1977-11-25

ROUTINE PROCEEDINGS


Mr. James A. McGrath (St. John's East):: Thank you, Mr. Speaker. I rise under the provisions of Standing Order 43 on a matter of urgent and pressing necessity. I do so out of a sense of indignation. Mr. Speaker, we in this House have come to accept the arrogance of the Prime Minister in dealing with the economic problems facing this country today, but I do not think any of us, and especially the rest of the country, was quite prepared for the Prime Minister's performance in St. John's yesterday when confronted with an orderly and peaceful demonstration of the unemployed. As a Canadian, and not just as a Newfoundlander, I do not and cannot accept the Prime Minister's "Rich Man-Poor Man" concept of confederation, which would have the poorer provinces content with acceptance of the crumbs from the table of the richer provinces. I would move, therefore, seconded by the hon. member for Humbert St. George's-St. Barbe (Mr. Marshall):
That in the opinion of this House, the Prime Minister should try living in Newfoundland, the province with the highest per capita cost of living in the country, for a period of one month on $115 per week, which amount is the maximum payable under Canada Works, and should then be directed to report to this House on the adequacy of the government's make-work programs.


Some hon. Members:: Hear, hear!


Mr. Speaker:: Under Standing Order 43 presentation of such a motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


URBAN AFFAIRS
Mrs. Jean E. Pigott (Ottawa-Carleton):: Mr. Speaker, under the provisions of Standing Order 43 I wish to move a motion
on a matter of urgent and pressing necessity. In view of the fact that the Ministry of State for Urban Affairs was created under the Government Administration Act by order in council, and, to quote the Prime Minister in a letter of May 16, 1971, that ministers of state will have "no direct program responsibilities", I move, seconded by the hon. member for Selkirk (Mr. Whiteway):
That the Minister of State for Urban Affairs make a statement on motions today outlining whether the minister intends to refer this matter of reorganization to parliament and whether the minister has consulted his provincial counterparts regarding this intrusion into provincial rights.


Mr. Speaker:: Such a motion can be presented pursuant to Standing Order 43 only with the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


VETERANS AFFAIRS
Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, I too rise under the provisions of Standing Order 43. I suppose this is a case of trying again, and I shall keep on trying until we win. I move, seconded by the hon. member for Humber-St. George's-St. Barbe (Mr. Marshall):
That this House notes the deep concern of all veteran's organizations with respect to the rule under which a veteran's widow receives no widow's pension unless the veteran was in receipt of a disability pension of 48 per cent or more, and this House calls on the government to correct this situation, without further delay, by providing pro rata pensions for widows of veterans in cases where the veteran's disability pension was less than 48 per cent, as recommended by the Woods Commission, the Hermann Commission and the Standing Committee on Veterans Affairs.


Mr. Speaker:: Pursuant to Standing Order 43, such a motion can be presented for discussion at this time only with unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.
[DOT] (U12)


PROPOSED REFERENCE OF ESTIMATES TO COMMITTEE SO ORGANIZATIONS CAN PRESENT VIEWS ON LEVEL OF PENSION-MOTION UNDER S.O. 43
Mr. Jack Marshall (Humber-St. George's-St. Barbe):: Mr. Speaker, I rise pursuant to Standing Order 43 to move a

November 25, 1977
Oral Questions
motion similar to the one presented by the hon. member for Winnipeg North Centre (Mr. Knowles). Briefs submitted by the National Council of Veterans Associations and the Army, Navy and Air Force Veterans Association stress the widespread concerns of the majority of veterans over the reluctance of government to adjust the basic rate of disability pension on a parity level with the unskilled labour group in the Public Service of Canada. Therefore, I move, seconded by the hon. member for Saskatoon-Biggar (Mr. Hnatyshyn):
That the supplementary estimates on veterans affairs be referred to the Standing Committee on Veterans Affairs, rather than the Standing Committee on Miscellaneous Estimates so that ample time be provided to hear presentations from veterans' groups to indicate their concern.


Mr. Speaker:: Presentation of such a motion at this time requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


SUPPORT FOR SENSE OF NATIONAL UNITY ENGENDERED BY GREY CUP GAME-MOTION UNDER S.O. 43
Mr. Steven E. Paproski (Edmonton Centre):: Mr. Speaker, I rise pursuant to Standing Order 43 to seek the unanimous consent of the House this day, as I will not be in the Chamber on Monday, to move a matter of urgent and pressing necessity. Grey Cup celebrations demonstrate national togetherness and good natured competition, captivating the Joneses, the Prefon-taines and the Paproskis of Canada. Therefore, I move, seconded by the hon. member for Joliette (Mr. La Salle):
That this House go on record supporting the sense of national unity engendered by the Grey Cup game, celebrated between the Eastern Montreal Alouettes and the Western Edmonton Eskimos.
Although I know already which is the better team, in the interest of national unity, and modest as I am, I will continue to adopt my usual gracious attitude should the other team win.


Some hon. Members:: Hear, hear!



ORAL QUESTION PERIOD


Mr. Sinclair Stevens (York-Simcoe):: Mr. Speaker, in the absence of the Prime Minister, I should like to put my first question to the Minister of Finance who is the chief spokesman for the government on economic affairs in this country. My

question arises out of the views expressed by the Prime Minister in St. John's, Newfoundland yesterday to the effect that the principle of Confederation is that there are some rich and some poor, and in effect, if they do not like it down there, that is just too bad.
Is the minister aware that tens of millions of dollars are being poured by the federal Export Development Corporation into the states of Texas, New Jersey and Minnesota to aid the construction of steel mills in those states, notwithstanding that the unemployment there is as low as 3.5 per cent and the average unemployment is one-third of that in Newfoundland? If he is aware of that type of financing going into the United States, would he indicate why it is the government's policy to help the citizens of Texas, and those other states, more than the citizens of Newfoundland who are crying for jobs?


Some hon. Members:: Hear, hear!


Hon. Jean Chretien (Minister of Finance):: Mr. Speaker, I think the hon. member is asking a very, very mixed type of question. What the Prime Minister said is something that everyone in Canada pretty well understands. Unfortunately, all provinces of Canada are not equally rich in natural resources. In terms of history, some provinces become rich and then poor. It is the federal government's role to attempt to equalize opportunities in Canada, and that is why we have equalization programs and work programs for the less fortunate Canadians to benefit in Confederation.
With regard to the second part of the question, I do not know exactly to what the hon. member is referring. I will look into that and provide him with a reply.


Some hon. Members:: Hear, hear!


U117) UNEMPLOYMENT-POSSIBILITY OF AID TO REFURBISH FISHING FLEET IN ATLANTIC REGION
Sinclair McKnight Stevens: Mr. Speaker, again to the Minister of Finance. In view of the fact that EDC has agreed to put out something over $100 million in the form of long term loans at low interest rates to Great Britain and various states in the United States for the construction of steel mills; in view of the fact that over $160 million has been lent to Poland to help build a pulp and paper mill in that country, and other money has gone to Iran; would the minister at least undertake to review this situation to see if this money could be used, for example, to help refurbish fishing fleets off the Atlantic coast and in that way give a few more jobs to Canadians?


Joseph Jacques Jean Chrétien: The hon. member's question puzzles me because we have an organisation that helps to export Canadian technology and Canadian materials abroad in order to create jobs in Canada, but members opposite are not happy with that. I am completely puzzled. If the hon. member is putting the proposition that we should not try to get into international markets and should have a completely closed internal economy, and if he thinks that is going
November 25, 1977

to build prosperity in Canada, I hope Canadians will never accept such a policy with such a person to lead it.


Sinclair McKnight Stevens: I have a supplementary question for the Minister of Finance. Would the minister indicate whether the government has considered not only exporting the technology that we are talking about to help others in the world, but using that technology to help people such as those who are out of work in Newfoundland? You could do two things. You could create more work for those who have the technology, and secondly you could create the work right here in Canada within that area where you have 17.5 per cent unemployment, compared to 3.5 per cent unemployment in Minnesota.


Joseph Jacques Jean Chrétien: Mr. Speaker, I am really surprised by the comments of the hon. member. In a modern society, should I explain to him, when we have reached a degree of sophistication which allows us to sell our technology it is normal to do so. I would like to tell him that if we do not sell Canadian machinery or technical services in Poland for the construction of a paper mill, if we did not sell those products and that technology, some other countries would willingly do so. In the competitive world in which we are living it is absolutely normal to sell abroad the products used to develop those industries. It is normal and it shows the degree of competitiveness that Canada has reached in fields in which we are specialized. I do not understand the hon. member who does not want us to use our assets to create jobs for Canadian workers manufacturing equipment, for Canadian engineers who can show abroad that Canadians have made great progress in the past few years.


UNEMPLOYMENT-GOVERNMENT POSITION ON ASSISTANCE TO DEVELOP NEWFOUNDLAND'S RESOURCES
James Aloysius McGrath: Mr. Speaker, the unemployed of the Atlantic region will draw precious little consolation from the answer given by the Minister of Finance. I would like to ask the Minister of Finance, in light of the observations and discussions of the Prime Minister yesterday with the ordinary people of Newfoundland, whether it is the view of the government that Confederation is to be a rich man-poor man affair, with the poor provinces expected to be content with the largesse of the central, richer provinces, or is this government prepared to assist provinces like Newfoundland to develop its vast resource potential which would provide employment, not only for its own people, but would contribute substantially to the Atlantic people as a whole?


Joseph Jacques Jean Chrétien: Mr. Speaker, I think the hon. member would be well advised to talk with the premier of Newfoundland who was on TV yesterday, and who said that he had a very good understanding with the Prime Minister during the meeting and that he acted more responsibly than the hon. member who is trying to score petty political points. I just want to say that we are preoccupied with that. What the Prime Minister said is that we are in Confederation
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and those who happen to be richer this time are there to help those who are not so fortunate. In order to help the hon. member's province we have extended the fishing limit to 200 miles, and we are trying to develop some industry which will benefit Newfoundland workers. There is more unemployment in Newfoundland than in any other province. That is why we have some programs which are designed to help areas where there are high levels of unemployment, and that is why the highest contribution to any single riding through the Canada Works Program is going to the riding of the hon. member's friend who sits behind him.


James Aloysius McGrath: Mr. Speaker, the riding of my colleague is getting the highest rate because it has the highest rate of unemployment in the country, and that is a disgrace.
By way of a supplementary question I would like to tell the minister that my concern is for the unemployed of my province. The real rate there is now 27.6 per cent. My question stems from the statement made by his colleague, the Secretary of State for External Affairs, when he said in Newfoundland last July that there was a need for rethinking the sort of development process to pursue in Newfoundland and that DREE was not working.
In light of that admission-I agree with the minister wholeheartedly and I am glad he has come around to my way of thinking-I would like to ask the Minister of Finance what the government proposes to do about this crisis situation in a province which is blessed with resources, enough to satisfy not only its own needs but also the needs of the whole region. Is the minister prepared to treat this as an emergency situation, or is he prepared to condone the arrogance and contempt of his leader, the Prime Minister, when he said in Newfoundland yesterday, "Let them eat cake"?


Joseph Jacques Jean Chrétien: Mr. Speaker, I know that the hon. member does not want to be aware, but I would like to tell him that yesterday the Prime Minister and the Premier of Newfoundland discussed two basic developments which could occur in Newfoundland, hydro electric development and the development of the fishing industry. Just to demonstrate that we have been concerned, in the program of decentralization the first thing we did was to decide to have a National Revenue data centre in St. John's, in the hon. member's own riding, and he never said thank you.


James Aloysius McGrath: Fifty jobs to St. John's and 1,500 to Sherbrooke.


INDUSTRY
Mr. Max Saltsman (Waterloo-Cambridge):: Mr. Speaker, 1 would have directed my question to the Minister of Industry, Trade and Commerce, but in his absence I will direct it to the

November 25, 1977
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Deputy Prime Minister, if I can get his attention for a moment. In July of this year representations by the shoe industry were made to the government outlining the serious difficulties facing the shoe industry and calling for immediate quotas to save jobs in the footwear industry. This week a telegram was received by members of this House asking us to press the government for a statement of policy on this matter. Would the Deputy Prime Minister now tell the House what decision the government has reached concerning the urgent matter put before it by the shoe industry?


Hon. Allan J. MacEachen (Deputy Prime Minister):: Mr. Speaker, I am able to advise the hon. member that the government has had this matter under consideration. As recently as yesterday it was considered, and certain decisions have been reached. I am not in a position to give the details of the decisions reached, but I hope it will be possible to make an announcement with respect to the decisions which have been taken in response to the concerns of the industry and members of this House.


Max Saltsman: Mr. Speaker, in view of the long delay in reaching a decision would the Deputy Prime Minister reconsider what he has just told the House and the fact that urgent action is needed now before another selling season is lost? Plans have to be made by the footwear industry. Can the Deputy Prime Minister give the House a definite date on which this decision will be announced, or can the government explain why there is this delay in telling the House, in view of what the Deputy Prime Minister has just told us?


Allan Joseph MacEachen: Mr. Speaker, there will be no new delay. I would hope an announcement will be made very shortly. As I said, decisions were taken yesterday and just as soon as it is possible to put the material together I am sure an announcement will be made. There will be no delay that should cause concern to the hon. member.


REQUEST FOR CLARIFICATION OF DEPUTY MINISTER'S STATEMENT ON TARIFF NEGOTIATIONS
Max Saltsman: A supplementary question, Mr. Speaker. I should like to ask the Deputy Prime Minister if he could indicate whether the statement made yesterday by the deputy minister of industry, trade and commerce is government policy? Regarding the negotiations on tariff concessions, he said that there are going to be some winners and most assuredly some losers. Because of the concern that will be aroused by this kind of general statement can the Deputy Prime Minister tell the House who the winners are, who the losers are and whether this is an accurate reflection of government policy?


Allan Joseph MacEachen: Mr. Speaker, if I may return to the original question I can tell the hon. member that it is the intention of the Minister of Finance to make an announcement on the footwear decision next week. Regarding the comments of the deputy minister of industry, trade and commerce, may I say that at the present time the Canadian government is preparing its negotiating stance. In fact, the major participants in the negotiations have not fully agreed upon a tariff plan that will be the subject of negotiations. It is obvious, however, that if any adjustments are to be made in the Canadian tariff it is the intention of the government to ensure that reciprocal benefits accrue to the Canadian economy. The objective is that the over-all wealth of the trading community be increased and accordingly the over-all prospects of Canada in the fields of employment and income will be improved as a result of the negotiations. We are looking at the negotiations as an opportunity to increase trade for Canada with a resultant increase in our over-all prosperity. I think in a narrow sense it may be possible to look at the situation in terms of particular industries that have tariff reductions, but over-all we hope it means growth in the prosperity of the country.

[ Translation]


INDUSTRY
Mr. Gerard Laprise (Abitibi):: Mr. Speaker, my question is directed to the Minister of State for Federal-Provincial Relations. On November 13 last, the minister announced to the House a series of meetings between federal and Quebec officials, referring to them as thawing operations. Can the minister inform the House whether these meetings are going on as anticipated in a climate of understanding or whether they are going on in a climate of confrontation? Moreover, can he say in particular what is the status of files on housing, urban renewal and home insulation as well as those on manufacturing industry, including textile and footwear?


Hon. Marc Lalonde (Minister of State for Federal-Provincial Relations):: Mr. Speaker, it is with pleasure that I say to the hon. member that these meetings are going on. Some have been held on November 15, 16 and 18 last. Another took palce yesterday, November 24, on regional economic development projects and the home insulation program. These issues will be considered next week during the meeting of Energy ministers. These discussions went very well and it is possible that agreements may be reached in several areas. A variety of measures should be announced very soon either by the Quebec government or the federal government, which will be evidence that these discussions were held in an extremely positive climate. I hope Quebecers will benefit from it all.
November 25, 1977


SOCIAL SECURITY
Gérard Laprise: I have a supplementary question, Mr. Speaker. Could the minister advise the House whether the general agreement which the federal government signed recently with the Prime Minister of Italy applies to all Canadians, including those Quebecers who are entitled to Canadian pension plan benefits, or whether they are excluded from this agreement, Quebec not having signed this agreement with Italy as yet?


Marc Lalonde: Mr. Speaker, I indicated yesterday how I deplore the statement by the Quebec premier that there had been no consultations between Quebec and Ottawa concerning the agreement signed by Canada and Italy. Yesterday, my colleague the Secretary of State for External Affairs tabled in the House the correspondence on this subject which clearly bears witness to the fact that the federal government has vainly tried over the past ten months to involve the Quebec government in these negotiations. I can assure the hon. member that the Canada-Italy agreement provides all Canadian citizens, including those residing in Quebec, with the relevant benefits of the old age security pension scheme, the family allowances plan, and of course the Canada Pension Plan for those Quebec residents who are covered by it; as the hon. member knows perfectly well, however, most Quebec residents are covered by the Quebec Pension Plan, not the Canada Pension Plan, and this situation will have to be dealt with under a special agreement between the Quebec Pension Board and its Italian counterpart, under the general agreement which Canada signed with Italy during Prime Minister Andreotti's visit to Ottawa. This general agreement contains a specific clause which allows provincial organizations to enter into such agreements, and we hope that the relevant agreement will be signed very shortly by the Quebec and Italian authorities.


URBAN AFFAIRS
Jean Elizabeth Pigott: Mr. Speaker, I would like to address my question to the Minister of State for Urban Affairs. Will the minister explain to the House why recent moves to expand the mandate of the Ministry of State for Urban Affairs were carried out without reference to parliament?


Hon. Andre Ouellet (Minister of State for Urban Affairs):: Mr. Speaker, I think the hon. member's question is based on
Oral Questions
an article which appeared recently in an Ottawa newspaper. I wish to inform her that the moves affecting personnel within the department have been grossly exaggerated and do not in any way imply a head to toe reorganization which would modify the department's vocation.


Jean Elizabeth Pigott: Even in light of that, I feel that head to toe there could be some parts of the anatomy which might be very interesting to know about.


Some hon. Members:: Explain.


Jean Elizabeth Pigott: Will the minister inform the House what he is doing, and whether legislation will be introduced to approve what is going on within that ministry?
[ Translation]


André Ouellet: What is being done essentially, Mr. Speaker, is that the Canadian government has entrusted the Department of Urban Affairs with analyzing, developing and coordinating policies on urban matters while the Central Mortgage and Housing Corporation is responsible for housing assistance. So we have tried to integrate those two government sectors into a more rational structure to improve efficiency and eliminate duplication.
Obviously some people have lost their employment in the course of this operation. There has been a cut in the personnel when there was duplication. Therefore some of the laid off employees have criticized and made statements to the press which exaggerate the scope of these changes. Since the hon. member comes from the private sector, I am sure she knows very well that to improve efficiency one must undertake some adjustments to be more efficient and save money to the Canadian taxpayers.


DIRECTORATE GENERAL OF SPECIAL URBAN PROJECTS- REQUEST FOR STATEMENT OF RESPONSIBILITIES
Mr. Dean Whiteway (Selkirk):: Mr. Speaker, my question is to the same minister. Can the minister confirm to the House today whether there is a position called the Directorate General of Special Urban Projects, whether that specific position has a budget of $29 million whereas the entire ministry has a budget of only $22 million, and what the specific responsibilities of the Directorate General of Special Urban Projects are.


Hon. Andr6 Ouellet (Minister of State for Urban Affairs):: Mr. Speaker, I repeat that the changes which have been made are strictly administrative and were aimed at getting more efficiency in the operations. I will appear before the parliamentary committee next week and have the opportunity to explain in further detail the figures and allegations of the hon. member. I would not want to abuse the time of the House by explaining details on budgets and various department components.

November 25, 1977
Oral Questions



HOUSING


Jack Marshall: Mr. Speaker, my question is to the Minister of State for Urban Affairs. Fuel costs in the Atlantic region are higher than anywhere in Canada. Most families on low incomes cannot take advantage of the home insulation project. Because of the deterioration of their homes, they are not in a position to put in insulation. Will the minister consider transferring some of the home insulation money to the Residential Rehabilitation Assistance Program in order to meet the needs of those people on low income?


André Ouellet: Mr. Speaker, it is important that the hon. member understand there are in fact three programs. Because of the high price of fuel, we established the housing insulation program in two provinces, namely Prince Edward Island and Nova Scotia. That program is going very well. It is proceeding at great speed because of the tremendous response by the people there. More recently we introduced for all the other provinces of Canada the Canadian Home Insulation Program, referred to as CHIP. That program is proceeding at a normal pace. It is indeed a very useful program. I do not understand the hon. member's argument that these people cannot afford this program. In fact, it is a total subsidy of $350.


Jack Marshall: Taxable.


André Ouellet: The hon. member is saying "taxable". It is applicable according to a person's income. He is referring to low income people. Obviously, these people do not pay income tax. Therefore, they receive the total amount.


Jack Marshall: The minister did not say that in Prince Edward Island and Nova Scotia the grants are $500 tax free. In the province of Newfoundland it is taxable. A person must spend $500 in order to receive two thirds of that amount. I again point out to the minister that there are many people on low income who are wasting fuel because of the lack of insulation. They cannot put in the insulation. They could do it under RRAP. The minister could make some of the $1.4 billion which they are not spending available to the RRAP program. That would help many people in Newfoundland as well as providing employment.


André Ouellet: Mr. Speaker, the hon. member should be aware that we have tripled the amount allotted under the RRAP program in his province. Unfortunately, not all of the money available under the RRAP program has been used because, for one reason or another, the recipients have to put forward their own money. Under the CHIP program, they do not have to put forward any money. I suggest that the hon. member advertise the CHIP program. Many people could take

advantage of this total subsidy that is being offered to them by the Canadian government.


Some hon. Members:: Hear, hear!



LABOUR CONDITIONS


Mr. Jean-Robert Gauthier (Ottawa-Vanier):: Mr. Speaker, my question is to the Minister of Labour. Considering that 85 per cent of Canada's labour force falls under provincial jurisdiction, and in view of the fact that according to reports from the ILO in Geneva that Canada led the list of countries in strikes, averaging 2.27 days lost per worker in 1976, can the Minister of Labour explain this situation and state what new actions he is taking in concert with his provincial colleagues to halt this turmoil in the industrial relations scene?


Hon. John C. Munro (Minister of Labour):: Mr. Speaker, the statistics revealed by the International Labour Organization are entirely erroneous as far as Canada is concerned. For one thing, the basis of comparison is faulty. The situation is this. They are comparing us with countries that do not count public service strikes, political strikes or even days lost unless the strike has been going on for more than two or three weeks. The fact is that Canada's strike record has improved by 200 per cent over what it was two years ago.


Some hon. Members:: Hear, hear!


John Carr Munro: Probably our record in terms of man days lost to strike is superior to most of the countries with which we traditionally compare ourselves, in particular Japan which had some words of criticism toward Canada in this regard.



AGRICULTURE


Mr. J. P. Nowlan (Annapolis Valley):: Mr. Speaker, my question, of which he has had notice, is for the Minister of Agriculture. Since a committee headed by Dean Howell of the Ontario Veterinary College, University of Guelph, was commissioned to determine whether there should be another veterinary college in Canada, which committee recommended that there should be and that it should be set up in one of the maritime provinces, does the minister approve of this recommendation and, if so, when does he anticipate that the government's financial commitment can be defined so that progress can be made on this very important matter?
November 25, 1977


Hon. E. F. Whelan (Minister of Agriculture):: Mr. Speaker,
I am sure the hon. member is fully aware, but I gently remind him, that the committee recommended that the veterinary college be in Prince Edward Island. I am sure he is also aware, though I will gently remind him again, that all provinces have to agree, and the good province of Nova Scotia said that they did not want it in Prince Edward Island, they wanted it in Nova Scotia. I have no influence in this matter. This was an independent committee, one to which the educational commission of the Atlantic provinces agreed. It was supposed to be, and I believe it was, an independent report, and I accept that report.


John Patrick (Pat) Nowlan: A supplementary question, Mr. Speaker. I thank the minister for most of that answer and I should like to gently remind him that Dean Howell's report, as the minister well knows, was submitted on August 31, 1975. In view of the conflict of interest mentioned by the minister between the various provinces and serious questions which go to the heart of Dean Howell's report regarding the recommendation that the college be in P.E.I., and in the intent of having this matter ironed out and focussing public attention so that different points of view can be expressed, I would ask the minister if he would use his good offices, either in consultation with the maritime premiers or the House leader, having regard to the serious fundamental nature of veterinary science in Canada, let alone the particular interest of Atlantic Canada in the matter, to have this report referred to, say, the agricultural committee where interested parties, including some of the premiers and people who submitted briefs before Dean Howell, could come before a public body and have this matter at least get off dead centre where it is obviously at the present time due to these provincial conflicts?


Eugene Whelan: Mr. Speaker, the report is not solely a Dean Howell report. It was a report made by many learned people on the commission which was given the responsibility of deciding where the veterinary college should be located. They decided that it should be located in Charlottetown and I have no objection to that. I took it for granted that the report was made public, and I think it was. There is nothing in the report which I would dispute in any manner. If the hon. member has any facts he would like to put on the record or submit to me indicating that he thinks the commission was wrong, I would be pleased to consider them.



EXTERNAL AFFAIRS


Mr. Douglas Roche (Edmonton-Strathcona):: Mr. Speaker, my question is directed to the Secretary of State for External Affairs. On December 22, 1976 the minister announced in the House the policy of the government with respect to strengthening the safeguards requirements which apply to the export of
Oral Questions
Canadian reactors and uranium. May I just quote the relevant sentence in what he said, Mr. Speaker. He said: "Shipments to non-nuclear weapon states under future contracts will be restricted to those which satisfy the non-proliferation treaty or otherwise accept international safeguards on their entire nuclear program."
Last night in Brussels the Minister of Industry, Trade and Commerce said that Canada is becoming less and less able to restrict the sales of its nuclear technology, and went on to give as a reason the possible commercial retaliation by West Germany. In view of this shocking departure from government policy by a minister who is reported to have made this statement with a laugh, will the Secretary of State for External Affairs now reaffirm his statement of last December and repudiate the statement of the Minister of Industry, Trade and Commerce?


Hon. Donald C. Jamieson (Secretary of State for External Affairs):: Mr. Speaker, I read the newspaper report, but I have not, of course, discussed this with the Minister of Industry, Trade and Commerce. From what I was able to deduce from it, he was in fact outlining what is a very serious problem, and I think all hon. members are aware of it, namely that it is getting to be extremely difficult to get international agreement on the whole question of nuclear controls. But that having been said, I am very happy to tell the hon. member that there has been no change in terms of the basic policy of the government. We are still of the view that we ought not to deal in nuclear supplies or technology with countries which do not sign the non-proliferation treaty or accept full scope safeguards.



REQUEST FOR LIFTING OF EMBARGO ON URANIUM SHIPMENTS TO EUROPEAN COMMUNITY-GOVERNMENT POSITION

Douglas Roche: I thank the minister for that statement, which is tantamount to a repudiation of the statement of the Minister of Industry, Trade and Commerce. I hope he will explain to his colleague that it is not his function to be outlining problems in formal gatherings in Europe in a field which is not in his domain.
May I put a supplementary question to the Secretary of State for External Affairs. Did he receive a request this week from Dr. Guido Brunner of the energy commission of the European Economic Community for a relaxation of Canada's embargo on uranium shipments to European countries, and did the minister, in the conference which was held, reaffirm the Canadian policy of safeguard requirements including his statement of last December that "we are prepared to accept the commercial consequences of being clearly ahead of other suppliers. This is the price we are prepared to pay to curb the threat to mankind of nuclear proliferation"?


Donald Campbell Jamieson: Mr. Speaker, the request from the gentleman in question, Mr. Brunner, came many, many months ago. It is a fact, and I am very happy that it is so, that he is in Canada at the present time. I had a session with him yesterday afternoon

November 25, 1977
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and I will be having another with him immediately following the question period today. It is no secret that the European community wishes we would resume the shipment of uranium to member states of the European Economic Community. It is no secret either that I have said all along that I want to do my very best to accommodate ourselves to what are some very pressing needs of the European community, for a whole range of reasons not the least of which is that they are, of course, partners of ours in a variety of both defence and economic exercises.
But I repeat what I said, Mr. Speaker, a moment ago to the hon. member, that in terms of our relationship on nuclear matters, NPT and full scope safeguards are a sine qua non. 1 would call to the hon. member's attention, if he does not understand it already, that this is not the nature of the problem as it relates to the European Economic Community.



PENITENTIARIES


Mr. John Gilbert (Broadview):: Mr. Speaker, my question is for the Solicitor General. In view of the hostage-taking incident at Millhaven penitentiary this week, the necessity to call in two professors to settle the incident and the indication by the professors that conditions were intolerable, has the minister received a report on this incident and, if so, would he table the report and circulate it to the members of the justice and legal affairs committee; and would he also set forth what he is going to do specifically in regard to this particular incident?


Hon. Francis Fox (Solicitor General):: Mr. Speaker, 1 have had meetings with the Ontario regional director and the director of the Millhaven institution following the incident that took place in Millhaven last week in which a group of inmates took another inmate as hostage and proceeded to beat him quite violently. I am expecting a complete report on the incident and expect to have more to say next week when I appear before the parliamentary committee which is studying the estimates of my department, at which point I will be prepared to answer all questions on that incident. In the meantime, I am most interested in seeing to it that in all the special handling units in the country there are indeed decent conditions of incarceration. However, there is no way that the Canadian Penitentiary Service can tolerate the type of hostage-taking and violent beating which took place last week.


John Gilbert: A supplementary question, Mr. Speaker. Would the minister either table the report he is about to receive or circulate it to members of the committee so that they may question him when he appears; and would he also bring the two professors for examination?


Francis Fox: Mr. Speaker, I would like to have a look at the report before I decide whether or not I will circulate it, but I

am having an in-depth look at the matter, and as I indicated previously will have more to say on the matter early next week.



POSSIBILITY OF ASSISTANCE FOR PROGRAMS FOR MENTALLY RETARDED

Mr. F. A. Philbrook (Halton):: Mr. Speaker, my question is for the Minister of State (Fitness and Amateur Sport). In view of the fact that we are at the present time in my town of Oakville, the riding of Halton, organizing a special Olympics for the mentally retarded next year, could the minister tell us whether she and her department have any intention of offering financial or other assistance in respect of sports for the mentally retarded.


Hon. Iona Campagnolo (Minister of State (Fitness and Amateur Sport)):: Not at this time, Mr. Speaker. To my knowledge I have received no such application. As you know, jurisdiction in respect of the handicapped does fall within the purview of the provinces.



GOVERNMENT ADMINISTRATION


Mr. Walter Baker (Grenville-Carleton):: Mr. Speaker, I have a question to put to the Minister of Finance. Last evening the hon. member for Ottawa West made a statement in the course of a public speech in which he indicated that the policy of the minister and the government in respect of decentralization from the national capital to the province of Quebec was in fact not going to be carried out because of difficulties with the government of Quebec in negotiations dealing with bill 101. This was denied this morning by one of the officials of his department. Would the minister tell us what the situation is in respect of the matter?


Joseph Jacques Jean Chrétien: Mr. Speaker, in that regard we are presently negotiating with Quebec on this basis; we have said, and I want to repeat, if there is no agreement to permit English-speaking public servants who will be going into Quebec to send their children to English schools, there will be no move. So far in our discussions with the province of Quebec we have not come to any agreement to that effect. The policy is the same; if there is no agreement there will be no move. If there is an agreement that will permit the bureaucrats, who will be moving into different areas of Quebec because of decentralization, to send their children to English schools they will be moved, but up to now there is no such agreement. In these circumstances some are predicting there will not be such an agreement, but I do not want to make a
November 25, 1977

final determination about it because negotiations are still going on.


Walter David Baker: Mr. Speaker, the minister has indicated that negotiations are going on. Because of the great interest in this matter, particularly in the national capital area, would the minister indicate how the negotiations are progressing? Is he optimistic about these negotiations as they stand at the moment, or is the situation otherwise? Will he give us some indication as a result of the discussions he has had whether he is hopeful about these negotiations being concluded satisfactorily?


Joseph Jacques Jean Chrétien: I would first like to add to my previous answer, Mr. Speaker. We are having negotiations of the same nature with all provinces before we make the move, and I am generally optimistic in respect of all provinces, leaving regard to the situation in Quebec, I have talked with some ministers and there was some confusion on the other side about this; some said it was absolutely impossible and others were telling me there was some possibility. I cannot pass judgment at this moment. It is possible that in order to achieve a proper agreement what will be needed is an amendment to bill 101, which will not be easy to negotiate.



DECENTRALIZATION PROGRAM-POSSIBILITY OF PROCEEDING IN OTHER AREAS BUT NOT IN QUEBEC

Walter David Baker: Mr. Speaker, the minister indicated at one time that there would be no moves anywhere if there could not be a resolution in respect of the problem that exists, and we all know it exists in the province of Quebec. He seems to be indicating by his answer that all decentralization will take place except with regard to the province of Quebec in the event that the difficulty in relation to the province of Quebec is not resolved. Is that the position of the minister, and can he explain why that position has changed?


Joseph Jacques Jean Chrétien: Mr. Speaker, we have not changed our position at all. The same principles apply everywhere. If there is some decentralization in another province which does not provide for education in French for French-speaking people, there will be no decentralization unless-


An hon. Member:: In that province.


Joseph Jacques Jean Chrétien: -yes, in that province, unless in some cases where personnel for decentralized units could be hired locally, as it sometimes happens. This is what we did in some cases of decentralization which were determined previously. If we cannot reach agreement with the province of Quebec, there will be no decentralization toward that province, just as there will be none toward Saskatchewan, Alberta or some areas of Ontario if French-speaking civil servants, provided they are in sufficient numbers, of course, cannot be assured of receiving their education in French.
Oral Questions



DECENTRALIZATION PROGRAM-POSSIBILITY OF CHANGES IN QUEBEC'S BILL 101-POSSIBILITY CHANGES APPLICABLE TO PUBLIC SERVANTS ONLY

Mr. Joe Clark (Leader of the Opposition):: Mr. Speaker, the minister has just said the government is seeking an amendment to bill 101.


Marc Lalonde: That's not what he said.


Charles Joseph Clark: Perhaps that is not what he said, but he told us that there would have to be an amendment to bill 101.


An hon. Member:: He said "perhaps".


Marc Lalonde: He didn't say that, again.


Charles Joseph Clark: Now we are getting another version from the Minister of State for Federal-Provincial Relations who is coaching, saying that is not what the minister said. Will the minister tell the House precisely what changes he is seeking to bill 101, if any, and will he tell the House of Commons whether he is now proposing a situation in which the provincial legislation of that province would apply to employees in the private sector but would not apply to federal public servants?


Joseph Jacques Jean Chrétien: Mr. Speaker, I used the word "perhaps" which in French is "peut-etre".


Some hon. Members:: Hear, hear!


Joseph Jacques Jean Chrétien: We are now discussing with the government of the province of Quebec. We want English-speaking federal employees who might be moved to Sherbrooke, Rigaud or Quebec City in the context of the decentralizations we announced recently, who might thus be called upon to go and work in Quebec, to be able to send their children to schools where they could be educated in their mother tongue, namely English. If the government of Quebec cannot give us this assurance, there will be no decentralization for the units I mentioned. Furthermore, I said earlier that in order to give us this assurance Quebec may have to amend bill 101. I did not say that they will have to amend it. Negotiations are presently going on of course; we shall make a progress report to the House.


Charles Joseph Clark: Mr. Speaker, just so we can be clear, what the government of Canada is proposing in its negotiations with the government of Quebec is that there would be a special status; en Fran^ais "Statut particulaire", for the employees of the government of Canada that would not apply to the English speaking employees of the private sector in the province of Quebec? Is that what the minister is saying?


Walter David Baker: That must be what he is saying.

November 25, 1977
Order Paper Questions


Joseph Jacques Jean Chrétien: Mr. Speaker, we are negotiating on the decentralization policy I put forward two years ago, a long time before the coming into power of the Parti Quebecois and before bill 101 was passed. We are negotiating on behalf of our employees as far as bill 101 is concerned but we do not have any jurisdiction in the private sector. The government of the province took the decision in this area and we are now discussing with the province of Quebec on behalf of the employees who are under the responsibility of the federal government.


Charles Joseph Clark: Mr. Speaker, would the minister tell us whether he had similar negotiations with the Liberal government of Mr. Bourassa in Quebec relative to the application of bill 22?


An hon. Member:: What difference does that make?


Joseph Jacques Jean Chrétien: There was no such problem at that time, Mr. Speaker.



QUESTIONS ON THE ORDER PAPER

[Stage Direction]
(Question answered orally are indicated by an asterisk.)
['The answer for the Cape Breton Development Corporation is as follows: 1. Nil.\n2. Not applicable.\n_______________________________________1255\nIncome Tax Act']
Mr. Yvon Pinard (Parliamentary Secretary to President of the Privy Council):: Mr. Speaker, the following questions will be answered today: Nos. 117, 180, 189, 198, 210, 240, 246 and 403.
1 ask, Mr. Speaker, that all remaining questions be allowed to stand.



Mr. Herbert: Does the Department of Supply and Services purchase and store materials for other departments and, if so, are applicable storage costs charged to the ordering departments at time of or after delivery?


Hon. Jean-Pierre Goyer (Minister of Supply and Services):: 1.	See reply to Question No. 2,646 answered October 17, 1977 in Hansard, pages 8245-6.
2.	In some cases, DSS purchases and stores material on the account of the customer department. In such cases, storage charges are normally billed monthly in arrears, however some departments are accommodated with less frequent billings at their request.
3.	In other cases, DSS, under the Stocked Item Supply Service, purchases, stores and issues material to customer departments upon receipt of a requisition. In such cases, prices

charged include all applicable costs including storage and these are billed to the customer after delivery.


NUMBER OF PERSONS UNDER CONTRACT TO BUREAU OF PENSIONS ADVOCATES
Mr. McKenzie: 1.	What is the total number of persons under contract to the Bureau of Pensions Advocates and how many are retired public servants?
2.	What was the total amount in (a) 1975 (b) 1976 paid to those under contract and how much of this was to retired public servants?


Hon. Daniel J. MacDonald (Minister of Veterans Affairs):: 1.	Nil.
2.	Not applicable.


NUMBER OF PERSONS UNDER CONTRACT TO CANADIAN JUDICIAL COUNCIL
Mr. McKenzie: 1.	What is the total number of persons under contract to the Canadian Judicial Council and how many are retired public servants?
2.	What was the total amount in (a) 1975 (b) 1976 paid to those under contract and how much of this was to retired public servants?


Hon. Ron Basford (Minister of Justice):: In so far as the
Canadian Judicial Council is concerned: 1. Nil.
2. 1974-75, Nil. 1975-76, Nil.


NUMBER OF PERSONS UNDER CONTRACT TO CANADIAN PENSION COMMISSION
Mr. McKenzie: 1.	What is the total number of persons under contract to the Canadian Pension Commission and how many are retired public servants?
2.	What was the total amount in (a) 1975 (b) 1976 paid to those under contract and how much of this was to retired public servants?


Daniel Joseph MacDonald: 1.	There are at present eight persons under contract to the Canadian Pension Commission, two of whom are retired public servants.
2.	(a) In 1975 two persons were under contract to the CPC, both of whom were retired public servants. The total amount paid to them was $7,625. (b) In 1976 one person was under contract to the CPC. This person was also a retired public servant and the total amount paid to him was $2,650.


NUMBER OF PERSONS UNDER CONTRACT TO CROWN ASSETS DISPOSAL CORPORATION
Mr. McKenzie: 1.	What is the total number of persons under contract to the Crown Assets Disposal Corporation and how many are retired public servants?
2.	What was the total amount in (a) 1975 (b) 1976 paid to those under contract and how much of this was to retired public servants?
November 25, 1977


Jean-Pierre Goyer: 1. Nil.
2. Nil.


NUMBER OF PERSONS UNDER CONTRACT TO ROYAL CANADIAN
Mr. McKenzie: 1.	What is the total number of persons under contract to the Royal Canadian Mint and how many are retired public servants?
2.	What was the total amount in (a) 1975 (b) 1976 paid to those under contract and how much of this was to retired public servants?


Jean-Pierre Goyer: 1.	Nil.
2.	Nil.


NATIVE PERSONS EMPLOYED IN RURAL AND NATIVE HOUSING PROGRAM OF CMHC
Mr. Firth: In (a) 1976 (b) 1977 to date, how many native persons were employed in any aspect of the construction and rehabilitation programme of the Rural and Native Housing Programme of Central Mortgage and Housing Corporation?


André Ouellet: am advised as follows by Central Mortgage and Housing Corporation: CMHC hired 27 native persons in 1976 and 30 in 1977, all on contract, under its Rural and Native Housing Program. Of these, 21 in 1976 and 27 in 1977 were engaged under the Cadre training program. Applications for employment do not supply information on ethnic or national origin and information on the ethnic origin of regular staff cannot be provided.


NUMBER OF PERSONS UNDER CONTRACT TO CAPE BRETON DEVELOPMENT CORPORATION
Mr. McKenzie: 1.	What is the total number of persons under contract to the Cape Breton Development Corporation and how many are retired public servants?
2.	What was the total amount in (a) 1975 (b) 1976 paid to those under contract and how much of this was to retired public servants?


Mr. Donald Wood (Parliamentary Secretary to Minister of Regional Economic Expansion):: The answer for the Cape Breton Development Corporation is as follows: 1. Nil.
2. Not applicable.
_______________________________________1255
Income Tax Act



GOVERNMENT ORDERS


[Stage Direction]
The House resumed from Thursday, November 24, consideration in committee of Bill C-l 1, to amend the statute law relating to income tax and to provide other authority for the raising of funds-Mr. Chretien-Mr. Laniel in the chair.
The Chairman:: Order. When the House adjourned last night, the committee was considering clause 1.
On clause 1.


Sinclair McKnight Stevens: Mr. Chairman, with regard to clause 1, certain of my colleagues will deal with general matters but I should like to deal with some quite specific aspects of the clause. As the explanatory notes indicate, "This amendment, which substitutes the underlined amount for $1,000, would implement paragraph (1) of the ways and means motion to amend the Income Tax Act", so that the amount an individual may claim against capital gains will be increased from $1,000 to $2,000.
My first question to the Minister of Finance on clause 1 is this. Could he tell us why his department has recommended that this change be made?


Joseph Jacques Jean Chrétien: Mr. Chairman, it was to adjust the amount of money which was allocated in order to help the people or to give them more incentive to invest risk money so that they could be somewhat compensated for the losses incurred. There were a lot of representations made on that subject by various groups. Some would like the government to permit a deduction of all the losses, which we do not think is advisable. I think this scheme is a good one. Not only can a person deduct $2,000 from capital gains but he can also deduct it from general income. It is a good incentive for people to take some risk in order to develop the Canadian economy.


Sinclair McKnight Stevens: Mr. Chairman, the minister has indicated that his departmental officials feel it would not be desirable to allow all of the capital losses to be deducted. Would the minister indicate why that is felt? Why cannot a person deduct all of his capital losses against all of his capital gains?


Joseph Jacques Jean Chrétien: Mr. Chairman, 1 think the main reason is that it would be much too expensive for the treasury; moreover, it might result in some inequities in our tax system. For those reasons, I think it would not be advisable at this time.


Sinclair McKnight Stevens: Mr. Chairman, 1 should like to explore that a little more. What would be the magnitude of the loss to the federal treasury if all capital losses were chargeable against all

November 25, 1977
Income Tax Act
capital gains? I ask this because it has always been represented by the department that this is not really a big money winner. The last time we inquired, capital gains tax was yielding approximately $70 billion or $80 billion of tax revenue. I am somewhat startled to find the minister using the rationale that if capital losses were permitted to be applied against capital gains, it would be just too big a loss as far as the treasury is concerned. Could the minister indicate more specifically what the estimated loss would be?


Joseph Jacques Jean Chrétien: Mr. Chairman, that is not exactly what I said. We are not permitting the losses to be deducted only against capital gains, as is the case in the United Kingdom and the United States. We will permit the losses to be deducted against other income. In terms of how costly it will be, I am informed that this deduction of another $1,000, in terms of losses from income, will cost the treasury $45 million. It is difficult to assess exactly, if we permitted all the losses to be deducted from income, the amount of money we would lose, but it could be in the hundreds of millions of dollars. That is why we think that should not be done, and it is not called for either.


Sinclair McKnight Stevens: Mr. Chairman, perhaps the minister misunderstood my question. I am well aware of what he said earlier. What would be the cost to the treasury if the British or American approach was accepted, thus allowing capital losses to be claimed against capital gains without any limit? What would be the loss then? 1 am not talking about all capital losses being claimed against income generally. How much would the loss be to the treasury if it was restricted to losses made on capital items being chargeable against any gains?


Joseph Jacques Jean Chrétien: Mr. Chairman, I am informed that now they are deductible against capital gains fully, but not against income.


Sinclair McKnight Stevens: Mr. Chairman, I will put my question another way. Is the minister able to indicate to us what actualy has been the capital gains tax revenue which the treasury has been able to pocket in the last year, or the last time-frame within his knowledge?


Mr. Hnatyshyn:: He is thinking.


Joseph Jacques Jean Chrétien: Mr. Chairman, I do not think the hon. member for Saskatoon-Biggar should be smart by smiling across the chamber. I do not pretend to have all those figures in my head.


Ramon John Hnatyshyn: I was talking to your colleague.


Joseph Jacques Jean Chrétien: When I am asked how many hundreds of millions have been gained out of a tax like that, those figures are not in my head. It is $165 million, and $90 million on the corporate tax act.


Sinclair McKnight Stevens: Mr. Chairman, I should like to have more exact figures. Combined, how much total revenue has been gained, after all losses are accounted for and all deductions

have been allowed, by the federal treasury in the last year for which the minister has information available?


Joseph Jacques Jean Chrétien: Mr. Chairman, in 1975 the total was $255 million.


Sinclair McKnight Stevens: Mr. Chairman, if I may, I should like to be able to reconcile those figures with the figures shown in the taxation statistics, 1977 edition. Perhaps after two o'clock I will have an opportunity to compare the $255 million figure that the minister has given us to the figures set out by the Department of National Revenue in that booklet. I should like to explore a more general subject dealing with capital gains. We have had, now, a few years experience with capital gains tax. Many people feel it is a grossly unfair tax, in the sense that there is no allowance made for inflation on items regarded as capital items. I know the government's stock answer is that it only takes 50 per cent of the gain-that is rough justice- and that somehow or other the eventual tax payable is not really confiscation of a person's assets.
Before getting into that, I should like to ask the minister the following: We have had some experience now with respect to indexing of income tax. What is the minister's general observation with regard to indexing? Does he feel it has been a good idea? Is it something that he feels is a step in the right direction?


Joseph Jacques Jean Chrétien: In some aspects, yes, and in other aspects, no. Those are my feelings. It is a good concept in the sense that in some ways it will cope, in terms of taxation, with the inflation problems that we face in this counry. That is a positive element. The negative element is that if you compare Canadian taxation with that of other nations, for example, because it is automatic nobody realizes there is a tax cut.
For example, if I combine in my economic statement the tax cut that you have proposed, plus indexation, I am told that it is, relatively speaking, as great a tax cut as that called for by the so-called liberal democrats in the United States at this time. The drawback is that automatic indexing of 7.2 per cent for the next year is not considered by the public to be a tax cut, in terms of the economic definition in other nations. This is a drawback because, in fact, rather than announcing a tax cut of $700 million, as I have, on personal income tax for the year of 1978,1 would have one of $1.5 billion or $1.6 billion.
Psychologically, it would have a better impact if I were to do it the way it is done in the United States. I heard many speeches made in that context in the United States a few years ago. Relatively speaking, it is not more than we have done here, but because of the automatic indexing system we do not get the psychological impact we would have if it was announced as a new tax cut.


Sinclair McKnight Stevens: Mr. Chairman, if I may continue, I take it from the minister's remarks that he has no intention of modifying the indexing as far as income tax is concerned. Could he tell us specifically what the department now feels will be the
November 25, 1977

increment, if you like, of income tax as opposed to the increase in income itself? What leverage is there in the tax system as far as tax revenue is concerned in relation to the general growth of income in the country? At one time, before indexing, I believe it was estimated that federal government income tax went up somewhere between 1.7 per cent and 1.9 per cent in relation to the general increase in income. With indexing, what do they determine the federal tax increase to be in relation to rising income?


Joseph Jacques Jean Chrétien: Mr. Chairman, this is a highly technical question, and I am not in a position to answer it right now. I will get the information and forward it to the hon. member later today.


Sinclair McKnight Stevens: Mr. Chairman, I would prefer the minister to give it to us this afternoon, because many people are interested and I think it should be in the record rather than just forwarded to me.


Joseph Jacques Jean Chrétien: Mr. Chairman, my intention is to report to this Elouse because I can see in which direction the hon. member is going. J would not want to impute any motives to him but in the speeches we heard on second reading, some members of the opposition mentioned on several occasions that Canada was the most heavily taxed country in the world or at least of the western world.


An hon. Member:: That is right.


Joseph Jacques Jean Chrétien: By the way, 1 want to say to the hon. member that he is wrong.


Sinclair McKnight Stevens: Mr. Chairman, I cannot speak for all members of this House, but I can speak for myself. The Minister of Finance is quite wrong in accusing me of having made the statement that we are the highest taxed.


Joseph Jacques Jean Chrétien: Mr. Chairman, I want to say that it was not the hon. member whom I heard make that statement, but I have heard it a number of times from members of the opposition.


Sinclair McKnight Stevens: Thank you for that clarification, Mr. Chairman. Could we shift, then, from the indexing of income tax to the question of inflation in relation to capital gains? It is a self-evident fact that if you have invested $10,000 in capital investment to keep up with inflation, at present you would need, at the end of 12 months, about $10,880 just to stand still as far as your capital assets are concerned. However, with capital gains tax, if you liquidate you are deemed to have made $880, which is simply an inflationary increment, and you are taxed with respect to 50 per cent of that. My question to the minister is whether the government has been giving any consideration to some type of an indexing formula which
Income Tax Act
would ensure that gains on capital items which are offsetting inflationary gains should not, in fact, be taxed.


Joseph Jacques Jean Chrétien: We have received many representations to that effect, and it is apparently an extremely difficult technical problem to resolve. You are talking about the capital gain of a person who is not, in fact, making that much of a capital gain because of inflation. He might have to pay as much as 25 per cent cent, for at least half of his rate. We are considering the problem, but we do not have any intention at this time of changing the present system.


Sinclair McKnight Stevens: There are two points that I would like to raise, Mr. Chairman. The minister has been told by his officials, as I noticed, that it is very complicated. I ask the same officials to advise him why it is so complicated. You know what your purchase price is, and we have a consumer price index that could report what, in fact, is the CPI on that date. When you choose a date to sell, surely the index will still be as useful to determine what, in fact, has been the rate of inflation. In short, you simply index each property in accordance with when you purchased it and when you decided to sell. Perhaps I will give the minister an opportunity to reply to that question first.


Joseph Jacques Jean Chrétien: If everything were to be done on a yearly basis and in a very clear fashion as you report your income tax each year, that would be fine. However, you can buy a piece of land and sell it some weeks later. You can buy a share on January 19 and decide to sell it a few days later and calculate the inflation in between, and so on. It is a difficult problem with many, many transactions, and there are millions of transactions.
If all transactions were made in a fixed period, it would be quite possible, and we can do that in terms of fixed income because the salaries are paid and you calculate your income at the end of the year. But there are a lot of transactions that are done in short periods of time, and it is extremely complicated, according to the experts who look into that. However, I have listened to the representations of the hon. member, and we have received other representations to that effect, but we have come to the conclusion that it would not be appropriate to do that at this time.


Sinclair McKnight Stevens: Mr. Chairman, again to the minister. I am wondering if the minister would agree that, in the example I gave of a person who has bought capital items amounting to $10,000 a year ago and, sells them for $10,880, he is simply selling them, in constant dollars, at exactly the same price he paid for them initially. Would the minister not agree that any tax on that increment of $880 is confiscation of a man's capital goods? It does not matter if you tax 50 per cent of it, or 10 per cent; the fact is that in real dollars, expressed as 1976 dollars, the man has made no gain, yet the federal treasury is deeming a gain to have been made and is taxing him. Is that not confiscation?


Joseph Jacques Jean Chrétien: If one wants to debate the principle of taxation, I have met people who claim that all taxes are confiscation. You can argue that forever. When income tax

November 25, 1977
Income Tax Act
was first started, people could have argued that any taxes are confiscation. I feel taxes are a way to operate a modern economy, and all taxes are creating a burden on some people. In fact, rather than a gain, you would have a loss because you would know when you bought the shares that you needed to make enough money to cover the taxes on their sale. He knew, when he bought the shares, that he needed to make enough money because there was a tax to pay, and he had a loss rather than a gain; that is all.


Sinclair McKnight Stevens: I would think the minister would agree that there is a very clear distinction between the example I am giving and the general feeling that any tax revenue you have to contribute is confiscation. In the example I have given, if we were to take it in a series the man, in fact, would have no money left after simply buying and selling an asset. He tried to keep up with inflation but constantly was taxed.
We could work it out, but certainly if you did for 15 or 20 years what I have indicated, buying $1,000 and selling it at a value just enough to equal your current inflation, and then rebuying but paying the tax in the meantime, you would virtually have no assets left. I think the insidious thing about this type of tax is the fact that it is confiscation of capital at the very time this nation needs huge capital investment in order to create the jobs we need for those who are out of work. In that sense, would the minister agree that there is a clear distinction when we are dealing with the possible confiscation of capital and the growth of capital compared with other taxation?


Joseph Jacques Jean Chrétien: We could go inio a long debate on the philosophical implications of taxation, and so forth. We decided to tax capital gains some years ago. It was somewhat controversial, but we decided that because it was a capital gain we would tax it at only half the rate because there is an element of risk. The hon. member knows that because of this risk we decided not to consider it normal income. The hon. member will remember the proposition in the Carter report that a buck is a buck whether it is earned by capital or as part of a salary.
However, we decided that because there was an element of risk we would tax at half the rate, and that is part of the gain. We know that in some cases a case can be made, just as the hon. member is making a case now. I explained earlier the complexity of trying to be just in every situation. So far we have not found the formula. There are some aspects of the argument of the hon. member which are valid; I have to concede that. There are some problems with these tax changes.
Every time we try to be nice to everybody, we make it so complicated that taxpayers do not understand how to deal with their tax forms, and in this case a problem which already exists will be further complicated. I recognize that there is a problem, but this matter involves risk. If people get just the equivalent of inflation, there has to be a reconciliation because of the tax system in Canada. In this situation, people did not

break even; they suffered losses. That is why we made an allocation for losses in the tax system.


Sinclair McKnight Stevens: Mr. Chairman-


Gérald Laniel: Order, please. The hon. member has had more than 20 minutes of questions and answers. I must see another hon. member, but I will come back to the hon. member for York-Simcoe later.


Max Saltsman: Mr. Chairman, I listened to this exchange with great interest. It is a very important exchange. I very much agreed with the hon. member for York-Simcoe when he talked about the danger of capital losses. Because I am always willing to be very helpful to both sides of this House-the minister has indicated how complex the whole thing is and that he is looking for a simplified and just way, which he has not found-I think there is a just and simple way. It is the way the Carter commission suggested.
The hon. member for York-Simcoe has a good argument about the effect of inflation on capital, and surely it should not be the purpose of a tax system, in our present philosophy, to wipe out the actual capital of a person. The answer should have been obvious. I think it is very simple, and I hope the hon. member for York-Simcoe will agree. Then we could go arm in arm to the Minister of Finance since he seems to be amenable to suggestions and to simplifying things. We might, in fact, get the taxation system changed along this line.
I would like to suggest to the hon. member for York-Simcoe that we agree to a full capital gains tax which is indexed for inflation. That is very, very simple. Capital gains could be taxed at the same rate as ordinary income, with indexation for inflation, which would retain the value of the capital. It seems to me that that would simplify the whole tax system. We could then go on from there.
I really need to hear from the hon. member for York-Simcoe whether he agrees with that kind of proposal. Justice would be done, because if we tax capital gains at their full value we get around this whole business of arguing whether it should be one-quarter, one-half or one-third, and then we assure those who do have capital that there will be no loss of their assets as a result of inflation.
I would be generous even to the point of saying that if it is bought and sold at different times of the year, it should be taken to the nearest year, allowing the benefit of that particular year's indexing, rather than the other way around. That seems to be a very simple proposition to which all of us might perhaps agree. That would restore the element of justice Carter was talking about in his report, that all income should be treated the same. I must say that my suggestion does not seem to be greeted with any wild enthusisasm. I thought it was a very good suggestion. I thought I was trying to be very helpful. Oh, I see I have the support of the hon. member for Winnipeg North Centre.


Mr. Woolliams:: First time he has ever agreed with you.
November 25, 1977


Max Saltsman: Not really. He has agreed with me on many occasions, and I value his judgment highly. I am glad to get endorsation from such an august authority.
Mr. Chairman, I do not expect we are going to get agreement on that, but since the question of indexing has been raised, I want to say something about that and leave it to the minister to comment. As the minister says, we can say good things and bad things about indexing. I just proposed one kind of indexing which I think is a very valid kind of indexing because it is a guarantee of indexing on capital. However, other kinds of indexing are equally valid. I certainly support the indexing of family allowances and old age pensions. I think that is important, particularly because we are dealing with people who do not have a way of recouping any losses from inflation in the way that most people who are in the labour market have some ability to do that. Because they are universal things, therefore everybody benefits to the same extent.
The minister has made some arguments for the indexing of income tax. He has also made some arguments against it. 1 have an argument which is very much against it, in the light of experience. I believe many of my colleagues supported the notion of indexing income tax as a way of ensuring some offset against inflation. I think the assumption was that our income tax system would be getting more and more progressive, and therefore indexing would not have the effect we now see it to have.
One of the consequences of indexing the minister has not dealt with is that it tends to help those in higher income brackets to a greater extent than those in lower income brackets, because of the percentage application that is made, which means that that element of social and economic policy is removed from debate. I think to that extent indexing has resulted in making our whole tax system more regressive than it need be. For that reason, I would be inclined to agree that indexing of the tax system has outlived its usefulness. The idea of visibility is terribly important, to this extent: we live in a society where there is hardly anyone who does not have a grievance. Everybody thinks he is hard done by. All these automatic benefits are built in, and while there is something to be said for them, they are not as visible as they should be.
It seems to me that if we are to understand our system somewhat better than we do now, more and more of the benefits that have been built in and taken for granted should be visible. This has certainly been the argument of my party on the tax system, and it will be the argument we put forward as this debate progresses. I am not putting this to the minister in the form of a question, because he has dealt with it- although, of course, if he cares to comment, he is free to do so. Instead, I intend to go into the clause by clause examination that we are prepared for.
Before doing that, however, I should like to bring to the attention of the minister something that I propose to use in the clause by clause examination. I was fortunate enough to receive a series of critiques of the clauses from Professor Neil
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Brooks of York University, prepared by his students at Osgoode Hall Law School. The letter states in part:
In particular, I would be very interested in your view on how such comments might be presented to be of more use to you and other MPs. I hope to have the students prepare comments on all future tax bills. Indeed in future semesters, we will be devoting more time to such a project. This semester we are doing as well another major project on tax reform.
It strikes me that this is an excellent idea. While these students may not be as expert as the minister's advisers, they are working in this field in a very serious manner. Because they can concentrate on each clause, they can provide some excellent advice and at least a different point of view. I have not answered the letter yet, but in a way I am answering it publicly. Not only do I feel that this critique will be of great help to me and other members, but I think the practice should continue. If any member would like a copy, it will be available. I do not intend to clutch it to my bosom or to keep it for my colleagues alone. I presume Professor Brooks intended it should be available to any member who chooses to use the information prepared in this way.
Not only will I be answering Professor Brooks by what I am doing, and stating my views on the critique, but the students will be able to see it in perhaps better from in Hansard. In that way, they will be able to see the extent to which their work has been used in this House. Personally, I am very grateful for the interest shown by this class at Osgoode Hall, and I intend to read into the record and base questions upon some of the studies conducted by the students. I use that as a preamble, Mr. Chairman, lest someone thinks this esoteric knowledge comes out of my own head and that the great and valuable research was done in my office.
Regarding clause 1, the paper notes as follows:
1.	The policy reason for not allowing individuals to offset allowable capital losses against ordinary income is sound. Capital gains are only taxed when realized. Thus, it would be possible for an individual to time his capital gains and losses to minimize tax. For example, he could realize his gains in years of low income and his losses in years of high income. To prevent this timing of gains and losses, capital losses are generally only deductible from capital gains.
2.	Two reasons can be suggested for the creation of the "$1,000 rule" which allows a partial offset of capital losses against other income.
(a)	It tends to decrease the down-side risk when investing in capital property. The purchaser of stocks, for example, is afforded some relief from a loss because he can deduct it to some extent from other income.
(b)	It provides some relief for taxpayers with little capital property; i.e. the person who might suffer a capital loss yet never incur a capital gains against which to offset the loss.
3.	Do present conditions justify increasing the capital loss offset figure?
(a) Consonant with the proposed aims outlined in the budget speech (p. 12), the Liberal government is attempting to increase purchases in the equity market by offering the average Canadian investment incentives by way of a larger write-off of capital losses against ordinary income. Tables found in the budget supplementary papers (p. 4) show that $45 million will be lost by the government in the first year of the provision's enactment, with an additional $5 million forfeited in 1978.
While the government has calculated the costs of implementation, it has no idea of the increased investment which the measure is supposed to stimulate or the extent to which it will encourage people to further bunch their losses in order to gain the benefit of the write-off. If this be the justification for increasing the amount of the offset, the government should have determined whether a sufficient increase in equity investment would take place in order to justify a loss of $45 million.

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(b) For the last few years, inflation has eaten away at the value of the dollar.
Consequently, losses of $1,000 Five years ago are losses of a greater amount
today. The capital loss offset may have been doubled in order to combat
inflation. A prudent and more logical alternative would have been simply to
index the present sum by the present rate of inflation.
4.	Even though it may appear arbitrary, the figure of $2,000 was not chosen at random. In increasing the amount permitted for capital loss offset, the Liberal government has followed the lead of the United States once more, having previously borrowed the "$1,000 rule" from the IRS Code. The Tax Reform Bill of 1976 provides for the increase of the capital loss offset figure to $2,000 in 1977 and $3,000 in 1978 and subsequent years. Based on the government's past method of choosing its figure for capital loss offset and its failure to conduct a cost-benefit analysis as to the merits of the proposal, it is surprising that the proposed changes do not advocate the institution of a "$3,000 rule" in 1978.
The question that arises is a very straightforward one of cost benefit. According to the best figures we have, it will result in a $45 million revenue loss to the government. In order to justify this kind of loss, we need to know if studies have been carried out and alternatives examined. For example, would $45 million be better invested directly in incentives to industry, in regional development, in direct job creation, or in public works, than in what has become a sort of traditional way when the government tries to stimulate employment by spreading money around without knowing the consequences of the spread?
If past experience is any guide, when incentives are offered to industry through the tax system and in other ways, increased investment in jobs will not necessarily result. My specific question to the minister, therefore, is whether studies have been made to determine alternate means of spending that $45 million to see if more jobs could be created or more equity created in some other way.


Joseph Jacques Jean Chrétien: Mr. Chairman, I cannot give a specific answer about particular studies, and so on. This is the collective judgment of the administration, and the money is needed in the economy at this time to stimulate risk investment. We must induce Canadians to put more money into risk ventures because we believe jobs cannot all be created by the public sector. The private sector is the one that creates the most jobs.
In giving that added incentive, we are very confident that a number of Canadians will want to channel their money into risk-buying rather than purchasing bonds, having a completely secure investment, which was the thing to do. We are confident of that. We have received many representations to the effect that we should give more incentive to the people so they can make that kind of investment, which is exactly the same proposition which my predecessor, the hon. member for Rose-dale, made to the House of Commons.


Max Saltsman: A little while ago the minister made a statement outside of the House, saying that Canadians may be saving too much and the consequences of that may not be good for the economy. The minister agreed he made that statement and he is concerned about that matter. This need to grant additional benefits to investors in the stock market is bothersome and arises as a direct result of the government's policy to encourage savings and to provide benefits for those who put

their money into bonds and into registered retirement savings plans-in the very sort of safe instruments he is now worried about.
Having now created the Frankenstein of encouraging savings in the safe sector, in the sector that has virtually no risk, he finds that by encouraging people to put money into the safe sector, then you have to find some way of giving them more if they go into the unsafe sector, the risky sector. Rather than recognizing where the problem is at its source, he has overencouraged savings and money into the safe sector. He simply says we now have to offset it by giving more benefits than we perhaps wanted to give in order to encourage people to begin to take risks again.
I do not disagree with the minister, Mr. Chairman, that we are living in a society which, certainly for the foreseeable future, will be dependent on the private sector for providing jobs. Anything we can do which would be effective-I emphasize the word "effective"-to provide those jobs is something my colleagues would certainly agree to. This is the problem. Why, in the minister's view, is it-and I am not quarrelling with him-that those who take risks should in some way be somewhat encouraged to take risks; because even if we lived another kind of society, risk-taking would still be necessary.
If the private sector does not do it, governments have to do it. Governments have to take risks in the sense of the public works they engage in. There are no guarantees that even the public works are going to be free of risks. The question I would like the minister to answer is this. Instead of building on this silly superstructure which the government has created by encouraging safe savings to a point where savings have become, perhaps, the most serious problem in our society in terms of trying to get economic development which encourages consumption, why would the minister not back off from some of the safe savings proposals that he brought in? In that way he would not have to be faced with this business of giving away $45 million in order to hopefully, encourage people to take additional risks, and there is no evidence that it will in fact happen.


Joseph Jacques Jean Chrétien: Would you kindly repeat the question for me, please?


Max Saltsman: I just want to make the point that we have demonstrated the utility of parliamentary assistants: they pay more attention to the debate than the minister does. I realize the minister is sitting with a most interesting former minister of finance who has heard my voice before and perhaps can anticipate some of the questions I am raising. My question is this: Rather than increase the benefits and lose the $45 million that is going to be lost in the tax system, through this particular measure in clause 1, to encourage people to take risks, why did he not reduce the incentive to save which, on his own analysis, is one of the problems?
Why did he not reduce those incentives? In that way the differential between the rewards for risk-taking and for those who do not take risks would have continued. Why did he not do it the other way, rather than give away this amount of
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money and still continue a system which has demonstrated that it is resulting in too much savings?


Joseph Jacques Jean Chrétien: I am learning a little listening to the hon. member, but I am learning much more by listening to the former minister of finance, my good colleague from Eglinton who has been an extremely useful member of this House. I will not apologize, because he was giving me some good advice.


Some hon. Members:: Hear, hear!


Joseph Jacques Jean Chrétien: To answer your question, we are talking about two different things. It is a question of judgment. We have decided to go along with this system of changing the amount of money that can be deducted from income, from losses, in order to stimulate the economy. That is the direction we have chosen. The incentive for savings is a completely different problem. Some people are saving too much, but that does not mean that we should not save as a nation. We should not be confused there.
As I said the other day, some people should start to spend some of their money because savings have been very high for the last three years. For some people we have special programs of savings; for example, the people who are saving for retirement purposes. I think this is a natural thing to do. We have another scheme, the home ownership desired by the young people. They eventually want to own their own home. That is a form of savings to be kept. This is our judgment. I can see the frustration of the hon. member, because he is from the NDP and he knows that he will never have to make those judgments.


An hon. Member:: You never know.


Eldon Mattison Woolliams: I heard that once in Saskatchewan.


Gérald Laniel: Order, please. I must interupt the hon. member because he has had more than his allotted 20 minutes. I will return to him after I have recognized another member. The hon. member for Calgary North.


Eldon Mattison Woolliams: I am quite prepared to consent, Mr. Chairman.


Gérald Laniel: 1 have no objection. I saw the hon. member for Calgary North rise a few times and I was ready to recognize him, but nothing prevents me from allowing the hon. member for Waterloo-Cambridge to pursue his questioning if no other member rises in between each question.


Max Saltsman: Thank you, Mr. Chairman. 1 appreciate the generosity of the hon. member. I was going to say that normally I appreciate the comments of the minister, but in this case I did not appreciate them at all. With respect to the comment about the NDP, I would rather be here in the opposition, without the opportunity he has, than be held responsible for the kind of mess that his government has got this country into.


Some hon. Members:: Hear, hear!


An hon. Member:: It could be worse.
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Max Saltsman: I do not see how it could be worse. You would have to stay up nights to try to figure out how to wreck an economy the way this government has. It is quite obvious what is happening. The minister talks about different problems. They are not different problems. He talks about it being our judgment. In face of the fact that your judgment has been pretty awful, is it not about time you changed your judgment or changed the people who are advising you? This really should be obvious to the minister, if it is not obvious to anyone else. I certainly think it is obvious to many people.
There are other comments I could make. I appreciate the generosity of the committee in giving me this time. 1 do not normally like to participate in this kind of personal banter. However, the minister does not have much of a stand from which he can point his finger at other people and be critical of their behaviour.


Joseph Jacques Jean Chrétien: Mr. Chairman, I do not want to engage in a political debate, but I cannot let that go. There are too many people who take pleasure in saying how bad things are in Canada. Of course, we have not been perfect as a government. We do not claim that. However, look at the programs which have been introduced in the past 15 years. Since I came to this House, many social programs have been put into effect in Canada, to the point that the hon. member sometimes claims-


Max Saltsman: It was the effectiveness of the NDP in the minority government.


Joseph Jacques Jean Chrétien: Having served in this House for the past 15 years, I am proud of the progress that has been made in spite of the gloom and doom we have heard from the other side for all those years.


Eldon Mattison Woolliams: Mr. Chairman, we are sitting as a committee of the whole House, as was done under the former rules. This is done particularly on tax measures. I want to discuss capital gains, particularly as they affect small business people, smallholders in the cities, the farmers and the oil and gas industry. Before discussing capital gains, there is something else I have to say. The job of the tax collectors in the Department of National Revenue is very difficult. Very often these people are seeking information. They must take certain steps in order to keep their records in shape, and must ensure that taxpayers pay their proper and equitable share of tax.
Through my associations as a lawyer, I have dealt with many people in the Department of National Revenue. I wish to compliment them. They do not have an easy job. The personnel in the city of Calgary are always polite, courteous and helpful. If there is some difficulty or dispute as to the interpretation of the act or the value of a property, they will sit down with the taxpayer and work it out in a proper, compromising way. I want to pay that compliment because too often the personnel in the department are criticized. It is in the every day

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working with citizens that the goodwill has built up in my city. I can only speak of my home city.
I also want to discuss capital gains. I say this nicely, even to my good friends in the NDP. I know we take the same position when the government gets into serious economic trouble and there is unemployment. We were the government of this country in the thirties when there was a world depression. We also had difficulty during the years of the right hon. member for Prince Albert. It is not always easy to come to the right decision. When you hear people talk about raising more taxes for grandiose things, you should remember who brought in capital gains. Edgar Benson and Pat Mahoney of Calgary- and he was defeated for this reason-piloted through this House, for the first time, a capital gains tax. I raised my voice against it.
One of the causes of economic destruction and distress in this country is that 50 per cent of capital gains is added to the top of your income, like the icing on the cake. If you are in the 30 per cent or 40 per cent bracket, you are put into another bracket. Capital gains are treated like any other income. We heard in this morning's question period that there is a lot less unemployment in the United States. I have relatives living in that country. In fact, my sister lives in San Francisco. I figured out what my tax would have been last year had I lived in the United States. It would have been 30 per cent to 40 per cent less on capital gains. That is because in Canada it is added on the top of your income.
In the United States you can go to the department to find out what your tax will be. It is a set tax of 25 per cent, with some rules and regulations for different kinds of property. If we had a reasonable and equitable capital gains tax, it would help the businessmen, the factories, the farmers and the oil and gas industry. We would not have such a high rate of unemployment in Newfoundland. It would help the people there.


André Ouellet: It would help the member from Calgary.


Eldon Mattison Woolliams: I appreciate your humour, but this is too serious a matter for nonsense. Coming back to capital gains, in addition to helping those people it would create jobs. There would be increased exploration and development in oil and gas. The farmer in Ontario would have more money to purchase machinery. More jobs would be available in the factories of Ontario. People could buy more consumer goods such as cars, refrigerators and farm machinery. By taking it off the top, you crush the capital flow. That is what has brought about economic collapse and chaos in this country. I refer to the bill brought in and piloted by Mr. Benson. The treasury benches today are reaping the sins of the Trudeau government of 1968, 1969 and 1970.
Supposing a person who owns a small plot of land wants to sell that land. He must go back to "V" day, valuation day. The difference between that and what the department determines to be the value on the day of the sale is the amount on which you pay tax. You go to the land titles office to get a certified copy of the transfer, to show the valuation. Along comes the

department and says that their appraiser has a different figure. Therefore, you must hire an appraiser. I was told by one tax department official-I will not name the area-that the government spent $16,000 for an appraiser in order to try to collect $3,000 more tax.


Gérald Laniel: Order, please. It being one o'clock, I do now leave the chair until two o'clock.
At one o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 2 p.m.
Gérald Laniel: Order. When the committee rose at one o'clock, clause 1 of Bill C-11 was under consideration and the hon. member for Calgary North had the floor.


Eldon Mattison Woolliams: Mr. Chairman, just before the lunch hour I was dealing with capital gains. I want to bring to the attention of this committee that when the Income Tax Act was changed in the days of Benson and Pat Mahoney from Calgary South, my home city, who was defeated on the bill, I thought the government had acted with some wisdom in abolishing succession duties and death duties. But the government went on to implement a capital gains tax, and this tax differs from similar taxes in other western nations. Under our law, capital gains are treated in the same way as other income. So whatever one's salary or income is, if a small businessman, say, sells a little piece of property and there is a capital gain, 50 per cent of that gain is taxable at the same rate as his income is taxed.
I was saying before lunch that there is a capital gains tax in the United States, which we must remember is an older industrial nation than ours. At the time the government introduced the capital gains tax, I said it would stop exploration for gas and oil. I also said it would affect the small businessman and the farmer. If you add all that together, Mr. Chairman, the growth of the country itself is affected, and without growth you have unemployment. If you inhibit capital flow-income flow, as it were-how can small businessmen, farmers or manufacturers grow, and how can oil and gas corporations conduct exploration for gas and oil and develop their business? When you stop growth because of overtaxed enterprises on the part of government, you bring about no growth and, as I say, no growth creates unemployment.
On the day that this voluminous bill which changed the income tax structure of this nation received royal assent, growth in this nation, whether growth of industry, farming operations or oil and gas or mining companies, started to decline. With that decline in growth, unemployment increased. This is where I fall out with my good friends, the members of the New Democratic Party. They always say that we must have a high capital gains tax; but once we have a tax structure like the one we have today in Canada, we might as well go all
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the way and have the state own everything, because it really amounts to that.
I want to deal with how this tax affects the small businessman. Take the case of the little corner store. A businessman buys such a store, the lot, the stock and equipment, and so on. Then after spending 13 or 14 hours a day in that store for seven or eight years, with his wife assisting him, too, he feels that he should retire because he has worked hard. When he puts his business up for sale, the lot has increased in price and he has to pay tax on 50 per cent of the capital gain that he makes on the lot, in addition to his income tax. In other words, progressive tax is not only progressive with regard to income; it is also progressive with regard to capital gains.
In the United States, the tax is fixed at 25 per cent; it cannot go higher. In this country, you do not have to make much money to get into the 50 per cent to 60 per cent bracket. A 50 per cent to 60 per cent tax on a capital gain, with inflation today, takes away the savings of a small grocer. This is why we must have an increase in pensions. You cannot have it both ways.
Now let me talk about another factor I mentioned before lunch. The owner of a small store says that in January, 1972, his land was worth $10,000. Perhaps if he sells it now it will be worth $15,000. Perhaps he obtains the transfer of a similar property close by. This might happen in any part of the country. The department might very well not accept that valuation and will hire its own appraiser to appraise the property. The department can do this, because money is no obstacle. The department will often spend $16,000 in order to collect $4,000 in taxes. When the taxpayer goes to the tax department, he is told that the department has an appraiser's report which indicates a certain value. The taxpayer might not agree with that value, and is told by the department to hire his own appraiser. If he does, he may be stuck with the cost, perhaps amounting to $1,000 or $1,600. Even if he wins the battle, he has to pay that amount.
Let me now talk about the situation in which farmers on the prairies find themselves. If a farmer sells his land, or rolls it over to his son-and we can thank the hon. member for Halifax for this legislation which was brought in when he was the national leader of this party-the land passes from the father to the son, or even to the grandson, and that tax is deferred. However, it has to be paid some day, by the last survivor, when the land is sold.
However, when we changed the rules the situation became entirely different. Perhaps a farmer would form a small personal company or corporation which included his son and his wife. Following that, he might decide to retire or sell his shares. The situation would not be the same as selling the land to his son, and the rule of rolling over the land from father to son would not apply. The individual had set up a corporation before the tax law came in; but what the governments have done-and I am speaking of them in the plural-is change the rules in midstream, and they then wonder why business is
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disrupted and there is little growth. They ask why there is unemployment. I suggest this is one good reason for unemployment.
Let me put the point in another way. If the farmer formed a small personal corporation before the change, it would meet the rules, making it much easier to transfer shares in the land, and at a savings on the death of the farmer. That is the situation if the corporation was formed before the tax change. If he should now liquidate his corporation and pass the land on, he must pay the capital gains tax. What manner of nonsense is this? This is the government which brought that law into being. As the member for Calgary North, I spoke for days criticizing the action of this government, but they just laughed it off, said my criticism meant nothing and rammed the legislation through. That is why the hon. member for Edmonton Centre took the tax bill, tore it in half and threw it on the floor, saying, "This is what you have done to Canada". I remember the night when the tax measures were rammed through by closure. I wish the members of this government would cross the country and talk to the people at the grass roots, to find out what they think about our income tax laws and how they are treated as taxpayers.
Let me discuss another industry which is dear to the heart of all Calgarians and Edmontonians, because practically every job in the cities of Calgary and Edmonton is based directly or indirectly on agriculture or on oil and gas. It was not by accident that the government of Alberta discovered oil and gas there. Premier Manning had a fine government: I have always said that. He encouraged capital investment on the part of foreign companies, giving them a chance to make a dollar on their investment.
I think Imperial Oil drilled 90 dry holes in Alberta before striking oil. I wonder how many here know what it cost to drill a well even back in those days. I suggest it cost about $600,000 then and about $1.6 million now. While that was taking place, drilling rigs were pulling out of Saskatchewan from all over because of that province's tax structure. That government believed in socialism, whereas the Alberta government believed in business and enterprise. Therein lies the difference.
We are now facing a very serious situation when dealing with capital gains and business taxes. Let me refer to the judgment handed down recently in the case of Canadian Industrial Gas and Oil Limited v. The Government of Saskatchewan. When the world price of oil went up, the Saskatchewan government said the price had to be maintained at $4.50 per barrel. It demanded that any increase would go entirely to the government no matter what happened to the cost of production. I think this recent judgment of the Supreme Court of Canada is one of the most important to be handed down in recent years. It will affect not only that province but the province of Ontario, where nickel is exported, and any other province which exports products such as oil, gas, wheat, or what have you. Let me read a short extract from this judgment as follows:
It is contended that both the mineral income tax and the royalty surcharge constitute indirect taxation, and are therefore beyond the power of the province
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to impose, the provincial legislative powers being limited to direct taxation within the province under subs. 92(2) of the British North America Act.
It is contended that the legislation relates to the regulation of interprovincial and international trade and commerce, a matter over which the federal parliament has exclusive legislative power-
This legislation will have serious ramifications in eastern Canada because of exportation. With this kind of taxation and law, what will happen to growth in this vigorous nation? Because of the serious ramifications of this decision in respect of provincial control of resources, and particularly in view of the thin strings of confederation, I would ask the Minister of Justice and the Prime Minister to bring the provinces together to discuss this matter and find a solution once and for all. Let me say to the people in the east that although they may think this only relates to oil and gas, it relates to all exported products.
Let us consider the nickel industry. This is a commodity that is exported. The tax will be applied in that case. People are wondering why mining companies are closing down and why there are so many lay-offs. They wonder why the companies are struggling to keep the mines open. My friends to the left have been talking about unemployment and lay-offs in the mines, and quite rightly so. 1 suggest that this situation is the result of the tax structure in this country. Because of this tax structure, these mines cannot make a profit. The government keeps trying to get the last dollar possible from these companies in the form of taxes, forcing the companies to close because they can no longer make a profit. This results in unemployment. It is a vicious circle.
This country's tax laws should be the subject of immediate review. It is almost impossible to think we can have so much unemployment in a country so rich in resources of all kinds. I suggest this is the only country in the world which until the last few years had problems only in relation to surpluses. Let us consider the situation in countries which have shortages. This country has a surplus of resources, many of them still waiting to be tapped and developed. As an hon. member from Newfoundland said today, that is a province with great resources waiting to be tapped, yet business is struggling to stay alive because of government taxes, including capital gains and high, progressive rates. Business just cannot be done in these circumstances and there is bound to be unemployment.
We have a monstrous tax structure in this country that is stifling growth, killing industry, creating unemployment, economic chaos and other problems which Canada faces today. This government should get together a strong committee made up of businessmen, union leaders and others across the nation to study the tax structure. I am sure such a committee would find that overtaxation is responsible for most of the economic ills of the nation. Let such a committee get on with the job of reviewing the tax structure, instead of the government always trying to figure out how to get the last dollar from the people of Canada. If the government continues with that approach, we will never have full growth or full employment. I see that my time has expired. Thank you very much, Mr. Chairman.
[Mr. Woolliams.l


James Aloysius McGrath: Mr. Chairman, I should like to take a few moments to address myself to the consequences that flow from the tax policies of this government, whether by way of tax incentives, capital gains tax, industrial incentives or any other kind of incentive under the Regional Development Incentives Act. The fact of the matter is that we have to create a climate in this country to develop the vast undeveloped resources of Canada as a first priority toward tackling what has to be the first priority, namely, unemployment.
Today, in the Atlantic provinces, there is an unemployment rate which exceeds that which is faced by industrial states elsewhere in the western world. The figures speak for themselves. For October, 1977, the unemployment rate in Newfoundland was 17.4 per cent, which is a substantial increase from last year. Still referring to October, 1977, the unemployment rate in New Brunswick was 14.6 per cent; in Nova Scotia, 10.7 per cent; and in Prince Edward Island, 11.2 per cent. For the Atlantic region as a whole, the unemployment rate was 13.5 per cent. Those figures do not tell the true story. They are seasonally adjusted, which is the strange, indefinable, incomprehensible methodology of Statistics Canada for measuring unemployment.
To arrive at the real rate of unemployment one must look at the number of recipients who are drawing unemployment insurance. One of the first qualifications for unemployment benefits is that the recipient has to be unemployed and available for work. Using the unemployment insurance program, the welfare rolls and the real method of measurement, one can arrive at the real situation.
I should like to refer to some percentages which are underestimates, for the month of October. In the province of Newfoundland the real unemployment rate was 27.6 per cent, or
60.000	people; in the province of Prince Edward Island, it was 20 per cent, or 11,000 people; in the province of Nova Scotia it was 15.5 per cent, or 55,000 people; and in New Brunswick it was 20.7 per cent, or 61,000 people. The real unemployment total for the four provinces during the month of October was
187.000	people. Considering the loss of productivity to this country, the drain on the unemployment insurance fund and the drain on the already overburdened exchequers of those provinces, in terms of what it costs for unemployment insurance benefits, is enormous.
I am glad the Minister of Employment and Immigration is present in the chamber. According to Statistics Canada, 40 per cent of those looking for work in Atlantic Canada as of October, 1977, had been unemployed for longer than three months. I consider that to be monumental. Winter is coming, and the unemployed will be further aggravated. They will go into the winter only to have their unemployment benefits expire. Thus, unemployed workers drawing benefits at the present time will have no alternative but to go through the humiliation of a means test and apply for welfare through their provincial agencies. The greatest potential for social unrest in this country would be in my region.
November 25, 1977

In terms of youth unemployment, again there are startling statistics for the month of October, 1977. In the four Atlantic provinces it was 20.6 per cent, as opposed to 16.7 per cent of unemployed youth a year ago. What has happened in the way of job creation? Using StatCan's figures for October once again, there was last year a net increase in employment of 6,000. However, that 6,000 has to be shown in contrast to the growth in the labour force, which was some 20,000 in the same year. Thus, job creation has lagged behind in the Atlantic region, during the past year, by some 14,000 jobs. Let the Minister of Employment and Immigration reconcile his job creation programs to that fact, notwithstanding that these programs help to alleviate some of the hardships which accrue because of this disastrous situation.
The Prime Minister was in Newfoundland yesterday. It has the highest rate of unemployment in the country, and indeed any state in the western hemisphere. What was the Prime Minister's reaction when he was confronted by an orderly and peaceful demonstration of unemployed? It can only be likened to the petulance of Marie Antoinette when she was faced with a mob in Paris saying, "We have no bread", and she said, "Eat cake". That is what the Prime Minister said, "If you do not want the equalization grants, we will take them back". As one man said during that demonstration yesterday, "We do not want welfare; we want work". That is the case.
The province of Newfoundland has the potential to generate enough jobs for its people. Also, it has enough potential in the way of resources to assist the region and the country as a whole. That province has been blessed with an abundance of natural resources. It is the greatest producer of iron ore in Canada and has contributed substantially to Canada's balance of payments program. Also, Newfoundland is the greatest producer of hydropower, with a substantially undeveloped hydroelectric resource at Churchill Falls. It cannot be developed because the province does not have the financial capacity. Approximately 40 per cent of Quebec's power is generated from Newfoundland. There is enough undeveloped power to satisfy not only the needs of the province of Newfoundland in the foreseeable future but to satisfy the needs, to a large extent, of the energy-hungry Atlantic region as a whole.
What about the power going into Quebec? Today it is going in at approximately three mills. The market rate for that power is approximately 20 mills. If Newfoundland was receiving market prices, it would not have to go to the money markets of the world to cover its current account deficit at the present time.
From time to time we have appealed to the government to exercise its constitutional right, which is its authority under the British North America Act, to build transmission lines to make it possible for Newfoundland's power to get to the Ontario grid. What about the national grid we have heard about for years? It has been just talk. It would take approximately $2 billion to develop the lower Churchill, yet this government has not changed its attitude toward participating in that program over the last two or three years, notwithstanding the toll which has been taken by inflation. The offer of the
Income Tax Act
federal government still stands at about $3 hundred million in terms of development capital to get that vast, undeveloped hydro resource on stream to help this energy-hungry country of ours.
What about the vast potential of our fisheries? Well, the Minister of Finance today, in response to my question, talked about one of the initiatives the government has undertaken with regard to the economy of Newfoundland and the Atlantic provinces with the imposition of the 200-mile limit. Sir, they had to be dragged kicking and screaming to sign that unilateral declaration for a 200-mile limit, and it was only after a number of bilateral agreements had been signed with a number of the countries that have had traditional, historic and treaty rights to the great Pacific and Atlantic Fishing grounds.
Sir, what have we been doing with that resource since we imposed a 200-mile limit? We have been bartering it away and allowing some of the countries of eastern Europe and the Caribbean, Cuba especially, to exploit quotas in certain species because we do not have the capacity at the present time to exploit all of our quotas within the 200-mile limit under our international agreement. So we barter away the unexploited quotas, and in the process we barter away future job opportunities for Canadians in that part of the country. It is done without reference to the province concerned. It is done unilaterally, as so many things are done by this government, without so much as a "by your leave", without so much as a consultation with the province that is to be affected. Of course, the province most affected in my area involving the fisheries near the Atlantic, obviously, is the province of Newfoundland where we are dependent on the fisheries, which is our first and prime resource.
Sir, I can go on to the timber resources in Newfoundland, second only to the vast timber resources of British Columbia, but which remain largely unexploited in the Labrador portion of the province. The potential is there for vast job creation possibilities, yet these timber resources are standing there rotting or being eaten away by various pests. We are a rich province, heavily endowed with mineral resources, hydroelectric resources, fishery resources, timber resources, resources of our people. In all, there are only 500,000 people in the province of Newfoundland.
I had my eyes opened a few years ago when I had occasion to visit Iceland, the independent republic of Iceland, with half the population of Newfoundland yet with so much in common with us. With half our population, they have an economy largely dependent on the same North Atlantic fishery that is so important to us. What have they been able to achieve with the proper exploitation and protection of that resource? Sir, they have been able to achieve full employment and have, probably, the fourth highest standard of living in the world.
Is it any wonder that our people are beginning to wonder about the approach to the concept of confederation by this government, this "rich man, poor man" approach so arrogantly expressed in St. John's yesterday by the Prime Minister?
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November 25, 1977
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We are not content to be looked upon as parasites in confederation. We will not be content to be the recipient of the crumbs off the table of the rich provinces, because we are a rich province. I realize, sir, that we cannot put a price tag on confederation because this country will not survive unless there is a spirit of nationalism within the country.
By the same token, neither will this country survive if any single province within the country is not given the right to develop its full potential, which is one of the essential roles of this government. I worry, Mr. Chairman, about the long-term consequences of unemployment, what it does to all our people, including our young people. The unproductivity represented by the disastrous unemployment figures that are released monthly by Statistics Canada shows no sign of improvement.
We wonder how it is possible for the government of Canada, through its Export Development Corporation, to finance offshore corrugated cardboard plants in the United States, when the Labrador linerboard mill in western Newfoundland is forced to close its doors, putting 2,100 Canadians out of work. And who cares? We wonder about the fluorspar mine in St. Lawrence, Newfoundland, forced to close after 40 years of production during which the Aluminum Company of Canada made vast profits. We do not deny them profits, but they just callously closed their doors and walked way. Why? Because they get the same fluorspar in Mexico, with cheaper labour.
We wonder where our federal government is while this is happening to us. We wonder how a government can boast of a relocation program that sends 50 jobs to Newfoundland, ignores what has happened there in the past two years of industrial lay-offs, and sends 1,500 jobs to Sherbrooke, Quebec. We are not even sure they are going to get there, because of Bill 101. We wonder about these things. That is why I say you cannot put a price tag on confederation. But I can say this, and I say it with certainty: this union will not survive unless each province is given the right to fully develop its own potential within confederation. That, sir, is being denied to us by policies pursued by this government.
I do not resent the billions of dollars that are used to develop the tarsands of Alberta. I could say that in 1932, were it not for the government of Canada, Alberta would have gone under as a bankrupt province. Today, of course, it is hard to concede that rich Alberta was once in a state of bankruptcy and would have gone bankrupt where it not for the Government of Canada-the same situation that happened in my part of the world. Yet they have been allowed the tax incentives, through a world shortage of oil, to develop the potential of fossil fuels which are there and you have the situation in Alberta that you have today.
If we were to have only a small portion of what is going into the development of the Alberta tarsands to develop the vast potential of the lower Churchill River to provide transmission lines in order to get that undeveloped hydroelectric power into energy-hungry Nova Scotia and New Brunswick-and, indeed, part of Ontario, not to mention the potential that exists in the upper New York state-surely that would make just as much sense. Sir, it would make a great deal more sense,
(Mr. McGrath.]
because we have a renewable resource in hydroelectric energy as opposed to a definite resource with which we are dealing in the case of Alberta and the tarsands when we are talking about carbon or fossil fuels.
We wonder about these things, and we wonder how we could have arrived at a point in time when we have a government in this country that is conditioned-and, indeed, would condition the people of Canada-to accept as a fact of life an unemployment rate in one of its provinces that exceeds 27 per cent. This is an unprecedented situation in the history of our province. Long-term unemployment is disastrous in terms of its social consequences. It is disastrous in terms of its potential for unrest and, indeed, it is serving as a catalyst for our people to question whether or not we can afford to continue with the Prime Minister's brand of federalism.
Sir, it is not only Quebec that has a grievance with this government and its brand of federalism. We have only been in this union for 28 years. We brought into it these vast resources. Without us, the 200-mile limit off eastern Canada would be nothing, because 70 per cent of it was in the territorial waters of the Dominion of Newfoundland prior to 1949. We brought with us the rights to the offshore mineral resources because we had sovereignty in 1949.
Again that fact is being questioned by this government. It is a fact which ultimately the courts will have to decide. A country cannot continue with that kind of confrontation politics. A country which allows one of its parts which has great potential and great promise to go underdeveloped, without providing for tax incentives and the investment capital that is so essential to realize the maximum yields from this potentially wealthy province, cannot continue. My time is up, Mr. Chairman.


Stanley Howard Knowles: Mr. Chairman, it was not my intention to intervene until later in this debate, but I am prompted by the tremendous speech which has just been made by the hon. member for St. John's East to say a few words at this time and to support the plea he has made.
I represent a portion of the city of Winnipeg. I come from western Canada, where Newfoundland is a couple thousand miles away, but I want to devote these few words exclusively to support the plea that all parts of this country-and 1 think Newfoundland is the place to start-should share equally in the bounty and the possibilities of life in Canada.
In my view, the hon. member who has just resumed his seat has been talking about one of the most important issues which face this country. As he was speaking, I recalled an occasion quite a few years ago when I happened to be with M. J. Coldwell in the presence of Louis St. Laurent, who was commenting on what he had learned from a trip he had just made across Canada from coast to coast. It was in the early years of Mr. St. Laurent's prime ministership, and in those days, of course, trips from coast to coast were made by train.
November 25, 1977

I remember very well sitting in that small company and hearing the then prime minister say to the rest of us, "We have a great country. It is a wonderful Canada. But we will fail unless we get rid of the terrible regional inequalities." I happen to feel the same way about inequalities among individuals. I have spent most of my time in the years I have been here trying to correct those inequalities by pursuing social security measures, but parallel with that is the absolute necessity of getting over the notion expressed yesterday by the Prime Minister, and again today by the Minister of Finance, that we just have to take it for granted that some parts of the country are better off than others and that some have more natural resources than others.
The Prime Minister says that is what confederation is all about, the rich and the poor somehow getting along together. 1 think Prime Minister Louis St. Laurent was right when he said 25 years or more ago that we would have to do something about the regional inequalities in this country or Canada would not hold together.
Therefore, I want to give the endorsation of my voice, as that of a westerner, to the plea which has been made for a much better approach to the problems In Newfoundland than was demonstrated there yesterday by the Prime Minister and today by the Minister of Finance.
These issues are serious. National unity is an important issue, but it is not just between the rest of Canada and the province of Quebec. It is not over just language and those issues. It is primarily over economic issues. If we go on accepting, as a matter of course and as a matter of what we have to live with, forever these gross inequalities, the country will not be the one of which we could be so proud.
So I join with the previous speaker in calling for those policies in terms of taxation, employment, regional concerns and distribution of wealth which would give Canadians in all parts of Canada an equal opportunity. I congratulate the hon. member for St. John's East for the speech he has just made.


Some hon. Members:: Hear, hear!


Sinclair McKnight Stevens: Mr. Chairman, I have a few more questions for the minister. I hope he is still with us somewhere. I come back to the line of questioning I was pursuing earlier. In answer to one of my questions, the minister made the point that there is an accrual, prices go up and the tax is on the capital gain portion of whatever the person has first of all bought and then sold.
I want to take the minister up on that comment. I wonder if he can indicate to what extent the imposition of the capital gains tax has, in itself, been inflationary. I am referring to the fact that people are now holding capital items-let us say a piece of real estate-and one of the things which is calculated is what the capital gains tax is gong to be if they sell. They automatically increase the price in anticipation of what they feel is a fair net to themselves, and the net result is that the tax revenue we are referring to as being something the federal government is very appreciative of is really being added to the value of real estate when it is sold, which in turn increases
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tremendously the inflation factor which we have experienced as far as real estate is concerned. Can the minister indicate to what extent any of his department's work has substantiated what I am saying?


Joseph Jacques Jean Chrétien: I do not agree at all with the hon. member, because in a market economy the market decides. If a person values his land higher because he anticipates some capital gains tax, the market will not bear that just for the sake of that. If we were to accept the argument of the hon. member, we would not have any capital gains tax at all-


Walter David Baker: I don't think he said that.


Joseph Jacques Jean Chrétien: -because if the capital gains tax causes inflation, we would not have any capital gains tax. We have decided to have a capital gains tax. 1 heard the hon. member for Calgary North arguing against it a few minutes ago. It is strange that we have not always had a capital gains tax in Canada, because if we want to have a fair tax system we must tax all kinds of gains and not exempt some aspects. I do not share the view of the hon. member that the capital gains tax is a cause of inflation. It is a contribution from citizens who make gains to the service programs we have at this time.
The hon. member could make the same argument about any tax. He could argue that because any tax is a tax, it is inflationary. I think taxation is a system of redistribution of income, and taxes have to come from capital gains just as taxes come from personal gains.


Sinclair McKnight Stevens: Mr. Chairman, may I just follow on what the minister is saying? Frankly, I am rather disturbed to hear his emphasis about revenue because, as I think we are going to bring out fairly clearly later, in terms of the nearly $50 billion of spending the minister is probably going to ask us to accept for fiscal 1979, the total amount of revenue the government gets from the capital gains tax is comparatively small.
However, the main point I want to readdress to the minister is that while the marketplace operates, there have to be buyers and sellers, and sellers today take as one of their considerations the fact that they have to pay a capital gains tax, before they fix prices for their properties. The net result, based on the figure the minister gave us of about $255 million in capital gains tax revenue both at the federal and provincial level, is that that probably means the price of property has been moved up $500 million to $600 million by sellers in anticipation of paying a tax.
I hope it is not lost on the minister that in many instances it is not, in truth, a gain that has been realized. In constant dollars, the so-called gain in the eyes of the federal tax man is simply inflation. I gave the example of someone making a $10,000 investment which is sold for $10,880 after 12 months. In constant dollars, nothing has been gained, yet the investor will be taxed on $440 at whatever his going rate is. This has contributed to inflation in real estate in that prior to selling, people adjust for the tax and ask a higher price. The govern-

November 25, 1977
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ment has put them in the position where if they hold on to the property, in effect they have a tax shelter. The tax is not levied until the property is disposed of, so it can be allowed to accrue.
Whereas an owner at one time would have been quite ready to sell, now he will not be as willing to sell quickly because of the federal or provincial capital gains tax he is liable for-and that, in effect, is confiscation of his property. Does the minister not realize what I have said?


Joseph Jacques Jean Chrétien: Mr. Chairman, as I explained this morning, the capital gains tax is half the rate of normal taxes. The NDP said that the logical thing would have been to impose a 100 per cent tax, but we went for a 50 per cent tax. Now I understand the Tories advocate a policy of no capital gains tax at all. The hon. member said that next year the federal government will need perhaps $50 billion, and that capital gains is inflationary, at the same time arguing it is a very small amount of money, only $250 million. How can he claim that $250 million, out of a budget of $50 billion, puts great pressure on inflation?
There is no capital gains tax on homes. Does the hon. member argue that there has not been inflation in house property because the capital gains tax did not apply to home ownership? I do not understand his argument. When he says that a capital gain is not directly indexed, I should like to reply that it is taxed at half the rate of the income tax, and exemptions apply, so in fact there is a kind of indexation for capital gains because it is added to the revenue and taxed at half level after the deductions, which are increased every year according to inflation. We should not have double indexation for that income.


Sinclair McKnight Stevens: Mr. Chairman, I have been attempting to have a meaningful dialogue with the minister about something that is of great concern to many Canadians, and that is the impact of capital gains tax. This is one of the first opportunities we have had to review the actual figures and to review the rhetoric advanced at the time the capital gains tax was introduced into this House. I wish the minister were less partisan when he feels he is under pressure. I am simply trying to get his view about some of the aspects of capital gains that Canadians are concerned about.
I have never suggested that there should be a capital gains tax on a personal home. I am saying that where there is a capital gains tax, it has had an adverse effect and that people who are considering selling their homes decide to either hold them because of the tax shelter or they bounce the price to a level that will cover the tax which the federal and provincial treasuries will collect. I take it the minister does not have a great deal of concern for that inflationary impact, be it small or large. I simply say that as we reassess the capital gains tax, surely we should at least consider that type of thing.


Joseph Jacques Jean Chrétien: Mr. Chairman, I do not want to have too long a dialogue on that. I should like to point out to the House, however, that if you compare the inflation rates in Canada and in the United States, in the long run, generally speaking, it is the same. The United States has had a capital gains tax since
[Mr. Stevens.)
1913, however, and it does not seem to have impaired their development over the last 64 years. One can argue there is an element of that which could cause a little bit of inflation, and that argument could be made for every tax.
Of course, if there were not to be any tax anywhere, there would perhaps be less inflation. If there is to be no tax at all, of course, then the consequence would be that we would go back to "les cavernes", and I am not ready to go that far back.


Sinclair McKnight Stevens: Mr. Chairman, I find it interesting, the way the minister likes to use figures from the United States when it suits his purpose. He is not so quick to use the inflation figures of the United States in the question period when we point out to him that the current inflation rate there, on an annual basis, was 3.8 per cent in the last three months, compared to 8.8 per cent in this country.
The minister made reference to the point made by the hon. member for Waterloo-Cambridge which I think he took rather out of context. As I understand what our colleague was saying, it was to the effect that there may be more equity instead of this so-called rough justice plan of saying only half the gain will be taken for tax purposes. As I understood the hon. member, he was saying it might be a more equitable approach to say that capital gains would be fully indexed; that the entire capital gain would be taken after indexing. In that sense, the confiscation I spoke of could be avoided where there may be a gain in current dollars, but in constant dollars it is no gain at all. Did the minister fully understand the contrast made by the hon. member for Waterloo-Cambridge?


Joseph Jacques Jean Chrétien: Mr. Chairman, I will take note of that, but the implications are quite serious. If we carry the hon. member's logic to its conclusion, it means we should have 100 per cent capital gains and indexing just as we do with other incomes. In order to achieve that, we would have to raise the taxes on capital gains to 100 per cent and consider the gain just as ordinary income. From there, the system of indexing would apply. I hope the business community in Toronto will react to the suggestion of the hon. member for York-Simcoe.


Sinclair McKnight Stevens: Mr. Chairman, I will let the record speak for itself, but clearly I was not saying what the minister is trying to put into my mouth. It may be of some help to the minister to say that I hope there is no doubt in his mind, or that of any other member, that this party believes capital gains should be indexed before they are taxed. That is our firm policy and we do not have any hesitation in advancing it. We wish the government would accept that type of proposal without fudging the issue.
If I could go back to my questioning before lunch at which time I was interested in the tax revenue received in 1975 with respect to capital gains, both at the federal and the provincial level, perhaps the minister could give us some breakdown as to the over-all capital gain which has been experienced, also the capital losses-in short, a fairly clear picture of what in fact was the experience with regard to capital gains in 1975.
November 25, 1977


Joseph Jacques Jean Chrétien: Mr. Chairman, I would like to clarify the matter of government revenue arising from capital gains tax. In 1975 the total federal and provincial capital gains tax was $255 million; the total federal and provincial gains value was $1370 million; the total federal and provincial taxable capital gain, was $680 million. The ratio of total capital gains tax to total taxable capital gains was 37.5 per cent. The total taxable capital gains of individuals was $405 million; the total taxable capital gains of corporations was $275 million. The federal government share of the total capital gains tax revenue was $190 million, and that of the provinces was $65 million.


Sinclair McKnight Stevens: Thank you. Mr. Chairman, I was wondering if we could get one or two further breakdowns. You have mentioned that $190 million was the total tax as far as federal coffers were concerned. Could you indicate how much of that came from the individual capital gains taxpayers and how much from the corporate taxpayers?


Joseph Jacques Jean Chrétien: It is the federal section?


Sinclair McKnight Stevens: Yes.


Joseph Jacques Jean Chrétien: The federal share is $100 million for individuals and $90 million for corporations.


Walter David Baker: You are right on.


Sinclair McKnight Stevens: Previously I gave the minister's officials the relevant table 18 from taxation's statistics 1977 edition for the taxation year 1975. If I may ask the minister a few questions concerning those tables, which I believe his officials have been able to reconcile with their own figures, and the figures which we were just given, one of the things I would draw the minister's attention to as far as individual capital gains tax payers are concerned-he will note that the total amount of the gain is shown as $1,065 million, and the total amount of the loss is shown as $409 million. That is before we consider the taxable gains or the taxable losses. I am in the second last column. My question is this: if you net those two, it is clear there was roughly something over $600 million of total gains in all categories that are reviewed in the chart.
When we shift to the taxable amount, I find it rather odd that while the taxable gain stays at $476 million, which is a little under the 50 per cent of the billion figure I gave earlier, the loss figure falls off very dramatically to $71 million. The net result is that we find that the taxable capital gain loss position is extremely low compared to the gross loss that is shown, whereas the total capital gains position is relatively what you would expect.
Could the minister indicate what it is that is working within the tax system which allows people so little loss write-off as appears to be reflected in the statistics I have just given?


Joseph Jacques Jean Chrétien: Mr. Chairman, I do not think I am in a position to give that kind of an elaborate technical answer which the hon. member would like to receive from me. These are based on statistics tabled by the Department of National Revenue. I am not in a position, even with my officials here, to
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give that sort of an answer. If the hon. member will look into that, we will make sure the information will be given to him.


Gérald Laniel: I am sorry to interrupt the hon. member for York-Simcoe but his time has expired. The hon. member for Scarborough East.


Mr. O'Connell:: Mr. Chairman, was I hearing properly during the debate, as carried on by the hon. member for York-Simcoe, and in the context of a speech made by the member for St. John's East to which I paid a great deal of attention, and to which I give a great deal of sympathy? I am astonished at what I am hearing from the member for York-Simcoe. Did he not say with respect to minimum wages, not that they should be indexed, but they should be frozen? They are too high! Did he not compare them with the United States' minimum wages and yet then charge the minister of using data comparable with the United States data when it suited his purposes?
With respect to the non-indexation of minimum wages, we are talking of poor people who need some help. He comes and says, if I am correct, with respect to those who have assets, which are making gains and are taxed at only half normal taxation, that this burden should be further eased by indexing their gains. I do not know if that is Tory doctrine; I suspect it is. It is good Tory doctrine to press down the poor even further and then to increase the wealth of the wealthy.


Some hon. Members:: Shame, shame!


Sinclair McKnight Stevens: On a point of order-


Gérald Laniel: The hon. member for York-Simcoe.


Sinclair McKnight Stevens: Mr. Chairman, on a point of order, and just before I direct a few more questions to the hon. minister, I want to assure all members who have been sitting in this committee of the whole session, I do not know where the hon. member has been hearing what he has referred to. We are discussing capital gains tax and the fact is-


Gérald Laniel: Order!


Sinclair McKnight Stevens: If I may finish.


Martin Patrick O'Connell: I did not address my question to you, I addressed my question to the minister.


Gérald Laniel: Order, please. The hon. member for York-Simcoe got up on a point of order. I believe I told him his time had expired.


Sinclair McKnight Stevens: I am referring to my point of order. We are discussing clause 1 of Bill C-ll. I have been addressing my remarks to the question of capital gains, the possible indexing of capital gains. Never in this discussion today have I referred to minimum wages or indexing minimum wages.


Gérald Laniel: Order, please. I believe the same rules apply to committee as to the House. It is not a point of order. The hon. member posed a question. The hon. Minister of Finance.

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Joseph Jacques Jean Chrétien: Mr. Chairman, I have no comment to make. I think that the hon. member for Scarborough East (Mr. O'Connell) is raising a matter of ideology on which he deeply disagrees with the hon. member for York-Simcoe (Mr. Stevens). Of course, I have always been inclined to side with the Liberals rather than with the Progressive Conservatives.


Sinclair McKnight Stevens: Mr. Chairman, if we can come back to clause 1 of Bill C-ll, it deals with this question of capital gains. Up until now persons could only claim $1,000 from capital gains loss against their income. Maybe, in the future, if clause 1 goes through, they will be able to claim $2,000 against their income. It is to that I would like to address my further comments, if I may.
We were dealing specifically with the question of what has been the impact of capital gains as far as tax revenue is concerned and, second, to what extent losses have been net-table against taxable gains. My question to the minister, you will recall, Mr. Chairman, was very simple. When we have the over-all gross figures, we find that the capital losses were $409 million against capital gains of $1,065 million. However, when we find the taxable losses, the losses, while not insignificant, are quite small in the sense that they fall from $409 million in the gross figure to only $71 million, whereas the capital gains that are taxable remain relatively high.
I will accept the minister's word that this is fairly technical to describe why there should be a relatively small loss which is chargeable against your taxable gains. However, I ask the minister if he agrees that this is further evidence of a certain inequity that presently exists in our capital gains process. It is one thing to tax the man who has the gain, but surely it should work that the losses that people are incurring are also to be quite readily chargeable against those gains.
On reflection, I wonder if the minister has any further suggestion as to why there seems to be this sharp fall off from the gross figures compared to the taxable figures with regard to tax losses.


Joseph Jacques Jean Chrétien: Mr. Chairman, I think we can argue over this for a long time. Perhaps I can give the committee an explanation. We have, of course, received a number of representations on this. These representations have suggested that there should be no limit on the deductibility of capital losses. This will not only be costly in terms of revenue, but will permit the reduction of taxes by many taxpayers with a significant investment portfolio, those we call the rich.
Taxpayers could arrange to dispose of those securities on which losses are accrued in order to realize the losses and hold on to those securities which have increased in value. In these circumstances taxable income should be reduced by losses even if the accrued gain exceeds the loss. Therefore if there were no limit on this allowance for capital losses, only those losses in
[The Chairman.]
excess of accrued gains should be deducted. It is a question of tax.

It is necessary, Mr. Chairman, in a system such as ours to tax at a given time the income of all people, even their capital gains. It is a logical thing; otherwise, part of the population would actually be fully exempted from their social obligations as taxpayers, while their taxes allow us, to set up programs designed to effect equalization payments to the poorer provinces, payments which substantially help Newfoundland, for example, or Quebec or New Brunswick, and go to pay old age pensions and so on.
Should we exempt richer people from taxation because they claim that their losses in a specific year are greater than they would wish? Such is the market system and the capitalist system. One must either win or lose. If we were to allow tax deductions every year for losses incurred, I am sure that a great many rich people in this country would use this system to hide a lot of revenues and avoid paying taxes as ordinary people like us pay year in and year out. Therefore rich and poor Canadian alike must put part of their revenues at the service of their fellow citizens through a taxation system. This $2,000 exemption is providing an incentive to take risks but if somebody has taken such risks incurring great losses, it is because he took too many risks and he must therefore pay the consequences. That is why other revenues should not be tax exempt.


Mr. Clermont:: Mr. Chairman-


The Assistant Deputy Chairman:: The hon. member for York-Simcoe (Mr. Stevens).


Gaston Clermont: Mr. Chairman, with all due respect- [English]


Sinclair McKnight Stevens: Mr. Chairman, I have not finished.
[ Translation]


Charles Robert Turner: The hon. member for York-Simcoe (Mr. Stevens) has the floor.


Gaston Clermont: With all due respect, Mr. Chairman, the hon. member for York-Simcoe (Mr. Stevens) has had a good part of the time-


Charles Robert Turner: Order.


Gaston Clermont: Mr. Chairman, the hon. member for York-Simcoe has had the floor a good part of the morning. Does another member not have the same rights?


Charles Robert Turner: Order. The hon. member for Gatineau (Mr. Clermont) has his rights. He will have the floor when the opportunity arises. He has not been able to seize the opportunity after the hon. member for Scarborough East (Mr. O'Connell) closed his remarks. As nobody was rising, I gave the floor to the hon. member for York-Simcoe who is entitled to his twenty minutes.
November 25, 1977


Gaston Clermont: With all due respect, Mr. Chairman, I rose. But a clerk was catching your attention.


Charles Robert Turner: I admit the hon. member rose, but he did so when the hon. member for York-Simcoe had the floor already. I will recognize the hon. member for Gatineau immediately after.


Sinclair McKnight Stevens: Mr. Chairman, the minister has led me exactly into the next line of questioning that 1 want to put to him. He left the impression that somehow this is a tax of the wealthy. That is clearly a misunderstanding on the government side. It is perhaps why the hon. member for York-Scarborough was so anxious in the sense that his point was that he felt it was a tax on the poor. In that sense perhaps he has a much greater point than I had realized.
I direct the minister's attention to the final column of the tax statistics to which I have referred. He will notice that approximately 40 per cent of the capital gains is earned by those with earnings of less than $20,000. Quite a large portion of the gain we are considering here, and out of which they make their revenue, is not from the so-called fat cats but from the average hard working Canadians who are earning something below $20,000.
If you go into the next category, $20,000 to $25,000, you find another 10 per cent. If you go to the $25,000 income level, approximately 50 per cent of the total gain on people who are paying capital gains tax is paid by people who are earning less than $25,000 a year. Forty per cent is paid by those earning under $20,000.
I would like to put this further question to the minister. Is he aware of this? Does he agree that this is a tax that quite significantly falls on relatively low income people in this country?


Joseph Jacques Jean Chrétien: Mr. Chairman, that is exactly the point we are making by increasing this to $2,000. I am told that, generally speaking, those earning less than $20,000 do not derive a great part of their income from investment. We are doubling the exemption for the losses so that these people can benefit from this tax measure that we are proposing. Either we have or do not have an equitable tax system in this country. In order to have an equitable tax system, we decided that we had to do what the United States did in 1913, namely, to have a capital gains tax in Canada.
I remind the committee that, when we introduced the capital gains tax, we got rid of the old system of succession duties at the federal level. We did this because we wanted to permit people at time of death to pass on to their descendants in some easier fashion what they had accumulated in terms of wealth.


Sinclair McKnight Stevens: Mr. Chairman, may I come back to my basic point. With indexing there would really be less of an inequity, bearing in mind that indexing would benefit, to the extent of 50 per cent of those who make a gain, people who earn
Income Tax Act
$25,000 a year or less. The minister says this is why he is raising, to $2,000 instead of $1,000, the privilege to write off a loss against other income.
With all due respect, surely the minister is missing the point. This allows a person who has sustained a loss to write it off against other income, but there are very few people earning less than $20,000 a year who would welcome the prospect of writing off a $2,000 loss. My point is, what about the man who has not made a loss but a gain of the kind to which I have referred? While in terms of current dollars it appears to be a gain, because there is no indexing it is in fact a confiscation of his capital in the sense that he is being taxed on something which in constant dollars is in truth not a gain. It is not a question of allowing him to write off a loss. I am concerned about a person who has made a gain. Fifty per cent of the total gains that were made were made by people earning less than $25,000. What about that person?


Joseph Jacques Jean Chrétien: Mr. Chairman, I should like to repeat what I have said many, many times, namely, that capital gains are taxed at half the rate of a person's normal income.


Sinclair McKnight Stevens: It is still confiscation.


Joseph Jacques Jean Chrétien: All of an individual's exemptions are indexed. If the hon. member is arguing the we should go back to the time of the dinosaurs, that is one thing. I know he is against capital gains, and so is the hon. member for Calgary North. Generally speaking, members of the NDP want us to tax them at 100 per cent. Like any other income, a buck is a buck. But typically we Liberals find a good compromise between these two extremes which, although it satisfies neither of the two extremes, satisfies the great majority of the Canadian people because they keep voting for us from year to year.


Sinclair McKnight Stevens: Mr. Chairman, the minister makes reference to going back to the age of the dinosaurs. Let me assure hon. members that if this government is allowed to stay in power much longer we could well go back to the age of the dinosaurs. Let me explore this question a little more fully. According to statistics before me, one of the big group of capital gains taxpayers is farmers, also fishermen. Let us bear in mind that when this legislation was first introduced it was represented to be a great device for getting at those who are making gains in shareholdings.
I had a question for the minister but I see he has left. Is he coming back?


Mr. Lumley:: Yes, he is.


Sinclair McKnight Stevens: I am very anxious to hear what the hon. member for Gatineau will have to say, but perhaps I can put my question to the parliamentary secretary, who might like to comment on it. What does the minister say in regard to who was wrong when it was initially represented to this House that the main group which would be paying the capital gains tax was those who made gains from shares? We now find, for example, that in that category the amount of gains in 1975 was $38 million, whereas the gains of farmers and fishermen
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November 25, 1977
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amount to $113 million. And I have other categories I can give. For example, employees are listed at $144 million.
I should like somebody from the department to indicate whether there was in fact a miscalculation here. Did they over-estimate the gains they were going to tax arising from shares, or was there some other rationalization for what seems to be such a small gain under the head of shares compared to gains, for example, from real estate?
I can break the figures down not only for farmers and fishermen but for gains on the sale of shares net, which is $38 million. The net gain on real estate is $661 million. Let there be no confusion from this point on. This is essentially a capital gains tax which has fallen mainly on those who made a gain from real estate which, as I have suggested, has perhaps aggravated inflation in that particular market.


Edward C. Lumley: First of all, Mr. Chairman, the hon. member must realize that the figures he has referred to vary from year to year. He talks about real estate. Real estate prices have increased far more dramatically than shares. As the minister said in one of his earlier replies, there is no capital gains tax on an individual's residence, so in answer to his point about inflation caused by the capital gains tax, there is no evidence that the tax has influenced residential homes or land prices.
The share in capital gains of those earning less than $20,000 is 36 per cent. However, their share in total assessed income is 77 per cent, thus relative to their income they receive very little in capital gains. Their share in capital gains tax is 25 per cent, compared to their share in total tax of 61 per cent. Therefore I have a little difficulty trying to understand the relevance of what the hon. member is saying.


Sinclair McKnight Stevens: Mr. Chairman, talk about trying to confuse the issue! I have been very, very specific. This is the first time I have been able to get the actual capital gains tax figures. I was very specific. I said there has been a total net gains tax of $38 million from shares and $661 million from real estate. It has nothing to do with total income or anything else; these are the capital gains tax figures for those two categories. I thought my question was very simple.
It was represented to this House that the capital gain which was going to be taxed was the gain from shares. How is it that it has now shifted to real estate? Sometimes, Mr. Chairman, I despair at the lack of knowledge in the Department of Finance. The parliamentary secretary stands up and says that somehow or other home prices are not being affected. Is he totally ignorant of the fact that much of the gain the government is taxing is subdivision land, land on which eventually homes will be built? Is the government totally ignorant of the fact that this has been one of the most significant reasons for driving up Canadian home prices at least one third above the prices that we find in the United States?
Let me come back to my very specific point. Has the government any particular explanation why this tax is falling not only on people of relatively low income-which it was never represented would happen-but on the real estate

market, not the share market which initially it was said would be the chief source of the capital gains tax?


Edward C. Lumley: Mr. Chairman, I answered that in my original reply to the hon. member. He is looking at the figures for one particular year, and the picture varies from year to year. In the figures the hon. member is alluding to, they are referring to capital gains on shares and real estate for that particular year. This is not constant from year to year.


Sinclair McKnight Stevens: Mr. Chairman, I should like-


Gérald Laniel: Order, please. I regret to interrupt the hon. member for York-Simcoe but his allotted time in the second round has expired.


Gaston Clermont: Mr. Chairman, we have been discussing for quite a while about revenues that the tax on capital gains can generate for the treasury but I suggest that when this tax authorized by the House of Commons in December 1971, it was also a matter of justice and equity because the salaried-


Sinclair McKnight Stevens: There is no justice from that government.


Gaston Clermont: Neither from you.
[ Translation]
Mr. Chairman, the salaried worker always reports his full income on his return. I recognize that the amount deductible as expenses has been raised from $150 to $250 in the budget tabled by the former finance minister. In my opinion-I have said so to the former finance minister and I repeat it again- this is not enough.
When the hon. member for York-Simcoe (Mr. Stevens) referred to the increased cost of land, he forgot to say that a large percentage of these higher costs are due to speculation, something which had been anticipated when the tax on the capital gains was voted. During the first years, the Treasury Board did not expect any noticeable increase in revenues but the opposition contended at times that that would be the case and we all remember that the then Minister of Finance, Mr. Benson, had to table a letter before the Standing Committee on Finance, Trade and Economic Affairs in which he promised that if revenues from capital gains were to increase unduly, taxes in other areas would be lowered. 1 remember it quite well, Mr. Chairman, because I was then chairman of the Standing Committee on Finance, Trade and Economic Affairs, and so does the hon. member for York-Simcoe because he appeared many times before this very committee.


Mr. Chr6tien:: I would like to thank the hon. member for his remarks.

The hon. member for York-Simcoe made a comment because I was not in the Chamber for a few minutes. We have been in this House every day for the last three weeks, and in
November 25, 1977

some instances for extended hours. I have responsibilities as Minister of Finance.
I left the Chamber for five minutes to go where every human being has to go once in a while.


Mr. Munro (Esquimalt-Saanich):: Your responsibility is here.


Joseph Jacques Jean Chrétien: I have been more than patient. Since the beginning of the afternoon, the hon. member for York-Simcoe has been on cloud nine. There are many people listening in the audience, and I am glad they will hear what I have to say. As yet we have not adopted the title of a bill with 160 clauses because we have had to listen to speeches like that of the hon. member, day in and day out, for the last three weeks.


Some hon. Members:: Right on!


Joseph Jacques Jean Chrétien: Mr. Chairman, I think I should be entitled to go to "la toilette", as we say "en frangais". I am back now. [Translation]
In answer to the hon. member, I would simply like to say that of course we shall never be able to agree with the hon. member for York-Simcoe (Mr. Stevens) on this point. What can we do? The taxpayers, the workers have their taxes deducted from their pay cheque. They have no other choice. After many years we discovered that by speculating on the stock market some people could avoid contributing to the social needs of this country. We then decided to tax capital gains. The hon. member does not agree. As I was associated with the income tax reform, I remember very well that this was recommended. This is ironical since it was recommended by the Carter report, among others, and the Carter report was published by the Carter Commission. This commission was established by the Progressive Conservative government in 1961-62. The Conservatives are therefore refusing to recognize their offspring, but we are more human than that; we find it fair to tax capital gains. The most capitalistic of all countries, the United States, was taxing capital gains in 1913. I was not even born then. As a matter of fact, this was a long time before my birth.
Mr. Chairman, I would like to say to the hon. member for Gatineau (Mr. Clermont) that it is very difficult in a society as complex as ours to give in to requests from all those who would like tax exemptions for something or other. There is only one clear problem, and I am not a Social Crediter like my friend from Roberval (Mr. Gauthier). I know that the money we spend is taken from the pockets of the taxpayers, and we try to be as fair as possible about it. And we, as well as everyone who has reflected for a moment on this matter, including the commission created by a Progressive Conservative government, the Carter Commission, have discovered that there should be a capital gains tax. Obviously I shall never be able to settle the issue of principle from which stem the diverging views of my friend from York-Simcoe and myself, but, Mr. Chairman, we are still on clause 1, which increases the loss exemption from $ 1,000 to $2,000 for capital gains.
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There are 160 clauses to be studied in this committee. Since we have started the study of this clause at noontime, it has not progressed by an inch. It might be necessary to wait until Monday or Tuesday or even Wednesday before clause 1 which contains only three lines gets its approval. It is quite clear and it does not take a genius to understand that we are raising from $1,000 to $2,000 the tax exemption for people who claim capital losses. It is obvious that once again the opposition is trying to prolong the debate simply to delay the work of this House rather than passing this bill as soon as possible. There are thousands of decisions in the business community which cannot be taken at the present time. Given the attitude taken by the Progressive Conservatives, it may be that we will never succeed in passing this bill. However, we have been able to impose a time allocation on second reading, so I guess they want us to do the same thing at the committee stage. I have no objection to that. We might spend three or four days studying clause 1, then the other clauses will be studied much more rapidly.


Mr. Watson:: Mr. Chairman, I should like to direct a question to the Minister of Finance which relates to the statement made by the hon. member for York-Simcoe when he blamed the prices of housing in Ontario, and in Toronto in particular, on capital gains tax.
Would the hon. minister not agree the principal reason for the cost of housing in Toronto being higher than most parts of the country is because, even though the Government of Canada has had a law on its books since 1953 which allowed for federal funding of land acquisition and land banking, it was never used to any extent by the government of Ontario? Also, would he not agree that the government of Ontario land development policies have consistently favoured land speculation in the Toronto and Ottawa areas, the result of which has been that people have taken advantage of these federal grants that were, and are available, except for the last two or three years? This is the main reason for the cost of housing in Toronto being $20,000 more than other parts of the country. It has nothing to do with capital gains tax.


Joseph Jacques Jean Chrétien: Mr. Chairman, capital gains tax on private residences does not exist because they are exempt. There has been a lot of land speculation. The hon. member for Laprairie blames it on the Ontario administration, but I do not want to comment too much about the provincial situation. Not long ago a very learned gentleman from Ontario, Walter Gordon, indicated in a speech that approximately 100 approvals are required to develop land in Ontario. Also he indicated that it requires many inquiries in order to do that. I do not know. I am not a resident of Ontario, so I cannot judge that. It is not due to capital gains at all.
Land speculation is not under federal jurisdiction. The permits for construction, the development of the land, and so on, are within provincial and municipal areas. To attempt to shift the burden on to capital gains is either stretching the argument a bit far, or the hon. member is simply stretching his
80027-12W

Income Tax Act
speech in an attempt to use up the remaining time until four o'clock, and thus clause 1 will not be passed.


Max Saltsman: Mr. Chairman, I have a brief question 1 want to put to the minister, and it is mostly for the record. Until recently an argument has been put forward against the capital gains tax that it was really a tax for equity purposes, and that in fact it was not much of a revenue producer, and even from the viewpoint of equity there were objections to it. The figures that the minister has produced for us today indicate that it is more than just an equity measure-we are talking about relatively big money which is now coming in from capital gains. Does the minister have some figures to indicate whether the take from the capital gains is increasing or holding its own? My own personal recollection is that, when it first came in, the income from capital gains was a relatively small amount of around $40 million. That seems to be increasing substantially as the years go by.


Joseph Jacques Jean Chrétien: The income from the tax is now $255 million. That is a good sum of money. Of course as the hon. member knows very well, capital gains before 1972 were not taxable, only the gains since 1974. Of course the amount is increasing every year. I do not know exactly by how much it is increasing. I have the figures for 1975 but not for 1976. The essential increase was from 1974 to 1975. I do not have the actual figures with me but I will provide them for the hon. member.


Gaston Clermont: Mr. Chairman, I noticed this afternoon that in his answer to a question he was asked, the minister said that at a given time people were saving too much. I would like him to give us something precise as to what he meant because we are all well aware of the campaigns made by several financial institutions to incite people to save more. So I would like the minister to be more precise on what he meant by his remarks that people are saving too much.


Joseph Jacques Jean Chrétien: Mr. Chairman, at the present time there is an insufficient demand in our economy. During the past three years, the level of savings has been rather constant and maintained at a very high level. I believe that Canadians are setting aside about 10 per cent of their income for savings.
This is excellent if it lasts for a year, but when it goes on for three years in a row problems begin to arise. I am urging people who have been putting money away for the last two or three years to spend part of it on consumer goods, particularly Canadian goods, to revitalize our economy and create jobs. Because it is very difficult to ask industry to expand when capacity utilization is only 80 per cent.
Of course there are programs to promote savings. We will always need savings, but within limits. I urge those who have enough savings to realize how worthwhile it would be to spend at this point. This does not mean by any stretch of the imagination that nobody must save. But those who have too much should spend at this point, to help revitalize our Canadian economy. This is what I meant, because during the last
[Mr. Chr6tien.1
three years I understand the level of savings has been at least 100 per cent higher than during the three preceeding years. In the current economic context where consumer expenditures are lagging, it would help if people with a lot of savings started doing some spending, particularly if they toured Canada rather than going further down south. I for one will be doing so at Christmas time. I said so and I was embarrassed myself because I had planned to go down south, but I realized it is better for me as a citizen to remain here at Christmas time and go skiing instead of sunbathing. So, in view of our $2 billion deficit for this year on the tourist trade account alone, I hope this will be done and also that we buy Canadian goods as much as possible so that our Canadian production capacity utilization is increased.


Sinclair McKnight Stevens: You should have told the Prime Minister to do that.
Before I get into some more questioning on clause 1 I must respond, at least in part, to some of the comments made by the minister in his impassioned plea after he returned. I wish to assure the minister that no one in this Chamber took any exception to his leaving.


Joseph Jacques Jean Chrétien: You did.


Sinclair McKnight Stevens: No. In fact we thought we were quite co-operative. I said that rather than having a delay I would put my questions to the parliamentary secretary, questions to which subsequently the parliamentary secretary, I thought, responded very effectively.


Joseph Jacques Jean Chrétien: I am sorry, and I take the hon. members' word. Someone had told me the hon. member had given me hell because I was out of the Chamber. If he did not, then I withdraw what I said, but I cannot withdraw my need to get out.


Sinclair McKnight Stevens: Mr. Chairman, let me assure the minister that we realize he does have certain human sides.
There are other points on which perhaps I should comment. The minister has left the unfortunate impression that there has been an undue delay with regard to discussion of clause 1, and he referred to the fact that we had not even passed the title to the bill. As the minister knows, the title is one of the last things we pass, not one of the first. I would point out to the minister, who surely keeps the score, that there have been more people questioning him on clause 1 on the government side of the House then there have been members questioning him from this side. If he wants to put the usual governmental gag on his own followers, he had better talk to them.


Joseph Jacques Jean Chrétien: Mr. Chairman, may I say that the hon. member, who had the floor for the third time now and used up 20 minutes, should recognize that members on my side are not as confused as hon. members opposite, so that they can put just one question and obtain satisfaction.
November 25, 1977

While I have the floor I would like to answer the question put by the hon. member for Waterloo-Cambridge who asked me about the capital gains tax. There has been an increase since we introduced the capital gains tax. Taxable capital gains went up from $239 million in 1972 to $431 million in 1973, to $507 million in 1974, and $680 million in 1975. These are the capital gains reported; the tax on them is less because people pay only half the normal rate on them.


Sinclair McKnight Stevens: I must assure the minister that if he keeps interrupting me, naturally time will keep running. I have a few questions I want to put to him, and surely the more he becomes impassioned and makes these various comments, the more he makes it impossible for me to do anything but correct the record.
What I was saying on clause 1 was that I feel it is pertinent to know that more questions have been directed to him from his own followers than there have been from this side. As the minister knows, clause 1 is generally the clause on which people make general comments on the bill. Comments on this clause are not solely restricted to a specific item.
Let us not forget that the minister left the impression that once the capital gains tax was written in stone into the law of the land there should be no question on it thereafter. Such are not the facts. What I have tried to make clear is that when we introduced the capital gains tax certain recommendations were made, and this is virtually the first opportunity we have had in the House to review the impact of the capital gains tax and to ask the Minister of Finance whether he feels that certain aspects of what has transpired are in truth equitable. One of those is our suggestion that there should be indexing of the capital gains tax rather than the so-called rough justice formula whereby we only take in half of the gain.
I do not think members of the House should be too impatient, because we must bear in mind that it was on this side of the House that the suggestion was first advocated for the indexing of the income tax. It took the government many years finally to catch on to what we were talking about and to realize that there was an inequity. Perhaps in the faint hope that it might win some votes the government said, "Fine, we are going to bring in indexing," because it realized that was an equitable thing and possibly even popular. Is there anything wrong with our at least exploring the possibility that indexing would also be a relevant thing for capital gains?
There was another reference made by one of the minister's colleagues to the fact that I referred to land prices going up in value, and that perhaps one of the things which had contributed to those prices going up was the fact that many speculators who are in the land development business have been using the system in a way they felt would at least compensate them for the tax they have had to pay with regard to capital gains. Somehow my simple pointing out that home prices in Canada are about one third higher than they are in the United States got twisted by the minister's colleague into some representation about Toronto prices.
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I never referred to Toronto prices. The hon. member somehow wanted to twist it so that somehow it was the fault of the Ontario government after all. I am talking about prices from Nova Scotia right through to Victoria.


James Aloysius McGrath: Newfoundland.


Sinclair McKnight Stevens: All right, St. John's. I hope the record is clear on that.
Let me put a different question now to the minister concerning capital gains. We have explored the impact, the revenue, who is actually paying and the fact that indexing is apparently not under any serious consideration as far as the department is concerned.
There is a second injustice with regard to capital gains. A person has the option either to liquidate every year and pay the tax payable at whatever his tax rate is for that year or, as many people are doing, bunching or holding their capital realization until a later time rather than paying the tax. Where the inequity comes in is when the person finally does sell his property.
Let us take my example of $10,000. Let us say that a person says he does not want to liquidate at possibly $10,800 because he just does not want to have to pay that tax. Let us say he holds it ten years. At the rate of inflation under this government it will probably be that he will have to sell that property for $20,000 in order to get the same buying power he could get last year with his $10,000. Under the present set-up-and I hope the minister will correct me if I am wrong-the only thing this person can then do in 1986 would be to take his $20,000 and put it into some type of annuity for up to 15 years if he wants to dollar average the gain. In short, there is no provision allowing him to have a charge-back, say, for the previous ten years of $1,000 per year and to come into the lower tax bracket. The fact is he will have to pay whatever his tax rate is in the year 1986 on the whole $10,000 falling into his income that year and, as I have said, a high portion of that or, in my example all of it, will simply be an inflationary gain.
Is the minister aware of that bunching inequity which is occurring, and is there any consideration being given to relieving that situation?


Joseph Jacques Jean Chrétien: Mr. Chairman, we are aware of that problem as well as of many other problems, including indexing in relation to capital gain. The provisions are not written in stone, as the hon. member said. We are constantly reviewing the tax system in every budget. We have a bill containing 160 clauses before the House at this time. We review the tax system every year, or every six months depending upon whether we are having two budgets in a year. The arguments of the hon. member will be looked into by the experts of my department, and we will see if we have to bring about some changes in the next budget.


Sinclair McKnight Stevens: Realizing that there are rather technical and somewhat complicated aspects to the whole capital gains tax situation I wonder if the minister would indicate if he would be

November 25, 1977
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willing to make a special reference of this subject to the Standing Committee on Finance, Trade and Economic Affairs so that there can be an in depth appraisal carried out as to the success or failure of the capital gains tax system, so that indexing can be reviewed and so that we could perhaps call witnesses and receive briefs on what people now feel about it. Frankly, I feel that the minister is sincere, and I have no reason to doubt that.
The whole tax system is an ongoing and very volatile thing. It would be quite constructive between now and the time he brings in a budget to have the benefit of a committee review of the whole question of the capital gains tax in this country. My next question will come later.


Joseph Jacques Jean Chrétien: Mr. Chairman, I am considering referring problems to the committee, but I have not decided to go along with this as yet. I will take into consideration the request of the hon. member, but I did not have such a thing in mind.


Sinclair McKnight Stevens: My next question comes from a suggestion which was made as long ago as perhaps 1971 by the hon. member for Edmonton West. I felt he suggested a rather innovative approach, that as far as Canadians are concerned- and the hon. member restricted it to the question of investing in the resource industry; I perhaps might want to expand on that to include any Canadian investment, be it resource or manufacturing-there should be a formula worked out with regard to capital gains which would make them non-taxable depending on the number of years an investment is held. For example, I think the hon. member's thinking was that if an investment were held for five years, there would be no taxable gain on the basis that that is obviously a relatively long-term investment and should not be taxed as current income. However, for every year short of that, the suggestion was that a person should lose 20 per cent of his total 100 per cent non-taxable position, and if he bought and sold something within a year it would be fully taxable. Has any thought been given to the suggestion made by the hon. member for Edmonton West?


Joseph Jacques Jean Chrétien: We are aware of that suggestion. It has been looked into, but it has not been recommended to the minister.


Charles Robert Turner: Order, please. It being four o'clock, it is my duty to rise, report progress, and request leave to consider the bill again at the next sitting of the House. Is that agreed?


Some hon. Members:: Agreed.
Progress reported.


The Acting Speaker (Mr. Ethier):: It being four o'clock the House will now proceed to the consideration of private members' business as listed on today's order paper, namely, public bills, notices of motions, and private bills.
[Mr. Stevens.J


PRIVATE MEMBERS' PUBLIC BILLS
The Acting Speaker (Mr. Ethier):: Shall order No. 2, standing in the name of the hon. member for Matane (Mr. De Bane), stand at the request of the government?


Steve Eugene Paproski: Mr. Speaker, I rise on a point of order. I believe there has been agreement to allow orders Nos. 2, 4, 8, 9 and 10 to stand at the request of the government, and to go ahead with order No. 11, standing in the name of the hon. member for Lanark-Renfrew-Carleton (Mr. Dick).


The Acting Speaker (Mr. Ethier):: Hon. members have heard the suggestion of the hon. member for Edmonton Centre (Mr. Paproski). Shall orders Nos. 2, 4, 8, 9 and 10 stand at the request of the government?


Some hon. Members:: Agreed.


The Acting Speaker (Mr. Ethier):: Stand at the request of the government.


HOUSE OF COMMONS ACT AND CANADA ELECTIONS ACT
Mr. Paul Dick (Lanark-Renfrew-Carleton) moved: that Bill C-211, to amend the House of Commons Act and the Canada Elections Act (by-elections), be read the second time and referred to the Standing Committee on Privileges and Elections.
He said: Mr. Speaker, I hope, rather than talking this bill out today, that the subject matter will be allowed to go to the Standing Committee on Privileges and Elections so that this House can deal with the very important principle involved. At the committee any necessary amendments to lengthen or shorten the time period proposed in the bill could be made.
I should like to open the debate by saying the importance of the bill is underscored by the fact that there are now five seats in this House vacant, thus effectively denying representation to over 680,000 Canadians. Under our present laws which govern the holding of by-elections this is a situation which is unlikely to be soon corrected. It is not a new issue, however. Every government in the history of the country, whether Progressive Conservative of Liberal, has abused the present laws on byelections to ensure they are held only at what is considered the most politically expedient moment. It is a record of which none of those governments or we as Canadians can be proud.
Quite apart from the intolerable situation where Canadians are denied a voice in government through their elected representatives, the issues surrounding any delay in the holding of a
November 25, 1977

by-election reflect some very old and very basic concepts essential to our system of democratic government.
Any such delay openly flouts our belief in the importance of the participation of all Canadians in our political process. In the past ten years we have heard much of participatory democracy. It seems to me that the representation of all Canadians in this House should be the cornerstone of participatory democracy. It should also be restated here that a central issue to the development of our parliamentary institutions and traditions was the idea of "no taxation without representation". Over a period of hundreds of years thousands of people have gone to war, fought, died, in order to gain the right of elected representation. This is a principle which has been fought for long and hard.
Today we have in Canada "taxation without representation". Those people in the five constituencies of Burnaby-Rich-mond-Delta in British Columbia, Hamilton-Wentworth in Ontario, York-Scarborough in Ontario, Fundy-Royal in New Brunswick, and Lotbiniere in Quebec, still pay taxes, yet have no elected representation. This bill also reflects a debate that has been going on in Canada for the past ten years-the role and importance of this House and of individual members in our political process.
I would suggest that a situation which allows unnecessary delays in filling a seat vacated through the death or resignation of a member is an insult to each and every member in this House, for it suggests that it is not important that some Canadians are not represented for unduly extended periods of time. It suggests that it is not important that all Canadians have a voice in this House of Commons. It suggests that an elected representative is not essential either to the people of a constituency or to the governing of this country. Worst of all it is a situation that suggests that political expediency take precedence over all other principles.
In Canada, under our present law, upon the death or resignation of a member, a writ for a by-election does not have to be issued until six months-approximately 180 days-after the Speaker is informed of the vacancy. At the end of that six months there is presently no provision that states a by-election must be called within a specific time frame. After the six months the writ could then be issued, setting the by-election date one month away, one year away, or even two or three years away.
I put forward this bill because quite simply the present situation is wrong. The present situation flouts the basic democratic principle of entitlement to elected representation. This bill would redress the situation by reducing the six months' period for the issuing of the writ to 60 days, and would require a by-election date to be set within 60 days after the writ is issued. This bill allows for a maximum total lapse of time, from when the Speaker is notified of a vacancy and the polling date, of 120 days.
I said before that our present law suggests that political expediency takes precedence. To verify that look at page 11,619 in Hansard of March 9, 1976. We have seen, quite recently, expediency at work. When the Hon. Gerard Pelletier
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resigned his seat to become Canada's ambassador to France, the government was able to bring about a by-election within 41 days. At the same time as Mr. Pelletier resigned, Walter Carter, the member for St. John's West, also resigned. The by-election in St. John's West took place 13 months-that is, one year and one month or over 390 days-after Mr. Carter's resignation. The situation in St. John's West was the longest vacancy in the 110-year history of our parliament. That was, incidentally, also at a time when the Chief Electoral Officer of Canada was appearing before the Standing Committee on Privileges and Elections, making recommendations to shorten substantially the time of national election campaigns.
Let us consider other countries. How do we compare? I am afraid not very favourably.
The problem of filling vacated seats is not unique to Canada, but is common to all western democracies, and I would like now to outline how other democracies deal with it. In western European countries members are often not elected on a constituency basis, but on the basis of their position on lists of candidates provided by their political parties and the apportioning of seats according to the percentage of the popular vote their party receives in a general election. This is commonly referred to as proportional representation. As such, these countries do not have by-elections, but they do recognize the importance of filling every seat after a vacancy occurs, and have instituted mechanisms to achieve this.
In the Netherlands, for example, the political party concerned simply fills the seat with the first name appearing on the party list remaining from the previous election, effective immediately. There is no time delay here in filling a vacancy. In other countries, such as Sweden, every member has an alternate who immediately takes the seat should it be vacated.
In the United States, on the death or resignation of a senator or congressman, the governor of the affected state is empowered to appoint a replacement immediately. The U.S. system clearly recognizes, even though members of the House of Representatives face an election every two years, that full representation in the Congress is needed at all times.
In the United Kingdom, under the provisions of the Representation of the Peoples Act, 1948 and 1969, upon notice of a vacancy the Speaker issues a warrant to the Clerk of the Crown, who forthwith issues a writ for a by-election. Nomination papers must then be delivered no earlier than the fourth day, and no later than the ninth day after the writ is issued in the case of a county constituency; in the case of a borough or urban constituency no earlier than the third day, and no later than the seventh day after the writ is issued. The returning officer of the constituency then fixes a polling day no earlier than the seventh day, nor later than the ninth day after the last day for delivery of nomination papers. The minimum time before the holding of a by-election in the United Kingdom is, therefore, ten days after the Speaker has been notified; the absolute maximum is 18 days after issuance of the writ. There are no politically expedient delays in England. In the United

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Kingdom they recognize the democratic principle of filling a vacated seat with an elected representative quickly.
In Australia, under the Commonwealth Electoral Act of 1918 and 1973, section 33 of the act compels the Speaker to issue a writ for a by-election upon receiving notice of a vacancy. Nomination papers must then be filed no later than 21 days and no earlier than 7 days after the writ is issued according to section 62(10). Under section 63, a polling date is set no less than seven days and no more than 30 days after the last date for nomination. In Australia, therefore, the minimum time between the notification of a Speaker, the issuance of the writ and the holding of a by-election is 14 days. The absolute maximum is 51 days.
In New Zealand, under the New Zealand Electoral Act of 1956, and under Section 72(2) of that act, the Speaker as soon as he knows of the vacancy must immediately publish a notice in the Gazette and direct a warrant to the clerk of writs to issue a writ to fill the vacancy. Under section 74 the clerk then issues a writ no later than 21 days after receipt of the warrant or, in exceptional cases and only if an Order-in-Council requests postponement, the clerk issues a writ no later than 42 days after receipt of the warrant. Under section 76 of the New Zealand legislation, a by-election must be held within 50 days after issuance of the writ. In New Zealand the absolute maximum time between the Speaker being notified of a vacancy, the issuance of his warrant and the holding of a by-election is 92 days. The usual practice in New Zealand is only 71 days.
The countries of western Europe, where proportional representation is common, fill their vacancies automatically- in a matter of days after the vacancy has been created.
In comparison then to the three Commonwealth countries- Britain, Australia, and New Zealand, the maximum time lapse between when the Speaker is notified of a vacant seat and the holding of a by-election, is 92 days. Compare this to the appalling 13 months, or, if you like, one year and one month and in the case of the St. John's West by-election here in Canda it was over 390 days. However, legally in Canada it could be two or three years after the vacancy before a by-election is held. We should be ashamed of ourselves in this country.
Under this bill, which I propose today, Mr. Speaker, a maximum time lapse between notice of a vancancy and the holding of a by-election is 120 days, more than any other western democratic country. And yet this would surely give us more than enough time.
As I said before, Mr. Speaker, there are presently five vacant seats in this House from four provinces, with a combined population of over 680,000 people. One of these seats, York-Scarborough, is by population the second largest constituency in Canada with over 248,000 constituents. On March 8th, 1976, as reported at page 11,572 of Hansard I asked our Prime Minister (Mr. Trudeau) the reason for the delay in calling a by-election in St. John's West. At that time he reaffirmed that he and the government believed that one of the fundamental rights in our democratic society is the right of a properly accredited electorate in any constituency in Canada
[Mr. Dick.)
to representation by elected officials in the House of Commons. Mr. Speaker, I believe that all members on all sides of this House share that belief. I would ask them, then, to reaffirm that belief by allowing this bill to go to committee, by assisting in the passage of this bill for the sake of the over
680,000	Canadians who are presently not represented in this House, and for the sake of the high principles upon which our democratic system is based. We have a duty to make sure that we retain full representation in this House of Commons as much as possible. We must correct that which is wrong.


Miss Aideen Nicholson (Parliamentary Secretary to Minister of Supply and Services):: Mr. Speaker, I should like to begin by commending the hon. member for Lanark-Renfrew-Carleton on the obvious concern he shows toward adequate representation, and for the constituents who, as a result of resignation or death of a member, find themselves without one. The fact that this bill is before us today is perhaps an indication of how strongly members feel about the administration of the Elections Act in general. Bill C-5, which is now before the Standing Committee on Privileges and Elections, was the product of a great deal of consultation, but it has not included the amendment which the hon. member for Lanark-Renfrew-Carleton (Mr. Dick) would like to see, and it does not include a number of amendments which I would like to see. This too is maybe an indication of the difficulty in reaching agreement as to the best way in which to achieve the end we all feel so strongly about.
Bill C-5, that cluster of amendments to the Canada Elections Act which is now before the Standing Committee on Privileges and Elections, has three groups of amendments.
The first group came out of a working group which originally met on election expenses but as a result of their work brought forward some concerns about other parts of the act. That working group had representation on it from the four registered political parties in the House of Commons. There were three members from each party which made up the group that worked with the Chief Electoral Officer for about three years. Even at the end of all that extensive study they have not brought in amendments that meet the views of all of us.
The particular amendment before us in Bill C-211 would present some difficulties. I am not suggesting these difficulties are insuperable, but I suggest they need to be addressed, whether in committee or elsewhere. Section 6(1) and Section 10 of the House of Commons Act require the Speaker to address his warrant concerning a vacancy to the Chief Electoral Officer "forthwith". Subsection 13(1) of the House of Commons Act requires that a writ shall be issued within six months after the receipt by the Chief Electoral Officer of the warrant.
Section 22(1) of the Canada Elections Act requires that the governor in council shall fix the day upon which the poll shall be held at an election. The effect of this is that while the writ of election at a by-election must be issued within six months of the vacancy occurring in the House, the governor in council
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can set polling day in the writ for any day subsequent to the six months. There is, in effect, no fixed time within which a by-election must be called except with regard to the dissolution of parliament or the expiration of the maximum five year term of parliament.
The bill before us would stipulate a maximum period of 120 days from the occurrence of the vacancy until polling day. The hon. member who presented the bill has certainly amassed a very impressive array of precedents as used in other countries. As I listened to him, however, I thought of our particular geography and our climatic conditions.


Paul Wyatt Dick: How about Sweden, Norway or Australia?


Aideen Nicholson: For example, if a vacancy occurred in October, what would be the effect of a winter election with polling day about Christmas or New Year's Day, particularly in a constituency such as the Yukon? Alternatively, if campaigning and polling day occurred in the summer months, it would certainly not be well received in our urban centres. Hon. members will recall the complaints we received recently when people were at their cottages on enumeration day.


Paul Wyatt Dick: Surely flexibility of four months would cover two months of summer.


Aideen Nicholson: In a case where a general election is being considered a few months after the vacancy arises, if we were locked into a rigid time frame as the bill proposes with no flexibility whatever, one could then have a situation where a successful candidate might only hold office for a month or two prior to dissolution for a general election.


Paul Wyatt Dick: Mackenzie King had somebody sit for two hours.


Aideen Nicholson: Mr. Speaker, perhaps I could complete my remarks and then accept questions at the end. The by-election writs are only superseded and withdrawn where parliament is dissolved after the issuance of the new by-election writ. There are obvious complications one could see resulting from that. I am sorry the hon. member becomes so angry at having his ideas questioned because I am not opposed to the principle of the bill, and I was hoping that some of these matters could be addressed in committee or on a further occasion. Also, I said at the beginning that while I see these difficulties, I am not suggesting they are insuperable.
The cost of by-elections is something that has to be taken into consideration because they are extremely expensive. If the bill before us were accepted and we were locked into a fixed time with no flexibility or options, and if we had a by-election followed almost immediately by a general election, one would have to consider very carefully the effect of this.
The cost of a by-election will vary from constituency to constituency. However, according to the figures given by the Chief Electoral Officer in committee last week, the recent general election cost $29V2 million, of which $10'/2 million went into enumeration. About $4'/2 million went into printing the lists. Obviously that was a general election where there
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may well have been some economies of scale. I expect a by-election figure would be proportionately more expensive.
The recent amendments to the Election Expenses Act added payment of some of the candidates' expenses. This is an additional expense factor which needs to be taken into consideration. The hon. member's point about the need for constituencies to be consistently represented is very valid. However, the total lack of flexibility in this bill concerns me.
The other question that I have is the idea of referring to the Standing Committee on Privileges and Elections amendments to the Canada Elections Act on a piecemeal basis. Bill C-5 which is now before the standing committee is based in part on the recommendations which came from the all-party working committee that worked for three years, primarily on election expenses, as well as other aspects of the act. Also included in the present Bill C-5 are some of the recommendations which the Chief Electoral Officer made and which were studied by the Standing Committee on Privileges and Elections last year. There is also the subject matter of three private members' bills.
Even with this amount of co-ordination, we still have a bill which does not meet everybody's requirements. I am not sure that the way to solve this problem is by adding yet another bill to deal with one specific aspect. I suggest there is more work to be done in committee by amending Bill C-5 and by enlarging it before we can proceed to further amendments to the Canada Elections Act.


Stanley Howard Knowles: Mr. Speaker, I should like to indicate very strong support of the bill that has been introduced by the hon. member for Lanark-Renfrew-Carleton (Mr. Dick). I hope that the portions of the speech just made by my friend, the hon. member for Trinity (Miss Nicholson), which indicated support will be the portions that will be implemented rather than her concern about certain difficulties.
It is interesting the number of myths and practices that have grown up around this business of the holding of by-elections. I recall not many weeks ago, when His Honour the Speaker announced the issuing of certain writs, my friend, the hon. member for Temiscamingue (Mr. Caouette), asking me why it was that the writ had not yet been issued for the constituency formerly represented by the late Andre Fortin. I explained to him that although we had spent time on the floor of the House expressing regret at the loss of our colleague, and although Mr. Speaker had sent our expressions of sympathy to the widow and the family, Mr. Speaker still had not been officially notified, so nothing had been done. Therefore my hon. friends had to give the official notice so that that writ could be issued.
A number of other events have occurred in my memory. Reference has been made to the fact that although the government must set the date and must do the setting within six months after the notice has been given by the Speaker, the actual date can be put off indefinitely. I remember in particu-

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lar, in the parliament of 1940 to 1945, that as we got close to the end of that parliament there was at least one vacancy, the seat of Kenora-Rainy River, and in fact there may have been two. The setting of the date for that election or for the two of them was put off until finally, when the six months had expired, Mr. King announced that the date had been set; but of course the date was in August or September of 1945, and everybody knew that because of the lapse of five years there would have to be a general election not later than June. So there has been a lot of fun playing around with this question.
I was also interested, if I may be pardoned for a personal reference, in the remarks just made by the Parliamentary Secretary to the Minister of Supply and Services (Miss Nicholson) to the effect that a four month limit such as suggested by my hon. friend could throw a by-election into the middle of winter. In my own case my predecessor, the late J. S. Woodsworth, died on March 21, 1942. The by-election could easily have been held that summer or fall, but it was delayed until November 30, which in Winnipeg is in the middle of winter. So as I say, Mr. Speaker, there has been a lot of manoeuvring with respect to this matter.
I believe the hon. member for Lanark-Renfrew-Carleton is right in asking that we lay down some specific rules such as are suggested in his bill. As he has just pointed out, there could be a change; the period could be lengthened or shortened, or we could provide that the rule not apply if a parliament had been in existence, say, for four and a half years. But in general I think that this idea should be adopted. The right of a government to be able to play around with this kind of thing and hold by-elections off to suit its convenience is totally inconsistent, I think with the democratic process.
The Parliamentary Secretary to the Minister of Supply and Services expressed a view that we often hear from that side, that she does not like things like this being dealt with on a piecemeal basis. Well, Mr. Speaker, there are two sides to that argument. If you go one way, you get one side; if you go the other way, you get the other. If a private member brings in a bill with three or four proposals in it, the answer is, "There is too much there; if there were only one point we could deal with it". But if you bring in only one proposition, it is said it is piecemeal. It seems to me that the crucial and important point here is the right of our people to be represented in the parliament of the day, and so I think that the principle of this bill deserves support.
If it is not possible for the bill as such to be given second reading and sent to standing committee, I hope that at five o'clock there will at least be agreement to send its subject matter, for it is one that is very important.


Jean Elizabeth Pigott: Mr. Speaker, I am delighted to speak on this bill because I have rather recent experience on this subject. I reserve the right to call myself the last elected Conservative on this side. I am the youngest-


Some hon. Members:: Hear, hear!


Jean Elizabeth Pigott: -but please do not look at the colour of my hair. But since the hon. member for St. John's West (Mr. Crosbie) was elected in Newfoundland time, he is half an hour older than I am.


Stanley Howard Knowles: An hour and a half.


Jean Elizabeth Pigott: That makes him very ancient then.
One of the things which I think we forget is how deeply the people feel about not being represented. As I walked from door to door in the constituency of Ottawa-Carleton that wonderful summer, the capital punishment bill had only recently gone through the House and there were so many persons who spoke to me about the fact that they did not have someone in the House representing them at that point so the House could hear what they felt about the bill, whether they were for or against it. There was a deep anger in people's hearts at the fact they had not had someone here to whom they could talk, to whom they could write or telephone. I see the hon. member from Sarnia has left. I know he tried to pinch-hit and take care of Sarnia, his ministry, and Ottawa-Carleton, but the people did not feel that he really belonged there, that it was just a draftee arrangement.
I think the people are intelligent. They are wise and they really want to participate. With the advent of TV in the House I find-I do not know whether other members are experiencing this-that I cannot move out of this Chamber without meeting people on the street, at meetings and events, who are saying, "We are delighted to have TV in the House; we feel more a part of the action and you are going to hear from us on certain aspects". I think TV is bringing this Chamber closer to the average person. You simply cannot go on with this poor show of putting over by-elections for longer periods of time. I think the people will rise up in anger. I just happen to think, Mr. Speaker, that my election and some of the majority I got was because the people were angry that they had been left one year without adequate representation.
I should like to move, Mr. Speaker:
That the bill be not now read a second time but that it be discharged and the subject matter thereof be referred to the Standing Committee on Privileges and Elections.


Some hon. Members:: Question.


The Acting Speaker (Mr. Ethier):: There has been a formal amendment moved by the hon. member for Ottawa-Carleton, which is as follows:
That the bill be not now read a second time but that it be discharged and the subject matter thereof be referred to the Standing Committee on Privileges and Elections.


Some hon. Members:: Question.


Mr. D. M. Collenette (York East):: Mr. Speaker, I can hear the great chorus over on the other side, but as Chairman of-


The Acting Speaker (Mr. Ethier):: Order, please. For the record I must have a seconder of the amendment.


Mr. Dinsdale:: I second it with pleasure, Mr. Speaker.
November 25, 1977


Some hon. Members:: Question.


David Michael Collenette: Mr. Speaker, I feel like a jack-in-the-box, bobbing up and down, but as Chairman of the Standing Committee on Privileges and Elections I am quite prepared to have the subject matter referred to the standing committee.
1 welcome, first of all, the opportunity to speak to the amendment moved by the hon. member for Ottawa-Carleton (Mrs. Pigott), as well as to the bill of the hon. member for Lanark-Renfrew-Carleton (Mr. Dick). When the bill does get to committee I will not have the advantage of speaking to it, so I hope hon. members on the other side will allow me to agree with the sentiments expressed by my colleague, the hon. member for Trinity (Miss Nicholson).


Paul Wyatt Dick: Don't talk it out.


David Michael Collenette: That is not my intention, though the best way to have a member talk a bill out is to interrupt him continually so that he has to extend his remarks. I think the hon. member should be commended, though I do have some reservations. I have reservations along the line of those expressed by the hon. member for Trinity. But notwithstanding those reservations, I am prepared to see the subject matter referred to the Standing Committee on Privileges and Elections.
There is an inflexibility in the period proposed by the hon. member for Lanark-Renfrew-Carleton in Bill C-211. It provides for a period of 120 days for the calling of a by-election. Notwithstanding his arguments concerning other countries such as Australia, Canada has some particular weather conditions and physical features which make it difficult to hold by-elections within set periods of time.
The hon. member for Churchill (Mr. Smith), who has one of the larger ridings, will agree with me that time is needed, especially in large constituencies, not only to organize the mechanics of the election but for the parties to select the proper candidates. In far flung ridings and those without principal centres, perhaps it would be difficult for parties to arrive at selecting an appropriate candidate within a period of four months.
I am not sure whether this particular comment is in order, but I would prefer to see the setting of elections to coincide with the summer. I am not sure how this would fit into our traditional British parliamentary system where there are minority governments. When I was elected, the election was as a result of the defeat of the government in the House. It occurred in May, but it could have occurred at any time during the year. Of course the New Democratic Party wanted to support the government at the time and prevented an election in the winter months.
When I was campaign manager for the hon. member for Spadina (Mr. Stollery) there was the fall election of 1972. I received lots of complaints during that election campaign indicating that October was an inappropriate time to conduct
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an election. This was in a constituency in metropolitan Toronto where people are close together and communications are good. In the fall many activities start, such as meetings of social groups, community affairs organizations and so on. The nights draw in, and the weather gets colder. Of course the weather does not get as cold in metropolitan Toronto as it does in Churchill; but older people are less likely to go out and vote on cold, dark, sombre days. I am sure the hon. member for Winnipeg North Centre (Mr. Knowles) would agree with this.
The timing of an election could deny the benefits of a democratic election to all elements in society. One advantage of the present system, which allows the government to call by-elections in a group, is that it affords the government and the opposition parties an opportunity to sound out public opinion in a number of constituencies. The by-elections this year were helpful to the government, because we happened to win five out of six by-elections. I am sure it was helpful to the official opposition to know their candidates were severely rejected in those by-elections, because that party had not felt the pulse of public opinion. As a result of those by-elections, I am sure the official opposition has taken into account the feeling of the electors as expressed in those results. Perhaps that caused the Conservatives to amend some of their party policies. It is not a bad idea to allow clusters of by-elections or mini-campaigns. There is a lot to be said for this kind of campaigning.
The hon. member for Lanark-Renfrew-Carleton and the hon. member for Ottawa-Carleton referred to the problems constituents have in not being served. This was a legitimate argument. It is unacceptable that ridings go for long periods of time without representatives. I think the hon. member for Winnipeg North Centre mentioned a lenghty spell in the parliament of 1940 to 1945. If it continues for more than a year, as was the case with St. John's West, it is unacceptable; although there were good reasons for that particular aberration in the case of St. John's West.
One of the largest ridings in Canada, that of the former hon. member for York-Scarborough, is in the position of having no representative at the present time. Mr. Stanbury had control over his resignation. Perhaps he expected a fall election and that there would be no vacancy. But of course there was no election. He had an opportunity in private life, which he felt he must take, and therefore he left. Likely there is to be an election in 1978. To call an election for York-Scarborough, a riding which will disappear after redistribution, because it is being divided up into five or six other ridings, would be a waste of taxpayers' money.
Before Mr. Stanbury resigned he made arrangements with the surrounding Liberal members-the hon. member for Scarborough East (Mr. O'Connell), the hon. member for Scarborough West (Mr. Martin), myself, and the Minister of National Defence (Mr. Danson)-to help in any emergency. Of course we cannot provide the same quality of representation he provided, because we have our own large ridings, but any person in the present York-Scarborough riding can call up one of these other members. This was mentioned by Mr. Stanbury

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in his final newsletter to his constituents. In fact tomorrow morning in my constituency office I will deal with two cases that have been referred to me from that riding. Perhaps that is possible in large metropolitan areas where there are numbers of constituencies, but in the rural areas that is not the case. Therefore I would accept the arguments made by the hon. member for Lanark-Renfrew-Carleton.
Another question concerns cost. The hon. member for Trinity mentioned that it is expensive to conduct by-election campaigns continually, especially in the case of York-Scarborough.
This bill was introduced a year ago, but it never got to committee. This is the first time it has been read. It is unfortunate the Chief Electoral Officer did not bring in amendments, or perhaps attempt to talk about the subject matter of some of the amendments before committee at the moment in Bill C-5.
I am not sure whether I should be talking about the costs of running an election. The hon. member for Trinity mentioned that it is quite expensive to run elections in Canada. I should like to remind hon. members that it is very expensive for parties to conduct elections, whether they be by-elections or general elections. The expenditure allotment is inadequate. I hope the hon. member for Lanark-Renfrew-Carleton will address himself to that particular issue when debating the bill now before committee.
1 believe that with the increase in postal rates in the last two or three years-I think it will be 6 cents by April 14-it is quite obvious that while the reimbursement from the government will be increased, the expenditure limit will be held. I am not sure how members of the Conservative party feel. I know the hon. member for Regina-Lake Centre (Mr. Benjamin) feels quite strongly, as do other members of his party, that there should be some increase in the expenditure limit for elections. I just wanted to mention a point by way of concluding my remarks on this bill, that there will be some agreement in the Standing Committee on Privileges and Elections that there be some increase in the expenditure limit, although perhaps not that expressed by the government in Bill C-5.
I would like to say in conclusion, because I do not wish to be the one who holds this bill up-I would send the bill to committee-that I support the principle, the thrust, the sentiments behind the bill, but the provision about the 120 days concerns me and I do not think all the questions have been answered. Nevertheless, the committee is probably the proper place for discussing all those reservations.


Mr. C. Douglas (Parliamentary Secretary to Minister of Communications):: Mr. Speaker, I wish to congratulate the hon. member on bringing this bill forward. I wish, however, that the bill had been put forward later in this session when debate on Bill C-5, which is now in committee, had either come to a conclusion or reached some form of decision because I feel, in the words of some lawyers, that there is some duplicity here in that we have been asked today to send to the

committee a reference having regard to the Elections Act at a time when amendments to the act are before the committee. I hope that the hon. member will bring his concern and grievances to that committee and perhaps suggest amendments, and make an application to have the matter included in the discussion that is already under way in the committee on Bill C-5. He may have done this.


Paul Wyatt Dick: Mr. Speaker, I rise on a point of order. Each of the members on the government side who wish to talk this bill out have referred to Bill C-5 which is in the committee. They are not talking about this bill. If the hon. member who has the floor is serious about what he wants, he will allow the subject matter of this bill to be referred to the committee where it will join Bill C-5. He will then have what he wants, and we will have the subject matter referred. Please do not talk out the bill.


The Acting Speaker (Mr. Ethier):: Order, please. This is not a point of order, it is a point of debate.


Crawford Douglas: The hon. member has put forth his views, and I think I have the right to put my views forward so far as this bill is concerned. He referred in his summation to the motion put forward by the hon. member for Ottawa-Carle-ton (Mrs. Pigott), for whom I have the greatest respect since her election. She has provided those services to the people of her constituency which all of us feel should be provided to the people whom we represent. What this bill does is to change the length of time-


Mr. Gillies:: I rise on a point of order, Mr. Speaker. I am sorry to interrupt my friend but I wonder if he realizes that the chairman of the committee has already said that, from his point of view, he would like to see the subject matter of this bill referred to the committee. I am very concerned that he will talk the bill out by mistake.


The Acting Speaker (Mr. Ethier):: Order, please.


Some hon. Members:: Question.


Crawford Douglas: Perhaps the hon. member for Don Valley (Mr. Gillies) wishes to accuse me of something, but I have every right to make a few points about the bill before us.
One point that has certainly not been made is that the bill refers to 120 days. It is stated in the bill:
In the event of a vacancy occuring, a writ shall be issued within 60 days after the receipt by the Chief Electoral Officer of the warrant for the issue of a new writ for the election of a member of the House of Commons.
Then it states:
At a by-election, the day upon which the poll is held shall be not later than 60 days-


Stanley Howard Knowles: What is wrong with that?


Crawford Douglas: I am not saying anything is wrong with it, but it ties it down pretty well to 120 days from
November 25, 1977

the time Mr. Speaker announces that a vacancy has occurred. I will give you an example right now of what would happen if the bill were in effect. As you may or may not be aware, if a vacancy had been announced by Mr. Speaker today, November 25, the election would have to take place 120 days from today, which falls on Sunday, March 26. Is the hon. member saying we should have elections on Sundays, on civic holidays, or on Christmas Day?


Stanley Howard Knowles: It says "within 60 days".


Crawford Douglas: It also says 120 days. The Elections Act states a date, but this amends the Elections Act.


Stanley Howard Knowles: The Elections Act states it must be held on a Monday.


Crawford Douglas: Yes, but the bill states 120 days, 60 days after the receipt by the Chief Electoral Officer of the warrant for a new writ, and also for a by-election, 60 days after the day on which the writ is issued. I object to such
By-Elections
a specific date. I believe that if the bill were forwarded to the committee, then we might be confronted with the possibility of an election being held on a Sunday or a civic holiday, and we would have no way of getting around that. We have spoken about political expediency. I admit that at least three opposition members have arrived in the House as a result of by-elections-


The Acting Speaker (Mr. Ethier):: Order, please. It being five o'clock-


Paul Wyatt Dick: Mr. Speaker, on a point of order, may I say, since you have called it five o'clock, that it is regrettable that the Liberal party wants to talk this bill out and play down the role of free, democratic elections.


The Acting Speaker (Mr. Ethier):: Order, please. It being five o'clock, this House stands adjourned until Monday next, at 2 o'clock p.m., pursuant to Standing Order 2(1).
At 5 p.m. the House adjourned, without question put, pursuant to Standing Order.

Monday, November 28, 1977