1968-03-07

Mr. Speaker:: Order. I have the honour to inform the house that a communication has been received as follows:
7th March, 1968
Sir:
I have the honour to inform you that the Honourable Gerald Fauteux, Puisne Judge of the Supreme Court of Canada, acting as Deputy to His Excellency the Governor General, will proceed to the Senate Chamber today, the 7th March, 1968, at 5.45 p.m. for the purpose of giving Royal Assent to certain bills.
I have the honour to be, Sir,
Your obedient servant, Louis-Fremont Trudeau, Assistant Secretary to the Governor General



COMMITTEES OF THE HOUSE


Mr. H. E. Gray (Essex Wesl):: Mr. Speaker, I have the honour to present the tenth report of the standing committee on finance, trade and economic affairs returning Bill No. S-25 to the house.
[Note: Text of foregoing report appears in today's Votes and Proceedings.]



NATIONAL DEFENCE-CONCURRENCE IN FIRST REPORT OF STANDING COMMITTEE

Mr. Gerald Laniel (Beauharnois-Salaberry) moved: that the first report of the standing committee on national defence, presented to the house on Tuesday, March 5, be concurred in.


[Stage Direction]
Motion agreed to.


Hon. J. R. Nicholson (Minister of Labour):: Mr. Speaker, in accordance with article 19 of the constitution of the International Labour
Organization I wish to table the texts in English and French of the instruments adopted at the fifty first international labour conference held in Geneva, Switzerland in June of last year.
Six instruments were adopted at the conference, two conventions and four recommendations. The opinion of the Minister of Justice is that the subject matter of each of the conventions and recommendations is partially within federal legislative jurisdiction and partially within provincial legislative jurisdiction.
Convention No. 127 and its accompanying recommendation No. 128 are designed to protect workers against the risk to health of being required to carry very heavy loads. Consultations will proceed with the provinces toward the objective of meeting these I.L.O. safety standards, which may permit eventual ratification of the convention with the agreement of all provinces.
Convention No. 128 and its accompanying recommendation No. 131 revise and consolidate six conventions adopted in 1933 on invalidity, old age and survivors' benefits in industry and agriculture. My department and the Department of National Health and Welfare are studying this convention, and conventions Nos. 102 and 118 which also deal with social security, with a view to their possible ratification by Canada.
Two other recommendations were adopted by the 1967 I.L.O. conference dealing with relations between management and workers at the level of the undertaking. Recommendation No. 129 sets forth the essentials of a communications policy at various levels within an undertaking, in respect of information channels and media, working conditions, job descriptions, safety and health, welfare services, social security and other matters. Recommendation No. 130 sets forth the general principles for the examination of grievances and procedures for their adjustment within the undertaking.


Mr. Speaker:: Has the minister leave to table the documents to which he has referred?


Some hon. Members:: Agreed.

March 7, 1968
Inquiries of the Ministry


EXTERNAL AFFAIRS
[Stage Direction]
On the orders of the day:
Mr. W. B. Nesbitt (Oxford):: Mr. Speaker, has the government of Canada had any discussions or been in consultation with Britain in respect of the position taken by Rhodesia in ignoring the commutation of the death penalty by Her Majesty?


Hon. Paul Martin (Secretary of State for External Affairs):: No, Mr. Speaker.


Right Hon. L. B. Pearson (Prime Minister):: Mr. Speaker, perhaps I could supplement that answer. Just before coming into the house, before I had a chance to talk to the Secretary of State for External Affairs, I received a telephone call from the United Kingdom high commissioner to the effect that he had a message from his Prime Minister bearing on this matter which he wished to deliver to me this afternoon.


Wallace Bickford (Wally) Nesbitt: Perhaps I should direct this supplementary question to the Prime Minister. What is Canada's position in this regard, and has the Canadian government expressed support for the British government? Are discussions under way at the present time in relation to what the Prime Minister indicated in respect of a review of the sanctions now in effect?


Lester Bowles Pearson: I think the Secretary of State for External Affairs dealt with this matter either yesterday or the day before. I prefer not to add anything until I have had a chance to study the latest communications.


Mr. Howard Johnston (Okanagan-Revel-stoke):: Considering the danger inherent in the action taken in Rhodesia, and noting its lack of success, did the Prime Minister of Great Britain consult with his fellow Commonwealth prime ministers before advising the use of the royal prerogative in Rhodesia?


Lester Bowles Pearson: No, Mr. Speaker.


[Stage Direction]
On the orders of the day:
Mr. T. C. Douglas (Burnaby-Coquiilam):: Mr. Speaker, I should like to direct a question regarding the report that the United States, the U.S.S.R. and Great Britain have accepted a nuclear non-proliferation agreement designed to protect countries which do not possess nuclear weapons. Does the Secretary of State for External Affairs have any

further information regarding this agreement, and can he tell us what steps the Canadian government will be taking to promote and support this agreement?


Paul Joseph James Martin: Mr. Speaker, in the discussions on the non-proliferation agreement, as is well known Canada has been strongly in favour of this proposal. We recognized, however, the position of certain countries whose security interests might be jeopardized, and the agreement among the Soviet union, Britain and the United States with regard to action that might be taken in the Security Council by a non-nuclear state for protection against a nuclear power is one that we think advances very considerably the possibilities with reference to a treaty which we regard to be so fundamentally necessary at this time.


Thomas Clement (Tommy) Douglas: A supplementary question, Mr. Speaker. Am I to take it that the Canadian government will be in accord with this agreement, and will be seeking through the Security Council to promote its accession by other countries?


Paul Joseph James Martin: The particular agreement in question has not yet been considered by the government. The non-proliferation treaty up to now has been considered by the government and given strong approval. I have not yet had an opportunity of bringing forward the interim arrangement that has been reached among some of the great powers. I will be making a recommendation to my colleagues shortly and I am very hopeful that Canada will be able to join other countries in supporting this particular agreement that now is so essential for the acceptance of the treaty as a whole.


Thomas Clement (Tommy) Douglas: A further supplementary
question, Mr. Speaker. Do I take it that when a decision has been reached the minister will be making a statement to the house?


Paul Joseph James Martin: Yes, Mr. Speaker.


Mr. David MacDonald (Prince):: Mr. Speaker, can the minister tell us whether the government is giving consideration to proposing certain amendments to the non-proliferation treaty along the lines suggested by some of the countries which find they are unable to accept the agreement as it now stands?


Mr. Martin (Essex Easl):: That is the purpose of the agreement reached by some of the great powers.
March 7, 1968


[Stage Direction]
On the orders of the day:
Hon. E. D. Fulton (Kamloops):: Mr. Speaker, I should like to ask the Secretary of State for External Affairs whether he has been informed of a statement reported to have been made by the government of Gabon, that the real reason the Canadian government has declined to establish diplomatic relations is that Canada is in default in our foreign aid commitments to that country. Has such a statement been made, and is Canada in fact in default with respect to foreign aid commitments?


Paul Joseph James Martin: No, Mr. Speaker, Canada is not in default in respect of any aid. Aid certainly is not an arrangement between countries. Aid extended by a donor country is something that is undertaken by the donor country on its own initiative, at the suggestion of other governments or the government particularly concerned. There is no contractual relationship involved in this situation. That is not the reason. By the way, we have not broken off relations; we have suspended relations with Gabon.


Edmund Davie Fulton: A supplementary question, Mr. Speaker. Was there any understanding with respect to the extension of aid on the basis of which Gabon might have concluded that it would receive aid which in fact has not been forthcoming?


Paul Joseph James Martin: No, sir.


Hon. George Hees (Northumberland):: Mr. Speaker, I have a supplementary question to the Prime Minister. Was the Minister of Justice expressing the view of the government last night in Quebec when he said that the Republic of France was behind the move by Gabon, and if France adopted a similar policy toward this country we should cut off our relationship with France?


Lester Bowles Pearson: Mr. Speaker, I have nothing to add to what I said yesterday except this, that we do not make distinctions between large countries and small countries in these matters.


Mr. Gilles Gregoire (Lapointe):: Mr. Speaker, further to the question put earlier by the hon. member for Kamloops (Mr. Fulton), I
Inquiries of the Ministry should like to direct a question to the Secretary of State for External Affairs (Mr. Martin), in order to clear up a point.
Since, in its press release, the government of Gabon does not refer to any contract or contractual commitment, but rather to promises of economic, financial and technical assistance made to Gabon by the Canadian government, can the minister tell us whether such promises have been made and actually kept?


Paul Joseph James Martin: Mr. Speaker, the government has kept all its promises to Gabon and is ready to carry out its obligations to any country whatsoever.


Gilles Grégoire: Mr. Speaker, may I ask a supplementary question?
Could the hon. minister inquire of the government of Gabon about the meaning of the sentence which accuses Canada of not having fulfilled its promises, and could he inform the house later on?


Paul Joseph James Martin: Mr. Speaker, I think I have already answered that question.


Hon. Martial Asselin (Charlevoix):: Mr. Speaker, I should like to ask the hon. minister to indicate to the house the objectives of the trip taken by Hon. Lionel Chevrier to African countries?


Mr. Speaker:: The hon. member will recognize that the question has already been asked and answered.


Martial Asselin: Mr. Speaker, I should like to direct another question to the hon. Secretary of State for External Affairs.
In view of the fact that the Gabon incident has started a dispute between the Quebec government and the Ottawa government, can the minister tell us if he will meet the Quebec authorities in order to set forth a clear and precise policy on the foreign representation of the provinces and the central government?


Paul Joseph James Martin: I think that the answer is very clear, Mr. Speaker.


Gilles Grégoire: Mr. Speaker, I have a question for the right hon. Prime Minister.
Does he intend to put before the committee on constitutional affairs instituted at the last federal-provincial conference, the dispute now existing between Ottawa and Quebec, and the Quebec representations on education and international affairs?

March 7, 1968
Inquiries of the Ministry


[Stage Direction]
On the orders of the day:
Mr. He ward Grafftey (Brome-Missisquoi):
Mr. Speaker, my question is directed to the right hon. Prime Minister. Since a number of independent French speaking countries will be meeting in France in a few weeks, is it the intention of the government to initiate without delay appropriate constitutional discussions with the provinces in order that in future any possibility of misunderstanding will be minimized?
Lester Bowles Pearson: Mr. Speaker, if an international conference is to be held in Paris in a few weeks and Canada is invited to it, which would be the normal course to take if Canadian representation is required, naturally we would discuss this matter with the provinces, as indeed we have done on similar occasions in the past, particularly if that conference dealt with matters within provincial jurisdiction.


[Stage Direction]
On the orders of the day:
Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, I wish to direct a question to the Secretary of State for External Affairs. In view of the answer given to me by the minister yesterday with respect to the export of Canadian nickel to the United States, I would like to ask the minister if, in view of the humanitarian principles involved in doing all we can to end the war in Viet Nam, the minister has not sufficient confidence in the integrity of the Canadian people to know that they would not permit any Canadian worker to suffer any temporary material inconvenience caused by the ending of that war.


Mr. Speaker:: Order. The question as asked is argumentative.


[Stage Direction]
REQUEST FOR EXTENSION OF PERIOD On the orders of the day:
Mr. Gerard Laprise (Chapleau):: Mr. Speaker, I would like to direct a question to the Minister of Manpower and Immigration. Can he tell us if the municipalities have requested that the winter works period be extended by one month to enable them to complete the 
projects undertaken? Can he tell us also if he will give those requests a favourable answer?


Hon. Jean Marchand (Minister of Manpower and Immigration):: Mr. Speaker, requests have been received and it is unlikely that the period will be extended.



CRIMINAL CODE


[Stage Direction]
On the orders of the day:
Mr.   Roger-E. Regimbal@Argenfeuil-Deux-Montagnes: Mr. Speaker, I had a question for the Minister of Justice but, in his absence, I shall put it to the Prime Minister.
Would he know whether the Minister of Justice has received representations from the caucus members of Quebec Liberals requesting him to postpone consideration of Bill No. C-195, especially as far as abortion and homosexuality are concerned?


Mr. Speaker:: I do not think that this question, as worded, is in order.


Mr. Regimbal:: Mr. Speaker, may I rephrase my question to the Prime Minister?
Is it the intention of the government to bury Bill No. C-195, Bill No. C-186 and the Ralliement Creditiste all at the same time?



BUSINESS OF THE HOUSE


[Stage Direction]
On the orders of the day:
Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, I should like to direct a question either to the Prime Minister, or to the Minister of Finance, or to the house leader. When will we be given the resolution or resolutions respecting matters other than taxation to which the Minister of Finance referred yesterday? Will we have these other resolutions before we proceed with the debate on the income tax resolution, notice of which was filed last night?


Lester Bowles Pearson: Mr. Speaker, it has not yet been decided whether it will be legally necessary to have a resolution and legislation to set up the kind of board to which my hon. friend no doubt is referring, but there will certainly be ample opportunity to discuss the nature of that
March 7. 1968

board and its functions whether or not legislation is required.


Mr. David Lewis (York South):: I have a supplementary question, Mr. Speaker. May I direct a question to the Minister of Finance and ask him whether, if it should be decided that no legislation is necessary and therefore no resolution is necessary, it is his intention and the intention of the government to table a white "pyper"-


Some hon. Members:: Oh, oh.


David Lewis: This was an example of Commonwealth solidarity-a white paper or some other document outlining the powers, objectives and functions of such a board.


Hon. Mitchell Sharp (Minister of Finance):: Mr. Speaker, a definite decision was not made whether that outline will consist of another statement in the house or will be embodied in a white paper, or both, but I can confirm that it is the intention to lay before the house more details on the nature of this board.


David Lewis: I have a further supplementary question. In view of the fact that the setting up of the board, as the minister indicated in his speech the other day, is part of the policy he presented to parliament, could he indicate whether we are likely to have that additional information before the resolution now on the order paper is debated by the house, and certainly before the bill based on the resolution is produced in the house?


Lester Bowles Pearson: Yes, Mr. Speaker. I hope to be in a position to make a statement on this matter tomorrow, or at the latest on Monday.



CONSUMER AFFAIRS


[Stage Direction]
On the orders of the day:
Mr. P. B. Rynard (Simcoe East):: Mr. Speaker, I should like to address a question to the Minister of Corporate and Consumer Affairs. In view of the Batten report showing excessive profits and indicating a monopoly in the distribution of food products by the western grocery chains, will the minister inform the house what action the combines branch has taken?


Hon. John N. Turner (Minister of Consumer and Corporate Affairs):: Mr. Speaker, we have received copies of the report and, as I suggested earlier in reply to a similar question, 27053-464J

Inquiries of the Ministry we are reviewing all the recommendations that affect our department. As a matter of fact, this morning I called Judge Batten and invited her to Ottawa next week in order that we might discuss some of the recommendations in her report.



INQUIRIES OF THE MINISTRY

[Stage Direction]
On the orders of the day:
Mr. Real Caouette (Villeneuve):: Mr. Speaker, my question is directed to the hon. Minister of Manpower and Immigration.
As part of the training courses now being given throughout Canada, does the minister intend to set up personality courses which would permit, for instance, to smarten up the hon. member for Argenteuil-Deux-Montagnes?


Mr. L. R. Sherman (Winnipeg South):: Mr. Speaker, I would like to ask the Prime Minister, if the government has any old centennial medals lying around would it consider sending one to Mr. George Bain?


Some hon. Members:: Hear, hear.


Lester Bowles Pearson: If I can find a very old one 1 will do that, Mr. Speaker.


Some hon. Members:: Hear, hear.


George Harris Hees: Mr. Speaker, I wish to direct my question to the Minister of Trade and Commerce. Does the minister soon expect to be free to express his opinion on financial matters, or does the Prime Minister intend to keep him chained to a sinking ship?


Some hon. Members:: Oh, oh.


Mr. Speaker:: Order, please.



FINANCE


[Stage Direction]
On the orders of the day:
Mr. Lloyd R. Crouse (Queens-Lunenburg):: In view of the present clamour for gold, has the Minister of Finance any information from his counterpart in the United States to the effect the United States may cut the price of gold or stop buying it altogether, as reported

March 7, 1968
Inquiries of the Ministry in an editorial in the Financial Post for Saturday, March 9, 1968?


Mitchell William Sharp: No, Mr. Speaker, I have had no such information.



POSSIBLE PENALTY ON WITHDRAWAL OF MONETARY FUND CREDIT

[Stage Direction]
On the orders of the day:
Mitchell William Sharp: May I take advantage of this occasion to reply to a question asked yesterday by the hon. member for Kamloops. He asked me about the recent drawing by Canada of our credit in the International Monetary Fund, and whether any transfer tax or penalty was payable by Canada in connection with that drawing. The answer is no.



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
George Harris Hees: should like to direct a question to the minister of manpower. In view of the fact that unemployment in the city of Montreal has now reached an eight year high, is the government looking into this situation to ascertain what can be done to alleviate this serious situation?


Jean Marchand: Mr. Speaker, all our services are available to the unemployed, and we do all we can to find them employment.


George Harris Hees: May I ask a supplementary question. Is the government not looking for some constructive method of finding employment for these people who are unemployed in the city of Montreal?



DIVORCE


[Stage Direction]
On the orders of the day:
Mr. Robert McCleave (Halifax):: My question is for the Minister of Justice, and I have just given him notice of it. Will he bring us up to date on the status of the divorce bill?


Hon.   P.-E. Trudeau@Minister of Justice: I thank the hon. member for having sent over 
a note saying he would ask this question. The developments on the divorce bill are, of course, that we have done as we have said we would. We are preparing new rules of practice for the courts which will apply under the act and next week we are meeting, amongst others, with the chief justices of the provinces to discuss this problem. They will be meeting with my officials and with me. I shall be glad to report any further developments in due course.



AIR TRANSPORT


[Stage Direction]
On the orders of the day:
Mr. Thomas M. Bell (Saint John-Alberi):: should like to direct a question to the Minister of Transport in connection with this matter of air line pilots not having the correct licence, which is now in the news. Has the minister checked, and is he personally satisfied that every Canadian pilot has the proper licence at the present time?


Hon. Paul Hellyer (Minister of Transport):: I saw that report in the newspaper, Mr. Speaker. It is the kind of thing which happens from time to time and which makes cabinet ministers turn gray. There are no existing anomalies that have been brought to my attention, Mr. Speaker.


Thomas Miller Bell: Can the house be assured the minister will show some leadership on this matter?


Mr. Speaker:: Order.



FINANCE


[Stage Direction]
On the orders of the day:
Mr. A. D. Hales (Wellington South):: Mr. Speaker, I should like to address a question to the President of the Treasury Board. In view of the fact that yesterday the Minister of Finance advised the house that a new schedule of estimates would be prepared, can the President of the Treasury Board inform the house whether this means that the old book of estimates will be scrapped and a new book published?


Hon. E. J. Benson (President of the Treasury Board):: Mr. Speaker, we are presently looking into this matter. What we would prefer to do is simply table revised estimates for those that are being changed. If the house
March 7. 1968	COMMONS
would agree to this it would save some $50,000 in having the book reprinted.


Mr. Donald Maclnnis (Cape Breton South):: I have a supplementary question for the President of the Treasury Board who, in answer to a previous question, indicated that the government would save about $50,000 by not reprinting the estimates. Could the President of the Treasury Board now indicate what the revisions will cost, so we might be aware of how wasteful this government has been?


Mr. Speaker:: Order, please.



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Mr. David Orlikow (Winnipeg North):: Mr. Speaker, I would like to direct a question to the Minister of Labour. In view of his statement today listing the various conventions adopted at the last I.L.O. conference, and in view of the large number of I.L.O. conventions which have never been ratified by Canada, will the government be discussing actively with the provinces the possible early implementation of these latest conventions to which the minister has referred?


John Robert (Jack) Nicholson: Yes, Mr. Speaker, such discussions have already begun.



NORTHERN AFFAIRS


[Stage Direction]
On the orders of the day:
Hon. W. G. Dinsdale (Brandon-Souris):: Mr. Speaker, I should like to direct a question to the Minister of National Health and Welfare. Were the special health needs of the Indian and Eskimo population in northern Canada, where the infant mortality rate is four times the normal rate and the life expectation span of the Eskimo is 20.9 years, taken into consideration when the recent substantial reductions were made in the northern health service budget?


Hon. Allan J. MacEachen (Minisler of National Health and Welfare):: Mr. Speaker, all factors were considered.
DEBATES	7363
Inquiries of the Ministry


Walter Gilbert Dinsdale: As a supplementary question, is the money saved going to be diverted into the medicare program?


Mr. Speaker:: Order, please.



PUBLIC SERVICE


[Stage Direction]
On the orders of the day:
Stanley Howard Knowles: Mr. Speaker, may I direct a question to the Prime Minister. Is the federal government aware of the fact that the government of British Columbia has brought in legislation to increase the pensions of retired British Columbian civil servants? Will the federal government now do likewise?


Lester Bowles Pearson: Mr. Speaker, I am not aware of that fact but I will look into it. I am sure my hon. friend would not wish us to follow the example of the government of British Columbia in every respect.



HARBOURS


[Stage Direction]
On the orders of the day:
Howard Earl Johnston: Mr. Speaker, my question is for the Minister of Transport. Since I note that the premier of British Columbia has proclaimed the British Columbia harbours board act because he is not convinced that Ottawa supports the Roberts Bank project, could the minister assure the house that the federal government will co-operate with the newly appointed provincial harbours board in the development of this port?


Mr. Speaker:: Order. I think that question could be placed on the order paper.



HUMAN RIGHTS


[Stage Direction]
On the orders of the day:
David Lewis: Mr. Speaker, I wish to direct a question to the Minister of Justice. Has he instructed officers of his department to study the comprehensive report on civil liberties which has just been prepared by the former chief justice of Ontario, Mr. McRuer, in order to see which recommendations might be implemented through the federal parliament?

March 7. 1968
Supply-Finance


Hon.   P.-E. Trudeau@Minister of Justice: This is a very good suggestion, Mr. Speaker. I had thought about it. We intend to look into these recommendations as well as those which will be submitted to us by the committee chaired by Judge Ouimet. This will surely help us considerably.


David Lewis: A supplementary question, Mr. Speaker. Since I think certain of the recommendations can be implemented without having to wait for any future action in any other direction, would the minister reconsider his present position and seek amendments to the Criminal Code to cover matters such as the right to counsel, questions of bail and the like?


Mr. Trudeau:: As I have already explained, Mr. Speaker, we would prefer these rights, that is, the right to counsel, the right to bail, and so on, to be applicable to all Canadian legislation and not only to the Criminal Code. For this reason we would prefer to obtain a charter of civil liberties. However, if that takes too long, we will naturally think of another way.


David Lewis: It will take a long time.



TRANSPORT


[Stage Direction]
On the orders of the day:
David Samuel Horne MacDonald: My question is for the Minister of Public Works. Can the minister tell the house whether he has received a report from Colonel Churchill on the redesign of the Northumberland strait crossing project? If he has not yet received the report, when might he expect to get it?


Hon. G. J. Mcllrailh (Minister of Public Works):: Mr. Speaker, we have not yet received the report. I expect it in about another six weeks.

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



DEPARTMENT OF FINANCE

[Stage Direction]
Administration
4c. Grant to the endowment fund of the Vanier Institute of the Family-L'institut Vanier de la famille, $236,869.
@Deputy Chair(man)? of Committees of the Whole: Order, please. House again in committee of supply, supplementary estimates (C), 1967-68, of the Department of Finance. Vote 4c. Shall vote 4c. carry?


Mr. Irvine:: Mr. Chairman-


@Deputy Chair(man)? of Committees of the Whole: I regret to inform the hon. member that his time, as I understand, had expired last evening.


Mr. Starr:: Let him continue.


John Alfred Irvine: I thought I had a minute or two. If the Chair thinks otherwise I shall abide by Your Honour's decision.


@Deputy Chair(man)? of Committees of the Whole: Does the committee agree to allow the hon. member another couple of minutes?


Some hon. Members:: Agreed.


John Alfred Irvine: I promise I shall not take more than a minute or two.
When I called it six o'clock last night I wanted to summarize and speak about the crisis that now faces us. I wanted to speak about high prices and our low productivity increase factor; I wanted to talk about inflation. I will not do so at great length now because I cannot. I must repeat, nevertheless, that 6.1 per cent of our working population is unemployed. We must consider rising wage rates, the softening of the dollar, which we are all concerned about, and the high cost of borrowing money. Above all we must pay particular attention to the absolutely senseless spending of this extravagant government. As I said yesterday, what a legacy all this mess is for a new prime minister.


Thomas Clement (Tommy) Douglas: Mr. Chairman, yesterday we listened to the Minister of Finance reviewing the state of the Canadian economy. I wish to say to him and to the government that we fully appreciate the difficulties they face and we do not propose to do anything that will aggravate the situation; nor do we desire to take political advantage of the government's difficult financial straits. At the same time I say to the government that we do not intend to acquiesce in mere palliatives which will do nothing to cure our present troubles and which will only give the Canadian people a sense of false security.
Undoubtedly we face a serious economic state of affairs in Canada. The sooner parliament and the Canadian people recognize this and the sooner the government applies
March 7. 1968

remedial measures, the sooner we shall see an improvement.
The Minister of Finance reviewed the state of the economy, and I thought it was appropriate for him to do so. But we must examine that review in the light of the objectives this government had formerly set for itself. We must remember that five years ago this government committed itself to continued economic growth and full employment; this government three years ago announced publicly, in the speech from the throne, that it was declaring war on poverty. Members of this government have talked inside and outside the house about our regaining control of the Canadian economy. The President of the Privy Council just before the last election blanketed this country with an article on buying Canada back. The Prime Minister summed up by saying of the government's program "This is a time to excite the daring and to test the strong."
[DOT] (3:10 p.m.)
In the light of these objectives I think we ought to examine the state of the Canadian economy. I want to look at some of the indicators by which it is customary to measure the health of the economy. The first and most important of these is, of course, the rate of economic growth. The Economic Council of Canada states in its first report that we need an annual increase in our productivity of some 5J per cent in constant dollars if we are to keep unemployment at 3 per cent and provide jobs for those entering the labour force. We are not doing this at the present time.
I notice that the minister said yesterday, as reported at page 7334 of Hansard:
We are still experiencing the upward thrust in our economy which began seven years ago and which has continued without serious interruption to the present.
I would certainly question this upward thrust in the economy. If we look at the year 1967 what do we find? We find that in constant dollars the increase in our gross national product for the first nine months was 2 per cent. Figures for the last three months are not yet available, but, bearing in mind the increasing unemployment it is very unlikely that there was any improvement in the last quarter of 1967. If we consider our productivity for the first nine months of 1967 on a per capita basis we find that in terms of real dollars it amounted to some $2,370 as compared with $2,368 in the previous year. In other words, on a per capita basis there was
Supply-Finance
virtually no increase in productivity in the first nine months of 1967 compared with the same period in 1966. Moreover, we find that in the third quarter of last year there was actually a decline in the rate of economic growth.
As I pointed out the other day, one of the segments of the economy in which an upward thrust is not apparent is agriculture, where the income of farm operators fell 19 per cent below the level of 1966. On the basis of economic growth, therefore, it cannot be said there is an upward thrust in the economy. We have been virtually stagnant for the last 12 months in terms of increasing the productivity of this nation.
The second indicator which it is customary to examine is, of course, employment. Employment is an important indicator because it tells us the extent to which we are utilizing our most important resource, namely our manpower. The Economic Council of Canada said we ought to be able to keep unemployment at 3 per cent or less. That should be the goal. I would point out incidentally that by the standards of western Europe 3 per cent is a very high figure. The government of Sweden was extremely perturbed last year and brought in some emergency measures when unemployment there reached 1.8 per cent.
What has happened in Canada? We have not been able to keep unemployment down to 3 per cent. We find that in the middle of January this year there were 464,000 unemployed, or 6.1 per cent of the labour force. This compares with 5.2 per cent in 1967 and 5.1 per cent in 1966. Most disturbing of all is the fact that this unemployment is affecting some regions of Canada even more adversely than others. In the Atlantic region unemployment at the middle of January amounted to 10.9 per cent. In Quebec and British Columbia it was 7.8 per cent. The number of persons unemployed for between one and three months rose from 135,000 in December to 195,000 in January. This is really alarming. In January, 1967 only 26,000 people had been unemployed for more than seven months. In January of this year 37,000 had been unemployed for more than seven months.
The Economic Council of Canada, as has been said many times in this house, pointed out that if we are to increase productivity the most effective way of doing so is by putting the unemployed to work. The council suggested that every time we reduced unemployment by one percentage point we increase the gross

March 7. 1968
Supply-Finance
national product by some $2 billion a year. An unemployment figure of more than 6 per cent means we are losing in the neighbourhood of $6 billion of increased wealth production, roughly one third of which would find its way back into the treasuries of federal, provincial and municipal governments of this country.
One thing which disturbs me about this question of unemployment is this. I have the uneasy feeling that the government considers unemployment one of the ways by which it can solve the problem of inflation. I refer to the statement made yesterday by the minister, as reported at page 7337 of Hansard:
We have found that at a level of unemployment of 3i per cent in 1965 and 1966 our prices began to reduce sharply. Our costs increased much more rapidly than did those in competing economies. Even when the level of employment dropped off a little and the pressure of demand upon our markets was less intense, we have found that the momentum of wage increases, of other cost increases, of price increases, has kept up. That is now the chief constraint upon our policy.
If the government is taking the position that allowing unemployment to rise is one of the methods by which it hopes to stop price inflation, then it is committed to a policy which will bring this country to disaster.
Another indicator to which I want to refer is the cost of living. The cost of living is something which affects every person in Canada. The Minister has already referred to the fact that increasing unemployment has not resulted in a drop in prices. On the contrary, the reverse is true; unemployment and rising prices have gone on side by side. In January, 1967 the consumer index was 146 compared with 152.6 in 1968, representing an increase of 4j per cent in twelve months in the cost of living. In the past four years during which this government has been in office the cost of living has gone up by almost 14 per cent. This is not due to increased demand. As a matter of fact, manufacturing orders last year failed to show any increase over the figure of $3,150 million of the previous year.
[DOT] (3:20 p.m.)
As my colleague from Waterloo South pointed out yesterday we are not suffering from the old style inflation of too much money chasing too few goods; we are facing a situation in which a large part of the economy dominated by large corporations has been able to establish administered prices which are not sensitive to the laws of supply and demand. I do not know of any better illustration I could give of this than to quote

from the Monthly Business Analysis put out by W. A. Beckett Associates Limited of Toronto. On page 1 it says:
Corporate profits actually turned In a surprisingly good performance in the third quarter of 1967 in the light of the slow progress in real output. This was achieved by price increases which show in wholesale and consumer prices rather than by any improvement in the productivity and cost picture.
I ask the house to note these words:

rather than by any improvement in the productivity and cost picture.
We have price increases in this country not necessarily because of an increase in costs or an increase in demand but because there are companies which are able to increase prices to suit themselves.
A very good example of this is the Canada-U.S. auto agreement under which the government has turned back to the auto companies some $50 million a year in return for which we were told the prices of cars in Canada would decline in relation to the prices of cars in the United States. What do the figures show? They show that the gap between the prices of cars in Canada and in the United States in 1964 was 17.6 per cent and in 1967 17.5 per cent. There has been virtually no change at all. In spite of the fact that the auto companies were able to put $50 million annually in their pockets they were still able to maintain the same disparity in price for Canadian cars compared with the price which the United States consumer is required to pay. What we are facing in this country today, along with a slowdown in economic growth and an increase in unemployment, is a steadily accelerating increase in the cost of living.
Another indicator at which we might look is housing construction. This is an important indicator not only in terms of the need for shelter but because it is a labour oriented industry which is very important in determining the rate of employment in this country. It is, of course, an economic multiplier, as will be pointed out later, because every dollar we spend on housing brings $2 in increased wealth and production in the country. The Economic Council of Canada suggested a target of 193,000 homes per year. We have not been able to meet this target. We now have a carry-over for the past two years of 72,284 houses which, plus what we should be building this year, means that we should construct 265,000 homes in 1968. The minister yesterday told us that the government is hoping that 175,000 homes will be constructed. If
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that is the situation we will still be 90,000 homes short of what we require even to keep up with the target set by the Economic Council of Canada to say nothing of the half a million families in Canada who are living in substandard houses. The higher rates of interest make it virtually impossible for persons with incomes of $8,000 or less to own their own homes.
The other day in one of his election speeches the Minister of Transport said that today a working man cannot afford to build a house. I commend the Minister of Transport for having discovered this very apparent fact. I cannot commend him or his colleagues for what they have done about it. Serviced lots have risen in price by 40 per cent since 1964. The average family in Canada is now being compelled to pay over 30 per cent of their income for shelter when the Canadian Welfare Council has said that the very maximum a family can afford to pay for shelter is from 20 per cent to 25 per cent.
In this very brief review of the economy I suggest to the minister that his optimistic statement yesterday about the upthrust in our economy continuing is sheer balderdash. I suggest that the economy is going down, unemployment is going up, the cost of living is rising at an accelerated pace, we are not keeping abreast of the need for homes in Canada, and the state of the economy today is an indictment of this government and its policies. It does not make anybody who is acquainted with the facts any happier when the minister comes into the house and tries to tell us as he did last night that all is well within the world and that the minister is in his place.
What does the government propose to do? First of all, the government introduced some fiscal measures. Bill C-193 was introduced and defeated. It is not necessary for me to go over the circumstances of that. It was a measure to impose among other things a 5 per cent surtax on the wage and salary earners. I think the house should be congratulated for having rejected that bill. I believe the government in the long run will find that their bungling and ineptitude in allowing it to be defeated did them a good turn because had that bill been passed it would have been a mistake of catastrophic magnitude. Now the minister proposes another measure. Instead of the 5 per cent surcharge on personal income tax he proposes a 3 per cent tax on personal income with the floor raised from $100 to $200 and no ceiling and a 3 per cent surtax on the corporations of this country.
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There is no doubt that this is some improvement. At least the minister has taken off the ceiling so that everybody will pay the surtax. He has reduced it from 5 per cent to 3 per cent. He has decided to place some of the burden upon the corporations. Surely, however, this is an attempt to deal with a malignant growth by putting on a band-aid. Surely this is a complete failure to grapple with the real problems which confront this country. First of all the minister is planning to impose a 3 per cent tax on incomes, whether personal or corporate, based on a structure which is already inequitable and unjust. The New Democratic party maintains that the government has no right to put on any tax until it restructures our tax system and places it on a fair and equitable basis.
[DOT] (3:30 p.m.)
The minister was out to get $185 million. He chipped that down by saying he will cut expenditures by $75 million, so he will only need $110 million. If the minister had been prepared to accept one of the basic recommendations of the Carter report, if he had been prepared to require oil companies, insurance companies and mining companies to pay not a special tax but just the same taxes and other corporatoins and had been prepared to remove the special concessions which these companies enjoy, he could have obtained another $200 million in revenues. We say that until the government is prepared to make the freeloaders pay their share of the taxes it has no right to ask anybody else to pay increased taxes.
Of course, the more fundamental point is that the answer does not lie in imposing more taxes or in curtailing essential government services. This is an outworn concept that we thought had died in the 1930's or had been destroyed by Franklin Delano Roosevelt and Lord Keynes. Surely the answer to our present situation is stimulation of productivity. If we can do what the Economic Council of Canada said we should be doing, reduce unemployment to 3 per cent and increase our gross national product in real terms by 5J or 6 per cent, we would have no problem of inflation.
The government does not start at the right end. The government's idea of solving this problem is to put more taxes on the wage and salary earners and on the corporations. Let me point out that the increased tax on corporations will be inflationary because it will be passed on to the consumers in the form of an

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increase in consumer prices. The government should start at the business end of this problem by allocating manpower, physical and capital resources the task of increasing productivity.
The other method by which the government has sought to cope with this problem is the undertaking of certain monetary measures. Last year the government removed the ceiling on the bank rate. We had all sorts of assurances from the Minister of Finance that the increased competition from banks and lending institutions would result in a decline in interest rates. Instead we have the highest interest rates in living memory, with a prime bank rate of more than 7 per cent. We have to go back before the 1900's to find a time when the bank rate was that high.
What is the result of these exorbitant interest rates? The result is that we are putting available capital up for auction to the highest bidder and therefore capital is not going where it is needed according to social requirements. Capital is going to whoever can pay these excessive interest rates. There has been no attempt to allocate our capital resources. Some industries are overcapitalized, some are undercapitalized and some essential services such as housing are being starved. This is not leadership, Mr. Chairman. This is a betrayal of the trust which the people of Canada have reposed in this government.
The government has raised the central bank rate to 7 per cent in response to the appeal by the President of the United States to United States subsidiaries in this and other countries to send part of their profits back to the United States. I am not going to condemn the President of the United States for doing something which I presume is essential to the economic well-being of that country, but as a Canadian I have to recognize the fact that what the United States is doing is transferring some of the cost of the Viet Nam war to its trading partners. That is exactly what is happening. The United States is seeking to export some of its problems, first by cutting down overseas investment and, second, by asking these subsidiaries to send back part of their retained earnings to the United States.
As every member knows, these subsidiaries responded with almost indecent alacrity. The New York weekly bond market report states that in three weeks in January the auto and rubber industries in Canada sent back $150 million to the United States. The rush by

many United States subsidiaries to send money back to the United States was so great that the Minister of Finance telephoned Mr. Fowler, the secretary of the treasury, and asked him to clarify the position. The minister telephoned from Winnipeg in great alarm. Mr. Fowler issued a statement telling the subsidiaries not to make abnormal, and I emphasize that word "abnormal", transfers of money back to the United States. There have been large transactions. From the best figures we can get, the Bank of Canada had to find $350 million in January and another $113 million in February to stop this trend, and the end has not yet been seen.
The government has done nothing about applying any exchange controls. In most of the countries of western Europe, if you want to transfer a large sum of money you have to get a permit from the central banking authority. The government has done nothing about this situation except to make a rather pathetic appeal to the government of the United States. Those are the two things the government has done in respect of fiscal and monetary policies.
I was pleased yesterday when the Minister of Finance said he had come to the conclusion that fiscal and monetary policies were not enough. Bless his heart. We have been telling him that ever since he became Minister of Finance. Fiscal and monetary policies are useful instruments but they are blunt instruments. If we are going to grapple with this situation there are other steps which must be taken. Let me outline one or two of the steps we have suggested from time to time.
The first step we have suggested is the establishment of a prices review board which would have the power to review prices and deal with cases where increases in consumer prices were unwarranted or unjustified. We would seek concurrent legislation in the provinces to give the board the necessary power to make companies which were profiteering at the expense of the Canadian people roll back their prices.


@Deputy Chair(man)? of Committees of the Whole: Order, please. I regret to interrupt the hon. member but his allotted time has now expired.


Some hon. Members:: Carry on.


@Deputy Chair(man)? of Committees of the Whole: Does the committee gives its unanimous consent to the hon. member to continue?


Some hon. Members:: 
Thomas Clement (Tommy) Douglas: I should like to thank the committee, Mr. Chairman, and I will try not to impose too much on its kindness.
We have advocated a prices review board. Yesterday the minister indicated that he is now going to set up such a board. People often ask me whether I get worried about the Liberals stealing our ideas. 1 do not mind them stealing our ideas, but what worries me is that they just steal the words. All we are going to get is words. This is not going to be a prices review board. The minister is not even sure it will require a bill. It is not going to have any statutory authority or power. It will be a glorified better business bureau located in somebody's office collecting statistics in order to state two years after a price increase has taken place that it was not really necessary. That will do the consumer in this country a lot of good. It will certainly make the housewife happy to know, two years after she has been paying the increased price, that the increased price of sugar or some other commodity was really unjustified.
[DOT] (3:40 p.m.)
Let me suggest to the minister that if he is really going to grapple with rising prices he is not going to fool the Canadian people by providing a toothless watchdog with no power except to bark, and then softly because it is old and weak and has been given no authority by the government. Therefore we shall continue to press the government for a genuine prices review board with power granted by both the federal parliament and, where necessary, the provincial legislatures of this country to impose selective price controls on any commodities where it has been demonstrated that prices have risen without any proper justification.
Our second proposal is that in order to stimulate the economy one of the most immediate things the government could do would be to undertake a housing program that would build a quarter of a million to 300,000 houses this year. The multiplier effect applies to house construction. All the materials can be produced in Canada; we do not need to import one commodity to build houses in this country. The employment such a program would bring to the construction industry, the industries which manufacture construction materials, the logging camps, the lumber industry and the transportation facilities of this country would be tremendous. We could reduce unemployment substantially by
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a massive housing program, a housing program that would build homes for ordinary people, not just massive, high-rise apartments for the wealthy, not the kind of program we have today under which you must have an income of $8,000, $10,000 or $12,000 a year before you can qualify under the National Housing Act.
We have advocated and do so again that the government ought to establish some priority for the use of our investment capital. We ought to be able to allocate capital in this country according to our social needs. I said a few moments ago that what we do now is allocate capital by puting it up for auction and those who can afford to pay an interest rate of 10 per cent, 11 per cent or 12 per cent have no difficulty obtaining capital. If municipalities, provincial governments, small industries and small businessmen are to get capital there will have to be an allocation of capital on some basis of priority predicated on, first, whatever will stimulate economic growth and, second, whatever will improve the quality of life for the great mass of the Canadian people.
We have capital in Canada. On a per capita basis the Canadian people are among the highest savers in the world. But a lot of our capital is frittered away. A report which appeared in the Globe and Mail shows that for the first 11 months of 1967 we had a deficit in our international transactions in outstanding securities of $323.2 million, 40 per cent below the previous year. We have money in pension funds, insurance funds and trust funds that could be mobilized and put to work to promote economic growth and full employment.
We could do what the government has been promising to do ever since it took office, namely, set up a Canada development corporation that would mobilize the savings of the Canadian people and send those savings marching into battle in the war against poverty, economic stagnation and unemployment. But the Canada development corporation still remains a will-o'-the-wisp; nothing has come of it.
The fourth thing we have suggested is that the government must restructure our tax system. I will not take the time of the committee to go into some of the recommendations of the Carter commission, but I say to the government that with this report in their hands it will haunt them unless they have the courage to put those recommendations into effect. The Canadian people have long suspected

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that the people in the middle and lower income groups have been carrying too heavy a share of the cost of financing Canada federally, provincially and municipally. They have long suspected that there are those with their hands in the cookie jar, that a lot of people have received special concessions and special privileges about which the public did not know. But all of this has been laid on the table by the Carter report which has shown the inequities in our tax structure, which has demonstrated beyond any shadow of doubt that we have freeloaders who have been riding on the backs of the rest of the taxpayers. This government will have to do something about restructuring our tax system. They cannot very much longer evade this question.
The fifth thing we have suggested is that the government should be taking steps now to begin regaining control of the Canadian economy. Again I want to tell the government that one of the things they are not going to be able to bury is the Watkins report. This report says what we in this party have been saying and what the President of the Privy Council has been saying over the years, namely, that the increasing ownership and control of the Canadian economy by foreign investors is eroding our sovereignty and diminishing our independence. If ever we needed a demonstration of this, we have had it in the past few months.
Why is the minister facing a financial crisis at the moment? It is not because of the inability of the Canadian people to produce. It is not because of the failure of the Canadian farmer to grow plenty of food. The reason the minister is facing a financial crisis at the moment is that the United States, facing difficulties arising out of the Viet Nam war, is calling back the money of its subsidiaries in this and other countries. This is part of the price we pay for having two-thirds of some of the major segments of our economy owned and controlled outside this country. We have ceased to be masters in our own house. We have ceased to have the power to direct and control the Canadian economy. The direction of the economy has moved from the treasury benches to the board rooms of New York. It is not one moment too soon, and I suspect that if we wait much longer it will be too late, to begin to regain control of the Canadian economy.
We believe that the basic decisions affecting the welfare and the lives of the Canadian people should be made in Canada and ought

not to be made elsewhere. We are not suggesting a program of economic isolation. There is no reason why we should not have capital come from other countries in the form of loan capital or even equity capital where it is in a minority position. But the basic control, the decision-making power as to whether our economy shall expand, whether we shall have full employment and economic growth or contraction and unemployment, as we have at the present time, ought to reside in Canada in the hands of the Canadian people, and particularly in the hands of the elected representatives of the Canadian people.
[DOT] (3:50 p.m.)
I want to say in closing that all is not well in the economy, in spite of the minister's bland assurances yesterday. We face a very serious situation. We face a drastic slowing down in our economic growth. We face an alarming increase both in unemployment and in the cost of living. We are failing to keep pace with the requirements for housing, schools, hospitals, and other essential public services. Therefore the program which the government has announced of merely adding a few taxes and cutting down a few expenditures may please some people as being the solution for a few months, but I suggest to the minister that, unless he does something much more fundamental, 12 months from now he will be in exactly the same situation or worse. We believe that what we need in this country is a government which has the courage and the vision to intervene in the economy when the public interest requires it. If the government fails to intervene actively in the economy and to direct it, then the present state of the economy will grow worse rather than better.


Mr. Flemming:: Mr. Chairman, when the minister reviewed the present state of the economy in Canada he was listened to by everyone with the proper amount of attention. However, last night when we heard over the radio the proposal with respect to additional taxation and a very minor reduction in expenditures, we were somewhat disappointed. I wish at this point to thank the minister for having made an extra copy of his speech available to me yesterday at my request. With his usual courtesy he gave it his special attention.
The minister referred to many factors which had brought about the present situation. He referred to the seriousness of the
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March 7, 1968
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the people of Canada are watching. These are the things I believe the people of Canada are anxious to see remedied. The government has the ability to do it but does not seem to have the inclination. I cannot tell you why, Mr. Chairman.
The government is now setting up this toothless and useless board of review. As the hon. member for Burnaby-Coquitlam has said, nobody even knows what the status of that board will be. I do not have much faith in boards anyway. I do not have much faith in commissions. This government is famous for setting up commissions and task forces. Why do they not accept their responsibility? I am one of those who believe in the general responsibility that has been entrusted to the elected representatives, whether they sit on this side or on the other side. I should like to have a majority over here, of course, but I do not care too much so far as the responsibilities or duties of members are concerned. Having been chosen by the people, I believe the members are the ones upon whom should rest the ultimate responsibility. They are the ones who are going to go back some day and give an account of their stewardship to the people who sent them here. I submit, therefore, that this board of review and all these cockeyed ideas are useless. I do not know from where they emanate but I do know that they do not seem to make too much ordinary common sense.
The $75 million which has been mentioned amounts to less than 1 per cent of the estimates. The government is now going to add 3 per cent to the corporation tax. This is the proposal. Of course, corporations have no body to be kicked or soul to be damned, but I wonder whether anyone realizes to what extent corporations contribute to the general revenues of this country. You will find, that it is many hundreds of millions of dollars. I can tell hon. members, from the little bit of experience I have had with a small business, that it takes a lot of hard work and planning to keep a business going. My friend the Minister of Labour knows this because he has been through it. You go to bed with your problems and you never get rid of them. Actually you have a great sense of satisfaction when you do accomplish something. This tendency to consider corporations who make profits as public enemies is just darned nuisance and should not be tolerated in this country.

The government has decided to set up this board of review and delegate its responsibility. I do not believe in the delegation of responsibility. In addition, the government has decided to remove the ceiling in connection with individual income tax payments. I am not so sure that is not right. When you get above the $600 mark I am not so sure that an extra 3 per cent is going to make much difference. I am not too critical of that. The accelerated payment of corporation tax is being reintroduced, and I find no great fault with that.
If I may summarize, we have to acknowledge that corporations are being asked to stand another blow. When the tax amounts to 54 per cent or 55 per cent of the total profits of any corporation, the time comes when people become discouraged. If they have a few thousand dollars to invest they are tempted to put their money in trust company certificates at 7 per cent, go down to Florida during the winter and come back and enjoy the sunshine of Canada during the summer. This is what they are liable to do if they are taxed too much. It seems to me a great deal of ordinary judgment is required in connection with the raising of this badly needed money. I repeat that I do not believe the area of expenditure, and particularly the area of waste, has been thoroughly explored with a view to eliminating it.
I wonder where the minister got his figures for the profits for next year? I assume he based them on the current year's profits. I submit there is no guarantee that profits in 1968 will be as large as they were in 1967. I have spoken to a few people who are in business and they are greatly concerned about their prospects for the current year. I consider there is one thing in this country that should be changed. There should be less government in business and more business in government. I am going to quote the words the Minister of Finance used in his speech yesterday because they relate to these same corporations it is proposed to tax. As found on page 7337 of Hansard he said:
We must give priority in our fiscal policy to resisting inflation. We must also plan, in consultation with business-
I draw attention to those words, "in consultation with business".
-with labour, and with all those whose decisions are important in determining prices, a means oi greater understanding oi the mutual danger ol excessive increases in prices and wages, and other costs by which those in positions oi strength can exploit their market power under present circumstances.
March 7. 1968

My reason for quoting these words is simply that it seems to me it is altogether fitting and proper that the groups of people under the general headings of business and labour should be consulted because they all have a part in this problem of inflation. They are contributing factors to it. The minister is now going to consult business as a means of resisting inflation. However, in the same breath he singles out business for discrimination in connection with the payment of taxes. In my opninon, that does not add up properly.
[DOT] (4:10 p.ra.)
Since 1963 there has been a large increase in the number of government employees. I admit that generally speaking government employees are very efficient, but there has been a large increase in the expense, with more and more boards, commissions, crown corporations and all that sort of thing, until one is almost black and blue in the face talking about them, all adding to the expense being paid by that apparently forgotten man, the taxpayer. We hardly ever hear his name mentioned in this chamber. He is the fellow who is paying the taxes but he is the forgotten man.
Governments apparently are tampering to a greater extent than ever before with pay envelopes. I believe that this trend should be reduced. I do not believe in governments taking to themselves the responsibility of providing for a segment of the population and then taxing the whole population to supply the funds for that purpose. No lesser man than the late Right Hon. W. L. Mackenzie King said that the collection of taxes by one government body for the benefit of and payment to another was a vicious principle. Now I am getting into another subject which I do not want to pursue, but the point is that it would be better for governments to address themselves to making it possible for people to do things for themselves rather than provide them with something at public expense.
One of the great philosophers of the United States, Professor Channing, about 100 years ago was asked if it was the function of government to provide happiness for people. He replied no, that it is the function of government, to the extent that it is in its power to do so, to provide the means by which people may make themselves happy. This is a statement which deserves more attention than it has received.
I now come to the question of Canadian productivity and a comparison with our friends to the south. It seems to me that this
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is right along the line I have been talking. If a producer is told that his pay cheque is going to be constantly eroded and interfered with, after a while he will become discouraged. He will ask himself, "What is the use? The government is going to take it all away from me anyway and there is going to be nothing left. What do I care how little I produce"?
A few moments ago I quoted from an editorial in this morning's Gazette headed "Still Not What Is Needed". I think it is a tremendous editorial. It is not entirely uncomplimentary to the minister, but that does not hurt my feelings. It deals with the subject of the protection of the country against inflation and the establishment of guide lines by the government. I am quite prepared to acknowledge that on account of the selfishness of some people individuals do require some regulating because they are not all perfect. We have to have some guide lines for business and to prevent inflation. I quote from the editorial:
In his statement yesterday Mr. Sharp admitted the need for the government to give some sort of guidance in the fight against inflation by establishing some kind of guide lines, even if the name "guide lines" was itself avoided. This is in itself a good step. The tendency of the government in the years that are past was to condemn inflation in generalities but never to come down to cases.
I do not see anything wrong with the word "guide lines". If I were a member of the government I would not mind it. It seems to me that guide lines are a good thing for a group of people such as a government in charge of the destinies of a large number of people. I continue quoting from the editorial:
One of the reasons, it might be suspected, why the government has hitherto avoided setting any sort of guide lines is that it was reluctant to set the necessary example. To lay down guide lines for others, while its own spending was bulging, would have been to invite acute embarrassment, with nowhere to hide.
I know that the minister and his colleagues have read this editorial. To me that last paragraph is a very potent one and proper note should be taken of it.
In his speech yesterday the minister announced the freezing of the number of employees in the public service. This is something which was done in 1962. The public service commission at that time, when vacancies arose, advertised them within the department concerned, then within the public service generally, and finally within the public service all over Canada. As a result nobody

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was hurt by the freeze. People in the service received the preference which they should receive. In 1962 that eliminated a good deal of expense in a gradual way. The editorial deals with the matter as follows:
As for freezing for the time being the number of employees, this was made necessary by the Auditor General's report-a report tabled in the house on the same day that Mr. Sharp's tax bill was defeated. The Auditor General pointed out that the costs of the government's administrative overhead had increased by almost 60 per cent since 1962-63, and that the number of those employed in government departments, the crown corporations and other instrumentalities had increased for the year ending March 31, 1967 by 18,788 over the previous year.
No government could set an example for curbing inflation when it was spending so much and employing so many.
It may well be that Mr. Sharp did the best he could amidst the cross-currents of a seriously divided cabinet-a cabinet so divided on economic policy as to have made adequate measures against inflation impossible for years. The government needs full support for whatever it may do to come to grips with the financial crisis.
The minister knows better than the writer of this editorial whether the reference to cross-currents in a seriously divided cabinet is justified. However, we can point to the fact that living next door to a very large, healthy and friendly neighbour, the minister often goes down to New York and Washington. This is a most natural thing for him to do, and there he discusses financial matters. But surely when he goes there they must ask him, "What about that fellow up there who doesn't want us in Canada? What about the President of the Privy Council who says you should buy Canada back and who doesn't want us there"? What does he reply when he is asked that question and has to answer it? I think it is a very difficult question to answer. This gives us some idea of the division within the cabinet, a division which has much to do with our people's lack of confidence in the cabinet.
[DOT] (4:20 p.m.)
In the 'Gazette yesterday Mr. Blakely, a distinguished member of the press gallery, said this about inflationary tendencies:
-back last October, the inflationary tendencies (which have certainly become no weaker since) were sufficiently disturbing that Mr. Sharp felt that he had little to lose and everything to gain by giving the guide line... er, that is voluntary restraint.. .concept a whirl. In his own mind, at least, he even had the timing fairly well worked out.
It adds up to everyone in this country being conscious of inflation. I do not think the government has paid enough attention to

ways to reduce expenditures. Expenditures for the current year ending March 31, 1968, cannot be reduced sufficiently in order to restore confidence in this country. Next year's expenditures must be considered. It is no good having someone say that next year's expenditure increase of, say, $6.5 billion has been reduced to $6 billion and that a saving has been made. In those figures there is no saving, and to suggest there is is nonsense.
I am critical of the government for not giving leadership to our people in ways to fight inflation. Ministers of finance have bragged about how good things are. I must say that the present Minister of Finance, who has a broader outlook than his predecessor had, has admitted that our good times began in 1961. His predecessor said they began in 1963 on the day the Liberals came to power. That was his submission. Nevertheless, the present Minister of Finance, who is a man of some stature, has said that our good times started under the previous government in 1961. We have had good times and that is why I suggested a few moments ago that we should have tapered off our public spending when the private sector of the economy could carry the ball. The government ought to have balanced its budget and kept out of the money markets. It ought not to have competed for materials and labour with the private sector.
Had the government balanced its budget when times were good and had it not gone to the money markets its credit would now be good. If it needed money in difficult times it could borrow it. Difficult times are not here yet but they may come. The Bible says that we may expect seven years of plenty to be followed by seven years that are not so good. I do not say that we will have seven bad years but since we have had seven years of plenty we may expect times not to be quite so good in future.
At his convenience I hope the Minister of Finance will explain why, when times were good, the government did not save for the rainy day which was bound to come. Failure to do so demonstrates lack of leadership. I charge the government with not giving leadership, and it deserves that charge. The government competed with private industry for labour, material and money. No one questions the government's right to govern, though many question its ability to govern.


Some hon. Members:: Hear, hear.


Hugh John Flemming: The government deserves censure for doing what it ought not to have
March 7, 1968

done and for not doing what it ought to have done. Now the minister asks us to co-operate in getting the country out of the mess. Speaking for myself, I am sure that every member in this chamber wishes to do what is good for the country.


The Chairman:: Order, please. I must interrupt the hon. member to advise him that his allotted time has expired.


An hon. Member:: Carry on.


Herman Maxwell Batten: Does the committee give unanimous consent for the hon. member to continue?


Some hon. Members:: Agreed.


Hugh John Flemming: I thank the committee and I thank you, Mr. Chairman, for your consideration. The minister used some phrases in his speech which deserve attention. He spoke of a new character of urgency. That urgency, I submit, has been caused by this government's mismanagement. He also spoke about buttressing confidence. I took the trouble to look up the meaning of "buttress" and I found that it means "to prop it up". The minister asks us to prop up confidence.


Walter Gilbert Dinsdale: One cannot prop up this government.


Hugh John Flemming: That is quite right, and I do not think we should. Confidence in this government has reached such a low level that it is almost impossible to restore it. Surely those who have weakened the country's confidence in the government are the members of the government themselves.
The minister asked for restraints in wage and price increases. That request is fair enough as long as the prices are restrained as well as wages. It would not be fair to interfere with wages unless attention were also paid to the cost of living and to the things that wages will buy.
The minister talked about the devaluation of sterling. May I suggest what brought about that devaluation? I wonder whether any member of the chamber would like to answer that question?


An hon. Member:: Such as the hon. member for Burnaby-Coquitlam?


Hugh John Flemming: No, no. I will not ask him
to answer. I shall try to answer it myself. Briefly, I think devaluation was brought on by too many handouts in Great Britain. The
Supply-Finance
British people could not produce goods in competition with the world and as a result Great Britain lost its foreign markets. For a long time the British have not been able to compete and this lack of competitiveness, for want of a better phrase, lasted without apparent ill effects just as long as Britain could borrow money. After a while Britain could borrow no more and there was nothing to be done except devalue sterling. The British lived beyond their means. We in Canada have lived beyond our means for the last five or six years. We have had a deficit of $750 million per year. That is the extent to which we have lived beyond our means, and for that the government must take responsibility.
Have we in Canada lost our ability to compete? Are we living beyond our means? Those are good questions and I shall attempt to answer them. No. I do not think we have lost our ability to compete but I do think we are living beyond our means. We have forgotten to encourage people to be productive. We must produce goods competitively with the rest of the world or we will find ourselves in the same predicament as Britain.


Some hon. Members:: Hear, hear.
[DOT] (4:30 p.m.)


Hugh John Flemming: As I say, we live alongside a very rich neighbour, a very good neighbour. They are fine people. They have many luxuries, and we think we are entitled to the same luxuries. I am not so sure we can afford them, but we do try to keep up with the Joneses. I suppose it is natural to do this. We enjoy virtually the same standard of living as the people of the United States, and we can compete with the United States in productivity and in the benefits it derives from world markets if we make up our minds to do so. That is all it takes. But the government must of necessity give some assistance and encouragement to industry to enable it to do that very thing. Up to now this encouragement and assistance have not been forthcoming.
I have mentioned foreign ownership of Canadian business, but since I am now trespassing on time which does not belong to me I shall not go into the subject further. We have the Watkins report. We have statements by the President of Privy Council about buying Canada back. If I had the time I could tell the committee some stories about businesses in the maritime provinces which would never have been started had it not been for United States capital. The proposals were turned down by Canadian banks. I know of

March 7, 1968
Supply-Finance
many such cases. What I think foreign owners of any business in Canada should do is this: they should abide by the laws of Canada. There can be no doubt about that. The things that are good for Canada are things that they should be doing; they should not ask for anything more than that.
I appreciate that the committee has been very kind to me in allowing me additional time. I have just about concluded what I wish to say except for one thing. We find that the whole question of the medicare program due to begin on July 1 is apparently still under consideration. People say to me: the one thing we do not need is more taxes. And this scheme would involve more taxes, an estimated 12 per cent.
I say to the government that this issue ought to be cleared up because nothing is worse in the life of a nation or an individual than uncertainty. Nothing is worse in the financial world than uncertainty. The government has to decide and restore the confidence which I believe has been partially destroyed, not completely destroyed but partially destroyed. The way to do this is for hon. gentlemen opposite to put their own house in order. If I were to give any advice to the Minister of Finance this would be the advice I would give him.


Some hon. Members:: Hear, hear.


Mr. McKinley:: Mr. Chairman, many of the problems facing the country at the present time result from the fact that this government's policy has been one of ad hoc measures, chopping and changing, looking for short-term expediency rather than following a consistent, carefully thought out program designed to ensure even economic expansion.
I should like to review a few facts in this connection. Part of what I have to say may have been said before but I still think it bears repeating. We are now experiencing high costs, increased taxes, high prices and general uneasiness because of the extravagant spending policies of the government. The high prices arise from an increase in demand in which the federal government has been a major component. Increases in the money supply of a sporadic nature and sudden fluctuations in federal spending, particularly in 1966, have unsettled the money market and added to our difficulties. Unwise taxation policies such as the sales tax on building materials have increased built-in business and industrial costs and harmed our productivity and capacity to produce. The minister is now
[Mr, riemmingj
forced to levy new taxes upon an already burdened economy. Unemployment is rising and a number of indicators show a general softening of the economy. Lay-offs are spreading, the boom has tapered off, yet inflation is still sweeping the country.
What is required is a return to competent, effective long-range policies which will not depend on day to day fluctuations and which will result in restoring a climate of confidence. For many millions today, prosperity is being siphoned off by the erosive forces of runaway inflation and rising costs. Inflation has taken a heavy toll of the welfare and economic well-being of every Canadian. There is none so poor as not to be made poorer by it, none so rich as to escape its effects. It has borne most heavily upon those least able to sustain it.
Inflation has become an uncontrolled monster seeking whom it may devour. Prosperity is being siphoned away. Those who never rose to the level of prosperity have had their situation worsened by the indirect yet nonetheless real tax which inflation imposes.
In his budget speech of June 1, 1967, the Minister of Finance outlined the very real dangers of inflation when he said, as reported at page 865 of Hansard:
Our record in the past two years, in this respect, has deteriorated. Between April, 1965 and this April the consumer price index has gone up by 7.3 per cent.
In the same speech he said:
If unchecked, such Increases in costs and prices must lead to increasing inequity and dissension in the country and to a worsening of our competitive position vis-a-vis the United States. This would impose a serious restraint on the growth of Canadian industry and frustrate our efforts to maintain a steady rate of expansion in the jobs available for our growing labour force.
This, Mr. Chairman, is exactly what has been happening.
The former minister of finance, now President of Privy Council, reduced taxes by 10 per cent in April, 1965. Some said it was an election budget. He said it was not. However, an election did take place in November, 1965, two years after the previous one. When hon. members opposite should have been straightening out financial affairs, all they could think about was getting a majority. Their hopes were disappointed.
The present minister brought in a budget in March, 1966, a springtime budget, whose major objective was to restore the pre-election tax cuts. His next budget was a minibudget. In that budget, he raised the amount
March 7, 1968

payable by the taxpayer for old age security, and increased the general sales tax by one percentage point. He felt this would not be inflationary. But it has been. In his budget speech, as reported in Hansard at page 11331, he stated:
We must moderate the rate of increase in new public expenditures. Neither the capacity nor the willingness of Canadians to pay higher taxes should be taken for granted.
[DOT] (4:40 p.m.)
I suggest also that neither should the willingness of the House of Commons be taken for granted. Let me quote from an editorial which appeared in the London Free Press of November 1, 1967. I believe the London Free Press is one of the most factual newspapers in Canada. This is what it had to say:
Employment in the federal civil service grew last year at an average rate of better than 1,000 a month, a pace unmatched since the crash build-up during the second world war.
Although precise statistics on this year's growth are not yet available, most officials believe the rate is continuing.
At Jan. 1 there were 222,385 persons on the payroll of government departments and their direct agencies, a 12-month increase of 13,711 or 6.6 per cent.
These figures does not include independent federal corporations such as the C.B.C., Air Canada, Central Mortgage and Housing Corp., Atomic Energy of Canada Ltd., or any of the special agencies set up for centennial year and Expo 67.
Civil service employment has been creeping up steadily from its wartime peak to 116,000 in 1945. But it didn't really start to surge until the start of 1965. Since then it has been increased by an astounding 9 per cent.
This was going on while the minister was making these statements in his budget speech. The main feature of the budget of last June was to remove the sales tax on drugs, no doubt in order that Canadians, in view of what was coming, would be able to have recourse to cheaper sedatives. Canadians are being asked, through higher taxes and unemployment to pay for the inability of the government to adopt effective, long-range policies.
In his budget of March, 1966 the Minister of Finance also did not seem to have been aware of the situation. When he became aware of the fact that he was dealing with a runaway situation he seemed to have been unable to impress upon his colleagues the need to sacrifice some personal programs. As reported at page 3390 of Hansard for March 29, 1966, the minister said:
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.
Supply-Finance
I am sure we all remember those words. The government is now in a difficult position which was brought about by the unevenness of its fiscal policies and lack of restraint. The government must now increase taxes in order to meet its obligations and reassure the financial markets. Obviously the government failed to foresee the sharp change in the economic climate brought about in part by its policies.
In the budget of last June the minister urged restraint and increased federal expenditures by $1.4 billion. Today the economy is levelling off but inflation continues to pose a threat. I say that the government waited altogether too long before dealing with inflation. Now the danger is that in attempting to do what the minister says they should have begun to do after 1965 they may bring great hardship and difficulty to large sections of the economy. Never was there greater need for clear, consistent fiscal policies. The following words appear in Hansard for April 10, 1962, page 2718. This was before I was a member of the house.
The taxpayer of this country is going to need a headache tablet when he is confronted this year with another deficit of $745 million.
That was said by the right hon. Prime Minister. I have here the press release of the minister's budget speech of November 30, 1967, in which he stated:
These high financial requirements were due not only to the deficit in our budget accounts which was forecast at $740 million-
The figure is almost the same. I believe this perhaps explains why the tax was taken off drugs, including headache tablets. We now find ourselves in a situation where all the indicators show a sagging economy. The unemployment figure for January included more than 6 per cent of the labour force. If one looks at Hansard one can see how those on the government side wailed about unemployment a few years ago. Now it does not seem to be nearly so big a problem. They say there is unemployment all over the world. However, while unemployment in Canada is rising the unemployment figure in the United States for the month of January was the lowest since 1953. It was a mere 3.5 per cent of the labour force.
Now the minister comes along with a surcharge on income tax. Canadians are paying more income tax now than ever before and are receiving less for it. The government does not intend to bring in a budget. When one is brought in I expect that taxes will be increased again. This is what the minister

March 7, 1968
Supply-Finance
said to the hon. member for Regina the other day. I believe we understand why they do not want to bring in a budget now. There would be a conflict of interest if the minister during his leadership campaign had to bring in a budget which called for another tax increase. He will leave that for the new leader. A few years ago it was said in the house that the government was rudderless. Now it is both rudderless and leaderless. I say to you that I believe this was proven on February 19. Obviously not very much will be done about the financial mess until the leadership convention is over.
In the meantime the bank interest rate is soaring at 7 per cent and higher. The N.H.A. mortgage rate at 8| per cent is out of reach of the majority of young Canadians and the average cost of a new home has risen 28 per cent in the past four years. What kind of policy is this? In addition, the provinces are financially unable to take on the responsibility of the federally designed medicare scheme, although most of them have schemes of their own which are equally good and a lot sounder financially. Instead of getting together with the provinces to work out a scheme that would be both feasible and practical the government insists on imposing its own particular scheme on the provinces even though it will be neither national nor portable.
I think the people of Canada should know that the government must face the bills both for medicare and Expo. The Expo deficit is estimated to be between $100 million and $200 million. The minister stated that these figures were not included in the last budget. The government tried to sweep this under the rug but it was still there. The other day in the house the minister said that it has been looked after. I suspect that the only way it could be looked after would be by having a larger deficit for the people to pay.
A while ago the former minister of finance, the President of the Privy Council, added to the confusion a little by bringing down a report which would have the effect of strangling our economic expansion by cutting off capital investment. There is no surprise in the fact that investors at home and abroad have lost confidence in the government's ability to manage the economy. It is an indication of the strength of the economy that we have maintained prosperity in spite of high taxes, high prices and the general mismanagement of the government.

[DOT] (4:50 p.m.)
Canada has been receiving $1 billion per year in the form of United States investment. That money is needed for expansion and the provision of jobs in Canada. In 1965-66 United States citizens invested $1,500 million in Canada. I should like to know how the President of the Privy Council intends to replace this investment if it is cut back. There has been a definite decline in economic expansion in this country as a result of the government's action in increasing taxes and bringing about measures which have increased the high level of government expenditure.
Since the first part of 1966 production has risen at a rate of only 2 per cent compared with the 6 per cent increase in the preceding five years. A growth rate of 2 per cent is not sufficient when one considers the additional 200,000 people entering our labour force each year. Income is slowing down at the same time that unemployment and inflation are increasing. In this regard I agree completely with the hon. member for Carleton.
Canadian productivity is only 70 per cent of the level attained by the United States. Unless we can keep pace and keep costs down we will be unable to compete in export markets. The report of the D.B.S. last September indicated that prices had increased by 4 per cent since 1966. The cost of housing has increased to a greater extent than ever before, and the sales tax on construction materials has not alleviated the situation. Federal expenditures under this government have increased by 60 per cent since the fiscal year 1962-63 after it took office. The government forecast of governmental expenditure is $10 billion for 1968-69. This estimate does not include the cost of medicare or the Expo deficit. As government expenditures have risen the cost of living has risen. This is partly the result of an increase in indirect taxes which Canadians pay for housing, food, clothing, medicine and all those things needed to maintain life.
The government says it intends to cut down on expenditures. Government spending increased last year by 4.6 per cent. I suppose the minister is trying to save money to offset the money he lost as a result of the defeat of his measure to increase taxes. It appears that government finances are pathetic. Public confidence in this government has evaporated. The Bank of Canada is desperately afraid of the dollar value sagging and the government has taken measures to prevent such an occurrence. In the meantime the farmer has been
March 7, 1968	COMMONS
caught in a cost-price squeeze and it seems that the government can do nothing about it. During the last three years the government has been talking about assisting the agricultural industry but it has done little or nothing to help. Let me congratulate the Minister of Agriculture for assisting the dairy farmer, but I must say that the assistance has been too small.
The government has frittered away huge sums in empty gestures which have been of very little assistance to the farmer, the businessman or the taxpayer. The government has allowed our productivity to diminish. It is no wonder that the financial world has very little confidence in this government which is so moribund and so lost to responsibility it cannot keep its feet on the ground or its eyes on the national economy.


Mitchell William Sharp: Mr. Chairman, I should like to ask the committee to rise and report progress in order that the house may revert to motions. At that time I should like to make an important announcement.
Progress reported.



FINANCE


Mitchell William Sharp: Mr. Speaker, I should like to ask the house to revert to motions.


Mr. Deputy Speaker:: Does the house give unanimous consent to the minister's request to revert to motions?


Some hon. Members:: Agreed.


Mitchell William Sharp: Mr. Speaker, I should like to table two documents and make an important announcement. The first document consists of an exchange of letters made today between the hon. Henry Fowler, secretary of the treasury in Washington, and myself concerning the application to Canada of the United States balance of payments measures.


Mr. Deputy Speaker:: Does the house give unanimous consent to the minister to table these documents?


Some hon. Members:: Agreed.


Mitchell William Sharp: The effect of this exchange is that Canada is now completely exempted from the operation of the balance of payments program of the United States affecting
DEBATES	7379
Exemption of Payments from U.S. Balance capital flow. I refer specifically to the measures affecting direct investment that are administered by the department of commerce and the programs administered by the federal reserve system. Our exemption from the interest equalization tax on new issues remains intact.
Freedom from these major United States programs achieves a goal toward which we have been working for a long time. Moreover, it does so without in any way impairing our independence of action.
[DOT] (5:00 p.m.)
The Canadian government on its side has felt that these steps by the United States should be matched by further reciprocal helpful steps on the Canadian side. To ensure that the United States balance of payments position is in no way impaired as a result of the United States action, the Canadian government has said that it is its intention to take any steps necessary to ensure that the exemption from the United States program does not result in Canada being used as a "passthrough" by which the purpose of the United States balance of payments program is frustrated.
In my letter I go on to say that it is also our intention to invest our entire holdings of United States dollars, apart from necessary working balances, in United States government securities which do not constitute a liquid claim on the United States, with, of course, effective safeguards to our position should our reserve level require. At the present time these exchange reserves are invested in marketable United States government securities. I have no doubt these undertakings are in the interests of both countries and in the general interest internationally.
The second announcement I am making today is that arrangements have now been made for an additional $900 million United States in stand-by credits to be available to supplement Canada's foreign exchange reserves. Of this amount $500 million United States will be made available by the United States Export-Import Bank to the government of Canada. The other $400 million United States will be made available to the Bank of Canada by the central banks of Germany and Italy and the Bank for International Settlements.
I wish to express the appreciation of the government for the action of the United States authorities and the three banks in Europe in arranging these credit facilities. I am sure that the house will recognize the
March 7. 1968
7380	COMMONS
Exemption o} Payments jrom U.S. Balance great significance of this announcement. There is no doubt about the basic underlying strength of the Canadian economy. All doubts regarding our access to capital from the United States have now been removed.


Thomas Clement (Tommy) Douglas: Mr. Speaker, could I ask the minister a question before he sits down?


Mr. Monteiih:: Wait for a minute.


Thomas Clement (Tommy) Douglas: I want to ask the minister a question to clarify one point, if I may. Does the removal of the United States balance of payments program so far as Canada is concerned include the matter of repatriation?


Mitchell William Sharp: Yes.


Hon. Robert L. Stanfield (Leader of the Opposition):: Mr. Speaker, I rise simply to say that we are pleased to hear of these arrangements made with the United States authorities and certainly hope they will provide further strength to our currency and our position.


Some hon. Members:: Hear, hear.


Mr. Colin Cameron (Nanaimo-Cowichan-The Islands):: Mr. Speaker, I presume we should greet the minister's comments with satisfaction although for my part some doubts are raised in my mind and I wonder whether there have been any special attacks on the Canadian dollar recently which have necessitated this arrangement with the United States for such a vast sum of money. It leaves me rather puzzled as to what can have happened in the last few days to cause this arrangement to be necessary.
With regard to the relief from the United States guide lines respecting foreign investment and repatriation of dividends I shall have something to say on that matter later today, I hope. I still think it is based upon a miscalculation of Canada's real needs or a miscalculation of the way in which we should deal with the problem of available capital in this country.


David Réal Caouette: Mr. Chairman, we are particularly pleased with the statement of the hon. Minister of Finance (Mr. Sharp) to the effect that Canadian investments in the United States will be better recognized and respected than they were previously, and that even the dividends on those investments will come back to Canada.


We feel that this will benefit Canada. Any country, not only the United States, acting in this fashion, would be helping to consolidate the economic position of Canada on the national as well as the international plane.
We are therefore quite pleased.



MESSAGE FROM THE SENATE

Mr. Speaker:: I have the honour to inform the house that a message has been received from the Senate informing this house that the Senate have passed Bill C-197, an act to amend the Unemployment Insurance Act, without any amendment.

The house in committee of supply, Mr. Tar-dif in the chair.
DEPARTMENT OF FINANCE Administration-
4c. Grant to the endowment fund of the Vanier Institute of the Family-L'institut Vanier de la famille, $236,869.


@Deputy Chair(man)? of Committees of the Whole: Order. House again in committee of supply, supplementary estimates (C), 1967-68, Department of Finance, vote 4c. Shall this item carry?


Gilles Grégoire: Mr. Chairman, before the hon. Minister of Finance (Mr. Sharp) made his statement, we were discussing the supplementary estimates, specifically those of the Department of Finance.
On scanning the speech made yesterday by the hon. minister, one realizes that it is rather likely to spread fear and anxiety with regard to the Canadian economy.
Indeed, one can read sentences like this one, that we must:
-take action which will buttress confidence in the Canadian economy and the Canadian dollar in the midst of mounting international financial uncertainties.
[DOT] (5:10 p.m.)
Mention is also made of new fiscal measures to replace the income lost through the defeat of Bill No. C-193.
There is also talk of further reductions in expenditures; of the need to slow down the increase in prices and wages; of the fact that the Bank of Canada has raised its bank rate from 6 to 7 per cent.
March 7, 1968

Mention is made also of the decrease in Canadian reserves, that is $100 million at the end of January, and another of $113 million at the end of February.
Further on, the hon. Minister of Finance also says, as found on page 7335 of Hansard:
-the rhythm of growth slackened, particularly in business capital spending while employment and production levelled off.
Mr. Chairman, the hon. minister uses all sorts of expressions, in speaking to us of cut-backs in spending, tax increases, the rising level of unemployment, and so on.
Oddly enough, this makes me think of a speech made by another candidate for the Liberal leadership, Mr. Eric Kierans who said, according to the October 2, 1967 issue of Le Devoir:
What would be the economic fate of a separated Quebec?
In his speech on a "separated Quebec", Mr. Eric Kierans said that separation would entail increased unemployment.
In his speech yesterday, the hon. Minister of Finance also tells us that employment has slowed down and that unemployment has increased.
In his speech, Mr. Kierans also mentioned that the separation of Quebec would lead to poverty, because expenditures would have to be reduced. Now, in his statement of yesterday afternoon, the Minister of Finance announced that the federal government had to reduce expenditures and restrict the number of civil servants.
On the other hand, in his speech of October last, Mr. Kierans said, and I quote:
Foreign capital will stay away from Quebec.
In his remarks yesterday, the Minister of Finance also announced the withdrawal of foreign capital, which is being redirected to the United States. They were the very same arguments put forward by Mr. Eric Kierans, candidate in the Liberal party leadership race, last October, in a hypothetic and psychedelic dream: the seven plagues of Egypt.
The Minister of Finance tells us today that the seven plagues of Egypt are raging throughout Canada, that unemployment is increasing, that production is slowing down noticeably, that expenditures must be cut, etc.
Mr. Kierans was trying to scare us at that time. The present Minister of Finance tells us: The seven plagues of Egypt are here.
Supply-Finance
Mr. Chairman, following the speech in which the Minister of Finance announced that we were faced with the situation against which Mr. Kierans was trying to warn us, I tell myself that if Quebec wants to avoid those seven plagues of Egypt, it should withdraw from this administration economically and financially directed by the present Minister of Finance.
Mr. Chairman, the reason for that is very simple. Canada has never been able to develop an entity of its own and become independent.
We are told about Canada's dismal economic situation at the present time. Mr. Chairman, with regard to that situation, I would like to refer to two questions I recently put to the Minister of Finance.
The first one was as follows:
Has Canada granted any loans to England since 1938?
What was the amount of each of these loans?
What was the interest rate on each of these loans?
What amounts were not paid back at the date of maturity?
On January 31, 1968, I obtained the following answer:
In 1943, a loan of $700 million, interest free, was granted to Great Britain under the 1942 legislation. That loan was granted without interest.
Other loans were granted at 2 per cent interest. They were not then granted under a war legislation, but in accordance with a 1946 legislation, even if war had ended. In fact, they were granted on account of the affection of the Minister of Finance of the time for his mother-in-law, Great Britain.
Those loans at 2 per cent interest were refundable in 50 instalments.
What were the amounts granted?
In 1947, $640 million. It was a large amount, but it was not enough!
In 1948, another loan of $368 million was made. That amounted to a big figure in two years, but it was still not enough.
In 1949, $37 million. In 1950, $120 million. In 1951, $20 million.
All these loans, Mr. Chairman, made up a total of $1,185 million loaned at 2 per cent interest for a 50-year period and repayable in 50 annual instalments.
When I asked whether the amount was repaid, I was told that the United Kingdom still owed us the whole amount in 1951, namely four years after. At that time, nothing had been repaid yet.

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In 1958, the repayment of principal is deferred: there is no repayment. In 1965, the repayment of principal is deferred. Until when? We do not know, nothing is said about that. In 1966, the repayment of principal is deferred again.
In 1957, the interest due on December 31 amounted to $22,300,000 and the payment was deferred, but we do not know until when.
In	1958,	the	interest	due	December	31
amounted to $21,900,000 and the payment was deferred once more.
In	1965,	the	interest	due	December	31
amounted to $19,600,000 and the payment was again deferred.
In	1966,	the	interest	due	December	31
amounted to $19,200,000, and it was deferred again.
The total of the interest due amounted to $83 million and the rate of interest is 2 per cent	only.	This	means	that,	between 1947
and 1967, we should have had 20 repayments out of 50 yet the United Kingdom still owes us $1,185 million.
In fact, they still owe us a principal of $976,200,000, plus the $83 million accrued interest that has not been paid yet or that was deferred. This makes up a total of about $1,165 million at the end of 20 years. While we loaned them $1,185 million in 20 years, they repaid only $120 million at an interest rate of 2 per cent.
In the meantime, the hon. Minister of Finance is tearing his hair out because the interest rates are going up. He is paying this year, on Canada's debt, and in interest only, the amount of $1,406 million, while we are lending to England at 2 per cent.
When Great Britain does not pay back any principal or interest, nothing is said. We are told: it is deferred. Till when? Nobody knows, it is just deferred. Seven or rather 12 payments deferred in 20 years!
Mr. Chairman, where are Canada's interests? In England or in Canada? It is no wonder that we find ourselves in the position so aptly described yesterday by the Minister of Finance when he spoke about lower employment, a decreased growth rate, more unemployment and more taxes. That is what Eric Kierans was saying to us in October 1967.
[DOT] (5:20 p.m.)
Mr. Chairman, when I see all those debts, I tell myself that Canadians, as we say, are always stung, in a country which does not even try to take its rightful place economically, but only to act according to
[Mr. Gregoire.l
the whims of mother-in-law, England. We have proof of that. While other countries owe us money, we find ourselves in the situation as described by the Minister of Finance yesterday.
Mr. Chairman, what we do not realize is precisely that Canada does not attempt to serve the interests of Canadians, it does not attempt to develop the Canadian economy, but rather endeavours to be the vassal of foreign interests. Our country does not try to develop a Canadian policy, but it is always oriented by a policy planned in Washington or in London. It does not attempt to develop its own identity, because it is always accepting what develops in England or in the United States.
Those are the reasons why I said that Quebec would gain by getting out as soon as possible, in order to avoid the seven plagues of Egypt of the Minister of Finance and establish its own economic, social and cultural policies and build its own identity.


Mr. Ballard:: Mr. Chairman, I think the basis of the point I want to put across this afternoon can be clearly understood if we look at the present situation in this chamber. We are now discussing the finance estimates, yet the Minister of Finance is not in the house. I doubt very much that there is anybody in the house directly representing him. This bears out the contempt in which the minister holds opinions expressed by members of this house and by people who are authorities in the field of finance. I draw a distinction between members of the house and those who are authorities in finance. It seems evident to me that the minister is thoroughly convinced that no one but himself really understands the problems of this country.
We were pleased, as Canadians and as members of parliament, to hear the announcement just made by the Minister of Finance. The fact that the United States government has come to our assistance with a promise of financial support if we need it, and more particularly the fact that the restrictions that have been applied by the United States government in the field of foreign investment will not apply to Canada, make us happier. I am pleased to hear this because the area which I represent is very much involved with investment from the United States.
March 7, 19G8

I am speaking, of course, of the oil industry of Alberta which has depended a great deal upon its ability to attract United States funds to this country. I do not know the current figure for investment in the oil industry but I would venture to say it is many millions of dollars. Many areas in Alberta, the Northwest Territories and the Arctic region are now being looked at by the oil industry, and the development of these areas will, of course, require influx of United States capital. One of these developments is the Pan-Arctic development in which the government is participating with several United States and Canadian oil companies. I take the personal view that we will never have too much in the way of oil reserves. We must encourage the oil industry to develop and find new reserves by every means at our disposal. The announcement that the United States government is not going to place general restrictions on the export of capital to Canada gives encouragement to the oil developers in my part of the country.
I must say that when the Carter report was tabled last year the oil industry was very much opposed to the concepts put forward in it. Many companies at that time were reluctant to go ahead with development plans for fear the recommendations in the Carter report would be put into effect. The statement made by the Minister of Finance in his December budget that the Carter recommendations would be put in limbo for an indefinite period of time was encouraging news to them.
When the minister opened his remarks on the supplementary estimates he stated, as recorded on page 7332 of Hansard:
The immediate and urgent task facing the government and parliament is to take action which will buttress confidence in the Canadian economy and the Canadian dollar in the midst of mounting international financial uncertanties.
I feel that this is one of the difficulties the Minister of Finance has to face. He has not been prepared to take a position on any matter in connection with finance until the situation is urgent and has to be solved immediately. He has been applying his remedies to situations after they occur instead of acting in such a way that government planning would influence the future developments of the country. In the next paragraph of the minister's speech on page 7332 of Hansard I find these words:
There is little we can do in this parliament to affect the underlying forces at work in international markets. We do have responsibility to ensure that 27053-465
Supply-Finance
we do not contribute, either by our action or by inaction, to the weakening of our own position and the worsening of the world financial situation.
These remarks reinforce the argument I have just made that the Minister of Finance and the government have been closing the door after the bull has escaped. I say "bull" advisedly because I think we are going to hear more of the bull later today. It is true that it is not possible for the minister to influence the present international financial situation by anything we may do in this house today. Remedies do not have an immediate effect in the international monetary field. The international monetary system responds to conditions that build up day after day until a point is reached where they are intolerable. At that time adjustments are automatically made in the international financial market.
It is also true, and I think it is unfortunate for the country, that the Minister of Finance is an arrogant person. He is a person who, as I indicated before, is not prepared to take advice from this side of the house. In fact, he is not prepared to take advice from any quarter, regardless of the responsibility, experience or capability of the person who may give the advice. We know that in many instances the minister has been advised by the governor of the Bank of Canada, by the Economic Council of Canada and by various recognized authorities on finance and monetary affairs. The minister has received advice from these people but has chosen to ignore it.
[DOT] (5:30 p.m.)
To substantiate the statement I have just made I wish to place on the record a few of the warnings expressed in the recent past, forecasting the position we are getting into in this country. I think it is obvious to all that for at least the past two years this country has been spending more than it has been earning. Our rate of productivity has gone up very slowly but the rate of government spending has gone up precipitously. As a matter of fact, the rate of government spending in Canada has increased more than in the United States even though that country is involved in an unfortunate war in Viet Nam.
An editorial headed, "You Can't Get A Quart Out Of A Pint Jug", in the Ottawa Journal of March 15, 1967, quoted Mr. Ras-minsky, governor of the Bank of Canada, as saying:
Diverging movements in costs and productivity such as we have been seeing recently cannot go on for long without seriously affecting the Canadian economy.

March 7, 1961
Supply-Finance
It is clear to me that for much of the last two years we have overloaded the economy.
As a matter of simple economic arithmetic, the real income of the community is inevitably limited by the amounts we can in fact produce. You cannot get a quart of wine out of a pint jug.
This is exactly what we have been trying to do in Canada. We have been trying to take more out of the economy than we have put into it. This is an impossibility and it is one of the main reasons for the financial dilemma in which we find ourselves. But the Minister of Finance chose to ignore the advice of one of Canada's senior civil servants. The editorial in the Journal called for some restraint on the part of the government, and I quote further:
On the same day revenue minister E. J. Benson disclosed to parliament the government's spending plans for 1967-68. They represent: an estimated $1.3 billion increase to more than $11 billion in the new fiscal year; by far the largest increase in peacetime history; more than twice the rate of increase in spending in the current year.
One can summarize the editorial writer's feeling by pointing out that in the fiscal year 1967-68 we had a budget of $11.2 billion whereas five years previously our budget was about $7J billion. We cannot move that far that rapidly without some serious consequences to the country. The editorial further quoted Mr. Rasminsky as follows:
Unfortunately, if the warning signals are ignored and policy does not respond until a large number of unsustainable positions have been created, until costs and prices have risen very sharply, and international competitiveness has been impaired, then the problem becomes much more difficult to deal with in a way that will not halt the expansion of the economy.
This is the position we have come to today, Mr. Chairman. We have allowed prices to rise to the point where international competition is going to keep us out of international markets. We have reached the crisis. It is only now that the crisis is apparent that the Minister of Finance has recognized it. At least we hope he has recognized it.
An editorial in the Ottawa Journal of May 30, 1967 quoted Dr. John Deutsch, former chairman of the Economic Council of Cana-day, as saying:
From the beginning of our work, we have been concerned with the inherent difficulty of achieving the goal of reasonable price stability in a Canadian economy which was successfully achieving high employment and rapid growth of output and living standards.
In other words, Dr. Deutsch was concerned about achieving the goal of reasonable price stability. This warning was ignored by the Minister of Finance.

I now quote another authority. Probably he will thank me for saying he is an authority in view of the fact that he is one of the candidates for the Liberal leadership. He is the Minister of Trade and Commerce, and as reported in the Globe and Mail of September 13, 1967, when speaking to the Canadian Construction Association he said:
.. .governments have tended to spend too much-* not in relation to our social needs, for much remains to be done-but in relation to the economy's ability to generate government revenues.
The Minister of Finance has chosen to ignore the advice of his friend, the Minister of Trade and Commerce. I could go on giving examples to substantiate my contention that the Minister of Finance has ignored advice from every quarter.
The situation we are in today has not been sprung on us at the last moment. It is something that has developed over the last two and probably three years. The government has been spending much more than it should have. It has actually been a profligate government, not giving much consideration to where the necessary money comes from.
On December 7 last in a speech in this chamber I suggested that the government should set up a system of priorities or set up a committee to study priorities. A few days after that, but not as a result of my speech, the Prime Minister indicated that a cabinet committee would be set up to study spending priorities. Now it appears as though he was paying lip service to the idea because nothing has been done about it in the interval.
There has been steadily growing uneasiness throughout the country at the ever-increasing government expenditures. This uneasiness is reflected in the Auditor General's report where we find that the expenditures of practically all departments have been growing by leaps and bounds. In fact one department increased its expenditures by 114 per cent. It is disheartening to find the government completely ignoring the Auditor General's report. In the past it has ignored reports which have been submitted by the public accounts committee and we find that year after year the same recommendations by the Auditor General appear in his reports.
[DOT] (5:40 p.m.)
It is almost axiomatic that there is an increasing waste of money on the part of government agencies and departments, that there is a continuing increase in the numbers of government employees and that there is no effective procedure for administrative control.
March 7, 1963

That being so, I submit that the government should implement some of the Auditor General's recommendations and some of the public accounts committee's recommendations. Certainly the government ought to take advice from those who are not politically implicated in its problems. We shall move from crisis to crisis as long as the government ignores the advice it receives and the storm warnings that must be evident.
We stumble from one crisis to another and each time the government says that if we do not support its program the consequences for the country will be dire. To get its own way the government has almost threatened parliament with blackmail. Much needs to be done and this party will co-operate to bring forward necessary measures. Yet somewhere along the line surely the government must show that it has a sense of responsibility.
The government must stop trying to put right something that has already happened and is in the past. In the financial world adjustments cannot be expected to take effect quickly; it takes a long time for some remedies to work. It is important for the government to use modern techniques in statistics. Here I am thinking of computers, data banks and that sort of thing. The government ought to use modern facilities to forecast the future. Certain future trends can now be predicted fairly accurately and by knowing what those trends will be the government may prevent difficulties such as we are now experiencing from reoccurring.
I wish to read from page 261 of the fourth annual review of the Economic Council of Canada, published in September, 1967. The report speaks of the waste in government and of the Parkinsonian build-up of bureaucracies as well as the lack of adequate procedures in administrative control. The report speaks of the care that must be taken to prevent overspending in government services, and it says:
However, this has not been matched by comparable advances in the development of procedures and machinery for dealing with much larger questions: for consistent and comprehensive determination of objectives and priorities; for continuing evaluation of the impact and effectiveness of the growing range and diversity of government programs in relation to their cost; and for increased co-ordination between governments in relation to these matters.
The members of the council say in their report that it is essential for the government to plan. They suggest that four questions about government programs ought to be asked, and for the sake of completeness I 27053-4654
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shall put the four questions, found on page 263 of the report, on the record:
1.	What are the purposes to be served by a given program of expenditures and is the given program the most effective way of serving these purposes?
2.	Are the purposes or the anticipated results of any program inconsistent in some ways with the purposes and results from other programs, and how can such inconsistencies be eliminated?
3.	What are the benefits in relation to the costs involved?
4.	What are the effects on the whole economic system of different tax or expenditure changes, as these work themselves out over time under changing conditions?
It will be remembered that along these lines I asked the government to set up a committee. In December I suggested that a committee of the house might be set up but the Prime Minister suggested that it might be a committee of cabinet. I will not quarrel with that. If we are to achieve a more rational structure of government financing we must establish priorities for government spending and rationalize existing expenditures. We must plan future expenditures within the framework of these priorities and we must find an acceptable way of transferring revenue sources from one level of government to another. Also, we must reform the revenue sources.
The government's present dilemma has resulted from lack of planning. Planning should be made to serve priorities in fields such as housing, urban transportation, water supply and the disposal of domestic and industrial waste, air pollution and water and soil pollution, education and research and, to complete the list, social welfare.
What has been done in these fields? I shall describe shortly what the government has done. In the field of housing the government's attention has been totally inadequate. In urban transportation government action has been negligible. In the field of water supply and waste disposal government action has been non-existent. With regard to air pollution, so far the government has just talked. In education and research the government has made a halfhearted attempt. With regard to social welfare the best one can say is that under this government it is unplanned, ramshackle and jerry-built. We need priorities. We must have a criterion for judging priorities.
[DOT] (5:50 p.m.)
What are these priorities? To deal first with social necessities, we could ask ourselves: Is

March 7, 1968
Royal Assent
there a genuine need for this program and ought it to be done now or at a later date? Will it increase the standard of living? What social dividend might be expected? The second criterion should be: What is the cost of the program and what will be its effect on the current budget? Are the people prepared to pay increased taxes? Which level of government will finance the program? The last question is: What effect will this social program have on future budgets? Will it leave the government of a future day with its hands tied so that it can no longer be flexible when presenting a budget? This is one of the problems we face today in the present parliament. Our hands are tied. The amount of the budget which can be changed is very small indeed. All programs in connection with social welfare, education, transfer payments of any kind-
The Assisianl Deputy Chairman: Order. I regret to interrupt the hon. member but his time has now expired.
Progress reported.


Mr. McNulty:: Mr. Speaker, before we proceed to royal assent may I say that I believe there is an understanding in the house that we will rise between 6 and 8 p.m. and postpone the private members' hour tonight.


Mr. Speaker:: Is it agreed?


Some hon. Members:: Agreed.



THE ROYAL ASSENT

[Stage Direction]
A message was delivered by Major C. R. Lamoureux, Gentleman Usher of the Black Rod, as follows:
Mr. Speaker, the Honourable the Deputy Governor General desires the immediate attendance of this honourable house in the chamber of the honourable the Senate.
Accordingly, Mr. Speaker with the house went up to the Senate chamber.
And being returned:
Mr. Speaker informed the house that the Deputy Governor General had been pleased to give, in Her Majesty's name, the royal assent to the following bills:
An act to amend the Territorial Lands Act, the Land Titles Act and the Public Lands Grants Act.
An act to provide for the dissolution of Northern Ontario Pipe Line Crown Corporation.
An act to amend the Defence Production Act.
An act to amend the Fish Inspection Act.
An act to amend the Currency, Mint and Exchange Fund Act and the Criminal Code.

An act to implement a broadcasting policy for Canada, to amend the Radio Act in consequence thereof and to enact other consequential and related provisions.
An act to amend the Excise Act.
An act to amend the Excise Tax Act.
An act to incorporate Commercial Solids Pipe Line Company.
An act respecting The Bell Telephone Company of Canada.
An act to amend the Unemployment Insurance Act.


Mr. Speaker:: It is my duty, pursuant to provisional standing order 39A, to inform the house that the question to be raised at ten o'clock this day is as follows: The hon. member for Brandon-Souris (Mr. Dinsdale), Northern Affairs-reduction in budget for northern health services.
Pursuant to special order of the house made earlier this day the private members' hour is suspended. The house will resume its sitting at eight o'clock.
At six o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at 8 p.m.
Mr. Speaker:: Government order No. 2, house again in committee of ways and means.



WAYS AND MEANS

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

[Stage Direction]
That it is expedient to introduce a measure to amend the Income Tax Act to provide among other things:
1.	That for the 1968 and subsequent taxation years the amount deductible by a taxpayer in respect of gifts made to a province shall not be subject to the limitation imposed by paragraph (a) of subsection (1) of section 27, and the amount deductible in a year by a taxpayer in respect of gifts made either to a province or to Canada shall include an amount in respect of such gifts made by him in the preceding year to the extent that such amount was not deductible in computing his taxable income for the preceding year.
2.	That with respect to taxable income earned in 1968 and 1969, in addition to the income tax otherwise payable by a corporation under the
March 7, 1968
[Stage Direction]
Income Tax Act, a surtax be payable equal to 3 per cent of the amount of tax as determined under section 39 or 69 of that act, as the case may be.
3.	That for the 1968 and 1969 taxation years, in addition to the income tax otherwise payable by an individual under the Income Tax Act, a surtax be payable equal to 3 per cent of the amount of the basic tax as determined under section 33 of that act in excess of $200.
4.	That for the taxation years commencing after November 1968 a corporation shall during the 12 months period ending 2 months after the close of each taxation year, pay to the Receiver General of Canada
(a)	on or before the last day of each of the 12 months in that period, an amount equal to one-twelfth of the tax as estimated by it at the rate for the taxation year
(i)	on its estimated taxable income for the year, or
(ii)	on its taxable income for the immediately preceding year,
(b)	on or before the last day of the month ending 3 months after the close of each taxation year the remainder of the tax payable on its taxable income for the year at the rate for the year and that for the taxation year commencing in the period after November 1967 and before December 1968 a corporation shall during the 10 months period ending 2 months after the close of its taxation year pay to the Receiver General of Canada
(c)	on or before the last day of
(i)	the 2nd month,
(ii)	the 4th month,
(iii)	the 6th month,
(iv)	the 8th month and
(v)	the 10th month
in that period an amount equal to one-fifth of the tax as estimated by it at the rate for the taxation year
(vi)	on its estimated taxable income for the year, or
(vii)	on its taxable income for the immediately preceding year,
(d)	on or before the last day of the month ending 3 months after the close of its taxation year the remainder of the tax payable for the year at the rate for the year.
Gilles Grégoire: Mr. Chairman, I rise on a point of order. Does a resolution such as this one not call for 48 hours notice. In fact, does standing order 41 not stipulate that:
Forty-eight hours' notice shall be given of a motion for leave to present a bill, resolution or address, for the appointment of a committee or for placing a question on the order paper;
It is quite clear here.
A motion for leave to present... a resolution.
That is exactly what we are doing at the present time. However, no 48 hours notice has been given since the resolution appeared only yesterday in Votes and Proceedings and that there is still no mention of it on the orders of the day.
Income Tax Act
Besides, standing order 41A says this:
Unless notice of motion has been given under standing order 41, any member proposing to raise a question of privilege-
I am sorry, Mr. Chairman, it is standing order 42 which applies here and I quote:
A motion may, in case of urgency and pressing necessity ... be made by unanimous consent of the house-
In this case, the Minister of Finance (Mr. Sharp) introduced the motion for the adoption of the resolution under standing order 41 without 48 hours notice, or without asking for the unanimous consent of the house.
Mr. Chairman, I notice that there is no mention of it yet on the order paper, or in the orders of the day. I will admit that a resolution appeared in today's Votes and Proceedings, but there was no mention of it in the orders of the day.
Item No. 2 of the orders of the day reads as follows:
House again in committee of ways and means.
And then, there is a note concerning the resolutions, and I quote:
Text of ways and means (customs tariff) resolutions appended to the notice paper of Votes and Proceedings of November 6, 1967.
But there is no mention at all of the text of the resolution, which appears in today's Votes and Proceedings. Tomorrow it will be mentioned in item No. 2 of the orders of the day under the heading: "House again in committee of ways and means". But it is not yet mentioned because 48 hours have not expired yet since notice was given that such resolution had been laid. That only makes 24 hours and it is only tomorrow that the committee could normally consider it.
Now, this 48 hour notice also applies to the committee of ways and means. I admit that for the house to resolve itself into the committee of ways and means, a motion can be introduced and be agreed to without debate, but once the committee of ways and means is set up and we are asked to discuss such a resolution, a 48 hour notice is required, under standing order 41, which specifically stipulates:
A motion for leave to present... a resolution.
That is the case here.
Then, Mr. Chairman, as less than 48 hours have elapsed since notice has been given, as no mention is made of the resolution in item 2 of orders of the day, and as the minister has

March 7, 1968
Income Tax Act
not requested unanimous consent of the house, I rise on a point of order and ask that we move on to another item or that you call the Minister of Finance to order by pointing out to him that it is against the rules for him to put his motion to pass a resolution this evening, because notice of such a move was given less than 48 hours ago.


Stanley Howard Knowles: Mr. Chairman, I rise really to express the hope that someone might comment on the point raised by the hon. member for Lapointe; perhaps someone who takes the other side of the argument.
It is generally known that the acting house leader did consult with spokesmen for the other parties today as to whether there would be consent to go on with this matter tonight. I hope I am not speaking out of turn in saying that. Speaking for our party, even though we may be opposed to the legislation, we are not opposed to the house proceeding with it today in spite of the fact that notice was given only yesterday. It does seem to me we are dealing with a procedural matter concerning things which are not completely clear. There are precedents for proceeding in committee of ways and means in a manner different from that by which we proceed in respect of other matters. But still it is pretty hard to get around both the letter and the spirit of standing order 41 which does require 48 hours notice before we proceed with any proposition.
[DOT] (8:10 p.m.)
I am speaking rather tentatively, Mr. Chairman, because we do have a committee on procedure that is taking a long, hard look at all our rules and we may solve this problem in due course. I wonder whether there is any way tonight whereby the general agreement that has been reached could be proceeded with, without seeming to set a precedent that overrules the right of one hon. member to raise the point that has been raised by the hon. member for Lapointe. I confess to having some sympathy with the hon. member with regard to the strict reading of standing order 41, but I think I also know the mood of the house, which is that we would be willing to proceed tonight. I hope we can work this out.


Allan Joseph MacEachen: Mr. Chairman, it is true, as the hon. member for Winnipeg North Centre has stated, that there was an understanding that we would proceed with this resolution at eight o'clock this evening. The hon.

member for Winnipeg North Centre has suggested that there is some doubt with respect to the point of order raised by the hon. member for Lapointe.


Stanley Howard Knowles: I think I expressed the doubt the other way. I think there is some doubt about our proceeding.


Allan Joseph MacEachen: This is what I am referring to. We take the view that under the practice at the present time it is possible for the committee of ways and means to deal now with this resolution. However, it is a matter, for the Chair to decide, and we will accept the decision of the Chair. It is obvious that unanimous consent is not forthcoming. In the absence of unanimous consent we would ask for a ruling from the Chair. If it is favourable, we will continue tonight. If it is not, we will put off the resolution until tomorrow.


Mr. Churchill:: Mr. Chairman, I have no objection to the waiving of standing order 41 tonight. That is not why I have risen. Also, I have no objection to the fact that I was not notified about this agreement.


Some hon. Members:: Oh, oh.


Gordon Minto Churchill: But I think the rights of hon. members have to be observed in this house. I object to the statement of the government house leader hinting that a ruling of the Chair will decide whether or not we shall proceed tonight. The only inference I can draw from this is that the government house leader wants the Chair to rule that standing order 41 in our rule book should be ignored.


Some hon. Members:: No.


Gordon Minto Churchill: I doubt very much whether under the circumstances that should be the case. On occasions where unanimous consent is required and that unanimous consent is not given, I see no recourse for the Chair but to abide by standing order 41.


George Harris Hees: Mr. Chairman, I rise to speak very briefly to the point of order. I think every member of this house would agree with the hon. member for Lapointe that this is a perfectly clear and well known rule. However, Mr. Chairman, I think there comes a time in the business of the parliament of Canada when something is more important than just the rules of the house. There is no question about it; the hon. member has a perfect right to draw attention to the rule. We all know that it exists. But I think we also know that
March 7, 1968

the matter being proposed for discussion tonight is very vital to this country. The longer it is delayed, I think the worse it will be for our country.


Some hon. Members:: Hear, hear.


George Harris Hees: As one member of the house, I ask the hon. member for Lapointe to agree to waiving this rule tonight, as a Canadian thinking more of his country than the rules of the house. I think that if he does, and we can get ahead with this debate tonight, the country will benefit and all members of the house will thank him very much indeed.


Some hon. Members:: Hear, hear.


Gilles Grégoire: Mr. Chairman, I should like to say a word about this point of order, seeing the member for Northumberland (Mr. Hees) associated me personally with it.
I should like to remind him that, two or three weeks ago, the government asked for the unanimous consent of the house to waive the 48-hour notice in order to discuss immediately the motion of confidence in the government. Personally. I was willing to give my consent, while the Conservative party were opposed to unanimity. I was willing to give my consent because I knew that, without it, nothing would be done on that day or the following day. Indeed, the house lost two days because of the Conservative party. It was not my fault.
Today, we are asked to waive that 24-hour notice and I refuse to give my consent, not for whims but on principle. I am opposed to any resolution or any bill to increase taxes. It is on the strength of that principle that I am opposed to them.
At times the Conservatives refuse their consent, at other times I do.
Mr. Chairman, I have as much right in the house as any individual member of the Conservative party, and I am ready to prove it.


Jay Waldo Monteith: Don't be silly.


David Réal Caouette: Mr. Chairman, I should like to say a few words about this point of order.
We have agreed to discuss this resolution immediately. It was also clearly agreed that no time limit would be tagged to the debate on this motion.
Income Tax Act
The hon. member for Lapointe (Mr. Gregoire) has just said that he is against waiving the 48-hour notice on principle, because he is against any tax increase.
Mr. Chairman, let us put the record straight. We are against taxes, just as much as the hon. member for Lapointe. But that debate will take place, whether it starts tomorrow or next week, and nothing will prevent the hon. member for Lapointe from making any speech he wants and the same is true for all of us about that resolution.
Therefore since that resolution is related to the estimates of the Department of Finance and is introduced by the Minister of Finance (Mr. Sharp), I think the hon. member for Lapointe should show a little more common sense, be a little more reasonable and allow us to proceed with the debate.
In my opinion, it is time to start this debate, since we are already discussing matters which concern the Department of Finance. For my part, I would be ready to let the hon. member for Lapointe take my place when it is my turn to speak later on.
In my opinion, Mr. Chairman, to prevent a debate on the budget speech made by the Minister of Finance and at this time would constitute a filibuster.


Herman Maxwell Batten: Order. I am sure the committee will realize that the point of order raised by the hon. member for Lapointe is indeed a very technical one, and in the mind of the Chairman there is some doubt as to whether he has the authority to decide on the operation of standing order 41. I would suggest to hon. members that they look at Votes and Proceedings of yesterday, and they will notice that the resolution which is now before the committee of ways and means is not on the notice paper. It is a resolution which is appended to the notice paper and is referred to here as "ways and means resolution appended".
[DOT] (8:20 p.m.)
May I refer hon. members to the precedent on September 27, 1962 when a similar situation arose. I could also refer hon. members to page 734 of May's seventeenth edition where the following is stated:
There Is a certain difficulty, peculiar to ways and means resolutions, in deciding precisely the stage at which the royal initiative in proposing a tax is signified in the house. Ways and means resolutions do not require notice and are usually moved without it. As a consequence, if notice is

March 7, 1968
Income Tax Act
given, there is nothing to prevent such a resolution being moved in a form which differs from the notice.
It is the opinion of the Chair that there is nothing before the chairman but the resolution which has been appended to ways and means. It is also the opinion of the Chair that if the 48 hours notice was to be questioned, it should have been questioned at another time.


Gilles Grégoire: Mr. Chairman, under standing order 59 (4), I appeal from your ruling.

Mr. Speaker resumed the chair, and the chairman of the committee made the following report:
Mr. Speaker, the question is as follows.
In committee of ways and means, when the Minister of Finance proposed a certain resolution to amend the Income Tax Act, the hon. member for Lapointe raised a point of order to the effect that 48 hours notice should have been given in the proposed resolution. The chairman, using page 734, May's seventeenth edition, ruled that in his opinion 48 hours notice was not required in the present case, and that in his opinion the question of order should have been raised on another occasion. Whereupon, in accordance with standing order 59(4), the hon. member for Lapointe appealed the ruling to Mr. Speaker.


Mr. Speaker:: I should perhaps mention to hon. members that I have listened to the argument which has been submitted to the chairman of the committee. I have taken judicial notice of the arguments, and I am prepared to give a decision at the present time on the appeal from the chairman's ruling in committee.
[DOT] (8:30 p.m.)


Gilles Grégoire: Mr. Speaker, if I may be allowed to say a word or two, there are two contradictory authorities in this case. The first one, which I think prevails, is the standing orders of the house.
Standing order No. 41 specifies very clearly:
Forty-eight hours' notice shall be given of a motion for leave to present a bill, resolution-
And so on.
Mr. Speaker, the wording of the standing order is very clear. Against that, the standing order is not denied, another rule is not quoted, but reference is made to May's Parliamentary Practice. When was it written? Maybe the hon. member for Winnipeg
[The Chairman.]
North Centre (Mr. Knowles) could tell me, but it is only a citation.
Has Sir Erskine May's treatise as much authority in this house as the standing order which was agreed to by all members of the house and agreed to unanimously many times, after being amended.
May's treatise has never been agreed to in this house; it is merely a collection of precedents.
It is true, Mr. Speaker, that in Great Britain common law is used, that precedents are created but there are also civil law proper,
On the other hand, we have here a digest of provisions accepted by the entire house. Which must prevail? The standing order which is clear and specific or May's treatise on procedure which has never been accepted as a rule in this house and which goes back to some twenty or thirty years. Which, Mr. Speaker, must prevail?
The standing orders are quite clear, definite and specific. What do we have before us? A motion of the Minister of Finance (Mr. Sharp) for the passage of a resolution. This is the measure which is submitted to us and the standing orders clearly state that a 48-hour notice is required.
Mr. Speaker, at this time, we have to consider not only the motion before us, but also the fact that we are trying to find out what authority should govern our proceedings. Is it the standing orders of the house to which we agreed to, or any other authority, such as May, Bourinot, Beauchesne or any other?
Besides, in consulting all these experts, we find they often contradict one another. When Sir Erskine May wrote his citation, at page 707, to which the Chairman referred a moment ago, was he aware of our standing order 41? Had he read our rules to write a citation such as this? Was his Guide to Parliamentary Practice still official when our rules were amended? Can May contribute anything to our own standing orders?
Naturally, Mr. Speaker, if you want other arguments, I can find any number of authorities who say that we have the right to appeal against a decision of the Speaker although the standing orders no longer allow it. Who will prevail? Who will give a ruling on a citation according to which we have the right to appeal against a decision of the Speaker, and when this can be done, whereas the standing orders have been changed to say that we no longer have the right to appeal against a decision of the Speaker?
March 7, 1968

To sum it up in two words, Mr. Speaker, the standing order is clear:
Forty-eight hours' notice shall be given of a motion for leave to present a ... resolution.
Otherwise, the unanimous consent of the house is necessary.
All that has been opposed to this is a citation from a very old book, May's. Who will prevail? It is up to you to decide, Mr. Speaker. The standing orders, or an author from the last century?


Stanley Howard Knowles: Mr. Speaker, I have read enough regarding this situation to know that there is at least some grayness in this area. Therefore I do not intend to come down in any hard and fast position in what I have to say. However, I do feel that a few comments should be made before Your Honour makes your ruling as to whether or not the ruling of the chairman of the committee of ways and means should be sustained. May I say also, in order to have it as part of the record, that so far as our party is concerned we indicated our willingness to give consent for this matter to be proceeded with tonight. Our only concern therefore is whether or not the ruling we are discussing does violence to the rules of the house.
When I said that I recognize there is a gray area, I had in mind the fact that what is before us is a situation in a committee of the house, which happens to be known as the committee of ways and means. We have a general rule which says that the rules of the house apply in the committees of the house. Here I am admitting that there is some argument on the other side. We know that in standing committees that meet elsewhere we do not require 48 hours notice for motions. In other words this 48 hour rule is not always practised in committees.
But surely there is a difference, at least in spirit, between standing committees that meet elsewhere and have lots of time to deal with matters, and committees of the whole that meet right here in this same chamber and are made up of the same personnel as the house itself. Surely, Mr. Speaker, if one looks at the spirit of standing order 41 it is very clear that no resolution can be proceeded with unless there has been 48 hours notice. There is no problem about six o'clock Wednesday being sufficient for 48 hours notice up to Friday morning. There is a citation that takes care of that. This same citation which takes care of 27053-466
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that, which is on page 159 of Beauchesne's fourth edition, reads in part:
The publication of a proposed motion, once in the Votes and Proceedings and the next day on the order paper, is sufficient to cover two days notice under standing order 41.
In the present instance, Mr. Speaker, there is a difference from what normally happens, where notice is given one day when something appears in Votes and Proceedings, and on the order paper the next day. As I say, we have some grayness in this area because this is committee of ways and means. Surely, however, if the requirement for two full days notice were to apply anywhere it ought to apply to the imposition of a tax.
In other circumstances, we have to wait two days before we proceed with something, no matter how inconsequential. If we can proceed with the imposition of a tax without that two days notice, it does seem a bit strange. I believe, Mr. Speaker, one of the reasons this issue arises now, whereas it does not normally arise is that in normal circumstances the committee of ways and means deals with taxing resolutions that have been public knowledge for six days. Usually when a minister of finance introduces a budget, he makes a budget speech. At the end of that budget speech he tables his resolutions. There then follows a six day debate with Mr. Speaker in the chair, and at the end of that six day period we go into committee of ways and means. At that point we deal with the resolutions immediately because we have had them for six days, and we never stop to inquire whether or not the necessary notice has been achieved. I noticed that the chairman of the committee made a point of the fact that the resolution is listed, not on Votes and Proceedings, not in the notice paper, but as an appendix to the notice paper. I think this is an interesting splitting of hairs. Surely the spirit of standing order 41 is that we should have two full days notice.
Now, Mr. Speaker, precisely because I have admitted that there is some doubt on the point, precisely because of the citation that has been read from May, precisely because it is difficult for Mr. Speaker in the chair to over-rule Mr. Deputy Speaker's ruling as chairman of committee of the whole, I realize the way Your Honour may be thinking about this matter. However, I do not believe a ruling against the hon. member for Lapointe (Mr. Gregoire) should be made without at least some strong concern being expressed

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about it on the floor of the house. That is what I am doing now, expressing concern that somehow or another a way is being found to get around, in the case of a tax measure, a rule that is so widely understood that my colleagues have been coming to me within the last few minutes expressing amazement that this situation has arisen at all.
[DOT] (8:40 p.m.)
With regard to the quotation from May, I would point out that a dozen or so of us had the privilege of spending a few days at Westminster two or three weeks ago. Maybe we do not agree on all of the ideas we brought back from the mother of parliaments, but I think we all do agree that the differences between their operations and ours are so great that one cannot really apply May to all of our situations here.
You look as though 1 am not being very helpful to you, Mr. Speaker-


Mr. Grafftey:: You are being very long-winded.


Stanley Howard Knowles: The issue is a serious one, and perhaps I am not being helpful to you, sir. I know that I am throwing the problem to you. The house generally is willing to proceed with this matter tonight, but that does not get around the importance of making sure that all rulings are correct. It seems to me that concern should be expressed about finding a way to set aside the rule, standing order 41, that no measure shall be proceeded with unless the house has had 48 hours notice. I express that concern as strongly as I can.


Gordon Minto Churchill: Mr. Speaker, in June, 1956, on a Thursday afternoon at 5.15, which has become a notable period in Canada's history, I raised a point of order on the subject of whether or not the Chairman of Committees should make a ruling which was not based on precedents established by the Speaker or not founded on decisions that have been arrived at by the Speaker. I argued the point, supported strongly by the hon. member for Winnipeg North Centre (Mr. Knowles), that there was a danger in having a body of rules established in committee of the whole, because we noted that from time to time the person who presides in committee of the whole is shifted. He is not always the Deputy Speaker. My point then, and I had quite a number of references to give, was that when the Chairman of Committees has no precedent to guide him,

established by the Speaker himself, the matter should be held in abeyance and the decision should be made by the Speaker rather than by the Chairman. It would avoid these embarrassing and awkward situations where a chairman is overruled by the Speaker.
I think, sir, the situation tonight is the same as it was in 1956. An issue which has not heretofore been decided by the House of Commons and established as a precedent by the Speaker, has come before the committee of the whole house, and the basis for giving the decision on it has not been established. I argue, sir, that viewpoints of this nature should not be decided by a committee chairman in committee of the whole house, if the issue can be avoided and transferrred to the Speaker, who is the authority in these matters.
In this particular instance I conclude, sir, by saying that I think it would be very inadvisable for rule 41 to be overruled on this occasion. We are stumbling into rather rapid changes in the rules of the house now. The fact that the Minister of Finance (Mr. Sharp) did not properly introduce a budget, and the fact that he had to make his tax announcement by radio and television, by a press conference last night, have led us into the quandary in which we are at the present time, but I do suggest that the rules of the house should be maintained, unless they are altered by consent of parliament as a whole.


Mr. H. A. Olson (Medicine Hal):: Mr. Speaker, very briefly I would like to direct your attention to page 222 of Beauchesne, citation 268. I am sure you are already aware of what is on page 734 of May where it says that ways and means resolutions do not require notice and are usually moved without it. Perhaps citation 268 is not entirely applicable here, but it does deal with changes introduced in committee of ways and means without notice, and I think this is the crux of the point of order we are dealing with.
Part of the citation reads:
Proposals for the variation or modification of taxation can therefore be made in the committee-
I suggest that these can be made without notice, but there are some qualifications.
-but these proposals must be grafted upon the financial scheme submitted by the government, and must not affect the balance of ways and means voted for the service of the year. Amendments, therefore, can be proposed to substitute another tax, of equivalent amount, for that proposed by the government, as an alternative duty, the necessity of new taxation, to that extent, being already declared on behalf of the crown.
March 7, 1968

I submit that the proposal made is in keeping with the balance of ways and means that has been declared on behalf of the crown and voted on partially by the house. I suggest in this context that notice to move a resolution of this kind, or indeed an amendment in committee, is not required in committee of ways and means.


Mr. Speaker:: I thank hon. members for the views they have expressed regarding the very serious point of order raised by the hon. member for Lapointe (Mr. Gregoire). As has been stated by the Chairman, perhaps the point might have been raised before we went into committee, which would have obviated the difficulty to which the hon. member for Winnipeg South Centre (Mr. Churchill) referred. But the situation is in fact that a decision has been rendered by the Chairman of the committee, from which an appeal has been made.
In the past I have expressed my views about this type of situation. I must say I have heard nothing which leads me to come to a conclusion other than that which has been reached by the Chairman of Committees. The suggestion made by the Chairman when he made his ruling is that no notice at all is required. I agree with this. It is not a question of whether 48 hour notice is required or 24 hour notice is required. The suggestion he made is that in the case of ways and means resolutions no notice is required. In point of fact it is not 24 hours notice that we have had until now. Procedurally there has been no notice because nothing appears on the order paper except an appendix for the convenience and information of hon. members.
It has been stated that there are no precedents. There is at least the one in 1962 where precisely this form of procedure was followed, where there was no notice put on the order paper for a ways and means resolution. The house has followed in this particular instance exactly the same procedure. There is more to the situation than the citation in May which, in spite of what the hon. member for Lapointe says, is not all that old, since the last edition, the seventeenth edition, appeared in 1965 or 1966.
I suggest to hon. members that there is obsolutely no application here of the 48 hour notice rule. An analogy can be found in committee of supply to indicate that procedurally standing order 41 does not always apply. The estimates are tabled one day and they are forthwith referred to the committee of supply. In a subsequent sitting they can be taken up 27053-4661
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in committee of supply without notice. The procedure we are following now is analogous; it is the same type of situation. This procedure has been followed before.
[DOT] (8:50 p.m.)
Since the ways and means resolutions are initiated in the committee itself and do not exist before that, no notice can be given of the resolutions. They do not exist until the Minister of Finance in committee of ways and means moves a motion and intimates to the house what the resolution will be. That being so, I fail to see how the standing order can apply, and I must therefore sustain the ruling.
And the house having resumed in committee.


Herman Maxwell Batten: Order, please. House again in committee of ways and means on a measure to amend the Income Tax Act.


Mitchell William Sharp: Mr. Chairman, yesterday in committee of supply I made a fairly lengthy statement outlining our economic condition. I said at that time that we intended to introduce fiscal measures to replace the revenues that would have been provided by Bill C-193. I explained at that time why the government considers it necessary to take this course of action. I do not intend to repeat those arguments and shall be brief in explaining this resolution.
The measures proposed in this resolution are intended to produce $390 million in budgetary revenues in the 1968-69 fiscal year. This compares with $425 million expected from the tax changes in Bill C-193. However, I have also announced that there will be reductions in expenditure which will more than offset the amount of $35 million by which the revenues from these measures will fall short of those formerly proposed.
The resolution now before the committee has four paragraphs, two of which concern corporations, one of which affects individuals only and one of which will affect donations to provincial governments or provincially owned institutions, by either corporations or individuals.
Paragraph 1 proposes an amendment to remove the 10 per cent of income limitation in respect of charitable donations to a province. The Income Tax Act at present provides that individuals and corporations may deduct for income tax purposes the amounts they donate to Her Majesty in right of a province. However, donations such as donations to

March 7, 1968
Income Tax Act
churches and other charitable organizations are deductible only up to a maximum of 10 per cent of income. In contrast, donations to Her Majesty in right of Canada are deductible up to the full amount of a taxpayer's income for the year. Representations have been made on behalf of certain provinces and several art galleries that the present 10 per cent limitation on donations to Her Majesty in right of a province places provincial art galleries and museums at a disadvantage in comparison with federal galleries. Since the provinces now share substantially in the income tax field and since all Canadians benefit from donations to galleries it seemed reasonable to propose this change. It is also proposed that this amendment will permit a taxpayer to carry over for deduction in the immediately following year any amount by which his donations to the federal government or a provincial government in a year exceed his income for that year.
Paragraph 2 proposes that a surtax of 3 per cent be imposed on corporations for the years 1968 and 1969. The effect of this surtax will be to raise the rate of tax on the first $35,000 of corporate taxable income from 18 per cent to 18.54 per cent and to raise the rate of tax on taxable income in excess of $35,000 from 47 per cent to 48.41 per cent. The surtax will not affect the old age security tax on corporations and it will not affect the provincial abatement or the provincial revenues from corporations.
Paragraph 3 proposes that a surtax of 3 per cent be imposed on individuals. This surtax will apply to basic tax in excess of $200. It will not affect approximately 2,400,000 taxpayers, which is about 36 per cent of the total number expected to pay individual income tax in 1968. The proposed surtax will apply without any top limit. Finally, this surtax will apply only for the taxation years 1968 and 1969.
Paragraph 4 of the resolution proposes that corporations be required to move forward by two months the period during which they pay their income tax for a year. Corporations will be required to make five payments, each of which is equal to one fifth of their estimated tax. For example, a corporation with a taxation year which coincides with the calendar year will make its first payment for 1968 in June and will make a payment equal to one fifth of its estimated tax for 1968.
I should like to break down the revenues from these proposals. The 3 per cent surtax on individuals is expected to yield in the

fiscal year 1968-69, the sum of $105 million. The 3 per cent surtax on corporations will yield $45 million and the move forward of the corporation income tax payment period will yield $240 million, for a total of $390 million.
As an illustration of the effect of the surtax I might point out that for a single taxpayer with no dependants-and most single taxpayers would have no dependants-


Some hon. Members:: Oh, oh.


Mitchell William Sharp: -the surtax will not apply to single taxpayers with incomes of less than $2,743. Taking a figure at random, a taxpayer with an income of $7,000 will pay a surtax of $25 a year. Taking a married taxpayer with no dependants, the surtax will not apply if his income is less than $3,743. A married taxpayer with no dependants but with an income of $7,000 will pay $18 a year. A married taxpayer with two children eligible for family allowances will not pay surtax if his income is less than $4,343. Such a man with an income of $7,000 a year would pay a surtax of $14 a year.
If there are questions about these resolutions, or any part of them, Mr. Chairman, I shall be happy to answer them.


Robert Lorne Stanfield: Mr. Chairman, my understanding is that this is a matter of confidence.


Jay Waldo Monteith: Don't blush, you people on the government benches.


Robert Lorne Stanfield: It may not be important tonight, but I hope that at some time someone on the government side of the house will explain what is the difference in principle between this measure and the one we defeated on February 19.


Some hon. Members:: Hear, hear.
[DOT] (9:00 p.m.)


Robert Lorne Stanfield: I want to be brief tonight and not inflammatory. I will simply state our position so that it may be clear it is not being abandoned, not for the sake of pursuing the argument on this occasion. We continue to take the position that inflation, which is reflected in rising prices, rising interest rates and rising costs, has been contributed to very substantially by the policy of this government.


Some hon. Members:: Hear, hear.


Robert Lorne Stanfield: I do not intend to take the committee through the history of budgets over the past few years. I do not think there
March 7. 1968

is any need to do that. I simply wish to state the position and point out that the government will be held answerable on these matters at another time and perhaps in another place. My view as to the radical solution which is necessary to provide stability and confidence is well known, and I simply state this for the record tonight, not, as I say, in order to be argumentative on this point.
Since the summer of 1965, at least, the government has been talking about the danger of inflation. It was referred to in the budget of March, 1966, in the so-called mini-budget of September, 1966, the budget of June, 1967, the so-called mini-budget of November, 1967 and the budget speech of March, 1968. The problem is-and I say this simply by way of background to the discussion on the resolution now before the committee-that on each of the four occasions to which I have referred, when we were warned against inflation the minister introduced seemingly one consistently proposed remedy, namely an increase in taxation. These successive tax increases in the past couple of years have been presented as anti-inflationary but they have been more than matched by increases in government spending. Only last June the minister presented a budget involving a forecast deficit of about $740 million, with increased government spending in the order of 20 per cent. The increases in taxation which have taken place have not been antiinflationary in effect; they have not controlled inflation. The consumer price index rose by 4.6 per cent in 1966 and by about 4.5 per cent in 1967. It is little wonder that when the government came to parliament a few weeks ago with proposals for yet another increase while, it seemed to us, failing to produce effective policies of restraint and leadership, the opposition voted against the measure and defeated it.
I think that is particularly true in view of the fact that the levelling off in the economy had already reached serious proportions. Private investment was lagging; the growth rate was sluggish-about half the rate regarded as essential by the economic council-and unemployment amounted to at least 464,000 jobless for a seasonally adjusted rate of 4.4 percent of the labour force. In addition, of course, this unemployment and the conditions I have described weigh with particular heaviness on certain sections of the country, including areas of relatively slow growth, though they are not confined to those areas. We were convinced that the 5 per cent surcharge proposed in the so-called mini-budget
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was unsuitable to the needs of the economy. It seemed to us that it might well have added to inflation. It would certainly have had a depressing effect on the economy resulting in an increase in unemployment and a continued lag in the growth rate.
The Minister of Finance is now proposing two new measures of particular concern to the committee. One involves proposed increases in taxation. The second proposes cuts in expenditures amounting to $75 million-I understand it is proposed to "freeze" employment in the public service. The third proposal involves the establishment of a board to review increases in prices and costs.
With regard to the third proposal, I have certainly urged for some time that the government take the initiative in encouraging restraint throughout the economy. I believe, and I have said so repeatedly, that such a program is necessary to supplement monetary and budgetary policy if we are to have reasonably full employment and reasonably stable prices.


Some hon. Members:: Hear, hear.


Robert Lorne Stanfield: I hope I shall be able to support and approve the measures being taken by the Minister of Finance in this regard, but of course I shall need to know a great deal more about them than I do at the present time. I look forward with great interest to learning more details about what the Minister of Finance and the government have in mind in this connection.
As to the second matter to which I referred, involving cuts in the estimates to the extent of $75 million in a budget of around $10 billion, I simply make the comment that I do not think the people of Canada or the financial community will find this particularly impressive.


Some hon. Members:: Hear, hear.


Robert Lorne Stanfield: As the Minister of Finance told us this evening, it is proposed to adopt a 3 per cent surcharge on personal incomes which is estimated to produce in the next fiscal year some $105 million in additional revenue, in addition to a 3 per cent surcharge on corporation tax which the minister has told us is estimated to produce about $45 million in the next fiscal year.
I have been studying these measures very carefully during the day in the context in which they have been put forward. In so far as they are regarded as measures related to

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the condition of the economy, I think we have to agree that they are objectionable on the ground that they may well be inflationary in themselves, adding to the cost of goods and adding to the pressure to increase incomes. In the second place I believe they must be regarded as objectionable in relation to the existing state of our affairs because they are bound to slow down an economy which, as I have already indicated, is growing at too slow a rate, and already involves a degree of unemployment which bears very heavily on particular areas.
[DOT] (9:10 p.m.)
I point out that the Economic Council of Canada has stated that it is necessary for our economy to expand at the rate of something better than 5 per cent per annum if we are to achieve and maintain a reasonable rate of employment and that actually the rate of growth is perhaps a little less than half that. So, clearly, these measures have undesirable effects in this regard. We must ask ourselves therefore whether these two measures, which clearly have undesirable effects that can be anticipated so far as our economy is concerned, are really necessary to restore confidence. I must say to the committee, Mr. Chairman, that I am not yet convinced they are. It is proposed to raise some $150 million by means of these measures. As I understand the situation, the government is by law bound to commence repaying the refundable corporation tax which was collected a couple of years ago not later than 36 months from the time the payment was made. As I understand it, this means that the government would have to commence these repayments not later than or earlier than May of 1969.
I have the impression that the minister had in mind beginning the making of these payments considerably earlier at a rate which would involve payments of some $105 million in the next fiscal year. I realize he has explained to the house that this does not come into his current budget, but it could affect the cash position of the government which is one of the matters of principle concerned during the coming year. It would appear to me, therefore, that within the law it would be quite proper for the government to defer any repayment of the refundable portion of this tax to which I referred until May of 1969, and that therefore it would not affect the figures at all for the next fiscal year. If this were done the difference between deferring these repayments until beyond the

next fiscal year on the one hand and collecting these new taxes on the other hand would amount to about $50 million or perhaps a little less.
I think I must suggest that in a budget in the amount of $10 billion it should be possible to find that $50 million. I really think that would be the view of the people of Canada generally and I must say that that is my view. After all, the government apparently was able to find an amount at least equal to this in order to proceed with the medicare program, despite the views of a number of provinces. In the circumstances it is a little difficult to be convinced that it is really necessary that these new taxes be imposed at this time for this purpose.


Some hon. Members:: Hear, hear.


Robert Lorne Stanfield: With regard to the proposition that these taxes would be applicable for two years, I really do not believe the minister has shown any justification for this. I have suggested that he really has not shown any effective justification for even one year, but certainly so far as I have been able to ascertain there is no justification for these additional taxes for a two year period. I hope I am not doing the minister an injustice when I say this, but this is the impression I have. In view of what I believe to be the obvious unfortunate effects of these particular tax increases so far as the condition of the economy is concerned, I do not think we have been shown any benefits that would offset the unfortunate effects. I think the same reasons that militated against the 5 per cent surcharge apply equally to these 3 per cent surcharges.
I have attempted to demonstrate that the government has an alternative to imposing these two surcharges which it states will raise $150 million. I suggest in all sincerity that the government has an alternative to its course of action which involves additional taxation to the Canadian people, which alternative I believe would be helpful to the Canadian people in its present situation. The Minister of Finance proposes to raise a considerably larger sum of money in the next fiscal year by insisting that the corporations speed up their rate of tax payments. As I understand it this would not increase the liabilities of a corporation, and therefore I do not consider this to be a measure that would contribute to inflation. In the government's position of apparently needing to increase confidence I do not
March 7, 1968

oppose the Minister of Finance with regard to this measure. I cannot go along with him however on the increase in the form of surcharges, but in the circumstances I do not oppose the stepped up rate of corporation taxes which does not increase the liabilities of the corporations, is not inflationary, and produces a return of a quarter of a million dollars more for the Minister of Finance. I believe this substantially helps his financial position without having an adverse effect on the economy.
As I have indicated, to date I am not convinced that the benefits of the proposed surcharges offset their detrimental effects and I believe there are alternatives open to the government in this regard. I pointed out also that the policies which would induce a more rapid rate of growth in the economy would of themselves produce more revenue for the government and would therefore help the government very substantially in a financial way.
I am most anxious to see the government attack inflation vigorously. As I mentioned, I hope the measure the minister has in mind with regard to encouraging restraints throughout the economy will be pushed vigorously and will be worthy of the support of members of this house. But I do not believe a slowdown in the economy is necessary. I do not think the economy of Canada is overheated in any sense of the word.
[DOT] (9:20 p.m.)
I believe it may be possible for us to achieve a greater rate of growth accompanied by effective policies of restraint which would increase the rate of growth and produce increased revenues for the government. I have not been convinced that the proposed surtaxes are desirable, in view of the position in which the government says the country is situated. I would go along with the proposal of the policies to step up the rate of corporation tax payments.
Let me say this in closing. Because of the uncertainties that exist, as I understand them, I believe the processes of parliament in reaching a decision should not be prolonged. This is a free parliament-and of course I am speaking for myself in this regard-but I have personally no desire to increase any uncertainties in this regard. I realize that uncertainties in this regard certainly prolonged uncertainties-might very well be evil in themselves. Therefore I believe that in all quarters of the house we should state our
Income Tax Act
position as forcefully and as persuasively as we are able, and then let parliament make a decision.


Colin Cameron: Mr. Chairman, at the outset I must say that we must give the Minister of Finance "A" for effort. He has proceeded to do what he has been trying to do all along. He has tried to sell a package of goods. He has taken a tip from the grocery chain. When they want to stimulate the sale of a package they change the package, wrapping the goods up in more fancy paper. I think perhaps we should take the fancy paper off to see what is inside, because I suspect the goods are essentially the same.
I am not referring specifically to this tax measure, because what the minister is trying to sell us is precisely the same as he tried to sell parliament and the country when he introduced the mini-budget last November. This whole thing goes far beyond that particular tax measure. The minister's package of goods is really his concept of how the government of Canada should control the economy, about which he has been so lugubriously eloquent since he introduced his budget.
The minister introduced to the committee certain goals of his own and of his government in this order: full employment, stability of prices, and equity. These are noble goals, They almost rival the liberte, egalite and fraternite of the French regime-if not "the life liberty and pursuit of happiness" of our American friends. The minister then talks about achieving these goals in a remarkable way. To achieve full employment, which is the first of his goals, he produces a policy deliberately planned to increase unemployment. Mind you, he has couched this in more euphemistic terms by saying he is allowing a certain amount of slack to develop in the economy. To achieve the goal of equity he again planned deliberately to perpetuate inequity in the taxation system, about which the government was warned so eloquently by the Carter commission. He is proposing to perpetuate this by rejecting out of hand the various recommendations of the commission which were designed to eliminate the gross inequities in our taxation system to abolish the special privileges for certain types of organizations, oil companies, insurance companies and mining companies, to name a few.

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The commission suggested also that we should impose a fair share of the tax on those who make a killing on the stock market and those who evade taxation via the expense account route. The minister has dismissed all this, in spite of the fact that today he announced as one of his goals the establishment of equity. I am not in the habit of rushing to the defence of corporations, but in all fairness I must point out the inequity of the minister's proposals in respect of corporations. He intends to impose a 3 per cent surtax on corporation income tax on companies which do not have these special privileges about which the Carter commission complained. These companies are going to pay proportionately less in taxes than some corporations engaged in general industrial production.
Once again our government is proceeding to sacrifice secondary industry in Canada to primary industries engaged in the export of raw materials. The minister tells us he plans to control prices to achieve stability. He proposes as one of his three goals the establishment of a review board. We still have to find out what that review board is going to do. For a long time we have suggested the establishment of a prices review board, but I am not at all sure the sort of board the minister has in mind will be effective. I am disturbed by the emphasis the minister has placed on control of wages, because he then casually suggested control of other costs and income. I suggest that if you are going to control wages, you must be prepared to control profits. I, for one, doubt whether this is feasible. I am not a businessman but my businessmen friends tell me there are hundreds of ways by which the real profits of a corporation can be concealed. I imagine that if the minister is going to place any reliance on that sort of proposition he will have wage controls and nothing else.
The only cost factor susceptible to control is prices. We have urged the establishment of a prices review board to concentrate solely on prices. We have also urged direct control on prices of those commodities, the costs of which enter into all other costs. This involves in the main corporations which are engaged in massive operations in resource industries. They are extremely powerful corporations and they face extremely powerful trade unions. Quite some time ago I suggested that there are certain areas in the economy where management and labour almost enter into collusion to exact a contribution from the general population. I have suggested before that it is in these areas the government

should have the courage to establish price controls, and then permit labour and capital to fight the battle as to the division of the proceeds. After all, that is why we have trade unions.
I am sure we will be told that the federal government lacks the constitutional power to control prices. It may be that this is correct, but I have difficulty in believing that any provincial government would dare to refuse to co-operate with the federal government in measures to control prices. As a matter of fact, I noticed the other day that the Prime Minister of Ontario suggested that he was prepared to co-operate with the federal government in any attempt it might make to control prices. It seems to me that the constitutional angle is not a very valid point to be used against the proposition of controlling these areas where prices are administered prices, free from competition.
This brings me to the other part of the minister's package of goods, his concept of suitable policy to direct the Canadian economy. He has been full of dark warnings about the position of the Canadian dollar, and if it were not such a ludicrously inappropriate role for him, I would suggest that he has been playing the part of Dickens' Fat Boy of Peckham, and deliberately making our flesh creep with his cryptic comments about the dark international forces, with designs on the Canadian dollar. And of course we have had his mysterious cloak and dagger trips to Washington.
[DOT] (9:30 p.m.)
Indeed, I cannot help but wonder whether some of the minister's antics have not added to a very measurable degree to the uncertainty with regard to the Canadian dollar, because I have noted that his reassurances about the state of the Canadian economy and the Canadian dollar always come after the grim forebodings he presents about the dangers to our dollar.
I imagine that there have been, and are now, pressures on the Canadian dollar, if only as side effects of pressures on the United States dollar. One may suspect-in fact, I more than suspect-that there are speculators both within and without Canada who are prepared to be involved in exchange operations in the hope of a devaluation of the Canadian dollar which will hand them a handsome profit, such as those people who speculated on the British pound before devaluation and
March 7, 1968

made a very handsome packet when the pound was finally devalued.
This may be so and there may be others who quite logically and normally have decided that these pressures, the statements of the Minister of Finance and his assertions on the air, together with the defeat of his government the other day on that taxation bill, have added greatly to the uncertainty of the fate of the Canadian dollar. There may have been people who have been listening to him and have decided that it is safer to take their money out of Canada. I do not know whether any of these things have happened or to what degree they have happened. Certainly the Bank of Canada professes not to know either, and not to know the precise causes of the pressures on our dollar.
I have wondered about this dollar crisis, if it exists-and it probably does-and whether it is anything more than part and parcel of the results of the misguided monetary policies of this government which in turn have led to misguided and disastrous fiscal policies. The minister tells us that these steps have been taken to restore confidence in the Canadian dollar. He proposes to restore it by means of a rather ineffectual tax measure, I suggest, because when he first introduced his minibudget last fall my chief criticism was that it was hardly worth discussing because it would have a minimal effect on the economy. However, the minister is going to rely on these measures to establish confidence in the Canadian dollar.
I hesitate to think that the Minister of Finance is so unsophisticated that he really thinks the stability of the Canadian dollar or the currency of any country can rest on anything whatever except the level of productivity in that country. This is the main yardstick of the stability of any currency.
The minister seems to have an old fashioned idea of what produces confidence in a nation's currency, and places his faith in a monetary bulwark in the form of exchange reserves. The minister should be aware that in the final analysis, the currency of any country is based upon the productive capacity of that country, which is the reason that even though the United States dollar is under heavy pressure today and they have a very severe drain on gold, no one really doubts the stability of the currency of the most productive country in the world. We know that when the chips are down the United States dollar will still be the premium currency in
Income Tax Act
the world, because it is backed by the most productive economy in the world.
I think the minister has been putting the cart before the horse, or perhaps one may say he has been clutching at the shadow and letting the substance go. If we have rising levels of production, our currency will be sound. But if on the other hand we have declining production and rising unemployment, no matter how many technical steps the minister may take with regard to the manipulation of exchange reserves there will be lack of confidence in the Canadian dollar. The longer that condition remains, the weaker the Canadian dollar will become and our exchange reserves, if our economy is allowed to continue contracting and is indeed encouraged to contract under the policies of this government, will eventually melt away in a vain endeavour to support the dollar at what will become an unrealistic pegged rate of exchange.
It seems to me that the minister is confusing cause and effect. A strong dollar cannot be artificially maintained, and if it could be artificially maintained it would not give us a strong and buoyant economy. On the other hand, a buoyant and expanding economy will provide us with a strong dollar in international exchange, if that is what we want.
Let me return to the minister's three stated objectives-stable prices, full employment and equity. These three express in capsule form the idea of a rich and developing economy supporting an enlightened and progressive society dedicated to the proposition of at least a reasonable measure of equity. I am sure no one will quarrel with those objectives, but I doubt whether even the Minister of Finance has the temerity to suggest that he has achieved these goals or is on the way to achieving them.
I am quite sure the minister seriously wishes he were achieving these goals. We have to examine the obstacles which continually frustrate him. How does one go about expanding the economy? I think even the minister will agree that you do not expand it by contracting it. You do not expand it by curtailing public expenditures and creating more unemployment. You do not expand it by allowing prices to climb and interest rates to soar. So what do you do? I suggest that you put yourself in a position whereby you can inject more fuel into the economic boiler.
I was interested to hear the Leader of the Opposition say a few minutes ago that he did

March 7, 1968
Income Tax Act
not believe our economy was overheated. I could not quite correlate this with his demands for more reductions in public expenditure. If he believes the economy is not overheated, I am sure he would agree with the proposition I am putting to the minister and to the house: you put yourself in a position to inject more fuel into the economic boiler, to encourage and stimulate investment, to expand the money supply to finance increasing investment in the production of goods and services.
I doubt whether even the Minister of Finance, with his odd ideas, would contest that statement. This afternoon in the house he gave us a very strange and mysterious report which indicates that he still does not realize he is dealing with shadow and not with substance. He presented to us the results of agreements made with the governments of the United States, West Germany and Italy. It was a rather mysterious statement. The minister tells us that in Washington the Secretary of the Treasury and himself have been having consultations concerning the application to Canada of the United States balance of payments measures. The effect of this exchange, the minister assures us, is that Canada is now completely exempted from the operation of the United States balance of payments program affecting the outflows of capital from the United States. The minister said in his statement:
I refer specifically to the measures affecting direct investment that are administered by the department of commerce and to the programs administered by the federal reserve system. Our exemption from the interest equalization tax on new issues remains intact.
I emphasize these words:
Freedom from these major United States programs achieves a goal towards which we have been working for a long time.
This is really the pay-off.
Moreover, it does so without in any way impairing our independence of action.
Perhaps that is technically correct, because under the aegis of this government we have lost all our independence of action, so we can hardly be further impaired in this respect.
[DOT] (9:40 p.m.)
This seems to me another case of the obsession this government has with the necessity for a continual inflow of capital from outside to finance the expansion of the Canadian economy. I submit to you, Mr. Chairman, and suggest to the Minister of Finance, that the
[Mr. Cameron (Nanaimo-Cowichan-The Islands) .1
great victory he has achieved in Washington is in essence no victory at all, because the report of the Bank of Canada on the Canadian balance of international payments, which shows the capital movements in the first three quarters of 1967, indicates that there is literally no measurable or important inflow of funds from the United States that is not balanced by an outflow. To this area of our problem the minister turns a blind eye. Apparently he considers, as I told him once before, that he has done his duty if he pleads with the United States authorities to keep the tap turned on, while at the same time he leaves the plug out of the bath at the other end. This is another sample of that type of action.
The minister has come back from Washington and told us he has scored a great victory, he has cleared a way for massive inflows of capital to Canada. The truth is that there are massive outflows of capital from Canada at the present time, and they have been going on long before the guide lines were established by the United States President. I am sure the Minister of Finance is aware of the fact that indeed many corporations were transferring more of their retained earnings than the guide lines called for. Why are they doing it? I suggest they are not doing it out of their patriotic duty as American citizens, because I have not noticed that American capitalists, any more than Canadian capitalists, are particularly prone to have their actions dictated by patriotism. I suggest they have decided that Canada is no longer a very important or desirable field for investment. Indeed we can understand why, because the bulk of this inflow of capital has gone into the resource industries, which are so plugged with overinvestment that there is little field for further expansion.
I have only to mention the oil industry in Alberta and the pulp and paper industry in my own province, both of which suffer, not from underinvestment but from overinvestment, with the result that their costs are unnecessarily high. However, it is part of the conventional wisdom of this government that Canada can only survive and expand if we have a continuing inflow of capital from abroad, and largely from the United States. So long as we have that obsession, and the further obsession that all the policies of the Canadian government must be directed to maintaining the pegged rate of the Canadian
March 7. 1968



dollar, we are doomed to a continual contraction of our economy and to a further squeeze on the Canadian dollar.
I do not know who the minister's advisers are, and I shudder to think who some of them may be, but I would suggest to the minister that he consult some of the best and most sophisticated economic minds in this country with regard to the question of the pegged exchange rate and the outflow of capital from Canada, because Canada is no longer an appealing investment area. As I have urged him again and again, I urge him now that instead of relying on these ineffectual taxation measures to control prices, he institute a real prices review board to bring publicity over most of the range of prices, and in the specific area of administered prices have the courage to co-operate with the provinces and establish price control in these areas; that he negotiate with the International Monetary Fund to allow us to escape from the strait-jacket of the fixed exchange rate and return to the floating exchange rate; and that he impose exchange controls to control the outflow of capital from this country, which at the present time is proceeding at the rate of a haemorrhage.
If the minister does this, he will place himself in a position where it will be possible for him to expand the Canadian economy, to cause unemployment to decline and production to rise, and to ensure the stability of the Canadian dollar on a firm foundation of the productive capacities of the country, a country which probably has the largest per capita store of natural wealth of any country in the world. Canada will be able to expand, but we will not be able to expand if we follow the policies which the minister suggested this afternoon.
I was very interested by the statement he made today, that-
-the Canadian government on its side has felt that these steps by the United States should be matched by further reciprocal helpful steps on the Canadian side.
I am in favour of Canada helping her friends, but I hope no one has any illusion as to how we are helping them, and under what difficulty we are doing so, by the measures that the minister proposed today. Obviously through the measures the minister proposed we are helping them to overcome their internal difficulties, which have been created by the disastrous war in southeast Asia. There can be no question about that.
Income Tax Act
I should also like to find out from the minister how he proposes to carry out his undertaking, as stated this afternoon, that it is the Canadian government's intention-
-to take any steps necessary to ensure that the exemption from the United States program does not result in Canada being used as a "pass-through" by which the purpose of the United States balance of payments program is frustrated.
The minister told me that he has many ways of doing this short of foreign exchange controls, and that some of them would be very successful. This is not what I hear from the banking fraternity. What I hear from them is that they thumb their noses at the Minister of Finance and propose to go on doing so. Exhortation will not make shrewd businessmen divest themselves of a valuable business opportunity.
In addition to that, we are going to help the United States in another curious way. We are going to invest our entire holding of United States dollars, apart from the necessary working balances, in United States government securities which do not constitute a liquid claim on the United States. What does this mean? It means that we are going to help the Americans with their balance of payment program by funnelling back to the United States American dollars which we earn either through exports or through various operations, and placing them in United States government securities which do not constitute a liquid claim on the United States, which will be neutralized, and which will be non-negotiable securities for an undisclosed fixed term.
In return for that, the United States, plus the central banks of Germany and Italy, will provide us with $900 million United States as a stand-by credit. Presumably when our transfer of funds to government securities in the United States reaches a sufficiently high level, we shall draw on this $900 million, and the process will continue indefinitely because this government will not take the fiscal steps that could be taken to get us out of this tangle.
I want to say right now that I think it is high time, in the interest of our own safety as a national entity, that we start to disengage ourselves from the United States in as many areas as we can. We should be establishing relationships with other parts of the world, not doing as the minister did the other day when he dashed off to Washington and tied us ever more firmly to the United States economy, which today is of course under the very

March 7. 1968
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heavy burden of waging war in southeast Asia.
So the minister has again tried to sell us a bill of goods which consists of contracting the Canadian economy in order to expand it; creating unemployment in order to achieve full employment; and permitting prices to rise in order to achieve price stability. During the whole process, our economy will continue to contract. Oddly enough, the minister is defeating his own purpose, which he states constantly, of achieving sufficient revenues for the Canadian government's operations, because I think it does not take a very profound economic insight to realize that a contracting economy provides less revenue for the government, and an expanding economy provides more revenue for the government. I do not imagine for a moment that the minister can possibly move from his position because, as I have told him many times, he is a doctrinaire. But I do suggest to him that if he had more concern for the welfare of the Canadian economy and less concern for aiding our United States friends in their self-inflicted difficulties, then we would have more confidence in him in Canada.
[DOT] (9:50 p.m.)
He speaks of having to get the confidence, not of the Canadian people but of the financial community. Now, the financial community are the very people who are producing the problems for the Canadian dollar. He knows that as well as anybody else, but for some reason or another he is trying to placate those interests. They are not awfully bright in the final analysis because the pressures they are bringing to bear on the government-and I am sure it is their pressures which force this government to their self-defeating policies -will eventually defeat business. In the long run, I would hope either this minister or some other minister will have the courage to free the Canadian economy from the chains that have been wrapped arount it, and enable it to expand in proportion to our capacity which, to date, has not nearly been reached.


Mr. Gauthier:: Mr. Chairman, may I say, first of all, that not only am I surprised but that I am stupefied at hearing the statement just made by the Minister of Finance (Mr. Sharp).
I think that we are taking part tonight in the beginning of the debate on the late Bill No. C-193. Frankly, we thought that rejection of this bill would have given a lesson to the government, and especially to the Minister of

Finance. But we are sure now that the lesson did not serve at all. Perhaps it served the minister, because I regard him as a very intelligent man. But what is an intelligent man worth if his hands are tied? That is how I see the minister tonight. He is a prisoner of great financial interests, and we can see that he is still under their control. He comes back before us to tax people and yet we pointed out to him recently other means to get these $150 million.
One hundred and fifty million dollars is not very much. If he had wanted to make a small effort-something he does quite often for foreign countries and England- it would have been easy for him to find that amount without bothering the workers who-and we keep repeating it-cannot pay more now. The minister can rest assured that We will find that measure.
Since we have come here, we have fought against tax increases because we are convinced that taxation will not solve our problems.
I was more than surprised to hear the leader of the New Democratic party (Mr. Douglas) say that levying taxes was the main duty of the government. Mr. Chairman, I assure you that we will not follow the economists of the New Democratic party, nor those of the Liberals, as long as their fiscal policy is based on the principle of taxation.
We are here to protect Canadian citizens. We are here to administer, to make the Canadian economy serve the human beings, provide for the welfare of the Canadian citizen, and we will fight to the bitter end to have it reach its goal. We know, and we have figures to prove it, that Canada can reach that objective, that it has the necessary means to establish an economy where all its citizens will have a modicum of security and freedom.
At the present time, our governments are not free. We are increasingly aware of it, especially when we force it to show its hand, as we did by our vote on February 19 last. This vote gave us the opportunity to show the people how public affairs were administered. It has enabled us to show Canadians that the federal government could commit illegal acts, the main one being to arrogate for itself the right to collect taxes even before legislation was passed by parliament.
If we went back over our parliamentary history, we would find many other cases of
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illegality. That is why by our vote of February 19 last, we have sought to force the government to show its hand.
Mr. Chairman, since 1 will not have enough time to conclude my remarks may I call it ten o'clock?


@Deputy Chair(man)? of Committees of the Whole: Order. It being ten o'clock, shall I rise, report progress and ask leave to sit again at the next sitting of the house?


Some hon. Members:: Agreed.
Progress reported.
[DOT] (10:00 p.m.)



BUSINESS OF THE HOUSE

Michael Starr: Does the government house leader want to tell us what we will take up tomorrow?


Allan Joseph MacEachen: Mr. Speaker, tomorrow we will continue with the tax resolution.



PROCEEDINGS ON ADJOURNMENT MOTION

[Stage Direction]
A motion to adjourn the house under provisional standing order 39A deemed to have been moved.

Walter Gilbert Dinsdale: Mr. Speaker, earlier this evening we were amazed by the meanderings and confusion of the government's fiscal and economic policies, and I wish to seize this opportunity to bring to the attention of the house something that will add to the general feeling of confusion already expressed. This is a report taken from a recent issue of News of the North, stating that there has been a drastic cutback in the finances provided for the care of the residents of northern Canada, particularly in the Northwest Territories, which reduction will principally effect the Indians and Eskimos in that part of Canada.
The report was based on information supplied by Dr. Gordon Butler, chief of the northern health services division, outlining how deep the slashes were that were made. Dr. Butler indicated that he was a quarter of a million dollars short in the funds required even to pay salaries, and the austerity measures of the federal government would make it impossible for his department to maintain
Proceedings on Adjournment Motion present health services, and still less could it increase the services.
This report was picked up by the Winnipeg Free Press which dealt with it in this fashion in an editorial on March 2:
There have been, so far, no demonstrations against the recent cuts in the money available to the field officers of the northern health service of the Department of National Health and Welfare. Who's to miss that $104,000 C.B.C. employees and bad management spent on unused rooms for Expo? The northern health service officers. But of course they would merely handle the money to provide health services for Indians and Eskimos of the north country. And their budget has just been cut.
I think this is the place and the time to bring attention to this problem. We are all aware that there is a real health problem in the territories. As I said earlier today during the question period, the infant mortality rate is astronomically high, being four times the rate in other parts of Canada. It is even greater than the rate in some of the so-called underdeveloped countries of the world. The anticipated life span of our Eskimo population is 20.9 years compared with the average life span of 35 years in countries like India.
At a time when the government is boasting of a breakthrough in medicare and universal health care for all the people of Canada, I think we should take pause because obviously our priorities are all askew. It is little wonder that the people of Canada have decreasing confidence in a government which, in such an inexplicable way, places emphasis on false priorities.
My time is limited, but I should like to ask whoever will be speaking for the government tonight if the tragic gap in health care that is represented by this misplaced economy on the part of the government will be made good by the provision of medicare to the Yukon and Northwest Territories. If not, I think the government deserves censure from this house and from the people of Canada.


Mrs. Margaret Rideout (Parliamentary Secretary to Minister of National Health and Welfare):: Mr. Speaker, while replying to the remarks of the hon. gentleman I should like to put a few facts on the record. There are 28 treatment institutions strategically located throughout the Northwest Territories. All will continue to be operated throughout the coming year and a number of health centres, health stations and dispensers will also continue to provide services. After the recent accelerated expansion of medical and public health services, including the introduction of total hospital insurance coverage and the
March 7, 19G8

Proceedings on Adjournment Motion development of an exclusively northern region of medical services, some levelling off in the rate of expansion now seems reasonable, especially since the major causes of the high rates of disease and death are not related either to lack of public health effort or to lack of treatment facilities.
Sixty per cent of the population of the Northwest Territories is comprised of Indians and Eskimos whose mode of living belongs to a more primitive age than that of the populations of the southern provinces. The high birth rates and the high proportion of young people in the population increases problems of child care in the homes. Poverty, the low level of socio-economic development, lack of education in the older age groups, the severe climate, inadequate housing and overcrowding of the limited space a family can afford to heat, all play a significant role as causes of pneumonia, accidents and diseases of infancy.
During the year 1966 the chief causes of death in the Northwest Territories were pneumonia, 22.3 per cent, injuries and violence, 18.9 per cent and malformations and diseases associated with infancy, 17.9 per cent. During the past few years great strides have been made toward the improvement of living conditions. Whole settlements have been rebuilt. Special attention has been paid to
public health engineering problems affecting the provision of potable water at all seasons, and safe, sanitary disposal of sewage.
In 1956 the infant mortality rate for Eskimos was 240 per 1,000 live births. By 1966 this had fallen to 100, for Eskimos. For all groups the infant mortality rate was 140 in 1956 and by 1966 it had fallen to below 80. Measures such as a full program of immunization and health education by public health nurses and trained community health workers are carried on in greater intensity in northern communities than in any other part of Canada. Improved diagnostic programs are turning up more cases of tuberculosis; but this is considered to be the result of increased effectiveness rather than lack of good health practices. Improved housing and nutrition will complement the role of the health department.
In the current year a total of $7,880,000 is being directed to northern health services. This is an increase of 14 per cent over the corresponding sum of $6,920,000 for the year 1966-67. Such a rate of growth repeated year after year would be abnormal and the intention for the year 1968-69 is to hold the line at essentially the current year's level and allocate $7,900,000 to northern health services.
Motion agreed to and the house adjourned at 10.10 p.m.

Friday, March 8, 1968