 470 feet in length, which according to the Department of Public Works is not an obstruction to navigation, they are told to put navigation lights on it during the navigation season.
The application filed with the Department of Public Works states that they want to run the retaining wall out another 70 feet, 540 feet in all. According to the letter of the Department of Public Works of January 21, 1965 it is only filled for 470 feet. This application, the first which was put in, to have a retaining wall around the fill will carry it out 540 feet into the water. If they are putting navigation lights on a 470 foot spit of land and say it is not an obstruction to navigation, what will it be when it is 70 feet farther out? I say the inference is that it is a hazard to navigation. The minister says it is a hazard without a retaining wall but when they put a retaining wall around it it will not be a hazard. Some people will believe that stuff; it does not ring true to me, but I could be wrong.
I have asked the cabinet to refer this matter to the Supreme Court of Canada to have it clarified whether a patented waterlot can be filled by a private owner without the prior consent of the Department of Public Works which looks after the Navigable Waters Protection Act. In addition, I asked them to turn these lands off Mimico and Long Branch into national parks, which would be better for all the people in the city of Toronto and for hundreds of miles around.

March 29, 1966
Supply-Public Works
I hate to use the word "ask"-it is not strong enough-but I would ask the department to withhold action on this matter concerning the proposed retaining wall until they have a decision from the Supreme Court of Canada, and I also ask that they make the land there now into a national park. I do not know who is speaking to the government on this matter but certainly it is quite apparent they have a lot more influence with the government than I have. I am only the elected representative for York-Humber.


Mr. Maclnnis (Cape Breton South):: Would the hon. member permit a question? Would he indicate what firms are making these representations?


Ralph Bronson Cowan: I can only say that I heard the name of a lawyer, Mr. James F. McCallum. I never met the gentleman. His name is mentioned in the New Toronto Advertiser week after week and his name is mentioned in the village of Long Branch and at the Mimico ratepayers' meetings. I only know that his name is James F. McCallum.
[DOT] (6:40 p.m.)


Gilles Grégoire: Mr. Chairman, I should like to ask a question. Is Mr. McCallum alone in this firm or has he some associates whom we might know?


Ralph Bronson Cowan: I know nothing about Mr. McCallum. I have never been in his office. I have never met the man. I am not a lawyer and do not circulate in legal circles in Toronto.


Thomas Speakman Barnett: Mr. Chairman, I certainly do not have any desire nor do I feel I have the knowledge or competence to make any assessment of whether certain works or fills or what-not should be put along the shores of lake Ontario. But what concerned me very much as I listened to the presentation of the hon. member for York-Humber was the whole question of what I might call the violableness of the Navigable Waters Protection Act.
I tried to follow closely the statement made by the Minister of Public Works. He made particular reference to a certain type of waterlot and the sequence of events that involved provincial and municipal authorities in the granting of construction permits and so on. But what disturbs me is not only what the hon. member for York-Humber said but also the fact that from what the minister said obviously certain works were constructed out

into lake Ontario, which as I understand it is certainly classified as a navigable water, without the Minister of Public Works of Canada, who is responsible for matters pertaining to the Navigable Waters Protection Act, having made a determination whether navigation interests were involved before the works were constructed.
If people can do that kind of thing and not be subject to some penalty, I submit there is something seriously wrong with the Navigable Waters Protection Act. The minister talked about negotiations and discussions with the province, which are probably useful, but one of the questions raised is: Who has been challenging the authority of the federal government in their control over navigation?
I can think of a place in my constituency where fill was placed in navigable waters along the eastern coast of Vancouver Island. There is now a big shopping centre, hotel and many other buildings in this area which at one time was part of Discovery Passage. I remember that the person who was intitially promoting this venture came to Ottawa to see me and asked if I would arrange an appointment with the Minister of Public Works and the officials who administer the act in order to discuss this question. This was done long before any shovel or dredge was involved in actual work. This man also had to obtain approval from the provincial authorities for a waterlot and all the rest of it.
By his answer the minister has left open this important question: Can people flaunt with impunity the Navigable Waters Protection Act? I think this question goes beyond the immediate determination of the particular structures which have been outlined to the committee by the hon. member for York-Humber. I understood the minister to say that if these protective works are constructed according to plans he intends to approve them. I am not prepared to say whether he should approve them, but it seems to me it is a very poor state of affairs if developers or anyone else involved can in effect thumb their nose at the constitution, the federal government and the Minister of Public Works, build structures out into lake Ontario or anywhere else in this country where navigable waters are involved and ask for nothing more than the blessing of the Minister of Public Works after the event. It seems to me this question has not yet been answered and I believe we should have from the Minister of Public Works some indication of what he
March 29, 1966

intends to do about this situation, which for all I know may have developed before he assumed his present office.


George James McIlraith: That is the fact, Mr. Chairman, but I do not plead it as any defence at all in the matter because I must assume responsibility for it. The situation is a little different. It becomes a question of fact whether they are doing anything that is in breach of the Navigable Waters Protection Act. I sought to indicate to the committee that in the particular case to which I referred, and I did not mention the name of the case, it became quite clear that they were in breach of the act in that they had not made application. They then immediately made application. The whole difficulty arises because it has to be determined when they are in fact in breach of the act as it now stands. The question of divided jurisdiction enters into this matter. There is a real difficulty in determining the facts as well as the problems inherent in divided jurisdiction as it applies in these cases.
There is also the question-and we are considering this as well-of the draftmanship of the act as it exists. I indicated what we are doing on the question of divided jurisdiction and I should add that we are also considering the act with a view to improving it within the jurisdiction that is admittedly federal, because I think it is fair comment that the act as it stands is not satisfactory.
With regard to the other point about public bodies taking care to make application in advance, I think the answer is very simple. When there is a question of divided jurisdiction public bodies always follow the precautionary course of applying whether or not they need to apply. They do this in order not to be put in the position of having appeared to break the law in the event that it is decided they should have applied. I believe this happens with regard to most public bodies. In spite of the reference to lawyers, I believe that any lawyer acting for a public body would advise them that if there is any question of doubt at all they should apply. In any event I am very happy to see that there is so much concern about some people not applying as promptly as they should. I do not think there is anything more I can usefully add on this point.


David Réal Caouette: Mr. Chairman, the explanation given by the minister to the question
Supply-Public Works raised by the member for York-Humber (Mr. Cowan) is rather confused.
The member mentioned earlier the name of a lawyer, Mr. James F. McCallum, who is greatly interested in this fill in lake Ontario, in the Mimico area or on the other side, in Long Branch. When we asked the member for York-Humber whether Mr. McCallum had any associates to help him in his transactions there, he said he was not aware of it and that he did not know Mr. McCallum.
However, I find that in the Canada Legal Directory, which contains the names of law firms or offices in Canada, under No. 123, appears the name of the law office "Cameron, Brewin, McCallum & Scott, 372 Bay Street". Now, 1 wonder whether Mr. A. J. P. Cameron could not add "M.P." to his name and whether Mr. F. A. Brewin would not also be a member of the New Democratic Party; I do not think Mr. Scott is a member of parliament, nor Mr. Joseph Lemire either. There it is, the law office of Messrs. Cameron, Brewin, McCallum and Scott.
If there are any members of parliament in that law office, I wonder whether it is against the regulations to transact business as is now being done on the shores of lake Ontario, and more specifically in the constituency of the member for York-Humber.
At any rate, I think the minister is not giving us much information about the procedure being followed. 1 noted myself that the member for York-Humber is bringing pressure to bear and is asking the minister for information. He wrote to him personally before raising the matter in the house and the answers he got were always non-committal. The matter is staying up in the air, in short, an attempt is made to ignore as far as possible the problem existing over there.
I think the minister should be more specific and state, on behalf of the department and the government, that action will be taken accordingly, so that the residents of Toronto and the shores of lake Ontario will be treated fairly and that some individuals or a few persons will not be granted privileges which clearly belong to the people of Toronto and vicinity.
[DOT] (6:50 p.m.)


William Arnold Peters: I know, Mr. Chairman, that we want to finish these estimates but I am not satisfied with the answer the minister has given. My friend says he has not given any,

March 29. 1966
Supply-Public Works but he has given an over-all answer to a specific problem. If we look deeply into the Navigable Waters Protection Act we will find it is a major piece of legislation which is not applied as extensively now as it has been in the past. I think the minister is wrong in saying that the act does not give his department power to request people to apply for approval before an obstruction is put into a navigable water.
In my own area I know that if one wants to build a small wharf in Lake Timiskaming the Upper Ottawa Improvement Company can remove the dock. They can hook onto it with a tug and remove it if the people have not applied for permission to put in these facilities. They have been known to haul these docks away and court cases have resulted, but the Upper Ottawa Improvement Company has been in the right because they have this power under the Navigable Waters Protection Act.
In my opinion the request was not made by the hon. member alone but was made by a number of people in the city of Toronto who are interested in maintaining the waterfront. They are not in favour of the waterfront being changed in the manner in which it is and for the purpose for which it is being changed. I think the minister is wrong in saying this company had any justification for putting any type of structure there without the prior permission of the department.


George James McIlraith: I do not believe the hon. member should misquote me. I did not say they put any type of structure there without the permission of the department. I was careful to point out that they had not done that.


William Arnold Peters: Then I stand corrected, but that is not the way I understood it. I understood the company had put in fill.


George James McIlraith: They did put in fill, but no structure. This is a difficult legal problem to decide what we can enforce against them.


William Arnold Peters: If you put an earth dam across a river you have effectively stopped navigation on that river. We are quibbling if we call dumping fill into the water no hazard and yet a wooden wharf is a hazard. That is quibbling.


George James McIlraith: The hon. member should not misrepresent what I said. If he takes a load of earth and puts it in a lake 60 miles wide, is that a "work" within the meaning of the

act in a navigable water or is it not? It is a very nice question of law. I have tried my best to get opinions on which we can rely. The problem here is to determine when it did become a breach of the act, and admittedly it did at a point. However, presuming to prejudge the case as the hon. member has done is something that I did not do and I am not willing to do.


William Arnold Peters: This is exactly what I agree happened; the case was prejudged. In my opinion it does not matter if you dump a wheelbarrow full of mud into a small opening or a large amount of fill into a big opening. It becomes an obstruction. It is only a matter of degree. One wheelbarrow full of refuse dumped on the shore is an obstruction for certain purposes under the Navigable Waters Protection Act. These obstructions do not relate only to the sailing of ships but to other matters.
I think this question should be referred to the law officers of the Crown. I know the minister has the right, if he wishes, to state a case to the Supreme Court for a ruling. I am not concerned about the question as it affects this case only but I am concerned about other areas. This question has been a factor and is still a factor in connection with Lake St. Clair. It is a factor in the Georgian Bay tourist area. It is a factor in the area of my own lake. I did not know until this discussion arose that it was not legal for me to put fill into a lake. I had intended to reclaim a certain amount of the lake but I know now that there are restrictions in the Navigable Waters Protection Act.
In my opinion this matter should be decided by a stated case to the Supreme Court. I think the minister is in a very weak position if he argues the question of degree in this case. I am quite prepared to say that a thousand foot wharf in lake Ontario in the Etobicoke area is not necessarily an obstruction to seaway traffic. However, I am of the opinion that a thousand foot wharf in Lake Ontario is an obstruction to motor boats. I think this piece of land would be difficult to cross on water skis and therefore it would be an obstruction.


George James McIlraith: Would the hon. member permit a question, because I fear he does not understand the two parts of the Navigable Waters Protection Act? If something is there and has become an obstruction, then there is a right not to grant a permit under certain
March 29, 1966



terms and conditions. They must make application, and they have made application. It is a matter of assessing and examining all the facts and deciding whether or not a permit should be granted.


William Arnold Peters: As I understand it, originally they did not make an application. If I recall the remarks made by the hon. member for York-Humber, this application was made later and this obstruction has been there for some period of time. My point, Mr. Chairman, is that the minister did not make any decision before the obstruction was there. The minister has the responsibility, not these people building the new land. The minister and his officials have a responsibility to decide whether or not this project is going to be an obstruction, whether or not it meets the terms of the act.


George James McIlraith: That is precisely the decision they took.
[DOT] (7:00 p.m.)


William Arnold Peters: Am I now being informed that it has now been decided what they will do in this particular instance?


George James McIlraith: It was decided that they had to take out this fill, or file an application to come within the terms of the act.


Donald MacInnis: After the original violation?


George James McIlraith: Certainly.


Donald MacInnis: The
minister indicated there had been a violation prior to the application.


George James McIlraith: Exactly. That is why it was taken out.


Raymond Langlois: Just one question. Did the minister receive any representation from the Mr. Cameron and the Mr. Brewin who have been mentioned in this case?


George James McIlraith: None whatever. May I just qualify that answer by saying that I came to the department only on July 8 of last year. There may have been some correspondence since then and I would have to check the file, but I have no recollection of any correspondence.


Mr. Macdonald (Rosedale):: I think he
means before that.


George James McIlraith: There may have been some correspondence before that and I would have to check the files to see whether there was. Certainly none has come to me, and
Supply-Public Works representations on this matter have been made by only one member, the member for York-Humber.


Ralph Bronson Cowan: The former hon. member for York West, Mr. Kelly, made several representations as well, when he was a member of the house.


George James McIlraith: I was not Minister of Public Works when Mr. Kelly was a member of the house.


Ralph Bronson Cowan: I did not say you were.


William Arnold Peters: I am thoroughly confused, frankly, with these answers. I had thought I understood the problem. If this matter has been solved to the satisfaction of everybody, then certainly I would not object; but I should like to ask the minister whether he is giving any consideration to policing the provisions of the Navigable Waters Protection Act, particularly in areas such as these under discussion at the present time, in order to see that none of these structures are built until permission has been granted by the department.
I believe we have prior claim to making decisions in federal matters. If structures are built and permission is received, this may satisfy the situation; but it does seem to me that the minister, before he gives approval, has the right to set down certain conditions under which protection is provided, such as construction of waterbreaks and other necessary structures to contain whatever works are undertaken. He would obviously have to cooperate with the municipalities to see that this was in their interests.


George James McIlraith: The whole scheme of legislation envisages an application being made before construction of any project, if I may call it that. We are concerned with this quite valuable land, if you wish to refer to it in that way, fronting Lake Ontario. We have been dealing with the province to see whether we can improve our policing technique so that we are given advance notice of proposed structures on waterlots. We are right in the midst of trying to do our best to deal with what is a very difficult and complex problem.


Donald MacInnis: The
minister made a very technical point. He tried to draw a distinction between a structure on a reclamation project, if I can call it that, and land fill. He drew a very narrow distinction, and as the hon. member for Ti-miskaming pointed out there is no difference

March 29, 1366
Ways and Means
between a structure and fill under the Navigable Waters Protection Act.
The hon. member also indicated that there had been a violation prior to the application made under the act, such as it is. Therefore I would ask whether the government took any steps to penalize these people who violated the act. I would further ask the minister whether the firm that was mentioned of McCallum, Brewin, Scott and Cameron has any connection with the hon. members for High Park, Danforth and Greenwood.


Donald Stovel Macdonald: No, not the hon. member for Danforth.


George James McIlraith: I assume that it does,
though I do not think it is connected with the hon. member for Danforth.


Donald MacInnis: But is
it connected with the hon. member for High Park?


George James McIlraith: The hon. member for York-Humber told me that it was, so I assume it is; but I do not know. In any event, neither hon. member made any representations to me.


Donald MacInnis: Would the minister indicate the penalties which were imposed, if any?


George James McIlraith: I should want to check the files of the department further. I may say that it was the legal officers who raised the question about the definition used in the act. I think the word "works" was the word which caused the trouble.


[Stage Direction]
Item agreed to.
Herman Maxwell Batten: This completes the supplementary estimates for the year ending March 31, 1966. Shall I rise, report certain resolutions, and request that the committee be granted leave to sit again at the next sitting of the house?


Some hon. Members:: Agreed.
Resolutions adopted in committee of supply this day reported and concurred in.



WAYS AND MEANS

["The table is as follows:\n[Editor's Note: The table above referred to is as follows:]\nTable 4\nBudgetary and Old Age Security Fund Revenues\n\t1965-66 Prelim-nary $ million\t1966-67 Forecast after Tax Changes $ million\nPersonal Income Tax Corporation Income\t2,150\t2,378Tax Non-resident with-\t1,610\t1,731holding tax\t170\t177Estate tax\t107\t101Customs duties\t676\t749Sales tax\t1,385\t1,475Other duties and taxes\t734\t773Total taxes 23033-215\t6,832\t7,384The Budget-Mr. Sharp Non-tax revenues\t841Budgetary revenues\t7,673\t8,300Old age security fund revenues\t1,163\t1,277\nTotal revenues\n8,836\n9,577\nSetting these revenues against our budgetary expenditures of $8,450 millions leaves us with a budgetary deficit of $150 million for the new fiscal year-again disregarding the yield of the refundable tax. In terms of the national economic accounts, where I am including as revenue the yield of this refundable tax, I am forecasting a surplus of about $615 million, compared with $494 million in the year now closing. These figures do not include the accumulation of funds in the Canada Pension Plan, which will be shown separately in the statistics. Such accumulation will be an additional source of national savings, as will be the corresponding item for the Quebec plan. I shall include with the budget papers as an appendix to Hansard if the House will agree, tables giving these national economic accounts figures and their reconciliation with the budgetary accounts.\nWe have of course many substantial transactions outside our budgetary accounts which must be taken note of in assessing our overall position. Our loans and investments will be higher this coming year than in the year now closing, chiefly because of Expo 1967 whose cash requirements will be at a peak this year. Another large factor will be our disbursements of Municipal Development Loans which will be high as projects are completed and interim financing is refunded by drawing upon the loans we have approved. On the other hand our non-budgetary receipts, apart from public debt transactions, will be down modestly, apart from the refundable tax-which I would leave out of account for the present, as well as any change in the level of our exchange reserves. The net balance of non-budgetary items on this basis I would expect to be a requirement of about $350 million compared with $163 million last year. Adding this to the budget deficit would give a total requirement for cash of about $500 million this year compared to $187 million shown in the White Paper for the year now closing.\nI do not propose that we should disburse the funds we receive from the refundable tax as we do normal revenue. Instead I would plan to hold it as an addition to whatever", 'March 29, 1966\nThe Budget-Mr. Sharp cash balances we would otherwise hold, unless economic circumstances change and make it economically desirable for us to borrow less and ease the pressure on the capital market.\nI should also recall that in our balance of payments arrangements with the United States the government has agreed that it would aim to reduce its exchange reserves to a range that would centre around $2,600 million. This would involve a reduction of an order of magnitude of about $200 million from the figure at the beginning of this month. However, the Government of Canada may either have to purchase Canadian securities held in the United States or itself borrow in the United States, depending on the requirements of our balance of payments and the borrowing which others do outside Canada. Consequently I believe we should not try at this time to forecast the effect of these prospective changes in our reserves and related transactions upon our requirements for cash in Canada.\nOur cash balances now, very near to the beginning of the year for which we are budgeting, are reasonably high. The extent to which we should draw them down rather than borrow to meet our cash requirements will be a matter to be decided upon from time to time during the year depending upon the state of the capital market, monetary policy and other economic circumstances. In this new fiscal year it is evident that our debt management decisions and operations will have an important role to play in our general economic policy.\nI should point out that the accumulation and investment of funds under the Canada Pension Plan, though large, will have little bearing upon our accounts or financing since we lend all these funds, except working balances, to the provincial governments or their agencies in accordance with the Canada Pension Plan act.\nConcluding Remarks\nBefore concluding I should like to make two points briefly. The Economic Council for Canada in its first Annual Review, in describing the conditions and policies which it considered necessary to reach our economic goals -as indicated in the Act establishing the Council-called for "Responsible restraint in both wage demands and business pricing policies, with clearer recognition that failure to maintain reasonable price and cost stability\n\nwill frustrate the attainment of other basic economic objectives, such as balance of payments viability and high employment, while also comprising our capacity to achieve steadily advancing living standards for the Canadian people, reasonable profitability of business, and the maintenance of purchasing power of pensions and savings." This is a time when all Canadians should observe such restraint, in our own long term interest, and resist the temptation to exploit the bargaining positions which the present boom presents to many in the country.\nSecond, we need more saving on the part of Canadians, and more investment in the capital assets of Canada\'s economy-private and public. We need it now more than ever before in normal peacetime. A modest increase in saving at the cost of reducing personal expenditure in boom times is a means by which Canadians, as individuals, can contribute to the success of national economic policy. The poor that remain among us cannot be expected to save more this way-but those of average incomes and better can.', 'I need hardly say that as a new Minister of Finance I would have preferred the main features of my first Budget to be proposals to reduce taxation. But we can all take satisfaction from the fact that our problems are no longer the problems of overcoming slackness or stagnation but those of managing growth and prosperity. Our task is to sustain the longest economic expansion in Canadian history.', 'I want to take this opportunity to express my warm appreciation of the contribution to this expansion that was made by the policies of my predecessor the hon. member for Davenport (Mr. Gordon).\n[DOT] (9:20 p.m.)\nI believe the measures I have proposed tonight will serve to moderate but by no means eliminate the increase in demand on our economy this year. Our situation calls for some restraint in expansion; it does not call for deflation. As a nation we should ease up our foot on the gas pedal, not slam on the brakes. We want growth, but sustained growth, not erratic fluctuations. The keynote of this budget is moderation. This is what is needed today if we are to guide our economy toward successive years of expansion and continued prosperity.\n23033-215*']
Edgar John Benson: that the house go into committee of ways and means.
Motion agreed to and the house went into committee, Mr. Batten in the chair.


Edgar John Benson: Resolved, that toward making good the supply
granted to Her Majesty on account of certain expenses of the public service for the fiscal year ending March 31, 1966, the sum of $270,207,367, be granted out of the Consolidated Revenue Fund of Canada.


[Stage Direction]
Motion agreed to.
Resolution reported and concurred in.
Mr. Benson thereupon moved for leave to introduce Bill No. C-159, for granting to Her Majesty certain sums of money for the public service for the financial year ending the 31st March, 1966.
Motion agreed to, bill read the first and second times and the house went into committee thereon, Mr. Batten in the chair.
[DOT] (7:10 p.m.)
Clauses 2 to 4 inclusive agreed to.
On clause 5-
['Resolved, that toward making good the supply\ngranted to Her Majesty on account of certain expenses of the public service for the fiscal year ending March 31, 1966, the sum of $270,207,367, be granted out of the Consolidated Revenue Fund of Canada.']
Michael Starr: Mr. Chairman, I just want the assurance of the Minister of National Revenue who is piloting this bill through that this is the standard type of appropriation bill.


Edgar John Benson: This is a standard type of appropriation bill. Clause 5 is necessary in order that bills may be paid in April out of these funds. It is for expenses incurred at March 31.


[Stage Direction]
Clause agreed to.
Clause 6 agreed to.
Clause 1 agreed to.
Schedule agreed to.
Bill reported.
['This is a standard type of appropriation bill. Clause 5 is necessary in order that bills may be paid in April out of these funds. It is for expenses incurred at March 31.']
The Deputy Speaker:: When shall the bill be read a third time.


Edgar John Benson: By leave, now?


Some hon. Members:: Agreed.


Edgar John Benson: the third reading of the bill.


[Stage Direction]
Motion agreed to, and bill read the third time and passed.

The Deputy Speaker:: Order, please. It is my duty pursuant to provisional standing order 39A to inform the house that the
March 29. 1966

questions to be raised at the time of adjournment tonight are as follows: the hon. member for Brandon-Souris (Mr. Dinsdale); technical and vocational training-request for subsidization of teacher training programs; the hon. member for Winnipeg North Centre (Mr. Knowles); the Canadian economy-effect on pensioners of increasing cost of living; the hon. member for Gaspe (Mr. Keays), northern affairs-construction of replica of Grande Hermine for Expo '67.


Michael Starr: Mr. Speaker, in view of the fact that tonight is the presentation night of the budget by the Minister of Finance, and to enable time to be available for reply by the opposition critic to the minister, I wonder if there is any provision that these questions not be taken up at ten o'clock, but postponed to some other time?


Some hon. Members:: Agreed.


Mr. Deputy Speaker:: Order, please. The three questions to be taken up on proceedings under the adjournment motion can be suspended by unanimous consent of the house.


Some hon. Members:: Agreed.


Mr. Deputy Speaker:: Is there unanimous consent?


Some hon. Members:: Agreed.


Thomas Speakman Barnett: It is understood that they are simply to be deferred, and will hold their order.


Mr. Deputy Speaker:: It is the understanding that the house will dispense with these questions on tonight's adjournment proceedings.
I should point out to the house that since the hour for private members was not taken up, that this hour also was deferred, and is not to be counted.


Michael Starr: Agreed.


Mr. Deputy Speaker:: Order, please. The sittings of this house are suspended until eight o'clock, pursuant to a special order made on Monday, March 28, 1966.
At 7.15 p.m. the sitting was suspended.


[Stage Direction]
The Budget-Mr. Sharp THE BUDGET
Mitchell William Sharp: That Mr. Speaker do now leave the chair for the house to go into committee of ways and means.
He said:

Mr. Speaker, a year ago my predecessor in office, the hon. member for Davenport (Mr. Gordon), reported to the house that there had been a great and encouraging improvement in the economic situation. I am happy to say that this trend continued in
1965.	The fiscal policies he initiated have resulted in further rapid economic growth.

Royal Commission on Taxation
For all those concerned with fiscal affairs and economic policy generally, 1966 will be a busy and important year. We expect to receive and publish within the next two months the report of the Royal Commission on Taxation which was appointed in 1962 to review the whole of our federal tax system.
It is clearly desirable that following the publication of the report sufficient time be made available for people to study it and make known their views on it. I found on taking office that it would not be possible to take action on the report in the Budget this year. To avoid any uncertainty about it I made clear in January that this budget would not reflect the proposals of the Royal Commission and such is the case.
When the Royal Commission was asked to make a comprehensive review of our tax system it was given a difficult task, to which the Commissioners and many experienced advisers have devoted much thought and work. We in turn will be faced with a difficult and controversial task when we come to reform our tax laws in the light of its report. Naturally we will not be able to consider the Royal Commission's recommendations in isolation. We shall have to take into account the issues we are discussing with the provinces concerning federal-provincial fiscal arrangements. Our reform of the tax system will be governed by two principles: equity and efficiency. Governments are going to need increasing revenues to meet the social and economic requirements of a nation determined to abolish poverty-and I personally share this determination. I believe Canadians

March 29, 1966
The Budget-Mr. Sharp generally are willing to play their part in this endeavour, but they must be satisfied that what is asked of them is fair and that the fiscal system does not stand in the way of work and enterprise.
Federal-Provincial Fiscal Arrangements
This will be the crucial year for the Federal-Provincial Tax Structure Committee which, as the House knows, is conducting a broad review of the fiscal relationships between the federal and provincial governments. One of the important elements underlying these discussions is the rapid increase in the expenditures of the provincial governments and their municipalities. Many of the major social requirements of Canadians today fall within the sphere of provincial responsibility, and provincial expenditures naturally reflect this trend. I have in mind chiefly education, health, a variety of welfare requirements, and highways. The trends in federal expenditure on the one hand appear to be increasing roughly in line with the Gross National Product. The requirements of the provincial governments and their municipalities on the other hand appear to be growing at a higher rate. The Provincial Treasurer of Ontario said in his Budget Speech last month, "It is becoming increasingly clear that the combined total of provincial and municipal expenditures will continue to grow at a much more rapid rate than the corresponding federal commitments."
[DOT] (8:10 p.m.)
In our federal system there are three lines of approach to ensuring that the provinces will be able to provide an adequate level of public services. First, the provinces must have access to an appropriate share of the sources of available revenue. This is the tax sharing problem. I have reached the conclusion that it will be possible both to ensure that the provinces have access to sufficient revenues to finance their responsibilities and to ensure that the Federal Government will have sufficient scope to make effective use of fiscal policy for economic purposes. In the second place, there has to be a system of equalization payments made by Parliament to underwrite the ability of the less wealthy provinces to provide adequate services. The present equalization formula is not entirely satisfactory. We would like to develop a formula that would take into account a wider concept of fiscal capacity based on a comprehensive range of provincial revenues. The third element comprises the conditional

grants made by the Federal Government to specific provincial programmes.
Here, and this is the central problem, we must find a balance between two important considerations: on the one hand the responsibility we feel here in parliament, and I feel here in parliament as one of its members, to give leadership on matters of national importance, and on the other hand the need to respect provincial responsibilities and provincial judgments about matters within their jurisdiction.
This will be no easy task but, given sufficient imagination and good will, I have no doubt whatever that we can find workable solutions.
Tariffs
In international economic affairs too this will be an important year. The Kennedy round of tariff negotiations sponsored by the members of the General Agreement on Tariffs and Trade must come to a head later this year if the negotiations are to be completed on time. In mid 1967 the powers accorded to the U.S. Government by the Trade Expansion Act expire. It would be a tragic waste if the world trading community failed to make effective use of that imaginative legislation which was one of President Kennedy's great achievements.
For our part, and I believe I speak not only on behalf of the government of Canada but on behalf of all of us in this house, we shall do our utmost to ensure the success of these negotiations.
Tonight I shall be proposing very few changes in the Customs Tariff. They are set forth in the resolution. We have received a great many suggestions and requests for tariff changes.
I am glad to see, as a former minister of trade and commerce and as one who believes in liberal trade, that the great majority are suggestions for decreases rather than increases. Many of these have considerable merit.
But at a time when we are engaged in one of the largest international tariff negotiations in our history I think the House will appreciate the desirability of using whatever tariff reductions we contemplate to help us obtain better access to foreign markets for our own exports.
International Monetary Co-operation
We are also playing an active part in the international consideration of methods for
March 29, 1966

improving the international monetary system. Supplies of traditional forms of reserves such as gold and the reserve currencies are not likely to be adequate in the future to meet the needs of a growing volume of world trade and payments. We would like to see machinery established which would enable some conscious action to be taken in the future to create international reserve assets much as a central bank influences the growth of the money supply within an individual country. We also want to see improvements in the process whereby countries adjust imbalances in their international position quickly and with the least damage to their trading partners.
In these discussions the Canadian Government has urged that a new reserve asset should be created through the joint action of a group of countries which are able to contribute strong backing for such a new asset and which have had considerable experience of co-operation together in monetary matters. We believe the decisions concerning issues of the new asset should be made within the general framework of the International Monetary Fund, and that all members of the Fund should be entitled to hold and to use the new asset. It is too early to say what the outcome of these discussions will be.
As many people in this house who follow these matters know, there are still differences of opinion among the countries involved as to the need for any new arrangements at this time and as to the form which such arrangements might take. However, Canada is making every effort to achieve as wide an area of agreement as possible, consistent with the sound evolution of the international monetary system.
Economic Situation and Outlook
In 1965 the dollar value of the nation's output of goods and services was about 9J per cent higher than in 1964. In terms of volume the increase in Gross National Product was about 6J per cent.
This growth in the economy was broadly based and brought benefits to people in all walks of life and in all parts of the country. Capital investment by governments and by private business was up very sharply; consumers spent substantially more than in 1964. Employment rose rapidly by just over a quarter of a million workers. By the end of 1965 not only had another 208,000 workers been added to our labour force, but by the end of the year the rate of unemployment
The Budget-Mr. Sharp had been reduced to 3J per cent. The expansion in the economy, which has now lasted five years, is the most sustained in Canada's history and it shows no signs of slackening.
In recent months indeed it has become evident that the rate of increase in expenditures is becoming too rapid and that we Canadians are trying to take on a bit more than we can handle. In this respect our position is quite different from what it was a few years ago. As late as 1963 the economy, although already expanding, was still operating well below its potential. The rate of unemployment then was much higher, our industries were operating well below capacity, and supplies of resources of all kinds were readily available. In short, even as late as 1963 there was considerable slack in the economy.
This is not the case today. Despite substantial additions to plant and equipment throughout the economy in the last few years and an unusually large growth in the labour force, most sectors of the economy today and most regions of the country are working at or close to capacity. Shortages of skilled labour have become widespread, shortages of other labour have appeared, and unit labour costs have been rising. Our task this year must be to maintain a reasonable balance between the increases in production which are physically possible and the increase in the demands we place on our resources. Since there is no appreciable slack in the economy to take up this year, we cannot look for as large an expansion of output as was achieved in 1965.
[DOT] (8:20 p.m.)
The capacity of the economy at any point in time is limited by the availability of manpower in the right places with the right training, and by our stock of industrial plant and equipment. With the labour force growing and with high annual rates of capital investment, our capacity increases year by year. But to achieve the full potential of our economy, as projected for example by the Economic Council for the year 1970, more than this is needed. We have to improve the quality of our resources and improve our methods of using them. We have to improve the skills of our labour force and organize the labour market more effectively so that people can move readily into the jobs for which they are suited. We have to improve our industrial organization, increase research and development, and ensure that we are using the most modern techniques in industry. The Government has adopted a variety of policies and

March 29, 1953
The Budget-Mr. Sharp programs along these lines to help bring our capacity up to our full potential Even so, these will need some years to take full effect. In these terms to speak of a margin between our present performance and our potential may be useful as a guide to assessing and as a spur to developing our longer-term capabilities. But there is no such margin between our present performance and our present capacity.
Our capacity will of course grow in 1966. The labour force will increase by a further 220,000 workers, although not all of them will be located where there are jobs available, nor will they all have the needed skills. There are pockets of unemployment in some regions which will be drawn on more effectively as our manpower programs and area development measures make themselves felt.
During the coming months, with new plant and equipment coming into production, we should be able to achieve higher levels of output per man-hour in many industries. For the nation as a whole, an expansion in the order of 5 per cent in the volume of output over 1965 levels should be within our reach.
However, even this rate of expansion may well be insufficient to meet the additional demands that appear likely to be made on the economy during the current year. Governments at all levels have already indicated that they intend to increase their total capital outlays in 1966 substantially above those of 1965. Growing requirements for schools, universities, hospitals and roads bulk heavily in provincial and municipal budgets. Other forms of government expenditures are almost certain to rise. The latest survey of the investment intentions of private business firms points to a continuation of the present investment boom. In manufacturing for example the business firms apparently intend to increase their capital investment by 20 per cent in 1966 following a similar increase last year. Substantial increases in private investment outside of the manufacturing sector are also expected. With continued high levels of employment and rising rates of wages and salaries, consumers will have more money to spend. Finally we can expect further increases in our exports during the current there is a growing demand for our goods in year. Prospects for wheat sales are good and many markets, particularly in the United States where the economic expansion appears to be accelerating. Indeed, Mr. Speaker-and I would like to emphasize this point-the change in the outlook in the United States in the past
[Mr. Sharp.l
three months is an important influence on our present situation, and necessarily upon the policies which we must follow.
All of this being so, 1966 presents a great challenge to Canadians. We have been successful during these past few years in stimulating the economy until it is now operating Close to capacity. Are we now prepared to exercise the moderation-as well as the enterprise-needed to keep the economy operating at full capacity not only in 1966 but in the years to come? In other words can we now pace and prolong our prosperity? That is the question we have to face as a people. If Canadians try to achieve more than is physically possible the result can only be severe strains on key industries, shortages of materials, and rising costs and prices; productivity would be adversely affected and our competitive position would deteriorate. Moreover imports would be drawn in at a rate that would bring about a substantially larger deficit in our balance of payments on current account. In recent months imports have been increasing more rapidly than exports; this was reflected in the increase in our current account deficit in 1965, and is likely to result in a further increase in 1966. This is not unreasonable in present circumstances, but we must keep it within sensible bounds.
Balance of Payments
It has been customary for Canada's external deficit on current account to increase during periods of economic expansion. As the domestic demands on our resources approach the limits of our capacity a larger import surplus makes available additional resources. The additional supplies of machinery, industrial products and consumer goods that we thus obtain from other countries help to avert shortages in Canada and help to avoid increases in prices and costs. They enable us to produce more and to consume more. Thus import surpluses help to alleviate pressures on the economy when it is operating at full capacity. By contrast large import surpluses several years ago, when the Canadian economy was running well below capacity, aggravated our own underemployment.
While there are short-term advantages in having a large current account deficit when the economy is at full stretch, we should not blind ourselves to the disadvantages of running such a deficit year after year. The deficit enables us, through borrowing, to use resources today which, as a nation, we have not yet earned and which will have to be repaid
March 29, 1966

out of future earnings. There are dangers in trying to enjoy, through borrowing, a standard of living over the years that is higher than our own productivity allows. Borrowing from abroad at a time when we are undertaking a large investment program is justifiable; but relying on borrowed external capital to sustain a high and rising rate of consumption can be as dangerous a temptation for a nation as for an individual.
From 1962 until our economic expansion gained greater momentum last year we made good progress in reducing our current account deficit. Even in 1965, during a period of rapid expansion, the deficit was much less than in 1959, which was a year of considerable slack. The trend therefore seems to be in the right direction but in the years ahead we must make further progress in reducing this deficit. We have preserved our access to the United States capital market with the cooperation of the United States Government, which recognizes the fact that Canada does not contribute to the United States balance of payments problem. But in the longer run, with the whole world hungry for capital, we cannot assume that it will always be feasible for Canada to import such large amounts of capital as we have in the past. This is not an immediate problem to be solved this year or next. It is a matter of developing a long-term balance of payments policy consistent with our international position as an open economy in an increasingly competitive world. Our basic approach is two-fold: first, through industrial, commercial and manpower policies, to adapt the structure of the Canadian economy to exploit effectively the most rapidly growing markets at home and abroad; and second, to develop and encourage the growth and use of Canadian savings. Canadians should be prepared to forgo some of the apparent advantages of immediate expenditures in order to invest in the expansion and productivity of their own economy.
Economic Council
Mr. Speaker, it is very useful to me as Minister of Finance to have had the opportunity of reading and studying the reports of the Economic Council of Canada. In its last report the Economic Council of Canada pointed out that the recent rate of expansion of investment spending is clearly not sustainable on a long-term basis. Our economy will grow more if the rate of expansion of investment keeps broadly in line with our longer-term potential requirements instead of fluctuating
The Budget-Mr. Sharp on the basis of the short-term outlook. We need to plan now to maintain our growth in the years beyond 1966. Investments by governments as well as by private business that can be postponed to a later time will help then to maintain stability and growth.
We have all, in government, in business and in labour circles, received much useful information and advice from our Economic Council on how to make our efforts, our labour and resources more productive; and on the proper choice of priorities.
[DOT] (8:30 p.m.)
I find myself generally in agreement with the substance of much that the Council has said in both its First and Second Reviews. I have taken to heart the concern that it expresses and implies about the way time lags can impair the effectiveness of fiscal measures and its concern that we must not lose sight of our longer-term goals in dealing with immediate problems. On the other hand I consider unduly pessimistic its opinion that fiscal measures should not be used to deal with what it calls "shorter term cyclical instability" and I do not share its view that fiscal policy can and should be reduced to an arithmetical formula. Appraisal, judgment and flexibility must have their place if we are to succeed.
While our present situation clearly calls for restraint on the increases in spending, rather than stimulus, this could change fairly quickly. Our objective is a steady and sustained rate of growth. Our intention is to keep our fiscal policies flexible, and readily adaptable to changing circumstances.
Mr. Speaker, if we do not by one means or another succeed in moderating the increase in aggregate expenditures this year the most immediate penalty we shall suffer is an inflationary increase in prices. Public and indeed parliamentary concern over this danger is already evident. It was only a few days ago that we were debating this very issue. As a practical matter in our society this danger cannot be avoided by trying to regulate prices and wages. We must deal with the basic issue which is at the present time an excess of spending power over what is available to meet demands. It is this excess which causes rising prices, costs and profits and which harms those in our society whose economic power and bargaining position are weak.

March 29. 1966
The Budget-Mr. Sharp The Out-turn of Last Year's Budget.
Mr. Speaker, I should like to turn now to a review of our government accounts. The outcome of the Government's accounts over the past year has been laid before you in detail in Part 2 of the White Paper. I propose simply to note a few highlights.
Budgetary revenues in the fiscal year now ending are estimated to have been $7,673 million. You may recall that my predecessor in office expected, nearly a year ago, that revenues would rise by some 5J per cent in the absence of any tax changes, and that he proposed to reduce this growth to just over 3 per cent by a reduction in personal income tax, which took effect last July. These revenue forecasts were based on an expected increase in the value of the Gross National Product of about 74 per cent. In the event, our rate of economic expansion was such that the value of the GNP rose by about 9J per cent; and revenues rose as a consequence, in spite of the tax cut, by $493 million, or 7 per cent. This is telling evidence of the considerable momentum which the expansion acquired during the course of 1965.
Expenditures within the framework of the budgetary accounts in the year now at an end are estimated at $7,707 million. This is only three-quarters of one per cent higher than was forecast in last year's budget.
I should like to congratulate my predecessor in office.


Some hon. Members:: Hear, hear.


Mitchell William Sharp: Indeed, I should like to congratulate him again because the resulting budgetary deficit of $34 million was the lowest since the fiscal year which ended on March 31, 1957, nine years ago. To all intents and purposes therefore the budget was in balance this year.
Federal revenues and expenditures on the national economic accounts basis, which takes in non-budgetary government transactions affecting the incomes of individuals and businesses, are again explained and reconciled with the budgetary presentation in Part I of the White Paper. I should like to point out to the house, however, that there was a surplus on the National Accounts basis of some $494 million, compared with the surplus of $279 million in the previous fiscal year. In terms of the impact of the Federal Government's total receipts and payments upon the incomes of the rest of the community, this healthy federal surplus of nearly half a billion dollars was no more than was needed to absorb

a substantial volume of potential private demand which would otherwise have largely been translated into higher prices and a larger deficit on current account in the balance of payments.
The Outlook for Revenue and Expenditure in
the Coming Year.
I have described our economic situation and prospects and have reviewed the outcome of Federal Government transactions in the fiscal year now ending. Let me now move ahead to discuss the outlook for the new fiscal year.
First of all, without taking into account the effects of this Budget my advisers would now expect another increase of rather more than 9 per cent in the Gross National Product in
1966.	Of this, a little more than 5 per cent would be in volume and 4 per cent in price. That is the prediction my advisers made without taking into account any of the proposals that I shall make subsequently. Part of the expected price increase is attributable directly to contributions under the Canada and Quebec Pension Plans and to the recently announced increase in the Ontario provincial sales tax, both of which reflect improvements in public and social services.
On the basis of present taxes and this increase in Gross National Product I would expect our budgetary revenues to be about $8,220 million in the coming fiscal year, an increase of 7 per cent. There are special reasons why this increase in revenue will be less than would normally result from such a large increase in Gross National Product. First of all, the income tax cut of 1965 applied only from July 1 last. In a full fiscal year the cost would be considerably more. In the second place, in 1966 there is a further abatement of three percentage points of basic income tax in favour of the provinces. In the third place, contributions by individuals and employers to the Canada Pension Plan and the Quebec Pension Plan, which commenced at the beginning of this year, are deductible for personal and corporation income tax purposes. Finally, corporation income tax receipts in 1965-66 included some extra revenue in respect of the movement forward of the payment period for this tax which we will not have this coming year.
I am forecasting budgetary expenditures for the coming fiscal year at $8,450 million representing an increase of nearly 10 per cent above the previous year's level. This takes into account not only the Main Estimates
March 29, 1966

which have already been tabled but the expenditures normally made from supplementary estimates. It also takes account of new legislation and programs that have been announced. It reflects as well the efforts to which I shall refer in a moment that my colleagues and I have recently made to defer capital expenditures previously planned for this coming fiscal year.
On the basis of these forecasts, before taking into account my following proposals, we would have a deficit of $230 million in our budgetary accounts. In terms of the national economic accounts there would be a surplus of $370 million.
Policy and Proposals-General
I turn now to the policies and proposals for dealing with the economic and budgetary situation I have been describing. I take this occasion to express my thanks to the numerous Canadians who, in response to my invitation, sent me their recommendations for this Budget.


Some hon. Members:: Hear, hear.


Mitchell William Sharp: I received a great variety of suggestions, some of them quite unorthodox, which I may reveal at some time, but many of them, indeed a very large number, were constructive. If I may be pardoned a parenthetical remark, a great many of the letters said either expressly or implicitly, "I did not know you were interested in my views."


Mr. Fullon:: They will find out later that you weren't.


Mitchell William Sharp: However, I have never regretted having sent out this general invitation.
It is clear that action should be taken promptly to moderate the present boom and to maintain a steady and sustainable rate of growth in our economy. We must avoid the kind of boom that will lead to a bust.
In seeking this major objective we wish also to protect and enhance our productivity and our ability to compete in trade with other nations. We also want to restrain the increase in our balance of payments deficit.
To achieve these aims we must moderate the increase in the total of demands being placed on the Canadian economy this year and next year. These demands include those of governments, of business, of consumers, and of those who buy our exports. We do not want to restrain export demands-we need the proceeds of exports to pay for imports and
The Budget-Mr. Sharp meet our very heavy obligations in respect of interest and dividends payable outside Canada.
We should restrain in some degree the increase in all the other demands this year on Canada's production.
[DOT] (8:40 p.m.)
Government Expenditures
First, in regard to our own government substantially higher this new fiscal year than in the one just closing-higher by some $743 millions, or 9J per cent. Since last August we have been reviewing our construction programs and deferring a number of projects -both those announced at the time and others that came up subsequently for decision.
Now that we are better able to appraise the total economic situation this year, and our part in it, the Government believes it should exercise further restraint upon its own expenditures, particularly in the field of construction, during this coming fiscal year.
As a consequence the Government has made several decisions. First, that it will not undertake any substantial new programs or projects requiring expenditures in 1966-67 that are not already provided for in the Estimates or are already announced, except for what are clearly unforeseen emergencies. This will mean deferring a number of plans that have been under consideration, or which we have been requested to undertake by the provinces or others.
Second, we will limit our departmental construction programs this year to a total that will be 10 per cent less, in terms of expenditures in 1966-67, than the total figure of $348 million submitted in the Main Estimates now before the House. This will require deferment of a number of projects already included in the Estimates or otherwise announced. We have already decided to defer or re-schedule a number of specific projects which we think can and should be deferred or re-scheduled at this time, among which the following are examples:
(a)	a grain elevator at Prince Rupert that we had intended to proceed with immediately but on which the tenders for construction came in at figures much higher than we thought were necessary;
(b)	the proposed new Taxation Building in Ottawa, the National Museum, the National Research Council Structures Laboratory, and the commencement of buildings on the Satellite Experimental Farm;

March 29, 19S8
The Budget-Mr. Sharp
(c)	some less urgent work at airports in various parts of the country;
(d)	a readjustment of the timetable for the next phase of the Northumberland Causeway project in order to minimize the pressures on the peak summertime employment market and maximize winter employment possibilities;
(e)	some harbour and marine works in coastal areas where there is serious pressure on the construction industry;
(f)	some smaller public buildings in Ontario and British Columbia.
I regret, and I am sure everyone in this house regrets, that it is necessary to defer these projects and others as well to which I have not referred, but I feel that it is essential to do so if we are to avoid an unreasonable level of demand on the economy this year. I hope that the provincial governments, whose construction programs have apparently increased even more than ours this year, will be able to contribute to this desirable restraint upon aggregate demand by holding back until a later year some of the projects they have scheduled for this year. I recognize that some of their requirements- particularly for schools and universities-are urgent, but there are others-for example some highway building-that could be delayed at some inconvenience but without serious economic or social consequences.
In order to permit deferment of projects, we have already agreed with the provincial governments to place before you amendments to some of our legislation to extend the deadlines for federal grants for various construction programmes. May I say to hon. members of the house that I know that this policy that I am announcing will be acceptable to most provincial governments across this country who are just as concerned as we on this side with the excessive demands that may be placed upon the construction industry this year. This was announced last August 2. We are now prepared to agree to delaying completion of centennial projects to which we are contributing, so that there will be no arbitrary pressure on this score in seeking to complete them by 1967. As a practical matter there is nothing we can do to reduce the abnormal pressure to complete work on many projects in Montreal that are part of Expo '67 or related to it. We are asking our Crown corporations to exercise restraint in respect of any of their projected building plans which can be deferred, as the Bank of Canada has done.

Income Tax
Turning now from expeditures to revenues, I shall lay before you a number of proposals affecting taxation. In the main these are designed to moderate the increase in demand of private individuals and business firms.
Let me begin with the Income Tax, the keystone of our tax system. It is the fairest of our taxes. It must be reformed, however, and made fully effective if it is to be really equitable. I believe it should be used by both Parliament and the provincial legislatures.
I should recall here some remarks I made in answer to press inquiries following the Budget Speech of the Provincial Treasurer of Ontario. He had announced Ontario's decision to increase its personal income tax for the purpose of financing its growing expenditures, a decision which has recently been embodied in a Bill placed before the Ontario Legislature. He made clear that Ontario would need to take such action whether or not there was an additional abatement of the federal tax. I said: "Any province is quite free to increase its income tax under its present arrangements with us-and I hope it will be just as free to do so under the new arrangements we will be working out this year. I think there should be as little suggestion as possible in our new arrangements that the provinces are entitled to use only a specified portion of the income tax and that in going beyond it they are somehow indulging in double taxation ... It is of course the right of a provincial government to decide what is the right combination of taxes for it to use, having in mind both equity and economics. We and they should both take into account as best we can what one another is doing." I regard what Mr. Allan has said and done as being quite consistent with what I am proposing tonight.

We will discuss these matters in the Tax Structure Committee this year and no doubt in a full federal-provincial conference of Prime Ministers and Premiers as well. I hope we shall be able to come to understand each others' views on the use of the personal income tax by both levels of government, and that each will accept responsibility for the extent to which it uses this tax, knowing the others' views. I would hope, moreover, that the provinces will be prepared to continue to follow our lead in regard to the various detailed provisions of the law in order to
March 29, 1966	COMMONS
minimize the trouble to which taxpayers may be subject in preparing their returns.

Last year Parliament reduced the income tax by 10 per cent of the basic tax with an upper limit of $600. This was done on the basis of the Government's appraisal of the economic situation at that time and the desirability of stimulating the expansion and growth of the economy.


Some hon. Members:: Oh, oh.


Mitchell William Sharp: It is quite clear, Mr. Speaker, from what I have been saying that this stimulus served to make 1965-66 the most prosperous year in Canada's history.
The stimulus has served its purpose and is no longer appropriate. As a consequence I feel we should now withdraw most of last year's tax cut.
In making the change I feel that we should, however, lighten the load upon those with the lowest incomes. I do so having considered the total tax load being imposed by all governments in all forms.
[DOT] (8:50 p.m.)
Accordingly I now propose that effective June 1 we reduce the present limit on the tax
DEBATES	3383
The Budget-Mr. Sharp cut from $600 per annum to $20 per annum. At the same time I propose that the rate of the tax cut, now 10 per cent, be changed to 20 per cent. With the new limit of $20 only the lowest brackets will benefit from this change in the rate. The result of these changes will be that those with average or better than average incomes will revert to tax levels slightly below the levels that prevailed in 1964. Those with lower than average incomes will pay less tax than they did at that time and less than they are now paying. This new rate of tax will prevail after June 1 this year and will be reflected in the deductions then made. The tax liability for the year 1966 will be a blend of what was enacted in 1965 to be in effect this year and the revised rates proposed to apply after June 1. I would ask permission at this point to insert in Hansard tables to illustrate the effect of these changes.


Mr. Speaker:: Is that agreed?


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


[Stage Direction]
TO ILLUSTRATE PROPOSED PERSONAL INCOME TAX CHANGE Single Taxpayers-no dependants
Income	Net Federal tax for 1966 if no change made	1965 tax cut to be cancelled	New tax cut for a full year	Change in tax for a full year	Net Federal tax for 1966$	$	$	$	$	%	$1,300...	
15	2	4	- 2	- 15	131,500...	
29	4	9	- 4	- 15	202,000...	
65	10	20	- 10	- 15	592,500...	
110	17	20	- 3	- 3	1083,000...	
156	24	20	+ 4	+ 2	1585,000...	
390	59	20	+ 39	+ 10	4147,500...	
762	115	20	+ 95	+ 13	81910,000...	
1,214	184	20	+164	+ 14	1,31315,000...	
2,396	363	20	+343	+ 14	2,60225,000...	
5,537	600	20	+580	+ 11	5,88550,000...	
15,333	600	20	+580	+ 4	15,741
The amounts shown above as net Federal tax are after deducting an abatement of 24% in accordance with current federal-provincial arrangements. The Federal tax in Quebec is lower because of additional abatements but the amount of tax cut is the same in each case. The amounts shown do not include provincial income tax or the old age security tax. It was assumed that taxpayers take the optional standard deduction of $100.
For 1966 the "1965 tax cut" will remain in effect for the first 4/10ths of the year and the "new tax cut" will be in effect for the remainder of the year. The "Net Federal tax for 1966" is after deducting a blend of these two tax adjustments.
[Stage Direction]
March 29, 1968
The Budget-Mr. Sharp
[Stage Direction]
TO ILLUSTRATE PROPOSED PERSONAL INCOME TAX CHANGE Married Taxpayer-no dependants
Income	Net Federal tax for 1966 if no change made	1965 tax cut to be cancelled	New tax cut for a full year	Change in tax for a full year	Net Federal tax for 1966$	$	$	s	$	%	$2,300...,	
14	2	4	2	- 15	132,500....	
29	4	9	- 4	- 15	263,000....	
65	10	20	- 10	- 15	594,000....	
156	24	20	+ 4	+ 2	1585,000....	
266	40	20	+ 20	+ 7	2787,500....	
606	92	20	+ 72	+ 12	64910,000....	
1,019	154	20	+134	+ 13	1,10015,000....	
2,132	323	20	+303	+ 14	2,31425,000....	
5,195	600	20	+580	+ 11	5,54350,000....	
14,915	600	20	+580	+ 4	15,263
The amounts shown above as net Federal tax are after deducting an abatement of 24% in accordance with current federal-provincial arrangements. The Federal tax in Quebec is lower because of additional abatements but the amount of tax cut is the same in each case. The amounts shown do not include provincial income tax or the old age security tax. It was assumed that taxpayers take the optional standard deduction of $100.
For 1966 the "1965 tax cut" will remain in effect for the first 4/10ths of the year and the "new tax cut" will be in effect for the remainder of the year. The "Net Federal tax for 1966" is after deducting a blend of these two tax adjustments.
[Stage Direction]
TO ILLUSTRATE PROPOSED PERSONAL INCOME TAX CHANGE Married Taxpayer-2 dependent children eligible for family allowance
Income	Net Federal tax for 1966 if no change made	1965 tax cut to be cancelled	New tax cut for a full year	Change in tax for a full year	Net Federal tax for 1966$	s	$	$	$	%	$3,000...	
22	3	7	- 3	15	203,500...	
58	9	18	9	- 15	534,000...	
100	15	20	- 5	- 5	975,000...	
199	30	20	+ 10	+ 5	2057,500...	
519	79	20	+ 59	+ 11	55410,000...	
916	139	20	+119	+ 13	98715,000...	
1,973	299	20	+279	+ 14	2,14125,000...	
4,986	600	20	+580	+ 12	5,33450,000...	
14,605	600	20	+580	+ 4	15,012
The amounts shown above as net Federal tax are after deducting an abatement of 24% in accordance with current federal-provincial arrangements. The Federal tax in Quebec is lower because of additional abatements but the amount of tax cut is the same in each case. The amounts shown do not include provincial income tax or the old age security tax. It was assumed that taxpayers take the optional standard deduction of $100.
For 1966 the "1965 tax cut" will remain in effect for the first 4/10ths of the year and the "new tax cut" will be in effect for the remainder of the year. The "Net Federal tax for 1966" is after deducting a blend of these two tax adjustments.

March 29, 196$
Mitchell William Sharp: Mr. Speaker, the Department of Finance estimates that this change in the income tax will increase our revenues at a rate of approximately $210 million per annum. The direct effect in the fiscal year 1966-67 should be about $140 million. It is designed to reduce moderately the rate of increase of consumer expenditures.
I am proposing a few technical changes in the Income Tax Act.
The first is to make more clearcut and specific arrangements in regard to charitable donations. All charitable organizations will be asked to register and to file annual returns of information. Only donations to such registered charitable organizations will be permitted as deductions from income in future years. This will not however affect the existing provision whereby a taxpayer may deduct up to $100 for charitable contributions or medical expenses without submitting receipts. In addition, donations to certain specified classes of charitable organizations outside Canada will be allowed as deductions. The essential points are given in the resolution and the Minister of National Revenue can explain the plans regarding registration when the resolution is under consideration.
Like all Ministers of Finance, I am concerned about the loopholes that remain in the law despite the vigilance of all my predecessors, and I am proposing a number of provisions on this score.
I should like to draw attention to some of them. In recent months there has been evidence of increasing abuse of the section of the Act providing special tax treatment for deferred profit sharing plans. In 1960 and 1961 my predecessor, then the hon. member for Eglinton, with the worthiest of motives, introduced a section in the Act to provide for these plans, which he described as an important piece of social legislation. Since then various businessmen and their professional advisers have exploited this well-intended but vulnerable section in various ways. Essentially what happens in typical cases is that contributions of profits from a business, made deductible in computing income for tax purpose and held in a tax free fund, which were intended to benefit the employees of the business generally are being diverted to benefit a few key people, chief shareholders or their relatives or heirs. The Minister of National Revenue will not accept any more deferred profit sharing plans for registration until we deal with the matter by a revision of the Act. There is a fairly general paragraph in the Resolution covering the essential 
The Budget-Mr. Sharp points, which would apply to existing plans as well as new ones.
In the income tax regulation there are a number of special rates of capital cost allowances that have been granted for limited periods as inducements to action of one kind or another. These will be allowed to expire at the dates now specified, with one exception, namely the special rate on property acquired for the prevention of water pollution. This will be extended until the end of December
1967.	Some of these special capital cost allowances are being replaced by grants, which in our view represent a more effective and fairer method of encouraging investment in designated areas, and industrial research and development.
The Resolution includes a paragraph to extend from April 1967 until April 1968 the deadline for the commencement of production for manufacturing projects in designated areas, on which construction has already started, if they are to qualify for the three-year exemption from income tax. Some of these projects are being delayed by events beyond the control of the companies concerned. The purpose of this action is to reduce the pressure that now exists to compete strenuously for equipment, materials and skilled labour which are in short supply. This is similar in principle to the proposed extension of the deadlines in the incentives offered provinces and municipalities to undertake certain types of construction work.
We also propose to extend the three-year tax exemption for new mines to wells for extracting potash by the solution method.
Withholding Tax
I come now, Mr. Speaker, to a major change affecting the sale of Canadian bonds to foreign buyers. The 15 per cent non-resident withholding tax on interest now constitutes in some measure an impediment to the sale of Canadian bonds in the United States and Europe.
In order to improve the market for such securities I propose that interest on bonds and debentures dated after April 15, 1966, issued by the federal or provincial governments or their agencies guaranteed by those governments, or issued by municipalities, or by hospitals and educational institutions guaranteed by a province, shall be exempt from this withholding tax. I have given consideration to whether this exemption should be extended to bonds and similar obligations

March 29, 19S6
The Budget-Mr. Sharp issued by businesses or individuals in Canada but I have concluded that I should not come to a decision on this point pending the general review and revision of the Income Tax Act.
This new exemption from the withholding tax will not reduce our revenue from outstanding issues, interest on which is already subject to the tax and will remain subject to it. It will eliminate our revenue from new issues that we would otherwise have expected to yield a tax, and this may cost the Treasury two or three million dollars in 1966-7. There should on the other hand be some saving to provinces and municipalities in what it is necessary to pay in interest to foreign lenders. I hope it will enable some borrowing to be done in Europe, despite the high cost of borrowing there.
I have described the steps to be taken to moderate the growth of government expenditure and consumer spending. I am going to propose three important measures affecting private capital investment. These are complementary, and taken together, should in my judgment effect a reasonable but not excessive degree of restraint on the rate of increase in investment demand.
Sales Tax and Excise taxes
First, the sales tax. I intend to review it thoroughly in the light of the Royal Commission report, our experience with the Tax and the criticisms we have received. Meanwhile several changes should be enacted now.
Beginning in 1963 the house will recall that the exemption from sales tax of building materials and of production machinery and equipment was withdrawn in several stages. The revenue that accrued from this step made a vital contribution to the improvement of the financial position of the Federal Government and the restoration of confidence in our fiscal capacity. It has not stood in the way of a rapid increase in capital investment, and indeed in the past few months has probably assisted in moderating an excessively rapid rate of increase. For a country such as Canada, however, where the ability to compete internationally is so important and where we must maintain a high rate of investment in modern machinery and equipment in order to achieve the increases in productivity which we all want, we should not have a sales tax on-


Some hon. Members:: Hear, hear.


Mitchell William Sharp: I repeat, Mr. Speaker, that we should not have a sales tax on production machinery and equipment as a permanent feature of our system.


Some hon. Members:: Oh, oh.


Mitchell William Sharp: On the other hand, the immediate removal of the tax on the whole of this category at the present time would only tend to exaggerate the capital investment boom now in progress.
[DOT] (9:00 p.m.)
There is, however, a certain type of machinery and equipment with very short lifetime, expenditures on which are really part of the current costs of production and which bear significantly upon our export trade and upon production that competes with imports. I refer to dies, jigs, fixtures and moulds, and tools for use in production machinery for shaping and working materials. I have come to the conclusion that these should be made exempt from sales tax forthwith. This is covered in the resolutions that I am placing before you and will go into effect provisionally at midnight tonight.
I next propose that Parliament legislate now to provide for the future restoration of the exemption for the remaining categories of production machinery and equipment. I propose that the exemption be restored partially a year hence, at the beginning of April 1967, by a reduction in the rate then by 5 percentage points, and that it be restored fully a year later, at the first of April 1968. Should the economic circumstances change in the meantime and make an earlier removal of this tax on machinery and equipment economically desirable, I will not hesitate to recomment to parliament in my next Budget that the remaining tax be removed at an earlier date.
The advance enactment of this exemption is proposed deliberately so that businesses can take it into account in their planning. It will constitute some inducement to defer the acquisition of machinery and equipment at a time when the expenditures on these categories seem likely to be exceedingly high, if not in fact excessive, judging from the figures that have just been published in the survey of intentions for private and public capital expenditures this year.
I am not convinced that the exemption from the sales tax for building materials should be restored. The arguments for this are not as strong as those that apply to
March 29, 1966

machinery and equipment, and I am reserving judgment on it until I am able to review our tax system as a whole.
I am also recommending a tew minor revisions in the sales tax which will be found set forth in the resolutions and can best be explained and discussed when they are under consideration.
I renew the undertaking given last year by my predecessor, the hon. member for Davenport (Mr. Gordon), that if the considerations of the Special Committee of the House on Food and Drugs lead it to recommend that drugs should be exempt from sales tax as part of a comprehensive and effective programme to reduce the prices of drugs, then the Government would be prepared to recommend such action by means of a special statute covering all the measures required to give effect to such a program.
I have considered the various special excise taxes that are imposed on a number of commodities under the Excise Tax Act. I cannot afford any wholesale revision of these until it can be done in the light of a general program of reform. I am proposing a minor simplification of the excise tax on electronic tubes and cigarette lighters.
The reduction in revenue consequent upon the actions I have proposed for immediate application in regard to the Excise Tax Act would be $21 million in the coming fiscal year. The cost of the first reduction in the present rate of sales tax on production machinery and equipment is estimated to be an additional $63 million in the fiscal year 196768. Given the present economic and budgetary outlook, this prospective reduction in revenue and the further reduction in the following year will have to be replaced, when the time comes, by increases in other tax revenues.
Special Temporary Measures
The proposal to provide now for the future reduction and later elimination of the sales tax on production machinery and equipment is the first of my three proposals designed to encourage the postponement of some private investment. I now wish to propose two temporary measures with the same objective.
In designing these measures I have been especially concerned to avoid tax increases of a kind that would get built into production costs and impair our future competitive position. After reviewing measures we have taken in the past, such as the deferred depreciation rules of 1951 and 1952 with which I was
The Budget-Mr. Sharp closely concerned as an official, and the well known Swedish tax free reserve plan, and several other possibilities put forward by the Department, I have selected two which I think are appropriate to our present Canadian circumstances. They can be brought quickly into effect, they will provide prompt pressures upon and inducements for business to defer capital expenditures, they will not add to the costs of production, and they will help business to maintain capital expenditures in future years. Each can be terminated on short notice without serious effects, should our economic circumstances change substantially.
The first measure has been put into effect by the government in an amendment to the Income Tax Regulations that comes into effect tonight. It reduces the capital cost allowances that may be claimed for various classes of capital assets acquired during the period between now and October 1, 1967-* about 18 months. This appears to me the period over which special inducements to postpone business capital expenditures are likely to be necessary, though of course this is a difficult matter to forecast. As I have said, these are the kinds of measures that can be changed quickly, and without any long delays.
This measure will restrict capital cost allowances for certain classes of assets during the three-year period following acquisition, by applying the normal rates to part only of the capital cost of the assets. It will apply to the classes that include most kinds of buildings, machinery and equipment, but not to heavy construction equipment, pipelines or the generating and distributing equipment of public utilities.
For those who need to know more precisely what is affected I should make it clear that the classes involved are numbers 3, 6, 8, 9, 10, 11 and 16. The effect of this measure is approximately the same as if we had reduced the rates for classes 3, 6 and 8 by one half, and for the other classes by ten percentage points. The exact details can be found in the Regulations which I will ask leave to table at the end of my speech.
It will not apply to property acquired under written contracts which can be shown to have existed tonight, to assets which have been used before tonight, nor to assets which are acquired for installation and use in designated areas, or those covered by the special temporary classes established as incentives.
We have for many years used increased rates of capital cost allowances as induce-

March 29, 1966
The Budget-Mr. Sharp ments for accelerating business investment. Indeed we have been using them recently. It is logical that we should now use reductions in these allowances to induce business to defer a part of its investment.
The other temporary measure is designed to divert and immobilize temporarily a modest portion of the flow of funds that is the chief source of finance for the increasing capital expenditure of businesses. I am proposing a wholly new device-a refundable tax on cash profits. It would be payable by all corporations not exempt from tax under Section 62 of the Income Tax Act, and by certain types of trusts on specified types of income. The base for the tax would be the taxable income of the company for the current year, less the income tax payable thereon, plus capital cost allowances deducted in determining income, plus depletion allowances and certain other items that are specified in the Resolution. In determining the tax base we would deduct from this adjusted net taxable income principal payments due and made on the debt of the company which had an original term of three years or longer under written loan contracts existing tonight. This is more precisely described in the Resolution. There will be a general deduction of $30,000 which should be adequate to mitigate the impact of the tax on smaller businesses which do not have ready recourse to the capital market. The appropriate rate of tax has involved a difficult judgment but I have decided on 5 per cent bearing in mind the many items added and deducted in establishing the base. Further details are given in the Resolution, and the measure itself will be incorporated as a separate temporary part added to the Income Tax Act.
This refundable tax would be payable monthly commencing in May this year for a period of 18 months. The monthly payments would be made on an estimated tax base computed by reference to the present or immediately preceding tax year subject to adjustment at the end of the period.
The amounts received under this new measure would be repaid, with interest at 5 per cent, after an interval of 18 to 36 months after receipt. The specific period within this range would be determined by the Government in the light of the economic prospects as assessed late in 1967.
There will of course be problems to be solved in working out the details of a novel measure of this kind, and I shall welcome

constructive suggestions from those affected by it or those expert in tax matters or economics as to how we can best accomplish the essential purpose of this measure with the least amount of unnecessary disruption. Some changes in investment plans should result, of course, since this is the purpose of the measure. I would appreciate receiving such suggestions first in writing, or in the House during the debate on the Budget itself, so I can take them into account as early as possible, in the framing of the legislation.
[DOT] (9:10 p.m.)
It is difficult to assess with any accuracy the quantitative effects of these new measures relating to capital expenditures. The temporary reduction in capital cost allowances below normal levels will act in the right direction in bringing about some postponement of capital expenditures. It will also increase our corporate tax revenues. The prospect of the reduction and later elimination of the sales tax on machinery and equipment will be a more powerful incentive to postpone capital expenditures. The refundable tax on cash profits should yield I would think something of the order of a quarter of a billion dollars in a full year. All in all, I would think it reasonable to expect that these three measures taken as a whole might result directly and indirectly in a reduction by a third of a billion dollars this year of the intended increase in business investment expenditure.
That increase-not the total; just the increase itself-was estimated at about one and one quarter billion dollars in the Public and Private Investment Outlook for 1966. This reduction in the rate of increase would be only a moderate one, but should serve to bring the total increase much closer into line with the increase in our capacity to produce what is demanded taking into account that there is some spare capacity available in designated areas. Similarly it should restrain the increase that would otherwise occur in the current account deficit of our balance of payments. The aftermath of these deferments should help to maintain a high level of business investment in future years and thus contribute to sustained growth, because the house will have noticed that all these measures have a very stimulating effect, eventually, on the level of construction, and thus help to stretch out our business prosperity. Resulting Budgetary and Cash Position
Drawing together the effects upon our revenues and budget position of the results of
March 29, 1966

these various measures requires consideration of the effect of them on total expenditures and incomes and thus on our revenues from existing taxes. The department estimates that the budget measures as a whole should restrain the increase in Gross National Product to something over 8i per cent instead of over 9 per cent as I mentioned before the tax changes. One must recognize that many imponderables must be assessed in any such calculation. We hope and expect that most of this reduction would consist of a smaller increase in costs and prices.
Taking this reduction in Gross National Product into account I estimate that our budgetary revenues, after the tax changes will be $8,300 million. This excludes the yield of the refundable tax which cannot properly be included in revenues for accounting purposes, though it has similar economic effects and I am assuming the statisticians will include it in revenues for the purpose of the national economic accounts.
With the consent of the House I would like to place on Hansard here a table summarizing our expected revenues from various sources making up this total of $8,300 million, and the tax revenues which go into the Old Age Security Fund. I am including for comparison our preliminary figures for revenues in the current fiscal year.


Mr. Speaker:: Is this agreed?


Some hon. Members:: Agreed.


Mitchell William Sharp: The table is as follows:
[Editor's Note: The table above referred to is as follows:]
Table 4
Budgetary and Old Age Security Fund Revenues
	1965-66 Prelim-nary $ million	1966-67 Forecast after Tax Changes $ million
Personal Income Tax Corporation Income	2,150	2,378Tax Non-resident with-	1,610	1,731holding tax	170	177Estate tax	107	101Customs duties	676	749Sales tax	1,385	1,475Other duties and taxes	734	773Total taxes 23033-215	6,832	7,384The Budget-Mr. Sharp Non-tax revenues	841Budgetary revenues	7,673	8,300Old age security fund revenues	1,163	1,277
Total revenues
8,836
9,577
Setting these revenues against our budgetary expenditures of $8,450 millions leaves us with a budgetary deficit of $150 million for the new fiscal year-again disregarding the yield of the refundable tax. In terms of the national economic accounts, where I am including as revenue the yield of this refundable tax, I am forecasting a surplus of about $615 million, compared with $494 million in the year now closing. These figures do not include the accumulation of funds in the Canada Pension Plan, which will be shown separately in the statistics. Such accumulation will be an additional source of national savings, as will be the corresponding item for the Quebec plan. I shall include with the budget papers as an appendix to Hansard if the House will agree, tables giving these national economic accounts figures and their reconciliation with the budgetary accounts.
We have of course many substantial transactions outside our budgetary accounts which must be taken note of in assessing our overall position. Our loans and investments will be higher this coming year than in the year now closing, chiefly because of Expo 1967 whose cash requirements will be at a peak this year. Another large factor will be our disbursements of Municipal Development Loans which will be high as projects are completed and interim financing is refunded by drawing upon the loans we have approved. On the other hand our non-budgetary receipts, apart from public debt transactions, will be down modestly, apart from the refundable tax-which I would leave out of account for the present, as well as any change in the level of our exchange reserves. The net balance of non-budgetary items on this basis I would expect to be a requirement of about $350 million compared with $163 million last year. Adding this to the budget deficit would give a total requirement for cash of about $500 million this year compared to $187 million shown in the White Paper for the year now closing.
I do not propose that we should disburse the funds we receive from the refundable tax as we do normal revenue. Instead I would plan to hold it as an addition to whatever

March 29, 1966
The Budget-Mr. Sharp cash balances we would otherwise hold, unless economic circumstances change and make it economically desirable for us to borrow less and ease the pressure on the capital market.
I should also recall that in our balance of payments arrangements with the United States the government has agreed that it would aim to reduce its exchange reserves to a range that would centre around $2,600 million. This would involve a reduction of an order of magnitude of about $200 million from the figure at the beginning of this month. However, the Government of Canada may either have to purchase Canadian securities held in the United States or itself borrow in the United States, depending on the requirements of our balance of payments and the borrowing which others do outside Canada. Consequently I believe we should not try at this time to forecast the effect of these prospective changes in our reserves and related transactions upon our requirements for cash in Canada.
Our cash balances now, very near to the beginning of the year for which we are budgeting, are reasonably high. The extent to which we should draw them down rather than borrow to meet our cash requirements will be a matter to be decided upon from time to time during the year depending upon the state of the capital market, monetary policy and other economic circumstances. In this new fiscal year it is evident that our debt management decisions and operations will have an important role to play in our general economic policy.
I should point out that the accumulation and investment of funds under the Canada Pension Plan, though large, will have little bearing upon our accounts or financing since we lend all these funds, except working balances, to the provincial governments or their agencies in accordance with the Canada Pension Plan act.
Concluding Remarks
Before concluding I should like to make two points briefly. The Economic Council for Canada in its first Annual Review, in describing the conditions and policies which it considered necessary to reach our economic goals -as indicated in the Act establishing the Council-called for "Responsible restraint in both wage demands and business pricing policies, with clearer recognition that failure to maintain reasonable price and cost stability

will frustrate the attainment of other basic economic objectives, such as balance of payments viability and high employment, while also comprising our capacity to achieve steadily advancing living standards for the Canadian people, reasonable profitability of business, and the maintenance of purchasing power of pensions and savings." This is a time when all Canadians should observe such restraint, in our own long term interest, and resist the temptation to exploit the bargaining positions which the present boom presents to many in the country.
Second, we need more saving on the part of Canadians, and more investment in the capital assets of Canada's economy-private and public. We need it now more than ever before in normal peacetime. A modest increase in saving at the cost of reducing personal expenditure in boom times is a means by which Canadians, as individuals, can contribute to the success of national economic policy. The poor that remain among us cannot be expected to save more this way-but those of average incomes and better can.

I need hardly say that as a new Minister of Finance I would have preferred the main features of my first Budget to be proposals to reduce taxation. But we can all take satisfaction from the fact that our problems are no longer the problems of overcoming slackness or stagnation but those of managing growth and prosperity. Our task is to sustain the longest economic expansion in Canadian history.

I want to take this opportunity to express my warm appreciation of the contribution to this expansion that was made by the policies of my predecessor the hon. member for Davenport (Mr. Gordon).
[DOT] (9:20 p.m.)
I believe the measures I have proposed tonight will serve to moderate but by no means eliminate the increase in demand on our economy this year. Our situation calls for some restraint in expansion; it does not call for deflation. As a nation we should ease up our foot on the gas pedal, not slam on the brakes. We want growth, but sustained growth, not erratic fluctuations. The keynote of this budget is moderation. This is what is needed today if we are to guide our economy toward successive years of expansion and continued prosperity.
23033-215*



RESOLUTIONS


[Stage Direction]
1. Resolved, that Schedule A to the Customs Tariff be amended by striking out tariff items 945-1, 7905-1, 20925-1, 21045-1, 23505-1, 23705-1, 24100-1, 26325-1, 41105-1, 42205-1, 44043-1, 44047-1, 44125-1, 70500-1, 70505-1 and 84805-1, and the enumerations of goods and the rates of duty set opposite each of those items, and by inserting therein the following items, enumerations of goods and rates of duty:
Rates in Effect Prior to Rates Proposed in this Budget Most-	
[Stage Direction]
Tariff Item
British Favoured-	British	Most-Preferential	Nation	General	Preferential	Favoured-Nation	GeneralTariff	Tariff	Tariff	Tariff	Tariff	Tariff945-1	Feeds for use exclusively in the feeding	of	trout.. Freeon and after July 1, 1968	15 p.c.7905-1	Carnation cuttings in their first year	of	introduction. Free20925-1	Potassium chloride	
Free
(Applicable to December 31, 1967)
21045-1	Sodium hypochlorite in solution	 15 p.c.
(Applicable to December 31, 1967)
23505-1 Liquorice blocks, granules, paste or powder, not
sweetened	 Free
23705-1 Deuterium oxide or heavy water; uranium in the form
of pigs, ingots, billets or bars	 Free
on and after July 1, 1968 Free
24100-1 Litharge and mixtures or combinations of litharge with other materials, such mixtures or combinations to contain not less than 50 per cent by weight of litharge, for use exclusively in the manufacture of storage battery plates	 Free
26325-1 Compounds of tetramethyl lead, in which tetra-methyl lead is the preponderant constituent by weight	12$ p.c.
(Applicable to December 31, 1967)
Free	25 p.c.	Free	Free	25 p.c.20 p.c.	25 p.c.	15 p.c.	20 p.c.	25 p.c.(on and	after July 1, 1966)Free	Free	Free	Free	Free12* p.c.	12* p.c.	30 p.c.Free	25 p.c.	Free	Free	25 p.c.(Applicable	to December 31, 1966)20 p.c.	30 p.c.	15 p.c.	20 p.c.	30 p.c.(Applicable	to December 31, 1966)12* P-c.	17$ p.c.	Free	12* p.c.	17* p.c.Free	15 p.c.	25 p.c.Free	25 p.c.	Free	Free	25 p.c.15 p.c.	25 p.c.	Free	15 p.c.	25 p.c.(on and after July 1, 1966)	Free	Free	Free 15 p.c.	Free Free 20 p.c. 25 p.c.12* p.c.	25 p.c.	12* p.c.	12$ p.c. 25 p.c. (Applicable to December 31, 1966)March 29, 19S6	COMMONS DEBATES	3391
The Budget-Mr. Sharp

Tariff
Item
Most-
British Favoured-Preferential	Nation
Tariff	Tariff
41105-1 Machines, logging cars, cranes, captive balloons having a volume of 1 SO,000 cubic feel or more, blocks and tackle, wire rope, but not including wire rope to be used for guv ropes or in braking logs going down grade, and parts of all the foregoing, for use exclusively in the operation of logging, such operation to include the removal of the log from stump
to skidway, log dump, or common or other carrier. 10 p.c.	12| p.c.
42205-1 Concrete road-paving machines, self-propelling, end loading type, with a capacity of 21 cubic feet of wet concrete or more; concrete and asphalt road finishing machines: form graders: sub-graders: combination excavating and transporting scraper units; concrete mixers, transit type: dump wagons or trailers, having a capacity of 10 cubic yards or over, not self-propelled; back-filling machines and equipment, mounted on self-propelling wheels or crawling traction, semi- or full-revolving boom and scraper type; steam or air driven pile hammers or extractors; truck turntables: all the foregoing of a class or kind not made in Canada, parts thereof	 Free	7£ p.c.
Aircraft, not including engines, under such regulations as the Minister may prescribe:
44043-1 When of types or sizes not made in Canada	 Free
on and after July 1, 1967 Free
Aircraft engines, when imported for use in the equipment of aircraft:
44047-1 When of types or sizes not made in Canada	 Free
on and after July 1, 1967 Free
Free 15 p.c.
Free 15 p.c.
Guns and rifles of a class or kind not made in Canada; parts thereof	 Free
71 p.c.
Rates in Effect Prior to Rates Proposed in this Budget
(O
to
General
Tariff
20 p.e
12J p.e.
27$ p.e. 27} p.e.
27$ p.e. 27 J p.e.
30 p.e.
British	Most-
Preferential	Favoured-Nation	GeneralTariff	Tariff	Tariff
10 p.e 25 p.e. 20 p.e
Free
Various
12$ p.e. 25 p.e. 27$ p.e.
7$ p.e. Various
20 p.e. 35 p.e. 50 p.e.
12$ p.e. Various
[Stage Direction]
o
s
s
o
sa
cn
[Stage Direction]

>
m
Free	Free 27$ p.e.	
Free	15 p.e. 27$ p.e. (on and after July 1, 1966)	
Free	Free 27$ p.e. 15 p.e. 27$ p.e.	
Free		g
	(on and after July 1, 1966)	Di H O
Free	7$ p.e. 30 p.e.	sr10 p.e.	22$ p.e. 35 p.e.	to15 p.e.	20 p.e. 30 p.e.	CD >-*
cn
The Budget-Mr. Sharp
44725-1 Well points, well screens, well strainers, pities* well heads; all the foregoing of a class or kind not made
in Canada, parts thereof	 Free	7 3 p.c.
57210-1 Oriental mg* or carpets with pile honked or knotted
by h-ind	 15 p.c.	15 p.c.
and, per square foot	5 cts.
70505-1 Goods, as defined by regulations made by the Minister, imported by a settler for his household or personal use, if actually owned by the settler and in his possession and use before his removal to Canada, under such regulations as the Minister may prescribe	 Free	Free
Any goods imported under this tariff item which are sold or otherwise disposed of within twelve months after importation are subject to the duties and taxes otherwise prescribed.
84805-1 Machines and apparatus and parts thereof (including motive power) of a class or kind not made in Canada and drilling mud, for use in the exploration, discovery, development and operation of potash and rock salt mines or for use in the production of crushed and screened rock salt	
Free	Free12% p.c.	Free 10 p.c.	7J p.c. 22j p.c.	12J p.c. 35 p.c.40 p.c.	25 p.c.	25 p.c.	40 p.c.20 cts.	5 cts.	20 cts.Free	Free	Free	FreeVarious	Various	VariousFree	Free	Free	FreeMarch 29, 1966	COMMONS DEBATES	3393
The Budget-Mr. Sharp

2. Resolved, that Schedule B to the Customs Tariff be amended by striking out item 97052-1 and the enumeration of goods and the rate of drawback of duty set opposite that item, and by inserting therein the following item, enumeration of goods and rate of drawback of duty:
Item No.	Goods	When Subject to Drawback	Portion of Duty (not including Special Duty or Dumping Duty) Payable as Drawback97052-1	Machines; precision instruments and apparatus for heat treating, welding, sorting, testing, inspecting or correcting; control panels for use with the aforementioned machines and precision instruments and apparatus; all of the foregoing of a class or kind not made in Canada; accessories and attachments for use with the aforementioned machines and precision instruments and apparatus; parts of all the foregoing, not including consumable tools.	When used in the plants of manufacturers of automobiles and motor vehicles or of automobile or motor vehicle parts for the manufacture of automobiles and motor vehicles or of automobile or motor vehicle parts; or when used for the manufacture of dies, jigs, fixtures or moulds which are	used in the production of automobile or motor vehicle	parts	99 p.c.3. Resolved, that Schedule C to the Customs Tariff be amended by striking out item 99219-1 and the enumeration of goods set opposite that item, and by inserting therein the following item and enumeration of goods:	99219-1	Used or second-hand mattresses or materials therefrom: This item does not affect in any manner: (a)	mattresses imported under traiff items 70405-1, 70410-1, 70505-1, 70600-1, 70700-1, 70800-1, or under tourists' or travellers' vehicle permits; (b)	materials from used or second-hand mattresses, when imported after having been cleaned and fumigated, under such regulations as the Minister may prescribe, accompanied by such certificates as he may designate.	
4. Resolved, that any enactment founded upon the foregoing resolutions shall be deemed to have come into force on the 30th day of March, 1966, and to have applied to all goods mentioned in the said resolutions imported or taken out of warehouse for consumption on or after that day, and to have applied to goods previously imported for which no entry for consumption was made before that day.
3394	COMMONS DEBATES	March 29, 1966
The Budget-Mr. Sharp
March 29, 1968

[Stage Direction]
Resolved that it is expedient to introduce a measure to amend the Income Tax Act and to provide among other things:
1.	That for the 1967 and subsequent taxation years the deduction from individual income tax equal to the lesser of 10 per cent of basic tax or $600, described in subsection (4) of section 33 of the said Act, be replaced by a deduction equal to the lesser of 20 per cent of basic tax or $20, and that for the 1966 taxation year the deduction be equal to the aggregate of
(a)	4 per cent of basic tax or $240, whichever is the lesser, and
(b)	12 per cent of basic tax or $12, whichever is the lesser.
2.	That for the 1967 and subsequent taxation years,
(a)	a gift made to a charitable organization in Canada exempt from tax by paragraph (e) of subsection (1) of section 62 or to a corporation or trust resident in Canada exempt from tax by paragraph (f) or (g) of that subsection may be deducted in computing taxable income for the year only if the donee is a registered Canadian charitable organization, and for this purpose a registered Canadian charitable organization shall mean
(i)	a charitable organization in Canada exempt from tax by paragraph (e) of subsection (1) of section 62 or a corporation or trust resident in Canada exempt from tax by paragraph (f) or (g) of that subsection, or
(ii)	a branch, section, parish, congregation or other division of an organization described in (i) that receives donations on its own behalf,
that has been registered in a prescribed manner with the Minister of National Revenue and has filed a return in prescribed form; and
(b)	the aggregate of gifts that a taxpayer may deduct in computing his taxable income for a taxation year by virtue of paragraph (a) of subsection (1) of section 27 of the Act may include a gift made
(i)	to the United Nations or any agency thereof,
(ii)	to a university outside Canada pre-cribed to be a university the student body of which ordinarily includes students from Canada, or
(iii)	to a charitable organization outside Canada to which Her Majesty in right of Canada has made a gift during the calendar
The Budget-Resolutions year coinciding with or ending in the taxation year.
3.	That with respect to bonds or other obligations issued after April 15, 1966, interest on such bonds or other obligations
(a)	of or guaranteed by the Government of Canada,
(b)	of the government of a province,
(c)	of an agent of a province, an educational institution or a hospital, where repayment of the principal amount thereof and payment of the interest thereon is guaranteed by the government of the province, or
(d)	of a municipal or local government established under provincial law,
be exempt from the 15% non-resident withholding tax.
4.	That with respect to taxation years ending after March 29, 1966, a corporation whose principal business during the year after that date was trading or dealing in bonds, shares or debentures will not be eligible to pay tax at the special 15 per cent rate of tax provided by section 70 of the said Act.
5.	That with respect to dividends received after March 29, 1966, a non-resident-owned investment corporation may not deduct from its income in computing its taxable income a dividend received by it from another nonresident-owned investment corporation other than a dividend paid by a non-resident-owned investment corporation that had previous to the payment of the dividend, and at a time when it was taxable as a non-resident-owned investment corporation, paid dividends (other than dividends on which no tax was payable under the said Act) the aggregate amount of which is not less than the corporation's surplus determined in the manner prescribed for purposes of subsection (la) of section 106 of the said Act for taxation years for which it was not taxable as a nonresident-owned investment corporation.
6.	That for the 1966 and subsequent taxation years an employee may not deduct in computing his income an amount in respect of tuition fees paid on his behalf by his employer in excess of the amount included in his income in respect of the said fees.
7.	That with respect to a benefit received after March 29, 1966 by virtue of a plan under which a corporation agrees to sell or issue shares to its employees, the rules described in subsection (2) of section 85A of the said Act that an employee may elect to use to calculate the amount of tax pn the said
3396	COMMONS
The Budget-Resolutions benefit be amended so that the 20 per cent of the amount of the benefit referred to in subparagraph (ii) of paragraph (b) of the said subsection will not exceed $200, but that this amendment shall not apply if the right to acquire shares was given to the employee before 1965 and the benefit is received before January 1, 1967.
8.	That it be declared for greater certainty that the expression "in Canada" in the said Act includes and has always included the sea bed and sub-soil of the submarine areas adjacent to the coasts of Canada in respect of which grants are issued, by the Government of Canada or of a province, of a right, license or privilege to explore for, drill for or take any materials or substances.
9.	That with respect to operations that cohie into commercial production after March 29, 1966, the definition of a mine be amended so that all wells, the material that is extracted from sylvite deposits by means of which is sent to a single plant for processing, be deemed to be one mine, and that where an operation that would qualify as a mine by reason of an enactment based on this resolution came into commercial production within the three years preceding March 29, 1966, that part of the income of the operator thereof that is attributable to commercial production therefrom in the part of the first 36 months of such operation that falls after March 29, 1966, shall be deemed to be income from the operation of a mine.
10.	That the date before which a new manufacturing or processing business must have commenced manufacturing or processing in reasonable commercial quantities in a designated area in order to qualify for an exemption from tax on its income from such operations for 36 months after the commencement of operations be changed from April 1, 1967 to April 1, 1968 in the case of a manufacturing or processing business where evidence satisfactory to the Minister of Industry is furnished to establish that:
(a)	the facilities to be used in the said business were in the process of being constructed, installed or assembled on the site of the proposed business premises on March 29, 1966, and
(b)	the said business is unable to commence manufacturing or processing in reasonable commercial quantities before April 1, 1967, by reason of an event beyond the control of the said business.
DEBATES	March 29, 1966
11.	That the provisions of section 79C of the said Act dealing with deferred profit sharing plans be revised and in particular that the said provisions:
(a)	authorize the Governor in Council to make regulations to define the property in which funds of a trust governed by a plan may be invested,
(b)	require that property of a trust governed by a plan be vested in the employees who are beneficiaries under the plan, and
(c)	provide rules for taxing amounts reallocated when employees who are beneficiaries under a plan cease to be beneficiaries under the plan.
12.	That paragraph (u) of subsection (1) of section 11 be amended to provide that the deduction from income provided thereunder shall not apply with respect to amounts paid after March 29, 1966, to a trustee under a deferred profit sharing plan.
13.	That section 79A of the Act, dealing with supplementary unemployment benefit plans, be amended to provide for the registration of such plans for the purposes of the said Act and to authorize the making of regulations governing the qualifications required of such plans for registration.
14.	That with respect to each taxation year included in whole or in part in the period commencing May 1, 1966, and ending October 31, 1967, a special refundable tax at the rate of 5 per cent shall be payable by all corporations that are not exempt from tax under the said Act by virtue of section 62 thereof and by all trusts (other than trusts arising on death) calculated, in the case of a corporation, on a tax base (hereinafter called the corporate tax base) comprising the aggregate of
(a)	its taxable income or loss,
(b)	amounts deducted under paragraph (a) of subsection (1) of section 11 in computing its income,
(c)	amounts deducted under paragraph (b) of subsection (1) of section 11 in computing its income,
(d)	business losses sustained in other years that are deducted in computing its taxable income,
(e)	the amount by which any amounts deducted under section 83A of the said Act in computing its income exceed any expenses described in that section actually incurred by it in the year,

March 29, 1986
[Stage Direction]
(1) dividends received from corporations described in paragraphs (d) and (e) of subsection (1) of section 28 of the said Act that are deducted in computing its taxable income, and
(g)	income from the operation of a mine not included in computing its income by virtue of subsection (5) of section 83 of the said Act, minus the aggregate of
(h)	$30,000, but where the corporation is associated with one or more other corporations in the year, than 30-35ths of the amount allocated to it for the year under subsection (3) or (3a) of section 39 of the said Act,
(i)	the aggregate of the payments made in the year by the corporation (not exceeding the aggregate of the amounts specified in sub-paragraphs (b) and (e)) each of which was a payment as or on account of principal made in retirement of a debt owed by the corporation or made into a sinking fund that under an agreement in writing entered into before March 30, 1966 was required to be established for the purpose of the retirement of a debt owed by the corporation, if
(i)	the original term for full repayment of the debt was three years or longer,
(ii)	the payment was required to be made in the year under an agreement in writing entered into before March 30, 1966, and
(iii)	the payment was made to a person with whom the corporation was dealing at arm's length,
(j)	payments made in the year by the corporation to redeem shares of its capital stock where such redemption was authorized by or on behalf of the corporation before March 30, 1966, or required by an agreement in writing entered into before that day, and
(k)	the following taxes payable by the corporation in respect of the year, namely
(i)	income tax payable to Her Majesty in right of Canada,
(ii)	income tax and logging tax payable to Her Majesty in right of a province, and
(iii)	income and profits taxes payable to the government of a country other than Canada, and in the case of a trust, on a tax base (hereinafter called the trust tax base) comprising the aggregate of
(l)	its income or loss from all businesses carried on by it,
(m)	its rental income not included in computing the amount determined under subparagraph (1),
The Budget-Resolutions
(n)	amounts deducted under paragraph (a) of subsection (1) of section 11 in computing the amounts specified in subparagraphs (1) and (m), and
(o)	amounts deducted under paragraph (b) of subsection (1) of section 11 in computing the amounts specified in subparagraphs (1) and (m), minus the aggregate of
(p)	$30,000,
(q)	the aggregate of the payments made in the year by the trust (not exceeding the amount specified in subparagraph (n) each of which was a payment as or on account of principal made in retirement of a debt owed by the trust, if
(i)	the original term for full repayment of the debt was three years or longer,
(ii)	the payment was required to be made in the year under an agreement in writing entered into before March 30, 1966, and
(iii)	the payment was made to a person with whom the trust was dealing at arm's length, and
(r)	income and profits taxes payable in respect of the year to the government of a country other than Canada.
15.	That for the purposes of the special refundable tax, the corporate tax base and trust tax base for any taxation year part of which is before May 1, 1966 or after October 31, 1967, shall be that proportion of the said tax base that the number of days in the taxation year that are after April 30, 1966 or before November 1, 1967, as the case may be, is of the total number of days in the taxation year.
16.	That payment of the special refundable tax shall be made,
(A)	in the case of a corporation, in monthly instalments on the last day of each month commencing with May 31, 1966, and ending with October 31, 1967, with each instalment calculated by reference to the corporate tax base for the same taxation year of the corporation as is used in computing or estimating the corporation tax payment that is due on the same day, and
(B)	in the case of a trust, in equal instalments on June 30, September 30 and December 31, 1966, and in equal instalments on March 31, June 30 and September 30, 1967, calculated by reference to the trust tax base for the preceding taxation year or the estimated trust tax base for the taxation year in which the instalments are paid.
17.	That each instalment of special refundable tax shall be,
[Stage Direction]
March 29, 1966
The Budget-Resolutions
(a)	in the case of a corporation, that proportion of the tax calculated or estimated to be payable for the taxation year, that one is of the number of instalment payment dates in the taxation year that are after April 30, 1966, and before November 1, 1967, and
(b)	in the case of a trust, one third of the tax calculated or estimated to be payable for the taxation year,
and that
(c)	the final adjusting payment, if any, shall be due, in respect of each taxation year, three months after the end of the taxation year, and
(d)	a return in prescribed form shall be filed by a corporation within six months from the end of each taxation year, and by a trust within 90 days from the end of each taxation year.
18.	That the special refundable tax shall be refunded together with interest at 5% per annum to taxpayers at such time or times as may be prescribed but not less than 18 months nor more than 36 months after the later of
(a)	the day on which the payment of tax to be refunded was due; or
(b)	the day on which the payment of tax to be refunded was paid.

[Stage Direction]
Resolved that it is expedient to introduce a measure to amend the Excise Tax Act and to provide among other things:
1.	That effective March 30, 1966,
(a)	dies, jigs, fixtures and moulds,
(b)	patterns for dies, jigs, fixtures and moulds, and
(c)	tools for use in or attachment to production machinery that are for working materials by turning, milling, grinding, polishing, drilling, punching, boring, shaping, shearing, pressing or planing,
when for use by manufacturers or producers directly in the manufacture or production of goods, be exempt from sales tax.
2.	That the combined rate of tax under the said Act and the Old Age Security Act on the following goods (other than goods described in paragraph 1) shall, effective April 1, 1967, be reduced to 6 per cent and effective April 1, 1968, be reduced to zero, namely:
(a) machinery and apparatus sold to or imported by manufacturers or producers for use by them directly in the manufacture or production of goods,

(b)	equipment sold to or imported by manufacturers or producers for use by them for exhausting dust and noxious fumes produced by their manufacturing or producing operations,
(c)	safety devices and equipment sold to or imported by manufacturers or producers for use by them in the prevention of accidents in the manufacture or production of goods,
(d)	equipment sold to or imported by manufacturers or producers for use by them in carrying refuse or waste from machinery and apparatus used by them directly in the manufacture or production of goods,
(e)	gasoline-powered and diesel powered self-propelled trucks mounted on rubber-tired wheels for off-highway use exclusively at mines and quarries,
(f)	internal combustion tractors, other than highway truck tractors, for use exclusively in the operation of logging, such operation to include the removal of the log from stump to skidway, log dump, or common or other carrier,
(g)	logging wagons and logging sleds,
(h)	machinery, logging cars, cranes, captive balloons having a volume of 150,000 cubic feet or more, blocks and tackle and wire rope; all the foregoing for use exclusively in the operation of logging, such operation to include the removal of the log from stump to skidway, log dump, or common or other carrier,
(i)	pipes or tubes commonly known as "oil-country goods", being casing or tubing and fittings, couplings, thread protectors and nipples therefor; drill pipe; all of the foregoing for use in connection with natural gas or oil wells,
(j)	machinery and apparatus, including drillings bits and seismic shot-hole casing, for use in exploration for or discovery or development of petroleum, natural gas or minerals,
(k)	repair and maintenance equipment sold to or imported by manufacturers or producers for use by them in servicing goods described in subparagraphs (a) to (j) that are used by them,
(l)	parts for goods described in sub-paragraphs (a) to (k),
(m)	drilling mud and additives therefor,
(n)	geophysical surveying precision instruments and equipment for use exclusively in prospecting for, or in the exploration and development of, petroleum, natural gas, water wells and minerals, or for geophysical studies
March 29, 1966
[Stage Direction]
for engineering projects, including the following: magnetometers; gravity meters and other instruments designed to measure the elements, variations and distortions of the natural gravitational force; field potentiometers, meggers, non-polarizing electrodes, and electrical equipment for making measurements in drill holes; instruments and equipment for seismic prospecting; geiger muller counters and other instruments for radioactive methods of geophysical prospecting; electrical and electronic amplifying devices and electrical thermostats designed to be used with any of the foregoing; repair parts, tripods and fitted carrying cases for any of the foregoing, and
(o)	articles and materials for use in the manufacture of goods described in sub-paragraphs (a) to (n) but not including:
(p)	goods for use by persons exempt from payment of consumption or sales tax under subsection (2) of section 34 of the said Act,
(q)	office equipment or
(r)	motor vehicles except those described in sub-paragraphs (e) and (h).
3.	That effective March 30, 1966, the consumption or sales tax on goods described in paragraph 2 that are produced or manufactured in Canada shall be imposed, levied and collected at the rate of tax in effect at the time when the goods are delivered to the purchaser and shall be payable at the time or times provided in paragraph (a) of subsection Cl) of section 30 of the said Act.
4.	That effective March 30, 1966, stained glass windows of handmade or hand rolled glass technically called antique glass and materials for use exclusively in the manufacture thereof be exempt from sales tax.
5.	That effective March 30, 1966, natural gas be exempt from sales tax.
6.	That effective March 30, 1966, fuel oil for use in the generation of electricity be exempt from sales tax.
7.	That effective March 30, 1966, a person engaged in the business of retreading tires be deemed to be a producer or manufacturer.
8.	That effective March 30, 1966, prepared surgical skin closure devices, plastic surgical drapes for use during surgical operations, artificial teeth and articles and materials for use in the manufacture of the foregoing be exempt from sales tax.
9.	That effective March 30, 1966, the present exemption from sales tax for lobster pots, lobster traps, and materials to be used
The Budget-Resolutions in the manufacture thereof be extended to include crab or shrimp pots, crab or shrimp traps, and materials to be used in the manufacture thereof.
10.	That effective March 30, 1966, the present exemption from sales tax for steel pens and complete parts thereof for farm animals be extended to include steel stalls and complete parts thereof for farm animals.
11.	That effective March 30, 1966, tobacco dryers, not including buildings, for use on the farm for farm purposes only, parts therefor and articles and materials for use in the manufacture thereof be exempt from sales tax.
12.	That effective March 30, 1966, vegetarian food products manufactured from vegetable and mineral ingredients to simulate meat products and materials for use in their manufacture be exempt from sales tax.
13.	That effective July 1, 1966,
(a)	dressers and dyers of furs shall be subject to sales tax on the aggregate of the current market value of raw furs dressed or dressed and dyed by them and the dressing or the dressing and dyeing charge, and
(b)	dyers of furs who dye tax-paid dressed furs shall be subject to sales tax on the dyeing charge only, and that for the purpose of the said Act, dressed or dressed and dyed furs shall be deemed not to be partly manufactured goods and shall be deemed to be sold at the time they are delivered out of the possession of the dresser or dyer.
14.	That effective July 1, 1966, where tax-paid dressed or dressed and dyed furs are delivered to a producer or manufacturer to be incorporated by him into articles on which sales tax is payable, a deduction from tax payable shall be allowed to such producer or manufacturer equal to the tax paid on the dressed or dressed and dyed furs less the amount of any deduction previously allowed in respect of such tax.
15.	That effective March 30, 1966, where by the said Act or An Act to amend the Excise Tax Act, Chapter 12 of the Statutes of Canada 1963, a deduction from or refund of tax is provided for or a payment by the Minister in an amount equal to tax paid is provided for, and circumstances exist which render it difficult to determine the exact amount of such deduction, refund or payment by the Minister, the Minister may, with the consent of the person entitled to such deduction, refund or payment, grant a deduction or refund or pay an amount determined, in such
March 23, 1966
[Stage Direction]
The Budget-Resolutions manner as the Governor in Council may by regulation prescribe, to be the correct deduction, refund or amount.
16.	That effective March 30, 1966, the tax imposed under section 5 of Schedule 1 of the said Act on electron tubes, not including cathode ray tubes, the duty-paid value or the sale price of which, as the case may be, does not exceed five dollars per tube, be changed from "fifteen per cent, but not less than ten cents per tube", to "ten cents per tube".
17.	That effective March 30, 1966, the tax imposed under section 3 of Schedule I of the
said Act on devices commonly known as lighters be changed from "ten per cent but not less than ten cents per device" to "ten cents per device".
18.	That effective March 30, 1966, in calculating the sale price of goods manufactured in Canada for the purpose of determining the excise tax payable under Part IV of the said Act, there shall not be included the amount charged as price for or in respect of any other goods contained in or attached to the wrapper, package, box, bottle or other container in which the goods are contained.

[Stage Direction]
1964-65	1965-66 estimate	1966-67 forecast after tax changes
		(millions of dollars)	
A. Revenue			
1. Direct taxes, persons	
2,630	2,758	3,0452. Direct taxes, corporations(1)	
1,477	1,624	1,7703. Refundable tax	-	-	1604. Withholding taxes	
147	170	1785. Indirect taxes	
2,920	3,341	3,5646. Investment income	
571	630	7587. Insurance and pension funds	
580	607	6628. Total revenue	
8,325	9,130	10,137B. Expenditure	1. Goods and services: defence	
1,589	1,565	1,6342. Goods and services: other	
1,500	1,794	1,9443. Transfers to persons	
2,263	2,345	2,5534. Interest on public debt	
1,012	1,057	1,1745. Subsidies	
260	325	3476. Capital Assistance	
82	84	697. Transfers to other levels of government	
1,340	1,466	1,8018. Total expenditure	
8,046	8,636	9,522C. Surplus (+) or deficit (-)	
+279	+494	+615
(1) Excludes taxes on government business enterprises. These taxes are included with government investment income.

March 29. 1966	COMMONS DEBATES	3401
The Budget-Resolutions

[Stage Direction]
1964-65	1965-66 estimate	1966-67 forecast after tax changes
		(millions of dollars)	
1. Budgetary revenue	7,180	7,673	8,3002. Supplementary period adjustment^	-42	+44	+83. Extra-budgetary revenues	Old age security tax collections	959	1,170	1,276Unemployment insurance employer-employee contributions....	310	328	343Government pension funds, employer-employee contributions...	270	279	319Prairie Farm Assistance Act levy	10	10	10Interest receipts of social insurance and pension accounts	158	180	2054. Corporate income tax(2>: excess (+) of accruals over collections	-162	-114	-1095. Refundable tax	-	-	1606. Profits before taxes (net of losses) of government business enter-	prises	226	247	2997. Interest on loans, advances and investments	187	203	2548. Less: Budgetary return on investments	-382	-477	-4989. Less: Postal revenue	-231	-236	-24510. Budgetary revenue items offset against budgetary expenditures^3*..	-125	-132	-14711. All other adjustments to budgetary revenue(4>	- 33	- 45	- 3812. Total revenue, National Accounts basis	8,325	9,130	10,137
(1>
In the national accounts, revenues in the supplementary period are shifted to the following fiscal year.
<2) Taxes on government business enterprises are excluded from this item and included in item 6.
<a) See also line 8, expenditure reconciliation.
I1' These adjustments are largely revenue items not relevant for the national accounts such as proceeds from sales of existing assets.
March 29, 19S8
[Stage Direction]
The Budget-Mr. Monteith FEDERAL GOVERNMENT EXPENDITURE: RECONCILIATION OF PUBLIC ACCOUNTS AND NATIONAL ACCOUNTS PRESENTATIONS
		1966-67
	1965-66	forecast after
1964-65	estimate	tax changes
7.
8. 9.
10.
Budgetary expenditure	
Supplementary period adjustment** 1*	
Expenditures of extra-budgetary funds
Old age security fund payments	
Unemployment insurance benefits	
Government pension fund payments	
Prairie farm assistance payments	
Transfers to extra-budgetary funds	
Adjustment to place other government funds and Crown agencies on
a disbursement basis*2*	
Budgetary expenditures offset against income of government business enterprises-
Post Office expenditures	
Deficits of government business enterprises	
Reserves and write-offs	
Budgetary revenue items offset against budgetary expenditure*3*... Other adjustments to budgetary expenditure	
Total expenditure, National Accounts basis.
11.	Surplus or deficit, National Accounts basis..
12.	Surplus or deficit, budgetary basis	
13.	Total, national accounts basis	
	(millions of dollars)	
7,218	7,707	8,450- 53	+ 58	- 7885	929	1,035335	306	310101	115	13211	10	1063	- 65	- 6733	11	57-211	-235	-253- 92	-126	- 88-43	- 35	- 26-125	-132	-14750	93	1168,046	8,636	9,522+279	+494	+ 615(- 38)	(- 34)	(-150)8,325	9,130	10,137
*'* In the national accounts, expenditures on goods and services in the supplementary period are split evenly between adjacent fiscal years. Other expenditure items are shifted entirely to the next fiscal year.
<2>
This adjustment replaces budgetary appropriations to various funds and agencies by the outlays actually made by these funds and agencies.
<3>
The largest component of this item consists of revenue from sales of goods and services by the government sector. These sales appear as final expenditure of the private sector and are deducted to avoid double counting.
Hon. J. W. Monteith (Perth):: Mr. Speaker, as I rise to participate in this debate tonight my thoughts, as I am sure do those of all hon. members, go back to those occasions when another member of the Progressive Conservative party so ably responded to the presentation of the budget. His easy ability to deal with a situation such as this is well remembered. I refer, of course, to the late Hon. George Nowlan.


Some hon. Members:: Hear, hear.


Jay Waldo Monteith: His presence in the house is missed by all of us.
In delivering his budget tonight I think the Minister of Finance (Mr. Sharp) was trying to enact a suggestion he made earlier, that he did not want to put his foot on the brake, but to ease up on the accelerator. Well, Mr. Speaker, I do not think it matters at all if you happen to have a jack under the back wheels.


Some hon. Members:: Hear, hear.


Jay Waldo Monteith: This budget tonight could be labelled several things. I think one might start out by calling it a procrastination budget. It is full of postponing, staggering all over the place. It is an innocuous budget. It is a dead end budget. I think this was fully appreciated by hon. members on the government side by their marked lack of applause. I noticed the greatest applause came when upon two occasions the minister congratulated and paid his respects to actions of the former minister of finance.
I do not know just what this all means. I do not know how far this is going to be carried. One hears rumours about what goes on in caucus, about arguments here and there. Who is going to win the battle, I am not too sure, but the applause gives one some cause for thought.
The most serious condition that exists today in the minds of all Canadians is concern about the ever spiralling increase in the cost of living. Canadians have been looking forward to some relief. They have been looking
March 29, 1966	COMMONS
forward to leadership from the government. They have been looking forward to determined action from the government.
That leadership and determined action by the government are not just forthcoming. The picture that we see right now is the highest expenditure in Canadian history, the highest taxes in Canadian history, the highest cost of living in Canadian history, and there is nothing being done about that picture. I would like to ask this question: what do Canadians face right now in 1966? They face Canada Pension Plan deductions for the first time. They face higher provincial taxes. They face much increased municipal taxes, almost without exception and this, Sir, has been proven only today where, according to the Ottawa papers, this municipality has increased its mill rate by more than four mills. This is common across the country. My own municipality of Stratford is faced with an increase. Other cities are facing other great increases.
What is this going to do to the little man? The municipalities have to have these additional revenues. Take home pay has been reduced by the Canada Pension Plan. The individual must face higher provincial and municipal taxes, and tonight he is faced with increased federal taxes.
As an easement in this respect the minister should have accepted the suggestion of the Progress Conservative party to allow up to $500 municipal tax reduction for income tax purposes. This would have offered some relief to the heavy burden of the home owner. But instead there is no alleviation whatsoever, no determined action by the government. The people want action. The people want help, they are being taxed out of their homes. Incidentally, we need more homes, but how can people build them under today's tight money conditions?
Right now is when Canadians need help. The minister has suggested taking off the 11 per cent sales tax on machinery and equipment. I agree this is a step in the right direction. This will assist in exports. It will assist, I hope, in lowering somewhat the costs of production. We in Canada must be able to meet competition, but the minister has not done anything about decreasing the 11 per cent sales tax on building supplies and materials. Here again the average Canadian is hit. The government has been very lax in not acting before this. Think of the pensioners and those on fixed incomes.
I refer to last Thursday's Ottawa Journal, Mr. Speaker, to an article by Ken Smith,
DEBATES	3403
The Budget-Mr. Monteith pointing out the increases over the past year right across Canada. For instance, he mentioned as a final item that in Newfoundland

and I am sure the Minister of Transport should be concerned about this-a dozen eggs cost 88 cents as compared with 66 cents a year ago. That is common across the country. This is what the housewife knows when she goes into a store to buy something for the table.
The Conservative Associations of Canada put this in a nutshell when they said-I think extremely modestly as the understatement of the year-that consumers are extremely concerned. I agree completely, and they should be concerned, Mr. Speaker.
The minister suggests that price increases are going to continue for another year. I ask, how can Canadians stand this inaction by government? There is nothing in tonight's budget for the old age pensioner. The Minister of Finance admits that prices are going to keep going up during 1966, but he does nothing for the old age pensioner.
In 1963 the old age pension was increased to $75 a month. In the meantime, due to the jumping cost of living, the value of that pension has dropped by nearly $5. In 1963 terms, old age pensioners are receiving only in the neighbourhood of $70. One cannot live today on $70 a month. One year from today, with the projected increase in the cost of living, which the minister admits is going to take place, that pension will be even less, but the government is doing nothing about it. It is not stopping inflation and it is not increasing the pension.
[DOT] (9:30 p.m.)
There are some income tax changes. We thought we were in for a decrease under the former minister a short while ago. The present minister comes in and we find that most of that decrease in taxes is taken away. I admit, however, there was an election in between. This is not the first time this sort of thing has happened. Whatever decrease in taxes was given to the people of Canada in the first place, a lot of that has been taken away of course by the Canada Pension Plan deductions. Now we are beginning to see the cost of the Pension Plan. I think, Mr. Speaker, it is safe to say at this stage at least that the government is not planning on another early election.
I can not see where there has been any vision exercised in the production of this budget. Canada has need of a creative budget. As I said earlier, it reveals the largest expenditure in Canada's history, the largest
March 29, 1966

The Budget-Mr. Monteith tax revenue in Canada's history and the highest cost of living in Canada's history. I do not know, Mr. Speaker, where this can lead.
There have been, as suggested by the minister, possibly some minor moves aimed at inflation. Probably the budget has made a few nudges on the international payments problem. What has it done to help those in need, like our old age pensioners, to provide the incentives for people to work, for industry to modernize, and for businessmen to get out and sell more around the world? What has it done to straighten out some of the relations with the provinces?
Mr. Speaker, in my opinion this budget states a small view of Canada. We believe in courageous leadership, the development of this land and its resources; we believe in selling, selling hard-a hard sell-around the world. We have no second rate bunch of people in Canada. Let us get out and do something; let us open markets around the world; let us get more people into Canada; let us move ahead into the second century.
The budget is going to be scrutinized very carefully between now and when it comes up for debate in the House of Commons. There will be more said at that time. I cannot, however, but repeat that this has been a laissez faire budget. The minister has reversed quite a few of his predecessor's policies.
I was interested, Mr. Speaker, in an article in the Financial Post of March 26. It contains the opinions of some ten economists, lawyers, investment counsellors, businessmen, research directors and so on. I was particularly impressed by the remarks of one H. A. Hamp-son, vice president of the Power Corporation of Canada, former secretary to the Royal Commission on Banking and Finance, and I understand at one time an employee in the treasury department. He makes some worthy suggestions. I will admit there are ten conflicting opinions. I think there are ten opinions and ten conflicting ones; it is hard to follow them all.
I was interested in three items in this article by Mr. H. A. Hampson. He starts out by saying that-
-the basic budget question as always is one of political leadership.
Mr. Speaker, that has been a lack. There is another sentence which I think is rather entertaining in some respects:
Sharp should remind his colleagues as forcibly as he can that soft soap-no matter how well-coated in Mother Martin's political marmalade-

And I am looking at the Secretary of State for External Affairs when I say this:
-still tastes to most voters suspiciously like supersuds.
Then after several suggestions by Mr. Hampson, he has this to say:
If Sharp does all these things, he might be the next Prime Minister.
I interpolate, without having to go to Quebec city last week end. But I am afraid he is never going to make it after this budget tonight.
Mr. Speaker, may I adjourn the debate.


Mr. Speaker:: Order, please. There is a long standing practice that the debate should be adjourned at this time.



BUSINESS OF THE HOUSE

Lawrence T. Pennell: Mr. Speaker, it is my understanding that we were going to proceed tomorrow with item No. 40 on the order paper, a measure to amend the Judges Act.
On motion of Mr. Favreau the house adjourned at 9.40 p.m.
[The following items were passed in Committee of Supply this day:]



DEPARTMENT OF CITIZENSHIP AND IMMIGRATION

[Stage Direction]
Citizenship-
5e. Administration, operation and maintenance including grants and contributions for language instruction and citizenship promotion, $40,000.
Indian affairs-
20e. Construction or acquisition of buildings, works, land and equipment, $500,000.
15e. Administration, operation and maintenance- To extend the purposes of Citizenship and Immigration Vote 15 of the main estimates for 1965-66 to authorize special payments in respect of social assistance to persons other than Indians residing on Indian Reserves and to authorize special payments in respect of the education in Indian schools of children other than Indian children and to provide a further amount of $1,000,000.

[Stage Direction]
Administration and general-
5e. Contributions to the provinces, pursuant to agreements entered into with the approval of the Governor in Council by Canada with the provinces, to assist in the development of roads leading to resources, $600,000.
March 29, 1966
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lOe. Contributions to the provinces, pursuant to agreements entered into with the approval of the Governor in Council by Canada with the provinces, of amounts equal to one half of the amounts confirmed by the provinces as having been spent by them for campground and picnic area developments. $100,000.
12e. Subventions under agreements entered into pursuant to the Atlantic Provinces Power Development Act in respect of electric power generated from eastern coal during the fiscal year 1965-66, $700,000.
Northern administration-
45e. Administration, operation and maintenance including grants and contributions as detailed in the estimates, $1.

[Stage Direction]
A-Department 1967 World Exhibition-
57e. Toward federal government's share of the cost of construction of an ice control structure, $800,000.
DEPARTMENT OF AGRICULTURE Production and marketing-
Administration-
17e. Grants, contributions and subsidies in the amounts and subject to the terms specified in the sub-vote titles listed in the details of the estimates, $42,439,500.
Plant and plant products-
35e. Grants, contributions and subsidies as detailed in the estimates, $20,900.
Health of animals-
40e. Administration, operation and maintenance, $216,000.
45e. Grants, contributions and subsidies as detailed in the estimates, $8,800.
Farm Credit Corporation-
90e. Estimated amount required to provide for the operating loss of the Farm Credit Corporation for the fiscal year ending March 31, 1966, $1,160,000.
95e. Payment to the Farm Credit Corporation for carrying out the purposes of the Farm Machinery Syndicates Credit Act, $75,000.

[Stage Direction]
le. Salaries and contingencies of the commission,

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A-Department-accommodation services-
5e. Maintenance and operation of public buildings and grounds, acquisition of furniture and furnishings for government departments, $3,700,000.
15e. Construction, acquisition, major repairs and improvements of, and plans and sites for, public buildings (including expenditures on works on other than federal property); provided that no contract may be entered into for new construction with an estimated total cost of $50,000 or more unless the project is individually listed in the details of estimates, $1.
Supply-Items Passed
Harbours and rivers engineering services-
30e. Construction, acquisition, major repairs and improvements of, and plans and sites for, harbour and river works (including expenditures on works on other than federal property); provided that no contract may be entered into for new construction with an estimated total cost of $50,000 or more unless the project is individually listed in the details of estimates, $360,000.
Hoads, bridges and other engineering services-
40e. Construction, acquisition, major repairs and improvements of and plans and sites for roads, bridges and other engineering works-To extend the purposes of Vote 40 of the main estimates for 1965-66 to provide for the construction of a causeway and associated structures across Northumberland Strait, $1.

[Stage Direction]
A-Departmentlie. Reimbursement of the Queen's Printer's advance account for the value of stores which have become obsolete or unserviceable, $44,477.
Loans, Investments and Advances-
Defence Production-
L18e. To authorize the operation, in accordance with section 58 of the Financial Administration Act, of a revolving fund, (a) for the purpose of acquiring and managing stores, for manufacturing, producing, processing or dealing in stores or materials, and (b) for the purchase and supply of repair services for office furniture and equipment, and for freight services, for federal government departments and agencies; the balance of the revolving fund at any time shall, notwithstanding section 58, be determined after deducting therefrom all amounts due at such time by federal government departments and agencies; the amount to be charged to the revolving fund at any time not to exceed. $10,000,000.

[Stage Direction]
A-Departmentle. Administration, operation and maintenance including grants as detailed in the estimates, $474,100.
5e. Representation abroad-operational, $96,000.
15e. Contributions to international multilateral economic and special aid programs as detailed in the estimates, $3,515,000.
External aid office-
35e. Economic, technical, educational, and other assistance as detailed in the estimates-To extend the purposes of External Affairs Vote 35 of the main estimates for 1965-66 to include authority for crediting the amount of the sub-vote for international development assistance to the special amount in the consolidated revenue fund established by External Affairs Vote 33d of Appropriation Act No. 2, 1965, $1.
B-International joint commission-
40e. Salaries and expenses of the commission and Canada's share of expenses of studies, surveys and investigations of the Commission, $76,200.
[Stage Direction]
March 29, 1966
Supply-Items Passed
Loans, Investments and Advances-
External Affairs-
L22e. Addtional advance to the working capital fund of the food and agriculture organization in an amount of $83,900 U.S., notwithstanding that payment may exceed or fall short of the equivalent in Canadian dollars, estimated as of February, 1966, which is, $90,600.
L23e. Additional advance to the working capital fund of the interim commission for the International Trade Organization in an amount of $6,278 U.S., notwithstanding that payment may exceed or fall short of the equivalent in Canadian dollars, estimated as of February, 1966, which is, $6,750.
L96e. Additional advance to the working capital fund of the United Nations Organization in an amount of $53,561 U.S., notwithstanding that payment may exceed or fall short of the equivalent in Canadian dollars, estimated as of February, 1966, which is. $57,900.
L97e. Additional advance to the working capital fund of the Intergovernmental Maritime Consultative Organization in an amount of $500 U.S., notwithstanding that payment may exceed or fall short of the equivalent in Canadian dollars, estimated as of February, 1966, which is, $540.
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Fisheries management and development-
15e. Grants, contributions and subsidies in the amounts and subject to the terms specified in the subvote titles listed	in	the	details	of estimates,
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Special-
17e. Estimated amount required to recoup the fishing vessel indemnity account and the lobster trap indemnity account established under Vote 540 of the Appropriation	Act	No.	5, 1955	and Vote 527of the Appropriation	Act	No.	6, 1956,	to cover thenet operating losses	in	the	said accounts as at
March 31, 1966, $56,000.
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5e. Contributions to the provinces in the amounts and subject to the terms specified in the details of estimates, $150,000.
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15e. To provide that the amount appropriated by section 5(1) of the Area Development Incentives Act may be credited to the area development account from time to time as required; notwithstanding section 5(3) of the Act, to authorize payments out of the consolidated revenue fund up to the amounts credited to the account; and to authorize total commitments in respect of development grants under the Act in the current and subsequent fiscal years not exceeding $100,000,000, $1.
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10e. Scholarships and grants in aid of research, $3,000,000.
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Legal and other services- le. Administration, $35,500.
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The Senate-
5e. General administration, $79,200.
7e. To deem, for the purpose of enabling the Governor in Council to grant an annuity under section 16 of an Act to make provision for the retirement of members of the Senate, that Senator J. W. Comeau was, at the time of his death, a person who had been granted an annuity under section 15 of the said Act, $1.
House of Commons-
20e. General administration, $220,000.
DEPARTMENT OF MINES AND TECHNICAL SURVEYS A-Department-
Marine surveys and research-
15e. Administration, operation and maintenance,
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Mining and metallurgical investigations and research-
35e. Administration, operation and maintenance- To increase to $70,000 the grants in aid of mining and mineral processing research in Canadian universities, $1.
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Medical services-
20e. Administration, operation and maintenance, $500,000.
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le. Postal services, $780,000.
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lOe. General administration, $37,000.
15e. Expenses of the royal commissions listed in the details of estimates. $150,000.
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A-Department-
5e. Companies and corporations branch, $9,500.
Loans, investments and advances-
National Film Board-
L35e. To increase to $2,000,000 the amount by which expenditures that may be charged at any time to the National Film Board operating account established by section 18 of the National Film Act may exceed receipts shown in the said account; additional amount required, $850,000.
Public Printing and Stationery-
L65e. To amend Vote L33a of the Appropriation Act No. 10, 1964, by providing that, notwithstanding section 58 of the Financial Administration Act, the balance of the revolving fund at any time shall be determined after deducting therefrom all amounts due at such time by federal government departments and agencies, $1.
March 29, 1966
[Stage Direction]
A-D epartment-
General administration-
5e. Trade commissioner service-Administration, operation, and maintenance, $207,000. lOe. Exhibitions branch. $244,200.
15e. Canadian Government Travel Bureau, $251,000.
Supply-Items Passed
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Treatment services-
30e. Operation and maintenance, $300,000.
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A-Departmentle. General administration, including grants as detailed in the estimates, $44,500.
March 29, 1966
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The Budget-Appendix
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presented by
the Honourable Mitchell Sharp, M.P., Minister of Finance for the information of Parliament in connection with the Budget of 1966-1967
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March 29, 1966
The Budget-Appendix
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The purpose of these Papers is twofold:
1.	to present a general economic review of 1965, bringing together in one place and in convenient form some of the more comprehensive indicators of economic conditions prepared by the Dominion Bureau of Statistics, the Bank of Canada and other Government Agencies, together with brief comments;
2.	to present a preliminary review of the Government Accounts for the fiscal year ending March 31, 1966.
March 29. 1966
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The Budget-Appendix
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Table of Contents
Page
The Canadian Economy-Retrospect and Prospect	 3412
Summary review of 1965	 3412
Outlook for 1966	 3425
Manpower in the Canadian Economy	 3430
The labour force	 3430
Employment	 3435
Regional developments	 3437
Output, Employment and Capital	 3442
Output by industry	 3442
Employment and output	 3444
Physical capital and output capacity	 3446
Incomes, Costs and Prices	 3450
Labour income	 3450
Corporation profits	 3452
Production costs	 3454
Price trends	 3456
Demand	 3462
Public and private investment	 3462
Government expenditures	 3466
Personal expenditure	 3467
Exports of goods and services	 3468
Changes in inventories	 3470
The Government Sector	 3471
Current position	 3471
Trends in revenues and expenditures of governments	 3475
Analysis by function	 3477
The Balance of Payments	 3484
Current account	 3484
Capital account	 3491
Source and Disposition of Saving	 3499
Capital Markets	 3501
The tables and charts in this Budget Paper are based upon estimates provided by the Dominion Bureau of Statistics, the Bank of Canada and other Government Agencies. Some of the figures appear for the first time; others have been published elsewhere. All 1965 estimates are preliminary and subject to revision.
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March 29, 1966
The Budget-Appendix
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The Canadian Gross National Product in 1965 rose by rather more than nine per cent. The volume of output of goods and services was about six and a half per cent higher than in 1964, while prices rose by about three per cent. The 1965 advance in output was a continuation of the expansion which began in early 1961 and which has become the longest in Canadian history.
There have been three chief dynamic elements contributing to this strong and sustained expansion. Private investment, following a serious decline after 1957, began to recover strongly by 1964 and has now reached boom proportions. Exports have risen considerably since 1961. Government spending on both current and capital account has also increased substantially. Incomes and employment have risen accordingly and the number of unemployed has fallen; unemployment in the closing months of the year averaged well below four per cent of the labour force. Shortages of skilled labour developed during the period of peak activity in many areas of the country.
The increase in incomes was accompanied by further large gains in consumer expenditures on goods and services of all kinds. In conjunction with the investment programme and the high level of demand there was a sharp rise in imports in 1965. Despite the higher level of exports, there was a rise in the balance of payments deficit on current account.
Incomes
Wages, salaries and supplementary labour income rose more rapidly in 1965 than in any previous year of the current expansion. This was due to the sharp gains in employment achieved during the year, as well as the more rapid rise in average earnings, as hourly wage rates rose in many sectors. Among the different industries, labour income rose most rapidly in construction, where both employment and wage rates rose very rapidly. Sharp increases were also recorded in the service and trade sectors, and in manufacturing.
Profits continued to rise in 1965. The rate of advance appeared about the same as that of labour income, but was somewhat below that achieved in
1964.	This rather slower rate of gain in 1965 was associated with higher costs, including wage costs, in many sectors. This development is typical of the more mature stages of the normal business cycle, and was observed in many manufacturing industries and some of the service industries. Other industries in the service group, however, recorded higher profits in 1965.
Net farm income as estimated in Gross National Product for the first three quarters showed a gain of about eight per cent over the same period in 1964. Farm cash receipts in the first three quarters of 1965, at $2,659 million, were up by over five per cent from the 1964 nine-month total. Receipts from sale of wheat, including participation payments, were down slightly, but receipts from sale of livestock were up very substantially.
Net income of non-farm unincorporated business, which rose by nearly six per cent in the nine months, was affected largely by improved net income in retail trade. Other changes were small and to some extent offsetting. Investment income also rose moderately during the nine months.
March 29, 1966
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The Budget-Appendix
chart 1
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Quarterly Data Seasonally Adjusted, (IQ 1961 = 100)
150
130
no
160
140
120
1961	1962	1963	1964	19651962	1963	1964	1965
Expenditures
The major contributions to the increase in expenditures in 1965 came from the rise in consumer expenditures, investment outlays and government spending. Exports, after the sharp gains of 1964, expanded more slowly in 1965.
Purchases of goods and services for private consumption rose by around seven and a half per cent in 1965. Expenditures on durable goods rose less rapidly than they had done in 1964, while the rise in expenditures on services was well maintained and purchases of non-durables accelerated. Price increases account for some part in these changes, especially in the area of services and non-durable goods.
Public and private investment expenditures rose very rapidly in 1965, for the second year in succession. In particular, new investment in manufacturing plant and equipment increased by over 30 per cent in 1964 and 20 per cent in 1965, with some of the commercial services recording gains of almost equal magnitude. Housing and social capital expenditures were also a major feature in the 1965 capital programme, with both the needs of industrial expansion and the needs of continued population growth pressing upon available resources in many areas. As the year wore on, the ability of the construction industry to meet the demands placed upon it became strained in many areas, and the later months of the year saw a decline in new apartment starts as the competition for mortgage funds intensified.
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NATIONAL INCOME AND GROSS NATIONAL PRODUCT (Seasonally adjusted at annual rates)
IQ | 2Q | 3Q | 4Q
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2Q | 3Q | 4Q
(Millions of dollars)
1.	Wages, salaries, and supplementary labour income	
2.	Military pay and allowances	
3.	Corporation profits before taxes	
4.	Deduct: Dividends paid to non-residents®	
5.	Rent, interest, and miscellaneous investment income	
6.	Accrued net income of farm operators from farm production 1*	
7.	Net income of non-farm unincorporated business®	
8.	Inventory valuation adjustment	
9.	National Income	
10.	Indirect taxes less subsidies	
11.	Capital consumption allowances and miscellaneous valuation adjustments.
12.	Residual error of estimate	
13.	Gross National Product at Market Prices	
14.	(Gross national product at market prices excluding accrued net income of
farm operators)	
22,732	23,100	23,704	24,128	25,000	25,592	26,292	O572	576	584	600	604	592	600	o4,596	4,468	4,376	4,880	4,940	4,908	5,052	
2-684	-588	-680	-788	-708	-756	-796	
23,220	3,252	3,248	3,388	3,416	3,508	3,504	
o1,372	1,680	1,432	1,404	1,532	1,564	1,712	
252,548	2,584	2,624	2,59?	2,632	2,764	2,812	Ui-140	-292	88	-140	-184	-448	-236	
a34,216	34,780	35,376	36,064	37,232	37,724	38,940	M 	
W>6,140	6,340	6,500	6,344	6,892	7,060	7,284	
H5,512	5,580	5,596	5,740	5,900	6,088	6,052	M52	-16	-80	-132	-116	8	-220	w45,920	46,684	47,392	48,016	49,908	50,880	52,056	(44,548)	(45,004)	(45,960)	(46,612)	(48,376)	(49,316)	(50,344)	
<')Includes the withholding taxes applicable to this item.
<2)Includes an arbitrary smoothing of crop production and standard seasonal adjustments for withdrawals of grain from farm stocks and the change in livestock items. Because of the arbitrary elements, too precise an interpretation should not be given the seasonally adjusted figures of accrued net income of farm operators.
® Includes net income of independent professional practitioners.
Source: DBS The National Accounts.
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GROSS NATIONAL EXPENDITURE (Seasonally adjusted at annual rates)
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1.	Personal expenditure on consumer goods and services-
2.	Government expenditure on goods and services	
3.	Business gross fixed capital formation^	
New residential construction	
New non-residential construction	
New machinery and equipment	
4.	Value of physical change in inventories-total(2>
Non-farm business inventories	
Farm inventories and grain in commercial channels.
5.	Exports of goods and services(3)	
6.	Imports of goods and services(3)	
7.	Residual error of estimate	
8.	Gross National Expenditure at Market Prices	
1964				1965			
IQ	2Q	3Q	4Q	IQ	2Q	3Q	4Q
			(Millions of dollars)				
28,852	29,040	29,684	30,148	30,512	31,344	32,120	8,564	8,524	8,544	8,796	9,120	9,412	9,596	8,944	8,828	8,720	9,380	10,052	10,236	10,776	2,176	1,908	1,872	2,128	2,156	2,144	2,160	3,164	3,244	3,376	3,588	3,948	4,040	4,348	3,604	3,676	3,472	3,664	3,948	4,052	4,268	452	448	388	232	1,076	936	436	572	616	804	48	944	768	700	-120	-168	-416	184	132	168	-264	9,996	10,604	10,756	10,404	10,552	10,892	11,244	-10,840	-10,772	-10,784	- 11,076	-11,520	-11,932	-12,336	-48	12	84	132	116	-8	220	45,920	46,684	47,392	48,016	49,908	50,880	52,056	
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<[DOT]>Includes private businesses and institutions, and publicly owned business enterprises.
(2)The book value of inventories is deflated to remove the effect of price changes and the derived "physical" change is then valued at average prices of the current period to obtain the value of physical change. The difference between this value of physical change and the change in book value is called the inventory valuation adjustment.
(*)Minor adjustments have been made to the figures of current receipts and payments shown in Table 37 to achieve consistency with the other component series. Source: DBS The National Accounts.
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The Budget-Appendix
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GROSS NATIONAL EXPENDITURE IN CONSTANT (1957) DOLLARS (Seasonally adjusted at annual rates)
1.	Personal expenditure on consumer goods and services...
2.	Government expenditure on goods and services	
3.	Business gross fixed capital formation	
New residential construction	
New non-residential construction	
New machinery and equipment	
4.	Value of physical change in inventories-total	
Non-farm business inventories	
Farm inventories and grain in commercial channels
5.	Exports of goods and services	
6.	Imports of goods and services	
7.	Residual error of estimate	
8.	Gross National Expenditure at Market Prices	
Source: DBS The National Accounts.
1964				1965			
IQ	2Q	3Q	4Q	IQ	2Q	3Q	4Q
			(Millions of dollars)				
26,252	26,316	26,812	27,156	27,384	27,904	28,496	7,140	7,076	6,996	7,184	7,372	7,516	7,608	7,684	7,476	7,360	7,848	8,248	8,288	8,696	1,796	1,552	1,504	1,692	1,692	1,656	1,664	2,764	2,808	2,904	3,048	3,288	3,292	3,516	3,124	3,116	2,952	3,108	3,268	3,340	3,516	444	424	336	208	1,012	896	396	568	596	744	32	896	728	660	-124	-172	-408	176	116	168	-264	9,128	9,648	9,672	9,404	9,584	9,832	10,020	-9,472	-9,364	-9,436	-9,740	-10,068	-10,452	-10,776	-44	12	76	116	100	-8	188	41,132	41,588	41,816	42,176	43,632	43,976	44,628	
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	3Q 1964 to 4Q 1964	4Q 1964 to IQ 1965	IQ 1965 to 2Q 1965	2Q 1965 to 3Q 1965	9 months 1964	9 months 1965
					9 months 1963	9 months 1964
Personal expenditure	1.6	1.2	2.7	2.5	7.4	7.3Non-Durables	2.5	-0.6	3.6	1.7	5.7	6.8Durables	-6.6	7.0	2.7	8.0	13.9	8.1Services	2.9	1.8	1.6	1.7	7.8	7.7Government expenditure	2.9	3.7	3.2	2.0	6.9	9.7Federal	-0.7	7.3	-1.0	5.4	3.8	6.4Provincial-Municipal	4.9	1.8	5.5	0.2	8.7	11.6Investment expenditure	7.6	7.2	1.8	5.3	18.6	17.3Residential	13.7	1.3	-0.6	0.7	19.2	8.5N on-residential	6.3	10.0	2.3	7.6	16.7	26.1Machinery and equipment	5.5	7.8	2.6	5.3	20.1	14.1Exports	-3.3	1.4	3.2	3.2	18.0	4.2Inventories: total $m	-156	+844	-140	-500	-35	+387farm Sm	+600	-52	+36	-432	-599	+247non-farm Sm	-756	+896	-176	-68	+564	+ 140Total final demand	1.5	4.0	2.5	2.2	10.6	9.3Total final demand ex. inventories	1.8	2.6	2.7	3.0	10.8	8.7Total domestic demand	2.6	4.5	2.3	1.9	9.1	10.4Total domestic demand ex. inventories	2.9	2.8	2.6	2.9	9.3	9.6
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'*'Quarterly magnitudes seasonally adjusted.
The Budget-Appendix
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March 29, 1966
The Budget-Appendix
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jg 1 1 M I I M l I I 1 I I I I I l I I 1 I I l l I I I I I i l I I 1 l I i l l I I I , t I I 1 I 1 M I IQ
1953	1955	1960	1965
(]) Seasonally Adjusted and at Annual Rates
March 29, 1966
[Stage Direction]
The Budget-Appendix
Government purchases of goods and services in 1965 rose by about ten per cent from the 1964 level. Spending by provincial governments and municipalities increased more than this, while total spending on goods and services by the
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-	1954-1956	1958-1960	1961-1965
	Annual compound growth rate over period of expansion		
10 Quarters after 2Q 1954 trough	8 Quarters after IQ 1958 trough	18 Quarters after IQ 1961 troughPersonal expenditure	7.6	5.4	6.8Non-durables	6.0	3.8	6.0Durables	9.6	4.6	10.8Services	8.8	8.0	6.4Government expenditure on goods and services	9.6	6.1	7.2Federal	5.6	-1.3	3.6Provincial-Municipal	13.6	13.2	9.2New residential construction	8.8	-1.0	9.6New non-residential construction	22.4	-4.2	12.0New machinerv and equipment	15.2	5.4	12.0Non-farm business inventories	(+$454 m)	(+$806 m)	(+$ 87 m)Farm and grain inventories	(+$222 m)	(+$ 86 m)	(+$ 15 m)Exports of goods and services	9.2	7.3	9.6Imports of goods and services	14.0	6.9	8.8Gross National Expenditure at Market Prices	10.4	6.7	8.0Final Demand (ex inventories)	9.6	4.9	8.0GNE in Constant (1957) Dollars	8.0	4.3	6.4Real Non-Agricultural Gross Domestic Product	8.0	4.6	6.0Per Capita GNE in Constant (1957) Dollars	5.2	2.0	4.4
federal government rose somewhat less. Spending on non-defence items rose substantially at the federal level, while defence spending was relatively stable. Outlays on capital goods by all levels of government combined increased sharply.
Exports rose less rapidly in 1965 than they did in 1964. This was partly a reflection of the timing of wheat shipments under special contracts, which caused total 1964 exports to rise steeply from 1963 levels, and thus affected the 1965 record by reducing its rate of advance. Non-farm exports rose by some ten per cent in 1965, slightly exceeding the rate of gain in Gross National Product. Exports to the United States in 1965 rose by about thirteen per cent. In the entire current period of expansion, exports have contributed relatively heavily to the total growth. Relative rates of growth in the various demand sectors are shown in Tables 4 and 5, and are illustrated in Chart 2.
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March 29. 1966
The Budget-Appendix
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-	2Q 1954 to 4Q 1950 (10 quarters after trough)	IQ 1958 to IQ 1960 (8 quarters after trough)	IQ 1961 to 3Q 1965 (18 quarters after trough)Personal expenditure on consumer goods and services	43.6	48.9	53.2Non-durable goods	IS.8	17.6	23.4Durable goods	7.0	4-8	10.0Services	17.8	26.5	19.8Government expenditure on goods and services	15.6	15.5	16.7Federal	4-7	-1.5	3.2Provincial and Municipal	10.9	17.0	13.5Business gross fixed capital formation	31.6	0.1	27.7New residential construction	3.7	-0.7	4.9New non-residential construction	16.1	-4.9	11.6New machinery and equipment	11.8	5.7	11.2Non-farm business inventories	15.1	33.8	2.5Farm inventories and grain in commercial channels	7.4	3.6	0.4Exports of goods and services	17.6	19.9	25.2Imports of goods and services (-)	-31.0	-21.8	-25.8GNE (ex error) 	100.0	100.0	100.0
Agriculture
The achievements of the agricultural sector in 1965 were significant. Last year's weather was, on the whole, favourable. In addition to this, however, it may be noted that the long-term improvement in agricultural skills has been sustained, with the improvement in livestock and plant varieties resulting from continued active research also contributing to the rise in real output from the farms. Prairie grain acreage was very slightly higher than in 1964 and the crop yield, in bushels per acre, was high. Conditions were not uniformly favourable for all crops in all areas, and production of vegetables and dairy products in the eastern part of the country in the first half of the year was reduced by severe drought. Despite this, however, and despite an accelerated flow of workers out of the farm sector into non-agricultural industries, agricultural output rose by six per cent in the year, from a 1964 level which was itself good in terms of the average of the preceding ten years.
Costs and Prices
Wage rates on the whole advanced more rapidly in 1965 than in the previous year. This trend reflected the growing maturity of the present period of expansion and accompanied the generally higher level of utilization of resources achieved during the course of the year. In manufacturing as a whole, average hourly
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earnings(1) were 5.0 per cent higher than they were in 1964. The advance a year earlier had been 3.6 per cent. The acceleration was slightly more marked in durable than non-durable goods production. In construction, the advance in 1965 was 8.5 per cent, compared to a 5.1 per cent gain the previous year. Productivity gains in general were below these levels, so that labour costs per unit of output rose across a wide selection of goods-producing industries.
Some other producers' costs also rose in 1965. In some cases, this was directly related to increased federal sales taxes on construction materials and production equipment. In other cases, raw material and semi-manufactured component prices advanced due to other factors, as indicated in the various industry selling price indexes, which exclude taxes. Some of these changes are summarized in Table 7, and the changes recorded in all major items in the indexes are shown on Chart 3. Bought-in services such as truck transportation and insurance showed some price advances. Some of these higher costs led to
[Stage Direction]
SELECTED INDUSTRY SELLING PRICE INDEXES 1961 TO 1965 (1956 = 100)
1961	1962	1963	1964	1965Slaughtering and meat packing	113.5	119.4	115.4	111.1	120.8Men's clothing	103.8	106.2	109.3	111.0	113.8Sash, door and planing mills	100.4	100.3	101.9	104.6	107.9Pulp mills	93.7	96.4	96.8	100.1	102.7Steel ingots	121.1	120.0	119.8	120.3	122.2Motor vehicles	116.8	119.1	119.8	120.2	119.1Cement	106.5	108.4	110.8	112.3	115.4Soaps	113.7	113.6	113.9	114.9	117.6-	1962 1961	1963 1962	1964 1963	1965 1964Per cent changes: Slaughtering and meat packing	
Men's clothing	+5.2	-3.4	-3.7	+8.7+2.3	+2.9	+1.6	+2.5Sash, door and planing mills	-0.1	+1.6	+2.6	+3.2Pulp mills	+2.9	+0.4	+3.4	+2.6Steel ingots	-0.9	-0.2	+0.4	+1.6Motor vehicles	+2.0	+0.6	+0.3	-1.0Cement	+1.8	+2.2	+1.4	+2.8Soaps	-0.1	+0.3	+0.9	+2.3
Source: DBS Prices and Price Indexes.
price adjustments in final product markets, as was the case in construction, where tender prices during the latter half of the year were substantially higher than originally estimated in some parts of the country. In other cases, these cost trends were reflected in lower profit margins than those recorded during earlier years of the present expansion.
WThese figures are based on data collected from establishments employing 15 persons or more, and do not necessarily reflect changes in earnings in industries, such as construction, where smaller establishments or sub-contracting account for a significant part of total employed.
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Consumer prices moved up during the year, partly in response to identifiable causes. The consumer price index for the year as a whole stood at 138.7 (1949=100), having advanced by 2.4 per cent over 1964. Table 8 shows the movement of the index and its components, and gives an indication of the areas in which the rise was most marked. Food prices in the early part of the year were affected by drought conditions in the eastern part of Canada and the United States, which led to higher prices for many vegetables. From mid-year
[Stage Direction]
CONSUMER PRICE INDEX, 1961-1965 (1949=100)
-	1961	1962	1963	1964	1965All items	129.2	130.7	133.0	135.4	138.7Food	124.0	126.2	130.3	132.4	135.9Housing	133.2	134.8	136.2	138.4	140.9Clothing	112.5	113.5	116.3	119.2	121.4Transportation	140.6	140.4	140.4	142.0	147.3Health and personal care	155.3	158.3	162.4	167.8	175.5Recreation and reading	146.1	147.3	149.3	151.8	154.3Tobacco and alcohol	116.3	117.8	118.1	120.2	122.3All commodities	120.0	121.0	123.1	124.7	126.7Durables	116.1	115.3	115.5	114.5	114.6Non-durables	120.7	122.1	124.6	126.7	129.2Non-durables excluding food	118.3	119.1	120.3	122.4	124.1Services	155.4	157.6	159.8	163.8	170.6
Source: DBS Prices and Price Indexes
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CONSUMER PRICE INDEX, 1961-1965 (1949=100)
(Percentage changes, year to year)
1962	1963	1964	1965	Feb. 19661961	1962	1963	1964	Feb. 1965All items	+1.2	+1.8	+1.8	+2.4	+3.6Food	+ 1.8	+3.2	+1.6	+2.6	+7.1Housing	+ 1.2	+ 1.0	+ 1.6	+1.8	+2.1Clothing	+0.9	+2.5	+2.5	+1.8	+3.2Transportation	-0.1	-	+1.1	+3.7	+2.5Health and personal care	+1.9	+2.6	+3.3	+4.6	+2.0Recreation and reading	+0.8	+ 1.4	+1.7	+1.6	+2.0Tobacco and alcohol	+1.3	+0.3	+1.8	+1.7	+1.3All commodities	+0.8	+1.7	+1.3	+1.6	+3.5Durables.	-0.7	+0.2	-0.9	+0.1	-0.7Non^durables	>	+1.2	+2.0	+1.7	+2.0	+4.2Non-durables excluding food	+0.7	+ 1.0	+1.7	+ 1.4	+2.0Services	+1.4	+ 1.4	+2.5	+4.2	+3.2
on, however, the major pressures came from a shortage of meat supplies in the United States, as a result of which meat prices rose sharply and have remained high. Other specific price gains included medical insurance premiums and automobile insurance rates, the latter reflecting higher accident rates and higher average claims.
In addition to this, however, the services component of the index moved upward, as the approach towards full utilization of resources which was achieved in 1965 was accompanied by continued upward movement of prices of services. This is an area in which the labour content of output is high, productivity gains are more difficult to achieve, or even to measure, and gains in wage rates are more directly reflected in prices. Price changes in this sector characteristically lag others in the cyclical context. Chart 4 illustrates the trends in the consumer price index during recent years.
Changes in the components of the wholesale price index reflected the trend in food prices, with the animal products index advancing sharply over the year. Movements of commodity prices on world markets, many of them upwards, were also reflected in the wholesale price index due to the importance of international trade in these commodities in the Canadian economy. Prices of wood products, affected by both the construction boom and tax changes, also moved up.
Until 1965, Canadian prices and unit labour costs in manufacturing enjoyed a relatively favourable record compared to that of many other industrialized countries. Only in the United States, where labour costs per unit of output had been stable since mid-1961, was the performance better than in Canada. During the course of 1965, however, Canadian unit labour costs in manufacturing moved up, rising to a level 2.3 per cent higher than they had been in 1964. Many wage contracts signed in 1965 provided for wage rate gains in the next two years in excess of those negotiated in the earlier part of the expansion, so that the rise in unit labour costs may well persist. If this were to occur, while the United States maintains greater stability, there would develop a worsening of Canada's competitive position vis-H-vis the United States, which is both our major supplier and our largest customer.
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[Stage Direction]
(Quarterly Averages, IQ 1961 = 100)
1962
1964
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Outlook for 1966
The economic climate changed during 1965, from one of moderate expansion in the early part of the year, to one of boom at present. This change was brought about by the rapidly rising level of public and private investment superimposed on rising demands by consumers, governments and from exports. Renewed expectations of continued expansion in the United States at this time represent a dramatic shift from the spring months, when there was a widespread belief that the expansion might be slowing down. As the year came to a close, a basic question in both countries was whether production could expand fast enough to meet the anticipated rapid increase in aggregate demand, so that economic stability would continue to be maintained.
In Canada, where the rate of unemployment, seasonally adjusted, was down to 3J per cent in the latter months of 1965, and where the actual rate of unemployment was well below that level in many areas, it was evident that slack resources in a position to be used economically by expanding general demand had all but disappeared. Markets showed signs of tightness. In these circumstances the emphasis in economic policy shifted from one of bringing unemployed resources into production through expansion of general demand, to one of ensuring that the long expansion would be sustained in accordance with the growth of capacity to produce. A higher rate of growth depends on improving the capacity and productivity of labour and capital. In the earlier stages of the upswing, the authorities had been able to bring into use unemployed resources through broad expansionary measures. The success of these measures in taking up slack means that the economy is now faced with problems of sustaining growth and economic stability by avoiding excesses rather than with problems of cyclical expansion.
The recent survey of public and private investment intentions in the Canadian economy indicates that plans have been made for a further substantial increase in fixed capital outlays by both government and business in 1966, similar to the increases of the preceding two years. In addition, there will be continued increases in other public expenditures on current account by the federal, provincial and municipal governments. With sustained increases in income, personal expenditures on durable goods, non-durable goods and services should rise considerably. Exports can be expected to increase further. This will reflect the continued rapid expansion foreseen in the United States, where a very large part of total Canadian production is sold, as well as the favourable world markets for Canadian wheat. The rate of increase in exports to the United States is expected to be substantially greater than that to the United Kingdom, Japan and other countries. Wheat sales to Russia and China and high levels of livestock production will continue to stimulate the farm economy, which will thereby be enabled to maintain its contribution to the general prosperity.
Taken together, these expenditures represent a total of final demand, in current prices, which is expected to exceed 1965 demands by about as much as those of 1965 exceeded those of 1964. The productive facilities of the Canadian economy are now close to their maximum rate of utilization, and the present and anticipated rate of expansion in demand appears likely to strain the resources currently available to meet it.
In circumstances such as this, additions to demand beyond this point serve to raise prices or draw imports from abroad, rather than adding much to
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domestic economic activity. Expansion and growth become more dependent on measures which improve the supply capabilities of the economy, through increases in mobility, reductions in bottlenecks and a general upgrading of the quality of labour and capital.
The assessment of the outlook for the various sectors contained in these pages represents an appraisal and projection of existing trends, on the basis of the statistical and other survey evidence available at the present time.
Public and Private Investment Intentions
The investment intentions for 1966 currently reported indicate a continued expansion in both public and private outlays. On the basis of these reports, which are here discussed without making any allowance for any adjustments or shortfalls that may occur during 1966, it appears that demand for new housing construction will not be greatly changed, capital spending by governments, especially by provinces and their agencies, will again rise in response to growing needs, and the business sector will continue its present sharp expansion.
In the public and semi-public areas, the main outlays will be for universities, schools, hospitals, roads and highways. In addition, publicly-owned water and power utilities and other enterprises, as well as other provincial and municipal facilities, are responding to growing requirements by further expansion and new development.
In the business area, the remarkable expansion in investment in manufacturing continues unabated. In broad terms, the present expansion in capacity in manufacturing differs from that of 1955 to 1957, in that it appears less heavily oriented to processing raw materials, while placing somewhat more emphasis on advanced processing. Manufacturing investment is still based to a considerable degree on the resources which are Canada's natural endowment, but the degree of processing is now more advanced. Industries such as petro-chemicals, synthetic textiles, communications equipment, secondary iron and steel products, transportation equipment and appliances, have come to play a larger role. Basic industries such as mining, pulp and paper, and primary iron and steel products will also continue to expand their facilities in the current year.
In total, the rate of expansion of new facilities in manufacturing is expected to amount to 20 per cent in 1966. There was some shortfall in the achievement of planned outlays in 1965, and efforts will be made to make good this shortfall in the current year.
Substantial increases in new investment are also expected to take place in private power and gas utilities, retail trade and financial and commercial services. These and other developments are reviewed more fully in the recently tabled "Public and Private Investment Outlook, 1966".
It is worthy of note that a substantial part of business investment, consisting of machinery and equipment required to expand productive facilities in Canada, is not produced by domestic manufacturing resources. This equipment must therefore be imported. These imports, while contributing to Canada's economic growth and development, serve to absorb expenditures which would otherwise add to domestic demand pressures. At the same time, these expenditures add to the deficit on the Canadian balance of international payments.
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The Second Annual Review of the Economic Council of Canada referred to the high capital requirements implicit in the particular industrial structure of Canada, which is heavily oriented towards mining, electric power, certain kinds of manufacturing, and rail and air transportation. These industries all are highly capital intensive in nature. This distinctive feature of Canada's industrial structure shows up in one of the highest overall ratios of the stock of capital to the volume of production that is found anywhere. The new investments planned for 1966 should increase the stock of capital at about the same rate as the volume of output can be expected to increase. Accordingly, very high rates of utilization of the existing capital equipment will continue to be required.
The construction industry experienced a more rapid increase in output and employment than any other during the past year and is probably operating at close to its maximum capacity. The demands indicated by the investment intentions survey imply a further large increase in output of construction in the coming year.
Residential construction has already levelled off and may be expected to continue at its present rate in 1966. There will likely be a small increase in the value of construction put in place, but the volume of work is expected to remain about unchanged from that of 1965. A shortage of new mortgage funds made itself felt in the late months of 1965. The N.H.A. interest rate on residential mortgages was increased in January, 1966, in an effort to attract more funds in the current year. It is expected that this action will arrest the decline in housing starts which was taking place within 1965. Conventional mortgages are expected to provide about the same amount of financing as last year.
Consumer Demands
In the projected circumstances of high-level employment and earnings, consumers appear likely to increase their purchases of durable and non-durable goods and services in 1966 at approximately the same rate as in the past year. Personal expenditures on durable goods will probably not advance quite as rapidly as in 1965, since spending on the furniture and appliances which go into new houses will be affected by the level rate of residential construction now expected for 1966. Manufacturers expect that the present high rate of automobile purchases will continue in 1966. There has been a continuous increase in number of cars per family and a reduction in the average age of the stock of cars on the road, for a number of years. In addition, the large number of new entrants to the labour force makes increased car ownership possible.
Non-durables purchases, such as food and clothing, should advance at much the same rate as in the past year. The volume of consumer purchases of services has continued to rise, while prices of many of these items have increased substantially. These prices are expected to continue to rise in the months ahead. No diminution in the rate of increase of consumer expenditure on services therefore seems likely in 1966 and the outlook generally is for an advance of much the same order as that recorded in 1965.
Foreign Trade and the Balance of Payments
The prospect of increased export sales in 1966 is encouraging. This is particularly the case with respect to exports to the United States. Current official forecasts in that country present a picture of very buoyant economic
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conditions in the coming year, and these conditions will involve a substantial increase in Canadian exports. On the past record, an increase in industrial production in the United States has been accompanied by a more than proportionate increase in their requirements for Canadian raw materials and fabricated products. There is no reason to expect that these past relationships between the United States' economic conditions and Canada's export sales will alter in 1966. In addition to these exports, the wheat sales to the U.S.S.R. and to mainland China will add to total exports in 1966. These developments will be supplemented by some increase in sales to other overseas countries. Taking all of these factors into account, export sales may be expected to increase at a higher rate in 1966 than they did in 1965.
Import requirements are expected to continue to increase as a result of the augmented demands for both consumption and investment goods. The near-balance on commodity trade recorded in 1965 is not expected to change by much. The traditionally negative balance on the current account for noncommodity items can be expected to grow in 1966.
Government Expenditures
The anticipated increases in capital outlays, particularly by provincial and municipal governments, has already been noted. The current or non-capital outlays of these governments, as well as those of the federal government, are expected to increase in 1966 at a rate in excess of that of 1965. Some of this will, of course, represent an increase in costs to government of labour and materials.
On the basis of current projections and current tax rates, (i.e. before any budgetary changes), it appears likely that the federal government will remain in a position of surplus on a national accounts basis, although the surplus will be reduced somewhat from 1965 levels. All of the information is not yet available, but present evidence suggests that the large increases in expenditures, both current and capital, by provincial and municipal governments may be approximately matched by increases in revenues from higher levels of economic activity and from some increases in tax rates. On balance, one might not expect much change in the combined deficit of provincial and municipal governments from the position in 1965. At the same time, the accumulations in the new government Pension Plans represent additional saving that will serve to offset the trend toward dissaving of all levels of government combined. In connection with the funds made available from the new Pension Plans, some provincial authorities have announced that they will be used to finance capital outlays beyond those of government departments, for example, schools and universities.
Government expenditures on goods and services, together with consumer spending, business capital formation, inventory increases and exports, constitute the total demand on Canadian productive resources. Almost three-fifths of total expenditures by government are spent on goods and services, and last year these expenditures absorbed 18| per cent of the nation's output. Since government expenditures on goods and services will probably increase more rapidly than output in 1966, this ratio will increase fractionally. This rate of advance in government demands for goods and services in 1966 is expected to be greater than the
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rise in consumer demands and probably close to the rate of increase expected in exports. An even greater demand on our productive resources is expected to result from the increase in business capital formation. It is the conjuncture of these added demands that would give rise to the strains that may develop in 1966.
Capabilities of Supply
The emergence of this combination of consumer, business, government and export demands, after five years of continued expansion, will probably strain available sources of supply in 1966. While some part of this strain will be taken up, as already noted, by imports, a large part of the total increase in demand will fall upon Canadian sources of supply. Any assessment of the likely course of events in 1966 therefore calls for a review of probable developments in the labour force, the capital facilities of the nation, and the gains in productivity which might be achieved in the current situation.
Over time, improvements in productivity can be expected to take place. In the short run, however, a number of rigidities can be expected to have an important effect on developments. During the past year, there have been substantial additions to the labour force and to the stock of capital facilities. There have been continued advances in productivity, but not as large as those achieved in the first three or four years of expansion. It is a common feature of most business cycles that productivity advances are more rapid in the early stages of an expansion, when resources are abundant, than in the later stages of expansion, when all available resources are pressed into use, and various shortages and bottlenecks appear. Of course the situation varies from industry to industry, from occupation to occupation and from region to region. Efforts are under way to improve productivity through various public and private efforts, but these require time to make their maximum contribution.
Looking forward in 1966, a continuation of recent broad trends in labour supply, capital facilities and economic productivity is expected. The domestic labour supply is likely to be augmented by a flow of immigrants at least as large as in the past year. The inflow of young adults and of married women into the labour force is expected to continue at the same rate as in the past year, or perhaps even a little more rapidly. A reduction of unemployment below the 1965 average of 3.9 per cent may be expected, since the rate in the later months of the past year was below that. There will be a larger number of part-time workers, particularly among married women, and among those who were previously retired or voluntarily idle. The increasing amount of part-time work is expected to continue to reduce average hours of work, at the same rate as in the past year. Taking all of these factors into account, it should be possible to increase substantially the total amount of manhours available for production. However, further substantial advances in manhour productivity cannot be counted upon in the present circumstances. Therefore, the increase in aggregate output of goods and services in the economy (apart from the crop prospects)
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will be hard pressed to equal the gains of the past year, when part of the increased output came out of the existence of a considerable amount of economic slack.
Capital facilities have been augmented by the massive investment programme of 1965, but the present rates of capacity utilization appear very high (insofar as available measurements permit an inference). The high utilization rates themselves suggest one reason why current investments are increasing rapidly and why construction activity and machinery and equipment purchases are at such a high level.
Taking into account all of the increases in supply which can be expected in 1966, the increase in volume of output cannot be expected to reach that of
1965,	and it seems likely that the increase attained will be the maximum possible within the limitations imposed by physical supply.
Prices
The forces currently bearing upon the determination of prices are of such complexity that firm conclusions on probable price trends cannot be drawn from a broad review of total supply and demand. In assessing the likely course of price developments in 1966, the relationships between projected demand and projected supply, however, will have important consequences. It is clear from the factors reviewed in these pages that current upward price trends could well persist, unless significant productivity improvements emerge to add to the supply capability of the economy, or unless the rate of increase in demand should turn out to be notably lower than currently expected. Some prices which affect the indexes fairly heavily, such as those of food, are governed by the vagaries of nature and prediction is difficult. Other factors also, having no direct relationship to supply or demand forces, may also contribute to the movement of prices. (One such factor is the commencement in January 1966 of payment of contributions to the Canada and Quebec Pension Plans, which will add somewhat to costs.) All of these factors, in the context of conditions in the early months of
1966,	suggest that it would not be prudent to assume a rate of price increase any less than that recorded in 1965.
[Stage Direction]
1 The Canadian labour force(1) in 1965 increased by 3.0 per cent over 1964. This growth was remarkably rapid by recent standards and also in comparison with the experience of other major industrialized nations. It reflected natural increase, higher immigration, and a rise in the rates of participation of the population in the labour force. Increased participation, in turn, was associated with the buoyancy of employment opportunities in most parts of the country. For the same reason, the movement out of agriculture into non-farm jobs accelerated in 1965. Major developments in the labour force, employment and unemployment are summarized in Table 10.
M Labour force and employment data analysed in this section are taken from The Labour Force, published monthly by DBS and the Department of Labour.
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Appendix
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1957 to 1965	,
Thousands of Persons
[Stage Direction]
1957	1958	1959	1960	1961	1962	1963	1964	1965Labour Force	6,008	6,137	6,242	6,411	6,521	6,615	6,748	6,933	7,141Employed	5,731	5,706	5,870	5,965	6,055	6,225	6,375	6,609	, 6,862Unemployed	278	432	372	446	466	390	374	324	280i ear-io-year cnange, per cent	Labour Force	2.1	1.7	2.7	1.7	1.4	2.0	2.7	3.0-0.4	2.9	1.6	1.5	2.8	2.4	3.7	3.8Average of monthly rates	Unemployment rate(1>....	! 4,6	7.0	6.0	7.0	7.1	5.9	5.5	4.7	3.9
<* Unemployed as a per cent of the labour force.
Source: DBS and Department of Labour, The Labour Force.
Total employment grew more rapidly than the labour' force, rising by 3.8 per cent! Non-agricujtural employment rose even more rapidly, by 4.8 per cent. Contributing to this {were sharp gains in the employment of women and young people. The seasonally-adjusted unemployment rate in 1965 averaged 3.9 per cent, and was in the region of 3.5' per cent during the final {quarter of the year.
Regional developments generally reflected the national pattern. In all regions, employment grew more rapidly than labour force, and non-agricultural employment grew more rapidly than total employment. The movement out of agriculture was most marked in the Atlantic i region, but the percentage gain in employment was greatest in British Columbia. The unemployment rate for the year was highest' in the Atlantic region and lowest in Ontario. The regional situation for 1965 is Summarized in Table 11.
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Thousands of Persons
Atlantic	| Quebec	i Ontario	Prairie	British ColumbiaLabour Force	611	2,022	2,614	1,228	666Employed	566	1,912	2,548	1,196	63945	110	66	32	27Unemployment rate (per cent)	7.4	5.4	2.5	2.6	4.1Per cent growth in labour force	3.9	3.6	2.3	2.4	4.2Per cent growth in employment	4.4	4.7	3.0	2.9	5.6Per cent grow'th in non-agricultural em-	ployment	5.8	4.8	3.6	6.8	5.8
Source: DBS and Department of Labour, The Labour Force.
These developments are discussed in detail in the following pages
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Millions	Millions
The Labour Force
The Canadian labour force was larger by 208,000 persons, or 3.0 per cent, in 1965 than in 1964. Table 12 summarizes the changes which have occurred in recent years. From this table, it may be seen that the rate of increase of women in
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the labour force was far higher than that of men. The number of women in the labour force grew in 1965 by 104,000, exactly matching the increase in the number of men, while the increase relative to the number of women in the 1964 labour force was 5.3 per cent. A review of the trend since 1957 (shown in the table) reveals a consistently higher year-to-year growth rate in the female labour force than that of the labour force as a whole.
[Stage Direction]
THE CANADIAN LABOUR FORCE 1957 to 1965 Thousands of Persons
-	1957	1958	1959	1960	1961	1962	1963	1964	1965Labour force- Total	
Agricultural	
Non-agricultural	
Men	
Women	
Age 14-19 years	
Per cent change, year to year- Total	
Agricultural	
N on-agricultural	
Men	
Women	
Age 14-19 years	6,008 755 5,253 4,573 1,435 587	6,137 731 5,406 4,641 1,496 591	6,242 712 5,530 4,687 1,554 603	6,411 697 5,714 4,754 1,657 627	6,521 698 5,823 4,782 1,739 630	6,615 675 5,940 4,819 1,797 648	6,748 662 6,086 4,879 1,870 672	6,933 641 6,292 4,961 1,972 700	7,141 602 6,540 5,065 2,076 7382.1 -3.2 2.9 1.5 4.3 0.7	1.7 -2.6 2.3 1.0 3.9 2.0	2.7 -2.1 3.3 1.4 6.6 4.0	1.7 0.1 1.9 0.6 4.9 0.5	1.4 -3.3 2.0 0.8 3.3 2.9	2.0 -1.9 2.5 1.2 4.1 3.7	2.7 -3.2 3.4 1.7 5.5 4.2	3.0 -6.1 3.0 2.1 5.3 5.4
Source: DBS and Department of Labour, The Labour Force.
The growth of the 14 to 19-year age group in the labour force, by 38,000 persons or 5.4 per cent, was mainly a reflection of demographic trends, and continued the acceleration which has been in evidence since 1962. In 1961, young people formed 9.7 per cent of the labour force, while in 1965 they represented 10.3 per cent. In part, however, it also reflected an upturn in participation rates; in this age-group, reversing the trend of recent years. In turn, this was largely-accounted for by a greater proportion of 18 and 19 year olds in this age group than has recently been the case.
PARTICIPATION RATES, POPULATION 14-19 YEARS (Labour force as a per cent of population)
-	I960	1961	1962	1963	1964Men	42.8	40.3	39.6	39.2	38.3Women	32.6	32.3	30.9	29.9	29.9
The male labour force, affected in part by the influx of teenagers, also grew more rapidly than in any recent year. The 55 to 64 age group continued the modest rise in its participation rate which first became evident in 1964. Other age groups maintained the characteristic stability of their labour force participation.
. Immigration contributed to the labour force increase, with the number of immigrants destined for the labour force in the first three quarters, at 56,000 being almost 30 per cent larger than the number a year earlier. The majority of these were adult males.
[Stage Direction]
March 29, 1966
The Budget-Appendix	_
A major feature of the labour force scene in 1965 was the acceleration in the movement out of agriculture. The agricultural labour force declined by
6.1	per cent, compared to a fall of 3.2 per cent in 1964. The shift from agriculture into non-agricultural occupations caused the non-farm labour force to rise by 3.9 per cent, compared with the 3.0 per cent increase recorded for the total labour force.	...
This accelerated shift, together with the uptrend in participation rates, the substantial increase in the female labour force, and the higher immigration were largely accounted for by the growth in employment opportunities in nonagricultural industries. A response of this nature to increases in the demand for labour has become a familiar feature of the Canadian economy in the postwar period, indicating the existence of a high degree of elasticity in the supply of labour. At the same time, there were proportionately fewer workers with experience in modern Canadian industry among those obtaining jobs in 1965, as the pool of experienced unemployed shrank, while there were proportionately more workers entering employment direct from the home, from school, from abroad, or from the farm sector. Many of the women who took jobs in 1965 worked only on a part-time basis. These developments had an important bearing upon the measured rate of overall productivity improvement in 1965, as discussed below.
The contribution made by the skills of new entrants to the labour force, and by the upgrading or more efficient use of the skills of those already at work, cannot be precisely measured. Some indication of the situation and prospects, however, is given by the record of enrolments and completions in the various technical and vocational institutes and schools now established in all regions of Canada. The numbers completing courses at the vocational high schools in 1965 are estimated to have been substantially higher than the 32,000 recorded a year earlier; the number of students in these courses has almost doubled in recent years. Graduations from two-year courses at the institutes of technology in 1965 were 3,100, but some 22.000 students are now enrolled and graduations will increase sharply. Enrolments in courses for retraining the unemployed, at 60 000, are currently 20 per cent higher than they were in 1964-65. Enrolments in'these and other courses, all of which are primarily under provincial administration, but which have been made available through federal-provincial co-operation and federal financial assistance, have been rising sharply in recent years. These trends may be expected to contribute more to the raising of levels of skill in future years, both as the number of graduates increases and as they acquire experience in applying their new training.
The numbers of professional and skilled immigrants have of course risen as immigration has risen. The distribution among the various kinds of skill and occupation has not, however, changed to any marked extent in recent years.
IMMIGRANTS DESTINED TO THE LABOUR FORCE DISTRIBUTION BY SKILLS AND OCCUPATION (Per cent)
9 months 1962	9 months 1963	9 months 1964	9 months 1965Managerial, professional and clerical	38.2	36.9	37.3	38.0Other skilled and semi-skilled	47.4	50.4	48.7	49.2Labourers and agriculture	14.4	12.7	14.0	12.8100.0	100.0	100.0	100.0
March 29, 1966
[Stage Direction]
The Budget-Appendix
Employment
The number of people in employment in 1965 was higher by 253,000, or 3.8 per cent, than it was in 1964. Non-agricultural employment rose by 4.8 per cent, while the number of young people with jobs rose by 7.2 per cent. The major developments of recent years in employment are summarized in Table 13.
[Stage Direction]
EMPLOYMENT, CANADA 1957 to 1965 Thousands of Persons
-	1957	1958	1959	1960	1961	1962	1963	1964	1965Employment- Total	
Agricultural	
Non-agricultural	
Men	
Women	5,731 748 4,983 4,329 1,402 537	5,706 718 4,988 4,263 1,442 515	5,870 700 5,170 4,363 1,507 536	5,965 683 5,282 4,368 1,597 545	6,055 681 5,374 4,381 1,674 5,48	6,225 660 5,565 4,488 1,737 573	6,375 649 5,726 4,567 1,808	6,609 630 5,979 4,698 1,911 628	6,862 594 6,268 4,842 2,020 673Per cent change, year to year- Total	!	
Agricultural	
Non-agricultural	
Men	
Women	
Age 14-19 years	-0.4 -4.0 0.1 -1.5 2.9 -4.1	2.9 -2.5 3.6 2.3 4.5 4.1	1.6 -2.4 2.2 0.1 6.0 1.7	1.5 -0.3 1.7 0.3 4.8 0.6	2.8 -3.1 3.6 2.4 3.8 4.6	2.4 -1.7 2.9 1.8 4.1 4.0	3.7 -2.9 4.4 2.9 5.7 5.4	3.8 -5.7 4.8 3.1 5.7 7.2
Source: DBS and Department of Labour, The Labour Force.
This table indicates the vulnerability of the teen-age group, with its relative lack of skills and experience, to fluctuations in the growth of employment opportunities. In 1958, for example, a fractional decline in total employment from the very high 1957 levels was accompanied by a very much greater than proportional drop in the number of young people with jobs. In the same way, the percentage gain in teen-age employment in 1965 was almost double that recorded for total employment.
[Stage Direction]
LABOUR FORCE AND EMPLOYMENT Growth Rates, 1949 to 1965 and 1961 to 1965
Labour Force:
Total	
Agricultural...
N on-agricultural.
Men	
Women	
Age 14-19 years.
Employment:
Total	
Agricultural...
N on-agricultural,
Men	
Women	
Age 14-19 years.
Per cent per year compound rate 1949 to 1965	1961 to 1965
2.2	2.3
-3.6	-3.6
3.1	2.9
1.5	1.4
4.1	4.5
1.6	4.0
2.1	3.2
-3.6	-3.4
3.1	3.9
1.4	2.5
4.1	4.8
1.4	5.3
[Stage Direction]
March 29, 1966
The Budget-Appendix
The number of women with jobs has revealed a very high year-to-year growth record in recent years. The annual rate of growth between 1961 and 1965 was 4.5 per cent, rather greater than the 4.1 per cent annual growth rate recorded over the entire 1949 to 1965 postwar period. Table 14 sets out the growth rates of the labour force and of employment over these periods, for purposes of comparison, and Charts 5 and 6 show these comparisons graphically. Women now represent 29 per cent of the employed labour force, compared to 22 per cent in 1949. It is of interest to note that the increase in employment of adult women has been
[Stage Direction]
March 29, 1966
[Stage Direction]
The Budget-Appendix
heavily concentrated among those 35 years of age and above, while the number of employed women in the age group 25 to 34 years has changed to a much lesser extent.
[Stage Direction]
Year	Age Group			
	25 to 34 | 35 to 44 | 45 to 54 | 55 to 64			
1965		361 292	(Thousands 417 248	of persons) 367 185	188 87
1956					
Increase 1956 to 1965					
	69	169	182	101
As a result of the continued growth of job opportunities in 1965, the number of unemployed declined again from the previous year's level. The unemployment rate for the year as a whole was 3.9 per cent, and the rate towards the end of the year averaged around 3.5 per cent on a seasonally adjusted basis. The 1965 unemployment rate was the lowest since 1956, when it was 3.4 per cent. Unemployment levels varied greatly among the different regions of Canada, as discussed in some detail below, and in some areas there were shortages of many kinds of skilled labour.
UNEMPLOYMENT RATE, 1957 TO 1965 (Unemployed as a per cent of the labour force)
1957	1958	1959	1960	1961	1962	1963	1964	19654.6	7.0	6.0	7.0	7.1	5.9	5.5	4.7	3.9
Regional Developments
The regional estimates of 1965 labour force and employment, illustrated in Chart 7, revealed a continuation of excess labour supply in some areas, while in others the flow of new entrants and new skills was insufficient to meet the need for workers which developed in the course of the year. In the Atlantic region, the total labour force rose by 3.9 per cent and total employment by 4.4 per cent, so that there was again a fall in the unemployment rate. The movement from agriculture was very marked in the Atlantic region, and non-agricultural employment rose by 5.8 per cent. Employment of young people rose even more rapidly. (These changes are summarized in Table 15). However, the unemployment rate in this region, at 7.4 per cent, remained substantially higher than that in any of the other major regions, while the percentage decline in the number of unemployed, compared to that in other areas, was smaller.
[Stage Direction]
March 29, 1966
The Budget-Appendix
[Stage Direction]
-	LABOUR FORCE
-	- EMPLOYMENT
(Ratio Scale)
[Stage Direction]
2,100
2,000
1,900
1,800
1,700
1,600
1,500
		. ;		
				
			X X X -	X
		X X^		
X X
[Stage Direction]
2,100
2,000
1,900
1,800
1,700
1,600
1,500
1,400
1,350
1,300
1,250
1,200
1,150
1,100
1,050
1,000


[Stage Direction]
675
625
575
525
2,800
2,700
2,600
2,500
2,400
2,300
2,200
2,100
2,000
675
625
575
525
March 29, 1966	COMMONS DEBATES	3439
The Budget-Appendix

[Stage Direction]
1964 and 1965
-	1964	1965	Change Per cent
[DOT][DOT] . .. 1	Thousands of Persons		
Atlantic Region Labour Force:			
Total	588	611	3.9Non-agricultural	548	577	5.3Employment:	566	4.4Total	542	Non-agricultural	504	533	5.8Age 14-19 years	57	62	8.8Unemployed	46	45	-2.2Quebec Region Labour Force:	Total	1,951	2,022	3.6Non-agricultural	1,832	1,903	3.9Employment:	4.7Total	1,827	1,912	Non-agricultural	1,713	1,796	4.8Age 14-19 years	190	204	7.4Unemployed	124	110	-11.3Ontario Region Labour Force:	Total	2,556	2,614	2.3N on-agricultural	2,394	2,461	2.8Employment:	Total	2,473	2,548	3.0N on-agricultural	2,314	2,397	3.6Age 14-19 years	211	224	6.2Unemployed	83	66	-20.5Prairie Region Labour Force:	Total	1,199	1,228	2.4Non-agricultural	901	955	6.0Employment1:	Total	1,162	1,196	2.9Non-agricultural	866	925	6.8Age 14-19 years	120	128	6.7Unemployed	37	32	-13.5British Columbia Labour Force:	Total	639	666	4.2N on-agricultural	616	644	4.5Employment:	605	Total	639	5.6Non-agricultural	583	617	5.8Age 14-19 years	50	55	10.0Unemployed	34	27	-20.6
Souhce: DBS and Department of Labour, The Labour Force.
[Stage Direction]
March 29, 1966
The Budget-Appendix
The Quebec region continued to experience above-average unemployment in the eastern areas, while conditions were much tighter in the western part of the province. In contrast to other areas, employment in agriculture in Quebec rose slightly. The total labour force rose by 3.6 per cent and total employment by 4.7 per cent. Employment of young people rose by 7.4 per cent. The unemployment rate for the year as a whole averaged 5.4 per cent, which (as Table 16 indicates) was below that of the Atlantic region but higher than that in any other region.

[Stage Direction]
UNEMPLOYMENT RATES BY REGION 1957 to 1965
(Unemployed as a per cent of the Labour Force)
Region	1957	1958	1959	1960	1961	1962	1963	1964	1965Atlantic	8.4	12.5	10.9	10.7	11.2	10.7	9.5	7.8	7.4Quebec	6.0	8.8	7.8	9.1	9.2	7.5	7.5	6.4	5.4Ontario	3.4	5.4	4.5	5.4	5.5	4.3	3.8	3.2	2.5Prairie	2.6	4.1	3.2	4.2	4.6	3.9	3.7	3.1	2.6British Columbia	5.0	8.6	6.5	8.5	8.5	6.6	6.4	5.3	4.1Canada	4.6	7.0	6.0	7.0	7.1	5.9	5.5	4.7	3.9
In Ontario, the increase in the labour force, at 2.3 per cent, was the lowest in Canada. The number of unemployed fell by over 20 per cent during the year, and the unemployment rate averaged 2.5 per cent for the year. The Prairie region, which also started the year at high employment levels, similarly experienced a relatively small increase in total labour force, namely, 2.4 per cent. In this region, however, the non-agricultural labour force rose by 6.0 per cent, with approximately one-half of the increase arising from a movement out of agriculture. Employment rose by 2.9 per cent and the unemployment rate fell to 2.6 per cent from the 3.1 per cent of the year before.
The labour force in British Columbia rose by 4.2 per cent, which was the highest rate recorded in any region. Total employment, rising by 5.6 per cent, was also a regional record. There was no net movement out of agriculture in this region, so that all of the net gain in non-farm employment came from natural increase, higher participation rates, and immigration from other provinces or from outside Canada. The 14-19 age group made particularly marked employment gains in this region in 1965.
March 29, 1966
[Stage Direction]
The Budget-Appendix

[Stage Direction]
Per Cent

[Stage Direction]
Per Cent 12
m 12 10

[Stage Direction]
3442
[Stage Direction]
March 29, 1966
The Budget-Appendix
OUTPUT, EMPLOYMENT AND CAPITAL Output by Industry
i Over the period from 1949 to 1965, total real output in the industriaj and commercial economy increased at a compound annual rate of about 4f per cent. The 1964 and 1965 increases of approximately 6| per cent each year were therefore considerably in excess of the long term average.
| This whole period can be subdivided into three periods of alternating fast and slow growth. The first period can be taken to include the Korean war and the subsequent resource boom which culminated in the 1957 peak; the second period extended to the cyclical trough in the first quarter of 1961, and the third period has extended from 1961 to date. The increases in output in 1964 and 1965 can therefore be seen in the perspective of a major cyclical expansion.
i The industrial composition of private non-farm output has not changed greatly over the whole postwar period, although there have been times when particular industries were growing more quickly or more slowly than the general average. Over the whole period, the growth rates of individual industries have been remarkably uniform. With the exception of mining and electric powder, both 6f which have had growth rates of 8 per cent, most other major groups were in the range of 4 to 5 per cent per year, paralleling the business output trend rate of 4| per cent. Output in public and community services has grown at \\ per cent, and agricultural output has grown at less than the average rate, recording about £§ per cent per year.
March 29, 1966
[Stage Direction]
The Budget-Appendix
In terms of current dollar values, the service industries as a group have expanded more rapidly than the goods-producing industries. In terms of the volume of output, production of services in real terms has shown a parallel growth to that of goods, as Chart 9 illustrates. Output of services related to commodity distribution, such as trade and much of transportation, has, as expected, displayed growth rates and, more recently, cyclical patterns very similar to those of commodity production. Output of other services, such as finance, insurance and real estate, also indicate long term trends generally parallel to those of aggregate business product.
Within these broad aggregates, there were of course many spectacular developments in individual industries. The resource-based industries such as petroleum and natural gas, non-ferrous metal mining and processing, pulp and paper products, and electric power, had very rapid expansion rates in the earlier period to 1957, and many of them have recently experienced a new round of expansion of output and investment. Electric power and gas utilities expanded their output steadily, at nearly twice the average rate of all industries, throughout the postwar period. All of these industries are highly capitalintensive, so that contemplated expansions in output have been of necessity accompanied by large fixed capital expenditures on construction, machinery and equipment. A degree of over-capacity was in fact created in the period prior to 1957, leading to a subsequent major investment downturn; by 1963, however, following increases in output, the rate of new investment had again begun to expand rapidly.
The most recent cyclical expansion of output has been characterized by developments in secondary manufacturing which are in many ways an extension and refinement of the primary resource boom described above. The resurgence of manufacturing in the past five years is in no small part due to advanced processing in petro-chemicals, synthetic textiles, a variety of iron and steel products, telecommunications equipment, aircraft, automobiles, refrigerators and appliances and many other highly processed manufactures. Durable goods manufacturing has advanced more rapidly than non-durables in the current period of

[Stage Direction]
(Per cent per year)
Forestry	
Mining	
Manufacturing	
Construction	
Transportation, storage and communication
Electric power, gas and water utilities...
Trade	
Finance, insurance and real estate	
Other commercial industries	
1949 to 1965
3.1
8.1
4.5
4.8 5.1
7.8
4.3
4.8
3.3
1961 to 1965
5.6
6.7 7.1
5.9
6.7
7.7 5.4
4.7
5.9
1964 to 1965<*
2.2
6.0
7.0 11.2
6.5
8.3
6.3
4.1
3.4
Total, Business Product
4.8	6.3	6.4Agriculture	
2.5	6.4	6.0Public administration, defence and community services	
4.2	1.0	2.2Total, Domestic Product___.[DOT]	
4.5	5.8	6.1
01965 estimated on the basis of nine months' data. Agricultural and total output in 1965 estimated by Department of Finance. Data in this and the following table will be revised by DBS during coming months.
[Stage Direction]
March 29, 1966
The Budget-Appendix
expansion. Durable goods consist of consumer items such as automobiles, appliances and furniture, together with producers' goods such as machinery, agricultural implements and structural steel, and primary products such as iron and steel, sheet metal and saw mill products, many items of which are related to fixed capital formation. Production of consumer non-durables such as food, textiles and clothing advanced at a more moderate rate both throughout the longer-run postwar period and throughout the course of the current period of rapid growth. These developments are summarized in Table 17.
Employment and Output
Over the postwar years, substantial gains in total output have been accompanied by smaller increases in employment in the economy as a whole. The difference between these two growth rates is the material evidence of growth in overall productivity. In 1965, the gain in labour productivity was at a lower rate than both the longer postwar average and the average of recent years. Output per manhour typically shows some retardation of growth as full employment is approached/1' when it becomes increasingly difficult to maintain continued rapid productivity increases.
In order to obtain a good measurement of labour productivity, it is necessary to remove from the total output certain areas in which the value of the output is conventionally measured only in terms of the value of the wage bill. These areas consist mainly of public administration and defence, and community services such as schools and hospitals and domestic service. Further, the conventional measure of real output in these areas is labour input, and the volume of output is therefore represented by the volume of employment. Consequently, productivity is necessarily defined as being constant and unvarying in these areas. For analytical purposes, agricultural output is also removed, because weather and crop variations can cause substantial fluctuations in aggregate output which are not related specifically to changes in agricultural employment. After these adjustments are made, the resulting measures of employment and output refer exclusively to the business economy. The term "business product", as used in this discussion, is synonymous with "commercial non-agricultural output" as used in official publications®.
Business product in 1965 increased by 6.4 per cent, while the corresponding increase in employment amounted to 4.9 per cent. This implies an increment of
1.5	per cent in output per man. These figures refer to both output and employment of all groups, that is, employers, self-employed and paid workers. The latter are numerically the most important, amounting to 85 per cent of all employed persons.
Over the postwar period, as in recent years, there has been a continuing and substantial inflow to the paid worker category of the labour force, and an outflow from the self-employed, so that year-to-year changes in paid worker employment are larger than changes in total employment. Accordingly, the measurement of labour productivity is strongly affected by the measure of employment being used. At the same time, however, it is not possible to apportion the volume of output in most industries as between the various categories of paid workers,
(^Economic Council of Canada, Second Annual Review, Ottawa, 1965, p. 35.
Hultgren, Thor, Costs, Prices and Profits: Their Cyclical Relations, N.B.E.R., New York, 1965, p. 155.
<*>The official statistics are entitled "Indexes of Output per Person Employed and per Manhour in Canada, Commercial Non-agricultural Industries, 1947-63". DBS Cat. No. 14-501 and Daily Bulletin, Oct. 12, 1965. These official statistics now cover the period 1946-64. Estimates for the year 1965 have been made by the Department of Finance, using the "Monthly Estimates of Employees by Province and Industry", DBS Cat. No. 72-008. These estimates have been reconciled to the labour force statistics obtained from the monthly labour force survey.
March 29, 1966
[Stage Direction]
The Budget-Appendix
employers and self-employed in those industries. As a result, the 1965 productivity improvement figure of 1.5 per cent is of necessity derived from statistics of total output and total employment, rather than paid workers only.
On a manhour basis, labour productivity in 1965 was rather higher than the man-year figure of 1.5 per cent, since average hours of work were reduced by the growing numbers of part-time workers in the increasingly active conditions of last year. This 1965 reduction in average hours of work, however, does not appear to have diverged significantly from the long term rate of decline of 0.6 per cent per year. From 1949 to 1965, the growth of productivity on a manhour basis was 3.0 per cent per year. The aggregate manhour productivity increase in 1965 was somewhat below this postwar trend value, just as the man-year productivity gain was rather below average. One reason for this has already been suggested, namely, that cyclical variations in manhour productivity typically show rapid increments in early stages of expansion and less rapid increases later on. This in turn is related to the facts that more marginal workers are hired, there are changes in the amounts of part-time and overtime work, various shortages and bottlenecks appear, and efficiency improvements are more difficult to achieve as activity expands towards peak rates of output.

[Stage Direction]
(Per cent changes per year)
-	1949 to 1965	1961 to 1965	1964 to 19650)Manufacturing	4.5	7.1	7.01.7	4.2	4.92.8	2.7	2.0Non-manufacturing	4.9	5.9	6.22.6	3.5	4.92.2	2.4	1.3Total. Business Product	4.8	6.3	6.42.3	3.7	4.92.4	2.5	1.5Agriculture	2.5	6.4	6.0-3.6	-2.9	-5.76.5	10.1	12.5Total Business Product and Agriculture	4.5	6.2	6.41.3	2.8	3.63.2	3.4	2.7
(1)1965 estimates by Department of Finance.
Manufacturing output per person employed has had a postwar growth rate of 2.8 per cent per year, as Table 18 indicates. This 2.8 per cent rate per man-year was not maintained in 1965, when it fell to 2.0 per cent, although the manufacturing rate remained higher than the 1.5 per cent average gain in output per man in all industries. A comparison of trends in manufacturing and non-manufacturing output per person employed is shown on Chart 10.
[Stage Direction]
March 29, 1966
The Budget-Appendix

[Stage Direction]
(1949 o 100)
1949	1955	1960	1965
Physical Capital and Output Capacity
During the past two years, the upsurge in new investment undertakings has resulted in net additions to the stock of business plant and equipment. There are also indications from the recent survey of business investment intentions that these additions will continue at a high rate during the current year.
In considering the broad question of economic growth, additions to the stock of physical capital in the business sector are of fundamental importance. They represent extra capabilities of supply, they supplement the growth of the labour force, and they add to economic productivity. The relationship between the existing capital stock in the business sector and current pressure of demand in the economy at large bears upon business sector planning for future investment activity. Estimates of the capital stock published in recent years(1) now make it possible to consider these various relationships within a broad statistical framework.
(1>Such estimates have been published by DBS, covering the period 1946 to I960, and by the Economic Council of Canada, covering the period 1935 to 1963. The capital stock estimates given below have been obtained by multiplying published capital-output ratios by published output statistics. The ratios for the period 1935 to 1963 are given in Economic Council of Canada, Staff Study No. 5, Business Investment to 1970 by D. A. White, pp 84-89. The output data are published by DBS (Cat. No. 61-505 and No. 61-005). The present discussion is confined to physical capital in the business sector. The business portion of capital and its related output excludes residential construction, agriculture and non-commercial services such as schools and hospitals.
March 29, 1966
[Stage Direction]
The Budget-Appendix
Chart 11, which illustrates the relationship between investment and gross national product, indicates that there have been substantial variations in the proportion of business investment to GNP over the past forty years. The peaks correspond to the expansions of the late twenties and of the mid-fifties. There was very little expansion of business capital during the depression of the thirties and during World War II, but there followed a long period of rapid and sustained expansion, which was heightened by the Korean war and the resource development of the mid-fifties. This series of historical events culminated in the 1957 peak investment ratio, as described above. Thereafter, the ratio of business investment to GNP declined, to reach a postwar low in 1962 and 1963. Output recovered earlier than this, in 1961, and as the expansions in output and employment got under way, their increases were accompanied by an increase in capital investment. Thus the ratio of investment to GNP once again recovered, and at the present time it appears to be approaching the high levels of previous expansions.
___________________________________chart n___________________________________

[Stage Direction]
Per Cent	P« Cent
Although the annual quantities of new investment are highly variable from year to year and during major cyclical episodes, they accumulate over a long span of years into a sizeable stock which grows at a relatively stable rate. By analogy with the labour force, which has new entrants and retiring persons, the capital stock has new additions and retirements or discards of old and obsolescent
3448	COMMONS DEBATES	March 29, 1966
The Budget-Appendix
buildings and equipment. Estimates of the capital stock are obtained by accumulating new additions over long periods of time, while at the same time writing-off the discards of obsolete equipment and buildings at the ends of their useful lives(1).
The estimates of the capital stock made by the Dominion Bureau of Statistics and by the Economic Council of Canada suggest that the existing stock of plant and equipment is almost three times the size of the real output which it produces. Machinery and equipment is one and one-eighth times the annual output, and buildings and structures are one and five-eighths the annual output. Their total is two and three quarters times as large as the annual business product. This number is technically known as a capital-output ratio.
The relation of new investment to the stock may be summarized as follows. New investment in business plant and equipment in 1965 was one-fifth of business output. Output in turn was one-third of the stock. Therefore, the ratio of new investment to the stock, in 1965, was in the neighbourhood of one-fifteenth or 7 per cent. New investment, less the discards of obsolete plant and equipment, was even smaller than this, probably in the order of 5 per cent of the stock. It is apparent that it takes a great deal of new investment to change the stock appreciably, and thus to add to productive capabilities.
(1)This is known as the perpetual inventory method of arriving at estimates of the gross stock of buildings and equipment. The available estimates are handicapped by lack of knowledge regarding asset lives and rates of obsolesence. However, it is not essential for the present discussion to have an exact measure of the stock, but rather an approximation of its magnitude relative to investment.
_____________________CHART 12____________________

[Stage Direction]
1949	1955	1960	1965
March 29, 1966
[Stage Direction]
The Budget-Appendix
Capital-output ratios vary a great deal from industry to industry, ranging from low ratios in construction, forestry and trade to high ratios in electric power and gas utilities, transportation and communication. Capital-output ratios vary from less than one to over ten, across the whole spectrum of industries, reflecting their different technologies and capital requirements. Despite this great diversity, each individual industry tends to have a more or less stable capital-output ratio over time, as does the capital-output ratio for the entire economy.
. During the past two years, despite rapidly increasing quantities of new investment, the capital-output ratio may very well have declined. (Chart 12 illustrates the relationship between capital stock and output over the period 1949 to 1965.) The implication is that it was simply not possible to keep the stock up to the rapidly advancing levels of output in such a short period of time. The available statistics indicate that the capital stock has increased in the order of four to five per cent per year, in the past two years, compared with business output increases of over six per cent per year. Although the volume of new business investment has increased by over 10 per cent per year, the absolute amount of it is such a small portion of the total stock (one-twentieth), that it cannot affect appreciably the latter total in one year.
It may well be that periods of rapid investment, in which the capital stock is required to catch up to rapidly increasing levels of output, or to business assessments of future levels of output, have in them ingredients of a cumulative or self-reinforcing nature. For example, the initial expansion of output may be met with existing capacity, but as soon as output gets beyond a certain point, more capacity is required. These new investment outlays generate even larger increases in income, employment and output in the total economy. The new higher levels of output in turn give rise to new and higher investment requirements. 1 his situation is not sustainable, because an extended period of rapidly increasing investment activity eventually brings about a state of affairs in which the stock of capital is growing more rapidly than total output, and conditions of excess capacity emerge. This, in itself, would lead to a declining rate of investment. In addition, investment plans may be based on the expansion of markets as represented by the growth in demand and output. In the earlier stages of a business upswing, the rate of increase in output is necessarily faster than in later stages, since increases in output result from both underlying growth factors as well as unemployed resources being brought into use. Accordingly, investment plans based upon the rapid growth in demand in the earlier stages of an upswing may not appear justified when seen later against the relatively slower growth of demand based upon more underlying factors. When this becomes apparent, the rapid increases in investment fall off, creating instability and unemployment in the capital goods industries and in the economy generally. The remedy for this type of situation may rest primarily in prevention rather than cure, by stretching out the period of rapid investment in order to approach the probable long-run position as smoothly as possible.
During periods of rapid expansion, when it is difficult to increase the capital stock beyond a certain limit in the short run, the economy of necessity responds by employing the available stock at very high rates of utilization.
The degree to which capital is utilized is shown to be quite flexible in the short run, as seen in Chart 12. In the long run, however, as already noted, the capital-output ratio appears to have some degree of stability, as there is time for various forms of adjustment to take place. Chart 13 illustrates some major trends in output, employment, capital stock and output per man.
[Stage Direction]
March 29, 1966
The Budget-Appendix

[Stage Direction]
Labour Income
The increase in wages, salaries and supplementary labour income in the first nine months of 1965, shown in Table 19, was greater than that achieved during any previous comparable period or in any calendar year since 1961. It has been observed elsewhere in this review that there has been a continued movement of workers from a self-employed to employee status, which contributed to this rise in labour income. The general increase in employment recorded in the discussion of manpower developments also added to the total. A rise in hourly earnings in many industries made an important contribution, and the total was also influenced by a degree of movement out of lower-income industries, such as agriculture, into employee status in higher-paid industries, such as construction.
The breakdown of labour income increases as between higher average earnings and higher employment is shown in Table 20, for selected industries. Thus, the 1965 increase in income in mining was accounted for about equally by higher employment and higher average earnings. This was true also in wholesale and retail trade. In manufacturing, the increase in average incomes was a little more significant than the gain in employment, and in construction the emphasis lay more heavily on average earnings. The increases in employment and average earnings in construction were the highest among all major industries.
March 29, 1966
[Stage Direction]
The Budget-Appendix

[Stage Direction]
-	1961	1962	1963	1964	1965<*
		(Millions of dollars)			
Wages, salaries and supplementary					
labour income	18,996	20,233	21,546	23,416	25,628Corporation profits before taxes and before dividends paid to non-residents 	3,427	3,750	3,996	4,580	4,967
(Per cent change)
Wages, salaries and supplementary labour income			+6.5	+6.5		+10.6
					
Corporation profits before taxes and before dividends paid to non-residents			+9.4	+6.6		
					
0>
Average of 3 quarters, seasonally adjusted at annual rates.

[Stage Direction]
1963 to 1965
Selected Industries
Per cent increase in
Labour Income	Employed Persons	Average Income	1964	19650)	1964	1965<*	1964	19650)1963	1964	1963	1964	1963	1964Mining	4.9	13.0	0.8	6.3	4.1	fi 3Manufacturing	8.6	10.2	4.8	5.6	3.6	4 4Construction	11.5	23.7	5.3	10.0	5.9	12^5Trade	8.6	10.5	4.0	5.0	4.4	5 2Finance, insurance and real estate	9.2	8.4	5.2	5.4	3.8	2.8Total all industries	8.7	10.9	3.7	5.4	4.8	5.2
<*>1965 preliminary estimates by Department of Finance.
T^T>S°^afE^En£maJ,f ofEmpfoyee8 &V Province and Industry, Occ. Paper, DBS Cat. 72-503; Ibid, monthly, DBb Oat. 72-008; The National Accounts', The Labour Force Survey; Department of Finance estimates.
Weekly wages and salaries'1' in these same industries in 1965 amounted to $111.39 in mining, $94.03 in manufacturing, $103.27 in construction, $76.47 in trade, and $88.23 in finance, insurance and real estate. Thus, the industry in which employment expanded most rapidly, namely construction, was one in which average weekly wages were relatively high. In the case of mining, employment also rose more rapidly than the average, and here also average weekly
(1)Source: DBS, Employment and Payrolls, Cat. 72-002. The data employed here refer to establishments employing 15 persons or more, and in certain respects are not strictly comparable to National Accounts and other data.
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March 29, 1966
The Budget-Appendix
wages and salaries were high. In the finance, insurance and real estate group, where weekly wages and salaries are relatively lower, the increase in employment was about average.
The movement of workers into construction employment from other industries was an important element in the increase in total labour income. Some of the additional workers in construction were drawn from the mining industry, although despite this the mining sector increased employment in 1965. Most of these additional construction workers, however, came from industries in which average weekly wages and salaries were lower than in construction. Some skilled workers were drawn from the manufacturing and trade sectors, but a large number came in from agriculture. Many of those who came from agriculture had been self-employed, and as wage earners in industry added to the increase in labour income.
Corporation Profits
The changes in corporation profits before taxes and before dividends paid to non-residents, which were presented in summary form in the introductory section of this review, are set out in greater detail in Table 21, and shown in Chart 14.
This table indicates that the rate of growth in profits was less in 1965 than 1964 in a large number of industries. (These comparisons are derived from Department of Finance preliminary estimates). Actual declines in profits occurred in the paper industries and textiles, knitting mills and clothing. The rate of growth in profits was higher than in 1964 in the utilities group, the service industries, food and beverages, and retail trade.

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PROFITS BY INDUSTRY 1963 to 1965
	Per cent increase		
-	1965<*	1964	1965WO)1964	1963	196112.0	32.9	14.77.6	8.6	10.210.9	10.3	7.0-16.3	10.3	-0.3- 1.3	-5.1	2.518.7	1.3	14.412.9	27.8	29.07.8	14.3	6.17.5	13.3	16.323.4	25.7	15.824.3	-1.3	1.411.7	18.2	13.116.5	6.1	9.24.6	19.2	5.3Service Industries	35.0	19.0	15.811.0	14.5	10.3
1965 preliminary estimates by Department of Finance. <2>Expressed as annual compound rate of increase.
March 29, 1966
[Stage Direction]
The Budget-Appendix

[Stage Direction]
Millions
225
775
125

[Stage Direction]
Quarterly Data Seasonally Adjusted TOTAL PROFITS
Millions
800
400


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Millions
225
775
700
23033-219
3454	COMMONS DEBATES	March 29, 1966
The Budget-Appendix
Comparing both 1964 and 1965 to the trends established over the 1961 to 1965 period, it may be seen that the 1964 annual gain was greater than the trend rate in the majority of industries. In 1965, partly because of the sharp 1964 gain, the annual increase tended to be rather less than the trend, although there were some marked exceptions. At the same time, wage costs in many industries rose more rapidly than productivity, and the margin of profits was lowered in those industries subject to a greater degree of competitive price pressure at home or abroad. By contrast, some industries (for example, the foods and beverages processing industries) managed to sustain their rate of improvement in profits.
In other industries, the conflict between rising costs on the one hand and the degree of freedom to adjust selling prices on the other had varying results. In retail trade, the buoyancy of consumer demand for all kinds of goods permitted upward price adjustments sufficient to offset cost increases. A similar situation was observed in the construction sector, where tender prices were reported as substantially higher in many parts of the country.
Production Costs
In the business sector as a whole, excluding agriculture and the noncommercial services, profits per unit of output are estimated to have risen by about 4.0 per cent in 1965. This was below the increase recorded in 1964, when profits per unit of output rose by 6.2 per cent from the 1963 rate. In manufacturing, corporation profits per unit of output appear to have continued their declining trend, as Table 22 indicates. This table also shows a sharp increase, amounting to over 2 per cent for the year as a whole, in labour costs per unit of output in the manufacturing sector, while labour costs per unit of output in the entire non-agricultural economy, including the government and non-commercial services sector, rose by over 4 per cent.

[Stage Direction]
-	1962 1961	1963 1962	1964 1963	1965<* 1964Labour cost per unit of non-farm output	1.1	1.7	1.6	4.2Corporation profits per unit of business sector output Wage and salary costs per unit of manufacturing	3.6	1.5	6.2	4.0output	-0.3	0.6	0.6	2.3Corporation profits per unit of manufacturing output.	6.9	4.0	0.4	-0.3
1965 preliminary estimates by Department of Finance.
The relatively favourable performance of the manufacturing sector compared to the total economy is due in part to the behaviour of unit labour costs in the construction and service industries in 1965. The lesser opportunities for productivity improvement in the service industries in conditions of generally rising hourly earnings raised aggregate unit wage costs accordingly, and unit labour costs were higher also in construction. However, the role of the manufacturing industries in Canada's international competitive position is important. This is true, whether it refers to industries competing in export markets or to industries supplying the domestic market which face import competition. In the United States, which is both Canada's largest market and her greatest competitor for most internationally-traded goods, labour costs per unit of output in manufacturing have been declining or stable.
March 29, 1966

[Stage Direction]
The Budget-Appendix

[Stage Direction]
1949 TO 1965
(1949 , 100)

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180
140
100
180
140
100
23033-219!
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March 29, 1966
The Budget-Appendix

[Stage Direction]
Monthly - Index 1957=100
Over the past five years, Canada's competitive position improved in relation to that of other countries in all of the world's major industrial markets. This was caused by a combination of a decline in the value of the Canadian dollar and relatively stable prices in Canada, alongside sharp increases in prices and costs which took place in many other countries during this period.
Price Trends
The productivity and cost developments discussed in these pages and the various economic forces underlying these changes provide a useful framework within which to view price changes. However, as will be pointed out, other factors are also important in explaining changes in prices.
In broad general terms, it has been noted that the value of the Gross National Product in 1965 rose by an estimated 9.3 per cent, its volume by 6.4 per cent, and hence its price by 2.9 per cent. (These estimates are preliminary only for the year as a whole.) On the basis of the analysis presented in these pages, it is possible to show a similar analysis of a number of individual industrial sectors on the same basis.
March 29, 1966
[Stage Direction]
r	The Budget-Appendix
I he value of the total product on an industry basis is the sum of the payments to the factors of production (e.g., wages, rent, interest and profits) directly employed by each industry. The volume of output represents the real amount of production on an industry basis and is analogous to constant dollar GNP(1). the ratio of the value over the volume of output by industry is an indicator of "price" or "cost" changes by industry. Such "prices" are not real in the sense that they are quoted on commodity exchanges. However, they have a real economic sense in that they reflect the relationship between the dollar costs of adding value to goods and services through the use of productive factors and the efficiency with which these factors of production are employed.
Any individual industry has selling prices which are influenced by the costs of production in that industry as well as by the costs of materials and services purchased from other industries. Since we are concerned with the. "prices" of value added in particular industries, the prices of purchases from other industries must be removed™. The difference between gross sales and gross purchases, called value added, consists of returns to labour and capital. In turn, the wage bill can be subdivided into the number of employees and their average earnings, (or manhours and wage rates). Similarly, the non-wage incomes, such as profits' and unincorporated net income, can be subdivided into the capital stock and the rate of return on that stock. The wage rate may be seen as the "price" of labour and the rate of return as the "price" of capital. Similarly, the volume of production may be seen as the quantity of labour and capital input times their productivity. Accordingly, the total "price" charged by each industry can be seen to consist of labour and capital costs, or simply unit costs of the factors of production. Obviously, productivity gains reduce such costs.
,, * T,^e 23 indicates that annual average increases in the value, volume and price components of business product over the whole postwar period amounted to 7.4 per cent, 4.8 per cent and 2.5 per cent respectively. In the business expansion from 1961 to date, there was much less price pressure than previously since business product prices increased by only 1| per cent per year. There was however, a renewal of price increases in 1965 of the same order of magnitude as those of the postwar average, amounting to about 2| per cent in that year.
Earlier comments on the components of the National Accounts deflators point out that some of these components, by convention, do not allow for changes m productivity, and hence do not accurately reflect cost developments in the economy as a whole. The removal of these elements of price from GNP results m a more accurate portrayal of the effects* of demand and supply pressures on real resources in the business area. As already observed, the price increase in business product was about 2£ per cent and the volume increase was about 6i per cent m 1965.	2
An examination of the industrial breakdown of business product over the whole postwar period (Column 1 in Table 23) indicates lower than average price increases for mining, manufacturing (particularly durables), transportation and communication and electric power, gas and water utilities. These are high capital intensity industries. They have also had the highest productivity gains in the postwar period. Wage rate increases granted in these industries were apparently
(CSto "Indexes of Real Domestic Product by Industry of Origin", DBS Catalogue No 61-505 2 In effect, the "price" of value added in an industry may be represented as follows:
Price of	Current value of sales	Current value of purchases
value added = 

	________________________
by industry Constant value of sales Constant value of purchases
= selling price	- buying price
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March 29, 1966
The Budget-Appendix

[Stage Direction]
VALUE, VOLUME AND PRICE COMPONENTS OF GDP BY INDUSTRY<'>
(Per cent changes per year)
1949 to 1965	1961 to 1965	1964 to 1965Forestry	3.6	5.8	2.43.1	5.6	2.20.5	0.2	0.2Mining	8.1	7.1	11.2
8.1	6.7	6.0
		0.4	4.9
Manufacturing	6.5	8.5	8.7
			
4.5	7.1	7.01.9	1.3	1.6Construction	10.0	18.87.9	4.8	5.9	11.22.9	3.9	6.9Transportation, storage and communication	7.3	6.5	7.35.1	6.7	0.52.0	-0.2	0.7Electric power, gas and water utilities	9.6	6.6	9.97.8	7.7	8.31.7	-1.0	1.5Trade	7.3	9.56.7	4.3	5.4	6.32.4	1.7	3.0Finance, insurance and real estate	9.1	7.1	7.34.8	4.7	4.14.1	2.2	3.1Other commercial industries(2>	7.89.0	8.7	3.3	5.9	3.45.5	2.5	4.2Total, Business Product	7.4	7.7	8.84.8	6.3	6.42.5	1.4	2.2Agriculture	2.4	10.1	9.0
2.5	6.4	6.0
		3.5	2.8
Public admin., defence and community services^			
-	-	-4.2	1.0	2.2-	-Total Domestic Product	8.87.2	7.8	4.5	5.8	6.12.5	1.9	2.6
0>Gross Domestic Product is equal to GNP plus net outpayments of interest and dividends minus indirect taxes less subsidies.
<2>Includes recreation, personal and business services.
^Includes schools, hospitals and health services, religious and other community services.
Source: DBS National Accounts, annual issues, Table 21 and DBS Indexes of Real Domestic Product by Industry of Origin (Cat. No. 61-505 and 61-005). Value Estimate for 1965 made by Department of r inance.
March 29, 1966
[Stage Direction]
The Budget-Appendix
absorbed by rising productivity, with consequent reduction of the upward pressure on prices. These long term trends toward greater productivity and lower-than-average price increases have by and large continued through the current expansion. Mining recorded substantial increases in price in 1965; this was probably due to conditions in external markets for mineral products.
In contrast to the relatively low price trend in terms of value added in the above group of industries, the construction, trade, and broad service groups had greater than average price increases throughout the postwar period, and again in 1965.
The construction industry, according to these measures, increased its value of output by 8 per cent per year over the whole period, representing a volume increase of 5 per cent and a price increase of 3 per cent per year. In the current expansion, from 1961 to date, the available measures show that construction value, volume and price increased by 10 per cent, 6 per cent and 4 per cent respectively. These increases accelerated in 1965, as shown in the last column of Table 23. It should, however, be noted that there are some serious difficulties of price measurement in this industry.
Price increases in the value added by wholesale and retail trade over the whole postwar period amounted to 2.4 per cent per year. They amounted to 1.7 per cent in the period 1961 to 1965, but rose to 3.0 per cent in 1965. The volume of output in trade was similar to that of total business product.
In finance, insurance, real estate and other commercial services, increases in the price of value added were above average throughout the postwar period, but statistical difficulties prohibit any real inference to be drawn from this type of measurement. The financial and commercial industries round out the industrial coverage of business product, in which they have 25 per cent of the total weight. Any inaccuracy in the measurement of the price of value added in these industries would have a corresponding effect on the price component of total business product.
Summarizing the evidence, it may be said that the goods-producing industries, plus transportation and electric power, gas and water utilities, have generally contributed much less to overall cost increase in the postwar period and in the most recent expansion, than have the distributive trades and financial and commercial services. There are difficulties of price measurement in the latter areas, and in the construction industry. Nevertheless, it is in these areas that the increases in 1965 in the price of value added appear to be most prominent.
Turning to more commonly used price indexes (for example, the consumer price index and the general wholesale price index), it is worthwhile noting that each index is designed for specific purposes, and its use as a general, overall indicator of economic trends may be subject to limitations. Thus, the Consumer Price Index cannot be regarded as a sensitive indicator of cyclical cost developments, although consumer prices reflect, sooner or later, the cost developments discussed in these pages. The Consumer Price Index is primarily intended to serve as a measure of changes in the prices of consumer goods and services, including those purchased from abroad. In conjunction with data on earnings, it can be used to derive an approximation to real wages. In this connection, the following table is of interest, since it draws attention to the general importance of productivity improvement in raising real wages over time.
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The Budget-Appendix

[Stage Direction]
Per cent change over preceding year			
Average Compen- sation Paid Per Hour*1*	Consumer Price Index	"Real" Hourly Earnings	Manhour Produc- tivity1961	6.1	0.9	5.2	4.21962 	2.5	1.2	1.3	1.61963 	4.4	1.8	2.6	3.01964 	3.6	1.8	1.8	2.61965	5.8	2.4	3.4	1.84.5	1.6	2.9	2.7
("Total compensation paid divided by total hours worked. Includes effects of changes in rates, overtime and inter-industry and occupational shifts.
Details of the changes in the Consumer Price Index are set out in Table 8. In 1965, the effect of severe drought, not only in some parts of Canada but throughout most of the eastern United States, was sufficient to raise the price of some staple food products, particularly potatoes, very sharply. While improved conditions during the summer permitted these prices to decline, new pressure arose as a general shortage of meat supplies developed in the United States Strong prices in cattle and meat markets therefore emerged in the United States, and this in turn forced Canadian prices to rise as Canadian producers sought their most advantageous returns.
Rising standards of living also have had their impact on the Consumer Price Index. Larger numbers of cars on the roads, and the growing preference for bigger and more expensive models, have resulted not only in more insurance claims, but also in larger claims. Accordingly, there have been increases in car insurance rates which caused the index to rise in 1965. Higher standards of public service have also been associated with higher property taxes and higher sales taxes in many areas, as modern living calls for continuing improvement in highways, schools, hospital care and social services generally. While much of this represents higher standards of consumption, a great deal of it is reflected in the record in the form of higher prices to consumers.
A second common measure of price changes in the Canadian economy (and one which excludes changes in the cost of imports) is the price index ("deflator") used in constructing the National Accounts constant-dollar tables. This measure, which rose by about 3 per cent in 1965, reflects not only the changes in prices but also the changes in the pattern of purchases. The greater relative importance of construction in the 1965 expenditure pattern therefore affected the movement of the total index fairly strongly, insofar as the index for construction outlays rose rather more than the index for some other forms of expenditure. Movements in the GNE "deflators" are set out in detail in Table 24.
n

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to
cn

[Stage Direction]
Seasonally Adjusted Gross National Expenditure and Components
(1957 = 100)
Personal Expenditure on Consumer Goods and Services	Non- Durable Goods	Durable Goods	Services	Government Expenditure on Goods and Services	Business Gross Fixed Capital Formation	New Residential Construc- tion	New Non-Residential Construction	New Machinery and Equipment	Exports of Goods and Services	Imports of Goods and Services	Gross National Expenditure1962 IQ. ..	106.7	104.4	100.8	111.4	112.2	110.0	111.6	109.2	110.0	105.7	108.2	107.62Q...	107.1	105.0	100.7	112.2	112.9	110.9	112.5	110.0	110.9	106.5	109.4	108.13Q...	107.4	105.2	100.9	112.6	114.0	111.4	113.3	109.8	111.7	107.1	109.7	108.74Q...	107.9	106.0	100.9	112.8	114.8	112.0	114.1	110.9	112.0	106.9	110.1	109.2Year	107.3	105.2	100.8	112.3	113.5	111.1	112.9	110.0	111.2	106.6	109.3	108.41963 IQ...	108.2	106.2	101.3	113.2	116.5	112.7	114.7	111.9	112.5	107.3	111.1	109.62Q...	108.6	106.6	101.1	114.0	117.6	113.4	115.8	112.2	113.2	107.4	111.6	110.13Q...	109.2	107.3	101.5	114.2	118.4	114.5	117.0	113.2	114.3	107.7	113.3	110.44Q...	109.4	107.8	100.9	114.5	119.7	115.3	119.6	114.0	114.3	108.9	113.6	111.1Year	108.9	107.0	101.2	114.0	118.1	114.0	116.8	112.9	113.6	107.8	112.5	110.31964 IQ...	109.9	108.3	100.7	115.4	119.9	116.4	121.2	114.5	115.4	109.5	114.4	111.62Q...	110.4	108.7	100.5	116.0	120.5	118.1	122.9	115.5	118.0	109.9	115.0	112.33Q...	110.7	109.2	99.8	116.9	122.1	118.5	124.5	116.3	117.6	111.2	114.3	113.34Q...	111.0	109.1	99.6	117.5	122.4	119.5	125.8	117.7	117.9	110.6	113.7	113.8Year	110.5	108.8	100.1	116.5	121.2	118.1	123.5	116.0	117.2	110.3	114.4	112.81965 IQ...	111.4	109.3	99.9	118.4	123.7	121.9	127.4	120.1	120.8	110.1	114.4	114.42Q...	112.3	110.6	100.2	119.1	125.2	123.5	129.5	122.7	121.3	110.8	114.2	115.73Q... 4Q...	112.7	110.9	99.9	120.2	126.1	123.9	129.8	123.7	121.4	112.2	114.5	116.6
Source: DBS
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The Budget-Appendix
[Stage Direction]
March 29, 1966
The Budget-Appendix
The Gross National Expenditure price index reflects a number of other special factors apart from the change in composition of expenditure. In particular, it includes the influence of indirect taxes; this was again a factor in 1965, as the prices of construction materials and machinery went up following the removal of the final part of their exemption from sales tax on January 1. It also is affected by the growing emphasis on government and community services in the consumption pattern, as these are activities in which wage increases are reflected immediately in the price measurement. As noted earlier, this reflects the convention of not measuring productivity changes for these services. Higher export prices have also been a feature of the GNE deflators in 1965, as some world commodity prices have been higher.
The Industry Selling Price Indexes, referred to briefly in the introductory section of this review, are a helpful indicator of cyclical and cost developments. These indexes report price changes excluding tax changes, and are also designed to exclude such factors as insurance or freight costs incurred in transporting merchandise from the factory to the customer. They cover a large part of the manufacturing sector, but are not comprehensive.
A selection of industry selling price indexes was shown in Table 7 and their recent movement was illustrated in Chart 3. The effect both of special factors and of some advancing cost pressures can be seen in this table, with the meat shortage having a particularly powerful impact on the meat packing industry. The cyclical trend in steel ingot prices in this table is shown by the downward movement into 1963, and the reversal in 1964 and 1965. Construction demand affected the 1965 movement of cement prices and sash, door and planing mills, while the downward movement of motor vehicle prices is also apparent.
It may be observed that many of the well-known wholesale price indexes are of value as an indication of costs of materials to users in certain sectors. In particular, the residential and non-residential building materials indexes are of help in revealing the trend in prices builders must pay for their materials. In 1965, the residential materials index (1949 = 100) rose from 149.5 in January to 151.3 in November, and the non-residential index rose from 145.5 to 148.5. These changes provide additional evidence that the rise in construction costs in 1965 was associated more with higher labour costs (including sub-trades costs) than with higher materials prices.
[Stage Direction]
Public and Private Investment
The current investment expansion in both public and private sectors accounted for one-third of the total increase in demand strengths in the past year. Total public and private investment expenditures rose by about $1,850 million, while total demand from all other sectors combined-consumers, governments with respect to their current outlays, exports and change in inventories- amounted to some $3,800 million. A considerable part of the investment expansion, particularly that which took the form of machinery and equipment, was met by importing such items from abroad. However, there remained a substantial portion of the total investment programme which competed for domestic supplies of labour and materials, and which had important but less direct effects (multiplier effects) in adding to incomes and expenditures in the other parts of the Canadian economy.
March 29, 1966
[Stage Direction]
The Budget-Appendix
This was the second successive year of rapid expansion in total public and private investment. The rates of increase amounted to over 15 per cent per year in both 1964 and 1965, exceeding the increases of about 9 per cent per year recorded in gross national expenditure in each of those two years. Thus, the share of investment in total expenditure increased in both years, to reach a level, in current prices, not far short of the two previous peaks, in 1957 and 1929. In contrast to the 1955-57 investment expansion, which was concentrated on electric power, oil and gas and other primary resource industries, the present expansion is notable for relatively greater emphasis on manufacturing, commercial and institutional construction (schools and hospitals) and service industries in general. Within manufacturing, resource-related industries such as paper products and primary metals continued to account for a large part of the new investments, but secondary products such as textiles, chemicals and transportation equipment played a much more prominent role. New manufacturing plant and equipment expenditures increased over 20 per cent in both years, and amounted to nearly one-fifth of total public and private capital expenditure. By 1965 they exceeded their 1957 percentage share in total investment.
Trade, finance and commercial services increased their investment outlays by approximately 20 per cent in both years, and were an important contributor to the overall investment increase in 1965. This present expansion thus appears to be related to continued urbanization and the development of secondary processing and services industries, to a much greater extent than previously. Further industrial detail is given in Table 25.

[Stage Direction]
-	1961	1962	1963	1964	1965	1966Agriculture and fishing	
Forestry	576 50 449 1,085 706 992 136 847 617 1,467 1,247	( 663 54 480 1,269 720 881 109 860 834 1,587 1,258	Millions 762 60 521 1,358 763 1,008 135 918 873 1,713 1,282	of dollars 836 88 632 1,831 888 1,171 197 1,042 771 2,028 1,460	) 928 102 687 2,238 1,129 1,289 235 1,218 1,009 2,133 1,830	975 102 936 2,696 1,282 1,381 248 1,464 1,261 2,216 1,985Mining, quarrying and oil wells	
Manufacturing	Electric power, gas and water works	
Transportation, storage and communications	
Construction industry	
Trade, finance and commercial services	Housing	Government departments	
Total Capital Expenditure	
Total Capital Expenditure as a percentage of Gross National Expenditure	
Index of total Capital Expenditure in constant dollars (1957 = 100)	8,172	8,715	9,393	10,944	12,798	14,54621.8	21.5	21.8	23.3	24.9	89.5	93.1	97.0	108.7	121.0	
Source: DBS and Department of Trade and Commerce.
Housing and social capital outlays in 1965 were also large, and were of course associated in some degree with this business investment activity. However, social capital expenditures are also directly related to the population developments discussed in the Economic Review of 1964. The construction of primary schools, then high schools, now universities, has accompanied the postwar population surge throughout its various stages. In addition, there have been rapid
23033-220 i
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March 29. 1966
The Budget-Appendix
urban expansions involving all of the needs of local supply, such as water, electricity, sanitation, road and highway construction and the building and equipping of hospitals and many other municipal facilities.

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-	1961	1962	1963	1964	1965	1966Private and Public Capital Expenditure, Table 25...	8,172	( 8,715	Millions 9,393	of dollars 10,944	) 12,798	14,546Deduct:	New residential construction by governments...	9	10	6	7	9	8New non-residential construction by governments	1,368	1,562	1,609	1,618	2,113	2,379New machinery and equipment outlays by governments	160	183	187	216	252	294Business Gross Fixed Capital Formation in Housing, Plant and Equipment-National Accounts definition	6,635	6,960	7,591	9,103	10,424	11,865
These developments are reflected in the following table, which shows that business investment accounted for an increase of $1,100 million, social capital an increase of $650 million, and housing an increase of $100 million, in the year 1965. The classification below is according to that used in Public and Private Investment, rather than that of the National Accounts.
MAIN COMPONENTS OF INVESTMENT DEMAND ($ million)
Business capital
Housing	
Social capital...
Total Public and Private
Increase from 1964 to
1964	1965	19656,617	7,719	1,1022,028	2,133	1052,299	2,946	64710,944	12,798	1,854
These main components of public and private investment are compared with Gross National Product in Chart 17. Here it can be seen that business capital has traditionally fluctuated much more than Gross National Product, while social capital outlays have followed a steadier course, except in the past year. Housing expenditures have shown a variety of movements. However, the chart suggests that, in the past, they have frequently changed direction in advance of general business conditions, turning downward a year in advance of the general business peaks and moving up from their cyclically lowest points well
March 29, 1966

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The Budget-Appendix

[Stage Direction]
before the general business troughs are reached. Over the past ten years, expenditures on social capital appear to have been advancing much more rapidly than housing outlays, and may also have exceeded the rate of growth of business capital, although the large fluctuations make it difficult to pick terminal years or to fit trends for such a comparison.
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March 29/ 1966
The Budget-Appendix

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1948 to 1965
1948..	.
1949..	.
1950..	.
1951..	.
1952..	. 1953. ..
1954..	.
1955..	. 1956. ..
1957..	.
1958..	.
1959..	.
1960..	.
1961..	.
1962..	.
1963..	.
1964..	. 1965. ..
Total Private and Public Investment	Housing and Social Capital11)	Business Investment Private and Public(2)20.4	7.8	12.621.7	8.7	13.021.9	8.9	13.022.4	8.6	13.822.9	9.0	13.923.9	9.4	14.523.0	9.6	13.423.0	9.8	13.226.3	9.9	16.427.3	9.6	17.725.4	10.6	14.824.1	10.4	13.722.8	9.3	13.421.8	9.1	12.721.5	9.2	12.321.8	9.1	12.723.3	9.2	14.124.9	9.9	15.0
^Includes housing, outlays by government departments, institutions and municipal waterworks.
^Includes government business enterprises.
Government Expenditures
Purchases of goods and services by all levels of government, estimated at $9.5 billion for 1965, were over 10 per cent higher than they were in 1964. They represented 18.6 per cent of gross national expenditures, a slightly higher proportion than that recorded a year earlier. Provincial-municipal expenditures, which account for almost two-thirds of total government outlays on goods and services, rose by 13 per cent, while the increase at the federal level amounted to 7 per cent. As a result, the provincial-municipal share of total government sector purchases of goods and services increased again, continuing the rising trend in this ratio which has been evident since World War II, except for the brief interruption caused by the Korean war. The smaller increase in the federal total results in part from the declining relative importance of defence expenditures within the total.
Within the government sector, it is of interest to note where the changes took place. Of the $3.3 billion spent by the federal government on goods and services in 1965, slightly less than one-half was accounted for by defence, which showed little change from the previous year. The non-defence portion^ is estimated to have risen by some 15 per cent, or about $240 million. Approximately one half of this was attributed to increased investment outlays for buildings for public use, for the development and construction of harbours, wharves and dams, and for the acquisition of equipment such as icebreakers. Another significant increase, amounting to almost a quarter of the total non-defence advance in expenditures at the federal level, resulted from increased labour costs, including those retroactive payments to a large number of government employees which were paid in September. Much of the balance can be explained by lower net liquidation of inventories held by government commodity agencies, and by increased payments for international aid.
March 29, 1966
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The Budget-Appendix
The provincial and municipal governments, taken together, increased their demand for goods and services by over $700 million, to a level of $6.3 billion in 1965. One-half of this 1965 gain occurred at the provincial level, although in the aggregate provinces account for a little more than a third of overall provincial-municipal spending on goods and services. A substantial part of the increase in spending by departments of provincial governments was for construction, primarily of roads, bridges and highways. The balance of the provincial increase can be attributed to higher wage and salary payments, which rose by about 10 per cent over the year.
i Labour costs account also for the major part of the increase at the municipal level. This is especially the case in the field of education, where salaries and wages have shown annual increments of about 10 per cent for several years, reflecting not only rising standards and rising salary levels, but also the continued increase necessary in staff and facilities as the number of young people in schools and training establishments continues to increase.
Personal Expenditure
Consumer expenditure remained an important sustaining force in 1965, rising by over 7 per cent and accounting for about two-fifths of the rise in total demand. Personal expenditures on durables in the first nine months of the year were just over 8 per cent above the level recorded during the same months of 1964. These purchases were strongly concentrated in new and used cars, and spending on home furnishings was also higher. This 8 per cent rate of increase was in keeping with the long-term rate for the period 1949 to 1965, and was below the rates of increase which occurred in both 1963 and 1964.
Purchases of non-durable goods in 1965 rose by just under 7 per cent. This movement reflected not only a larger volume of purchases, but also the sharp increase in the price of some food products during the course of the year. Purchases of services by consumers also rose substantially, and here again a significant rise in some prices contributed measurably to the overall increase. Table 28 compares the various growth rates, in both current and constant dollars, of the components of consumer expenditure in the postwar period.

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Annual Gbowth Rates Per cent
1949 to 1965	1961 to 1965	1964 to 1965	$ current	$ constant	$ current	$ constant	S current	$ constantNon-durables	5.5	4.0	5.6	4.1	6.8	5.2Durables	7.9	7.0	9.3	9.6	8.1	8.7Services	8.4	4.6	6.4	4.3	7.7	4.9Total	6.8	4.6	6.4	4.8	7.3	5.6
. The aggregate increase in personal expenditure in 1965 reflected both the increase in employment and incomes and also the changing age-structure of the population. The sharp rise in the number of young people earning money was an
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March 29, 1966
The Budget-Appendix
important factor. Purchases of used cars, clothing, some foods and beverages and many kinds of personal consumer services all increased substantially, in part as young people entered the market for consumer goods and services. On a per capita basis, consumer expenditures in constant dollars rose by about 3.0 per cent per year between 1961 and 1965, but the rate of advance in 1965 alone was in the region of 3.7 per cent.
It is of interest to compare the growth pattern in consumer expenditures over recent years and over the longer term, as they are set out in Table 28. While personal consumption patterns are, of course, influenced strongly by relative price movements, the constant-dollar trend comparisons over the longer term give some insight into the changing economic structure (as it is reflected in final consumption patterns) and changing standards of living in Canada. The period from 1949 to 1965 shows an annual rise in total consumption of 4.6 per cent. Population during this period has risen by 2.4 per cent per year, so that real consumption has risen by more than 2 per cent per year. As the table shows, purchases of durables of all kinds-cars, furniture and home appliances- have shown the most rapid rate of growth, while purchases of services has risen at about the same rate as total purchases. In many ways, these trends have reflected the rapid modernization, the growth of the cities and the move to the suburbs which characterized these years. The rise in expenditures on nondurable items, although lower than the others, is still above the rate of growth of population, indicating that living standards have been rising even apart from the urbanization developments.
The constant-dollar increases of 1965 were above the trends established both for the longer term and for the more recent 1961 to 1965 period, and were related to the high levels of employment and income.
Exports of Goods and Services
In 1965, the rise of 10.0 per cent in the value of non-farm merchandise exports more than matched the increase of 9.2 per cent in non-farm GNP at market prices. Largely as a result of the phasing of wheat shipments under special contracts, farm exports were lower than in 1964, bringing the growth in total merchandise exports down to 5.6 per cent. The position regarding wheat in 1965 is typical of a number of special factors which can, and do, affect the level of Canadian exports from time to time; apart from these, there also appears to have been some slowing-down in 1965 in the very high rate of growth of exports which had prevailed since 1962.
An important question for the Canadian economy is the extent to which this slowing-down was accounted for by less buoyant conditions in Canada s foreign markets in 1965, or by any change in the Canadian share in those markets. By far the greater part of the overall rise in Canadian exports in 196o was accounted for by a 13.4 per cent increase in sales to the United States, which was about the same as the rise in U.S. merchandise imports from all sources. Although total United Kingdom imports rose a little in 1965, Canadian exports to Britain fell slightly, despite the fact that the weight of foodstuffs and industrial raw materials in those exports makes it unlikely that the impact of the emergency U.K. surcharge upon them was greater than the average for all U.K. imports. It is probable, however, that U.K. industry was running down its inventories of those raw materials which figure so prominently in Canadian exports, in response to fiscal and monetary measures other than the surcharge taken by the United Kingdom to deal with its balance of payments problem. In the case of the United States,
March 29, 1966
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The Budget-Appendix two major elements in the growth of U.S. imports in 1965 were coffee and steel; Canadian capacity in the one case, needless to say, is non-existent and in the other was heavily committed in 1965 to meeting domestic Canadian demand.
The case of exports to the rest of the world in 1965 is rather different. It may seem a little paradoxical that a year which saw the signing of a second very large contract to sell wheat to the Soviet Union, and of another with China which only the sale to Russia surpasses, should have seen an actual fall of $100 million in total exports to countries other than the United States and the United Kingdom. The drop as such was entirely accounted for by the phasing of the wheat shipments; that is to say, by the fact that about $300 million-worth was shipped

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CANADIAN COMMODITY EXPORTS 1964 and 1965
(Domestic and re-export, millions of dollars)
1964	1965	% ChangeTo: United States	.... 4,437.0	5,030.9	+13.4United Kingdom	.... 1,207.1	1,185.4	- 1.8Other Commonwealth and Preferential	.... 503.4	512.7	+ 1.8All other countries	.... 2,156.1	2,035.5	- 5.6Total	.... 8,303.5	8,764.5	+ 5.6
Source: DBS
in 1964 under the first contract with the Soviet Union, but only about $200 million-worth in 1965 under the second contract. The larger part of the second contract, and the beginning of shipments under the new contract with China, fall in 1966. Although the drop is explicable in terms of wheat, non-farm exports to countries other than the United States and the United Kingdom nevertheless showed no significant rise, remaining on the plateau reached in 1964. The Communist countries are negligible markets for the Canadian minerals, chemicals and manufactured goods concerned, and the less developed countries take comparatively modest quantities; Canada evidently succeeded in maintaining sales at about their 1964 level in the markets of Western Europe and Japan. The growth of demand in some of these countries was affected by stabilization measures designed to reduce inflationary pressures or improve the balance of payments. Some of these measures may have had a significant effect on the inventories of commodities which Canada normally exports to these countries.
While Canadian exports to overseas markets did not show much change, the rise in Canadian sales below the border was substantial. Under the stimulus of the new Automotive Free Trade Agreement with the United States, total Canadian exports of automobiles and parts increased by no less than 90 per cent, and this in the first year of the Agreement, during which the rationalization and enlargement of production runs at which it is aimed can only have begun to get under way. (It should be added that imports rose by only a quarter, although by an absolutely greater value.) Offsetting this striking growth to some extent was a rather lower total of exports of aircraft and parts, under production-sharing arrangements, than in the exceptional year 1964, when they rose by 130 per cent.
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The Budget-Appendix
Increases in 1965 in exports of the crude and semi-processed materials which account for the majority of Canadian non-farm exports tended to range fairly narrowly about the global average of 5| per cent. Two exceptions to this were soft-wood lumber, exports of which increased by 1.0 per cent, and aluminum and its alloys, which recorded an export gain of 12.4 per cent.
The breakdown of Canadian merchandise exports by major commodity groups in Table 29 is presented for 1965 in terms of the twelve-month period ending on September 30. Data for the calendar year are not yet available, but the period shown has in any case the advantage of eliminating most of the effect of both the first and second major wheat contracts with the Soviet Union and thus representing fairly accurately the change which has taken place in the basic composition of Canadian export trade since 1961. For two or three years to come, at least, major special wheat sales are likely to raise the share of total exports accounted for by farm and fish products above 20 per cent again; and the development of potash exports should progressively raise both the share accounted for

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MERCHANDISE EXPORTS BY COMMODITY GROUPS 1961 and 1965
-	Farm and Fish Products	Forest Products	Metals and Minerals	Chem- icals and Ferti- lizers	Other Manu- factured and Miscel- laneous	Re- Exports	Total1961 million dollars	1,301	1,623	1,861	251	719	140	5,896% of total	22.1	27.5	31.6	4.3	12.2	2.4	100.01965 million dollars	1,542	2,071	2,623	324	1,589	229	8,378% of total	
(year ending Sept. 30)	18.4	24.7	31.3	3.9	19.0	2.7	100.0% Increase 1965 over 1961	18.5	27.6	40.9	29.1	121.0	63.6	42.1
by chemicals and fertilizers, and the comparatively lower rate of growth in such exports. But the general pattern has become quite clearly established, with growth in exports of manufactured goods some three times as high as that for the next most dynamic sector of domestic exports, metals and minerals. Growth in entrep6t trade has also been well above the average, but involves comparatively small values.
Exports of services (to which, by statistical convention, a proportion of domestic production of gold and the receipt of interest and dividends on Canadian investments abroad are attributed), rose by 8.0 per cent between 1964 and 1965. Although gold production has been declining slowly for a number of years, there were increases in receipts on all other non-merchandise accounts, and particularly in the cases of travel and inheritances and migrants' funds. In total, however, such receipts are heavily outweighed by corresponding payments for imports of services, and are best considered in terms of the net payments which result, as in the later section dealing with the balance of payments as such.
Changes in Inventories
Changes in business inventories usually accompany large swings in fixed investment, accentuating both expansions and contractions, although with somewhat different timing. Minor business cycles have frequently been identified with
March 29, 1966
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The Budget-Appendix inventory changes, which have on such occasions shown the largest swings in demand. In the present substantial and protracted expansion, however, fixed investment has become the driving force, and inventories have played a much lesser role.
In the past year, the increases in retail and wholesale sales appear to have drained off the additional supplies of goods as soon as they were produced, and producers have not accumulated large stocks. This was especially the case with automobiles, sales of which have continued at a high rate in most recent months.
The following table shows the latest available data on business inventories.
CHANGE IN NON-FARM BUSINESS INVENTORIES (Seasonally adjusted at annual rates)
Manufacturing	
Durables	
Non-durables... Wholesale Trade...
Retail Trade	
"Other" Industries
Total	
1st Q.	2nd Q.	3rd Q.
(Millions of dollars)		
. 540	308	256. (308)	(300)	(240). (232)	(8)	(16). 84	148	92. 204	216	332. 116	96	20. 944	768	700
Inventory-sales ratios have been declining for several years, as computer techniques and other modern methods of inventory management have permitted improved control over flows and stocks. At the same time, relative price stability and ready availability of goods have meant that buyers have not needed or wanted to carry excessive stocks. In all of manufacturing, there is at present two months' supply on hand. Raw materials and goods in process increased somewhat more rapidly than finished goods in the past year, but in neither case were the increases very rapid. The relatively low level of finished goods inventories was reflected in a high level of unfilled orders at the end of 1965. At that time, new orders being received by manufacturers were running ahead of shipments, so that no early change in manufacturers' inventory positions was indicated.

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Current Position
On a national accounts basis, combined revenue of all governments rose by more than 12 per cent in 1965 over the preceding year while expenditures increased by 10 per cent (on the basis of preliminary estimates). On balance, revenues rose faster in 1965 than expenditures, so that governments ran a surplus of about one-quarter of a billion dollars, compared with a deficit of about $100 million in 1964. The change to an overall surplus arose from an increase in the federal surplus to $535 million, and a smaller increase in provincial governments' surplus to almost $300 million. Municipalities combined ran a deficit of about $575 million, virtually unchanged from 1964.
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March 29, 1966
The Budget-Appendix

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(National accounts basis)
-	1953	1964	19650)
	(Millions of dollars)		
Federal- Revenue	4,726	8,132	8,940Expenditure	4,584	7,886	8,405Surplus (+) or deficit (-)	+ 142	+246	+535Provincial-Revenue	1,612	5,403	6,374Expenditure	1,409	5,299	6,084Surplus (+) or deficit (-)	+203	+104	+290Municipal-Revenue	1,119	3,594	3,945Expenditure	1,289	4,046	4,519Surplus (+) or deficit (-)	-170	-452	-574All Governments-Revenue(2)	7,457	17,129	19,259Expenditure(2) (3)	7,282	17,231	19,008Surplus (+) or Deficit (-)	+175	-102	+251
^Department of Finance estimates based on preliminary DBS data.
(^Includes intergovernmental transfers.
^Capital assistance is now included in government expenditure on a national accounts basis; in the past it has been omitted.
At the federal level, for which more detailed data are available, the surplus in 1965 more than doubled from the level of $246 million in 1964. Federal revenue rose by more than three quarters of a billion dollars, mainly on account of increased taxation revenue. However, the percentage increase in taxes in 1965 was lower than the gain of 14.7 per cent recorded from 1963 to 1964, since tax adjustments took place in the course of the year. Despite the strong upward trend in labour income during the year, federal personal direct taxes rose less rapidly than in 1964, reflecting the reduction of 10 per cent in the basic personal income tax rate beginning July 1, 1965, and the higher abatements to the provinces effective the beginning of 1965. Corporate tax liabilities also increased somewhat less than in 1964, associated with the lower gain in corporate profits. The largest part of the increased taxation revenues in 1965 was accounted for by a 14 per cent rise in indirect taxes to a level of $3,245 million, partly associated with the rise from 8 to 11 per cent in the sales tax on building materials and construction equipment as well as with the rapid increase in personal expenditures and the higher level of fixed capital formation.
In contrast to revenue, which showed a sharper increase in 1964 than last year, federal government expenditure on a national accounts basis rose more rapidly in 1965 than in 1964, from a level of $7,886 million in 1964 to over $8,400 million in 1965, a gain of 7 per cent. Outlays on non-defence goods and services rose by almost 15 per cent with substantial gains in capital outlays and higher wages and salaries, while expenditure on goods and services for defence increased only marginally over the year. Transfers from the federal to other levels of governments increased by about 14 per cent, to a level of almost $1,430 million. Higher equalization payments and payments to the provinces under the various shared-cost programmes more than offset the effect of one province opting out from a number of shared-cost programmes. Outlays for the Trans-Canada Highway and for technical and vocational training were up substantially from their 1964 levels. Transfers to persons showed a larger increase than in the previous year with increased family allowances, veterans' pensions and old age security

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sr
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to
Government Revenue
Direct taxes-persons	
Federal	
Provincial and Municipal	
Direct taxes-corporations	
Federal	
Provincial	
Withholding taxes-Federal	
Indirect taxes	
Federal	
Provincial and Municipal	
Investment income	
Federal	
Provincial and Municipal	
Employer and employee contributions to social insurance and government pension funds...
Federal	
Provincial and Municipal	
Transfers from federal governments-
Provincial and Municipal	
Total Revenue	
Federal	
Provincial and Municipal
1962	1963	1964	1965«	IQ	1 2Q	1 3Q(Millions	of dollars)	2,730	2,911	3,407	3,772	3,872	3,9162,088	2,193	2,558	2,724	2,760	2,628642	718	849	1,048	1,112	1,2881,702	1,821	1,989	2,068	2,120	2,1481,271	1,356	1,482	1,548	1,580	1,600431	465	507	520	540	548125	127	140	160	176	1605,565	5,879	6,648	7,096	7,300	7,5402,401	2,451	2,847	3,000	3,144	3,3443,164	3,428	3,801	4,096	4,156	4,1961,257	1,376	1,519	1,584	1,644	1,636448	502	547	556	580	580809	874	972	1,028	1,064	1,056812	847	892	908	952	948518	534	558	572	604	584294	313	334	336	348	3641,134	1,169	1,254	1,516	1,448	1,30813,325	14,130	15,849	17,104	17,512	17,6566,851	7,163	8,132	8,560	8,844	8,8966,474	6,967	7,717	8,544	8,668	8,760
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Seasonally adjusted at annual rates.
Source: DBS The National Accounts, Income and Expenditure, Quarterly.
The Budget-Appendix
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>u
1962	1963	1964	1965<*	IQ	2Q	3Q(Millions of dollars)	Government Expenditure	Goods and services	7,710	8,024	8,607	9,120	9,412	9,596Federal-Defence	1,678	1,576	1,552	1,648	1,556	1,572Non-defence	1,345	1,363	1,490	1,568	1,628	1,784Provincial and Municipal	4,687	5,085	5,565	5,904	6,228	6,240Transfer payments to persons	3,729	3,838	4,159	4,520	4,396	4,628Federal	2,112	2,137	2,235	2,364	2,320	2,332Provincial and Municipal	1,617	1,701	1,924	2,156	2,076	2,296Interest on the public debt	1,302	1,420	1,532	1,604	1,628	1,644Federal	866	935	995	1,052	1,036	1,040Provincial and Municipal	436	485	537	552	592	604292	311	317	204	240	256260	275	278	164	200	216Provincial	32	36	39	40	40	40Capital Assistance-Federal!2)	27	61	82	80	84	84Transfers to Provincial and Municipal governments-	Federal	1,134	1,169	1,254	1,516	1,448	1,308Total Expenditure	14,194	14,823	15,951	17,044	17,208	17,5167,422	7,516	7,886	8,392	8,272	8,336Provincial and Municipal	6,772	7,307	8,065	8,652	8,936	9,180Surplus (+) or Deficit (-)	-869	-693	-102	+ 60	+384	+140-571	-353	+246	+ 168	+572	+ 560Provincial and Municipal	-298	-340	-348	-108	-268	-420
<* Seasonally adjusted at annual rates.
(2) This item is now included in government expenditure on a national accounts basis; in the past in has been omitted. Source: DBS, The National Accounts, Income and Expenditure, Quarterly.
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The Budget-Appendix
March 29, 1966
[Stage Direction]
The Budget-Appendix
payments more than offsetting a decline in unemployment insurance benefit payments. It will be recalled also that youth allowances were paid to 16- and 17-year-olds attending school, beginning in the fall of 1964.
The combined provincial-municipal deficit, on a national accounts basis, is estimated to have been somewhat lower in 1965 than in 1964. As noted above, the reduction represented some increase in the provincial surplus, while the municipal deficit was larger. For both levels of government combined, there was improvement through the year, with the exception of the second quarter.
Provincial-municipal expenditures continued to increase steadily during each quarter of the year, and for the year as a whole were up by about 13 per cent. The provinces increased their spending at a more rapid rate than their municipalities, as outlays on both capital goods and current expenditure rose substantially. More comment on trends in expenditure is given in following pages.
Revenue of provinces and municipalities, which rose very sharply in the first quarter partly because of the final settlement of fiscal 1963-64 federal-provincial fiscal arrangements and partly because of the increase in the federal abatement of personal income tax, moved up at a somewhat slower pace in the succeeding quarters.
. Total provincial-municipal revenue is estimated to have been $8.9 billion in 1965, higher by more than 14 per cent than it was in 1964. Indirect taxes rose from $3.8 billion to $4.2 billion over this period, due to higher collections of real property taxes, sales and gasoline taxes. Transfers from the federal government were also higher largely because of increased equalization payments. Moreover, the gain in personal income tax was unusually large on account of increased abatements in favour of all of the provinces from 18 per cent in 1964 to 21 per cent in 1965, with the exception of Quebec where the abatement increased to 44 per cent to compensate for withdrawal from a number of shared-cost programmes.
Trends in Revenues and Expenditures of Governments
Between the end of the Korean war in 1953 and 1965, the combined revenues and expenditures of all governments, adjusted for intergovernmental transfers, increased at an average annual rate of about 1\ per cent, with only a modest difference in the overall surplus position at the terminal periods. During this time, however, the fiscal position of government as a whole swung considerably from a surplus of nearly $400 million in 1956, to a deficit of over a billion dollars in 1958, through a succession of deficits to 1964, when near balance was achieved, to 1965 when there was a modest surplus. Almost all of the fluctuations occurred at the federal level, with the provincial governments showing generally a relatively steady and small surplus and the municipalities showing a deficit growing from about $200 million to almost $600 million over the period.
Since 1953 federal revenue has varied cyclically, but has risen over the interval by an average of over 5 per cent annually. By 1965 it had reached a level of $8.9 billion.
Revenues from personal direct taxes more than doubled in the twelve year period and their share in total federal revenue increased from 28 to 30 per cent. This happened despite the considerable abatements of this tax in favour of the provinces, who were able to raise their share of total revenues from this source
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The Budget-Appendix from 4 to 18 per cent. Changes in tax rates apart, it is known that personal direct taxes are highly elastic to income changes, increasing proportionately more over time.
Indirect taxes, which form a major source of federal revenues, increased by
5.5	per cent annually and showed little change in their relative proportion to total revenue; this rate of increase includes the effects of recent tax changes. Taxes on corporate income have shown the least growth since 1953. Income from investments and from employer and employee contributions to social insurance and government pension funds formed 10.6 per cent of federal revenues in 1953. By 1965, their ratio had increased to over 13 per cent.
Total federal expenditures on goods and services have grown by about 2 per cent annually since the end of the Korean war. However, outlays on goods and services for non-defence purposes rose by more than 150 per cent over this twelve year period, for an average annual gain of more than 8 per cent. Defence expenditures declined from a level of $1.9 billion in 1953 to less than $1.6 billion in 1965. Transfers to persons increased more rapidly than total federal outlays, and formed some 28 per cent of federal expenditures in 1965 compared to less than 23 per cent in 1953. This increase resulted mainly from higher payments for family allowances, unemployment insurance and old age security. Interest payments on the public debt also rose very rapidly.

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reliance on direct sources of revenue, these transfers have risen to an annual rate of more than $1.4 billion in the current period. They include the introduction of payments under the Hospital Insurance and Diagnostic Services Act and for unemployment assistance; increased emphasis for highway construction and technical and vocational training programmes; and unconditional statutory grants and equalization payments.
Since 1953, the share of provincial-municipal income and outlays has increased markedly in the combined governments' revenue and expenditure. Provincial-municipal revenue has more than tripled; this increase has been almost entirely related to the growth in their taxation revenue and transfer receipts. Apart from transfer receipts from the federal government, the most rapid increase in provincial-municipal revenue has taken place in personal direct taxes as a result of changes which took place in the tax-sharing arrangements between the different levels of government. Receipts from indirect taxes, the main source of provincial and municipal revenue, have also increased rapidly. Real property taxes remain by far the largest single revenue source, although receipts from the retail sales tax (excluding gasoline tax but including taxes on liquor and tobacco) have continued to increase rapidly, so that revenue from this source is now equivalent to almost one-half of that obtained from the municipal real property tax. Transfers from the federal government have expanded by 11 per cent, approximately the same rate as total provincial-municipal revenue. It is of interest to note that the transfers from the federal government to the provinces are roughly equal in size to the transfers from the provinces to their municipalities.
Provincial-municipal expenditures on goods and services have been expanding at a distinctly faster rate than federal outlays, with sharp expansion in fixed capital formation, wages and salaries and other expenditures on goods and services, primarily for education. As would be inferred from the relatively unchanging fiscal position of provinces and municipalities, these increases in expenditures have about matched the increases in revenues brought about by a higher tax base, higher rates, and abatements and transfers from the federal government.
As a proportion of gross national expenditure, provincial-municipal spending on goods and services rose from 7.5 per cent in 1953 to 12 per cent in 1965. Transfers to persons, mostly in the form of pensions and other social expenditures, as well as grants to hospitals and other non-commercial institutions, increased almost five times over that period. Interest on the public debt and subsidy payments also increased very rapidly.
Analysis by Function
Apart from a national accounts framework, there are other ways of measuring the transactions of government, such as the system used in the Public Accounts and the DBS classifications of revenues by source and expenditure by function.
Federal transactions on a public accounts basis are discussed in considerable detail in Part II of this document and therefore the analysis is not repeated here. Perhaps some background should be given for the analysis by function.
As is well known, the raison d'etre of government is the collective provision of services. Some of these services such as the keeping of order within a nation, protection from outside attack and the regulation of economic affairs in the general interest can only be provided by government. Similarly, basic services needed for community living, such as refuse disposal, sanitation, fire protection,

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(After elimination of inter-government transfers)
For the Fiscal Year Ended Nearest to December 31
Defence services and mutual aid	
Veterans' pensions and other benefits..
Health	
Sanitation and waste removal	
Social welfare	
Education	
Transportation and communications	
Natural resources and primary industries. Debt charges (excluding debt retirement)
General government	
Protection of persons and property	
Other	
Total Net General Expenditure
Federal
1952	|	1962
45.7 5.6 1.1
17.8 0.5
3.4 3.9
9.5
4.0
1.1
7.4
100.«
23.3
4.9
6.2
22.8
4.0
6.3
5.2
11.0
4.2
1.4
10.6
100.0
Provincial-Municipal
1952	|	1962	|	1964
21.0
4.6
7.0
24.0
3.1 6.8 5.0
11.0 4.5 1.9
11.1
100.0
11.6
2.4 5.8
27.2
23.9
4.5
4.6 5.3 8.1 6.5
(per cent)
12.5
3.0
5.8 31.9 18.7
3.3
4.8
5.3 7.6
7.1
100.0
100.0
12.0
3.0
5.0
31.0
22.0
3.0
5.5
5.0
7.0
6.5
100.0
30.5
3.7
4.6
0.9
13.8
9.4
10.2
4.1 7.9
4.4
3.4
7.1
100.0
Total
12.6
2.7
9.1 1.4
15.0 16.9
12.0
4.3
8.1
4.7 4.2 9.0
100.0
10.6
2.3
9.6
1.4
14.7
16.8 14.3
4.2
8.2
4.7
4.4
8.8
100.0
Source: see footnote table 34.
3478	COMMONS DEBATES	March 29, 1966
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BETWEEN GOVERNMENTS (After elimination of inter-government transfers)
For the Fiscal Year Ended Nearest to December 31
Function	1952	1962	1964	Federal	Provincial- Municipal	Federal	Provincial- Municipal	Federal	Provincial- Municipal(per cent)	Defence services and mutual aid..	100.0	100.0	100.0	_Veterans' pensions and other bene-	fits	100.0	-	100.0	-	100.0	-Health	ie.o	84.0	36.9	63.1	37.0	63.0Sanitation and waste removal....	-	100.0	-	100.0	-	100.0Social welfare	86.0	14.0	82.2	17.8	83.0	17.0Education	3.2	96.8	12.8	87.2	9.0	91.0Transportation and communica-	tions	22.0	78.0	28.5	71.5	24.0	70.0Natural resources and primary	industries	63.3	36.7	65.0	35.0	61.0	39.0Debt charges (excluding debt re-	tirement)	80.6	19.4	72.9	27.1	68.0	32.0General government	60.4	39.6	48.3	51.7	49.0	51.0Protection of persons and property	20.9	79.1	17.7	82.3	21.0	79.0Other	69.5	30.5	63.6	36.4	64.0	36.0Total Net General Expendi-	ture	66.7	33.3	54.0	46.0	51.0	49.0
Source: see footnote table 34.
The type of services provided by governments can be analytically classified according to the broad purposes or functions for which these are created. These functions are analogous to industry classification used for identifying types of production. Tables 32 and 33 give an indication of the percentage breakdown of net general expenditure of governments and the share of expenditure, by function, carried out by the different levels of government. However, consolidation of these figures leads to certain technical statistical problems and these have been treated as follows: a) Grants-in-aid and shared-cost contributions between governments have been included in the expenditures of the paying government and are excluded from the expenditures of the receiving government, b) General grants and subsidies and payments made under fiscal and tax-sharing arrangements are eliminated from the expenditure of the paying government only, c) Ordinary expenditures of municipal utilities and enterprises, hospitals, libraries and certain special areas are not included nor are capital expenditures of utilities and enterprises.
Several points are apparent from the functional comparisons by level of government.(1) The percentages indicate that the federal government bears the major share in the provision of services related to social welfare, natural resources and primary industries and debt charges exclusive of debt retirement, along with, of course, the total cost of defence and veterans' pensions and benefits. These items account for two-thirds of federal net general expenditure.
wit might be noted that there are some differences between the functional classification used by DBS and the Public Accounts series discussed in Part II.
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1952-1957	1957-1962	1962-1964	Federal	Provincial- Municipal	Total	Federal	Provincial- Municipal	Total	Federal	Provincial- Municipal	Total1. Defence services and mutual aid	-2.3	-2.3	-1.3	-1.3	-0.5	n 52. Veterans' pensions and other benefits	4.3	-	4.3	3.2	3.2	1.8	1 83. Health	6.2	9.6	9.1	47.0	13.7	21.0	11.7	11.2	11 44. Sanitation and waste removal	-	18.5	18.5	8.8	8.8	6 0	6 05. Social welfare	7.0	10.6	7.5	8.4	11.1	8.8	7.5	6.0	7 26. Education	39.0	12.2	13.5	23.0	13.0	14.0	-8.5	10.3	8.17. Transportation and communications	14.9	12.0	12.7	9.1	4.3	5.5	8.3	22.0	18 58. Natural resources and primary industries	2.5	9.4	5.2	14.3	5.5	10.7	3.2	11 8	fi 39. Debt charges (excluding debt retirement)	4.6	8.3	5.3	8.6	14.4	10.0	4.8	19.5	9.010. General government	12.2	11.6	12.0	-0.7	10.2	4.1	8.5	7.6	8 011. Protection of persons and property	7.6	10.5	9.9	7.9	9.5	9.2	21.0	8.6	11.012. Other	11.1	14.5	12.2	6.6	9.1	7.5	7.4	7.0	7.3Total Net General Expenditure	3.8	11.6	6.7	6.3	io. e	7.9	4.9	12.4	8.4
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1963-64	1964-65	1965-66	1964	1965	IQ	2Q	3Q	4Q	IQ	2Q	1 3Q	1 4Q1. Budgetary revenue	6,253	7,180	7,673	1,688	(Mill 1,772	ons of dc 1,721	>llars) 1,835	1,852	1,918	1,862	1,9442. Supplementary period adjustment'1'	-21	-42	44	-146	146	-188	188	3. Extra-budgetary revenues	Old Age Security tax collections	747	959	1,170	202	247	214	220	278	300	272	279Prairie Farm Assistance Act levy	9	10	10	2	2	4	2	2	1	5	2Unemployment insurance employer-employee contributions	297	310	328	77	71	78	79	82	74	84	84Government pension funds-employer-employee contribu-	tions	244	270	279	65	69	67	68	66	70	70	72Interest receipts of social insurance and government pension	funds	142	158	180	37	37	39	39	43	43	45	464. Corporate income tax(2): excess (+) of accruals over collections..	+ 40	-162	-114	- 10	-128	- 8	+ 6	- 32	-139	+ 2	+445. Profits before taxes (net of losses) of government business enter-	prises	205	226	247	42	43	61	86	36	59	55	986. Interest on loans, advances and investments	184	187	203	43	43	43	57	44	51	45	537. Less: Budgetary return on investments	-391	-382	-477	-112	-102	- 60	- 95	-125	-138	-120	-938. Less: Postal revenue	-201	-231	-236	- 52	- 53	- 49	- 70	- 59	- 57	- 49	-739. Budgetary revenue items offset against budgetary expenditures^	-109	-125	-132	- 28	- 30	- 31	- 32	- 32	- 33	- 33	-3310. All other adjustments to budgetary revenue'*'	- 43	- 33	- 45	- 35	- 9	- 12	10	- 22	- 13	- 6	1611. Total Revenue, National Accounts Basis'5'	7,356	8,325	9,130	1,773	2,108	2,067	2,205	1,945	2,324	2,232	2,439
<*In the National Accounts, revenues in the supplementary period are shifted to the following fiscal year. <2'Taxes on government business enterprises are excluded from this item and included in item 5.
(,'See also line 8 expenditure reconciliation.
(,)These adjustments are largely revenue items not relevant for the National Accounts such as proceeds from sales of existing assets. Department of Finance estimates based on preliminary DBS data.
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TABLE 35-Concluded
1963-64	1964-65	1965-66	1964	1965	IQ	2Q	3Q	4Q	IQ	2Q	3Q	4Q1.	Budgetary expenditure	6,872	7,218	7,707	2,265	(Milb 1,420	ons of dc 1,675	liars) 1,809	2,314	1,492	1,785	1,9152.	Supplementary period adjustment*11	- 32	- 53	+ 58	-408	408	-	-	-461	461	3.	Expenditures of extra-budgetary funds Old Age Security Fund payments	808	885	929	218	220	221	222	222	224	226	228Unemployment Insurance benefits	366	335	306	150	102	40	52	141	91	36	44Government Pension Fund payments	86	101	115	24	24	25	26	26	27	28	28Prairie Farm Assistance payments	11	11	10	7	-	-	2	9	2	-	14.	Transfers to extra-budgetary funds	- 66	- 63	- 65	- 15	- 16	- 15	- 16	- 16	- 16	- 17	- 175.	Adjustment to place other government funds and crown agencies on a disbursement basis(2>	8	33	11	- 15	- 92	40	- 17	102	-100	32	236.	Budgetary expenditures offset against income of government business enterprises Post Office expenditures	-206	-211	-235	- 53	- 51	- 50	- 54	- 56	- 54	- 61	- 63Deficits of government business enterprises	- 73	- 92	-126	- 5	- 59	- 10	- 12	- 11	- 84	- 8	- 47.	Reserves and write-offs	-152	- 43	- 35	- 87	- 11	- 10	- 11	- 11	- 32	- 9	- 78.	Budgetary revenue items offset against budgetary expenditure(3).	-109	-125	-132	- 28	- 30	- 31	- 32	- 32	- 33	- 33	- 339.	All other adjustments to budgetary expenditure	79	50	93	- 25	62	32	-	- 44	86	73	- 910.	Total Expenditure, National Accounts Basis*11	7,592	8,046 +279	8,636 +494	2,028	1,977 +131	1,917	1,969	2,183	2,064	2,052	2,10611.	Surplus (+) or deficit (-), National Accounts basis(4)	-236	-255	+150	+236	-238	+200	+180	+33312.	Surplus (+) or deficit (-), budgetary basis	-619	- 38	- 34	-577	+352	+ 46	+ 26	-462	+426	+ 77	+ 2913.	Total, National Accounts basis	7,356	8,325	9,130	1,773	2,108	2,067	2,205	1,945	2,324	2,232	2,439
<*In the National Accounts, expenditures on goods and services in the supplementary period are split evenly between adjacent fiscal years. Most other expenditure items are shifted entirely to the next fiscal year.
<21This adjustment replaces budgetary appropriations to various funds and agencies by the outlays actually made by these funds and agencies.
<3>The largest component of this item consists of revenue from sales of goods and services by the government. These sales appear as final expenditure of the private sector and are deducted to avoid double counting.
Department of Finance revised estimates based on preliminary DBS data. There are some minor differences between these revised estimates and those appearing in Table 31.
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The provinces provide the major share of health services and share with municipalities the cost of education. At the provincial level, outlays connected with education, health, and roads, highways and bridges absorb 70% of their spending.
Sanitation and waste removal costs are borne exclusively by municipalities but this forms only about 7% of their spending. The major share of their expenditure is on schools, roads and streets, and recreational facilities, the latter being included in the item "other".
Four functions defence, social welfare, education, and transportation facilities and the "other" category which includes recreational and cultural facilities and trade development-account for about two-thirds of total net general expenditures of all levels of government combined.
The trend in services provided by governments is also of considerable analytical interest. Table 34 shows the average annual rate of change from 1952 through to 1964. This time span has been broken into three intervals, to show the rate at which particular services have speeded up or declined as between one period and another. Because the allocation of responsibility between the provinces and municipalities may shift over time, these two levels of government have been combined for these comparisons.
These time comparisons indicate that the average rate of growth in total government net general expenditures has speeded up from 7.9% per year between 1957 and 1962 to 8.4% per year in the more recent period. The rate at the federal level abated between these years, but it has been more than offset by the acceleration at the provincial-municipal levels. Two areas-streets, roads and bridges, and debt charges-share the sharpest increase in the recent period. This is related to the demands for infrastructure facilities arising from urban growth in the recent expansion. Most of those capital facilities at the municipal level seem to be financed by borrowing, as indicated by the increasing debt charges.
The sharp increase in federal expenditures on health shown in the 1957-62 period was caused by the introduction of the hospital insurance programme, while the apparent decline in education outlays between 1962 and 1964 was related to unusually high payments in 1962 for the federal government's share of the cost of building technical and vocational schools.
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The year 1965 saw marked changes both in particular sectors and in the overall pattern of Canada's payments relationship with the rest of the world. There was some increase in the total of official reserve assets, despite the fact that the deficit on current account more than doubled. The current account position reflected rising pressure of demand in the domestic economy, offset by special circumstances on the trading account to a lesser extent than in 1963 and 1964. The movements in the capital account in 1965 were, on the other hand, affected by special factors. The inflow of funds which occurred was exceptional in its composition. Having opened with changes in the pattern of Canadian payments as a result of one TJ.S. programme of balance of payments guidelines, the year closed with further U.S. measures, and with the extension of specific arrangements between Canada and the United States to take account of their interdependence in this field.

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SUMMARY OF BALANCE OF PAYMENTS (not seasonally adjusted)
		1964				1965		
IQ	2Q	3Q	4Q	IQ	2Q	3Q	4QMerchandise trade balance	+ 35	+150	( +354	Millions +161	of dollars - 42	) - 28	+155	+ 16Deficit on non-merchandise transactions	-373	-298	-140	-322	-359	-339	-145	-394Current account balance	-338	-148	+214	-161	-401	-367	+ 10	-378Capital movements (+ inflow) (- outflow) Long-term forms	- 15	+152	+223	+493	+121	+ 90	+214	+183Short-term forms	+311	+ 64	-281	-151	+208	+278	+ 2	+197- 42	+ 68	+156	+181	- 72	+ 1	+226	+ 2Change in official holdings of gold and foreign exchange expressed in Canadian dollars (+ increase)	-127	+ 62	+ 97	+ 54	-118	- 92	+144	+ 55(- decrease) Net International Monetary Fund position	+ 85	+ 6	+ 59	+127	+ 46	+ 93	+ 82	- 53- 42	+ 68	+156	+181	- 72	+ 1	+226	+ 2
The Current Account
The simple fact that the deficit on current trade in goods and services rose from $433 million in 1964 to $1,136 million in 1965 suggests a more rapid widening of Canada's deficit on current international transactions than might otherwise have been expected. But a balance struck for a year as a whole does not fully reflect the underlying trend in the Canadian economy's requirement for external resources, which was already rising towards the end of 1964.
The higher rates of economic growth, and of business investment in particular, to which the economy moved in 1963, have reversed for the time being the trend of delining current account deficits which set in after 1959. It is typical of the Canadian economy that, as it approaches the limits of its own resources, the
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incentive for drawing in resources from abroad is increased. As far as the current account is concerned, this will be reflected in practice in increased imports, not only of capital equipment, but also of consumer goods.

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INTERNATIONAL PAYMENTS: CURRENT ACCOUNT
1 -	1959	1960	1961	1962	1963	1964	1965Current Receipts- Merchandise exports (adjusted) 	5,150	5,392	(Mil 5,889	lions of do 6,380	lars) 7,082	8,240	8,737Gold available for export. .	148	162	162	155	154	145	138Travel expenditures	391	420	482	562	609	662	737Interest and dividends	182	173	209	202	230	313	315Freight and shipping	420	442	486	509	563	645	656Inheritances and immigrants' funds	109	102	103	124	151	169	211Other current receipts	392	419	403	451	473	502	573Total Current Receipts	6,792	7,110	7,734	8,383	9,262	10,676	11,367Current Payments- Merchandise imports (adjusted) 	5,572	5,540	5,716	6,203	6,579	7,540	8,636Travel expenditures	598	627	642	605	585	712	'786Interest and dividends	671	653	770	794	860	978	1,048Freight and shipping	525	533	568	595	648	685	736Inheritances and emigrants' funds	165	181	174	175	186	190	206Official contributions	72	61	56	36	65	69	92Other current payments. . .	693	758	790	849	881	935	999Total Current Payments	8,296	8,353	8,716	9,257	9,804	11,109	12,503Balance on merchandise trade	-422	-148	+173	+177	+503	+700	+101Balance on other transactions	-1,082	-1,095	-1,155	-1,051	-1,045	-1,133	-1,237Current Account Balance..	-1,504	-1,243	-982	-874	-542	-433	-1,136
Source: DBS Quarterly Estimates of the Canadian Balance of Payments, Cat. 67-001.
Canadian merchandise imports have been rising strongly since the removal of the emergency surcharges early in 1963, though they levelled off for several months in 1964. The main reason why this trend did not reduce the net merchandise surplus until late 1964, and is not seen in the annual net balance shown in Table 37 until 1965, was the fact that exports of goods had been rising faster still. This growth in exports was solidly founded on demand in foreign markets for Canadian raw materials and on the growing volume and improved competitiveness of Canadian secondary manufacturing. The margin by which the growth of exports exceeded that of imports, however, was largely attributable to the first special sale of wheat to the Soviet Union, combined with large shipments under contract to China; imports were affected by strikes in the automobile industry, first in the United States and then in Canada, which cut the flow of parts and vehicles across the border.
In the earlier months of 1965, none of these special factors was any longer an influence, while imports were growing rapidly in response to investment expenditures in Canada. The merchandise trade surplus therefore fell abruptly, on a seasonally adjusted basis and at annual rates, from a peak of $1.1 billion in
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NON-MERCHANDISE TRADE		Payments			-
_ i					-
		Receipts			-
	 f BALANCE					-
					
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the third quarter of 1964, through $0.5 billion in the fourth, to a low point of just over $100 million in the first quarter of 1965. From this it rose slightly in both the second and third quarters of 1965, but disappeared in the fourth quarter, even though shipments of wheat under the second major contract with the Soviet Union got under way during that period.
On non-merchandise aocount, the smallest deficit in recent years, on a seasonally adjusted basis and at an annual rate, was that of about $850 million recorded in the last quarter of 1962, when the impact of the devaluation and emergency measures effected earlier that year was at its height, especially on the travel account. The deficit has grown again fairly slowly and steadily ever since, with some acceleration in the rate of growth in the second half of 1965.
This increase in the deficit on invisible trade pushed the overall current account deficit a little higher in each succeeding quarter of 1965; on a seasonally adjusted basis and at annual rates, the deficit rose from just under $1 billion in the first quarter to just over this figure in the second, nearly $1.1 billion in the third, and over $1.5 billion in the fourth quarter, to give a deficit for the year as a whole of $1,141 million, or $1,136 million on a Balance of Payments basis.<l)
Merchandise exports have been reviewed in an earlier section. Adjusted for balance of payments purposes, they rose by 6.0 per cent in 1965. Merchandise imports as recorded in Customs returns are also adjusted for balance of payments purposes; the total of $8,636 million estimated for 1965 represented an increase of 14.5 per cent, with the resultant narrowing of the net merchandise surplus from $700 million to $101 million which largely contributed to the rise in the overall deficit on current account for the year as a whole.
This rise in imports seems to have been quite broadly based, although no detail is yet available in terms of major categories of end-use such as industrial materials, investment goods and consumer goods. The increase does not appear to have been quite as even as in 1964, however, when each of these three main categories of imports grew roughly in proportion with the others. Disregarding the special cases of automobiles and aircraft, import figures for 1965 show a fairly clear bias towards industrial and investment goods rather than consumer goods, and specifically towards materials and machinery used in construction. Reinforcing bars, structural steel shapes, cranes, front-end loaders and shovels, and track-laying tractors: these are typical of the individual import headings which recorded the most striking increases between 1964 and 1965, evidently as a direct result of the sharp rise in investment in construction.
Annual changes in aggregate imports, as chart 20 demonstrates, tend to be very much in line with changes in the aggregate of business investment (private gross fixed capital formation other than housing). This is not inconsistent with
(1>The above review in terms of seasonally adjusted figures and chart 19 which illustrates it are based on the National Accounts concept of the current external balance; this differs from Balance of Payments definitions only in that inheritances and migrants' funds are excluded. Since that particular account has been very close to balance in the past two years, the effect of this distinction is not important in a general analysis. Both concepts, whether or not subject to adjustment for seasonal factors, differ from Trade of Canada figures of merchandise trade, which are not adjusted for the timing of wheat shipments or for progress payments on ships, aircraft, and defence goods; but detailed analysis is only possible on the basis of the basic Trade of Canada commodity figures.
23033-22U
[Stage Direction]
March 29, 1966
The Budget-Appendix
the slow long-term decline in the import content of Gross National Expenditure which has been taking place at least since the Korean war; but the sharp increase in investment in 1965 did raise the ratio of expenditure on imported goods to GNE: on a quarterly and seasonally adjusted basis, it rose to a peak of about
17.5	per cent of GNE in the fourth quarter, the highest level since the recession of 1957-58, but still below the ratios of 20.7 and 18.5 per cent recorded in 1951 and 1956 respectively.
RATIO OF IMPORT OF GOODS TO GROSS NATIONAL EXPENDITURE (seasonally adjusted, per cent)
1964 IQ	 16.4
2Q	 16.2
3Q	 15.8
4Q	 15.8
O) Preliminary estimate.
1965 IQ			 16.2
2Q			 16.3
3Q			 16.5
4Q			 17.5W

[Stage Direction]
Millions of Dollars
Millions of Dollars
The effect upon the net merchandise balance of these trends in exports and imports has already been described: on a year-to-year basis, the surplus fell from $700 million in 1964 to $101 million in 1965. Taking into account the special sale of wheat in each figure, the underlying merchandise account can be said to have swung from a surplus of about $400 million to a deficit of some $150 million (always subject to the qualification that other exports and imports would not necessarily have been the same in the absence of the special wheat sale).
March 29, 1966
[Stage Direction]
The Budget-Appendix

[Stage Direction]
NON-MERCHANDISE ACCOUNT (Seasonally adjusted at annual rates) (National accounts basis)
	Receipts	Payments	Balance
1964-	(Millions of dollars)		
IQ		2,192 2,124 2,184 2,308	3,312 3,200 3,308 3,500	
2Q				
3Q				-li 124
4Q				
1965-			
IQ		2,348 2,404 2,460	3,452 3,620	
2Q				- 1,216
3Q				
4Q				
			
d>
Department of Finance estimate, n.a.-not available.
Source: DBS Ibid.
From the quarterly and seasonally adjusted figures in Table 38, it will be seen that the rise in the non-merchandise deficit proceeded throughout the year, and was particularly marked in the fourth quarter. The jump from the third to the fourth quarter is largely attributable to a sharply higher rate of outpayment of dividends towards the end of the year. Until the fourth quarter, relatively high receipts from Canadian investments abroad had kept the net deficit on this account from rising as fast as in some recent years.
MAJOR ITEMS IN THE BALANCE ON NON-MERCHANDISE TRANSACTIONS (Net receipts or payments, millions of dollars)
-	1959	1960	1961	1962	1963	1964	1965
Gold production available for							
export	+ 148	+ 162	+ 162	+155	+154	+ 145	+138Travel expenditures	-207	-207	-160	- 43	+ 24	- 50	- 49Interest and dividends	-489	-480	-561	-592	-630	-665	-733freight and shipping	-105	- 91	- 82	- 86	- 85	- 40	- 80inheritances and migrants'	funds	- 56	- 79	- 71	- 51	- 35	- 21	+ 5Official contributions	- 72	- 61	- 56	- 36	- 65	- 69	- 92All other non-merchandise	transactions	-301	-339	-387	-398	-408	-433	-426Balance on non-merchandise account	-1,082	-1,095	-1,155	-1,051	-1,045	-1,133	-1,237
The increased physical volume of merchandise trade resulted in some addition to net outpayments in respect of freight and shipping; official contributions of aid made directly and through international organizations were more than a third as high again as in 1964; and gold production was again a smaller credit item than in the previous year. On the three other main service accounts the net outpayments in 1965 were lower than in 1964. The marked rise in immigration since 1962, possibly coupled with some increase in the average value of the assets brought into the country by immigrants, has brought this account back into small surplus for the first time since 1953. The deficit on the residual
[Stage Direction]
March 29, 1966
The Budget-Appendix
category of non-merchandise transactions, (which cover chiefly business services but also government expenditures, personal remittances and a certain proportion of debt interest and other income) has grown rather unevenly over the postwar period but has moved within a narrow range since 1961.
The deficit on travel account declined a little in 1965. It is not possible to deduce from this a structural improvement; but the swing back into deficit which occurred in 1964, as the immediate effect of the 1962 devaluation and limitation of tourist purchases wore off, seems to have been contained for the time being. A major factor in this is evidently the reduced cost of trans-Atlantic air travel: in 1964 this seemed to be chiefly acting upon travel by Canadians to Europe, but in 1965, as Table 39 indicates, lower fares appear to have been effective also in stimulating travel to Canada from Europe.

[Stage Direction]
BALANCE ON TRAVEL ACCOUNT All Countries
Receipts	Payments	Balance	u.s.	Rest of World	Total	u.s.	Rest of World	Total	u.s.	Rest of World	Total(Millions of dollars)	1953	282	20	302	307	58	365	- 25	- 38	- 631954	283	22	305	320	69	389	- 37	- 47	- 841955	303	25	328	363	86	449	- 60	- 61	-1211956	309	28	337	391	107	498	- 82	- 79	-1611957	325	38	363	403	122	525	- 78	- 84	-1621958	309	40	349	413	129	542	-104	- 89	-1931959	351	40	391	448	150	598	- 97	-110	-2071960	375	45	420	462	165	627	- 87	-120	-2071961	435	47	482	459	183	642	- 24	-136	-1601962	512	50	562	419	186	605	+ 93	-136	- 431963	549	60	609	388	197	585	+ 161	-137	+ 241964	590	72	662	481	231	712	+ 109	-159	- 501965	650	87	737	531	255	786	+ 119	-168	- 49
Source: DBS Ibid.

[Stage Direction]
United	United	Other	All	States	Kingdom	Countries	Countries	1964	1965	1964	1965	1964	1965	1964	1965(Millions of dollars)	Merchandise Exports (adjusted).. .	4,396	4,986	1,219	1,184	2,625	2,567	8,240	8,737Merchandise Imports (adjusted)...	5,207	6,042	584	625	1,749	1,969	7,540	8,636Trade balance	-811	-1,056	+635	+559	+876	+598	+700	+101Non-merchandise receipts	1,621	1,764	385	359	430	507	2,436	2,630Non-merchandise payments	2,465	2,639	413	422	691	806	3,569	3,867Non-merchandise balance	-844	-875	-28	-63	-261	-299	-1,133	-1,237Total current receipts	6,017	6,750	1,604	1,543	3,055	3,074	10,676	11,367Total current payments	7,672	8,681	997	1,047	2,440	2,775	11,109	12,503Current account balance	-1,655	-1,931	+607	+496	+615	+299	-433	-1,136
Source: DBS Ibid.
March 29. 1966
[Stage Direction]
The Budget-Appendix
The geographical pattern of Canada's current external account in 1965 was chiefly influenced by the substantial reduction in the merchandise surplus with overseas countries other than the United Kingdom, resulting from lower wheat shipments, and by further increases in the deficits on both merchandise and non-merchandise accounts with the United States. The overall current deficit with the United States, which is considered in more detail below, is raised from the figure of $1,931 million shown in Table 40 to $2,069 million when Canadian gold production is considered as a financing item rather than, as here, an item on the current account which is conventionally attributed to the United States.

[Stage Direction]
BALANCE OF PAYMENTS ON CURRENT ACCOUNT: MERCHANDISE AND NON-MERCHANDISE BALANCE, 1946 TO 1965
		Non-	Current
Merchandise	Merchandise	AccountTrade	Trade	Balance
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
Source: DBS Ibid.
(Millions of dollars)
+571 + 188 +432 +293 + 10 -147 +489 - 58 + 13 -211 -728 -594 -179 -422 -148 + 173 + 177 +503 +700 +101
-208 -139 + 19 -116 -344 -370 -325 -385 -445 -487 -638 -861 -952 -1,082 -1,095 -1,155 -1,051 -1,045 -1,133 -1,237
+363 + 49 +451 +177 -334 -517 + 164 -443 -432 -698 -1,366 -1,455 -1,131 -1,504 -1,243 -982 -874 -542 -433 -1,136
The Capital Account
The financing of the current account deficit was subject to abnormal features and certain distortions in 1965. In broad outline, the net inflow of long-term capital, which in recent decades has largely originated in the United States, was at a lower level than usual. The deficit was made up by a net inflow of shortterm capital and there was some gain in official reserve assets. The really exceptional feature of this flow of short-term capital was that it was the net of very substantial flows into Canada from overseas and from Canada to the United States, in a comparatively abrupt reversal of movements which had been taking place in the opposite direction over a number of years, and particularly in 1964.
The reduction in the relative importance of long-term capital in the financing of the current deficit in 1965 occurred despite the maintenance of a fairly high rate of long-term new borrowing abroad.
[Stage Direction]
March 29. 1966
The Budget-Appendix
In that part of the U.S. balance of payments programme introduced in February which was directed at U.S. non-financial corporations, direct investment abroad by such corporations was covered by a request that they should collectively improve their global balance of payments position, taking physical trade, income and capital investment all into account. Canada, however, was specifically exempted from this guideline.
Direct investment in Canada by non-residents in fact rose in 1965 from the particularly low levels recorded in 1963 and 1964, though at $390 million it remained well below the level of at least a half-billion dollars which was typical of most of the previous decade. Direct investment abroad by Canadian residents was again at the relatively high annual level of $100 million or so which has been recorded since 1962.
New guidelines for U.S. non-financial corporations were announced in December 1965. In these, a global target was again specified, but direct investment was also singled out for limitation by each corporation, in 1965 and 1966 taken together, to 90 per cent of the total for the three preceding years on a basis inclusive of retained earnings. The geographic basis upon which this was to be achieved was again left to the discretion of individual corporations, but the specific exemption of Canada was withdrawn.
Despite the fact that they are subject to the U.S. Interest Equalization Tax, net sales abroad of outstanding Canadian bonds and debentures continued at a relatively high level. However, as Table 44 shows, they were heavily outweighed by the repatriation of some $240 million of outstanding Canadian common and preference stocks, a reflux of such securities (in other words, an outflow of capital) which was roughly twice as large as any previously recorded. This, then, was one major offset to the capital inflow from new issues. Another was the continued high level of capital outflows for the retirement of securities in the hands of non-residents, which have now exceeded $300 million in each year since 1961. There was also a net outflow of long-term capital through net purchases by Canadians of foreign securities.
Repayment of both interest and principal on the postwar loan to the United Kingdom was waived for the second year running (although there was a small receipt of interest in respect of the deferment itself, which cannot be waived under the terms of the loan). As against the first receipt of U.S. $50 million in 1964, the second capital receipt arising from the Columbia River Treaty was U.S. $30 million. This was the proceeds upon maturity on November 1, 1965, of a medium-term non-marketable U.S. government security, the first of six annual maturities to this value, followed by a final maturity of U.S. $23.9 million in 1971; these securities were purchased by the Minister of Finance in 1964 with the majority of the funds representing payment by the United States for its share of the first thirty years of downstream benefits from development of the Columbia River. A final offset to the inflow from long-term new issues was a substantial debit for the residual category of long-term capital, in large part associated with the extension of export credits.
The issue abroad by Canadian residents of new, long-term securities in 1965 was, as usual, largely accounted for by bonds and largely directed at the United States market. The total capital inflow from new issues shown in Table 42 was $1,127 million, of which $1,075 million is accounted for in Table 46 by deliveries of bonds to United States residents.
March 29, 19B6
[Stage Direction]
The Budget-Appendix
So much had occurred to disrupt, without actually restricting, access by Canadian borrowers to this market, that the third quarter of 1965 saw quite heavy offerings of new long-term Canadian securities in the New York market. When this heavy traffic persisted into the fourth quarter, the U.S. authorities requested Canadian co-operation in smoothing out the flow involved. The Minister of Finance requested major Canadian borrowers wherever possible to defer delivery of the securities concerned until after the turn of the year. Canadian borrowers co-operated by suspending some $140 million of deliveries in this way.

[Stage Direction]
INTERNATIONAL PAYMENTS: CAPITAL MOVEMENTS
-	1961		1962		1963		1964		1965	
				(Millions		of dollars)				
Direct investment in Canada	+	520	+	495	+	280	+	255	+	390Direct investment abroad	-	75	109	-	135	-	140	-	115Canadian securities-	Trade in outstanding bonds and debentures....	+	61	+	64	+	39	+	77	+	64Trade in outstanding common and preference	stocks	+	39	-	116	-	179	-	97	-	241New issues	+	538	+	728	+	784	+1,123	+	1,127Retirements	300	320	-	404	-	358	-	373Foreign securities (total)	-	34	-	65	+	22	-	63	-	74Loans and capital subscriptions by Government of	Canada-	Advances, etc	-	8	-	22	-	18	-	10	-	16Repayments to Canada	+	37	+	129	+	25	+	9	+	10Columbia River Treaty, net(1)	+	54	+	32Long-term capital transactions not included else-	where	+	132	-	116	+	14	+	3	-	196Change in certain Canadian assets of foreigners-	Canadian dollar deposits	+	34	-	13	+	43	+	28	+	30Government of Canada demand liabilities^...	2	-	4	+	1	-	2Canadian treasury bills	-	58	+	4	-	27	-	16	-	12Canadian commercial paper	1	(	-	23	-	11	+	11Canadian finance paper	+	93	+	176	-	179Canadian finance company obligations not in-	+	eluded elsewhere	J	l	+	35	+	49	+	205Bank balances and other short-term funds abroad.	+	140	+	93	-	258	-	524	-	136All other transactions	+	148	+	148	+	187	+	241	+	468Net Capital Movements excluding monetary	items shown below	+1,272	+1,029	+	688	+	796	+ 1,293	Official monetary movements in the form of:	Change in official holdings of gold and foreign	exchange	+	229	+	537	+	60	+	68	-	11Change in net International Monetary Fund	position	+	61	-	378	+	86	+	277	+	168Other special international financial assistance.	~	4	
<*See reference to Columbia River Treaty on page 81.
(2>Demand notes of international investment agencies other than the International Monetary Fund, Trust and Deposit Account of U.S. Government with Government of Canada.
Source: DBS Ibid. 23033-222

[Stage Direction]
INTERNATIONAL PAYMENTS: QUARTERLY CAPITAL MOVEMENTS
		1964				1965		
IQ	1 2Q	1 3Q	4Q	IQ	2Q	3Q	4QDirect investment in Canada	+ 69	+ 44	+ 52	(Millions + 90	)f dollars) + 70	+120	+100	+100Direct investment abroad	- 44	- 68	- 3	- 25	- 35	- 5	- 50	- 25Canadian securities-	Trade in outstanding bonds and debentures	+ 4	+ 14	+ 37	+ 22	+ 3	+ 17	+ 38	+ 6Trade in outstanding common and preference stocks	- 44	- 8	- 5	- 40	- 83	- 84	- 28	- 46New issues	+ 138	+318	+117	+550	+273	+306	+298	+250Retirements	-109	-100	- 57	- 92	- 66	-176	- 57	- 74Foreign securities (total)	- 7	- 38	- 7	- 11	- 35	- 5	- 22	- 12Loans and capital subscriptions by Government of Canada	Advances, etc	- 2	-	-	- 8	- 16Repayments to Canada	+ 4	+ 2	+ 1	+ 2	+ 5	+ 2	+ 1	+ 2Columbia River Treaty net(1>	-	-	+ 54	-	-	-	-	+ 32Long-term cap tal transactions not included elsewhere	- 24	- 12	+ 34	+ 5	- 11	- 85	- 66	- 34Change in certain Canadian assets of foreigners:	Canadian dollar deposits	+ 20	- 9	- 36	+ 53	+ 38	- 37	- 19	+ 48Government of Canada demand liabilities*2)	-	- 3	-	+ 3	- 1	- 4	- 5	+ 12Canadian treasury bills	+ 14	- 16	- 18	+ 27	- 10	- 2	- 3Canadian commercial paper	+ 27	- 19	- 18	- 1	-	+ 7	+ 4	-Canadian finance paper	+ 107	+102	+ 4	- 17	- 38	- 7	- 65	- 69Canadian finance company obligations not included elsewhere	- 2	+ 1	+ 16	+ 37	+ 25	+ 99	+ 89	- 8Bank balances and other short-term funds abroad	+150	-127	-164	-385	+170	+140	- 73	-101All other transactions	+ 5	+105	- 67	+177	- 13	+ 90	+ 73	+318Net Capital Movement excluding monetary items shown below	+296	+216	- 58	+342	+329	+368	+216	+380Official monetary movements in the form of:	Change in official holdings of gold and foreign exchange	-127	+ 62	+ 97	+ 54	-118	- 92	+144	+ 55Change in net International Monetary Fund position	+ 85	+ 6	+ 59	+127	+ 46	+ 93	+ 82	- 53
ll)See reference to Columbia River Treaty on page 81.
<2)Demand notes of international investment agencies other than the International Monetary Fund, Trust and Deposit Account of U.S. Government with Government of Canada.
Source: DBS
3494	COMMONS DEBATES	March 29, 1966
The Budget-Appendix
March 29, 1966
[Stage Direction]
The Budget-Appendix

[Stage Direction]
TRADE IN OUTSTANDING CANADIAN SECURITIES BETWEEN CANADA AND ALL COUNTRIES (Millions of dollars)
Period	Canadian Bonds and Debentures	Canadian Common and Preference Stocks	Total	Sales to	Purchases from	Net	Sales to	Purchases from	Net	Sales to	Purchases from	Net1963-	IQ	67	44	+23	124	181	-57	191	225	-342Q	86	59	+27	131	175	-44	217	234	-173Q	39	46	- 7	75	102	-27	114	148	-344Q	47	51	- 4	86	128	-42	133	179	-461964-	IQ	38	34	+ 4	107	151	-44	145	185	-402Q	62	48	+ 14	164	172	- 8	226	220	+ 63Q	58	21	+37	137	142	- 5	195	163	+324Q	69	47	+22	127	167	-40	196	214	-181965-	IQ	53	50	+ 3	127	210	-83	180	260	-802Q	43	26	+ 17	110	194	-84	153	220	-673Q	65	27	+38	75	103	-28	140	130	+ 104Q	42	36	+ 6	131	177	-46	173	213	-40
+capital inflow - capital outflow Source: DBS Ibid

[Stage Direction]
Period
Sales to
Purchases
from
Net
[Stage Direction]
2Q
3Q
4Q
1964- IQ 2Q 3Q 4Q
1965- IQ 2Q 3Q 4Q
(Millions of dollars)
82	77	+ 5134	113	+2190	94	- 4128	110	+ 18124	129	- 5151	182	-31122	126	- 4128	134	- 6135	146	-11157	170	-13137	153	-16212	214	_ 2
+ capital inflow - capital outflow Source: DBS Ibid 23033-222J
[Stage Direction]
March 29, 1966
The Budget-Appendix
In December 1965, the state of uncertainty which had affected the market was resolved by a new arrangement arrived at between Canada and the United States, at the time of the announcement of further restrictions by the United States upon the outflow of both short and long-term capital. In effect, the exemption of new Canadian long-term issues from the Interest Equalization Tax was extended to include the exemption of such issues from a new quantitative limitation on the acquisition of long-term securities by U.S. non-banlc financial institutions. In return for this assurance of access for Canadian borrowers to the U.S. long-term market, the Canadian government undertook that it would purchase Canadian securities in the U.S. market, if this proves necessary, in

[Stage Direction]
Period	Offerings	Deliveries	Undelivered 0)
	(Millions of dollars)		
1964-			
IQ	91	125	882Q	238	294	323Q	309	103	2384Q	345	532	51
1965-			
IQ	339	255	1352Q	265	298	1023Q	378	290	1904Q	344	232	302
0>At end of period. Source: DBS Ibid.

[Stage Direction]
1962	1963	1964	1965Transactions with U.S. (excluding international financial agencies) Current account deficit (exc. gold)	-1,277	(Millions -1,316	3f dollars) -1,800	-2,069Capital inflow from U.S	+1,091	+ 850	+1,755	+ 468Net amount to be financed by other trans-	actions	- 186	- 466	- 45	-1,601Other transactions	Current account surplus with rest of world	+248	+620	+ 1,222	+795Net capital movement from (+) or to (-) rest of world	- 62	-162	- 959	+825New gold production available for export	+ 155	+ 154	+ 145	+138Increase (-) in Canadian holdings of gold and foreign	exchange	-533	- 60	- 86	+ 11Change in Canada's position with the International Monetary FundO)	+378	- 86	- 277	-168Total financing	+186	+466	+ 45	+1,601
('[DOT]Improvement (-) in Canadian position represents net provision of resources by Canada to the I.M.F.
March 29, 1966
[Stage Direction]
The Budget-Appendix
order to ensure that the net flow of capital funds to Canada is not in excess of the amount required to meet the needs of the current account in the balance of payments and to keep Canada's reserves within an appropriate range.
The basis for the exemption of long-term Canadian new issues in this way is the recognition on the part of the U.S. authorities of the fact that U.S. current account earnings in Canada almost invariably exceed U.S. capital outflows to Canada. It will be seen from Table 47 that this pattern was strikingly confirmed in 1965, when a U.S. current account surplus with Canada of over $2 billion was only financed to the extent of less than $500 million by U.S. capital.
In 1964, a substantial outflow of short-term U.S. capital to Canada, much of it destined ultimately for the Eurodollar market, had been added to the longterm flow to produce a total flow to Canada which nearly, though still not quite, equalled the U.S. current account surplus with Canada. This flow continued into the first quarter of 1965; but in February new balance of payments guidelines were issued to all U.S. banks by the U.S. government which had the objective of limiting new short-term outflows from the United States in 1965 to a small proportion of the total outstanding at the end of 1964. In order to provide assurance that the foreign currency operations of Canadian banks would not be inconsistent with the aims of these guidelines, the Canadian government requested all chartered banks to conduct their foreign currency operations in such a way that the net position of their head offices and Canadian branches vis-k-vis

[Stage Direction]
1964-	January__
February. .
March....
April	
May	
June	
July	
August....
September
October___
November
December.
1965-	January.... February..
March....
April	
May	
June	
July	
August....
September.
October___
November. December.
1966-	January__
February..
End of Period
Gold
U.S. Dollars
Total
(Millions of U.S. dollars)
836.7
849.7
871.0
892.2
910.1
931.3
948.8
969.0
989.6
1,001.1
1,007.4
1,025.7
1,745.7
1,692.6
1.594.5
1.588.9
1,599.3
1.602.6
1,585.1
1.606.9
1.634.9
1.685.5
1,736.0
1.648.6
2.582.4
2.542.3
2.465.5
2,481.1
2.509.4
2.533.9
2.533.9
2.575.9
2.624.5
2.686.6
2,743.4 2,674.3
1.036.0
1.040.6
1.044.1
1.044.7
1.081.4
1.089.1 1,096.3
1,104.0
1,111.9
1.123.7
1.137.5
1.150.8
1.632.2
1,608.1
1.510.0
1,521.8
1.417.3
1.391.0
1.395.2
1.494.0
1.502.2
1.520.1
1.543.6
1.513.7
2,668.2
2.648.7
2.554.1
2.566.5
2.498.7
2.480.1
2.491.5
2.598.0
2.614.1
2.643.8
2.681.1
2.664.5
1,112.8
1,076.5
1.449.6	2,562.4
1.471.1	2,547.6
Soukce: Department of Finance.
[Stage Direction]
March 29, 1966
The Budget-Appendix
residents of the United States was not reduced below the position which existed on December 31, 1964. The Canadian banks in fact increased their net asset position vis-a-vis U.S. residents during the year. Moreover, they so drew down their assets and increased their liabilities elsewhere in the world that a net credit of over 1400 million accrued to the Canadian balance on capital account as well. This very substantial reversal of earlier movements of short-term funds occurred mainly in the first and second quarters of 1965, after which flows were on a more modest scale.
Two other events which occurred in 1965 had marked effects upon capital flows into and out of Canada. The first was the collapse, in June, of a Canadian finance company whose notes were quite widely held in the United States. A withdrawal by U.S. investors from Canadian finance paper, which had been in progress on a small scale for some months already, was accelerated by this default and continued for the rest of the year, though Canadian finance companies continued to obtain funds abroad in other forms. In August, the announcement of a second major wheat contract with the Soviet Union, to a value of some $450 million, brought an immediate influx of short-term capital in connection with anticipatory exchange transactions by grain houses; as Table 48 shows, this resulted in strengthening of the reserves, which rose by U.S. $123 million in that month and the next, and in the exchange rate for the Canadian dollar. This had reached a low point of about 92 U.S. cents in July, but recovered to a high of around 93 U.S. cents in October, remaining in the neighbourhood of this level until the end of the year.
While official holdings of gold and foreign exchange were virtually unchanged over the year as a whole, having decreased by less than U.S. $10 million, Canada's net creditor position with the International Monetary Fund improved by U.S. $156 million. Other countries drew the equivalent of U.S. $183.4 million net in Canadian dollars of which the Fund obtained $27.5 million by the sale of gold to Canada. Canada also made resources equivalent to U.S. $35.0 million available through the Fund under the General Arrangements to Borrow.

[Stage Direction]
U.S. s
Million
IMF holdings of Canadian dollars at the end of 1964
367.5
(minus) Repurchases by Canada (net)	
Drawings of Canadian dollars by other countries (net) 183.4
183.4
(plus) Gold sales to Canada by IMF	 27.5
Borrowings from Canada under the General Arrangements to Borrow	 35.0	62.5
Net change during 1965
120.9
IMF holdings at the end of 1965
246.6
Source: DBS Quarterly Estimates of The Canadian Balance of International Payments. Cat. 67-001.
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The national saving and investment account offers in capsule form a summary of the net position of the personal, government, business and foreign sectors discussed in detail in foregoing sections of this review. The revenue and expenditures of each of these main sectors can be reduced to a single figure of net income or saving. Each saving estimate is a residual. Disposable personal income minus personal expenditure equals personal saving; business receipts minus business outlays equals business gross saving; revenues and expenditures of governments on the national accounts basis are reduced to a single surplus or deficit figure; and the difference between exports and imports of goods and services is shown as the net foreign balance on current account. The latter can be regarded either as an additional source of real resources (that is, foreign savings) as shown in Table 50, or as part of national investment. The table also shows the elements of savings and investment in 1965, compared with the preceding year. Finally, the table offers a connecting link between the National Accounts analysis upon which most of the earlier discussion has been based and the discussion of capital markets which follows.

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SOURCES OF SAVING (Millions of dollars)
Personal Saving	
Business Gross Saving, Total	
(a)	Undistributed corporation profits	
(b)	Capital consumption allowances and miscellaneous
ments	
(c)	Adjustments on grain transactions	
(d)	Capital assistance	
Inventory Valuation Adjustment	
Government surplus (+) or deficit (-)	
Federal	
Provincial and Municipal	
Deficit on current account with non-residents	
Residual error	
Total	
valuation adjust-
1965
2,181	3,098
7,051 1,252	7,454 1,466
5,607 110 82	6,085 - 97 84
-121	-330
-102 +246 -348	+251 +535 -284
+428	+1,141
- 45	-183
9,392	11,431
DISPOSITION OF SAVING (Millions of dollars)
-	1964	1965Business gross fixed capital formation <*>	8,968 380 +44	10,424 824 +183Value of physical change in inventories	Residual error	Total	9,392	11,431.	
(1^Based on unrevised National Accounts data for 1964 and Public and Private Investment Survey for 1965. For revised data in both years, see Table 26.
Source: DBS The National Accounts, 1964, and Department of Finance estimates for 1965.
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In 1965, total sources of saving, including savings from abroad (that is, resources drawn from abroad in the form of the current account deficit), increased by about $2 billion, sufficient on balance to finance a similar increase in business fixed capital formation and inventories. The principal components of the saving increase, in order of their contribution to the total change in sources of funds, were as follows: a personal saving increase of $900 million; an increase in the use of foreign savings of $700 million; a change from a deficit to a surplus on government transactions, amounting to $350 million; and an increase in business gross saving (including the inventory valuation adjustment) of about $200 million.
While total national saving has been increasing rapidly since the first quarter of 1961, there has been a considerable difference in behaviour of the several components. Personal saving has doubled in the past five years, reaching a level of over $3,000 million in 1965 compared to $1,545 million in 1961, and giving rise to a high saving ratio of nine per cent of disposable income. Part of the increase was due to a higher level of farm incomes resulting from a succession of good crops and exceptional wheat marketings. Some increase in the savings ratio often occurs in periods of rapidly advancing incomes, due to the lag of expenditure behind changes in income. This factor may also account for some of the increased saving in more recent quarters, following upon the personal income tax reauction of mid-1965.
Business saving has two principal components: capital cost allowances and net retained earnings after payment of dividends and taxes. Capital cost allowances, as reported in taxation statistics, show a long term upward trend, as the size of the capital stock increases, as well as some short term variation which causes them to increase more rapidly in cyclical expansions. These allowances have increased by approximately $400 million per year in the past few years. Retained earnings are subject to a great deal of cyclical variation, having quadrupled from a low figure of $400 million (at seasonally adjusted annual rates) in the first quarter of 1961, to a high figure of $1,500 million in fhe first quarter of 1965. Since then they have been relatively stable. Total business saving, or retained cash flow, increased from $4,900 million in the first quarter of 1961 (seasonally adjusted annual rate), to nearly $7,600 million in the third quarter of 1965. The five year increase averaged over $500 million per year, and continued at approximately the same rate into 1965, as capital cost allowances continued to rise. An offsetting inventory valuation adjustment is made against business gross saving in order to make allowance for that part of recorded business profits which arises from the effect of rising prices on inventory values. The 1965 increase in the inventory valuation adjustment was $200 million.
The government sector position improved in each one of the past five years, slowly at first and then with increasing momentum as total income and expenditure in the remainder of the economy increased. Some tax changes occurred, and the elasticity of certain revenue sources brought increases in revenues which were relatively greater than income change^. At the same time, government costs were increasing, in the forms of wages and materials, and new programmes were being undertaken, as described in the discussions of the government sector and public and private investment. The net result of all of these changes in the government sector was a swing from a combined deficit position of $1,000 million in 1961 to a combined surplus position, presently estimated on the National Accounts basis at $251 million in 1965. The Government of Canada had a surplus of over $500 million in calendar 1965 on this basis, while provincial and municipal governments had a combined deficit approaching $300 million on the same basis. The swing from a combined government deficit to a combined surplus position in
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the past year therefore contributed to the supply of national saving. It permitted governments to have less recourse to capital markets, at the time that private businesses were making greater demands on the markets to finance a higher level of investment.
It will be noted that increased business investments considerably exceeded the increases in the retained cash flow of the business sector. Business capital formation was financed to a greater extent by savings from abroad. As already stated, the net current account deficit increased by approximately $700 million in 1965. This development in 1965 contrasts with the continued reduction of foreign deficits which had taken place from 1959 to 1964.

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The preceding section on sources and disposition of saving indicates that approximately $2 billion more savings were available for Canadian business investment in 1965 than in 1964. About $700 million of this increase was attributable to foreign savings, as reflected in the widening of Canada's current account deficit in the balance of payments, and over $1.4 billion to domestic saving. In contrast to 1964, when the total increase in domestic saving was supplied by businesses and governments, the major part of the 1965 increase came from personal saving. Despite this substantial increase in total saving, it did not keep pace with increasing demands for investment funds. The high rate of economic expansion recorded in 1965 brought with it heavy demands for credit and, in contrast to 1964 when stable credit conditions prevailed, gave rise to higher interest rates and more selective lending policies.
Increases in government revenues relative to expenditures enabled all levels of governments taken together to reduce their demands on the capital market in 1965. Corporate demands on the market, however, to finance heavy expenditures on fixed assets and inventory increased substantially. Net new issues of corporate securities together with increases in bank loans to corporations in 1965 reflect the heavier dependence by corporations on sources other than internal corporate savings. Net new issues of non-financial corporate securities increased by $264 million to $988 million, and chartered bank loans to businesses, excluding financial companies, increased by $698 million to $5,627 million.
Of particular significance to Canada's capital markets during 1965 were the U.S. balance of payments guidelines announced on February 10, 1965, and the default on its notes of a major Canadian sales finance company in June 1965. The U.S. guidelines, including the revisions in December 1965, as outlined in the section on the Balance of Payments, created some uncertainties initially throughout the capital markets, but the main impact was felt in the shortterm market and short-term flows became much less sensitive to covered shortterm yield differentials in favour of U.S. investors. The Atlantic Acceptance Corporation default on its obligations, a large proportion of which were held by U.S. investors, was of much more serious consequence to the short-term market. Investor confidence, both at home and abroad, was affected by this event and short-term borrowers, especially sales finance companies, experienced difficulties in raising funds in the market through the balance of 1965. Shortterm paper outstanding fell by 25 per cent or by $350 million to $1,069 million during the second half of 1965. Partly offsetting the loss of short-term funds to finance companies in this period was an increase by $170 million or 48 per cent in chartered bank loans to instalment finance companies to a level of $527
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Seasonally Adjusted
Average of Wednesdays - Billions of Dollars
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Seasonally Adjusted Monthly - Billions of Dollars
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million. Net new issues of securities by financial corporations in the last six months of 1965 amounted to $243 million compared with $197 million in the same period of 1964.
During 1965 money supply, defined as total currency and chartered bank deposits, increased by 12 per cent compared with a 6 per cent increase in 1964. While this increase in money supply reflected strong demands for credit it also reflected measures taken by the Bank of Canada to counteract the effects of the U.S. guidelines and to maintain confidence during the aftermath of the Atlantic Acceptance Corporation default. The growth in money supply enabled chartered banks to meet a 17 per cent increase in loans without reducing their holdings of Government of Canada securities. There was, however, a decline in the more liquid assets of chartered banks from 32.0 per cent of total assets at the end of 1964 to 30.0 per cent at the end of 1965.
Net new issues of Canadian securities payable in other currencies, excluding short-term paper, declined from a total of $691 million in 1964 to $606 million in 1965. Provincial and municipal net new issues payable in other currencies declined by $196 million while net new issues of corporate securities in other currencies increased by $110 million in this period. The bulk of these net new issues were sold during the second half of 1965 reflecting in part the existence of a significantly wider long-term yield differential between U.S. and Canadian bonds in this period than in the first half of the year.
Demand and Supply or Funds through the Capital Markets Federal Government
Continued improvements in the federal government's financial position during 1965, coupled with a healthy cash position, enabled the federal government to retire on balance $52 million of its outstanding securities. In 1964 there was a $457 million increase in net new securities. Taking into consideration changes in both Bank of Canada and Government Account holdings of Government of Canada securities, there was a large reduction in the net impact on the capital market of federal government borrowing in 1965 compared with 1964, which made room for other borrowers in the public and private sectors.
In addition to the federal government's influence on the capital markets as a net borrower or net supplier of funds, considerable influence is exerted on the composition and holdings of outstanding obligations through its debt management operations. A full description of federal government debt operations for the fiscal year ending March 31, 1966, begins on page 104.
The Provincial and Municipal Governments
In 1965 the net new issues of direct and guaranteed bonds of the provinces and municipalities were reduced from the 1964 level. This reduction was particularly significant in the second half of 1965 for provincial bonds and throughout 1965 for municipal bonds. The total net new issues of provincial bonds in 1965 amounted to $646 million compared to $942 million in 1964. Net new issues of municipal bonds in 1965 were $183 million or approximately 48 per cent of the net new issues in 1964. During 1965 both the provincial and municipal governments reduced their borrowings in capital markets outside Canada compared to the previous year. In 1964 the total net new issues in currencies other than Canadian dollars of provincial and municipal bonds were $358 million and $117 million respectively. By comparison in 1965, net new issues in foreign currencies had been reduced to $252 million and $25 million respectively for the provinces and municipalities.

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NET CHANGES IN SECURITIES^ AND BANK LOANS<*>
OUTSTANDING FOR CALENDAR YEARS
(Millions of dollars)
Government of Canada securities.
801
827
457
-52
1965
1st half
2nd half
1st half
2nd half
Provincial governments
Securities^®	
Bank loans	
Sub-total	
Municipal governments
Securities	
Bank loans	
Sub-total	
Total Governments	
Private Canadian borrowers
Corporate bonds	
Other bonds	
Corporate stocks	
Commercial paper	
Bank loans to business and instalment finance companies	
Call and day-to-day loans	
Other bank loans	
Total Private	
Grand Total	
-16
899
917
-18
646
675
-20
382
384
-17
147
193
-3
1,734
57
2,103
62
1,837
158
964
1
480
61
1,358
42
72
116
892
8
237
138
1,894
3,628
29
144
-84
1,186
3,289
11
339
5
2,417
4,254
1,068
376
925
661
2,827
3,793
10
400
-78
1,413
1,893
1
-63
83
1,002
2,360
18
61
-36
1,813
1,885
22
-359
92
1,014
1,906
dllncludes foreign pay issues.
Excludes foreign bank loans.
<®Includes securities guaranteed by provinces.
(^Includes loans to grain dealers, personal loans, loans to farmers, loans to institutions, loans for insured mortgages and for Canada Savings Bonds. Source: Bank of Canada.
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Billions of Dollars
1961 62 63 64 65	1961 62 63 64 65
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On the other hand, there was during 1965 an increase in bank loans to both the provincial and municipal governments. Bank loans to the provinces increased from $30 million at the end of 1964 to $59 million by the end of 1965. At the same time bank loans to the municipalities increased from $363 million to $521 million by the end of 1965. A significant portion of this municipal borrowing was in anticipation of loans from the Municipal Development and Loans Board.
Corporations
A more rapid increase in business investment outlays than in business savings during 1965 caused businesses to rely more heavily on other sources of funds than in the previous year. As shown in Table 50 business gross fixed capital formation reached about $10.4 billion in 1965, an increase of $1.4 billion over the 1964 level, while business gross saving increased by about $400 million. Within the business sector, corporate savings (retained earnings after tax plus corporate capital cost allowances) increased by approximately $500 million, from $4.4 billion in 1964 to an estimated $4.9 billion in 1965, which is equal to about one third of the increase in corporate investment outlays during 1965. A significant increase in the level of non-farm inventories over 1964 levels had the effect of adding further strain on corporate financial resources.
Additional sources of funds tapped by corporations during the year were mainly increases in net new issues of securities and bank loans. In Table 51 net new issues of corporate bonds and stocks by corporations in 1965 amounted to $1,444 million compared with $1,068 million in 1964, which is equal to a 35 per cent increase over that year. A $325 million or 44 per cent increase in net new issues of corporate bonds from $743 million in 1964 to $1,068 million in 1965 was responsible for the largest proportion of the overall increase in net new corporate securities. About 30 per cent of the net new corporate bond issues were in other currencies compared with 28 per cent in 1964, reflecting a somewhat higher volume of net new corporate bond issue sales abroad. An increase of $48 million or about 15 per cent in net new issues of equity securities, preferred and common stock, took place in 1965.
As a result of the U.S. guidelines and the Atlantic Acceptance Corporation default on its obligations, all corporations, and particularly financial corporations, were forced to rely less on the money market for short-term funds in 1965 than in. 1964. Offsetting this, and providing additional funds was the substantial increase in chartered bank business loans to corporations and to finance companies. By the end of 1965 these two categories of loans had increased by 14 per cent and 76 per cent respectively to $5,627 million and $527 million.
Mortgage Credit
Lending institutions, Central Mortgage and Housing Corporation, and private, committed $3,015 million on mortgages for new and existing residences and other property in 1965. The increase in total commitments was 12 per cent, less than half the 26 per cent increase in each of the two preceding years. (See Table 52.) There was a deceleration in the commitment of funds to the housing sector in the second half of 1965. This reflected, amongst several factors, the very high rate of conventional mortgage approvals a year ago, physical shortages in the construction field, stiffening financial conditions following the mid-year disturbances in Canadian financial markets and the rise in interest rates in North America in the latter half of the year.
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The winter housebuilding incentive scheme, accompanied by the provision of mortgage funds through CMHC, was successfully repeated in the winter of 1965-66. CMHC once again temporarily relaxed existing policy by making direct loans available to merchant builders without the requirement that the houses must have been pre-sold. Preliminary information indicates that applications received under the 1965-66 programme are 2 per cent down from the corresponding total of last winter. Applications approved in 1964-65 totalled 33,579 dwelling units.
Reflecting the general uptrend in interest rates in North America, Canadian conventional mortgage rates on prime property rose from 6f-7 per cent early in 1965 to 7J-8 per cent, and in some cases higher, by the end of the year. Early in 1966 the NHA rate was raised from 6| per cent to 6f per cent.

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1961	1962	1963	1964	1965
		(Millions of dollars)			
Mortgage Loans Approved under National Housing Act CMHC direct					367
Single detached	225	152	253	312	Apartments and other	46	20	49	65	95<'>Sub-total	271	172	302	377	462Approved Lenders	178	129Single detached	321	316	281	Apartments and other	132	96	104	175	191Sub-total	453	412	385	353	320Total	724	584	687	730	782Conventional Mortgage Approvals New residences	356Single detached	174	187	250	294	Apartments and other	158	264	402	518	547Existing residences	539Single detached	215	256	306	443	Apartments and other	85	102	124	197	210Commercial and other	298	311	373	507	581Total conventional	930	1,120	1,455	1,959	2,233Grand Total	1,654	1,704	2,142	2,689	3,015of which:	Single residences new	720	655	784	784	852Apartment residences, etc. new	336	380	555	758	833Total residential new	1,056	1,035	1,339	1,542	1,685
Win addition to direct CMHC loans which refer only to new construction, CMHC also made rental loans for $22 million for existing multiple dwellings.
Source: Central Mortgage and Housing Corporation.
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Consumer Credit
Last year, buoyed by a 9.6 per cent increase in personal income after taxes from the corresponding first nine months of calendar year 1964, personal spending on goods and services rose by 7.3 per cent. There was also a substantial gain in personal holdings of financial assets. In an environment of confidence about future prospects, persons increased their short-term liabilities in 1965 to a level 13.9 per cent above that of a year earlier.
Through most of 1964 consumer credit expanded at an annual rate between
14.5	and 16.5 per cent. In the first half of 1965 it decelerated slightly, then rose again to an annual rate of 16.1 per cent in the third quarter.

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Amount outstanding seasonally adjusted	1964	1965	March	June	Sept.	Dec.	March	June	Sept.	Dec.(Millions of dollars)	Chartered banks	1,497	1,672	1,736	1,793	1,848	2,064	2,150	2,186Sales finance companies	886	996	1,038	1,035	1,023	1,099	1,136	1,140Consumer loan companies	796	837	866	904	925	975	994	1,029Quebec Savings Banks	14	14	15	15	17	18	17	16Life insurance companies	388	392	396	398	400	402	405	407Retail dealers W	620	626	643	727	668	667	696	794Sub-total	4,201	4,537	4,694	4,872	4,881	5,225	5,398	5,572Other retail(2)	426	435	445	479	430	438	457	482Credit unions and caisses	n.a.	n.a.	n.a.	840	n.a.	n.a.	n.a.	n.a.
n.a. not available.
d)Includes department stores, furniture and appliance dealers and the instalment credit of motor vehicle dealers.
<2)Includes oil companies credit cards.
Sources: Bank of Canada, Department of Insurance, Department of Finance, DBS, and Department of Agriculture.
Sources and Application of Funds-Private Financial Institutions
A consolidation of the assets and liabilities of deposit-accepting institutions is shown in Tables 54 and 55, and the percentage distribution of these assets and liabilities in Tables 56 and 57. The deposit-accepting institutions covered are the chartered banks, Quebec savings banks, trust companies and mortgage loan companies; caisses populaires and credit unions are excluded only because quarterly data on their operations is not available. Term liabilities of deposit-accepting institutions grew rapidly in 1965, in continuation of a trend which was apparent in 1964. In particular, the total of non-chequable, term and notice deposits and debentures and certificates rose much faster than the total of notes and chequable deposits. As a result, "other deposits and deposit-type liabilities" were 21.1 per cent of total liabilities at the end of 1965 as compared with 18.5 per cent and 16.1 per cent at December 31, 1964 and December 31, 1963 respectively.
This increase in term liabilities enabled deposit-accepting institutions to meet strong demands for loans and mortgages. Their loans and holdings of mortgages expanded by $1,972 million and $983 million respectively in 1965, as compared with corresponding increases of $1,056 million and $589 million in 1964. Because of these changes, the proportion of their assets held in the form of loans and mortgages rose to 50.1 per cent in 1963, to 54.1 per cent in 1964 and to 58.3 per cent in 1965. The highest rate of growth occurred in holdings of
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mortgages, which rose from 15.4 per cent of total assets at December 31, 1964 to 17.1 per cent at the end of 1965; this increase reflected both the high demand for mortgages and the attraction for deposit-accepting institutions of the high rates of interest on mortgages.
To finance the expansion of their loans and holdings of mortgages, deposit-accepting institutions used the additional funds made available by depositors and purchasers of their certificates and debentures; they also refrained from making any substantial additions to their holdings of government bonds even though net new issues of federal, provincial and municipal bonds totalled $775 million for the year. As a result, government bonds fell from 33.5 per cent to
30.1	per cent of their total assets during 1965. In this regard, deposit-accepting institutions were continuing a trend already in force in 1964 when their holdings of government bonds showed little change and when the proportion of such bonds fell from 36.1 to 33.5 per cent of total assets.
With the increase in the proportions of their assets held in the form of loans and mortgages to over 55 per cent and the decline in their holdings of government bonds to 30.1 per cent, deposit-accepting institutions during 1965 approached a point where further extensions in their loans and holdings of mortgages had become more dependent upon the expansion of their deposits and other deposit-type liabilities. To some extent, this higher proportion of assets held in loans and mortgages had been made possible because of the increases in the proportion of their liabilities accounted for by term and notice deposits. This proportion cannot, however, be increased indefinitely without affecting the cash flows and liquidity of these institutions.
Table 54 indicates that the institutions covered by this analysis increased their loans to governments, businesses and individuals by approximately $2 billion in 1965 and their loans against mortgages by approximately $1 billion. Holdings of treasury bills, bonds, equities and other securities remained virtually unchanged at the end of the year.
The main private financial institutions not covered by the above analysis are the insurance companies and pension funds. These institutions are mainly concerned with gathering savings on a contractual basis and are among the most important investors in long-term securities and other longer term obligations in Canada. Life insurance companies and trusteed pension funds account for the bulk of the total assets in this group.
During 1965, the Canadian assets of sixteen life insurance companies(1), which account for about 84 per cent of total net premium income in Canada, increased by about $600 million. Funds financing this increase arose mainly out of insurance operations in Canada (net premium income) together with about $44 million transferred from earnings abroad. The sixteen life insurance companies were net sellers of government securities during 1965. Portfolio investments in Government of Canada bonds were reduced by $77 million and holdings of provincial and municipal bonds were reduced by $16 million and $4 million respectively. Funds obtained from disinvestment in these securities helped in part to finance the increase in holdings of other securities. Insurance companies, like the deposit-accepting institutions analyzed above, have been increasing the proportion of their assets held in the form of mortgage loans and sales agreements. In 1965 the net increase in assets held in this form totalled $390 million. Net investment in corporate bonds amounted to $191 million and net investment in corporate stocks amounted to $48 million.
(1)Statistical data up to the end of June 1965 are based upon cash transactions by 12 insurance companies representing about 74 per cent of net premium income for all companies and thereafter the data relate to 16 insurance companies representing about 84 per cent of such net premium income. The figures quoted will therefore tend to understate asset increases.

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ASSETS OF DEPOSIT-ACCEPTING INSTITUTIONS^
(In millions of dollars)
1963	1964	1965	31st December	31st March	30th June	30th September	31st December	31st March	30th June	30th September	31st December^Loans:	Canadian day to day loans	263	163	193	258	253	167	213	265	251Call and short loans	145	93	127	120	150	165	154	203	208To instalment finance companies	302	279	295	243	299	288	357	425	527To other businesses	5,186	5,329	5,658	5,734	5,762	6,058	6,480	6,624	6,850To individuals	2,254	2,228	2,381	2,408	2,660	2,710	2,869	2,924	3,050To non-profit institutions	234	232	241	247	262	246	268	269	285To provinces	48	33	28	54	30	14	13	35	59To municipalities	301	374	302	303	363	465	405	446	5218,723	8,731	9,225	9,367	9,779	10,113	10,759	11,191	11,751Mortgages	3,302	3,421	3,573	3,725	3,891	4,094	4,344	4,619	4,874Government bonds Govt, of Canada treasury bills	1,778	1,719	1,662	1,725	1,756	1,797	1,747	1,824	1,880Govt, of Canada bonds	5,655	5,651	5,553	5,467	5,562	5,532	5,687	5,581	5,580Provincial bonds	653	666	655	630	655	677	675	636	625Municipal bonds	445	473	489	482	480	506	502	488	5008,531	8,509	8,359	8,304	8,435	8,512	8,611	8,529	8,585Other securities	Short term notes(3>	112	240	267	236	159	315	343	260	250Industrial Development Bank debentures	240and stock	184	187	194	200	213	219	226	229	Other corporate bonds	709	738	750	757	753	761	795	815	830Stocks	117	119	125	121	124	124	138	135	1401,122	1,284	1,336	1,314	1,249	1,419	1,502	1,439	1,460Assets abroad (net)	102	73	-9	-20	101	168	30	3	75All other assets	1,854	1,815	1,622	1,572	1,796	1,724	1,775	1,737	1,795Total	23,634	23,833	24,106	24,262	25,269	26,030	27,021	27,518	28,540
^Excluding credit unions and caisses populaires. <2) Estimated.
<3>Of sales finance and other companies.
Source: DBS, and Bank of Canada.
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LIABILITIES OF DEPOSIT-ACCEPTING INSTITUTIONS^ (In millions of dollars)
1963	1964	1965	31st December	31st March	30th June	30th September	31st December	31st March	30th June	30th September	31st Decern ber^2*Bank of Canada Notes	1,886	1,845	1,916	1,920	2,026	1,938	2,053	2,071	2,153Chequable deposits of:	518	Government of Canada	969	833	829	430	773	683	674	804Provincial governments(3)	183	224	208	170	204	267	360	344	344Other financial institutions	88	112	103	108	122	120	143	156	165Other Canadian residents(4)	14,405	14,290	14,408	14,692	14,913	14,937	15,371	15,763	16,125Total Chequable Deposits	15,645	15,459	15,548	15,400	16,012	16,007	16,548	16,781	17,438Other deposits and deposit-type liabilities:	Non chequable demand deposits	489	579	609	642	710	733	767	748	760Term deposits, G.I.C.'s, debentures and instalment certificates	2,124	2,267	2,367	2,396	2,458	2,723	2,832	2,925	3,015Other notice deposits	1,191	1,224	1,369	1,445	1,505	1.818	2,031	2,186	2,044Total Non-Chequablc and Time De-	posits	3,804	4,070	4,345	4,483	4,673	5,274	5,630	5,859	6,019Deposit and deposit-type liabilities to nonresidents	231	287	211	227	221	233	215	196	200Total deposit and deposit-type liabilities	21,566	21,661	22,020	22,030	22,932	23,452	24,446	24,907	25,810Shareholders' equity	1,613	1,651	1,658	1,679	1,708	1,743	1,761	1,799	1,880All other liabilities	455	521	428	553	629	835	814	812	850Total	23,634	23,833	24,106	24,262	25,269	26,030	27,021	27,518	28,540^Excluding credit unions and caisses populaires.	*
<2>Estimated.
Includes non-chequable deposits.
(^Includes demand and savings deposits at chartered banks and chequable demand deposits at trust and loan companies. Source: DBS, and Bank of Canada.
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The Budget-Appendix

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ASSETS OF DEPOSIT-ACCEPTING INSTITUTIONS (Percentage distribution)
-	1963	1964	1965	31st December	31st March	30th June	30th September	31st December	31st March	30th June	30th September	31st DecemberLoans:	Canadian day-to-day loans	1.07	0.68	0.80	1.06	1.00	0.64	0.79	0.96	0.88Call and short loans	0.61	0.39	0.53	0.49	0.59	0.63	0.57	0.74	0.73To Instalment Finance Companies	1.28	1.17	1.22	1.00	1.18	1.11	1.32	1.54	1.85To other businesses	21.94	22.36	23.47	23.63	22.80	23.27	23.98	24.07	24.00To individuals	9.54	9.35	9.88	9.92	10.53	10.41	10.62	10.63	10.67To non-profit institutions	0.99	0.97	1.00	1.02	1.04	0.95	0.99	0.98	1.00lo provinces	0.20	0.14	0.12	0.22	0.12	0.05	0.05	0.13	0.21To municipalities	1.27	1.57	1.25	1.25	1.44	1.79	1.50	1.62	1.8336.91	36.63	38.27	38.61	38.70	38.85	39.82	40.67	41.17Mortgages	13.97	14.35	14.82	16.35	15.40	15.73	16.08	16.79	17.08Government bonds	Government of Canada treasury bills	7.52	7.21	6.89	7.11	6.95	6.90	6.47	6.63	6.59Government of Canada bonds	23.93	23.71	23.04	22.53	22.01	21.25	21.05	20.28	19.55Provincial bonds	2.76	2.79	2.72	2.60	2.51	2.60	2.50	2.31	2.19Municipal bonds	1.88	1.98	2.03	1.99	1.90	1.94	1.86	1.77	1.7536.10	35.70	34.68	34.23	33.45	32.70	31.87	30.99	30.08Other securities	Short-term notes	0.47	1.01	1.11	0.97	0.63	1.21	1.27	0.94	0.88Industrial Development Bank debentures and	stock	0.78	0.78	0.80	0.82	0.84	0.84	0.84	0.83	0.84Other corporate bonds	3.00	3.10	3.11	3.12	2.98	2.92	2.94	2.96	2.91Stocks	0.50	0.50	0.52	0.50	0.49	0.48	0.51	0.49	0.494.75	5.39	5.54	5.41	4.94	5.45	5.22	5.23	5.12Assets abroad (net)	0.43	0.31	-0.04	-0.08	0.40	0.65	0.11	0.01	0.26All other assets	7.84	7.62	6.73	6.48	7.11	6.62	6.57	6.31	6.29Total	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00
Source: DBS, and Bank of Canada.
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The Budget-Appendix

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LIABILITIES OF DEPOSIT-ACCEPTING INSTITUTIONS^) (Percentage distribution)
1963	1964	1965	31st December	31st March	30th June	30th September	31st December	31st March	30th June	30th September	31st DecemberBank of Canada Notes	
Chequable deposits of : Government of Canada	
Provincial Governments	
Other Financial Institutions	
Other Canadian residents	
Total Chequable Deposits	
Other deposits and deposit-type liabilities: Non-chequable demand deposits	
Term deposits, G.I.C.'s, debentures and instalment certificates	
Other notice deposits-	
Total Non-chequable and Time Deposits	
Deposits and deposit-type liabilities to nonresidents	7.98 4.10 .77 .37 60.95	7.74 3.50 .94 .47 59.96	7.95 3.44 .86 .43 59.77	7.91 1.77 .70 .45 60.56	8.02 3.06 .81 .48 59.02	7.45 2.62 1.03 .46 57.38	7.60 2.49 1.33 .53 56.89	7.53 1.88 1.25 .57 57.28	7.54 2.82 1.21 .58 56.5066.20	64.86	64.50	63.48	63.37	61.49	61.24	60.98	61.112.07 8.99 5.04	2.43 9.51 5.14	2.53 9.82 5.68	2.65 9.88 5.96	2.81 9.73 5.96	2.82 10.46 6.98	2.84 10.48 7.52	2.72 10.63 7.94	2.66 11.27 7.1616.10	17.08	18.02	18.48	18.50	20.26	20.84	21.29	21.09.98	1.20	.88	.94	.87	.90	.80	.71	.70Total deposit and deposit-type liabilities....	91.25	90.89	91.35	90.80	90.75	90.10	90.47	90.51	90.44Shareholders' Equity	6.82	6.93	6.88	6.92	6.76	6.70	6.52	6.54	6.58All Other Liabilities	1.93	2.19	1.64	2.28	2.49	3.20	3.01	2.95	2.98Total	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00
U>See footnotes Table 55.
Source: DBS, and Bank of Canada.
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The Budget-Appendix
March 29, 1966
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The Budget-Appendix Federal Government Debt Operations
(Fiscal year ending March 31, 1966)
In**? budget speech of April 26, 1965, a budgetary deficit of $300 million, a non-budgetary deficit of $225 million assuming no Exchange Fund charges and total cash requirements of $525 million were forecast. Government of Canada marketable securities, excluding regular weekly issues of three month and six month treasury bills, scheduled to mature within the fiscal year 1965-66 amounted to $1,705 million.
As a result of a higher rate of economic expansion than had been anticipated, federal government budgetary revenues are now expected to exceed the original forecast by almost $300 million while budgetary expenditures are expected to remain close to original estimates. The resulting net decrease in the budgetary deficit is partially offset by a significant increase in the original non-budgetary deficit estimate. Part of this increase has resulted from Exchange Fund transac-«i°nn'	?asl requirements, before debt changes, are expected to be about
$100 million lower than the original estimate made in the April 1965 budget.
There were several changes in the federal government's unmatured debt during the past fiscal year, the net effect of which produced an increase in such debt amounting to $160 million. The bulk of this increase as shown in Table 58 came from net sales of Canada Savings Bonds which amounted to $205 u11 cc 0a!Stan^'S [DOT] marketable securities, excluding Treasury Bills, declined j i ml, lon- lhe mcrease in cash provided by the net increase in unmatured debt helped to meet a good portion of the federal government's cash requirements. A ;ecr ,,e " the federal government's cash balance from $681 million at the end of March 1965 to about $600 million at the end of March, 1966, will finance the balance of the federal government's cash requirements.

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(Millions of dollars)	
	Increase	Decrease
Treasury Bills-weekly		10 205 100	155
Canada Savings Bonds			
Unemployment Insurance Fund			
Marketable Securities				
		
	315 -155	155
	160	
Federal government cash balances throughout the 1965-66 fiscal year have generally been high enough to allow considerable flexibility in formulating debt management policies. The overriding consideration in debt management during this period has been the desire to complement monetary and fiscal policies Subordinated to this consideration but nevertheless playing important roles in determining the size and frequency of issues, maturity lengths, coupon rates and prices have been the general debt management aims of achieving a broader market, of extending maturity lengths when possible, and of providing greater flexibility m future debt management operations.
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March 29, 1966
The Budget-Appendix
During the first quarter of calendar 1965, Canada's bond and money markets became unsettled. The United States' balance of payments programme, introduced on February 10, 1965, which asked U.S. banks, financial institutions and other businesses to reduce voluntarily their foreign lending and investment activities, had a particularly unsettling effect on Canada's bond and money markets. Also having a bearing on general market conditions at this time was the buildup of a heavy calendar of new corporate and provincial bond issues. On April 1 1965 $200 million Government of Canada 4j per cent bonds matured. It was decided to refund $175 million only of the maturing issue. The refunding issue had a maturity length of 2 years 6 months and was an addition to the outstanding 3f per cent bonds due October 1, 1967. Details of this and other new^Government of Canada bond issues floated during the fiscal year are shown in lable o9.
In the weeks following the April 1 refunding issue, upward pressures on shortterm rates became increasingly evident, reflecting in part the effects of the U.S. guidelines. Upward adjustments in long-term yields also occurred when the previously anticipated heavy calendar of new provincial and corporate bond issues began to materialize. $400 million Government of Canada 3 2 per cent bonds matured on July 1, 1965. This issue was refunded in part by a new $32o million bond issue in three tranches, ranging in maturity length from ten months to five years and open as to amount in each maturity.
In the intervening period between the July 1 bond issue and the September 1 issue a sequence of events brought about a further change in monetary conditions. A major disturbance occurred on June 14, 1965, when Atlantic Acceptance Corporation defaulted on its obligations. This event had a severe impact on the financial system in general and on Canada's rapidly growing money market 111 particular. Despite the sizeable increases in money supply which occurred as a result of Bank of Canada attempts to meet the situation in the money market, upward pressures on interest rates developed. The mid-year review of capital spending intentions indicated an 18.6 per cent increase over 1964 expenditures instead of the original 13.7 per cent estimate. It was recognized that realization of these capital spending intentions could create strains on the economy and lead to a further widening in the balance of payments deficit on current account. Cost pressures began to appear in the construction industry. An announcement was made by the Prime Minister at the beginning of August to the effect that the Government was deferring certain construction projects in order to alleviate pressures of demand on the construction industry. Heavy demands for funds were mainly responsible for the further increase in yields which occurred during this period.
On September 1, 1965, $450 million 3f per cent Government of Canada bonds were due to mature. The full amount of $450 million was refunded. As shown in Table 59, the new refunding issue was in three tranches including the first long-term maturity of the year-$100 million 5J per cent bonds due May 1, 1990 and having a maturity length of 24 years 8 months.
The outlook for the Canadian economy changed little over the remaining months of the year. Consumer and business opinion continued to be decisively optimistic. In choosing refunding issues to meet $325 million 85 per cent bonds due December 1, 1965 and $330 million 3| per cent bonds due February 1, 1966, however, several other important factors also had to be considered. In the three week period immediately preceding the announcement of the December 1 refunding a substantial upward adjustment in Canadian bond yields took place in all maturities. Increasing concern that Canadian exemption from y-®-Interest Equalization Tax and her special position under the U.S. guidelines were endangered, a weaker U.S. bond market and a relatively poor response to
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^	TABLE 59
ES	DETAILS OF NEW ISSUES AND RETIREMENTS OF GOVERNMENT OF CANADA

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Date of Issue	Maturing Bonds	Amount ($ millions par value)	New Bonds	Amount ($ millions par value)	Net Change in Amount Outstanding	Term of New Bonds	Price at Issue (%)	Yield at Issue (%)
1965								
Jan.29	3|% Sept. 1, 1965	175	-175	Feb. 1	3j% Feb. 1, 1965	415	31% May 1, 1966	175	+ 35	1 yr. 3 mos.	99.20	4.165% Oct. 1, 1973	275	8 yrs. 8 mos.	100.00	5.00Mar. 25	3f% Sept. 1, 1965	125	-	-125	April 1	41% April 1,1965	200	31% Oct. 1, 1967	175	- 25	2 yrs. 6 mos.	98.55	4.37April 15	5% Oct. 15,19870)	3	-	- 3	July 1	31% July 1,1965	400	31% May 1, 1966	150	1 yr. 10 mos.	99.33	4.3241% June 1, 1967	50	- 75	1 yr. 11 mos.	99.50	4.525% July 1, 1970	125	5 years	99.75	5.06Sept. 1	31% Sept. 1, 1965	450	31% Sept. 1, 1966	205	1 year	99.00	4.7951% Oct. 1, 1969	145	0	4 yrs. 1 mo.	100.75	5.2951% May 1, 1990	100	24 yrs. 8 mos.	98.50	5.36Oct. 15	5% Oct. 15,1987(1)	3	-	- 3	Dec. 1	3|% Dec. 1,1965	325	4% Dec. 15, 1966	150	1 yr. 1 mo.	98.85	5.1551% April 1, 1969	100	- 25	3 yrs. 4 mos.	100.25	5.4151% Oct. 1, 1975	50	9 yrs. 10 mos.	100.00	5.50Totals	(Calendar 1965)	2,095	1,700	-396	1966	Jan. 3	C.N.R. 3%	Jan. 3, 1966	35	- 35	Feb. 1	3f% Feb. 1, 1966	330	4% April 1, 1967	170	1 yr. 2 mos.	98.70	5.165% July 1, 1970	50	- 30	4 yrs. 5 mos.	98.50	5.3851% Aug. 1, 1980	80	14 yrs. 6 mos.	100.00	5.50Totals (Fiscal year 1965-66)	1,745	1,550	-195	
W This issue was made in New York and bonds of this issue are subject to partial redemption at par for the sinking fund on each interest payment date, commencing with April 15, 1965, in a principal amount equal to U.S. $2,500,000.
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The Budget-Appendix
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March 29, 1966
The Budget-Appendix
new provincial, municipal and corporate bond issues brought to the market in this period all contributed to the widespread expectations that higher bond yields were in the offing. In the light of these developments it was considered desirable to avoid adding to market difficulties. Thus, only $300 million of the maturing $325 million 3| per cent bonds due December 1, 1965 was refunded and the Bank of Canada agreed to subscribe for a minimum of $100 million of the new issue. Also, investors were offered the choice of three maturities-two shortterm and one medium-term, as described in Table 59. The issue was priced on the market to maintain market stability.
Shortly after the December 1, 1965 refunding issue, a revised Balance of Payments programme was announced by the U.S. Government which set out guidelines to non-financial U.S. corporations with respect to their direct investments abroad, including those in Canada. It was reaffirmed, however, that Canadian borrowers would continue to have unlimited access, exempt from the Interest Equalization Tax, to the U.S. market for new issues of long-term securities. Early in December the U.S. Federal Reserve Board approved an increase in the discount rate from 4 per cent to 4§ per cent. The Bank of Canada also increased its Bank Rate from 4f per cent to 4f per cent and announced that the policy of the Bank would continue to be directed to making provision for the overall credit needs of sound economic growth.
The reaction in the Canadian bond market to these developments was small, in part because of the strong technical position which had emerged over the preceding weeks' bearish atmosphere, and in part because unlimited access by Canadian borrowers to the U.S. long-term market was to continue. A somewhat sharper reaction to the U.S. Federal Reserve Board's announcement took place in the U.S. bond market.
On February 1, 1966, $330 million 3| per cent bonds were due to mature. Not wishing to upset the relatively delicate stability in Canadian interest rates, which in the face of declining U.S. bond prices was bringing about a narrowing of the yield differential between U.S. and Canadian bonds at a time when first quarter capital inflows were expected to be at a relatively high level, priority was given to designing an issue having a minimum impact on market prices. It was decided to refund $300 million only of the maturing $330 million 3| per cent bonds due February 1, 1966 and to offer investors a wide choice of maturities. A refunding issue was offered with three maturities, described more fully in Table 59, open as to amount in each maturity and priced close to prevailing market levels. In addition, the Bank of Canada offered to primary distributors $25 million in each of 5 per cent Government of Canada bonds due October 1, 1973 and 5i per cent Government of Canada bonds due May 1, 1990 out of its own portfolio in exchange for the new issue. This had the effect of making available an even wider choice to Canadian investors and, since these bonds offered by the Bank of Canada were not exempt from U.S. Interest Equalization Tax, U.S. investor interest was kept to a minimum.
As in previous years, outstanding issues were added to where possible during the fiscal year 1965-66 in order to provide a broader market and to provide greater flexibility in future debt management operations. Of the thirteen new issues during 1965-1966, nine were additions to existing issues and four new maturity dates were opened. In the circumstances, it was not possible to achieve any lengthening of maturity during this period, and the average term to maturity of Government of Canada marketable securities, excluding perpetual bonds, declined from 7 years 11 months to 7 years 9 months.
March 29. 1966
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The Budget-Appendix

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Monthly Averages - Per Cent
23033-223J
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March 29. 1966
The Budget-Appendix
The Canada Savings Bond campaign of 1964 offered an initial interest rate of 4| per cent and a yield to maturity of 5 per cent per annum. These rates were competitive with those available elsewhere to the general public and the amount of Savings Bonds outstanding increased by $480 million during 1964 to a total of $5,613 million at the end of the year. In planning the 1965 campaign, approximately the same interest rates were offered as in 1964 even although it was recognized that the rate was less competitive with rates offered on other savings instruments. It was anticipated that its effect would be to reduce net receipts from Savings Bonds; in the event, the net amount of outstanding Savings Bonds rose by only $253 million in 1965.

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March 29. 1966
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The Budget-Appendix
Interest Rates
Table 60 indicates the quarter by quarter changes in interest rates of a broad representative list of investments. The most significant changes which took place in 1965 were the continuous upward adjustments in the general level of interest rates after the first quarter and a flattening of the yield curve associated with the relatively greater increase in short-term rates than in longterm rates.
The upward adjustments in the general level of interest rates reflect the heavier demands for credit associated with the high rate of economic growth achieved in 1965 and a tighter monetary policy posture. In addition to these general developments were two events of particular significance to the shortterm market, namely, the U.S. guidelines announced in February and the default of Atlantic Acceptance Corporation in June, which helped to bring about a relatively greater increase in short-term rates of under one year maturity than in the rest of the maturity range. While finance companies were particularly hard pressed to raise funds in the short-term market after June, the undermining of investor confidence brought about by the Atlantic Acceptance Corporation default caused other financial corporations to experience difficulties also. From March 31 to the end of 1965 short-term rates, as represented by prime finance and commercial paper, increased by about 160 basis points while long-term Government of Canada bonds increased by about 40 basis points in yield.

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Period to Maturity	Issuer	Investment	1964	1965	Changes in each quarter of 1965	Dec.	March	June	Sept.	Dec.	1st	2nd	3rd	4th4.19	4.19	4.44	4.75	5.13	Nil	+0.25	+0.31	+0.384.38	4.13	4.63	4.88	4.95	-0.25	+0.50	+0.25	+0.07Finance Companies	Prime Finance Paper:	4.14	3.89	4.27	4.87	5.75	-0.25	+0.38	+0.60	+0.88High	4.39	4.14	4.52	5.02	6.00	-0.25	+0.38	+0.50	+0.98Corporations	Prime Commerical Paper...	4.38	4.13	4.63	4.88	6.00	-0.25	+0.50	+0.25	+ 1.123.63	3.88	4.13	4.25	5.25	+0.25	-j-0.25	+0.12	+ 1.00Trust Companies	G.I.C.'s	3.92	3.92	4.50	4.63	5.38	Nil	+0.58	+0.13	+0.75Term Deposits	4.00	4.00	4.13	4.75	5.50	Nil	+0.13	+0.62	+0.753.82	3.62	3.93	4.13	4,56	-0.20	+0.31	+0.20	+0.434.20	3.95	4.15	4.63	5.05	-0.25	+0.20	+0.48	+0.42Finance Companies	Prime Finance Paper:	4.55	4.42	4.81	5.06	5.88	-0.13	+0.39	-j-0.25	+0.82High	4.68	4.55	4.93	5.32	6.13	-0.13	+0.38	+0.39	+0.81Corporations	Prime Commercial Paper...	4.63	4.50	4.88	5.13	6.00	-0.13	+0.38	+0.25	+0.874.00	4.25	4.37	4.50	5.63	+0.25	+0.12	+0.13	+1.13Trust Companies	G.I.C.'s	4.25	4.21	4.57	4.70	5.56	-0.04	+0.36	+0.19	+0.80Term Deposits	4.38	4.38	4.50	4.88	5.75	Nil	+0.12	+0.38	+0.873.96	3.73	4.04	4.35	4.78	-0.23	+0.31	+0.31	+0.434.13	4.38	4.50	4.63	5.63	+0.25	+0.12	+0.13	+1.00G.I.C.'s	4.46	4.34	4.69	4.94	5.58	-0.12	+0.35	+0.25	+0.64Term Deposits	4.50	4.50	4.63	5.00	5.75	Nil	+0.13	+0.37	+0.754.75	4.75	5.00	5.00	5.63	Nil	+0.25	Nil	+0.63Trust Companies	G.I.C.'s	4.83	4.83	5.00	5.20	5.76	Nil	+0.17	+0.20	+0.56Term Deposits	5.00	4.88	5.00	5.25	5.75	-0.12	+0.12	-j-0.25	-j-0.504.15	4.04	4.32	4.93	5.14	-0.11	+0.28	+0.61	+0.214.30	4.33	4.43	5.01	5.11	+0.03	+0.10	+0.58	+0.104.56	4.57	4.84	5.09	5.25	+0.01	+0.27	+0.25	+0.164.83	4.85	5.10	5.21	5.42	+0.02	+0.25	+0.11	+0.214.97	5.05	5.19	5.32	5.41	+0.08	+0.14	+0.13	+0.095.07	5.09	5.16	5.36	5.45	+0.02	+0.07	+0.20	+0.095.41	5.41	5.50	5.76	5.90	Nil	+0.09	+0.26	+0.145.57	5.55	5.69	5.96	6.03	-0.02	+0.14	+0.27	+0.075.48	5.46	5.63	5.84	6.01	-0.02	+0.17	+0.21	+0.17Long Term	Industrial corporations	Bonds	5.47	5.50	5.64	5.83	6.05	+0.03	+0.14	+0.19	+0.22
Total Change in 1965
+0.94
+0.57
+ 1.61 + 1.61 + 1.62 + 1.62 + 1.46 + 1.50
+0.74
+0.85
+1.33 + 1.45 + 1.37 +1.63 +1.31 +1.37
+0.82
+1.50
+1.12
+1.25
+0.88
+0.93
+0.75
+0.99
+0.81
+0.69
+0.59
+0.44
+0.38
+0.49
+0.46
+0.53
+0.58
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The Budget-Appendix
March 29, 1966	COMMONS DEBATES	3523
The Budget-Appendix
Pakt II

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Table of Contents
Page
Introduction	 3524
Highlights of the government's financial operations during 1965-66. 3524
Budgetary accounts	 3527
Revenue	 3528
Expenditure	 3536
Assets and liabilities as at March 31, 1966	 3566
Summary	 3566
Liability accounts	 3567
Asset accounts	 3576
Net debt	 3586
The cash position	 3586
The public debt	 3589
Supplementary detailed tables	 3595
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March 29, 1966
The Budget-Appendix


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This Part of the Budget Papers presents in summary form a review of the accounts of the Government of Canada for the fiscal year 1965-66. The fiscal year of the government ends on March 31, but under the provisions of section 35 of the Financial Administration Act, for thirty days after the end of each fiscal year, payments for the discharge of debts properly applicable to the old year may be made and charged to that year. Consequently the books must remain open for some time after the fiscal year-end to take into account these payments and to record various adjusting entries. The figures used in this report are based on ten months actual and two months estimated. The final figures when they become available next July or August will vary to some extent from those given in the following pages.
Previous year figures have been adjusted to reflect transfers of duties pursuant to the Public Service Rearrangement and Transfer of Duties Act.

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This section outlines the financial operations of the government giving a brief summary of the budgetary and non-budgetary transactions, the unmatured debt transactions and the changes in the cash position and the debt position during 1965-66. More detailed explanations of these transactions are given in subsequent sections of this Part.	[DOT]
The following table summarizes the budgetary and non-budgetary transactions for 1965-66 with comparative figures for 1964-65 and indicates how these transactions affect the government's cash balances:
March 29, 1966
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The Budget-Appendix

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(in millions of dollars)
Summary or Budgetary and Non-Budgetary Transactions and Changes in Cash Position	Fiscal year ending March 31	
	1966 (estimated)	1965
Budgetary transactions-		
Revenue-		
	6,832	6,367
	'841	813
	7,67$	7,180
Expenditure-		
	1,585	1,586
Non-defence		6| 122	5,632
	7,707	7,218
	-34	-38
Non-budgetary transactions (excluding unmatured debt trans-		
actions)-		
Receipts and credits-		
Repayment of temporary loans to old age security fund	25	75Repayment of other loans, investments and advances	51	65Net annuity, insurance and pension account receipts	705	545289	1491,070	8$4Disbursements and charges-	Advances to exchange fund	51	20Redemption of non-interest-bearing notes payable on demand..	108	219Other loans, investments and advances	896	700168	2791,22$	1,218Net amount available from or required for (-) non-budgetary	transactions	-153	-384Overall cash requirements to he financed by increase In unmatured	debt or decrease in cash balances	-187	-422Net increase in unmatured debt outstanding in the hands of the	public	147	275Net increase or decrease (-) in Receiver General bank balances...	-40	-147
Budgetary transactions
The budgetary revenue, expenditure and deficit as forecast in the budget speech of April 26, 1965 and the figures as now estimated for the fiscal year 1965-66 are shown in the following table:

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(in millions of dollars)
Budgetary Transactions for Fiscal Year 1965-66	Budget forecast April 26,	Actual (estimated)	Increase or decrease (-) compared with April 26, 1965 forecast	1965	Amount	Per cent7,350 7,650	7,673 7,707	323	4.3957	0.75
300	34	-266	
				
3526
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March 29, 1966
The Budget-Appendix Revenue
Budgetary revenue of the government in the fiscal year 1965-66 is estimated at $7,673 million. This is $323 million or approximately 4J per cent more than the April 26, 1965 budget forecast and $493 million or 7 per cent more than the total of $7,180 million collected in 1964-65.
Tax revenue accounts for $465 million and non-tax revenue for $28 million of the increase over 1964-65 receipts.
The yield from personal income tax, corporation income tax and the tax on dividends, interest, etc., going abroad is $159 million more than collections in 1964-65 and receipts from the sales tax are $180 million more.
Expenditure
Budgetary expenditure of the government in 1965-66 is estimated at $7,707 million, $57 million or approximately one per cent higher than forecast and $489 million or 7 per cent higher than expenditures in 1964-65.
Defence expenditure at $1,585 million is 21 per cent of total budgetary expenditure, compared with $1,586 million or 22 per cent in 1964-65 and is again the largest category.
Civil or non-defence expenditure at $6,122 million compares with $5,632 million in 1964-65, an increase of $490 million. The main changes are an increase of $115 million in fiscal, subsidy and other payments to provinces and a decrease of $120 million in contributions to provinces under the Hospital Insurance and Diagnostic Services Act due to the fact that Quebec opted out of the program.
Deficit
Expenditure of $7,707 million exceeds revenue of $7,673 million resulting in a deficit of $34 million compared with a deficit of $300 million as forecast on April 26, 1965 and the deficit of $38 million in 1964-65.
Non-budgetary transactions (excluding unmatured debt transactions)
Non-budgetary transactions are those which increase or decrease the government's asset and liability accounts and do not enter into the calculation of the annual budgetary surplus or deficit.
In 1965-66 estimated net disbursements and charges of $1,223 million exceed net receipts and credits of $1,070 million resulting in a net requirement of $153 million. In 1964-65 net receipts and credits totalled $834 million, net disbursements and charges totalled $1,218 million, resulting in a net requirement of $384 million.
Old age security fund
Receipts by the fund during 1965-66 are estimated at $1,163 million and exceed estimated payments of $923 million from the fund by $240 million. In 1964-65 receipts were $960 million and payments were $885 million.﻿March 29, 1966
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The excess of $240 million of receipts over payments resulted in the liquidation of the $25 million in outstanding temporary loans by the Minister of Finance and a credit balance of $215 million in the old age security fund.
The transactions in the account during 1965-66 compared with those for 1964-65 are as follows:
Fiscal year ending March 31
	1966 (estimated)	1965
	(in millions of dollars)	
Tax receipts	
Pension payments	1,163 923	960 885Excess of receipts over payments	240	75Temporary loans by the Minister of Finance carried forward 	-25	-100Balance in old age security fund	215	-25
Unmatured debt transactions
Unmatured debt transactions in 1965-66 reflect an increase of $147 million in unmatured debt outstanding in the hands of the public compared with an increase of $275 million in 1964-65.
Cash position
Receiver General bank balances are expected to be $642 million at March 31, 1966, a decrease of $40 million from the March 31, 1965 total. (Cash received after March 31 is recorded in the subsequent fiscal year bank accounts.) The decrease in cash balances is the result of the non-budgetary requirements of $153 million plus the budgetary deficit of $34 million partly offset by the increase of $147 million in unmatured debt outstanding in the hands of the public.
Debt position
As a result of these budgetary and non-budgetary transactions the gross public debt increased by $1,044 million to $27,617 million, net recorded assets by $1,010 million to $12,079 million and net debt by $34 million to $15,538 million at March 31, 1966. The increase in net debt reflects the budgetary deficit of $34 million.

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Estimated total revenue at $7,673 million for 1965-66 is $493 million more than the total for the previous fiscal year. Estimated total expenditure of $7,707 million is $489 million more than the total for 1964-65. The estimated deficit is $34 million compared with $38 million for the previous fiscal year.
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The Budget-Appendix

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Fiscal Years Ended March 31 Billions of Doll ars

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Budgetary Revenue, Expenditure and Deficit (in millions of dollars)
Fiscal Year Ending March 31
1957		
1958		
1959		
1960		
1961		
1962		
1963		
1964		
1965		
1966	(estimated)
Budgetary- revenue	Budgetary expenditure	Surplus or deficit (-)5,106.5	4,849.0	257.55,048.8	5,087.4	-38.64,754.7	5,364.0	-609.35,289.8	5,702.9	-413.15,617.7	5,958.1	-340.45,729.6	6,520.6	-791.05,878.7	6,570.3	-691.66,253.2	6,872.4	-619.27,180.3	7,218.3	-38.07,673.0	7,707.0	-34.0
Revenue
Budgetary revenue in 1965-66 is estimated at $7,673 million, $493 million or 7 per cent over the total of $7,180 million received in 1964-65. Tax revenue at $6,832 million accounts for 89 per cent of the total revenue for the fiscal year and non-tax revenue at $841 million accounts for 11 per cent.	.
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BUDGETARY REVENUE	BUDGETARY EXPENDITURE
BY MAJOR SOURCE	BY MAJOR FUNCTION
For Fiscal Year Ended March 31, 1966 Estimated
1.	Does not include payments out of old age security fund.
2.	Does not include those payments mode to provincial and municipal governments for specific purposes.

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Fiscal Years Ended March 31 Billions of Dollars
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The Budget-Appendix
The more important items are increases of $47 million in personal income tax collections, $86 million in corporation income tax collections, $180 million in sales tax receipts and $54 million in customs import duties.

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Budgetary Revenue by Major Sources (in millions of dollars)
Source
Tax revenue- Income tax-[DOT] Personal'11.... Corporation'1'.
Fiscal year ending March 31
(estimated)
Amount Per cent
On dividends, interest, etc., going abroad	
Excise taxes-
Sales'1)'2'	
Other	
Customs import duties.
Excise duties	
Estate tax'3'	
Other taxes	
Non-tax revenue-
Return on investments	
Post office-net postal revenue. Other non-tax revenue	
Total budgetary revenue.
2.150.0
1.610.0
170.0
1.385.0
295.0
676.0
439.0 106.8
0.2
6.832.0
436.0
235.0
170.0
841.0
7,673.0
28.0
21.0
2.2
18.1
3.8
8.8
5.7
I.	4
89.0
5.7
3.1
2.2
II.	0
Amount Per cent
100.0
2,103.3
1,523.8
143.7
1,204.6
269.1
622.1
411.4
88.6
0.2
6,366.8
422.7
230.4
160.4
813.5
7,180.3
29.3
21.2
2.0
16.8
3.8
8.7
5.7
1.2
88.7
5.9
3.2
2.2
11.3
Increase
or
decrease (-)
Amount Per cent
100.0
46.7
86.2
26.3
180.4
25.9
53.9 27.6 18.2
465.2
13.3
4.6
9.6
27.5
492.7
2.2
5.4
18.3
15.0
9.6
8.7
6.7
20.5
7.3
3.1
2.0
6.0
3.4
6.9
(''Excluding tax credited to the old age security fund-
Personal income tax	
Corporation income tax	
Sales tax	
1965-66	. Qfi, R-
(estimated)	1964~65
. 496.0	431.9
. 151.0	145.2
. 516.0	383.2
1,163.0	960.3
GO Net after deduction of refunds and drawbacks.
<3) Includes duties levied under the Dominion Succession Duty Act.
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Federal-provincial fiscal arrangements
Under fiscal arrangements, that became operative in 1962, the federal government withdrew in part from the field of direct taxation and left the vacated area to the provinces. The federal government offered to collect the provincial income taxes without charge provided that provincial personal income tax was expressed as a percentage of federal personal income tax otherwise payable and provincial corporation income tax applied to taxable income calculated in the same way as for federal income tax purposes. To allow for the imposition of the provincial income taxes, the Income Tax Act was amended to abate the federal income tax otherwise payable by individuals in all provinces by 16 per cent in 1962, 17 per cent in 1963, 18 per cent in 1964, 21 per cent in 1965 and 24 per cent in 1966. For 1965 and 1966, the Province of Quebec obtained an additional 23 percentage points of the federal income tax otherwise payable in that province in compensation of the fact that the payment of youth allowances and the full cost of certain programs which are supported jointly by federal and provincial governments in the other provinces have been assumed by that province. The personal income tax abatement rates for Quebec in 1965 and 1966 are thus 44 per cent and 47 per cent respectively. For the period 1962-67 the federal corporation income tax rates are abated by 9 percentage points for taxable income earned in a province other than Quebec and by 10 percentage points for taxable income earned in Quebec. The additional one percentage point for Quebec is in compensation of the payment by that province of university grants which in the other provinces are made by the federal government. The federal government has entered into tax-collection agreements under which it collects the provincial personal income taxes for all provinces except Quebec and the provincial corporation income taxes for all provinces except Ontario and Quebec.
Under these collection agreements, payments are made monthly to each province based on an estimate of that province's tax revenue. When the actual amounts of assessed returns are established, usually in the month of December following the end of the fiscal year, adjustments are made with the provinces.
Under the 1962-67 fiscal arrangements, the federal government agreed to abate its estate tax by 50 per cent in the fiscal years 1962-63 and 1963-64, and by 75 per cent in the fiscal yeais 1964-65, 1965-66 and 1966-67 in any province that imposed its own succession duties. To a province that did not wish to reenter the succession duty field the federal government agreed to pay 50 per cent of the federal estate tax revenue in 1962-63 and 1963-64 and 75 per cent in 1964-65, 1965-66 and 1966-67. During 1962-63, Quebec and Ontario collected their own succession duties while the other provinces received a payment in lieu of imposing duties. Starting in 1963-64 British Columbia joined Ontario and Quebec in imposing its own succession duties. When the abatement was raised to 75 per cent in 1964-65, British Columbia increased its rates accordingly but Quebec and Ontario accepted in lieu of the extra abatement a payment equivalent to 25 per cent of the federal estate tax in those provinces.
Tax on personal income
In 1965-66 the largest source of government revenue is again the personal income tax. The yield (excluding the old age security tax) is $2,150 million or 28 per cent of all budgetary revenue. The increase of $47 million or 2 per cent over 1964-65 collections is due principally to the higher level of personal incomes during the year partly offset by higher provincial abatements and a federal tax reduction effective July 1, 1965. In addition to the federal revenue, $357 million was allocated to the provincial tax collection agreements account under the
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The Budget-Appendix
terms of federal-provincial fiscal arrangements. In 1964-65 federal revenue from this source was $2,103 million and in addition $369 million was allocated to the provincial tax collection agreements account.
The tax on personal incomes levied under the Old Age Security Act and credited to the old age security fund is $496 million compared with $432 million in 1964-65.
Corporation income tax
The corporation income tax is the second largest source of government revenue. The yield (excluding the old age security tax) is $1,610 million or 21 per cent of all budgetary revenue. The increase of $86 million or 5 per cent over the 1964-65 collections is due mainly to the continuous growth of corporation profits in recent years. In addition to the federal revenue, $118 million was allocated to the provincial tax collection agreements account under terms of federal-provincial fiscal arrangements. In 1964-65 federal revenue from this source was $1,524 million and in addition $135 million was allocated to the provincial tax collection agreements account.
The tax on incomes of corporations levied under the Old Age Security Act and credited to the old age security fund is $151 million compared with $145 million in 1964-65.
Taxes on dividends, interest, etc., going abroad
Revenue in this category is derived from taxes withheld on payments of dividends, interest, rents, royalties, alimony and income from estates and trusts paid to non-residents. Collections for 1965-66 are $170 million, an increase of $26 million or 18 per cent over the 1964-65 total.
Excise taxes
Revenue under this heading is from the general sales tax and other excise taxes.
From a revenue standpoint the general sales tax is the most important tax levied under the Excise Tax Act. Receipts (excluding the old age security tax) are $1,385 million or 15 per cent higher than in the previous fiscal year.
The tax on sales levied under the Old Age Security Act and credited to the old age security fund is $516 million.
The yield from excise taxes levied under the Excise Tax Act, other than the general sales tax, at $295 million is $26 million more than in 1964-65.
Customs import duties
Receipts from this source are $676 million compared with $622 million in 1964-65. The increase of $54 million or 9 per cent reflects the greater volume and value of imports during 1965-66.
Excise duties
Excise duties are levied on alcoholic beverages (other than wines) and tobacco products. (Additional taxes on tobacco products are levied under the Excise Tax Act.) Net receipts in 1965-66 are $439 million compared with $411 million in 1964-65.
Gross receipts of $261 million from duties on alcoholic beverages ($155 million in respect of spirits and $106 million in respect of beer) and $184 million from duties on tobacco products have been reduced by refunds and drawbacks of $6 million. In 1964-65 gross receipts of $240 million from duties on alcoholic beverages ($135 million in respect of spirits and $105 million in respect of beer) and $177 million from duties on tobacco products were reduced by refunds and drawbacks of $6 million.
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The Budget-Appendix

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Fiscal Years Ended March 31 Millions of Dollars
Estate tax
Revenue in this category is derived under the Estate Tax Act. Net receipts of $107 million are $18 million more than in 1964-65.
Other taxes
Revenue under this heading during the fiscal year is $200 thousand, the same as in the previous year.

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Non-tax revenue is $841 million, an increase of $28 million over the 1964-65 total.

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(in millions of dollars)
Non-Tax Revenue	Fiscal year ending March 31	Increase or decrease (-)	1966 (estimated)	1965	Amount	Per centReturn on investments	436.0	422.7	13.3	3.1Post office-net postal revenue	235.0	230.4	4.6	2.0Refunds of previous years' expenditure	16.0	20.5	-4.5	-22.0Services and service fees	64.0	60.9	3.1	5.1Proceeds from sales	25.0	24.3	0.7	2.9Privileges, licences and permits	39.0	30.8	8.2	26.6Bullion and coinage	12.0	12.3	-0.3	-2.4Other	14.0	11.6	2.4	17.1841.0	813.5	27.5	3.4
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The Budget-Appendix
Return on investments
These receipts, in an amount of $436 million, consist of income derived from loans and advances made by the government and from investments by the government in productive or earning assets. In 1964-65 receipts were $423 million.
Receipts from Crown corporations at $314 million are $3 million more than in the previous year. The main changes are a decrease of $34 million in payments by The St. Lawrence Seaway Authority in respect of deferred interest and increases of $15 million in the Bank of Canada profits paid to the government and $11 million in payments by the Central Mortgage and Housing Corporation.
The yield from other loans and investments at $122 million is $10 million more than the 1964-65 total. This is mainly accounted for by the receipt of $8 million in interest on special United States of America securities-Columbia River Treaty.

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(in millions of dollars)
Return on Investments	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Loans to, and investments in, Crown corporations- Bank of Canada-profits	143.1	128.3	14.8Canadian National Railways	11.3	11.6	-0.3Canadian Overseas Telecommunication Corporation. . ..	2.0	2.7	-0.1Central Mortgage and Housing Corporation	104.4	93.3	11.1Eldorado Mining and Refining Limited	1.5	1.5	Export Credits Insurance Corporation	5.6	3.0	2.6Farm Credit Corporation	21.0	13.9	7.1National Capital Commission	3.3	2.9	0.4National Harbours Board	4.1	3.4	0.7Northern Canada Power Commission	2.5	2.1	0.4Polymer Corporation Limited	4.0	4.0	-33.7The St. Lawrence Seaway Authority	9.4	43.1	Miscellaneous	1.3	1.4	-0.1314.1	311.2	2.9Other loans and investments- United Kingdom	1.9	1.2	0.7Other national governments	5.0	5.2	-0.2Provincial governments	1.0	1.1	-0.1Exchange fund account	02.8	63.6	-0.8Interest-bearing deposits with chartered banks	20.5	19.6	0.9Profit on bond exchange	0.9	-0.9Securities investment account	2.0	5.6	-3.6Sinking fund and other investments held for retirement of un matured debt	0.3	0.3Soldier and general land settlement loans and veterans land act advances	9.6	8.3	1.3Special United States of America securities-Columbia River Treaty	9.2	1.1	8.1Unemployment Insurance Commission	0.2	-0.2Miscellaneous	9.6	4.7	4.9131.9	111.5	10.4436.0	422.7	13.3
Post office revenue
Gross post office receipts are $272 million but authorized disbursements from revenue for salaries and rent allowances, other allowances and commissions at semi-staff and revenue offices, commissions at sub-offices, transit charges on Canadian mail forwarded through and delivered in foreign countries, etc. in the
March 29, 1966
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The Budget-Appendix
amount of $37 million, brings net revenue to $235 million. In the previous fiscal year gross revenue was $264 million, authorized disbursements were $33 million and net revenue was $231 million.

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(in millions of dollars)
Post Office Revenue	Fiscal year ending March 31	Increase1966 (estimated)	1965	or decrease (-)Postage-	254.8	246.6	8.2In Canada	From foreign countries	4.0	4.3	-0.3Commission on money orders	9.2	9.0	0.2Rental of post office boxes	2.4	2.2	0.21.6	1.6	m.o	262.7	8.SLess-	-28.8	-3.7Salaries and allowances at semi-staff and revenue offices.	-32.5	Transit charges on foreign correspondence	-1.3	-1.3	Other	-3.2	-3.2	-3.7-37.0	-ss.s	235.0	230.4	4.6
Net costs of operating the Post Office Department during 1965-66 (excluding the $37 million charged to revenue) of $239 million exceeds net revenue by $4 million. However, in making this comparison, it should be noted that the total shown for post office revenue does not reflect any payment for the franking privilege covering parliamentary and departmental mail or for certain miscellaneous services provided for other government departments and agencies, nor does the total shown for operating expenses reflect any charges for premises occupied by the Post Office Department or for accounting and miscellaneous services provided by other departments.
Refunds of previous years' expenditure	. .
Refunds in 1965-66 of expenditures made in prior years are $16 million, a decrease of $5 million from the comparable total for 1964-65.
The Department of National Defence received $7 million of which $4 million was due to contract re-negotiations and the Department of Veterans Affairs received $3 million in refunds of veterans pensions, allowances and reestablishment credits.
Services and service fees
Revenue at $64 million during 1965-66 is $3 million more than in the previous fiscal year.
The Department of Transport received $20 million including aircraft landing fees of $11 million, marine steamers earnings of $3 million, harbour dues and wharfage of $2 million and air-ground radio service fees of $1 million; the Royal Canadian Mounted Police received $16 million for police services mainly to provinces and municipalities; the Department of Agriculture received $9 million of which $6 million is for services in connection with the inspection, weighing, storage and elevation of grain and $2 million for race track supervision; the Department of Finance received $5 million derived from the issuance of coin sets by the Royal Canadian Mint; the Department of National Health and Welfare received $5 million including a $3 million reimbursement by the provinces for treatment of Indians in federal government hospitals; and the Department of Trade and Commerce received $3 million, mainly from weights and measures and electricity and gas inspection fees.
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March 29, 1966
The Budget-Appendix Proceeds from sales
Receipts of $25 million from this source are $1 million more than the total for 1964-65.
The Department of Defence Production received $10 million mainly from the sale of surplus Crown assets and Central Mortgage and Housing Corporation received $5 million from the sales of properties.
Privileges, licences and permits
Revenue from this category totals $39 million for 1965-66, $8 million more than receipts of $31 million in 1964-65.
The Department of Transport received $15 million mainly from rentals, concessions and radio licence fees; the Department of Northern Affairs and National Resources received $10 million of which $6 million was in respect of oil and gas and $1 million from transient motor vehicle licences; and the Department of Public Works received $4 million for rental of public buildings and sites.
Bullion and coinage
Revenue of $12 million derived from the operations of the Royal Canadian Mint consists mainly of a net gain on coinage. Small amounts are also obtained from gold refining charges, handling charges and gain on gold refining. In 1964-65 revenue from this source was $12 million. In addition $5 million has been received from the issuance of coin sets and reported under services and service fees.
Other non-tax revenue
Other non-tax revenue in the amount of $14 million is $2 million more than in 1964-65.
Expenditure
Budgetary expenditure is estimated at $7,707 million for 1965-66, $489 million or 7 per cent higher than in 1964-65.

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Fiscal Years Ended March 31 Billions of Dollars
March 29, 1966
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The Budget-Appendix

[Stage Direction]
Statement of Budgetary Expenditure by Departments and Major Classifications
(in millions of dollars)
	Fiscal year ending March 31					
-	1966 (estimated)	1965	decrease (-)	Amount	Per cent	Amount	Per cent	Amount	Per centDefence expenditure- National Defence	1,536.7	20.0	1,537.8	21.3	-i.i	-0.1Defence Production^1*	14.6	0.2	19.7	0.3	-5.1	-25.9Emergency Measures Organization	8.4	0.1	7.7	0.1	0.7	9.1Industry 	25.0	0.3	20.5	0.3	4.5	22.01,584.7	20.6	1,585.7	22.0	-1.0	-0.1Non-defence expenditure- Agriculture	197.6	2.5	165.7	2.3	31.9	19.2Atlantic Development Board	22.9	0.3	4.3	0.1	18.6	432.6Atomic Energy	53.6	0.7	46.6	0.6	7.0	15.0Canadian Broadcasting Corporation...	99.4	1.3	88.0	1.2	11.4	13.0Central Mortgage and Housing Corporation 	19.4	0.3	15.0	0.2	4.4	29.3Citizenship and Immigration	203.7	2.6	179.7	2.5	24.0	13.4External Affairs	153.7	2.0	131.2	1.8	22.5	17.1Finance- Public debt charges	1,085.0	14.1	1,051.3	14.5	33.7	3.2Fiscal, subsidy and other payments to provinces	
Government's contribution to the public service superannuation account	473.3	6.1	358.4	5.0	114.9	32.058.0	0.7	55.6	0.8	2.4	4.3Other	213.7	2.8	157.4	2.2	56.3	35.81,830.0	23.7	1,622.7	22.5	207.3	12.8Fisheries	35.4	0.5	25.6	0.3	9.8	38.3Forestry	59.2	0.8	49.8	0.7	9.4	18.9Justice	11.8	0.2	10.9	0.1	0.9	8.3Labour	24.4	0.3	24.3	0.4	0.1	4.1Unemployment Insurance Act administration and government's contribution	98.6	1.3	95.2	1.3	3.4	3.6m.o	1.6	119.5	1.7	3.5	2.9Legislation	14.9	0.2	14.2	0.2	0.7	4.9Mines and Technical Surveys	108.6	1.4	94.2	1.3	14.4	15.3National Capital Commission	18.6	0.2	10.4	0.1	8.2	78.8National Health and Welfare- Family allowances	552.0	7.2	545.8	7.6	6.2	1.1Government's contributions under the Hospital Insurance and Diagnostic Services Act	314.0	4.1	433.9	6.0	-119.9	-27.6Other	312.4	4.0	321.4	4.4	-9.0	-2.81,178.4	15.3	1,301.1	18.0	-122.7	-9.4National Research Council, including the Medical Research Council	74.1	1.0	56.6	0.8	17.5	30.9National Revenue	95.2	1.2	86.9	1.2	8.3	9.6Northern Affairs and National Resources	71.7	0.9	62.6	0.9	9.1	14.5Indian affairs branch	81.5	1.1	64.8	0.9	16.7	24.1153.3	2.0	127.4	1.8	25.8	20.2Post Office	239.2	3.1	210.5	2.9	28.7	13.6Public Works	259.4	3.4	224.0	3.1	35.4	15.8Royal Canadian Mounted Police	82.0	1.1	76.2	1.1	5.8	7.6Secretary of State	25.8	0.3	21.9	0.3	3.9	17.8Office of the Solicitor General	57.3	0.7	39.0	0.5	18.3	46.9Trade and Commerce	46.8	0.6	54.7	0.8	-7.9	-14.4Transport	523.8	6.8	466.4	6.5	57.4	12.3Veterans Affairs	370.0	4.8	351.6	4.9	18.4	5.2All Other Departments	65.3	0.8	38.5	0.5	26.8	69.66,122.3	79.4	5,632.6	78.0	489.7	8.7Total budgetary expenditure....	7,707.0	100.0	7,218.3	100.0	488.7	6.8
U>Does not include non-defence expenditure which is included in "All Other Departments".
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March 29. 1966
The Budget-Appendix

[Stage Direction]
Fiscal Years Ended March 31
Millions of Dollars	nrav ruigc.cc
1962	63	64	65	66*	1962	63	64	65	66*
* Estimated
1.	The unshaded areas of the tolumns in the chart lor health, welfare and social security represent pension poyments out of old age security fund not charged to budgetary expenditure in the year in which they were paid.
2.	Does not include those payments made to provincial and municipal governments for specific purposes.

[Stage Direction]
Expenditures of the Department of National Defence and the Emergency Measures Organization and defence expenditures of the Department of Defence Production and the Department of Industry are again the largest category of government expenditure. The total of $1,585 million for 1965-66 is 21 per cent of the aggregate budgetary expenditure of the government for the year and is $1 million less than the total of $1,586 million for 1964-65 when it was 22 per cent of total expenditure.
National Defence
Expenditures of the Department of National Defence are $1,537 million compared with $1,538 million in 1964-65, a decrease of $1 million.
Expenditures for air services are $620 million compared with $656 million in the previous fiscal year, for army services $460 million compared with $434 million, for naval services $266 million compared with $272 million and for inspection services $7 million, approximately the same as in the previous year.
The government's contribution to the Canadian forces superannuation account, of an amount equal to If times the contributions of permanent services personnel, is $59 million, the same as in the previous year. A further amount of $17 million, equal to one fifth of the actuarial deficiency arising out of pay increases, has been charged to budgetary expenditure in 1965-66.
Defence research and development costs are $73 million compared with $55 million in 1964-65, an increase of $18 million.
March 29, 1966
[Stage Direction]
The Budget-Appendix

[Stage Direction]
(in millions of dollars)
Defence Expenditure	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Department of National Defence-			
Naval services	266.3	272.5	-6.2Army services	459.6	433.6	26.0Air services	620.2	656.0	-35.8Inspection services	7.3	7.1	0.21,353.4	1,369.2	-15.8Canadian forces superannuation account-	Government's contribution	58.8	58.8	Amortization of deferred charges	16.8	13.4	3.4Defence research and development	73.0	54.5	18.5Mutual aid to NATO countries including contributions	towards military costs of NATO	18.6	27.5	-8.9Defence Construction (1951) Limited	2.1	2.2	-0.1Administration and general	14.0	12.2	1.81,536.7	1,537.8	-1.1Department of Industry -	Technological capability	25.0	20.5	4.5Department of Defence Production <0-	Canadian Arsenals Limited	1.8	4.6	-2.8Production capacity and capital assistance	2.4	0.7	1.7Administration and general	10.4	14.4	-4.014.6	19.7	-5.1Emergency Measures Organization	8.4	7.7	0.71,584.7	1,585.7	-1.0
(1)See also under "All Other Departments" at the end of this section.
Mutual aid to NATO countries including contributions towards military-costs of NATO at $19 million are $9 million less than the total of $28 million in 1964-65.
Emergency Measures Organization
Expenditures of the Emergency Measures Organization amount to $8 million, $1 million more than in the previous fiscal year.
Defence Production
Defence expenditures of the Department of Defence Production including those for Canadian Arsenals Limited total $15 million compared with $20 million in 1964-65.
Industry
Defence expenditures of the Department of Industry are $25 million, an increase of $5 million over the previous year. The increase is due to higher outlays in connection with the government program instituted in 1959-60 of supporting selected defence development programs in order to sustain technological capability in Canada's industry.
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The Budget-Appendix Cash outlays for defence
In addition to these budgetary expenditures for defence, there are other cash outlays which must be considered in arriving at the cost of Canada's defence program.

[Stage Direction]
(in millions of dollars)
Cash Outlays for Defence	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Budgetary expenditures-	1,536.7	1,537.8	-1.1Department of National Defence	Department of Defence Production^	14.6	19.7	-5.1Emergency Measures Organization	8.4	7.7	0.7Department of Industry(l>	25.0	20.5	4.51,584.7	1,585.7	-1.0Disbursements for-	2.4	-5.8Defence production revolving fund (net)	-3.4	Replacement of materiel account-sec. 11, National	0.4	-0.5Defence Act (net)	-0.1	-S.5	2.8	-6.SNet cash outlay for defence	1,581.2	1,588.5	-7.3
(*See also under "All Other Departments" at the end of this section.
Section 11 of the National Defence Act provides that materiel, not immediately required for the use of the Canadian defence forces or the Defence Research Board, may be sold to such countries and upon such terms as the Governor in Council may determine. The proceeds of such sales are credited to a special account to be used for the procurement of materiel. In 1965-66 credits to, and cash outlays from, the account are each $1 million. The balance in the account at March 31, 1966 is $1 million, approximately the same as at the previous fiscal year-end.
The Department of Defence Production also makes cash disbursements for the procurement of materials for use in the manufacture of defence equipment which are not recorded as budgetary expenditures. For purposes of accounting and control, these amounts are charged to the defence production revolving fund and are treated as assets on the books of the government until they are charged to the Department of National Defence or sold to defence contractors for use in the manufacture of defence equipment. During 1965-66 proceeds from sales of $49 million exceeded purchases of $46 million, resulting in a balance in the account as at March 31, 1966 of $27 million.

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Agriculture
Expenditures of the Department of Agriculture amount to $198 million, an increase of $32 million over the total for 1964-65.
Outlays for production and marketing are $61 million, an increase of $33 million over 1964-65 expenditures. The increase is due mainly to payments of $21 million to eligible producers for manufacturing milk and cream delivered to
March 29, 1966
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The Budget-Appendix
plants during the 1964-65 production year in accordance with terms and conditions prescribed by the Governor in Council (for which there was no comparable amount in 1964-65) and an increase of $11 million in respect of plant and plant products due mainly to payments to compensate certain agricultural producers for crop losses incurred in the 1964 and 1965 crop years.
The operating loss of the agricultural stabilization board is $41 million compared with $57 million in the previous fiscal year, a decrease of $16 million.
Expenditures for land rehabilitation, irrigation and water storage projects total $32 million, an increase of $6 million over the total of $26 million for 1964-65.
Research expenditures are $33 million compared with $29 million in the previous fiscal year.

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(in millions of dollars)
Agriculture	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Production and marketing- Animal and animal products	19.1	17.7	1.4Grants, contributions and subsidies to milk producers...	21.0	21.0Plant and plant products	18.8	7.7	11.1Administration and general	2.4	2.6	-0.261. S	28.0	83.3Agricultural stabilization board-net operating loss	40.7	57.1	-16.4Land rehabilitation, irrigation and water storage projects. . .	32.3	26.4	5.9Research	32.5	28.8	3.7Health of animals	15.4	13.5	1.9Farm Credit Corporation-net operating loss	1.2	0.5	0.7Board of grain commissioners	7.4	6.6	0.8Agricultural products board-net operating loss	1.7	0.3	1.4Administration and general	5.1	4.5	0.6197.6	165.7	31.9
Atlantic Development Board
Expenditures in respect of the Atlantic Development Board total $23 million compared with $4 million in 1964-65. Progress payments are made from time to time on projects which have been approved by the Board.
TABLE 12 (in millions of dollars)
Atlantic Development Board	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Payments to the Atlantic Development Board	20.0	3.6	16.4Federal share of the cost of a trunk highway program	2.0	2.0Administration and operation	0.9	0.7	0.222.9	4.3	18.6
March 29. 1966
The Budget-Appendix Atomic Energy
Expenditures by the government in respect of Atomic Energy of Canada Limited and the Atomic Energy Control Board are $54 million compared with $47 million in 1964-65.
Atomic Energy of Canada Limited received $52 million in respect of its research program, of which $40 million is for operation and maintenance and $12 million for construction or acquisition of buildings, works, land and equipment. In 1964-65 the company received $45 million of which $35 million was for operation and maintenance and $10 million for construction or acquisition.
The Atomic Energy Control Board received $2 million ($1 million in 196465) mainly for grants for researches and investigations.
TABLE 13 (in millions of dollars)
Atomic Energy	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Atomic Energy of Canada Limited- Research program- Current operation and maintenance	39.5	34.9	4.6Construction or acquisition of buildings, works, land and equipment	12.3	10.3	2.051.8	45.2	6.6Atomic Energy Control Board- Grants for researches and investigations with respect to atomic energy	1.6	1.2	0.4Administration	0.2	0.2	1.8	i.i	0.453.6	46.6	7.0
Canadian Broadcasting Corporation
Payments of $99 million by the government to the Canadian Broadcasting Corporation and charged to budgetary expenditures are $11 million more than the total of $88 million in 1964-65.
Grants for net operating requirements in respect of the national broadcasting service are $97 million, $11 million more than in 1964-65. There are no grants for capital requirements charged to budgetary expenditure in 1965-66.
In addition loans to the corporation for capital expenditure amount to $14 million in 1965-66.
TABLE 14 (in millions of dollars)
Canadian Broadcasting Corporation	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Grants in respect of the national broadcasting service- Net operating requirements	97.0	85.9	n.iInternational broadcasting service	2.4	2.1	0.399.4	88.0	11.4
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Central Mortgage and Housing Corporation
Budgetary expenditures of the government in respect of Central Mortgage and Housing Corporation at $19 million are $4 million more than the total of $15 million in 1964-65.
Loans in the amount of $10 million, originally made to municipalities and municipal sewerage corporations, were forgiven by Central Mortgage and Housing Corporation pursuant to section 36G of the National Housing Act and written off to budgetary expenditure.
Contributions of $5 million to provinces or municipalities for urban renewal are approximately the same as in 1964-65.
TABLE 15 (in millions of dollars)
Central Mortgage and Housing Corporation	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Loans forgiven by the corporation	10.3	7.0	3.3Contributions to provinces or municipalities for urban renewal	4.9	4.8	0.1Losses sustained- Federal-provincial projects	2.0	1.5	0.5Sale of mortgages	0.7	0.4	0.32.7	1.9	0.8Housing research and community planning	1.5	1.3	0.219.4	15.0	4.4
Citizenship and Immigration
Expenditures of the Department of Citizenship and Immigration are $204 million in 1965-66 compared with $180 million in the previous year.
Expenditures of the Indian affairs branch, which in previous years were included in the expenditures of the Department of Citizenship and Immigration, are now included in expenditures of the Department of Northern Affairs and National Resources and expenditures in respect of the national employment service, civilian rehabilitation branch, technical and vocational training branch, manpower consultative service and such parts of branches as relate to manpower, which in previous years were included in expenditures of the Department of Labour, are now included in expenditures of the Department of Citizenship and Immigration.
Payments of $119 million to provinces under the Technical and Vocational Training Assistance Act, from which the Province of Quebec has opted out in part, are $22 million more than the 1964-65 total, payments of $40 million under the municipal winter works incentive program to provinces and in respect of Indian bands are $2 million less, outlays of $23 million in respect of the national employment service are $2 million more and immigration expenditures of $15 million are $3 million higher.
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The Budget-Appendix
TABLE 16 (in millions of dollars)
Citizenship and Immigration	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Technical and Vocational Training Assistance Act- Payments to provinces	119.0	97.3	21.7Administration and general	1.2	0.6	0.6120.2	97.9	22. SPayments to provinces under the municipal winter works incentive program	40.4	42.8	-2.4National employment service- Administration	22.3	21.2	1.1Manpower mobility	0.5	0.522.8	21.2	1.6Immigration	15.0	12.2	2.8Citizenship	2.1	1.8	0.3Administration and general	3.2	3.8	-0.6203.7	179.7	24.0
External Affairs
Expenditures of the Department of External Affairs are $154 million for 1965-66, $23 million more than the total for the previous year.

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(in millions of dollars)
External Affairs	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
External aid office-			
Economic, technical, education and other assistance-			
International food aid program	34.3	20.6	13.7International development assistance	48.5	48.5	Contribution to the Indus Basin development fund..	1.7	6.4	-4.7Other	0.1	5.1	-5.0Administration	1.1	0.8	0.385.7	81.4	4.3Representation abroad	19.6	17.0	2.6Contributions to international multilateral economic and	special aid programs	18.1	9.8	8.3Assessments for membership in the international (including	commonwealth) organizations	10.3	9.0	1.3Other payments to international organizations and programs.	5.4	1.3	4.1Administration and general	14.6	12.7	1.9153.7	131.2	22.5
Outlays of $86 million by the external aid office are $4 million more than in 1964-65. There is a decrease of $5 million in contributions to the Indus Basin development fund and an increase of $14 million for the international food aid program.
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Costs of representation abroad at $20 million are $3 million higher than in 1964-65, contributions to international multilateral economic and special aid programs at $18 million are $8 million higher, assessments for membership in the international (including commonwealth) organizations at $10 million are $1 million higher and other payments to international organizations and programs at $5 million are $4 million higher.
Finance
Expenditures of the Department of Finance are $1,830 million for 1965-66 $207 million more than the previous year's total due mainly to increases of $115 million in payments to provinces, $34 million in public debt charges and $27 million in respect of forgiveness of indebtedness under the Municipal Development and Loan Act.

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(in millions of dollars)
Finance	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Public debt charges	1,085.0	1,051.3	33.7Fiscal, subsidy and other payments to provinces	
Public service superannuation account-	473.3	358.4	114.9Government's contribution	58.0	55.6	2.4Amortization of deferred charges	25.6	10.0	15.6Canadian Wheat Board-	83.6	65.6	18.0Carrying costs of temporary wheat reserves	37.5	34.0	3.5Prairie Grain Advance Payments Act	0.5	0.6	-0.1Grants to municipalities in lieu of taxes on federal property.. Forgiveness of indebtedness-municipal development and	36.9	84.6 35.7	3.4 1.2loan board	
Grants to universities-	30.0	2.6	27.4Payments to the Canadian Universities Foundation	27.8	27.3	0.5Office of the Comptroller of the Treasury	25.0	24.9	0.1Government's share of surgical-medical insurance premiums. Government's contribution as an employer to the unem-	9.7	9.3	0.4ployment insurance fund	1.1	0.9	0.2Administration and general	19.6	12.1	7.51,830.0	1,622.7	207.3
Public debt charges
Public debt charges are again the third largest item of budgetary expenditure, exceeded only by those for defence and those for health, welfare and social security.
Public debt charges consist of interest on the public debt, the annual amortization of bond discounts and commissions, the cost of issuing new loans and other costs incurred in servicing the public debt. These charges are $1,085 million for 1965-66 or 14 per cent of all budgetary expenditure compared with $1,051 million or 14 per cent for 1964-65.
Interest on public debt amounts to $1,052 million of which $823 million is in respect of unmatured debt and $229 million in respect of other liabilities. In 1964-65 total interest was $1,012 million of which $803 million was for unmatured debt and $209 million for other liabilities.
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The Budget-Appendix
The increase of $20 million in interest on unmatured debt reflects higher interest rates and an increase in unmatured debt. The increase in interest on other liabilities is due mainly to increases of $7 million in respect of the public service superannuation account and $11 million in respect of the Canadian forces superannuation account.
Other public debt charges at $33 million are $6 million less than in 1964-65,. attributable to lower expenditures in respect of annual amortization of bond discounts and commissions.
TABLE 19 (in millions of dollars)
Interest and Other Public Debt Charges	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Interest on public debt- Unmatured debt including treasury bills-[DOT] Payable in Canada	806.8	786.2	20.6Payable in New York	16.3	16.4	-0.1823.1	802.6	20.5Other liabilities- Annuity, insurance and pension accounts	225.7	206.3	19.4Deposit and trust accounts	3.2	3.2	19.4228.9	209.6	Total interest on public debt	1,052.0	1,012.1	39.9Other public debt charges-	36.4	-6.2Annual amortization of bond discounts and commissions.	30.2	Cost of issuing new loans	1.8	1.8	Servicing of public debt	1.0	1.0	-6.2SS.O	39.2	1,085.0	1,051.3	33.7
When considering the magnitude of these public debt charges and the burden they place upon the public treasury, it must be borne in mind that a substantial portion of the debt is attributable to, or is invested in, productive or earning assets. Therefore, in calculating the net burden of the government's annual interest charges, the income derived from loans, investments and other productive assets must be taken into account. For 1965-66 this income totals $436 million as shown in the non-tax revenue section under the heading "return on investments". This amount deducted from the gross total of $1,052 million for interest as shown in the table leaves a net amount of $616 million compared with a net of $589 million in 1964-65. Measured as a percentage of the net debt the burden of the net annual interest charges is 3.96 per cent in 1965-66 compared with 3.80 per cent in 1964-65.
TABLE 20 (in millions of dollars)
Net Burden of Annual Interest Charges	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
	1,052.0 -436.0	1,012.1 -422.7	39.9 -13.3
			
			
	616.0	589.4	26.6
			
	3.96	3.80	
			
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Fiscal, subsidy and other payments to provinces
Payments to provinces in the amount of $473 million are $115 million higher than in 1964-65.
However, in addition to the above payments, $475 million in provincial income taxes collected by the federal government on behalf of the provinces has been allocated to the provincial tax collection agreements account under the terms of the Federal-Provincial Fiscal Arrangements Act. A more detailed explanation of these arrangements is given in the tax revenue section of this Part.

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(in millions of dollars)
Fiscal, Subsidy and Other Payments to Provinces	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Payments under the Federal-Provincial Fiscal Arrangements Act and the Federal-Provincial Fiscal Revision Act (youth allowances)	351.2	321.3	29.9Payments under the Established Programs (Interim Arrangements) Act 0)	86.7	86.7Statutory subsidies	23.6	23.6	Transfer of certain public utility tax receipts	8.4	9.7	-1.3Crown Corporations (Provincial Taxes and Fees'* Act	3.8	-3.8Payments under the Federal-Provincial Tax Sharing Arrangements Act	3.4	3.4473.3	358.4	114.9
Payments made to the Province of Quebec in respect of opting out agreements.
A summary of payments, by provinces, during 1965-66 is given in the following table:
TABLE 22 (in millions of dollars)
Fiscal year ending March 31, 1966 (estimated)
Fiscal, Subsidy and Other Payments to Provinces	Payments under fiscal arrange- ments	Payments under Interim Arrange- ments Act	Statutory subsidies	Payments under the Federal-Provincial Fiscal Revision Act (youth allowances)	Transfer of certain public utility tax receipts	Payments under Federal- Provincial Tax Sharing Arrange- ments Act	TotalNewfoundland	41.6	1.7	0.2	0.3	43.8Prince Edward Island	9.7	0.7	0.1	(i)	10.5Nova Scotia	47.3	2.1	0.8	0.4	50.6New Brunswick	42.8	1.7	0.1	0.3	44.9Quebec	(«136.1	86.7	4.0	4.9 Cr.	2.2	0.1 Cr.	224.0Ontario	16.8	4.6	1.1	22.5Manitoba	27.8	2.1	0.1	0.5	30.5Saskatchewan	28.7	2.1	(1)	0.4	31.2Alberta	5.3	2.9	3.1	0.7	12.0British Columbia	1.7	0.7	0.9	3.3356.1	86.7	23.6	4.9 Cr.	8.4	3.4	473.3
WLess than $50,000.
<2>The credit of $4.9 million under the Federal-Provincial Fiscal Revision Act (youth allowances) will be recovered from this amount.
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The Budget-Appendix
Public service superannuation account
The government's contribution to the public service superannuation account, in an amount equal to the estimated current and prior service payments of individuals in 1964-65, is $58 million in 1965-66. In the previous fiscal year the government's contribution was $56 million.
A further amount of $26 million, equal to one fifth of the actuarial deficiency arising out of pay increases, has been charged to budgetary expenditure in 1965-66.
Canadian Wheat Board
Expenditures of the Canadian Wheat Board which were included under the Department of Trade and Commerce in 1964-65 are now included under the Department of Finance.
Expenditures during 1965-66 amount to $38 million compared with $35 million in the previous year and are mainly in respect of carrying costs of temporary wheat reserves.
Grants to municipalities
Payments to municipalities in lieu of taxes on federal property amount to $37 million, $1 million more than in 1964-65.
Forgiveness of indebtedness, the municipal development and loan board
Under the Municipal Development and Loan Act, advances are made to the municipal development and loan board to provide financial assistance by way of loans to municipalities to augment or accelerate capital works programs. The act also provides that the board shall, under certain conditions, forgive payment by the municipality of 25 per cent of the principal amount of the loan. During 1965-66 charges amount to $30 million compared with $3 million in the previous year.
Fisheries
Expenditures of the Department of Fisheries are $35 million in 1965-66, an increase of $10 million over the 1964-65 total, due mainly to outlays in respect of fisheries management and development.
TABLE 23 (in millions of dollars)
Fisheries	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Fisheries management and development- Conservation and development service	11.3	8.3	3.0Grants, contributions and subsidies	4.0	1.5	2.5Industrial development service	3.1	1.3	1.8Inspection service	2.6	2.3	0.3Canadian share of the expenses of international commissions	1.5	1.2	0.3Other	2.3	2.3	U-S	16.9	7.9Fisheries Research Board of Canada	9.2	7.4	1.8Administration and general	1.4	1.3	0.135.4	25.6	9.8
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Forestry
Expenditures of the Department of Forestry amount to $59 million compared with $50 million in the previous fiscal year.
The increase is due mainly to higher expenditures in respect of programs for rural development under the Agricultural Rehabilitation and Development Act and the Maritime Marshland Rehabilitation Act of $16 million compared with $10 million in 1964-65.
Freight assistance and grain storage costs on western feed grains at $21 million are $2 million higher than in 1964-65, outlays for forestry at $11 million are $1 million higher and contributions to provinces for assistance in forest inventory, reforestation, forest fire protection, forest stand improvement and forest access road construction at $8 million are $1 million less.
TABLE 24 (in millions of dollars)
Forestry
Freight assistance and grain storage costs on western feed
grains	
Rural development-
Agricultural Rehabilitation and Development Act	
Maritime Marshland Rehabilitation Act	
Forestry-
Forest research	
Forest products research	
Administration	
Contributions to the provinces-
Assistance in forest inventory, reforestation, forest fire
protection and forest stand improvement	
Forest access road construction	
Administration and general	
Fiscal year ending March 31		Increase or decrease (-)
1966 (estimated)	1965	
21.0	19.1	1.915.0	9.4	5.61.0	0.6	0.416.0	10.0	6.08.1	6.8	1.31.6	1.7	-0.11.2	1.0	0.210.9	9.6	t-45.9	5.7	0.22.0	2.8	-0.87.9	8.6	-0.63.4	2.7	0.759.2	49.8	9.4
Justice
Expenditures of the Department of Justice at $12 million, of which $9 million is for judges' salaries, travelling allowances and pensions and $3 million for administration, are $1 million more than in 1964-65.
TABLE 25 (in millions of dollars)
Justice	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Legal and other services-			
Judges' salaries, travelling allowances and pensions..	9.0	8.7	0 3Administration and general	2.8	2.2	0.611.8	10.9	0.9
3550
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The Budget-Appendix
Expenditures for correctional services, which previously were shown under the Department of Justice, are now shown under the Office of the Solicitor General and expenditures for the patent division, copyright and industrial designs division and the trade marks office are now shown under Privy Council.
Labour
Expenditures of the Department of Labour, including the Unemployment Insurance Commission, total $123 million compared with $119 million in 1964-65.
Expenditures in respect of the national employment service, civilian rehabilitation branch, technical and vocational training branch, manpower consultative service and such parts of branches as relate to manpower, which in previous years were shown under the Department of Labour, are now shown under the Department of Citizenship and Immigration.
TABLE 26 (in millions of dollars)
Labour	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Unemployment Insurance Commission- Administration of the Unemployment Insurance Act... .	33.1	33.1	Government's contribution to the unemployment insurance fund	65.5	62.1	3.498.6	95.2	S.4Winter house building program	14.4	16.3	-1.9Payments under the Government Employees Compensation Act	2.9	2.5	0.4Administration and general	7.1	5.5	1.6123.0	119.5	3.5
Unemployment Insurance Commission
Expenditures for the commission amount to $99 million including the government's contribution of $65 million to the fund. In 1964-65 expenditures were $95 million of which $62 million was the government's contribution to the fund.
Unemployment benefit payments are not charged to budgetary expenditure but are paid from the fund which is financed by equal contributions from employees and employers, by interest earned on investments and by the government's contribution of an amount equal to one fifth of the combined employee-employer contributions. Further information about the fund is given under the liability category "annuity, insurance and pension accounts".
Winter house building program
Under the winter house building program payments are made, in accordance with terms and conditions approved by the Governor in Council, of $500 per dwelling unit substantially built during the periods November 15, 1964 to March 31, 1965 and November 15, 1965 to April 15, 1966. In 1965-66 payments amount to $14 million compared with $16 million in the previous fiscal year.
Legislation
Costs of Legislation are $15 million compared with $14 million in 1964-65.
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TABLE 27 (in millions of dollars)
Legislation	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
House of Commons	11.7	11.1	0.6The Senate	2.7	2.7	Library of Parliament	0.5	0.4	0.114.9	14.2	0.7
Mines and Technical Surveys
Expenditures of the Department of Mines and Technical Surveys are $109 million compared with $94 million in the previous fiscal year.
The increase of $14 million was due mainly to $3 million for subventions in respect of electric power generated from eastern coal, for which there was no comparable expenditure in 1964-65, and to increases of $3 million for marine surveys and research and $3 million for research in astronomy and geophysics.
Expenditures of the water resources branch and the resource development branch, but excluding those parts of the said branches concerned with the administration of resources on Indian lands, contributions to provinces to assist in the development of roads leading to resources and expenditures made under the Atlantic Provinces Power Development Act, which previously were shown under the Department of Northern Affairs and National Resources, and expenditures of the National Energy Board, which previously were shown under the Department of Trade and Commerce, are now shown under the Department of Mines and Technical Surveys.
TABLE 28 (in millions of dollars)
Mines and Technical Surveys	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Dominion coal board	23.4	23.2 15.7 12.1 9.0 6.9 6.9 5.7 6.1 2.9	-?	
0.2 -1.4 1.6 3.2 1.4 1.0 1.3 0.6 2.8 2.5Emergency gold mining assistance	14.3	13.7 12.2	Marine surveys and research	Field and air surveys, mapping and aeronautical charting. ..	8.3 7.9 7.0	Mining and metallurgical investigations and research	Contributions to provinces to assist in the development of roads leading to resources	6.7	Research in astronomy and geophysics	5.7	Subventions pursuant to the Atlantic Provinces Power Development Act in respect of electric power generated from eastern coal	2.5	Polar continental shelf	1.5	1.5 0.7 0.7 2.8	Geographical surveys and research	0.9	0.2 0.2 0.8National energy board	0.9	Administration and general	3.6	
108.6	94.2		14.4
23033-225)
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The Budget-Appendix
National Capital Commission
Expenditures of the National Capital Commission are $18 million compared with $10 million in 1964-65.
Payments into the national capital fund amount to $12 million, an increase of $8 million over the previous year. Outlays for the operation and maintenance of parks, parkways, etc. at $5 million are $1 million more and interest charges of $2 million are $1 million less than in the previous fiscal year.

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(in millions of dollars)
National Capital Commission	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Operation and maintenance	4.6	3.4	1.2Interest charges (net)	1.9	2.5	-0.66.5	5.9	0.6Payment to the national capital fund	12.1	4.5	7.618.6	10.4	8.2
National Health and Welfare
Expenditures of the Department of National Health and Welfare at $1,178 million are $123 million less than the previous year's total of $1,301 million, due mainly to a decrease of $120 million in the government's contribution under the Hospital Insurance and Diagnostic Services Act as a result of the Province of Quebec opting out of this program under a federal-provincial agreement.
TABLE 30 (in millions of dollars)
National Health and Welfare	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Welfare services-			
Family allowances.. 	552.0	545.8	6.2Youth allowances	v	46.5	26.9	19.6Old age assistance	27.0	45.0	-18.0Blind persons allowances	3.6	5.6	-2.0Disabled persons allowances	14.8	23.4	-8.6Unemployment assistance	104.6	107.5	-2.9Fitness and amateur sport	2.0	2.0	Family assistance.	2.8	2.1	0.7Other	7.0	6.3	0.7760. S	764.6	-4.3Health services-	Government's contributions under the Hospital Insur-	ance ai}d Diagnostic Services Act.	314.0	433.9	-119.9Grants to provinces-	General health	32.0	35.2	-3.2Hospital construction	20.0	21.5	-1.5Other	7.0	6.8	0.2S7S.0	497.4	-m-4Medical services	37.5	32.5	5.0Food and drug services	5.3	4.3	1.0Administration and general	2.3	2.3	1,178.4	1,301.1	-122.7
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Welfare services account for $760 million, $4 million less than in 1964-65, health services account for $373 million compared with $497 million and medical services account for $37 million compared with $32 million in the previous fiscal year.
Family allowances
Family allowances are payable in respect of all children under sixteen years of age, resident in Canada, with minor exceptions such as in the case of children of immigrants who must reside in Canada one year before an allowance is payable. The monthly allowance is $6 if the child is under 10 years of age and $8 in the age group 10 to 15. Children of immigrants receive family assistance at the same rates during their first year of residence in Canada. As family assistance in 1964-65 was paid from a Department of Citizenship and Immigration vote the 1964-65 figures in the previous table have been adjusted accordingly.
In 1965-66 payments of $552 million account for 7 per cent of all budgetary expenditure compared with $546 million and 8 per cent in 1964-65. The increase of $6 million reflects the increase in the number of children in the eligible age groups.
TABLE 31 (in millions of dollars)
Family Allowances Payments	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Newfoundland	16.5 21.6 .1 9.	Nova Scotia	Prince Edward Island	3.3 19.1	-0.1 -0.2New Brunswick	18.9 166.1 182.4 25.9 26.9 42.3 47.0 1.2	Quebec	Ontario	Manitoba	Saskatchewan	Alberta	British Columbia	1.3 -0.1Northwest and Yukon Territories...	1.3	
552.0	545.8	6.2
Youth allowances
Under the Youth Allowances Act which was given Royal Assent on July 16, 1964, payments were effective from September 1964. Under provisions of this act payments of $10 per month are payable in respect of persons resident in Canada, other than those resident in the Province of Quebec, who have attained the age of 16 years and have not attained the age of 18 years who are in full time attendance at a school or university or are by reason of mental or physical infirmity precluded from attending school or university. During 1965-66 payments amount to $47 million compared with $27 million in 1964-65.
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(in millions of dollars)
Youth Allowances Payments	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)1.5	0.9	0.62.6	1.6	1.00.3	0.2	0.12.3	1.4	0.921.8	12.7	9.13.3	1.9	1.43.4	2.0	1.44.8	2.8	2.05.9	3.4	2.50.6	(1)	0.6
46.5	26.9	19.6
WLess than $50,000.
Old age assistance, disabled persons allowances, blind persons allowances and unemployment assistance
Under the Old Age Assistance Act, the federal government reimburses the provinces by paying 50 per cent of the lesser of $75 monthly or the amount of assistance given by the provinces in the form of monthly pensions to eligible persons in need who are in the age group 65 to 69. (Under the Old Age Security Act, all persons who satisfy the residence requirements of the act may receive a pension of $75 per month from the federal government out of the old age security fund provided that no pension is paid in any month before January 1966 in which the person had not attained 70 years of age, the age limit being reduced by one in each subsequent year until 1970.) Similarly, the federal government reimburses the provinces under the Blind Persons Act for allowances of not more than $75 per month to blind persons in need 18 years of age or over by paying 75 per cent of the total payments, and under the Disabled Persons Act by paying 50 per

[Stage Direction]
(in millions of dollars)
Federal Share of Old Age Assistance, Disabled Persons Allowances, Blind Persons Allowances and Unemployment Assistance	Fiscal year ending March 31, 1966 (estimated)			
Old age assistance	Disabled persons allowances	Blind persons allowances	Unemploy- ment assistance2.0	0.8	0.2	4.62.2	1.5	0.5	1.50.4	0.4	0.1	0.22.2	1.3	0.4	1.524.810.9	7.3	1.2	28.12.2	0.7	0.3	5.52.2	0.9	0.2	5.42.4	0.9	0.3	12.22.4	1.0	0.4	20.60.1	(1)	0)	0.2
27.0	14.8	3.6	104.6
MLess than $50,000.
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cent of not more than $75 per month for allowances to disabled persons in need 18 years of age or over. In 1965-66 payments for old age assistance amount to $27 million, for disabled persons allowances $15 million and for blind persons allowances $4 million. In 1964-65 payments were $45 million for old age assistance, $23 million for disabled persons allowances and $6 million for blind persons allowances. The decreases are due to the opting out of these programs by the Province of Quebec under federal-provincial agreement.
Under the Unemployment Assistance Act, the Minister may, with the approval of the Governor in Council, enter into an agreement with any province for the payment by Canada to the province of contributions not exceeding 50 per cent of unemployment assistance costs in the province. Contributions in 196566 are $105 million compared with $108 million in 1964-65. The decrease is due to the opting out of a portion of this program by the Province of Quebec under federal-provincial agreement.
The following table presents a distribution of these payments to provinces for 1965-66:
Government's contributions under the Hospital Insurance and Diagnostic Services Act
Contributions of $314 million to the provinces under the Hospital Insurance and Diagnostic Services Act are $120 million less than the 1964-65 total of $434 million, due mainly to the Province of Quebec opting out of this program.
TABLE 34 (in millions of dollars)
Government's Contributions under the Hospital Insurance and Diagnostic Services Act	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Newfoundland	9.7	9.6	0 1Nova Scotia	18.4	15.9	2.5Prince Edward Island	2.0	2.1	- 0 1New Brunswick	
Quebec	11.6	13.8	-2.2Ontario	159.4	151.5	7.9Manitoba	20.3	20.9	-0.6Saskatchewan	23.3	23.5	- 0.2Alberta	32.5	31.4	1.1British Columbia	36.0	36.1	-0.1Northwest and Yukon Territories	0.8	0.9	-0.1314.0	433.9	-119.9
General health grants and hospital construction grants to provinces
Grants to provinces for general health services total $32 million and for hospital construction $20 million compared with $35 million and $22 million respectively in 1964-65. The decrease is partially due to the opting out of a portion of this program by the Province of Quebec under federal-provincial agreement.
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TABLE 35 (in millions of dollars)
General Health Grants and Hospital Construction Grants	Fiscal year ending March 31, 1966 (estimated)		
General health grants	Hospital construction grants	TotalNewfoundland	1.1	0.6	1.7Nova Scotia	1.8	0.7	2.5Prince Edward Island	0.4	(1)	0.4New Brunswick	1.5	0.7	2.2Quebec	3.3	5.7	9.0Ontario	12.0	7.0	19.0Manitoba	2.6	1.0	3.6Saskatchewan	2.5	1.0	3.5Alberta	2.9	2.3	5.2British Columbia	3.7	1.0	4.7Northwest and Yukon Territories	0.2	(1)	0.232.0	20.0	52.0
<'>Less than $50,000.
National Research Council, including the Medical Research Council
Expenditures of the National Research Council, including the Medical Research Council, are $74 million, an increase of $17 million over the previous year's total.
Outlays of $33 million in respect of scholarships and grants in aid of research account for $10 million of the increase and higher outlays of $32 million for administration account for $5 million.
TABLE 36 (in millions of dollars)
National Research Council, including	Fiscal year ending March 31	Increasethe Medical Research Council	1966 (estimated)	1965	decrease (-)Scholarships and grants in aid of research	33.3	23.3	10.0Construction or acquisition of buildings, works, land and equipment	5.9	4.5	1.4Assistance towards research in industry	3.4	2.2	1.2Administration and general	31.5	26.6	4.974.1	56.6	17.5
National Revenue
Expenditures of the Department of National Revenue amount to $95 million, an increase of $8 million over the 1964-65 total of $87 million.
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TABLE 37 (in millions of dollars)
National Revenue	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)48.2	44.2	4.046.7	42.4	4.30.3	0.3	
95.2	86.9	8.3
Northern Affairs and National Resources
Expenditures of the Department of Northern Affairs and National Resources, including the Indian affairs branch, are $153 million compared with $127 million in the previous year.
Expenditures of the Indian affairs branch, which in previous years were included under the Department of Citizenship and Immigration, are now included in expenditures of the Department of Northern Affairs and National Resources. Expenditures pursuant to the Atlantic Provinces Power Development Act and expenditures in respect of water resources and resource development (excluding those parts concerned with the administration of resources on Indian lands) which in previous years were included under the Department of Northern Affairs and National Resources are now included in expenditures of the Department of Mines and Technical Surveys.
TABLE 38 (in millions of dollars)
Northern Affairs and National Resources	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Indian affairs-	40.7	35.7	5.025.0	16.7	8.37.7	6.5	1.24.5	2.4	2.11.4	1.7	-0.32.2	1.8	0.481.6 40.1	64.8 35.8	16.7 4.329.5	25.1	4.42.1	1.7	0.4
153.2	127.4	25.8
Indian affairs expenditures are $82 million, an increase of $17 million over the previous year's total. There are increases of $8 million in respect of social programs, $5 million for education, $2 million for economic development and $1 million for Indian agencies.
Outlays of $40 million in respect of northern administration are $4 million more than in 1964-65 and outlays of $29 million in respect of national parks are $4 million more than in the previous fiscal year.
3558
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The Budget-Appendix Post Office
Costs of the Post Office Department charged to budgetary expenditure at $239 miflion are $29 miilion more than in 1964-65 due mainly to normal staff growth and to salary increases.
TABLE 39 (in millions of dollars)
Post Office	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Charged to budgetary expenditure-* Operations-salaries and other expenses of staff post offices, district offices and railway mail services; and supplies and equipment and other items for revenue post offices	159.5	135.4	24.1Transportation-movement of mail by land, air and water	72.7	69.1	3.6Financial services	3.6	3.4	0.2Administration and general	3.4	2.6	0.8239.2	210.5	28.7Charged to revenue- Operations-salaries of postmasters and staffs at revenue and semi-staff offices, commissions paid at sub-offices and other disbursements	37.0	33.3	3.7276.2	243.8	32.4
Costs of operations at $160 million are $24 million more than in the previous fiscal year and costs of movement of mail at $73 million are $4 million more.
Remuneration of postmasters and staffs at revenue and semi-staff offices and certain other authorized disbursements are paid from revenue. These payments at $37 million ($4 million more than in 1964-65) bring gross post office expenditures to $276 million in 1965-66.
Public Works
Expenditures of the Department of Public Works amount to $259 million, $35 million more than in 1964-65.
Accommodation services
Expenditures for these services are $109 million, $21 million higher than the 1964-65 total.
Maintenance and operation of public buildings and grounds at $72 million are $17 million higher and construction or acquisition of buildings, etc. at $35 million are $5 million higher than in 1964-65.
Harbours and rivers engineering services
Expenditures for these services total $36 million, $6 million higher than in 1964-65 due mainly to an increase in outlays for construction or acquisition, etc. of harbour and river works which are $28 million compared with $23 million in the previous fiscal year.
Roads, bridges and other engineering services
Expenditures for these services total $89 million, $2 million higher than in 1964-65. Contributions of $80 million to provinces in respect of the trans-Canada highway are $4 million higher.
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TABLE 40 (in millions of dollars)
Public Works	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Accommodation services- Maintenance and operation of public buildings and grounds-	7.6Ottawa and Hull	27.8	20.2	Other than Ottawa and Hull	41.3	33.2	8.1Office furniture and furnishings	3.2	2.3	0.9Acquisition of equipment and furnishings other than	office furnishings	1.3	1.5	-0.2Construction, acquisition, major repairs, etc. of public buildings-	Ottawa	17.5	15.1	2.4Other than Ottawa	17.6	15.1	2.5108.7	87.4	21. SHarbours and rivers engineering services-	Operation and maintenance	7.9	7.0	0.9Construction or acquisition of equipment	0.5	0.7	-0.2Construction, acquisition, major repairs, etc. of harbour	and river works	27.5	22.5	5.0Dry dock subsidies	0.2	0.1	0.136.1	SO.S	5.8Roads, bridges and other engineering services-	Operation and maintenance	5.2	9.0	-3.8Construction, acquisition, major repairs and improvements of, and plans and sites for, roads, bridges and	other engineering works	3.9	2.4	1.5Trans-Canada highway- Contributions to provinces under terms of the Trans-	Canada Highway Act	80.0	76.1	3.9Construction through national parks	0.3	0.2	0.189.4	87.7	1.7Testing laboratories	1.1	1.0	0.1Federal share of an ice control structure	8.9	5.8	3.1Administration and general	15.2	11.8	3.4259.4	224.0	35.4
Royal Canadian Mounted Police
Expenditures of the Royal Canadian Mounted Police are $82 million compared with $76 million in the previous fiscal year. Receipts of $16 million, arising

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(in millions of dollars)
Royal Canadian Mounted Police	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Land, air and training divisions	59.4	55.9	3.5Headquarters administration and national police services...	10.7	9.8	0.9Pensions and other benefits-	Pensions	4.5	4.1	0.4Royal Canadian Mounted Police superannuation ac-	count-	Government's contribution	3.9	3.2	0.7Amortization of deferred charges	1.1	1.0	0.1Other	0.2	0.2	9.7	8.5	1.2Marine services	2.2	2.0	0.282.0	76.2	5.8
23033-226£
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out of expenditures for policing certain provinces, territories and municipalities, are credited to revenue. In 1964-65 receipts of $16 million were credited to revenue.
Secretary of State
Expenditures of the Department of the Secretary of State amount to $26 million, an increase of $4 million over the previous fiscal year's total.
Centennial Commission expenditures of $20 million are $13 million higher than in 1964-65 due mainly to increases of $7 million in outlays for programs and projects of national significance and $5 million in payments to the centennial of confederation fund to enable giants to be made to the provinces for local projects of a lasting nature.
Outlays of $3 million in respect of the translation bureau and $2 million in respect of the National Museum of Canada are both slightly higher than in 1964-65.
There is no comparable expenditure in 1965-66 to the special grant of $10 million made in 1964-65 under the Canada Council Act.
TABLE 42 (in millions of dollars)
Secretary of State	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Centennial Commission-			
Programs and projects of national significance	9.0	2.5	6.5Payment to the centennial of confederation fund	9.0	4.0	5.0General administration	2.0	0.8	1.220.0	7.5	12.7Translation Bureau	2.8	2.2	0.6National Museum of Canada	1.8	1.4	0.4Special grants-Canada Council Act	10.0	-10.0Administration and general	1.2	1.0	0.225.8	21.9	3.9
Office of the Solicitor General
Expenditures of the Office of the Solicitor General amount to $57 million compared with $39 million in the previous fiscal year. [DOT]
The increase of $18 million is due mainly to increases of $15 million in outlays for construction or acquisition of buildings, etc. and $3 million in outlays for operation and maintenance of penitentiaries.
Correctional services expenditures which in previous years were shown under the Department of Justice are now shown under the Office of the Solicitor General
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(in millions of dollars)
Office of the Solicitor General	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Correctional services- Administration of the Canadian penitentiaries service... Operation and maintenance of penitentiaries...	0.9 27.1 0 8	0.8 23.8 0 8	0.1 3.3Parole Act administration	Construction or acquisition of buildings, works, land and equipment	28.4	Other	0.1
57.3	39.0	18.3
Trade and Commerce
Expenditures of the Department of Trade and Commerce at $47 million are $8 million less than in 1964-65.
Outlays of $5 million in respect of the Canadian corporation for the 1967 world exhibition compare with $20 million in 1964-65. The decrease is due mainly to the fact that no payment is being made to the corporation in 1965-66 comparable to the payment of $19 million in 1964-65, puisuant to sec. 11 of the Canaan C?,rp0rftl0n for t.he World Exhibition Act, partly offset by an increase of oi $4 million for Canadian government participation in the exhibition.
0,lltlay,s.°,f $16 million in respect of the Dominion Bureau of Statistics are $2 million higher than in 1964-65 and outlays of $6 million for the Canadian government travel bureau are $2 million higher.
Expenditures of the Canadian Wheat Board and of the National Energy E°ard' wkich i" previous years were included in expenditures of the Department of lrade and Commerce are now included in expenditures of the Departments of Finance and Mines and Technical Surveys, respectively.

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(in millions of dollars)
Trade and Commerce	Fiscal year ending March 31	Increase1966 (estimated)	1965	or decrease (-)Dominion Bureau of Statistics	15.8 7.6 6.4 5.0	2.3Trade commissioner service	lo. 0	Canadian government travel bureau	0.8Canadian corporation for the 1967 world exhibition- Canadian government participation	1.5 4.2Payment to the corporation	Acquisition of land	- 18.6Standards branch	5.0 3.6 8.4	19.5	-0.1 -U.& 0.3Administration and general	1.746.8	54.7	-7.92	COMMONS DEBATES	March 29, 1966
The Budget-Appendix
Transport
Expenditures of the Department of Transport are $524 million compared with $466 million in 1964-65.
TABLE 45 (in millions of dollars)
Transport
Air services-	.
Airports and other ground services	
Radio aids to air and marine navigation.
Meteorological services	
Air traffic control	
Control of civil aviation	
Radio Act and Regulations	
Administration and general	
Railways and steamships-
Construction or acquisition	
Maritime Freight Rates Act-
Difference between tariffs and normal tolls....
Railway to Great Slave Lake	
Victoria Bridge	
Deficits-	.
Canadian National Railways	
Newfoundland ferry and terminals	;[DOT][DOT][DOT][DOT][DOT]
Prince Edward Island car ferry and terminals.
Other.
Board of Transport Commissioners for Canadarates of freight traffic	
Maintenance of trackage	
Contributions to the railway grade crossing fund. Administration and general	
Marine services-
Canadian coast guard	
Aids to navigation	
Canals	[DOT] [DOT] [DOT] [DOT];	 [DOT] [DOT]
Marine hydraulics including the Saguenay Rivers ship channels.
Marine regulations	
Administration and general	
St. Lawrence
Canadian Maritime Commission.
Authority-
Welland Canal deficit 1965	
Welland Canal deficit 1959-64	:	
Other operating deficit and capital requirements.
National Harbours Board... Administration and general.
Fiscal year ending March 31		Increase or decrease (-)
1966 (estimated)	1965	
50.0	46.8	3.240.2	36.5	3.722.0	21.8	0.210.0	9.4	0.66.3	6.7	-0.44.1	3.5	0.68.6	6.7	1.9141.2	131.4	9.826.6	10.2	16.415.3	14.7	0.612.0	24.1	-12.10.8	0.9	-0.133.4	38.7	-5.312.7	11.1	1.64.1	4.0	0.10.1	-0.11.0	0.2	0.8105.9	104.0	1.995.2	68.7	26.57.0	7.0	14.0	5.1	8.91.6	1.5	0.1117.8	82.3	35.5. 50.0	38.0	12.014.9	10.9	4.09.6 1	7.0	2.66.1	3.0	3.15.0	4.4	0.61.6	1.2	0.487.2	64.6	22.7. 49.8 y	40.6	9.28.3	8.327.1	-27.12.2	1.9	0.310.5	29.0	-18.55.1	7.6	-2.56.3	7.0	-0.7523.8	466.4	57.4
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Air services
Outlays for air services at $141 million are $10 million higher than the 1964-65 total due mainly to an increase of $3 million in respect of airports and other ground services and an increase of $4 million for radio aids to air and marine navigation.
Railways and steamships
Expenditures for these services are $106 million compared with $104 million in 1964-65.
Costs of construction or acquisition of buildings, works, land, etc. are $27 million, $16 million higher than 1964-65 costs due mainly to improvements of the facilities, terminals, ships, etc., in the Port-aux-Basques-North Sydney ferry service; payments under the Maritime Freight Rates Act are $15 million, $1 million higher; and the subsidy of $12 million in respect of a railway to Great Slave Lake is $12 million less.
The charge of $33 million to budgetary expenditure in 1965-66 to cover the 1965 operating deficit of the Canadian National Railways is $5 million less than the charge of $38 million in 1964-65 to cover the railway's 1964 operating deficit.
Board of Transport Commissioners
Expenditures in respect of the board amount to $118 million compared with $82 million in 1964-65.
Included are $95 million in payments to the railways for the maintenance of the rates of freight traffic compared with $69 million in 1964-65, $7 million in each year in payments to the railways for maintenance of trackage in northern Ontario and $14 million in contributions to the railway grade crossing fund compared with $5 million in the previous year.
Marine services
Expenditures of $87 million for marine services are $23 million more than in 1964-65. Included in these expenditures are $50 million in respect of the Canadian coast guard, $12 million higher than in 1964-65 and $15 million in respect of aids to navigation, $4 million more than in the previous fiscal year. The aggregate increase is due to increased outlays for capital works.
Canadian Maritime Commission
Expenditures of the commission in the amount of $50 million are $9 million higher than in 1964-65 due mainly to increased outlays in respect of capital subsidies for the construction of commercial and fishing vessels.
Canals and works entrusted to The St. Lawrence Seaway Authority
Expenditures of $11 million are $18 million less than in 1964-65, due mainly to the fact that the 1964-65 total included a payment of $27 million covering the accumulated Welland Canal deficit for 1959-64 whereas the 1965-66 total includes a payment of $8 million for the Welland Canal deficit for 1965.
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National Harbours Board
Non-active advances to the board total $5 million and include $4 million to cover expenditures in connection with the 1967 World Exhibition. In 1964-65 non-active advances totalled $8 million and included $6 million to cover expenditures in connection with the 1967 World Exhibition.
Veterans Affairs
Expenditures of the Department of Veterans Affairs are $370 million, an increase of $18 million over the 1964-65 total.
War veterans allowances and civilian allowances at $100 million are $7 million higher, pensions for disability and death at $186 million are $5 million higher and costs of $50 million for tieatment services are $4 million higher than in 1964-65.
TABLE 46 (in millions of dollars)
Veterans Affairs	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Pensions-			
Disability and death	185.5	180.3	5.2Administration and general	2.9	2.8	0.1188.4	183.1	5.3Welfare services, allowances and other benefits-	War veterans allowances and civilian allowances	100.2	92.8	7.4Assistance under provisions of the Assistance Fund (War	Veterans Allowances) Regulations	5.8	4.0	1.8Veterans welfare services	4.0	3.8	0.2Treatment and related allowances	2.7	2.7	Administration and general	3.4	3.5	-0.1116.1	106.8	9.3Treatment services	50.1	46.4	3.7Soldier settlement and veterans land act-	Provision for reserve for conditional benefits	3.0	3.1	-0.1Administration and general	4.6	4.5	0.17.6	7.6	Administration and general	7.8	7.7	0.1370.0	351.6	18.4
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All Other Departments
Expenditures of the departments not dealt with individually amount to $65 million, an increase of $27 million over the total for 1964-65.
Expenditures under the Combines Investigation Act in respect of the restrictive trade practices commission and the office of investigation and research and expenditures of the patent division, copyright and industrial designs division and the trade marks office, which were included previously under expenditures of the Department of Justice, are now included in expenditures of the Privy Council.
The main changes are an increase of $13 million in respect of the Office of the Chief Electoral Officer due to the general election in 1965-66 and an increase of $6 million in non-defence expenditures of the Department of Defence Production as a result of three new services (supply, purchasing and repair) coming into operation.
TABLE 47 (in millions of dollars)
	Fiscal year ending March 31		Increase
All Other Departments			
1966 (estimated)	1965	decrease (-)1.7	1.6	0.10.4	0.4	13.1	0.6	12.58.2	6.2	2.0<«9.0	3.3	5.71.1	0.8	0.30.7	0.6	0.16.0	3.3	2.71.5	1.4	0.16.9	6.4	0.51.9	1.3	0.69.1	8.2	0.91.9	1.5	0.43.0	2.7	0.30.8	0.2	0.6
65.3	38.5	26.8
<i>See also under defence expenditure at the beginning of this section.
<2)The Canadian government supply service, Canadian government purchasing service and the Canadian government repair service came into operation substantially in 1965-66 and are the cause of the large increase in non-defence expenditure.
3566	COMMONS DEBATES	March 29. 1966
The Budget-Appendix

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The estimated assets and liabilities of the Government of Canada as at March 31,1966, the comparable balances at March 31, 1965 and the changes in each category during 1965-66, are shown in condensed form in the following table.

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Summary of Assets and Liabilities of Canada
(in millions of dollars)
	Balance at March 31		Increase
	1966 (estimated)	1965	or decrease (-)
Liabilities			
Current and demand liabilities	1,467.2	1,432.6	34.6Deposit and trust accounts	394.6	272.3	122.3Annuity, insurance and pension accounts	6,381.2	5,675.9	705.3Undisbursed balances of appropriations to special accounts..	87.6	95.7	-8.1Deferred credits	136.1	113.2	22.9Suspense accounts	13.8	5.5	8.3Unmatured debt	19,136.6	18,978.2	158.4Total liabilities	27,617.1	26,573.4	1,043.7Assets	Current assets	1,291.1	1,302.0	-10.9Advances to the exchange fund account	2,672.0	2,621.0	51.0Investments in special United States of America securities-	Columbia River Treaty	187.2	219.5	-32.3Sinking fund and other investments held for retirement of	unmatured debt	5.4	-5.4Canada pension plan investment account	34.0	34.0Loans to, and investments in, Crown corporations	5,535.2	4,914.5	620.7Loans to national governments	1,343.8	1,288.4	55.4Other loans and investments	1,036.9	908.1	128.8Securities held in trust	171.9	53.1	118.8Deferred charges- Unamortized portions of actuarial deficiencies-	Canadian forces superannuation account	54.0	53.8	0.2Public service superannuation account	92.5	39.9	52.6Royal Canadian Mounted Police superannuation ac-	count	3.8	4.2	-0.4Unamortized loan flotation costs	107.9	110.7	-2.8258.2	208.6	49.6Capital assets	(1)	(1)	Inactive loans and investments	94.8	94.8	Total recorded assets	12,625.1	11,615.4	1,009.7Less reserve for losses on realization of assets	-546.4	-546.4	Net recorded assets	12,078.7	11,069.0	1,009.7Net debt, represented by excess of liabilities over net re-	corded assets	15,538.4	15,504.4	0)34.0
Shown at nominal value of $1.
<2)Reflecting the budgetary deficit of $34 million.
Summary
The gross liabilities of the government are estimated at $27,617 million as at March 31, 1966 compared with $26,573 million at March 31, 1965. The main changes are increases of $705 million in annuity, insurance and pension accounts, $158 million in unmatured debt and $122 million in deposit and trust accounts.
March 29, 1966
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Net recorded assets aie estimated at $12,079 million as at March 31, 1966 compared with $11,069 million at March 31, 1965. The main changes are increases of $621 million in loans to, and investments in, Crown corporations, $144 million in securities held in trust and $129 million in other loans and investments.
The net debt of Canada, or the excess of liabilities over net recorded assets, at $15,538 million is $34 million higher than the net debt of $15,504 million at March 31, 1965, reflecting the 1965-66 budgetary deficit of $34 million.

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Fiscal Years Ended March 31 Billions of Dollars
Liability Accounts
Current and demand liabilities
These liabilities, which consist of obligations of the government payable currently or on demand, in the amount of $1,467 million are $35 million more than the total at March 31, 1965.

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(in millions of dollars)
	Balance at March 31		Increase
Current and Demand Liabilities	1966 (estimated)	1965	or decrease (-)Outstanding treasury cheques	352.9	315.1	37.8Accounts payable	412.9	363.9	49.0Non-interest-bearing notes payable to-	25.0	22.9	2.1The international development association	The international monetary fund	235.0	345.0	-110.0260.0	367.9	-107.9Matured debt outstanding	23.5	19.1	4.4Interest due and outstanding	117.0	102.0	15.0Interest accrued	267.6	231.2	36.4Post office-outstanding money orders	26.4	26.6	-0.2Outstanding letter of credit cheques	6.0	6.0	0.1Other current liabilities	0.9	0.8	1,467.2	1,432.6	34.6
March 29, 1966
The Budget-Appendix
The main changes during 1965-66 are a decrease of $108 million in noninterest-bearing notes payable on demand and increases of $38 million in outstanding treasury cheques, $49 million in accounts payable and $36 million in accrued interest.
Non-interest-bearing notes represent those portions of Canada's equities in the capital of certain international agencies which are not covered by cash or gold. Notes in respect of the international monetary fund in the amount of $235 million are $110 million less than at March 31, 1965 and notes in respect of the international development association in the amount of $25 million are $2 million more.
Deposit and trust accounts
Sundry funds deposited with, or held in trust by, the Receiver General of Canada for various purposes are recorded in these accounts.
TABLE 50 (in millions of dollars)
Deposit and Trust Accounts	Balance at March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Indian trust funds		31.5	31.1	0.4
Guarantee deposits-			
National Revenue	5.6	5.3	0.3Northern Affairs and National Resources	30.0	29.2	0.8ss.e	34.5	1.1Post office savings bank	22.2	23.3	-1.1Crown corporations deposits-	Atomic Energy of Canada Limited	5.0	5.0	Canadian Arsenals Limited	0.1	0.1	Crown Assets Disposal Corporation	0.4	0.4	Eldorado Mining and Refining Limited	4.0	11.2	-7.2Export Credits Insurance Corporation	14.0	10.0	4.023.5	26.7	-3.2Canadian Pension Commission-administration trust fund..	15.2	14.5	0.7National Harbours Board-special accounts	18.4	13.5	4.9Instalment purchase of bonds, public service	12.9	13.2	-0.3Contractors holdbacks	9.1	8.8	0.3Contractors securities-sundry departments-	Bonds	2.5	4.2	-1.7Cash	1.3	1.6	-0.3Certified cheques	0.2	0.2	4.0	6.0	-2.0Army benevolent fund	5.2	5.6	-0.4Canadian Arsenals Limited pension fund	1.0	1.0	Canadian vessel construction assistance	6.7	6.7Common school funds-Ontario and Quebec	2.7	2.7	Emergency gold mining assistance-holdbacks	2.2	2.3	-0.1Immigration guarantee fund	1.5	1.3	0.2National Research Council-special fund	2.3	2.3	Northwest Territories revenue account	3.0	2.7	0.3Permanent services deferred pay	3.3	3.4	-0.1Provincial tax collection agreements account	50.7	48.8	1.9Royal Canadian Mint-prepayments	0.5	3.1	-2.6Municipal development and loan board-security deposits...	124.4	9.4	115.0Veterans land act trust account-general	5.4	4.5	0.9United States of America	1.2	1.6	-0.4Veterans care trust fund	2.9	2.7	0.2Other	9 2	9.3	-0.1394.6	272.3	122.3
March 29, 1966
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There was a net increase of $122 million during 1965-66 bringing the total to $395 million at March 31, 1966 due mainly to an increase of $115 million in the municipal development and loan board-security deposits account.
Annuity, insurance and pension accounts
Recorded herein are moneys held in the consolidated revenue fund to the credit of various annuity, insurance and pension accounts.
During 1965-66 an increase of $705 million brings the total to $6,381 million as at March 31, 1966. The main changes are increases of $224 million in the public service superannuation account, $163 million in the Canadian forces superannuation account, $215 million in the old age security fund and a new account for the Canada pension plan which has a balance of $80 million at March 31, 1966.
TABLE 51 (in millions of dollars)
Annuity, Insurance and Pension Accounts	Balance at March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Unemployment insurance fund	159.0	58.3	100.7Less investment in bonds and accrued interest	-147.5	-44.0	-103.5Uninvested funds on deposit with the government	11.5	14.3	-2.8Superannuation accounts-	Public service	2,385.8	2,161.8	224.0Canadian forces	2,191.1	2,028.1	163.0Royal Canadian Mounted Police	65.7	57.7	8.04,642.6	4,247.6	396.0Canada pension plan account	80.0	80.0Government annuities	1,320.5	1,303.2	17.3Old age security fund	215.0	215.0Other	111 6	110 8	0 86,381.2	5,675.9	705.3
Unemployment insurance fund
The balance in the fund at March 31, 1966 is $159 million (of which $22 million represents a liability for unredeemed warrants and deposits from employers) and consists of $147 million invested in special government bonds (including accrued interest) and $12 million on deposit with the Receiver General. The balance in the fund at March 31, 1965 was $58 million (of which $18 million represented a liability for unredeemed warrants and deposits from employers) consisting of $44 million invested in special government bonds (including accrued interest) and $14 million on deposit with the government.
Receipts of $395 million during the fiscal year include employee and employer contributions of $325 million, the government's contribution of $65 million and $5 million in interest from investments. As benefit payments total $302 million, receipts exceed payments from the fund by $93 million during 1965-66. Receipts during 1964-65 totalled $375 million and included employee and employer contributions of $311 million, the government's contribution of $62 million and $2 million in income from investments. Benefit payments during 1964-65 totalled $335 million.
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The Budget-Appendix
TABLE 52 (in millions of dollars)
Fiscal year ending March 31
Unemployment Insurance Fund	1962	1963	1964	1965	1966 (esti- mated)Revenue- Contributions-	310.8	325.4Employee and employer (1>	277.8	286.4	296.6	Govern ment(2)	55.5	57.3	59.3	62.1	65.5Net income from investments	6.2	2.5	1.1	1.8	4.6Other income	0.1	0.1	0.1	0.1	0.1339.6	346.3	357.1	374.8	395.6Expenditure-	-365.7 -0.2	-335.0 -0.2	-301.9Benefit payments	
Interest on loans	-454.7 -3.0	-403.2	Excess of revenue over expenditure or expenditure	-8.8	39.6	93.7over revenue (-)	-118.1	-56.9	Balance at credit of fund at fiscal year-end	66.6	9.7	0.9	40.5	136.8Unredeemed benefit warrants and deposits from	17.8	22.2employers	11.6	16.7	15.9	78.2	26.4	16.8	58.3	159.0Investment in bonds and accrued interest	-63.6	-11.8	-44.0	-147.5Balance on deposit with the government	14.6	14.6	16.8	14.3	11.5
(('Contributions by employees and employers are on an equal basis.
<*>
Government contribution is equal to 20 per cent of the combined employee-employer contributions.
Public service superannuation account
The balance of $2,386 million in this account is $224 million higher than the balance at the end of the previous fiscal year.
Receipts of $290 million during the year consist of credits of $78 million in respect of a salary revision made in 1965-66, contributions of $65 million by individuals, a contribution of $58 million by the government, contributions of $3 million by certain Crown corporations and interest of $86 million credited to the account by the government. Contributions by the government and Crown corporations are equal to the estimated current and prior service payments of individuals in 1964-65. Interest at 4 per cent per annum is credited to the account quarterly and is computed quarterly on the outstanding balance at the end of the previous quarter.
Disbursements total $66 million and include $55 million in annuities and $11 million in withdrawals of contributions.
In 1964-65 receipts totalled $369 million and disbursements totalled $64 million.
Canadian forces superannuation account
The balance of $2,191 million at March 31, 1966 reflects an increase of $163 million during the fiscal year.
Receipts of $198 million include $36 million in contributions by personnel, $59 million in regular government contributions, $86 million in interest credited by the government and a credit of $17 million in respect of additional liabilities
March 29, 1966
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_	The Budget-Appendix
due to increased rates of pay for certain ranks. Regular government contributions are made at the rate of one and two-thirds times the current and prior service contributions by personnel. Interest at 4 per cent per annum is credited to the account quarterly and is computed quarterly on the outstanding balance at the end of the previous quarter.
Disbursements of $35 million include $25 million in pensions and retiring allowances and $10 million in cash termination allowances and return of contributions.
In 1964-65 receipts were $237 million and disbursements were $30 million
Royal Canadian Mounted Police superannuation account
The balance of $66 million in this account as at March 31, 1966 is $8 million more than the previous fiscal year-end balance of $58 million.
Receipts during the year of $9 million consist of $2 million in contributions by personnel, $3 million in interest credited to the account and $4 million in contributions by the government.
Disbursements of $1 million consist mainly of annuities and allowances, cash termination allowances and return of contributions.
In 1964-65 receipts were $12 million and disbursements were $1 million. Canada pension plan account
This is a new account to record contributions and payments as authorized by the Canada Pension Plan Act which became effective January 1, 1966.
Government annuities account
The balance in this account of $1,321 million is $17 million higher than the balance at March 31, 1965. Receipts of $79 million include $29 million from premiums and $50 million in interest from the government. Disbursements of $62 million consist mainly of vested annuity and commuted value payments and refunds of premiums. In 1964-65 receipts amounted to $79 million and disbursements were $60 million.
Old age security fund
Under the Old Age Security Act, as amended, all persons who satisfy the residence requirements of the act may receive a pension of $75 per month from the federal government out of the old age security fund provided that no pension is paid in any month before January 1966 in which the person had not attained 70 years of age, the age limit being reduced by one in each subsequent year until 1970.
Receipts of $1,163 million in 1965-66 exceed pension payments of $923 million by $240 million. Temporary loans by the Minister of Finance of $25 million were repaid leaving a balance in the fund of $215 million as at March 31, 1966.
In 1964-65 receipts of $960 million exceeded pension payments of $885 million by $75 million which resulted in temporary loans of $100 million as at March 31, 1964 being reduced to $25 million as at March 31, 1965.
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TABLE 53 (in millions of dollars)
Old Age Security Fund	Fiscal year ending March 31				
1962	1963	1964	1965	1966 (esti- mated)Tax receipts-	284.9 259.0 100.1	302.2 273.7 115.2	331.8 302.6 115.7	383.2 431.9 145.2	516.0 496.0 151.0Personal income tax	
Corporation income tax	
Total tax receipts	
Pension payments	
Excess of receipts over payments	
Temporary loans brought forward	
Balance in fund brought forward	
Temporary loans by the Minister of Finance to cover deficit in fund	
Balance in fund	644.0 -625.1	691.1 -734.4	750.1 -808.4	960.3 -885.3	1,163.0 -923.018.9 -17.3	-43.3 1.6 41.7	-58.3 -41.7 100.0	75.0 -100.0 25.0	240.0 -25.01.6	215.0
A distribution by provinces of pension payments from the old age security fund for the last two years is shown in the following table:
TABLE 54 (in millions of dollars)
Old Age Security Payments	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
17.6	16.8	0.842.0	40.4	1.68.1	7.1	1.031.6	29.8	1.8198.0	189.7	8.3332.1	321.1	11.055.8	53.4	2.457.1	55.1	2.063.7	60.0	3.7116.2	111.3	4.90.8	0.6	0.2
923.0	885.3	37.7
Undisbursed balances of appropriations to special accounts
These special accounts record the undisbursed balances of appropriations for which moneys have been appropriated by parliament and from which disbursements may be made for authorized purposes in periods subsequent to that in which the appropriation was made. The balance of $88 million is $8 million less than the balance at March 31, 1965.
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TABLE 55 (in millions of dollars)
Undisbursed Balances of Appropriations to Special Accounts	Balance at March 31	Increase1966 (estimated)	1965	or decrease (-)68.5	82.3	-13.810.4	6.9	3.58.5	6.0	2.50.1	0.4	-0.30.1	0.1	
87.6	95.7	-8.1
The balance of $69 million in the international assistance account is 114 million less than the balance at March 31, 1965. Disbursements of $41 million from the fund are paitly offset by a credit of $27 million, which amount is the unexpended balance of External Affairs Vote 35 as set out in the sub-vote for international development assistance.
The balance of $10 million in the railway grade crossing fund is $3 million higher than the balance at the previous fiscal year-end. The increase of $3 million is due to an amount of $14 million credited to the fund and charged to budgetary expenditure and to disbursements of $11 million from the fund.
The balance of $9 million in the centennial of confederation fund is $3 million more than the balance at March 31, 1965. The amount of $9 million credited to the fund and charged to budgetary expenditure is offset by disbursements of $6 million from the fund during the year.
Deferred credits
Recorded in these accounts are amounts due the government in respect of which payment is deferred. These are contra accounts to corresponding items under the following asset categories: "loans to, and investments in, Crown corporations", "loans to national governments" and "other loans and investments". The balance of $136 million is $23 million more than the balance at March 31, 1965.
TABLE 56 (in millions of dollars)
Balance at March 31
Increase
Deferred Cbedits
(estimated)
or
decrease (-)
Deferred interest-
The St. Lawrence Seaway Authority	
United Kingdom Financial Agreement Act, 1946	
Northern Canada Power Commission	
Balances receivable under agreements of sale of Crown assets. Crown Assets Disposal Corporation-government equity.... Unamortized premium on loan	
45.3 83.0 2.2 ISO. 5 1.4
3.1
1.1
38.7
63.8 2.2
10i.7
3.0
5.5
6.6
19.2
25.8
-1.6
-2.4
1.1
136.1
113.2
22.9
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The Budget-Appendix
There is an increase of $26 million in deferred interest during the year bringing the balance to $131 million as at March 31, 1966.
Deferred interest in respect of The St. Lawrence Seaway Authority, which is a contra account to a corresponding item in "loans to, and investments in, Crown corporations", increased by $7 million during the year bringing the balance at March 31, 1966 to $45 million. See the asset account for explanation of increase.
Deferred interest in respect of the loan under the United Kingdom Financial Agreement Act, 1946, which is a contra account to a corresponding item in "loans to national governments", increased by $19 million during the year bringing the balance at March 31, 1966 to $83 million. See the asset account for explanation of increase.
Balances receivable under agreements of sale of Crown assets are contra accounts to corresponding items under the asset category "other loans and investments". During the year payments of $2 million leave an outstanding balance of $1 million at March 31, 1966. There were no new agreements of sale during the year.
The government equity in the agency account of Crown assets disposal corporation is a contra account to a corresponding asset account under "other loans and investments". The balance in the account of $3 million is $2 million less than the total at the end of the previous fiscal year.
Suspense accounts
These consist of balances where some uncertainty as to disposition exists.
There is a net increase of $8 million during 1965-66 bringing the outstanding balances to $14 million as at March 31, 1966.
The replacement of materiel account, which was established by section 11 of the National Defence Act, is credited with amounts realized from the sale of materiel that has not been declared surplus to requirements but has been authorized by the Governor in Council to be sold to other countiies. The account is debited with disbursements representing amounts paid for procurement of replacement materiel. During 1965-66 credits to and disbursements from the account are approximately $1 million each, resulting in a balance of approximately $1 million.
The surplus Crown assets account, which is a new account established by Vote 48 of the Department pf National Defence 1965-66 Estimates, is credited with all revenue received during the current and subsequent fiscal years from the sale of surplus materials, supplies and equipment and from the sale during the current fiscal year of surplus buildings, works and land. The account is debited with expenditures, subject to the approval of Treasury Board, for any of the purposes of the Department of National Defence. The balance of $8 million consists of credits to the account during the year. There were no disbursements.
TABLE 57 (in millions of dollars)
	Balance at March 31		Increase
Suspense Accounts	1966 (estimated)	1965	or decrease (-)Replacement of materiel, sec. 11, National Defence Act	0.7 7.8	0.6	0.1 7.81.3	1.3	4.0	3.6	0.4
13.8	5.5	8.3
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Unmatured debt
The unmatured debt of Canada in the amount of $19,137 million is $158 million more than the previous fiscal year-end total. Obligations payable in Canada are $18,766 million and those payable in New York are $371 million compared with $18,602 million and $376 million respectively at March 31, 1965.
TABLE 58 (in millions of dollars)
Unmatured Debt	Balance at March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Payable in Canada-	10.711.5 5,757.1 147.0 16.615.6 2,150.0	10,866.4 5,552.4 43.0 16,461.8 2,140.0	-154.9 204.7 104.0 153.8 10.0
Non-marketable bonds-			
			
			
			
	18,765.6 0)371.0	18,601.8 0>376.4	163.8 -5.4.
			
	19,136.6	18,978.2	158.4
Marketable bonds.
^Converted at the official parity rate of SI U.S. = $1.08108 Canadian.
Details of the various loan issues, maturities and redemptions resulting in the net increase are described more fully in the section "The Public Debt".

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Fiscal Years Ended March 31 Billions of Dollars
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Asset Accounts
Current assets
These accounts consist of working capital advances and revolving funds, the securities investment account and various cash accounts.
Total current assets at $1,291 million reflect a decrease of $11 million during the year. The main changes are decreases of $40 million in cash in current and special deposits, $10 million in cash in hands of collectors and in transit and increases of $22 million in the securities investment account and $15 million in departmental working capital advances and revolving funds.
TABLE 59 (in millions of dollars)
Current Assets	Balance a 1966 (estimated)	March 31 1965	Increase or decrease (-)Cash in current and special deposits^1*	642.3	682.3	-40.0Cash in hands of collectors and in transit	158.0	168.0	-10.0Departmental working capital advances and revolving	
funds

			
Agricultural commodities stabilization account	7.0	23.2	-16.2Defence production revolving fund	26.8	30.2	-3.4Royal Canadian Mint	16.7	18.7	-2.0Miscellaneous departmental imprest and advance ac-	counts	19.5	18.6	0.9Stockpiling of uranium concentrates	37.9	24.4	13.5Veterans land act fund	280.0	255.6	24.4Less reserve for conditional benefits-Veterans Land	Act	-22.3	-24.3	2.0Other	15.2	19.1	-3.9S80.8	865.5	15. SSecurities investment account	79.0	57.1	21.9Moneys received after March 31 but applicable to the current	year	17.0	17.0	Post Office-cash on hand and in transit	14.0	12.1	1.91,291.1	1,302.0	-10.9
("Receiver General year-end balances in London, New York, Paris and Bonn are at the Canadian dollar equivalent of exchange rates at March 31.
The agricultural commodities stabilization account records the operations of the Agricultural Stabilization Board. It is estimated that the board's operations will result in a net decrease in the account of $16 million bringing the balance as at March 31, 1966 to $7 million.
The stockpiling of uranium concentrates account records the acquisition of uranium concentrates in accordance with contracts entered into with the approval of the Governor in Council by the Eldorado Mining and Refining Limited on behalf of Her Majesty in right of Canada with certain mining companies. The balance as at March 31, 1966 at $38 million is $14 million higher than the balance at the previous fiscal year-end.
The veterans land act fund was established by an Act to amend the Veterans' Land Act, assented to June 30, 1965, to record advances made under the Veterans' Land Act, not to exceed the amount of $380 million, for the acquisition.
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by the Director, of properties, buildings, materials, livestock, farm equipment and commercial fishing equipment for purposes of the act, for sale to qualified veterans of world war 2 and Korea under sales agreements which carry specified conditional benefits if the terms of such agreements are adhered to by the veterans, and for progress payments to veterans during construction of housing. The outstanding balances in the veterans land act advances and reserve for conditional benefits under the category "other loans and investments" and the veterans land act housing account under the category "departmental working capital advances and revolving funds" were transferred to the new account. Advances during the year of $64 million and repayments of $40 million bring outstanding advances at March 31, 1966 to $280 million. This is partly offset by a reserve for conditional benefits amounting to $22 million, resulting in a balance in this account of $258 million at the fiscal year-end.
Advances to the exchange fund account
Advances during the year to finance the purchase of gold and foreign exchange amount to $947 million and repayments to $896 million, an increase of $51 million bringing the outstanding advances to $2,672 million at March 31, 1966.
During 1964-65 advances were $699 million and repayments totalled $679 million resulting in a balance of $2,621 million at March 31, 1965.
Investments in special United States of America securities-Columbia River Treaty
This account records the special securities issued by the Government of the United States of America and purchased by Canada pursuant to agreements made to carry out the Columbia River Treaty between the Government of the United States and the Government of Canada. During 1965-66 securities in the amount of $32 million were redeemed leaving a balance of $187 million as at March 31, 1966.
Sinking fund and other investments held for the retirement of unmatured debt
The holdings of $5 million in this account at March 31, 1965 were transferred to the securities investment account during the fiscal year leaving a nil balance in the account.
Canada pension plan investment fund
The Canada pension plan investment fund is a new account to record securities purchased under the Canada Pension Plan Act and the sale of these securities. The amount by which the operating balance of the Canada pension plan account in any month exceeds the estimated amount required to meet all payments in the following three month period is available for the purchase of securities of participating provinces. Securities of Canada shall be purchased with the excess remaining after purchasing securities of each province as required. It is estimated that holdings at March 31, 1966 will total $34 million in provincial securities.
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Loans to, and investments in, Crown corporations
Loans and investments in this category total $5,535 million, an increase of $621 million over the total at March 31, 1965.
TABLE 60 fin millions of dollars)
	Balance at March 31		Increase
Loans to, and Investments in, Crown Corporations	1966 (estimated)	1965	or decrease (-)Atomic Energy of Canada Limited	77.6	65.7	11.9Bank of Canada	5.9	5.9	-2.5Canadian Arsenals Limited	5.0	7.5	Canadian Broadcasting Corporation	3.0	3.0	4.0Canadian Commercial Corporation	7.5	3.5	Canadian National Railways	1,489.3	1,430.6	58.7Air Canada	6.0	3.6	2.41, 495.3	1,434.2	61.1Canadian Overseas Telecommunication Corporation	57.8	55.1	2.7Central Mortgage and Housing Corporation	2,437.8	2,137.8	300.0Eldorado Mining and Refining Limited	8.2	8.2	Export Credits Insurance Corporation	10.0	10.0	150.0Farm Credit Corporation	591.3	441.3	National Capital Commission	33.4	26.1	7.3National Harbours Board	203.5	199.8	3.7Northern Canada Power Commission	30.7	27.8	2.9Polymer Corporation Limited	30.0	30.0	The St. Lawrence Seaway Authority-	326.5	326.5	6.6Deferred interest	45.3	38.7	Interest-free loans	63.0	44.0	19.0m-s	409.2	25.6Recovery likely to require parliamentary appropriations-	28.3	14.3	14.0Canadian Broadcasting Corporation	Canadian Corporation for the 1967 World Exhibition....	37.0	33.8	37.0National Capital Commission-Greenbelt	36.8	3.0102.1	48.1	54-0Other Crown Corporations	1.3	1.3	5,535.2	4,914.5	620.7
Canadian Broadcasting Corporation
There is no change in the advance for working capital during 1965-66, the balance remaining at $3 million as at March 31, 1966. During the year advances to the corporation for the purpose of capital expenditures amounted to $14 million, bringing the total of advances to $28 million at the fiscal year-end. Recovery of these advances is likely to require parliamentary appropriations in subsequent fiscal years.
Canadian Corporation for the 1967 World Exhibition
This is a new account authorized in the amount of $80 million by Department of Finance Vote L26b to record the acquisition of securities issued by the corporation in accordance with the Canadian Corporation for the 1967 World Exhibition Act. The balance as at March 31, 1966 is estimated at $37 million. Recovery of these advances is likely to require parliamentary appropriations in subsequent fiscal years.
March 29, 1966
[Stage Direction]
The Budget-Appendix
Canadian National Railways (including Air Canada)
Outstanding advances to the Canadian National Railways at March 31, 1966 of $1,495 million are $61 million more than the balance of $1,434 million at the previous fiscal year-end.
TABLE 61 (in millions of dollars)
Advances to the Canadian National Railways	Balance at March 31	Increase1966 (estimated)	1965	or decrease (-)Capital Revision Act, 1952- Preferred stock	1,043.9 100.0 27.0 28.4 273.0 17.0 6.0	1,020.2 100.0 27.0 28.4 238.0 17.0 3.6	23.7Twenty-year obligation	Financing and Guarantee Act, 19C0	Financing and Guarantee Act, 1961	Refunding Act, 1955	35.0Canadian Government Railways	Air Canada	2.4
1,495.3	1,434.2	61.1
During the 1965-66 fiscal year the government made available to the company $100 million and received repayments of $39 million. In 1964-65 advances were $68 million and repayments were $45 million.
TABLE 62 (in millions of dollars)
Advances to, and Repayments by, the Canadian National Railways	Fiscal year ending March 31	Increase1966 (estimated)	1965	decrease (-)Advances- For the refunding of debt	35.0	35.0For interim financing of income deficits- Canadian National Railways	33.4	38.7	-5.3Air Canada	7.7	4.6	3.1Total advances	76.1	43.3	32.8Purchase of 4 per cent preferred stock (C.N.R. Capital Revision Act, 1952)	23.7	24.7	-1.099.8	68.0	31.8Repayments- Advances for interim financing of income deficits- Canadian National Railways	-33.4	-38.7	5.3Air Canada	-5.3	-6.0	0.7-S8.7	-U-7	6.0Net increase or decrease (-) during the fiscal year	61.1	23.3	37.8
In 1965-66 the government advanced to the company $35 million for the refunding of debt in the hands of the public.
To assist the company to finance further capital expenditure during the year, the government will have purchased $24 million of the 4 per cent preferred stock of the company. This stock is issued under the authority of the Canadian National Railways Capital Revision Act, 1952, in an amount equal to 3 per cent of the gross revenue of the company.
[Stage Direction]
March 29# 1966
The Budget-Appendix
The government also provided the company with temporary loans of $33 million in respect of its 1965 deficit which will be repaid when the company's income deficit is charged against 1965-66 budgetary expenditures.
At March 31, 1965 temporary loans of $3 million were outstanding to Air Canada in respect of its 1965 operations. An additional $2 million was advanced during the year for its 1965 operations. These have been repaid by the company during 1965-66. However, additional loans of $6 million have been made during 1965-66 in respect of the company's 1966 operations.
Central Mortgage and Housing Corporation
The balance of $2,438 million in this account at March 31, 1966 is $300 million higher than at March 31, 1965, and comprises the Crown's investment of $25 million in the capital of the corporation and $2,413 million in loans and advances.
Loans and advances to the corporation are $490 million in 1965-66 and repayments are $190 million. In 1964-65 advances were $314 million and repayments were $92 million.
Advances comprise $372 million for direct lending and limited dividend housing, $7 million for federal-provincial projects for housing, $35 million for the loan and mortgage purchase fund, $36 million in respect of municipal sewage treatment and $40 million for university housing.
Repayments of $190 million are comprised of $155 million for direct lending and limited dividend housing, $3 million for housing, $15 million for the loan and mortgage purchase fund, $13 million for municipal sewage treatment and $4 million in respect of acquisition or construction of real estate.
TABLE 63 (in millions of dollars)
Advances to, and Repayments by, Central Mobtgage and Housing Cohpobation	Fiscal year ending March 31		Increase or decrease (-)
	1966 (estimated)	1965	
Advances-		371.9 7.5 34.9 36.0 40.0	248.5 10.0 28.5 26.5	123.4 -2.5 34.9 7.5 13.5
			
			
			
University housing				
Repayments-	490.3	313.5	176.8-155.5 -3.3 -14.9 -12.8 -0.3 -3.5	-74.9 -4.8 -8.4 -0.2 -3.5	-80.6 1.5 -14.9 -4.4 -0.1-190.3	-91.8	-98.5300.0	221.7	78.3
March 29, 1966
[Stage Direction]
The Budget-Appendix
Farm Credit Corporation
The government provides loans to the corporation which makes loans on farm property. The balance of $591 million in the account at March 31, 1966 consists of the Crown's investment of $22 million in the capital of the corporation and $569 million in loans and advances. At March 31, 1965 the balance was $441 million consisting of capital investment of $17 million and loans and advances of $424 million.
During 1965-66 the transactions in the account consist of additional subscriptions by the government of $5 million to the capital of the corporation, loans and advances of $165 million and repayments by the corporation of $20 million.
National Capital Commission
Loans to acquire property in the "Greenbelt" area increased by $3 million during the year bringing the balance to $37 million. Recovery of these loans is likely to require parliamentaiy appropriation in subsequent fiscal years.
Loans to acquire property excluding the "Greenbelt" area increased by $7 million to $33 million at March 31, 1966.
The St. Lawrence Seaway Authority
Outstanding loans in this account at March 31,1966 amount to $390 million, an increase of $19 million over the previous fiscal year-end balance of $371 million. There are no repayments.
Deferred interest increased by $7 million during the fiscal year bringing the balance at March 31, 1966 to $45 million.
Other Crown Corporations
Loans to Atomic Energy of Canada Limited are estimated to increase by $12 million during 1965-66, loans to Canadian Commercial Corporation by $4 million, loans to the Canadian Overseas Telecommunication Corporation by $3 million, loans to the National Harbours Board by $4 million, loans to the Northern Canada Power Commission by $3 million and loans to Canadian Arsenals Limited to decrease by $2 million.
Loans to national governments
There is a net increase of $55 million in this category bringing total balances to $1,344 million at March 31, 1966.
The Government of the United Kingdom deferred the payment of principal and interest due December 31, 1965 on the $1,185 million loan made under the $1,250 million credit authorized by the United Kingdom Financial Agreement Act, 1946, the principal outstanding at the close of the year remaining at $995 million and deferred interest increasing by $19 million to $83 million. The deferment of principal and interest is by an agreement between the Government of Canada and the Government of the United Kingdom that was approved by
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March 29, 1966
The Budget-Appendix
a 1957 Act to amend the United Kingdom Financial Agreement Act, 1946. The agreement, which became effective April 29, 1957, permits the United Kingdom in lieu of any right of waiver hitherto existing to defer after December 31, 1956, seven instalments of principal and interest under certain conditions. Interest at 2 per cent is payable on deferred instalments of both principal and interest.
Advances under Part II of the Export Credits Insurance Act to Belgium, France and The Netherlands to assist them in the purchasing of goods in Canada were reduced by a repayment of $2 million, bringing the balance at March 31, 1966 to $125 million. The decrease of $2 million is the regular annual payment by the Government of Belgium. There are no repayments by the Governments of France and The Netherlands as each of these countries had made advance payments in 1962-63 covering instalments up to and including the 1969 instalment.
Loans under the Export Credits Insurance Act, sec. 21A amount to $121 million, an increase of $39 million over the March 31, 1965 total.
Special loans by Canada to Colombo plan countries to finance the purchase of wheat and flour from Canada amount to $7 million, a decrease of $5 million from the previous fiscal year-end balance.
Loans to India for the purchase in Canada of aircraft and associated parts at $7 million are $2 million less than at March 31, 1965.
Special loan assistance-developing countries account is a new account which records loans, not to exceed $50 million, which are subject to terms and conditions as the Governor in Council may approve, for the purpose of undertaking agreed upon economic, educational and technical projects. The balance in the account as at March 31, 1966 is estimated to be $6 million.
TABLE 64 (in millions of dollars)
Loans to National Governments	Balance at March 31	Increase1966 (estimated)	1965	or decrease (-)Loans to United Kingdom- The United Kingdom Financial Agreement Act, 1946...	995.1	995.1	Deferred interest	83.0	63.8	19.21,078.1	1,058.9	19.2Loans under the Export Credits Insurance Act, Part II- Belgium	25.4	27.7	-2.3France	67.0	67.0	The Netherlands	32.1	32.1	124.5	126.8	-2.SLoans under the Export Credits Insurance Act, sec. 21a	120.8	81.8	39.0Special loans to Colombo plan countries to finance the purchase of wheat from Canada- Ceylon	0.6	0.8	-0.2India	6.4	10.7	-4.37.0	11.5	-4.5Miscellaneous loans and advances- India-loan for purchase in Canada of aircraft and associated spare parts	6.5	8.6	-2.1France-interim credit-consolidated interest	0.7	0.7	Special loan assistance-developing countries	6.1	6.1Other	0.1	0.1	IS. 4	9.4	4.01,343.8	1,288.4	55.4
March 29, 1966
[Stage Direction]
The Budget-Appendix
Other loans and investments
Balances in these accounts total $1,037 million at March 31, 1966, $129 million more than at the end of the previous fiscal year.
Canada's subscriptions to the capital of international organizations are $15 million higher due to additional subscriptions of $15 millon to the international development association. Working capital advances and loans to international organizations at $8 million are the same amount as at the previous fiscal year-end.
TABLE 65 (in millions of dollars)
Other Loans and Investments	Balance at March 31	Increase1966 (estimated)	1965	or decrease (-)Subscriptions to capital of, and working capital advances and loans to, international organizations- Canada's subscriptions to capital of- International bank for reconstruction and development 	80.5	80.5	International development association...	55.7	40.7	15.0International finance corporation	3.5	3.5	International monetary fund	577.3	577.3	Working capital advances and loans to international organizations	7.8	7.8	Loans to provincial governments- Alberta	714.8	709.8	16.05.9	6.3	-0 ABritish Columbia	13.2	12.5	0.7Manitoba	10.5	10.7	-0.2*New Brunswick	33.8	32.8	1.0Newfoundland	6.5	0.5	6.0Nova Scotia	21.7	7.1	14 0 'Saskatchewan	29.5	28.5	1.0m.i	98.4	22.7Municipal development and loan board advances ..	124.4	9.4	115.0Less reserve for forgiveness of indebtedness	-7.0	-1.8	-5.2'Miscellaneous- Assisted passage scheme (section 69, Immigration Act. R.S. 1962)	117.4	7.6	109.8;5.0	3.7	1.3Balances receivable under agreements of sale of Crown assets	2.4	4.2	-1.8;City of Montreal- Atwater tunnel	1.8	1.9	n rSt. Remi tunnel	1.0	-1.0 -0 1City of Whitehorse	1.9	2.0	Construction of dock and rail facilities for Steep Rock Iron Mines Limited	0.9	1.1	-0.2Crown Assets Disposal Corporation-	Government equity in agency account	8.1	5.5	2.6Dominion Coal Company Limited	4.5	4.5	Hamilton Harbour Commissioners	1.7	1.7	Housing projects for Canadian forces	20.9	20.4	0 5Municipal Improvements Assistance Act, 1938..	0.8	0.9	-0 1New Westminster Harbour Commission	1.3	1 4	-0.1 2 2Northwest Territories	7.1	3.9	Old age security fund-temporary loans	25.0	-25 0Ottawa civil service recreational association re: W. Clifford Clark Memorial Recreational Centre..	1.1	1.0	0 1Town of Oromocto Development Corporation	1.1	1.2	-0.1Yukon Territory	6.6	4.9	1.7Recovery likely to require parliamentary appropriations, Town of Oromocto, New Brunswick	3.8	3.8	Other	4.6	4.2	0.475.6	92.3	-18.71,036.9	908.1	128.8
23033-227J
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March 29, 1966
The Budget-Appendix
Loans to provincial governments are estimated to increase by $23 million due mainly to additional advances of $15 million to Nova Scotia and $6 million to Newfoundland made pursuant to the Atlantic Provinces Power Development Act.
Under the Municipal Development and Loan Act advances are made to the Municipal Development and Loan Board to provide financial assistance by way of loans to municipalities to augment or accelerate municipal capital works programs. Where the municipal project in respect of which a loan is made is completed on or before September 30, 1966, the board shall forgive payment to the municipality of 25 per cent of the principal amount of the loan. If a project is not completed as at September 30, 1966, the board shall forgive 25 per cent of that portion of the loan that has been advanced to the municipality as of September 30, 1966. Advances of $124 million at March 31, 1966 are partly offset by a reserve of $7 million for forgiveness of indebtedness. At March 31,
1965	advances were $10 million, partly offset by a reserve of $2 million. Miscellaneous loans and investments totalling $74 million reflect a net
decrease of $19 million from the March 31, 1965 total. The decrease is due mainly to the repayment out of the old age security fund of temporary loans of $25 million which were outstanding at the previous fiscal year-end.
Securities held in trust
Recorded herein are the security holdings of various deposit and trust accounts and annuity, insurance and pension accounts. Bonds and certified cheques held in connection with contractors' securities included in the deposit and trust category are also recorded under this heading. The balance at March 31,
1966	of $172 million is $119 million more than the previous fiscal year-end balance due mainly to an increase of $115 million in holdings under the Municipal Development and Loan Act.
Deferred charges
The balance of $258 million in this account is $50 million more than at March 31, 1965, reflecting an increase in the unamortized portions of actuarial deficiencies in the superannuation accounts and a decrease of $3 million in unamortized loan flotation costs.
Unamortized portions of actuarial deficiencies
These accounts record the unamortized portions of the actuarial deficiencies in the Canadian forces, the public service and the Royal Canadian Mounted Police superannuation accounts which are set up as deferred charges.
Due to salary revisions in 1965-66 additional amounts were credited to the superannuation accounts to cover the estimated actuarial liability and recorded as deferred charges. Consistent with established policy these amounts are amortized over a five year period. The current adjustments for the additional liability were $17 million in respect of the Canadian forces superannuation account, $78 million in respect of the public service superannuation account and $1 million in respect of the Royal Canadian Mounted Police superannuation account.
March 29, 1966
[Stage Direction]
The Budget-Appendix
Credited to these accounts and charged to budgetary expenditure for current and prior actuarial adjustments were $17 million in respect of the Canadian forces superannuation account resulting in a balance of $54 million, $26 million in respect of the public service superannuation account resulting in a balance of $93 million and $1 million in respect of the Royal Canadian Mounted Police superannuation account resulting in a balance of $4 million.
Unamortized loan flotation costs
This account records the residual balances of discounts, commissions, redemption bonuses and conversion premiums on loan flotations that have not been charged to budgetary expenditures. The balance of $108 million is $3 million less than the previous fiscal year-end balance.
TABLE 66 (in millions of dollars)
Unamortized Loan Flotation Costs	Fiscal year ending March 31	
	1966 (estimated)	1965
Balance of account at beginning of fiscal year		110.7	123.7
New flotation costs to be amortized-		
4|% loan July 1, 1965-June 1, 1967		0.3	
5% loan July 1, 1965-July 1, 1970		1.4	
3f% loan Sept. 1, 1965-Sept. 1, 1966		2.2	
5|% loan Sept. 1, 1965-Oct. 1, 1969		0.1	
4% loan Dec. 1, 1965-Dec. 15, 1966		1.8	
5|% loan Dec. 1, 1965-Apr. 1, 1969		0.1	
5i% loan Dec. 1, 1965-Oct. 1, 1975		0.2	
4% loan Feb. 1, 1966-Apr. 1, 1967		2.3	
5i% loan Feb. 1, 1966-Aug. 1, 1980		0.4	
Adjustments^	5.9	-0.7Treasury bills discount	16.5	13.2Canada savings bonds-adjustment of previous issues	1.0	0.9Canada savings bonds-new issue	9.0	8.83|% loan May 1, 1964-July 1, 1965	3.95% loan May 1, 1964-July 1, 1969	0.35j% loan May 1, 1964-May 1, 1990	2.43|% loan Oct. 1, 1964-Dec. 1, 1965	3.63J% loan Oct. 1, 1964-Oct. 1, 1967	2.15% loan Dec. 1, 1964-June 1, 1971	0.63w% loan Feb. 1, 1965-May 1, 1966	1.65% loan Feb. 1, 1965-Oct. 1, 1973	0.541.2	37.2Less-	Amortization applicable to fiscal year-	Canada savings bonds and general loans	-30.8	-36.4Discount on treasury bills charged to interest on public debt...	-13.2	-13.8-44.0	-60.2Increase or decrease (-) during the year	-2.8	-13.0Balance of account at end of fiscal year	107.9	110.7
Adjustments due to additional issues of existing loans.
Cost of new loans issued during 1965-66 and charged to the account amounts to $41 million, of which $16 million is in respect of treasury bills discounts which will be charged to interest on public debt in 1966-67. Credits to the account are $44 million, of which $31 million is a charge to the budgetary item "annual amortization costs" and $13 million (representing discount applicable to 1965-66 on treasury bills sold in 1964-65) is a charge to the budgetary item "interest on public debt".
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March 29, 1966
The Budget-Appendix	'
Capital assets
Assets of the government such as land, buildings, works and equipment, etc., that are charged to budgetary expenditure at the time of acquisition or construction, are included in this category and are shown on the statement of assets and liabilities at a nominal value of $1.
Inactive loans and investments
Loans and investments which are not currently revenue-producing or realizable are recorded herein. Included are the loan of $49 million to China under the Export Credits Insurance Act, loans of $24 million and $7 million made to Roumania and Greece in 1919-20 and 1920-21 respectively and advances of $15 million in respect of the implementation of guarantees (Ming Sung Industrial Company Limited).
Reserve for losses on realization of assets
The balance of this account at March 31, 1966 was $546 million, unchanged from the end of the previous fiscal year.
Net Debt
The net debt of Canada, or the excess of liabilities over net recorded assets, is expected to be $15,538 million at March 31, 1966, $34 million higher than at March 31, 1965 reflecting the estimated 1965-66 budgetary deficit of $34 million.

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The government's cash account represents balances of current and special deposits to the credit of the Receiver General of Canada in the Bank of Canada, chartered banks in Canada and certain banks in London, Paris and Bonn. These balances are expected to total $642 million at March 31, 1966 compared with $682 million at March 31, 1965, a decrease of $40 million.
The cash position of the government is affected not only by budgetary transactions but also by changes in the government's unmatured debt and other non-budgetary transactions. Non-budgetary transactions are those which affect the government's asset and liability accounts and must be taken into account when considering the full scope of the government's financial operations and their effect on the economy of the country.
On the assets side, the non-budgetary transactions consist, for the most part, of loans and advances to, and repayments by, Crown corporations and other government agencies and funds (including the old age security fund), national, provincial and municipal governments, international organizations, veterans and other borrowers. On the liability side they relate mainly to receipts and payments in connection with the many deposit and trust accounts, and annuity, insurance and pension accounts held or administered by the government.
March 29. 1966
[Stage Direction]
The Budget-Appendix The following statement summarizes both the budgetary and non-budgetary transactions for 1965-66 and indicates their effect on the government's cash position. For purposes of comparison the corresponding figures for 1964-65 are also shown.
TABLE 67 (in millions of dollars)
Changes in Cash Position	Fiscal year ending March 31	
	1966 (estimated)	1965
Budgetary transactions-		
Revenue	7,673.0	7,180.3Expenditure	-7,707.0	-7,218.3Deficit	
Non-budgetary transactions (excluding unmatured debt transactions)- Receipts and credits (net)-	-34.0	-38.0Repayments of loans, investments and advances...	76.0	-103.7Annuity, insurance and pension accounts	705.3	544.8Other	288.5	88.7Disbursements and charges (net)-	1,069.8	529.8Loans, investments and advances	-946.8	-476.2Other	-276.3	-437.8-1,223.1	- 914-0Net amount received from, or required for (-), non-	budgetary transactions	-153.3	-384.2Overall cash requirement (-) to be financed by increase	In unmatured debt or decrease in cash balances... Net increase in unmatured debt outstanding in the hands of the public- Unmatured debt-	-187.3	-422.2Canada savings bonds	204.7	460.1Market issues	-154.9	-175.0Treasury bills	
Special issues to the Unemployment Insurance	10.0	-90.0Commission	104.0	43.016S.8	238.1Securities investment account	-21.9	42.8Sinking fund and other investments	5.4	-5.4147.3	275.5Net increase or decrease (-) in Receiver General cash	balances	-40.0	-146.7
March 29. 1966
The Budget-Appendix
In 1965-66 a deficit of $34 million and net requirements of $153 million for non-budgetary transactions (excluding unmatured debt transactions) result in an overall net requirement of $187 million and as there is an increase of $147 million in outstanding unmatured debt there is a reduction of $40 million in Receiver General bank balances. In 1964-65 a budgetary deficit of $38 million and net disbursements of $384 million for non-budgetary transactions (excluding unmatured debt transactions) resulted in a net cash requirement of $422 million and as outstanding unmatured debt increased by $275 million, Receiver General bank balances decreased by $147 million.
Non-budgetary receipts and credits (excluding unmatured debt transactions)
As shown in the previous table, non-budgetary receipts and credits total $1,070 million in 1965-66. Further details are presented in the following table:
TABLE 68 (in millions of dollars)
	Fiscal year ending March 31	
Non-Btidgetaky Receipts and Credits (Net)	1966 (estimated)	1965
Repayments of loans, investments and advances-		
Agricultural commodities stabilization account		16.2	40.8
Canadian Arsenals Limited		2.5	
Special United States of America securities (Columbia River Treaty)..	32.3	-219.5Old age security fund	25.0	75.076.0	-103.7Annuity, insurance and pension accounts-	Public service superannuation account	224.0	305.4Canadian forces superannuation account	163.0	206.6Old age security fund	215.0	Canada pension plan account	80.0	23.3	32.8705.3	5U-SOther receipts and credits-	Outstanding treasury cheques	37.8	-4.549.0	21.2Cash in hands of collectors and in transit	10.0	-12.4Interest due and outstanding	15.0	10.136.4	15.2Provincial tax collection agreements account	1.9	59.2Security deposits-Municipal Development and Loan Board	115.0	9.522.9	-6.20.5	-3.4m.5	88.71,069.8	529.8
March 29, 1966
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The Budget-Appendix
Non-budgetary disbursements and charges (excluding unmatured debt transactions)
As already indicated, non-budgetary disbursements and charges are $1,223 million in 1965-66. Further details are presented in the following table:
TABLE 69 (in millions of dollars)
	Fiscal year ending March 31	
Non-Budgetaby Disbubsements and Chakges (Net)	1966 (estimated)	1965Loans, investments and advances-	26.4	14.351.0	20.034.0	11.9	12.04.0	-2.037.0	61.1	23.32.7	-0.4300.0	221.7150.0	102.410.3	6.93.7	1.72.9	5.425.6	-6.514.0	14.355.4	44.315.0	7.922.7	-4.8109.8	7.69.3	8.1Other disbursements and charges-	946.8 49.6	476.2 204.5118.8	14.2107.9	219.1276. S	4S7.81,223.1	914.0

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Gross and net debt
The gross debt of Canada, or the total of liabilities as recorded on the statement of assets and liabilities, is estimated at $27,617 million as at March 31, 1966, an increase of $1,044 million over the total at March 31, 1965. The main changes are increases of $705 million in annuity, insurance and pension accounts, $158 million in unmatured debt and $122 million in deposit and trust accounts. Unmatured debt at $19,137 million represents 70 per cent of the total and annuity, insurance and pension accounts at $6,381 million represent 23 per cent. At March 31, 1965 unmatured debt was $18,978 million or 71 per cent and annuity, insurance and pension accounts totalled $5,676 million or 21 per cent.
The government's net recorded assets are estimated at $12,079 million as at March 31, 1966 an increase of $1,010 million over the total at March 31,1965. The main changes are increases of $621 million in loans to, and investments in, Crown corporations, $119 million in securities held in trust and $129 million in
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The Budget-Appendix
other loans and investments. Loans to, and investments in, Crown corporations represent 46 per cent of the total and advances to the exchange fund represent 22 per cent. At March 31, 1965 loans to, and investments in, Crown corporations were $4,915 million or 44 per cent and advances to the exchange fund were $2,621 million or 24 per cent.
The net debt of Canada is estimated at $15,538 million as at March 31, 1966 reflecting an increase of $34 million, equivalent to the 1965-66 budgetary deficit.

[Stage Direction]
Statement of Public Debt, Unmatched Debt, Net Recorded Assets and Net Debt of Canada
(in millions of dollars)
As at March 31	Gross Public Debt	Less net recorded assets	Net debt	Increase in net debt during fiscal yearUnmatured debt	Other liabilities	Total	1962	16,945.7	5,962.1	22,907.8	9,679.7	13,228.1	791.01963	17,961.8	6,837.4	24,799.2	10,879.5	13,919.7	691.61964	18,740.1	7,183.3	25,923.4	10,853.3	15,070.1	1,150.41965	18,978.2	7,595.2	26,573.4	11,069.0	15,504.4	434.31966 (estimated)	19,136.6	8,480.5	27,617.1	12,078.7	15,538.4	34.0
Unmatured debt
Total unmatured debt of $19,137 million is $158 million more than the balance at March 31, 1965.

[Stage Direction]
Billions of Dollars
Estimated
March 29, 1966
[Stage Direction]
The Budget-Appendix
The government's holdings of its own securities as at March 31, 1966 is comprised of $79 million in the securities investment account (of which $31 million is in respect of the employees instalment purchase plan). This is an increase of $17 million over the previous fiscal year-end total when holdings were $57 million in the securities investment account (of which $31 million was in respect of the employees instalment purchase plan) and $5 million in the sinking fund and other investments account.
Of the total unmatured debt, $18,766 million is payable in Canada and $371 million in New York. Securities payable in New York have been valued at the official parity rate of $1 U.S. =$1.08108 Canadian.
TABLE 71 (in millions of dollars)
Unmatured Debt Transactions	Fiscal year ending March 31	
	1966 (estimated)	1965
Balance at beginning of year		18,978	18,740
New issues- For cash- Canada savings bonds series 18			99
Canada savings bonds series 19		89	1,011
Canada savings bonds series 20 (net)		879	
Marketable bonds	1,550	1,975Non-marketable bonds (Unemployment Insurance Commis-	144	87Weekly treasury bills (net)	10	102,672	3,182By renewals and conversions- Marketable bonds	250Total new issues	2,672	3,432Less- Matured marketable bonds	-1,705	-1,850Redeemed non-marketable bonds (Unemployment Insurance Com-	-40	-44-250Canada savings bonds redeemed or matured	-763	-650One-year treasury bills (net)	-100-2,608	-2,894Unmatured marketable bonds (redeemed or cancelled)	-5	-300-2,513	-3,194Increase in unmatured debt	159	238Balance at end of year	19,137	18,978
Summary of security issues, maturities and redemptions
Excluding the refunding of treasury bills which mature weekly, the government has issued securities of $2,672 million and redemptions and maturities total $2,513 million.
Net sales of Canada savings bonds series 20 are $879 million and additional sales of series 19 are $89 million. Redemptions and maturities of series 8 to 19 total $763 million. The net increase for all series is $205 million bringing the total of outstanding Canada savings bonds to $5,757 million.
3592
[Stage Direction]
March 29, 1966
The Budget-Appendix
Treasury bills in the amount of $2,150 million consist of $1,370 million in three-month bills and $780 million in six-month bills.

[Stage Direction]
Debt Matured or Converted During the Fiscal Year Ending March 31, 1966
(in millions of dollars)
-		Matured	Redeemed	Total
Marketable bonds-				
41% 1962-65	...AT 15	110.0	110.041% 1963-65	...CT 2	90.0	90.031% 1964-65	...CT 10	400.0	400.031% 1958-65	...T 27	449.9	449.931% 1964-65	...CT 13	325.0	325.031% 1963-66	...AT 19	225.0	225.031% 1964-66	...CT 7	105.0	105.05% 1962-87 (N. Y. loan)	5.4	5.41,704.9	5.4	1,710.3Non-marketable bonds-	Canada savings bonds S 8	43.1	43.1Canada savings bonds S 8-19	719.8	719.8Unemployment Insurance Commission, 4|%...	40.0	40.01,748.0	765.2	2,513.2

[Stage Direction]
New Securities Issued During Fiscal Year Ending March 31, 1966
(in millions of dollars)
-		Price to government	Yield at price to government	Total amount issued	Amount issued for cash
			per cent		
Marketable bonds-					
31% 1965-66	..CT 16	99.33	4.32	150.0	150.03j% 1964/65-67	..CT 14	98.55	4.37	175.0	175.03J% 1965-66	..CT 20	99.00	4.79	205.0	205.04% 1965-66	. .CT 22	98.85	5.15	150.0	150.04% 1966-67	..CT 25	98.70	5.16	170.0	170.041% 1965-67	..CT 18	99.50	4.52	50.0	50.051% 1965-69	..CT 23	100.25	5.41	100.0	100.05% 1965-70	..CT 19	99.75	5.06	125.0	125.05% 1966-70	..CT 19	98.50	5.38	50.0	50.051% 1965-75	.. CT 24	100.00	5.50	50.0	50.051% 1966-80	.. CT 26	100.00	5.50	80.0	80.051% 1965-69	. .CT 21	100.75	5.29	145.0	145.051% 1964/65-90	..CT 12	98.50	5.36	100.0	100.01,550.0	1,550.0Non-marketable bonds-	Unemployment Insurance Commission-	41%	100.00	4.50	80.5	80.541%	100.00	4.875	63.5	63.5Canada savings bonds-	Nov. 1, 1964-Nov. 1, 1974	41-51%	,.S 19	100.00	5.00	89.1	89.1Nov. 1, 1965-Nov. 1, 1975	41-51% (net)	..S 20	100.00	5.03	878.6	878.6Weekly treasury bills (net)	10.0	10.02,671.7	2,671.7
Interest rates
The average interest rate on the government's unmatured debt rose to 4.43 per cent during the fiscal year from 4.32 per cent at March 31, 1965.
The yield on three-month treasury bills which was 3.62 per cent at tender on March 25, 1965 was 4.92 per cent at tender on March 17, 1966.
March 29, 1966
[Stage Direction]
The Budget-Appendix
The yield on six-month treasury bills which was 3.73 per cent at tender on March 25, 1965 was 5.15 per cent at tender on March 17, 1966.
The following table shows the high and low yields together with the yield on the latest issues for the fiscal years 1961-62 to 1965-66 inclusive:

[Stage Direction]
Treasury Bill Yields at Tender
Fiscal year ending March 31	High	Low	Last issueper cent	per cent	per centThree-month bills-	1962	3.34	2.26	3.121963	5.51	3.04	3.621964	3.90	3.19	3.881965	3.87	3.53	3.621966	4.92	3.61	<*4.92Six-month bills-	1962	3.49	2.53	3.291963	5.74	3.19	3.741964	4.06	3.30	4.041965	4.06	3.69	3.731966	5.15	3.70	<05.15
(1)At tender on March 17, 1966.

[Stage Direction]
As At March 31
Indirect debt or contingent liabilities
In addition to the direct debt as set out in the statement of assets and liabilities, the government has assumed certain indirect or contingent liabilities. These consist of securities of the Canadian National Railways, guaranteed as to principal and interest, the guarantees of insured loans made by chartered
[Stage Direction]
March 29. 1966
The Budget*-Appendix
banks and other approved lending institutions under the National Housing Act, deposits maintained by the chartered banks in the Bank of Canada, advances under the Export Credits Insurance Act and bank loans under a number of Federal Statutes.

[Stage Direction]
Summary or Indirect Debt or Contingent Liabilities (estimated)
Railway securities guaranteed as to principal and interest* *1)-
1.	Canadian National 21% due January 2, 1967	
2.	Canadian National 4|% due April 1,1967	
3.	Canadian National 5% due May 15, 1968	
4.	Canadian National 2|% due September 15, 1969	
5.	Canadian National 21% due January 16, 1971	
6.	Canadian National 51% due December 15, 1971	
7.	Canadian National 3}% due February 1,1974	
8.	Canadian National 2j% due June 15, 1975, U.S. $6,000,000®-
9.	Canadian National 5% due May 15, 1977	
10.	Canadian National 4% due February 1, 1981	
11.	Canadian National 5f% due January 1, 1985	
12.	Canadian National 5% due October 1, 1987	
Other outstanding guarantees and contingent liabilities-
13.	Deposits maintained by the chartered banks in the Bank of
Canada®	; [DOT] *
14.	Loans made by lenders under Part IV of the National Housing
Act, 1954, for home extensions and improvements®	
15.	Insured loans made by approved lenders under the National
Housing Act, 1954®	_....
16.	Liability for insurance and guarantees and other commitments
with respect to long-term financing under sections 21 and 21A of the Export Credits Insurance Act®	
17.	Loans made by chartered banks under the Farm Improvement
Loans Act®	
18.	Loans made by chartered banks under the Veterans' Business
and Professional Loans Act ®	_	
19.	Loans made by chartered banks and credit unions under the
Fisheries Improvement Loans Act®	
20.	Loans made by chartered banks under the Small Businesses
Loans Act®	;

,	 [DOT]
21.	Loans made by chartered banks and credit unions under the
Canada Student Loans Act ®	
22.	Notes issued by the Canadian Corporation for the 1967 World
Exhibition*7)	[DOT]_.[DOT]

23.	Loans made by chartered banks to the Canadian Wheat
Board®	
24.	Loans maintained by approved lending institutions under
National Housing Acts prior to 1954 Act	
25.	Guarantees to owners of returns from moderate rental housing
projects*9*	j	
Amount of guarantee	Amount outstanding
$	$
50.000.	000 72.300.000 55.800.000 70.000.	000 40.000.	000 190,561,500 200,000,000 6,486,486 84.150.000 300,000,000 99.500.000 162,750,000	50.000.	000 72.300.000 55.800.000 70.000.	000 40.000.	000 190,561,500 200,000,000 6,486,486 84.150.000 300,000,000 99.500.000 162,750,000
1,331,547,986	1,331,547,986
Unstated	1,020,807,448
25,000,000	17,341,000
8,500,000,000	5,321,000,000
1,000,000,000	515,320,235
127,913,000	68,600,000
4,000	4,000
2,700,000	325,000
37,316,000	12,572,000
81,995,000	64,392,000
Unstated	37,000,000
398,000,000	34,128,000
	7,091,489,683
Unstated	Indeterminate
Unstated	Indeterminate
®As at February 28,1966.	:
(^Converted at $1.08108 Can. official parity rate. <*>As at March 2, 1966.
® As at December 31,1965.	.	,	.	, ,	,
(5)As reported (in accordance with sec. 45, National Housing Regulations) by approved lenders at December 31, 1965.			. , ,,
(*As at December 31, 1965. Includes contingent liability m respect of alternative payments to nonparticipating province.
*7>As at March 7, 1966.
*8>As at January 31, 1966.	,	.	..	,	,,
<*>Funds totalling $3,957,495 are held by Central Mortgage and Housing Corporation for the purpose of settling claims. In 1965 rental guarantee contracts totalled $13,876,000.
March 29, 1966
[Stage Direction]
The Budget-Appendix
SUPPLEMENTARY DETAILED TABLES Revenue Expenditure
Annual Changes in Loans and Investments Unmatured Debt
[Stage Direction]
March 29, 1966
The Budget-Appendix

[Stage Direction]
(in millions of dollars)
Tax Revenue-
Income tax-
Personal 0)	
Corporation 0)	
On dividends, interest, etc., going abroad-
Excise taxes-
Sales taxOHS	
Other taxes-
Automobiles	
Cigarettes, tobacco and cigars	
Electric power export	
Jewellery, watches, ornaments, etc	
Matches and lighters	
Television sets, radios and phonographs...
Toilet preparations	
Wines	
Sundry commodities	
Interest and penalties	
Less refunds	
Customs import duties	
Excise duties-
Spirits	
Beer	
Cigarettes, tobacco and cigars
Licences	
Less refunds	
Estate tax<4>
Miscellaneous tax revenue...
Total tax revenue
Non-Tax Revenue-
Return on investments	
Post office-net postal revenue Other	
Total non-tax revenue Total revenue	
1961-62	1962-63	1963-64	1964-65	1965-66 (estimated)1,792.7	1,744.6	1,865.1	2,103.3	2,150.01,202.0	1,182.8	1,259.0	1,523.8	1,610.0112.3	129.2	124.5	143.7	170.03,107.0	3,056.6	3,248.6	3,770.8	3,930.0759.7	806.0	946.1	1,204.6	1,385.025.3	(3)	(3)	(3)	207.6	217.8	226.9	218.3	237.01.0	0.5	0.1	(3)	5.6	5.8	6.4	6.9	7.91.1	1.2	1.3	1.2	1.318.4	19.9	22.0	23.5	27.79.4	10.2	11.1	12.8	14.23.3	3.7	3.8	4.1	4.31.1	1.2	1.3	1.4	1.40.7	0.5	0.8	1.2	1.6-11.0	-0.4	-0.3	-0.3	-0.4262.5	260.4	273.4	269.1	295.0534.5	645.0	581.4	622.1	676.0114.1	122.1	129.4	134.7	155.092.7	98.2	102.9	105.4	106.0160.5	166.5	165.7	177.2	184.0(3)	(3)	(3)	(3)	(3)-4.5	-4.9	-4.7	-5.9	-6.0362.8	S81.9	393.3	411-4	439.084.6	87.1	90.6	88.6	106.80.1	(3)	0.1	0.2	0.25,111.2	5,237.0	5,533.5	6,366.8	6,832.0307.5	311.9	366.4	422.7	436.0183.7	192.8	200.7	230.4	235.0127.2	137.0	152.6	160.4	170.0618.4	641.7	719.7	813.5	841.05,729.6	5,878.7	6,253.2	7,180.3	7,673.0
(^Excluding tax credit to the old age security fund-
1961-62	1962-63	1963-64	1964-65 (estimated)Personal income tax	259.0	273.7	302.6	431.9	496.0Corporation income tax	
100.1	115.2	115.7	145.2	151.0Sales tax	
284.9	302.2	331.8	383.2	516.0
<!>Net after deduction of refunds and drawbacks as well as transfers to the old age security fund. <3>Less than $50,000.
(^Includes duties levied under the Dominion Succession Duty Act.
March 29, 1966	COMMONS DEBATES
The Budget-Appendix
STATEMENT OF EXPENDITURE BY DEPARTMENTS AND MAJOR CATEGORIES FOR THE LAST FIVE FISCAL YEARS (in millions of dollars)
1961-62
1963-64
1965-66
(estimated)
Agriculture-
Administration and general	
Agricultural commodities stabilization
account-net operating loss	
Agricultural products board accountnet operating loss	
Board of Grain Commissioners	
Farm Credit Corporation-net operating loss	
Prairie farm emergency fund-deficit..
Production and marketing	
Payments to western grain producers Rehabilitation and reclamation projects	
Research	
Atlantic Development Board__
Atomic Energy	
Auditor General's Office....
Board of Broadcast Governors .
Canadian Broadcasting Corporation- Grants in respect of the net operating requirements of the national broadcasting service	
International service	
Central Mortgage and Housing Corporation	
Office of the Chief Electoral Officer .
Citizenship and Immigration-
Administration and general	
Immigration	
Municipal winter works incentive program	
National employment service....
Technical and vocational training assistance payments to provinces...
Civil Service Commission .
Defence Production-
Defence expenditure...
Non-defence expenditure..
Economic Council of Canada	
Emergency Measures Organization.
External Affairs- Administration and general.
External aid	
Representation abroad	
Finance-
Administration and general	
Assistance re storage costs of grain..
4.1
22.0
4.9
6.5
47.7 41.5
40.1
25.1
26.8 218.7
34.7
1.1
0.3
76.5
1.7
78.2
5.8
0.4
3.6
10.7
17.9
35.7
67.9
4.7
16.1
2.1
18.2
5.1
28.9
53.9 12.8 95.6
19.4
48.8
3.3
71.8
0.9
6.2
7.3
39.0
0.1
27.8
27.0 183.4
(O
63.2
1.2
0.4
79.0
1.8
80.8
8.7
11.8
3.9
10.8
0.9
18.8
208.0
242.4
4.8
17.8
1.9
19.7
6.4
23.7
46.5
15.0
85.2
32.3 35.2
3.8
122.2
1.0
6.7
1.1
1.1
38.5
23.7
27.6 225.7
0.2
45.9
1.3
0.3
85.7
1.9
87.6
13.5
11.9
4.6
11.4
26.7
19.0
136.4
198.1
5.2
18.1
1.9 20.0
0.2
6.9
28.8
51.7
16.5
97.0
23.1
39.6
4.1
57.1
0.3
6.6
0.5
0.4
41.5
26.4
28.8
165.7
4.3
46.6 1.6 0.4
85.9
2.1
88.0
15.0 0.6
5.6 12.2
42.8
21.2
97.9 179.7
6.2
19.7
3.3
23.0
0.8
7.7
32.8 81.4
17.0 131.2
22.9
34.0
5.1
40.7
1.7
7.4
1.2
76.7
32.3
32.5 197.6
22.9
53.6
1.7 0.4
97.0
2.4
99.4
19.4
13.1
5.3
15.0
40.4
22.8
120.2
203.7
8.2
14.6
9.0
23.6
1.1
8.4
48.4 85.7 19.6
153.7
30.9
37.5
[Stage Direction]
March 29, 1966
The Budget-Appendix

[Stage Direction]
FOR THE LAST FIVE FISCAL YEARS-Continued
(in millions of dollars)
-	1961-62	1962-63	1963-64	1964-65	1965-66 (estimated)
Finance-Concluded					
Office of the Comptroller of the					
Treasury		22.0	23.3	23.8	24.9	25.0
Grants to municipalities in lieu of taxes					
on federal property	24.7	29.2	31.5	35.7	36.9Grants to universities	19.4	26.3	26.8	27.3	27.8Municipal Development and Loan	Board	0.1	2.6	30.0Public service superannuation account-	Government's contribution	46.9	51.1	54.0	55.6	58.0Amortization of deferred charges	10.0	25.6Fiscal, subsidy and other payments to	provinces	541.2	275.3	254.3	358.4	473.3Public debt charges-	Interest on public debt	802.9	881.6	954.5	1,012.1	1,052.0Cost of issuing new loans and annual	amortization of bond discounts and	commissions	35.3	34.6	38.2	38.2	32.0Servicing of public debt	0.8	1.6	1.0	1.0	1.0t,561.4	1,390.5	1,448.9	1,622.7	1,830.0Fisheries	23.1	23.3	23.7	25.6	35.4Forestry-	Administration and general	14.8	16.2	18.5	20.7	22.2Freight assistance and grain storage	costs	17.5	14.4	18.7	19.1	21.0Rehabilitation and reclamation proj-	ects	1.0	1.2	4.6	10.0	16.0S3.8	SI.8	41.8	49.8	59.2Governor General and Lieutenant-	Governors	0.5	0.5	0.5	0.6	0.7Industry-	Defence	4.4	8.0	19.0	20.5	25.0Non-defence	0.1	0.4	0.7	3.3	6.04-5	8.4	19.7	23.8	31.0Insurance	1.4	1.4	1.4	1.4	1.5Justice	8.2	8.4	9.9	10.9	11.8Labour	30.7	32.8	7.3	24.3	24.4Unemployment Insurance Commis-	sion-	Administration and general	28.0	29.3	29.8	33.1	33.1Government's contribution	55.6	57.3	59.3	62.1	65.5114-S	119.4	96.4	119.5	123.0Legislation-	House of Commons	6.2	5.9	10.1	11.1	11.7Senate	1.9	1.8	2.5	2.7	2.7Library of Parliament	0.3	0.4	0.3	0.4	0.58.4	8.1	12.9	14.2	14.9Mines and Technical Surveys-	Administration and general	49.1	47.2	40.7	42.5	56.3Dominion Coal Board	19.9	20.4	20.6	23.2	23.4Emergency gold mining assistance	12.4	15.2	15.0	15.7	14.3National Energy Board	0.4	0.5	0.6	0.7	0.9Water resources branch	2.4	5.5	10.3	12.1	13.784.2	88.8	87.2	94-2	108.6National Capital Commission	8.7	13.0	12.2	10.4	18.6
March 29, 1966
[Stage Direction]
The Budget-Appendix

[Stage Direction]
FOR THE LAST FIVE FISCAL YEARS-Continued
(in millions of dollars)
-	1961-62	1962-63	1963-64	1964-65	1965-66 (estimated)
National Defence- Defence forces, army, naval and air					1,353.4
services	1,504.3	1,435.4	1,460.6	1,369.2	Defence research and development	40.4	41.1	46.1	54.5	73.0Canadian forces superannuation account-	58.8Government's contribution	56.0	58.1	59.7	58.8	Special government contribution.... Amortization of deferred charges - Mutual aid to NATO countries	11.1	25.0	76.5 28.9	13.4 27.5	16.8 18.6Pensions-payments under Defence	8.1	9.0Services Pension Act	7.3	7.5	7.9	Other	7.4	7.2	6.3	6.3	7.11,626.5	1,674.3	1,686.0	1,537.8	1,536.7National Film Board	5.1	5.6	5.8	6.4	6.9National Gallery of Canada	1.0	1.0	1.1	1.3	1.9National Health and Welfare-	2.3	2.3Administration and general	1.8	1.9	2.0	Health services- General health grants and hospital	56.7	52.0construction grants	49.0	50.3	53.0	Government's contributions under the Hospital Insurance and Diag-	433.9	314.0nostic Services Act	283.9	336.7	392.2	Other	6.3	6.6	6.9	6.8	7.0Welfare services-	545.8	552.0Family allowances	520.8	531.6	538.3	Youth allowances	
Fitness and amateur sport payments.	0.2	1.1	1.6	26.9 2.0	46.5 2.0Old age assistance, blind persons and	62.7	74.0	45.4disabled persons allowances	51.4	64.4	Unemployment assistance	92.0	96.5	107.4	107.5	104.6Other	5.4	5.9	6.9	8.4	9.8Medical services	28.1	28.9	30.6	32.5	37.5Food and drug services	2.5	2.8	3.4	4.3	5.31,041.4	1,125.0	1,206.7	1,301.1	1,178.4National Research Council, including	74.1the Medical Research Council	38.8	40.6	47.3	56.6	National Revenue	75.3	78.6	83.0	86.9	95.2Northern Affairs and National Resources-	71.7Administration and general	62.2	69.2	58.5	62.6	50.4	51.0	55.6	64.8	81.5112.6	120.2	114-1	127.4	153.2Post Office	185.0	189.4	206.9	210.5	239.2Privy Council, including Prime	9.1Minister's Office	6.8	5.2	6.1	8.2	Public Archives and National Library	1.0	1.1	1.1	1.5	1.9Public Printing and Stationery-	2.7	3.0Publications	1.9	2.0	2.2	Public Works-	34.6Administration and general	15.5	15.7	15.6	30.2	Accommodation services	81.4	71.6	74.3	87.4	108.7Harbours and rivers engineering services	35.8	29.4	23.6	30.3	36.1Trans-Canada highway contributions.	41.6	33.0	41.3	76.1	80.0174. S	149.7	154.8	224.0	259.4
March 29, 1966
The Budget-Appendix

[Stage Direction]
FOR THE LAST FIVE FISCAL YEARS-Concfaded
(in millions of dollars)
-	1961-62	1962-63	1963-64	1964-65	1965-66 (estimated)Office of the Representation Commissioner 	(1)	0.2	0.8Royal Canadian Mounted Police	60.5	65.4	66.9	76.2	82.0Secretary of State	
Solicitor General-	3.2	4.8	7.6	21.9	25.8Correctional services	
Trade and Commerce-	23.9	25.5	27.9	39.0	57.3Administration and general	14.3	14.0	15.0	16.8	19.6Canadian government travel bureau... Canadian Corporation for the 1967	3.0	3.4	3.9	4.9	6.4World Exhibition	0.3	1.2	19.5	5.0Dominion Bureau of Statistics	24.6	11.9	12.3	13.5	15.8Transport-	41.9	29.8	32.4	54.7	46.8Administration and general	5.8	5.9	4.7	7.0	6.3Air services	150.0	136.9	121.1	131.4	141.2Canadian Maritime Commission	10.2	31.0	49.8	40.6	49.8Marine services	
Non-active assets-	48.6	57.8	64.1	64.5	87.2National Harbours Board	4.9	5.2	0.3	7.6	5.1Railways and steamships	4.6	14.6	30.2	35.4	40.4Maritime Freight Rates Act	
Deficits-	12.2	12.9	13.4	14.7	15.3Canadian National Railways	67.3	48.9	43.0	38.7	33.4Newfoundland ferry and terminals Prince Edward Island car ferry and	7.3	8.2	8.6	11.1	12.7terminals	
Yarmouth-Bar Harbour ferry	3.0	3.3	3.3	4.0	4.1service	0.1	0.2	0.2	0.1	Board of Transport Commissioners	
Freight Rates Reduction Act	
Payments to railways for the main-	1.3 19.0	1.3 20.6	1.4	1.5	1.6tenance of the rates of freight traffic	50.0	50.0	68.1	68.7	95.2Maintenance of trackage	
Contributions to the railway grade	7.0	7.0	7.0	7.0	7.0crossing fund	
Air Canada-deficit	
Canals and works entrusted to The St.	10.0 6.5	5.8 3.5	5.1	5.1	14.0Lawrence Seaway Authority	2.6	2.9	3.0	29.0	10.5Veterans Affairs-	410.4	418.0	423.3	486.4	523.8Administration and general	10.4	10.3	10.0	10.5	10.7Pensions	
Provision for reserve for conditional	177.9	175.9	173.2	180.3	185.5benefits	
Soldier settlement and veterans land	3.3	3.2	3.2	3.1	3.0acts	4.6	4.6	4.5	4.5	4.6Treatment services	
Welfare services, allowances and other	47.0	45.3	45.5	46.4	50.1benefits	89.1	95.4	96.4	106.8	116.1332. S	334.7	332.8	351.8	370.0Total Expenditure	6,520.6	6,570.3	6,872.4	7,218.3	7,707.0
Where transfers have taken place during the current fiscal year, pursuant to the Public Services Rearrangement and Transfer of Duties Act, necessitating the transfer of part votes, such changes as required have been made in 1964-65, but not in prior years. d>Less than §50,000.
March 29, 1966	COMMONS DEBATES	3601
The Budget-Appendix

[Stage Direction]
(in millions of dollars)
-	1961-62	1962-63	1963-64	1964-65	1965-66 (estimated)
Loans to, and investments in, Crown corpora-					
tions-
[Stage Direction]
Air Canada
[Stage Direction]
0.2
[Stage Direction]
-0.4
[Stage Direction]
0.4
[Stage Direction]
-1.4
[Stage Direction]
2.4
[Stage Direction]
Atomic Energy of Canada Limited
[Stage Direction]
4.9
[Stage Direction]
-12.5
[Stage Direction]
0.4
[Stage Direction]
12.0
[Stage Direction]
11.9
[Stage Direction]
Canadian Arsenals Limited
[Stage Direction]
-2.5
[Stage Direction]
Canadian Broadcasting Corporation
[Stage Direction]
14.3
[Stage Direction]
14.0
[Stage Direction]
Canadian Commercial Corporation
[Stage Direction]
3.0
[Stage Direction]
-0.5
[Stage Direction]
-4.0
[Stage Direction]
-2.0
[Stage Direction]
4.0
[Stage Direction]
Canadian Corporation for the 1967 World Ex-
[Stage Direction]
hibition
[Stage Direction]
37.0
[Stage Direction]
Canadian National Railways
[Stage Direction]
72.2
[Stage Direction]
274.7
[Stage Direction]
-28.8
[Stage Direction]
24.7
[Stage Direction]
58.7
[Stage Direction]
Canadian National (West Indies) Steamships
[Stage Direction]
Limited
[Stage Direction]
-0.7
[Stage Direction]
-0.6
[Stage Direction]
Canadian Overseas Telecommunication Corpo-
[Stage Direction]
ration
[Stage Direction]
6.2
[Stage Direction]
11.4
[Stage Direction]
6.2
[Stage Direction]
-0.4
[Stage Direction]
2.7
[Stage Direction]
Central Mortgage and Housing Corporation
[Stage Direction]
190.3
[Stage Direction]
101.8
[Stage Direction]
113.3
[Stage Direction]
221.7
[Stage Direction]
300.0
[Stage Direction]
Farm Credit Corporation
[Stage Direction]
54.2
[Stage Direction]
59.0
[Stage Direction]
69.9
[Stage Direction]
102.4
[Stage Direction]
150.0
[Stage Direction]
National Capital Commission
[Stage Direction]
6.2
[Stage Direction]
9.4
[Stage Direction]
12.1
[Stage Direction]
6.9
[Stage Direction]
10.3
[Stage Direction]
National Harbours Board
[Stage Direction]
6.0
[Stage Direction]
13.8
[Stage Direction]
5.5
[Stage Direction]
1.7
[Stage Direction]
3.7
[Stage Direction]
Northern Canada Power Commission
[Stage Direction]
-0.3
[Stage Direction]
-7.2
[Stage Direction]
3.4
[Stage Direction]
5.4
[Stage Direction]
2.9
[Stage Direction]
Northern Ontario Pipe Line Crown Corporation
[Stage Direction]
-4.7
[Stage Direction]
-8.4
[Stage Direction]
-110.6
[Stage Direction]
The St. Lawrence Seaway Authority
[Stage Direction]
("28.3
[Stage Direction]
<"22.7
[Stage Direction]
("24.9
[Stage Direction]
("-6.5
[Stage Direction]
<"25.6
[Stage Direction]
Other
[Stage Direction]
-0.1
[Stage Direction]
365.8
[Stage Direction]
463.3
[Stage Direction]
92.7
[Stage Direction]
378.7
[Stage Direction]
620.7
[Stage Direction]
Loans to national governments-
[Stage Direction]
United Kingdom-
[Stage Direction]
The United Kingdom Financial Agreement
[Stage Direction]
Act, 1946
[Stage Direction]
-17.1
[Stage Direction]
-17.5
[Stage Direction]
-17.8
[Stage Direction]
("19.6
[Stage Direction]
("19.2
[Stage Direction]
Export Credit Insurance Act
[Stage Direction]
-15.3
[Stage Direction]
-105.9
[Stage Direction]
-2.3
[Stage Direction]
-2.3
[Stage Direction]
-2.3
[Stage Direction]
Export Credits Insurance Corporation, sec. 21A
[Stage Direction]
5.3
[Stage Direction]
19.6
[Stage Direction]
23.4
[Stage Direction]
33.4
[Stage Direction]
39.0
[Stage Direction]
Special loans to Colombo plan countries to fi-
[Stage Direction]
nance the purchase of wheat and flour from
[Stage Direction]
Canada
[Stage Direction]
-5.0
[Stage Direction]
-5.0
[Stage Direction]
-5.0
[Stage Direction]
-5.0
[Stage Direction]
-4.5
[Stage Direction]
Loan to India for the purchase in Canada of air-
[Stage Direction]
craft and associated spare parts and equip-
[Stage Direction]
ment
[Stage Direction]
10.0
[Stage Direction]
-1.4
[Stage Direction]
-2.1
[Stage Direction]
Special loan assistance-developing countries...
[Stage Direction]
6.1
[Stage Direction]
Other
[Stage Direction]
-1.0
[Stage Direction]
-0.6
[Stage Direction]
-SS.l
[Stage Direction]
-109.4
[Stage Direction]
8.3
[Stage Direction]
44-3
[Stage Direction]
55.4
[Stage Direction]
*Other loans and investments-
[Stage Direction]
Subscriptions to capital of, working capital ad-
[Stage Direction]
vances and loans to, international organi-
[Stage Direction]
zations-
[Stage Direction]
Canada's subscription to capital of-
[Stage Direction]
International monetary fund
[Stage Direction]
21.0
[Stage Direction]
12.6
[Stage Direction]
International bank for reconstruction and
[Stage Direction]
development
[Stage Direction]
6.8
[Stage Direction]
International development association
[Stage Direction]
7.9
[Stage Direction]
8.5
[Stage Direction]
7.9
[Stage Direction]
7.9
[Stage Direction]
15.0
[Stage Direction]
Working capital advances and loans to inter-
[Stage Direction]
national organizations
[Stage Direction]
-0.1
[Stage Direction]
6.2
[Stage Direction]
0.2
[Stage Direction]
-0.2
[Stage Direction]
Loans to provincial governments
[Stage Direction]
-0.5
[Stage Direction]
5.8
[Stage Direction]
-0.5
[Stage Direction]
-4.8
[Stage Direction]
22.7
[Stage Direction]
Municipal development and loan board
[Stage Direction]
7.6
[Stage Direction]
109.8
[Stage Direction]
Provincial tax collection agreements-advances
[Stage Direction]
13.1
[Stage Direction]
-2.7
[Stage Direction]
-10.4
[Stage Direction]
Balances receivable under agreements of sale of
[Stage Direction]
Crown assets
[Stage Direction]
-1.5
[Stage Direction]
-2.3
[Stage Direction]
-2.3
[Stage Direction]
-1.8
[Stage Direction]
-1.8
[Stage Direction]
Housing projects for Canadian forces
[Stage Direction]
1.9
[Stage Direction]
6.1
[Stage Direction]
5.4
[Stage Direction]
2.5
[Stage Direction]
0.5
[Stage Direction]
Old age security fund
[Stage Direction]
-17.3
[Stage Direction]
41.7
[Stage Direction]
58.3
[Stage Direction]
-75.0
[Stage Direction]
-25.0
[Stage Direction]
Unemployment Insurance Commission
[Stage Direction]
-67.0
[Stage Direction]
Other
[Stage Direction]
2.5
[Stage Direction]
-0.3
[Stage Direction]
-0.2
[Stage Direction]
1.5
[Stage Direction]
7.6
[Stage Direction]
-53.1
[Stage Direction]
98.3
[Stage Direction]
66.1
[Stage Direction]
-72.7
[Stage Direction]
128.8
[Stage Direction]
Net total of changes in loans and investments...
[Stage Direction]
279.6
[Stage Direction]
452.0
[Stage Direction]
167.1
[Stage Direction]
350.3
[Stage Direction]
804.9
[Stage Direction]
("Includes deferred interest. ("Deferred interest.
[Stage Direction]
March 26, 1966
The Budget-Appendix
UNMATURED DEBT INCLUDING TREASURY BILLS AS AT MARCH 31, 1966 AND THE ANNUAL INTEREST THEREON (estimated)
[Stage Direction]
Date of
[Stage Direction]
Rate
[Stage Direction]
Amount of
[Stage Direction]
Annual
[Stage Direction]
maturity
[Stage Direction]
per cent
[Stage Direction]
loan
[Stage Direction]
interest
[Stage Direction]
Payable in Canada-
[Stage Direction]
$
[Stage Direction]
$
[Stage Direction]
Loan of 1965
[Stage Direction]
CT 16
[Stage Direction]
1966
[Stage Direction]
May
[Stage Direction]
i
[Stage Direction]
3J
[Stage Direction]
325,000,000
[Stage Direction]
11,375,000
[Stage Direction]
Ninth victory loan
[Stage Direction]
P 7
[Stage Direction]
Sept.
[Stage Direction]
i
[Stage Direction]
3
[Stage Direction]
245,202,200
[Stage Direction]
7,356,066
[Stage Direction]
Loan of 1965
[Stage Direction]
CT 20
[Stage Direction]
Sept.
[Stage Direction]
i
[Stage Direction]
3f
[Stage Direction]
205,000,000
[Stage Direction]
7,687,500
[Stage Direction]
Canada savings bonds 1954 -
[Stage Direction]
S 9
[Stage Direction]
Nov.
[Stage Direction]
i
[Stage Direction]
3i
[Stage Direction]
<>>23,320,700
[Stage Direction]
757,923
[Stage Direction]
Loan of 1961
[Stage Direction]
AT 6
[Stage Direction]
Dec.
[Stage Direction]
15
[Stage Direction]
41
[Stage Direction]
175,000,000
[Stage Direction]
7,875,000
[Stage Direction]
Loan of 1963 and 1964
[Stage Direction]
CT 5
[Stage Direction]
Dec.
[Stage Direction]
15
[Stage Direction]
41
[Stage Direction]
125,000,000
[Stage Direction]
5,625,000
[Stage Direction]
Loan of 1965
[Stage Direction]
CT 22
[Stage Direction]
Dec.
[Stage Direction]
15
[Stage Direction]
4
[Stage Direction]
150,000,000
[Stage Direction]
6,000,000
[Stage Direction]
Loan of 1966
[Stage Direction]
CT 25
[Stage Direction]
1967
[Stage Direction]
Apr.
[Stage Direction]
1
[Stage Direction]
4
[Stage Direction]
170,000,000
[Stage Direction]
6,800,000
[Stage Direction]
Loan of 1961 and 1963
[Stage Direction]
AT 9
[Stage Direction]
June
[Stage Direction]
1
[Stage Direction]
4i
[Stage Direction]
275,000,000
[Stage Direction]
11,687,500
[Stage Direction]
Loan of 1965
[Stage Direction]
CT 18
[Stage Direction]
June
[Stage Direction]
1
[Stage Direction]
41
[Stage Direction]
50,000,000
[Stage Direction]
2,125,000
[Stage Direction]
Loan of 1962
[Stage Direction]
AT 12
[Stage Direction]
Oct.
[Stage Direction]
1
[Stage Direction]
31
[Stage Direction]
100,000,000
[Stage Direction]
3,750,000
[Stage Direction]
Loan of 1964 and 1965
[Stage Direction]
CT 14
[Stage Direction]
Oct.
[Stage Direction]
1
[Stage Direction]
31
[Stage Direction]
250,000,000
[Stage Direction]
9,375,000
[Stage Direction]
Canada savings bonds 1955
[Stage Direction]
S 10
[Stage Direction]
Nov.
[Stage Direction]
1
[Stage Direction]
31
[Stage Direction]
0)22,538,600
[Stage Direction]
732,504
[Stage Direction]
Loan of 1962
[Stage Direction]
AT 11
[Stage Direction]
1968
[Stage Direction]
Jan.
[Stage Direction]
15
[Stage Direction]
41
[Stage Direction]
250,000,000
[Stage Direction]
10,625,000
[Stage Direction]
Loan of 1964
[Stage Direction]
CT 8
[Stage Direction]
Jan.
[Stage Direction]
15
[Stage Direction]
41
[Stage Direction]
130,000,000
[Stage Direction]
5,525,000
[Stage Direction]
Refunding loan 1950
[Stage Direction]
P 9
[Stage Direction]
June
[Stage Direction]
15
[Stage Direction]
21
[Stage Direction]
308,581,000
[Stage Direction]
8,485,978
[Stage Direction]
Loan of 1963 and 1964
[Stage Direction]
CT 3
[Stage Direction]
Oct.
[Stage Direction]
1
[Stage Direction]
5
[Stage Direction]
441,000,000
[Stage Direction]
22,050,000
[Stage Direction]
Canada savings bonds 1959
[Stage Direction]
S 14
[Stage Direction]
Nov.
[Stage Direction]
1
[Stage Direction]
5
[Stage Direction]
0)851,797,350
[Stage Direction]
42,589,867
[Stage Direction]
Loan of 1960
[Stage Direction]
T 39
[Stage Direction]
1969
[Stage Direction]
Apr.
[Stage Direction]
1
[Stage Direction]
51
[Stage Direction]
80,000,000
[Stage Direction]
4,400,000
[Stage Direction]
Loan of 1965
[Stage Direction]
CT 23
[Stage Direction]
Apr.
[Stage Direction]
1
[Stage Direction]
51
[Stage Direction]
100,000,000
[Stage Direction]
5,500,000
[Stage Direction]
Loan of 1962
[Stage Direction]
AT 16
[Stage Direction]
Apr.
[Stage Direction]
1
[Stage Direction]
51
[Stage Direction]
100,000,000
[Stage Direction]
5,500,000
[Stage Direction]
Canada savings bonds 1956 -
[Stage Direction]
S 11
[Stage Direction]
May
[Stage Direction]
1
[Stage Direction]
4
[Stage Direction]
<1)41,105,600
[Stage Direction]
1,644,224
[Stage Direction]
Loan of 1964
[Stage Direction]
CT 11
[Stage Direction]
July
[Stage Direction]
1
[Stage Direction]
5
[Stage Direction]
325,000,000
[Stage Direction]
16,250,000
[Stage Direction]
Loan of 1962
[Stage Direction]
AT 13
[Stage Direction]
Oct.
[Stage Direction]
1
[Stage Direction]
51
[Stage Direction]
80,000,000
[Stage Direction]
4,400,000
[Stage Direction]
Loan of 1965
[Stage Direction]
CT 21
[Stage Direction]
Oct.
[Stage Direction]
1
[Stage Direction]
51
[Stage Direction]
145,000,000
[Stage Direction]
7,975,000
[Stage Direction]
Loan of 1958
[Stage Direction]
T 24
[Stage Direction]
1970
[Stage Direction]
May
[Stage Direction]
1
[Stage Direction]
31
[Stage Direction]
200,000,000
[Stage Direction]
7,000,000
[Stage Direction]
Loan of 1965 and 1966
[Stage Direction]
CT 19
[Stage Direction]
July
[Stage Direction]
1
[Stage Direction]
5
[Stage Direction]
175,000,000
[Stage Direction]
8,750,000
[Stage Direction]
Canada savings bonds 1957 -
[Stage Direction]
S 12
[Stage Direction]
Nov.
[Stage Direction]
1
[Stage Direction]
41
[Stage Direction]
<>>336,301,350
[Stage Direction]
15,974,314
[Stage Direction]
Canada savings bonds 1960
[Stage Direction]
S 15
[Stage Direction]
Nov.
[Stage Direction]
1
[Stage Direction]
5
[Stage Direction]
<1)375,117,950
[Stage Direction]
18,755,897
[Stage Direction]
Loan of 1964
[Stage Direction]
CT 15
[Stage Direction]
1971
[Stage Direction]
June
[Stage Direction]
1
[Stage Direction]
5
[Stage Direction]
350,000,000
[Stage Direction]
17,500,000
[Stage Direction]
Canada savings bonds 1961 -
[Stage Direction]
S 16
[Stage Direction]
Nov.
[Stage Direction]
1
[Stage Direction]
41
[Stage Direction]
<1)293,177,450
[Stage Direction]
13,192,985
[Stage Direction]
Conversion loan 1958
[Stage Direction]
T 28
[Stage Direction]
1972
[Stage Direction]
Sept.
[Stage Direction]
1
[Stage Direction]
41
[Stage Direction]
1,267,203,100
[Stage Direction]
53,856,132
[Stage Direction]
Loan of 1965
[Stage Direction]
CT 17
[Stage Direction]
1973
[Stage Direction]
Oct.
[Stage Direction]
1
[Stage Direction]
5
[Stage Direction]
275,000,000
[Stage Direction]
13,750,000
[Stage Direction]
Canada savings bonds 1958 -
[Stage Direction]
S 13
[Stage Direction]
Nov.
[Stage Direction]
1
[Stage Direction]
41
[Stage Direction]
<1)90,017,600
[Stage Direction]
3,825,748
[Stage Direction]
Canada savings bonds 1964 -
[Stage Direction]
S 19
[Stage Direction]
1974
[Stage Direction]
Nov.
[Stage Direction]
1
[Stage Direction]
41
[Stage Direction]
<1)851,848,550
[Stage Direction]
38,333,185
[Stage Direction]
Loan of 1959
[Stage Direction]
T 36
[Stage Direction]
1975
[Stage Direction]
Oct.
[Stage Direction]
1
[Stage Direction]
51
[Stage Direction]
310,361,000
[Stage Direction]
17,069,855
[Stage Direction]
Loan of 1965
[Stage Direction]
CT 24
[Stage Direction]
Oct.
[Stage Direction]
1
[Stage Direction]
51
[Stage Direction]
50,000,000
[Stage Direction]
2,750,000
[Stage Direction]
Canada savings bonds 1963 -
[Stage Direction]
S 18
[Stage Direction]
Nov.
[Stage Direction]
1
[Stage Direction]
5
[Stage Direction]
0)818,813,300
[Stage Direction]
40,940,665
[Stage Direction]
Loan of 1960
[Stage Direction]
T 38
[Stage Direction]
1976
[Stage Direction]
Apr.
[Stage Direction]
1
[Stage Direction]
51
[Stage Direction]
436,198,000
[Stage Direction]
23,990,890
[Stage Direction]
Loan of 1954
[Stage Direction]
T 11
[Stage Direction]
June
[Stage Direction]
1
[Stage Direction]
31
[Stage Direction]
247,046,500
[Stage Direction]
8,029,011
[Stage Direction]
Canada savings bonds 1962
[Stage Direction]
S 17
[Stage Direction]
Nov.
[Stage Direction]
1
[Stage Direction]
5
[Stage Direction]
<1)1,174,623,450
[Stage Direction]
58,731,173
[Stage Direction]
Canada savings bonds 1965
[Stage Direction]
S 20
[Stage Direction]
1977
[Stage Direction]
Nov.
[Stage Direction]
1
[Stage Direction]
41
[Stage Direction]
<1)878,484,750
[Stage Direction]
39,536,314
[Stage Direction]
Loan of 1953 and 1958
[Stage Direction]
T 5
[Stage Direction]
1978
[Stage Direction]
Jan.
[Stage Direction]
15
[Stage Direction]
31
[Stage Direction]
207,911,500
[Stage Direction]
7,796,681
[Stage Direction]
Loan of 1954
[Stage Direction]
T 13
[Stage Direction]
1979
[Stage Direction]
Oct.
[Stage Direction]
1
[Stage Direction]
31
[Stage Direction]
343,246,500
[Stage Direction]
11,155,511
[Stage Direction]
Loan of 1962
[Stage Direction]
AT 14
[Stage Direction]
1980
[Stage Direction]
Aug.
[Stage Direction]
1
[Stage Direction]
51
[Stage Direction]
120,000,000
[Stage Direction]
6,600,000
[Stage Direction]
Loan of 1966
[Stage Direction]
CT 26
[Stage Direction]
Aug.
[Stage Direction]
1
[Stage Direction]
51
[Stage Direction]
80,000,000
[Stage Direction]
4,400,000
[Stage Direction]
Conversion loan 1958
[Stage Direction]
T 29
[Stage Direction]
1983
[Stage Direction]
Sept.
[Stage Direction]
1
[Stage Direction]
41
[Stage Direction]
1,992,679,450
[Stage Direction]
89,670,575
[Stage Direction]
Loan of 1963
[Stage Direction]
AT 21
[Stage Direction]
1988
[Stage Direction]
June
[Stage Direction]
1
[Stage Direction]
5
[Stage Direction]
100,000,000
[Stage Direction]
5,000,000
[Stage Direction]
Loan of 1964
[Stage Direction]
CT 9
[Stage Direction]
June
[Stage Direction]
1
[Stage Direction]
5
[Stage Direction]
50,000,000
[Stage Direction]
2,500,000
[Stage Direction]
Loan of 1964
[Stage Direction]
CT 12
[Stage Direction]
1990
[Stage Direction]
May
[Stage Direction]
1
[Stage Direction]
51
[Stage Direction]
225,000,000
[Stage Direction]
11,812,500
[Stage Direction]
Conversion loan 1956
[Stage Direction]
T 15
[Stage Direction]
1998
[Stage Direction]
Mar.
[Stage Direction]
15
[Stage Direction]
31
[Stage Direction]
197,045,000
[Stage Direction]
7,389,188
[Stage Direction]
Loan of 1936
[Stage Direction]
P 1
[Stage Direction]
Perpetual
[Stage Direction]
3
[Stage Direction]
55,000,000
[Stage Direction]
1,650,000
[Stage Direction]
<2>4.92
[Stage Direction]
1,370,000,000 780,000,000 3,000,000
[Stage Direction]
49.594.000 29.094.000 138,750
[Stage Direction]
«5.15
[Stage Direction]
Special non-marketable bonds (U.I.C.)
[Stage Direction]
41
[Stage Direction]
Special non-marketable bonds
[Stage Direction]
(U.I.C.)
[Stage Direction]
41
[Stage Direction]
80,500,000
[Stage Direction]
3,622,500
[Stage Direction]
Special non-marketable bonds
[Stage Direction]
(U.I.C.)
[Stage Direction]
41
[Stage Direction]
63,500,000
[Stage Direction]
3,095,625
[Stage Direction]
18,765,620,900
[Stage Direction]
831,597,061
[Stage Direction]
Payable in New York-
[Stage Direction]
Loan of 1949
[Stage Direction]
1974
[Stage Direction]
Sept. Sept. Oct.
[Stage Direction]
1
[Stage Direction]
21
[Stage Direction]
«>65,087,502 <3)41,047,527 <3>264,864, 600
[Stage Direction]
1,789,906 1,128,807 13,243,230
[Stage Direction]
1975
[Stage Direction]
15
[Stage Direction]
2f 5
[Stage Direction]
1987
[Stage Direction]
15
[Stage Direction]
370,999,629	16,161,943
						19,136,620,529	847,759,004
The interest shown is a projection for one year at the annual rates on principal amounts outstanding at March 31, 1966. Where various rates of interest are applicable during the term of a loan the interest rate in effect at March 31, 1966 has been used.
(^Estimated.
<2)Rate of discount at tender on March 17, 1966.
(^Conversion rate SI U.S. = $1.08108 Canadian.
[Stage Direction]
Wednesday, March 30, 1966