1978-06-16

ROUTINE PROCEEDINGS


Mr. Douglas Roche (Edmonton-Strathcona):: Mr. Speaker, 1 rise under the provisions of Standing Order 43 on a matter of urgent and pressing necessity. In light of new reports that the trial of Anatoly Shcharansky, who has now completed 15 months in jail, is about to begin, and in keeping with the support which this House has shown for Mr. Shcharansky and his activities on behalf of human rights in resolutions unanimously adopted on February 8 and March 2 of this year, I move, seconded by the hon. member for Edmonton Centre (Mr. Paproski):
That the Government of Canada, conscious of the serious ramifications to east-west relations which this trial will have, publicly repeat its offer to grant immediate landed immigrant status to Mr. Shcharansky and that it remind the U.S.S.R. of its obligations to uphold human rights in accordance with commitments it voluntarily undertook in the Helsinki Final Act.


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


Some hon. Members:: Agreed.


Some hon. Members:: No.


ADMINISTRATION OF JUSTICE
Mr. John C. Crosbie (St. John's West):: Mr. Speaker, I rise on a matter of urgent and pressing necessity under the provisions of Standing Order 43. In view of the fact that the government of Newfoundland, through official channels, has requested that the Government of Canada take such actions as are necessary to request permission from Her Majesty the Queen to permit the use of the prefix "Royal" in the title of the Newfoundland constabulary, so that the Newfoundland constabulary could thereafter be known as the Royal Newfoundland Constabulary representing one of the oldest police
forces in North America, still policing St. John's, the oldest city in North America, and in view of the fact that this request was first made in August, 1977, and passed on to the Secretary of State for Canada in that month with an acknowledgment from him on November 7, 1977, but nothing further has transpired despite correspondence since, and in view of the fact that Her Majesty the Queen is scheduled to visit Newfoundland and St. John's in July, at which time the recognition of the oldest police force in North America by permission to use the prefix "Royal" would be most appropriate to be celebrated, I move, seconded by the hon. member for St. John's East (Mr. McGrath):
That this Flouse of Commons supports the request of the government of Newfoundland and the Monarchist League of Newfoundland for a request to be made for the addition of the prefix "Royal" to the title of the Newfoundland constabulary and that this request be made and arrangements completed, if the request is accepted, so that an appropriate ceremony can be held during the visit of Her Majesty the Queen to St. John's, Newfoundland, on July 26, 1978.


Mr. Speaker:: Presentation of such a motion for discussion at this time would require the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


EXTERNAL AFFAIRS
Mr. Andrew Brewin (Greenwood):: Mr. Speaker, I would like to move a motion, pursuant to Standing Order 43, on a matter of urgent and pressing necessity. I move, seconded by the hon. member for Winnipeg North Centre (Mr. Knowles):
That in view of the representations of the Latin American Working Group supported by the churches and other organizations, and in view of the second anniversary of the Soweto affair, that the government bring forward for immediate debate Bill C-371 which received first reading in October, 1977, which prohibits chartered banks and Crown agencies from extending loans and other assistance to foreign countries continually violating human rights, of which Chile and South Africa are two notorious illustrations.


Mr. Speaker:: Introduction of such a motion for debate at this time would require the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.

June 16, 1978


INDUSTRY
Mr. Ron Huntington (Capilano):: Mr. Speaker, I rise under the provisions of Standing Order 43 on a matter of urgent and pressing necessity concerning the dumping duty on wide-flange steel beams. As British Columbia Steel fabricators can only acquire a fraction of their requirements from Canadian mills, as offshore steel prices are already higher than Canadian prices, and since offshore steel prices plus dumping duty make it impossible for the industry in B.C. to survive, I move, seconded by the hon. member for Vancouver Quadra (Mr. Clarke):
That wide-flange steel entering through B.C. ports be exempt all dumping duty immediately.


Mr. Speaker:: The presentation of such a motion for debate, pursuant to Standing Order 43, requires unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


EDUCATION
Mr. Cecil Smith (Churchill):: Mr. Speaker, I rise under the provisions of Standing Order 43 on a matter of urgency. For the second time in four months the Oxford House school has been closed, thus depriving 370 students of completing the term. Road conditions on the Oxford House reserve are in such a deplorable state that the chief and council took this action to prevent injury to students travelling on school buses. I therefore move, seconded by the hon. member for Selkirk (Mr. Whiteway):
That the minister take immediate action to provide funds and expertise to repair the roads on the Oxford House reserve so that the 370 students can complete their term.


Mr. Speaker:: The presentation of such a motion for debate at this time would require the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


ANTI-INFLATION BOARD INCREASE IN SALARIES OF STAFF-MOTION UNDER S.O. 43
Mr. David Orlikow (Winnipeg North):: Mr. Speaker, I wish to move a motion under the provisions of Standing Order 43,

seconded by the hon. member for Winnipeg North Centre (Mr. Knowles):
In light of the revelation that the directors and staff of the Anti-Inflation Board have demanded an 11.5 per cent increase in salaries, including a substantial catch-up provision already approved by Treasury Board and listed in the estimates, and since this is completely contrary to the purpose and spirit of the anti-inflation program, therefore this House calls on the government to roll back the salary provision for the Anti-Inflation Board staff to the statutory maximum of 6 per cent.


Mr. Speaker:: The presentation of such a motion for debate, pursuant to Standing Order 43, would require the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.



ORAL QUESTION PERIOD


Mr. Sinclair Stevens (York-Simcoe):: Mr. Speaker, my question is to the Minister of Finance: it arises from the statement made yesterday by the chairman of the Anti-Inflation Board, Mr. Renouf. He confirmed it is likely there will be at least Vh per cent inflation rate this October compared to the previous October. He went on to state that he thinks sometimes there has to be an actual decline in real incomes for the workers of Canada, referring to the fact that the 6 per cent ceiling would result in such a real income decline for our workers.
Will the Minister of Finance indicate if this, in fact, is the attitude of the government, that the workers of Canada should be prepared to accept a real income reduction? If inflation is IVi per cent, and they abide by a 6 per cent ceiling, it will mean a $200 average reduction in earnings and in real buying power for the workers of Canada. At 9 per cent it will be a $400 reduction.


Hon. Jean Chretien (Minister of Finance):: Mr. Speaker, we said yesterday or the day before, when discussing the figures of inflation, that internal inflation in Canada is 6.2 per cent. 1 have stated many times that it is not possible to guarantee that everyone in Canada will be protected against inflation which is imported. That is a policy which cannot be achieved. When inflation is not caused within our own economy-for example, when prices increase elsewhere-it is impossible to protect everybody in Canada against such inflation.


Sinclair McKnight Stevens: The Minister of Finance is, in effect, confirming the loss of real buying power that our workers may experience. Surely even he agrees they have to continue to eat and heat their homes. Does the minister support the salary
June 16, 1978

increase that the AIB have taken unto themselves which results in an 11.5 per cent, in effect, salary increase when all contracts are taken into account? Bearing in mind that the 6 per cent ceiling was generally presented as something that all workers in Canada were to abide by, why does the AIB get an 1 1.5 per cent increase?


Joseph Jacques Jean Chrétien: Mr. Speaker, 1 did not have time to talk to Mr. Renouf this morning. However, I understand he does not accept the proposition that those working for the AIB are receiving such an increase. 1 understand he is going to deny that. I will be in touch with him to verify this. It would not be acceptable that they receive that level of increase, if that is the case. In any event, I will be talking with Mr. Renouf as quickly as I can.
[DOT] din)


Sinclair McKnight Stevens: Again to the Minister of Finance. As Mr. Renoufs explanation yesterday with respect to the 11.5 per cent increase was that people are on contracts as opposed to receiving an actual wage, would the minister tell us whether the figure mentioned is the actual figure, whether on a contract basis or otherwise and, if so, will he order that it be rolled back so that there may be at least some equity attached to the government's plan to hold people to a 6.5 per cent ceiling?


Joseph Jacques Jean Chrétien: I said I would look into that. I cannot accept the accuracy of the figure at this time because I have not spoken to Mr. Renouf. I understand it is not the case. Of course, if he has granted increases which are outside the allocation permitted under the AIB, I will look into the matter and act accordingly.


STUDY OF RATE OF INFLATION
Mr. James A. McGrath (St. John's East):: Mr. Speaker, 1 have a question for the Prime Minister. Yesterday, the chairman of the Economic Council, announcing the setting up of the new centre for the study of inflation and productivity, said the centre would be concerned with studying the reasons for the underlying rate of inflation, the components of which, of course, include food and energy. Considering that these two represent one-third of the basket which makes up the consumer price index and 60 per cent of the total increase in the rate of inflation over the past year, 1 ask the Prime Minister whether this is some kind of sick joke at the expense of Canadian consumers. If not, who will look into the cause of the serious increase in the price of food which is weighing so heavily on consumers?


Right Hon. P. E. Trudeau (Prime Minister):: I do not have the benefit of having the text of the lady's press conference before me, so 1 cannot check the context in which she said those words. If, as the Minister of Finance has just indicated, it was an assertion that no government could guarantee to indemnify all Canadians against higher costs abroad, that is the only reasonable position one can take. It is impossible for the government to guarantee that they will be held safe from
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price increases which appear in energy or food coming from abroad. Any attempt to the contrary would be mere hypocrisy.


James Aloysius McGrath: The Prime Minister did not have the same inhibitions a few years ago when the government established the Food Prices Review Board with complete investigatory powers to look into the underlying reasons for inflation in food prices. Now we are to have the ridiculous situation in which another agency, employing 75 people, will have no authority to look into food prices or energy prices. Moreover, we were told yesterday that the Anti-Inflation Board will continue to exist into the eighties, yet neither agency will concern itself with the price of food.
On behalf of Canadian consumers who can expect nothing but higher prices this summer, I suggest to the Prime Minister that the same criteria must surely exist now as existed when the Food Prices Review Board was established by the government. Does the government intend, at the very least, to direct the Economic Council to concern itself with the prices of food and energy which are of major interest to consumers?


Pierre Elliott Trudeau: The food monitoring action which was taken some years ago had to with gouging and excess profits in the distribution and processing industries in Canada. It has nothing to do with the high cost of food produced abroad, for the reason that it is impossible to force foreigners to accept what we think to be a fair price. If the hon. member made as great an effort at understanding as he seems to make at misunderstanding, I think this debate would be more easily understood by Canadians.


James Aloysius McGrath: I am trying to get the government to take a position which Canadian consumers will understand, because at this point they are confused. Beef and chicken are produced in this country, and there are charges by the Canadian Cattlemen's Association of profiteering and undue price spreads and charges by the Ontario Federation of Agriculture of pricegouging and profiteering with regard to chicken prices. Who is going to look into this? The new agency set up by the Economic Council of Canada does not have the terms of reference to do so. The AIB does not have the terms of reference to do so. The Minister of Consumer and Corporate Affairs has no enthusiasm for the job. Who, in the name of God, is going to look after the interests of Canadian consumers?


Pierre Elliott Trudeau: Mr. Speaker, the hon. member does not have to shout. The answer has been given several times in this House. The AIB is still in existence and will be until the end of December. It still has authority to look into cases of excessive pricing and gouging on the part of companies which will not have made their reports by then. When certain companies, unions or workers come out from under the cover of the AIB, they will be subject to the powers of examination of this new body set up by the Economic Council of Canada.
If this body finds that, with the normal accusations to which the hon. member is referring before it, there is proof which

June 16, 1978
Oral Questions
everybody can investigate through open sources but the truth still cannot be found, then that body will recommend to the government some investigatory action, some roll-back or some other action the government might take. At that point I hope we will have the support of the hon. member, who will remember his position today, but the opposition constantly waffles on whether it will support controls or not. 1 think hon. members opposite will have to make up their minds.


Mr. Clark:: Zap, you're frozen.


INDUSTRY
Mr. Edward Broadbent (Oshawa-Whitby):: Mr. Speaker, I have a question for the Minister of Industry, Trade and Commerce. Just over an hour ago the minister made the extraordinary announcement that he is appointing Mr. Simon Reisman to examine the Canadian automotive industry and to report some time early in the fall. Just two weeks ago the minister promised me in the House that during the month of June he would have an announcement to make about one automotive company and possibly about all three. The announcement was to be about their decision to expand needed facilities here in Canada.
Would the minister now confirm that today's pathetic announcement about the establishment of another study in addition to the Arthur report and the Ontario government study really means that he has failed completely to get the commitments from the Big Three he promised the House?


Hon. Jack H. Horner (Minister of Industry, Trade and Commerce):: Mr. Speaker, I at no time promised the House that I could get commitments from the Big Three. I told the House that we were attempting to get commitments from them. I think the House should recognize that we are entering into a new era in the automobile industry, brought about by the energy conservation measures with which the United States government and Canada have asked the industry to comply and the environmental measures with which both governments have asked the industry to comply. The industry has said that because of these and other things, it will have to make tremendous investments in plant repairs, renovation and new plant construction. Figures tossed about from time to time have been as high as $60 billion.
As I look at our own study, I see that between 1966 and 1970 about $159 million annually was spent in the automobile industry for updating the industry in Canada. Between 1970 and 1975 that decreased to $142 million annually. As a government, we are concerned that with regard to new investment either in plant renovation or in new plants we get the share which is demanded by the Canadian market. That is why we have given Mr. Reisman powers under the Inquiries Act to conduct a full investigation and to talk to the American government and to the Big Three automobile companies. If

necessary, Mr. Reisman even has the power to attempt to talk to offshore automobile manufacturers so that we can make certain that because of its market demand in the total picture, Canada gets its fair share of the investment.


John Edward Broadbent: Mr. Speaker, the minister took a long time to say nothing. I pointed out to the minister last fall that it was the intention of the industry on this continent to invest some $58 billion in new equipment. I urged last fall that something be done to make sure that we got our share to make up for the loss of 20,000 Canadian jobs because of the incompetence of this government. The minister has been saying for months that he has talked with the industry. Did he go specially to General Motors, Chrysler and Ford and ask them for written commitments about their investment plants for the next three years? That would be fully consistent with the pact. If the minister did so, will he now tell the House what the companies told him?


John (Jack) Henry Horner: We are continuing negotiations with the Big Three. I do not think there is any advantage in disclosing the stage of the negotiations right now with any one of the Big Three. However, I would like to say that we did set up a sector study on the automobile industry, headed by a very knowledgeable person, namely, Mr. Bell. I consulted him, and also Mr. White of the UAW. Both those persons, because of their direct involvement with the industry, felt that the steps we were taking were wise and prudent and that in the long term they would benefit Canada greatly.


Some hon. Members:: Hear, hear!


John Edward Broadbent: The minister knows that not only the Canadian UAW but the Automotive Parts Association of Canada on the business side is 100 per cent opposed to the steps he announced this morning. They recognize that to carry out another study is simply to acknowledge failure, simply an attempt by the government to buy further time. I use the word with care because I think it is appropriate, considering the fact that we have not had our share of investment for more than eight years. They are investing $58 billion in the next half a dozen years, and the minister has obtained not one commitment that he can report back to the House. Would he admit that there is a crisis in the implementation of the Canada-U.S. automotive agreement, would he admit that he has failed to resolve that crisis and, finally, related to that, will he resign because of his failure?


Mr. Speaker:: Order, please. The House will recognize the argumentative nature of the question.

June 16, 1978


HOUSING
Mr. Gerard Laprise (Abitibi):: Mr. Speaker, my question is for the Minister of State for Urban Affairs and deals with the AHOP housing program for 1976 and 1978. Can the minister tell us what happens when a house has been sold and the documents have been sent to the Central Mortgage and Housing Corporation office before May 1, 1978? In that case, does the 1976 or the 1978 act apply?


Hon. Andre Ouellet (Minister of State for Urban Affairs):: Mr. Speaker, if this is a specific case, I will be glad to look into it if the hon. member will send me all the particulars. At all events, all projects submitted before May 1 and approved before that date are subject, of course, to the previous regulations. As regards the requests submitted to the departmental officials after May 1, they are subject to the terms and conditions of the new regulations.


Gérard Laprise: Mr. Speaker, on a supplementary. I readily admit that the applications filed after May 1 fall within the ambit of the new act. But in the case of applications filed before May 1, but held up in the Central Mortgage and Housing Corporation office in order to be received or dealt with after May 1, does the old or the new policy apply to them, because some of the documents were sent well before May 1 and the Val d'Or office refused to accept them?


André Ouellet: Mr. Speaker, the specific case of those documents would have to be looked into. If they pertain to a general application without specific details, I think it would be difficult to accept them. If, on the other hand, they constitute a complete file respecting former requirements and regulations and that was not dealt with for lack of time or because there was a backlog of applications in the last days of April, then of course, as our officials at the regional level have discretionary powers, they would have to determine whether they fall within the first or the second category.


EXTERNAL AFFAIRS
John Carnell Crosbie: Mr. Speaker, my question is for the Prime Minister and it is in connection with the Arab boycott of Israel and the Jewish people. In that connection, our party supports legislation to make any compliance with that boycott illegal in Canada, but yesterday the Minister of Industry, Trade and Commerce was quoted by the Canadian Press as stating that the government does not plan legislation. He said:
Oral Questions
if we please the Canada-Israel committee, then we harm our chances of doing trade with the Arab states.
My question to the Prime Minister is, what is the priority of the government? Is it to ensure that Canadian Jewish people have their civil and human rights recognized, observed and upheld, and opposing any kind of boycott based on religious grounds; or is the government's priority doing trade with the Arab countries no matter what the humiliation, no matter what we have to put up with to do it? Which is it?


Pierre Elliott Trudeau: Mr. Speaker, the obvious dilemma in which the hon. member has put himself is not one in which the government wants to put itself. We believe in protecting Canadian citizens by ensuring the government in no way supports the boycott. This is a firm and practised policy. The effect of it is that very little, if any, significant trade is done in the Middle East by Canadians under the boycott. To trade in that area it is important to have government support, and one cannot receive Canadian support if he is complying with the boycott. Beyond this, we are not taking freedom away from individual Canadians who want to trade in the way they want, without government support, in any part of the world except those which are against the law, as in the case of the United Nations boycott on Rhodesia.


John Carnell Crosbie: Mr. Speaker, my supplementary question is directed to the Prime Minister. Can he tell the House what the minister meant when he said:
-if we please the Canada-Israel committee, then we harm our chances of doing trade with the Arab states.
Is the basis of the government's policy to please the Canada-Israel committee for whatever purposes that might entail, perhaps voting purposes or whatever, or does the government intend to do what is right no matter whom it pleases? Whether it pleases the Canada-Israel committee or not, is the government policy one which is going to battle to the hilt by legislation any attempt to force Canadians to deal with Arab countries only on a certain basis of racial or religious prejudice, or is the government only interested in trying to please the Canada-Israel committee? What is the basis of the government's policy?


Pierre Elliott Trudeau: Mr. Speaker, it seems to me the hon. member is a bit mixed up. Certainly, our policy is not to please him or the Canada-Israel committee. Our policy is to do what is right. I have just explained to the hon. member what we are doing. In the first place, we are not taking away freedom from all Canadians to do what they want in various parts of the world. I understand the Tory party is to do that, pass a law which will make it a crime to do certain things in other parts of the world.


Some hon. Members:: Oh, oh!


Sinclair McKnight Stevens: You do that.


Pierre Elliott Trudeau: This is what the hon. member is suggesting is Tory policy. It is not our policy.


Sinclair McKnight Stevens: We know what your policy is.

June 16, 1978
Oral Questions


Pierre Elliott Trudeau: Our policy is to ensure that the government will not support in any way people who are complying with a boycott which is contravening our concept of rights and dignity. But we are not making it a crime if some individuals want to comply with that policy on their own. What we are saying is that the effect of the governemtn's action is making such trade in the Middle East under boycott policies impractical and probably non-existent.


John Carnell Crosbie: Mr. Speaker, the government has a partial boycott policy which it wants to enforce in legislation. If the policy of the Prime Minister is so effective in preventing boycotts, why does he not go the whole way and make it illegal for a Canadian citizen to participate in that kind of boycott? Why does he hold back? If his policy is effective, then we are irritating the Arabs in any event. We are aggravating them and it may affect our trade. It seems to me that what the minister is saying is that we want an ineffective parliament.


Mr. Speaker:: Order, please.


Pierre Elliott Trudeau: Mr. Speaker, now the hon. member is worried that it is going to affect our trade. I think he is contradicting himself in his very question.


Mr. Hnatyshyn:: Bunkum!


FINANCE
Mr. Stan Darling (Parry Sound-Muskoka):: Mr. Speaker, my question is directed to the Minister of Finance. It concerns the low income earners of this country who, because prices for food consumed in the home have increased nearly 20 per cent in a year and fresh vegetables have gone up by 40 per cent in the same period, can no longer afford to feed their families adequately. Will the minister tell the House whether he has investigated the real impact of food price inflation on low income earners who spend over 40 per cent of their income on food?


Joseph Jacques Jean Chrétien: Mr. Speaker, as I have said many times, we have policies which provide compensation and payments to people who are in those categories of society. Most of those schemes are indexed with the cost of living, such as pension plans, unemployment insurance and other payments made by the provinces to people on welfare. Our policy is well known. We have indexed those social schemes in order to meet the conditions of those people.


Stan Darling: Mr. Speaker, my supplementary question is directed to the Minister of Finance. In light of the fact that the minister has no idea of the impact of his inflationary policies on low income earners, will he tell the House why he has not prevailed upon Statistics Canada, which produced this month's bogus inflation statistics that excluded food and

energy at his request, to come out with what my party has long recommended-a low income person's index?


Joseph Jacques Jean Chrétien: Mr. Speaker, I think the hon. member is spreading a false rumour. We are not asking Statistics Canada to change its formula. On a scientific basis, it decided that its formula has to be modified in order to meet the real cost of living in the land. We have used the same pattern for the past years. Some countries have three or four different indexes which are published every year. For scientific reasons, Statistics Canada modified its own formula. It is a very independent organization. There have been discussions with Statistics Canada and the labour movement. There were meetings between ministers, Statistics Canada and labour representatives. We do not want an index which suits us, or anyone. We want to have the truth in terms of inflation. Scientifically speaking, Statistics Canada has to make some changes.


HOUSING
Mr. Jim Fleming (York West):: Mr. Speaker, my question is directed to the Minister of State for Urban Affairs: it concerns the recent decision by CMHC to encourage conversion from the Assisted Home Ownership Program to the Assisted Rental Program. This is of particular concern in the metro Toronto area where there is a surplus of condominium units for sale and an acute shortage of rental accommodation. Therefore, I should like to ask the minister if he is prepared to instruct CMHC to be more flexible with the ARP square footage regulations so that more AHOP condominium units will be eligible for ARP assistance.


André Ouellet: Yes, Mr. Speaker, this is an excellent suggestion. I will convey to the officials of CMHC in Toronto, and in other large cities across Canada where it could be applied, the need to have some flexibility in evaluating the regulations of CMHC.


FINANCE
Arthur Ronald Huntington: Mr. Speaker, my question is directed to the Minister of Finance. Less than six months ago the Anti-Dumping Tribunal upheld the Algoma appeal and applied dumping duty to wide-flange steel beams. In view of the unnecessary injury and injustice imposed on British Columbia steel workers and industries, will the Minister of Finance now acknowledge that more than one market can exist in Canada, that Canadian producers are protected by freight rates which control and identify these markets, and that this is a concept fundamental to equity in the Canadian federation?
June 16, 1978


Joseph Jacques Jean Chrétien: Mr. Speaker, I have some difficulty accepting the principle that we have many countries within Canada. I think we need some national policies. We can make some adjustments once in a while. In the case of the steel problem in British Columbia, as part of the decision of the board it was decided to give an extension of time up to the end of this month to the people who consume that type of steel in British Columbia. I understand we have now received a letter requesting an extension of that exemption.
1 have to tell the hon. member that when the problem came to my desk in February 1 had been in touch with the British Columbia government which at that time said it would be quite satisfied if 1 extended this special case until the month of July. Now they seem to have changed their minds and are asking for a further extension, which is something we are looking into at this time.


Arthur Ronald Huntington: Mr. Speaker, the minister's answer indicates to me, and to anyone knowledgeable on this subject, that he has not been properly informed on this most important matter. In view of the unnecessary waste and disturbance which is being caused by this Anti-Dumping Tribunal ruling, will he now agree that we should isolate duties and safeguards to regions where safeguard is prompted through the threat or reality of injury? Also, will he not agree that injury should be isolated to the region or market where the injury can be identified and where recognition of this principle is prompted?


Joseph Jacques Jean Chrétien: Mr. Speaker, I think the hon. member is on a very dangerous course. If I were to subscribe to the theory which he is advocating, we would have ten different markets controlled internally in Canada and we would no longer have a country. On every issue raised in the last six months by the other side, I detect that they would rather have ten different nations as opposed to one Canada.


EXTERNAL AFFAIRS
Charles Joseph Clark: Mr. Speaker, I must say that members on this side of the House and, I am sure, the reasonable Canadian public very much regret that kind of distorting and baiting by the Minister of Finance who should behave himself more responsibly.


Some hon. Members:: Oh, oh!


Charles Joseph Clark: As soon as the other side quietens down, Mr. Speaker, my question will be to the Prime Minister. If I correctly understood the Prime Minister, in responding to my colleague from St. John's West, he said that present Canadian policy has the effect of making trade by Canadian firms with Arab countries, to use the Prime Minister's words, "impractical and probably non-existent". If that is the case, why did the
Oral Questions
Minister of Industry, Trade and Commerce say that any change in that practice would harm Canada's chances of trading with Arab nations? In other words, how can we harm what does not exist?


Pierre Elliott Trudeau: Mr. Speaker, since the hon. member used a preamble to lecture my colleague, the Minister of Finance, I am sure that he would not mind if I were to answer that preamble and support the Minister of Finance. The indignation of the Leader of the Opposition would be better addressed-


Mr. Baker (Grenville-Carleton):: Shameful.


Pierre Elliott Trudeau: -to his own members who stand up here and take positions which are indeed-


Walter David Baker: You are shameful, too.


Pierre Elliott Trudeau: -conducive to the destruction of the national market of Canada.


An hon. Member:: Canada's Senator McCarthy.


An hon. Member:: I cannot support that statement.


An hon. Member:: Sit down.


Pierre Elliott Trudeau: Come over here and make me sit down.


Some hon. Members:: Oh, oh!


Charles Joseph Clark: Mr. Speaker, we all know the Prime Minister's position, which was established in 1968 in a campaign, of gentle deception, that there is only one patriot in this country and that is himself, and that all the rest of us, because we happen to oppose what he has done to this country in the last decade, are somehow unpatriotic. That is not at all becoming to the Prime Minister. We are quite prepared to let those statements be judged by the Canadian public. I hear the member for Crowfoot, who should perhaps be reminded-


Mr. Speaker:: Order. It seems to me that each side of the House is getting very far away from the purpose of the question period.


Charles Joseph Clark: Mr. Speaker, I apologize to the House for following the attempt by the Minister of Finance and the Prime Minister to avoid answering a question about a very difficult position they have put themselves in regarding policy in the Middle East. The Prime Minister did not answer my earlier question. The situation is we have the Prime Minister of Canada saying that the present policy of Canada limits, almost to the point of non-existence, Canadian trade with Arab nations in which the boycott clause might be involved. The Minister of Industry, Trade and Commerce is quoted as saying, and to my knowledge he has not yet denied that statement although that is a frequent practice of his-


Some hon. Members:: Oh, oh!

June 16, 1978
Oral Questions


Charles Joseph Clark: The Minister of Industry, Trade and Commerce has now said that for Canada to adopt a policy different from the one which is now in place, to use his words, "might harm our chances of doing trade with Arab states." 1 ask the Prime Minister, if this policy which he is following now is so very effective in eliminating trade, how would a change in that policy harm trade that does not exist?


Pierre Elliott Trudeau: Mr. Speaker, once again referring to the little homily which the Leader of the Opposition dealt with in his preamble, he suggests we are talking about unpatriotic conduct. I suggest that he himself is trying to drag a red herring across the path of the discussion. He heard his own member suggest a theory regarding dumping policy, a policy which in effect would regionalize the country. This is not a question of bad patriotism; it is a question of bad economics. The hon. Leader of the Opposition should not draw the question of partriotism into the discussion.
In so far as what the Minister of Industry, Trade and Commerce has said, I would be glad to refer the hon. member's question to the minister and ask him to show the context in which he said that. Indeed, it is the current practice of the Leader of the Opposition to trot out things that he reads in the newspapers and which are generally inaccurate.


Charles Joseph Clark: Mr. Speaker, my question is really quite simple. On this matter of the effectiveness of Canadian policy in relation to the Arab boycott, are we to believe the Prime Minister when he says that this policy now eliminates any trade by Canadian companies with countries imposing a boycott, or are we to believe the contrary statement of the Minister of Industry, Trade and Commerce to the effect that a stronger policy, a policy of the kind we advocate and the United States of America practises, would stop trade involving countries practising a boycott but now exists because of the Government of Canada's position?


Pierre Elliott Trudeau: Mr. Speaker, it would be surprising if we had a Tory policy which was clear on this matter. 1 can tell hon. members what government policy is. When there are boycott clauses, we do not support companies which want to enter into trade with boycott clauses. The effect of this is that there is very little trade, if any, in contravention-


Charles Joseph Clark: Your minister says the opposite.


Pierre Elliott Trudeau: Mr. Speaker, if the Leader of the Opposition wants to ask questions, he should at least listen to the answers, not provide his own.


Mr. Gillespie:: Stand up.


Pierre Elliott Trudeau: I am saying that this is government policy. Apparently, if 1 listen to the Leader of the Opposition and his own members, the Tory policy would be to make trade with the Middle East impossible and make a law there. The policy we are taking now is that we can trade with the Middle East provided there is no respect of the boycott policy, which is supported by the government. The effect of this is that there is,
[Mr. Clark.)
indeed, a great deal of trade with the Middle East, and we welcome this because it is not contravening our anti-boycott policy and because our trade which is taking place is beneficial to Canadians.
We are not subscribing to any boycott policy practised by the Arab countries. This is our policy. But 1 understand that the Tory policy would be to pass a law. Either it would be a law which has the results we are obtaining now, or it would be a law which indeed would make trade with the Middle East, regardless of whether the boycott policies are respected or not, illegal. This is not our position.


TAKEOVER OF HUSKY OIL COMPANY
Mr. T. C. Douglas (Nanaimo-Cowichan-The Islands):: Mr. Speaker, my question is for the Minister of Energy, Mines and Resources. As the minister knows, during the past week we have seen a game of stock market badminton going on between two American companies, Husky Oil of Cody, Wyoming, and Occidental Petroleum Corporation of Los Angeles. Every time Petro-Canada has made an offer for the purchase of the Husky facilities in Canada, Occidental has raised the bid. This has happened twice in one week. The result is that the value of the stock has gone up by nearly $200 million, which ultimately the Canadian people are going to pay for.
1 want to ask the minister, in view of the apparent and almost transparent collusion between those two companies to run up the price of the holdings of Husky, what action does the minister and the government intend to take to deal with this very apparent deprivation of the Canadian people, not only of their oil resources but it is going to make them pay an extra $200 million for the privilege of losing those resources.


Alastair William Gillespie: Mr. Speaker, the hon. member has raised a legal question with me, the question of collusion and whether or not that could be prosecuted under Canadian law. That is a question I would be quite prepared to refer to the law officers of the Crown for an opinion.


Thomas Clement (Tommy) Douglas: Mr. Speaker, last Monday, June 12, at page 6268 of Hansard, in answering the hon. member for Calgary Centre the Minister of Energy, Mines and Resources said:
-he would realize that the activities, including acquisition by Petro-Canada, are very much in the national interest-
In view of that statement, in view of the statement made in the House yesterday by the Prime Minister and the statement allegedly made outside the House by the Minister of Energy, Mines and Resources, is the House to understand that the government has changed its position and that what is in the national interest is not whether Petro-Canada develops the
June 16, 1978

heavy oil reserves of the Alberta-Saskatchewan border but that they be developed no matter whether it is done by Canadians or foreign interests and controlled outside this country? Is that the position the government is taking since last monday?


Alastair William Gillespie: Mr. Speaker, there has been no change in position. I was answering a question the preamble to which made it quite clear that the questioner questioned whether the Crown corporation, Petro-Canada, should be involved in acquisitions or not. If the hon. member reads my answer again, he will note I was indicating that acquisitions were within the mandate of Petro-Canada.


THE CANADIAN ECONOMY
Mr. Paul E. McRae (Fort William):: Mr. Speaker, my question for the Minister of Finance follows an earlier statement by the Prime Minister to the effect that many beef distributors and processors still fall under the guidelines of the AIB. This was confirmed yesterday by Dr. Renouf following the fact that the AIB report for this quarter will not be ready until mid or late July.
Since most increases in beef prices occur in this quarter, if the minister has not had discussions with the Anti-Inflation Board would he take the matter up with them to see whether the report could be accelerated, in order to ensure there will be no excess profit-taking and that if there has been, it can be stopped as quickly as possible.


Joseph Jacques Jean Chrétien: Yes, Mr. Speaker, I think it is a good suggestion that we ask the AIB to have a special look at the businesses of people involved in products where there have been great price increases. I will be asking Dr. Renouf to make a special effort in that field.
While I am on my feet, Mr. Speaker, I should like to confirm that Dr. Renouf, chairman of the Anti-Inflation Board, denied that he was asking for big increases for AIB employees that would be above those allowed for other Canadian workers.


HOUSING
Mr. Dean Whiteway (Selkirk):: Mr. Speaker, my question is directed to the President of the Treasury Board and follows a question I put to him on Monday regarding the study dealing with AHOP mortgage defaults. My information is that the document was denied on the basis that it was a matter of national security. The minister undertook to look into this question. Can he tell the House whether it was classified as a
Ora! Questions
national security document and, if so, why? If it is not so classified, when can we expect him to table the report in the House?


Hon. Robert K. Andras (President of the Treasury Board):: Mr. Speaker, I have initiated some checking into the allegation of the hon. member. I do not believe his description of the document is correct. I have made reference to my colleague, the Minister of State for Urban Affairs. He has been away and I do not know whether he has had the opportunity to check on it, but perhaps he could respond to the question in more detail.


André Ouellet: Mr. Speaker, the answer to the question asked by the hon. member is that the percentage of all AHOP mortgage accounts in arrears of three months or more in December, 1977, was 0.53 per cent, compared to 0.36 per cent a year ago; so it is an infinitesimal percentage of arrears and I do not know why the hon. member is so upset about this.


Dean Waldon Whiteway: Mr. Speaker, I do not think I ever gave the impression of being upset. My question, which the minister did not answer, is whether there was a study by Treasury Board and whether it was classified as a national security document. If so, why was it so classified? If not, will the minister table the study in the House? Perhaps he could also indicate whether the government would be prepared to table today the terms of reference given for Mr. Bill Teron's leave of absence, so that we could be in a position-


Mr. Speaker:: Order, please. Surely that question cannot be a related or supplementary question.


Dean Waldon Whiteway: On a point of order, Mr. Speaker-


Mr. Speaker:: The hon. member for Edmonton-Strathcona.


EXTERNAL AFFAIRS
Douglas Roche: Mr. Speaker, my question is for the Prime Minister, returning to the subject of Canada's trade policies on South Africa. On December 19, 1977, the Secretary of State for External Affairs announced the policy of withdrawing Canada's trade counsellors from South Africa in protest against that country's apartheid policy. Today, CUSO announced it is withdrawing its investment in the Royal Bank in protest against that bank's policies of making loans to South Africa. This amounts to an escalation of Canada's steps against South Africa.
I wish to ask the Prime Minister if CUSO policy represents government policy. If so, why was the Royal Bank singled out when five major banks are making loans to South Africa?
6484

June 16, 1978
Oral Questions


Pierre Elliott Trudeau: Mr. Speaker, 1 have no responsibility for CUSO, nor does this government. I wonder what the hon. member's question is based on.


Douglas Roche: Mr. Speaker, I am absolutely astonished at the answer, since CUSO is Canada's largest governmental international development agency. It comes under the Department of External Affairs; it is funded by the Departent of External Affairs and funded by CIDA. 1 wish to ask the Prime Minister whether an action by a governmental agency, an agency funded by Canadian government funds, represents government policy?


Pierre Elliott Trudeau: Mr. Speaker, the hon. member is obviously confusing CIDA and CUSO. His allegation concerns CUSO, which is a private, non-governmental organization. We do not control it; we do not direct what it should do or should not do. It does get funds from the government, as many non-government organizations do, but are free to act and we do not try to dictate to them on the use of funds.


THE CANADIAN ECONOMY
Mr. Bill Clarke (Vancouver Quadra):: Mr. Speaker, my question is for the Minister of Finance and concerns the Anti-Inflation Board. Today, the Prime Minister confirmed that the anti-inflation program would wind down by December 31. While referring to the monitoring agency, the Prime Minister referred to a post-AIB monitoring board. The announcements made yesterday were that the new agency would be monitoring the consumer price index. If the AntiInflation Board will have nothing to do after December 31 this year, may I ask the Minister of Finance why the estimates provide for 330 continuing employees as of March 31, 1979?


Joseph Jacques Jean Chrétien: Mr. Speaker, I think the chairman explained that correctly yesterday. Of course, there will be some documentation to complete for the companies who have to report, who will finish by the end of the year. The reports will have to be analysed and verified, and there may be some problem that they have to comply with the law and pay back some funds, or another mechanism to make sure that the excess profit will be returned to consumers, and so on. It will take the number of man-years to wind up the operation. The hon. member has to recognize that it will wind down from 900 to 300 and by the end of the fiscal year 1979-80 nobody will be involved.


SALARIES OF AIB STAFF
David Orlikow: Mr. Speaker, my question to the Minister of Finance is on the subject already raised, the Anti-Inflation Board. The minister has given us the explanation of the chairman of the Anti-Inflation Board, but if one looks at the estimates tabled by the minister there is an

increase of some $479,000 for salaries and a decrease of over 60 people in the staff for the coming year. It seems obvious there is provision for an increase in the neighbourhood of 11 per cent for salaries.
Will the minister direct the chairman of the Anti-Inflation Board to see that no employee of the board will receive in the coming year more than the 6 per cent which is permitted other workers?


Joseph Jacques Jean Chrétien: Mr. Speaker, employees of the AIB are under the same rules and regulations as other employees of the government, and negotiation of their contract comes under the authority of my colleague, the President of the Treasury Board.


David Orlikow: A supplementary question. Since any requests for wage and salary increases of more than 6 per cent are studied, monitored and decided by the Anti-Inflation Board, who is going to decide on requests and proposals for increases of more than 6 per cent made by people working in the Anti-Inflation Board, and who will monitor and process those requests?


Joseph Jacques Jean Chrétien: Mr. Speaker, their increases will be given them by Treasury Board. Therefore, Treasury Board will apply to those employees the same rules and regulations that apply to all other employees of the government.


POINTS OF ORDER
Dean Waldon Whiteway: Mr. Speaker, I rise on a point of order relating to the question I raised-my first supplementary question to the Minister of State for Urban Affairs (Mr. Ouellet). I find no fault with you suggesting and ruling that the last part of my supplementary question had nothing to do with my original question. I do not argue with that, but surely my entire question ought not to have been ruled out of order on that basis. It was not a repetition of my first question because my first question was addressed to the President of the Treasury Board (Mr. Andras). At least, sir, 1 ought to have been permitted to ask a supplementary question. My first supplementary question ought to have been answered by the Minister of State for Urban Affairs. At least, Mr. Speaker, I should have been given the opportunity of a second supplementary question.


Mr. Speaker:: The hon. member has clearly confirmed my disposition, and that is that he had gone on to try to add in a matter which in no way related to his first two questions. I do not know how he could expect to have favourable treatment in the question period in doing something which he has now clearly acknowledged is out of order. In any case I was not certain whether the minister was rising to answer the first part of his question or not.
June 16, 1978


MR. ANDRAS-ANTI-INFLATION BOARD STAFF SALARIES
Robert Knight Andras: Mr. Speaker, I rise on a point of order. 1 think it would be dangerous to leave the impression which seems to have arisen out of the questioning today regarding the actions of the Anti-Inflation Board and salary revisions. It is absolutely lacking in fundamental research and examination of the facts to suggest that the base increase in estimates, salary-wise, from one year to another, reflects only individual settlements of classification, salaries or employees or positions, or contract negotiations. I will get a detailed analysis of how that is put together. But in the meantime I plead with hon. members and those observing this situation to recognize that those differences include some aspects of retroactive pay. It includes a change in mix-


Some hon. Members:: Order.


Robert Knight Andras: -it includes a change in mix-


Some hon. Members:: Order.


Mr. Speaker:: Order! 1 am sure the House is interested in the offer of the minister to table the document and do the research that he has just indicated. However, 1 am reluctant to let him go on at any great length about the components of it. To do so would be quite out of order at this time.


MR. ALEXANDER-ANTI-INFLATION BOARD STAFF SALARIES
Mr. Lincoln M. Alexander (Hamilton West):: Mr. Speaker, I was rising on the same point of order. We find that the Minister of Finance (Mr. Chretien) has restricted the private sector to 6 per cent, and we are trying to determine whether the same rules and regulations will apply-


An hon. Member:: Sit down.


Lincoln MacCauley Alexander: -to government employees, and as yet-


Mr. Speaker:: Order, please.


Lincoln MacCauley Alexander: -as yet the President of the Treasury Board-


Robert Knight Andras: Because I got cut off.


Mr. Speaker:: Order, please. Do I understand that the hon. member for Hamilton West (Mr. Alexander) is now pleading with me to allow the hon. President of the Treasury Board (Mr. Andras) to finish what he had to say?


Lincoln MacCauley Alexander: Mr. Speaker, he has not said anything yet, and all we are trying to find out is whether-


Some hon. Members:: Order.


Mr. Speaker:: Order, please. This is a precedent that I want to understand. Is the hon. member for Hamilton West asking me to permit the minister to have the floor now? Is that correct?
Order Paper Questions


Lincoln MacCauley Alexander: Mr. Speaker, if you want a direct answer, the answer is, no, because-


An hon. Member:: Hit and run.


MR. STEVENS-ANTI-INFLATION BOARD STAFF SALARIES
Sinclair McKnight Stevens: Mr. Speaker, I rise on a related point of order. I might be able to clear the air on this misunderstanding with respect to the AIB.


Some hon. Members:: Oh, oh!


Sinclair McKnight Stevens: I happen to have the actual transcript of what Mr. Renouf said yesterday before the Standing Committee on Finance dealing with this question of salaries-


Some hon. Members:: Order.


Mr. Speaker:: Order, please. Hon. members will realize that either we will launch into a discussion of a matter that is not listed on the orders of the day and not scheuled for discussion at this time, or we will not. To do so would be clearly out of order. In order to do that we would have to take some very special steps in respect to permission and agreement of the House. At the moment I do not even have an application for consent to do that.


QUESTIONS ON THE ORDER PAPER
[Stage Direction]
(Questions answered orally are indicated by an asterisk.)
Mr. Yvon Pinard (Parliamentary Secretary to President of Privy Council):: Mr. Speaker, the following questions will be answered today: 447, 1,115, 1,286, 1,519, 1553 and 1,615.


Mr. Leggatt: In each fiscal year since 1970, what amount was spent in the constituency of New Westminster by the Department of Employment and Immigration and those agencies that report to it?


Hon. Bud Cullen (Minister of Employment and Immigration):: 


[Stage Direction]
For the Department of Manpower and Immigration: (fiscal year), 1970-71, $1,321,042; 1971-72, $2,540,033; 1972-73, $3,252,085; 1973-74, $1,929,381; 1974-75, $2,718,200; 197576, $2,927,937; 1976-77, $4,057,109; 1977-78 (to September 30, 1977, $1,906,341; $20,652,128.
For the Unemployment Insurance Commission: (salaries and overtime) (calendar year), 1971, 1972, 1973, 1974 The information is not available; 1975, $1,210,991; 1976, $1,204,872; 1977, $1,358,811.
6486
[Stage Direction]
June 16, 1978
Order Paper Questions
For the U1C the financial system is not designed to identify costs other than those for salary and overtime by constituency and to attempt to provide a reply to this part of the question would be a very lengthy and costly procedure.
Mr. Rodriguez: For each fiscal year since 1970, what amount was spent in the constituency of Nickel Belt by the Department of Employment and Immigration and those agencies that report to it?


Jack Sydney George (Bud) Cullen: 


[Stage Direction]
For the Department of Manpower and Immigration: 197071, Not available; 1971-72, $2,059,620; 1972-73, $2,284,192; 1973-74, $3,359,861; 1974-75, $5,173,803; 1975-76, $5,366,925; 1976-77, $7,120,138; 1977-78, $5,571,793 (to December 31, 1977): $30,936,332. (Above totals include personnel costs and other expenditures).
For the Unemployment Insurance Commission: Personnel costs (calendar year): 1971, Information not available; 1972, Information not available; 1973, $656,487; 1974, $723,413; 1975, $828,981; 1976, $711,522; 1977, $790,047; $3,710,450. Other Expenditures (Fiscal Year): 1970-71 Not available; 1971-72, Not available; 1972-73, $774,890; 1973-74, $892,898; 1974-75, $989,820; 1975-76, $909,612; 1976-77, $800,398; 1977-78, $923,855.00; $5,291,473. The amount reported above does not include the unemployment insurance benefit payments as the financial system is not designed to identify costs by constituency.
Mr. Jones: 1.	Who pays for the unemployment insurance advertisements?
2.	Is this in the long run the money of those who are collecting the benefits?
3.	Should the advertisement then read, "Cheating on Unemployment Insurance is stealing from your neighbours, friends, fellow employees employers and the Government of Canada," and yourself?


Jack Sydney George (Bud) Cullen: 1, 2 and 3. See Beauchesne's Rules and Forms of the House of Commons, citation 171 (a) and (j).


Mr. Forrestall: 1.	Is Mr. A. E. Masters, president of the Maritime Employers Association, a member of the Montreal Port Authority and, if so, does the government consider this appointment an affront to the shipping communities in Halifax and Saint John and an antagonism to good management/labour relations in the ports?
2.	What was the total payment to Mr. Masters' by the government for each year of his appointment?
3.	Will the government remove Mr. Masters' immediately from his position as member of the Montreal Port Authority?


Hon. Otto E. Lang (Minister of Transport):: The National Harbours Board advises as follows: 1. Mr. Masters has been a
member of the Montreal Port Authority since it was established as an advisory body. The port authority membership includes representatives from both labour and employers, and Mr. Masters' knowledge and expertise in labour matters associated with shipping is considered an asset in providing advice to those responsible for management at the Port of Montreal.
2.	1972, $3,225; 1973, $2,237.50; 1974, $2,600; 1975, $2,650; 1976, $2,300; 1977, $2,400.
3.	No.


Mr. McKinnon: 1.	How many new-born babies were added to the (a) Quebec (b) Ontario family allowance rolls during the year (i) 1973 (ii) 1974 (iii) 1975?
2.	Is the (a) Quebec (b) Ontario region for family allowance purposes coincident with the boundaries of the Province and, if not, what are the differences?
3.	For the year 1975, what were the ages of the mothers in part 1?


Hon. Monique Begin (Minister of National Health and Welfare):: 1. Statistics Canada reports the following live births:
	Ontario	Quebec
1973	123,776	84,0571974	124,229	89,3641975	125,775	93,597
These figures do not provide an answer as to precisely how many new family allowances accounts were opened on behalf of new-born babies in those years because: (a) the children's parents may not have been residents of the province in which the birth was reported; (b) applications are not made on behalf of all surviving live births; (c) applications include those on behalf of new residents of the two provinces.
2.	(a) and (b) Yes.
3.	Information not available.


Mr. Epp: 1.	Did Mr. Lionel Orlikow receive funding in the form of a grant, loan, payment, etc., from the government for services rendered in fulfilling a specific contract, mandate, arrangement, entered into exclusively or jointly by the government and Mr. Orlikow and, if so (a) in what amount (b) for what purpose (c) for what period of time?
2.	Is anyone working with him or for him?
3.	Is he working in conjunction with any provincial or municipal government?


Hon. John Roberts (Secretary of State):: 1. No. (a), (b) and (c) Not applicable.
2.	Not applicable.
3.	Not applicable.

June 16, 1978


Mr. Speaker:: The questions enumerated by the parliamentary secretary have been answered.

[ Translation]


Yvon Pinard: Mr. Speaker, if question No. 1,468 could be made an order for return, this return would be tabled immediately.


Mr. Speaker:: Is it the pleasure of the House that question No. 1,468 be deemed to have been made an order for return?


Some hon. Members:: Agreed.


Mr. Allard: 1.	Since the implementation of the Local Initiatives Program, did the government allocate money to the constituency of Rimouski and, if so, in what amount?
2.	For each project accepted, what was the (a) name of the project (b) amount allocated (c) year of acceptance (d) name of the municipality involved (e) number of jobs created?
Return tabled.


Mr. Speaker:: Shall the remaining questions be allowed to stand?


Some hon. Members:: Agreed.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed, from Tuesday, June 13, consideration in committee of the whole of Bill C-56, to amend the statute law relating to income tax and to authorize payments related to provincial sales tax reductions-Mr. Chretien-Mr. Ethier in the chair.
The Chairman:: When the committee rose on Tuesday, June 13, 1978, clauses 6 and 17 were allowed to stand, and clause 30 was before the committee.
On clause 30-Deduction from tax otherwise payable.
Income Tax Act


Mr.   La Salle@: Mr. Chairman, 1 should like to add to the remarks I was making a few days ago. 1 think it is still important to remind the committee of the fundamental principle we have always fought for on this side of the House, namely that arrangements should be made between governments, federal and provincial, not only when dealing with Quebec but with all the provinces. 1 know the minister has reminded us repeatedly that there were agreements with eight out of nine provinces. The position of my colleagues, which is also mine, has always been that whenever one province cannot accept the federal proposal, it is possible-and there have been precedents-for the minister of the federal government to enter into special arrangements in order to allow the citizens of that province to benefit from the generous proposal now before us.
I really think, Mr. Chairman, that I am not exaggerating when I say that Quebec did submit such a proposal. We remember full well, and we have even repeated it, that the Minister of Finance proved that Quebec did not commit itself with regard to the proposal made by the Minister of Finance, and that it should. That is one interpretation that could be discussed at great length. The Minister of Finance also knew that the Quebec budget had not been brought down. The Minister of Finance should therefore have expected Quebec, in response to the federal government proposal, to try and direct those credits to the areas experiencing severe problems.
In general, I am sure people would not blame any government for trying to stimulate those areas while at the same time allowing the citizens of Quebec to benefit from that money, according to the method suggested by the Quebec government, namely a cut in the 8 per cent sales tax. To that, of course, some will answer that Quebec or any other province are quite free to reduce their taxes as they see fit. But the fact remains that the proposal submitted by the Quebec government, in the present state of the situation in Quebec as we know it, was designed to meet a special need which all hon. members do recognize.
So, my question to the Minister of Finance is this. I am well aware that there is a bill before the House and that we are considering it in committee. 1 think that the minister gave the impression that he did not want to amend the bill. The Quebec premier, in his phone call yesterday, qualified, I believe, Quebec's position-and 1 must agree with the Minister of Finance that in my view, Mr. Parizeau's proposal or letter was not clear enough. It recognized the authority of the federal government and also noted that if the government's position remained unchanged, Quebec did not want to loose these millions of dollars.
We also acknowledge that the second proposal contained in the letter is closer to the formula proposed by Mr. Ryan, the leader of the Quebec Liberal party, and also that Quebec

June 16, 1978
Income Tax Act
would have preferred this proposal. In any event, the minister will recognize that Quebec would have preferred the second proposal. The minister is saying: I have introduced my bill and 1 do not intend to amend it. Nevertheless, it remains that normally the federal government should do its utmost to come to an agreement with the provincial governments. The second proposal contained in this letter would meet much more the wishes of all members and all parties in the National Assembly. 1 would therefore ask this question of the Minister of Finance:
Would the Minister of Finance be willing to reconsider today the clause before us and attempt to come to an arrangement with the Quebec government under which the federal government would not pay the taxpayers directly, but which would meet the objectives that the Minister of Finance set out in his budget?


Joseph Jacques Jean Chrétien: Mr. Chairman, I have tried time and time again to come to some agreement. Since the budget was brought down, I have made four additional proposals to the Quebec government which were all turned down with a good deal of arrogance. I called the Quebec finance minister several times but he called me for the first time only recently, and last Monday, I confirmed to him that I was proceeding with the bill in its present form. 1 should like to point out to the hon. member, more especially as he just said that the sales tax provision was included in Mr. Parizeau's budget, that it is not so. He made unilateral tax changes on a Wednesday, outside the agreement which the other provinces and outside his budget which he did not table before the following Monday. Therefore, he acted unilaterally and gave me only a three-hour notice. He did not negotiate, he just said: "I'm doing it alone". I replied: "You certainly have a right to do so, it is your tax, your jurisdiction, you do as you please." But you accept only part of the federal proposal. And, ultimately, I agreed to pay the $40 millions for which Quebec qualified.
Then, two weeks ago, I had several contacts with Mr. Parizeau, and, in order to avoid confusion, I even invited my colleague, the Minister of State for Federal-Provincial Relations to attend a telephone conference like those that are announced every day on television, and at the other end of the line there was at least Claude Morin, the minister of intergovernmental affairs. So there could be no confusion, since there were also a group of officials in my office at that time, and I suppose there were some other people in the other office too. Even after that, my proposals were rejected. One week later, that is on June 7, i received a letter from Mr. Parizeau in which he said, concerning that proposal we are discussing today, and I quote:
"-on the very basis of the originality of the economic and tax policies of the government of Quebec-"
That was not in his letter, but at the press conference he held at that time-
"-I would like to examine the first one-", but that is the one we are considering now and proceeding with.
Last Wednesday he told me: whether you choose 1977 or 1978, it makes no difference to me. That was quite an about-face compared to the position they held before. He also said that in terms of the originality of the economic and fiscal policies, that was the one he preferred. But it was exactly what I had proposed on May 15 and the Quebec government tells me: We can accept that! When I have been trying for almost a month to convince everybody that it was acceptable. I report to my colleagues in the cabinet and they say: Congratulations! At last they see it your way! Last week, instead of gloating over it, because it was a significant retreat on the part of the Quebec government, I was even very modest when I received Mr. Parizeau's letter. So I proceeded as 1 had been announcing for a month, reduction of $85 so that the money can flow immediately into the Quebec economy.
Mr. Parizeau said in his letter last week that he intended to recover. He can recover whenever and whatever he wants. He is responsible in his own field. If he spends money before receiving it, I am not the financial critic who will hold him responsible before the National Assembly. But I decided that, as the government of Quebec did not subscribe to our national plan endorsed by the other eight provinces up to $186 million, and as the hon. member for Joliette came in the House at that time saying that we were unfair towards Quebec, I would not penalize Quebeckers and I would reduce their income tax. That is what we did, and that is what we are doing today.
If Mr. Parizeau needs $186 million, $190 million, $300 million or even $50 million, he simply has to increase his taxes. I do not want the Quebec taxpayers to be penalized. If he can convince them that it would be in their best interests to do something else than take the money I am offering Quebec, and if they accept that, good for him. However, he refused to go along with a national agreement, but he was free to take part. I did not force him.
He said "no", two days later and he acted on a unilateral basis in his own jurisdiction, according to his own priorities. This proves that I did not interfere with his area of responsibilities. But since he did not qualify on a national basis for this amount of $186 million, and we wanted to inject $186 million into the Quebec economy we decided on a tax abatement for 1977. The reason why we chose the 1977 fiscal year, and I repeat it once again, is that 200,000 taxpayers would not benefit if we had chosen the 1978 taxpayers' list; moreover, the money would not reach the Quebec economy until 1979. So this is quite fair to Quebeckers. If Mr. Parizeau now realizes "he has painted himself into a corner" that is his problem, I was willing to co-operate. I am not the one who refused to agree. And then in yesterday's letter he tells me to forget about last week's letter. Listen, we are no longer kids. You saw Mr. Parizeau's press conference last week. He was very confident, all smiles, and said that if Mr. Chretien chose option No.

June 16, 1978

1, that was the one he preferred because the originality of his fiscal and economic policies will be improved. I imagine the originality disappeared during the week and the minister now has problems.
That is too bad, 1 have problems too. The hon. member for Joliette gave me a couple. Ele also created problems for himself and I find that at this point when we are talking about good relationships in Canada, it is rather surprising to see the premier yesterday threaten me on television and threaten the Parliament of Canada. I think that is going a bit too far. Earlier the hon. member for Joliette who is the ambassador of the Parti Quebecois to the Tories, if not this Elouse, rose and said: What do you want? Accommodate them! 1 made accommodations, Mr. Chairman, more than would have been expected under these circumstances. However, 1 think that what 1 am doing is quite fair to Quebec taxpayers. But Mr. Parizeau painted himself into a corner; he says he wants $186 million, he spent $186 million and put it down in his books, in his budget as an account receivable from the federal government-without an agreement. Any business accountant who would do a thing like that would get fired. There was no contract, there was no contractual obligation between the federal government and the province, he possibly thought that politically he could twist my arm, well, he possibly assumed that, and I showed a lot of flexibility but for him it was all or nothing.
The hon. member for Joliette spent whole question periods telling me: Send Quebeckers a cheque. It took me weeks to make them understand that we were not sending the other provinces any and that I could not do it for Quebec. Eventually, Mr. Parizeau recognized that I was right, that it was logical, then he asked me for a collection agreement, contrary to all Quebec traditions since 1954. The last time we spoke about that, that is Tuesday, the hon. member for Joliette said if he were Parizeau he would never have asked for it because it was betraying the Quebec traditions since 1954, if I understood him correctly.
And now they are in a bind, they want us to help them out. They should have tried to co-operate with us from the beginning. Again last week they were saying: Do as you wish with your taxes, Mr. Chretien, it is your jurisdiction. I recognize he may do whatever he wants in his jurisdiction, so there is no problem. I do what I want in my jurisdiction and he does what he wants in his. He says: Do what you want! I decided to go ahead with my bill. Now that I have made this decision, he turns around once more and demands exactly the opposite of what I wanted to do. I hope it is a serious government. When he writes to the Minister of Finance of Canada, I expect him to stand by his word. On budget night, Mr. Parizeau did not answer yes or no.
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I was justified in being furious because the others did respect the agreement. I thought that throughout this dispute it was possible for the Minister of Finance of Canada who has a national responsibility to talk with Mr. Parizeau as a minister of finance without any consideration for his political goal- the destruction of Canada-that I could deal with him as I did with the minister of finance of Ontario or of British Columbia. And when I met him in Montreal with Mr. McKeough, he told me himself that for the first time in the history of Canada before presenting a budget the Minister of Finance was talking of fiscal economic policy, of the monetary policy of the Bank of Canada, of the value of the Canadian dollar and its effect on the economy of Quebec or Ontario. 1 was told it was fantastic. But he should have played the role of an elected government trying to provide good administration and not only trying to prove that Confederation does not work.
He could have suggested amendments to my proposal at that time and perhaps I would then have become his ally. But he preferred to remain silent and after an agreement was reached 48 hours later, I was accused of being inflexible. I believe I went very far in my offers. I even offered the full Ryan formula two weeks ago. Now, it is no longer the Ryan formula, it is something else which includes interests and $40 million cash. There is no end to this. We have been trying to solve this problem for two months. The House lost many hours before June 7 when Mr. Parizeau said: You are entitled to do what you did and the Quebec government will let you do as you wish.
I have now made my choice and as 1 said before I have no intention of changing my mind. Now, 1 am being threatened. Threats do not scare me. If Mr. Parizeau needs $200 million, $500 million or $1 billion, this does not bother me, it is his problem. When I have problems, 1 try to solve them. He must do the same. He must now face reality. He has strutted like a peacock for two months and now he must pay the piper. Let him do so. For my part, I shall go on being fair with Quebec citizens, and I shall send them up to $85 for each taxpayer in 1977. Mr. Parizeau wants to take his tax roll from 1977 and send us a bill of $85 or more if he needs more. That is his business. It is his problem. The voters will judge. For my part, I shall have reduced the taxes of Quebec taxpayers by up to $85. If Mr. Parizeau wants to get it back from the taxpayers, let him do so. If he wants to get more, let him do so. The taxpayers will know that the federal government has reduced the taxes of federal taxpayers. In this way, justice will be done.


Mr.   La Salle@: Mr. Chairman, I would like the minister to tell us if it would be possible for him to establish an agreement under which the taxes paid by Quebeckers to Ottawa could be freed to allow the Quebec government to recuperate these taxes, as this would change nothing to the proposal, would not increase by one cent the contribution of the federal government, and would also meet one of our basic principles, that is that the agreements would be between governments. I would

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like to know if the minister could do this. I would like him to tell us if he could do this and then I have other questions to ask him. I believe the minister has every means to do this if he so decides.


Joseph Jacques Jean Chrétien: Mr. Chairman, the government took a long and hard look at this issue on many occasions. We took a decision within our jurisdiction. As you know, it was impossible to reach an agreement with the Quebec government. From the outset I was looking for an agreement and I came up with four additional proposals. But it is obvious he does not want any agreement. Again yesterday they did not try to get an agreement. They said: "Accept our conditions or else''. Big words. Listen, we are not kids anymore. 1 have seen worse than that. I am not impressed by those threats. That is no way to work out solutions. I made five proposals but Quebec refuses to accept them. What can I do?
As a member of the National Assembly told me last night, they came out with that last night because they wanted to draw the attention of reporters away from the bloody mess which the government finds itself in after the National Assembly was closed down because of a demonstration. They wanted to empty the press gallery so no one would see that the government was in trouble with a motion which would have forced it to recognize that the justice minister was wrong. I cannot make a judgment, but the newspapers reported that he refused to have the doors of the assembly opened by the police. And then to get the reporters out of that debate, they held a press conference at 8:50, right in the middle of the speech of opposition leader, Mr. Gerard D. Levesque. What can 1 do? We are now at the eleventh hour. For two months and four days now we have been stuck with that issue, a measure supported by all people in Canada, that is a sales tax reduction to improve demand.
Last week, after several attempts and even after endorsing the Ryan formula, not without some misgivings, 1 decided to go ahead, come what may. If they have problems, let them solve them. When I have problems, I deal with them, even if the opposition members make my life very difficult and I do not blame them. What can we do? That is democracy. I assume my responsibilities, and 1 did so upon receipt of the letter of June 7, after untold negotiations and interventions by many people from all sides who tried to help us find a solution. 1 am going ahead with what was in fact my original proposal which was agreeable last week to the Quebec government and that became suddenly, one week later, socially unfair. Let us not forget that there is nothing unfair in tax cuts. They go to taxpayers. Not to people who do not pay taxes.
When I cut taxes by $100 in January it was for the benefit of taxpayers. Those who do not pay taxes, are on welfare or unemployment insurance, have other programs and are not affected by tax cuts. Only taxpayers are affected by tax cuts

and there is nothing socially unfair in this. 1 believe that there is much fairness in giving out $85 because if 1 had applied a tax percentage formula, the better off would have got much more than $85 and I wanted to give the maximum. As we are talking about social justice, 1 wish to mention to the hon. member that in Mr. Parizeau's proposal, when he cuts the sales tax it is on luxury items. Someone who buys a $10,000 fur coat saves $800 on the sales tax. If you buy Roche-Bobois furniture imported from France at Valiquette's in Montreal, or that kind of stores, you are going to save $800 on a $10,000 purchase while with my proposal even a millionaire gets no more than $85.


Mr.   La Salle@: 1 would rather not discuss the government's proposal. It was recognized as valid and effective, a view shared by other provinces. I think that the Minister of Finance who is accusing the Quebec government of having changed its mind, has himself changed his mind and I am not blaming him for that. At first, he refused categorically to accept a selective tax reduction but now he accepts it and the Quebec government will be able to play with that money any way it wishes in applying a selective tax reduction. This means an 8 per cent increase in the taxpayer's income, whichever way we look at it, and I believe is a good measure. We think that it is possible to reach an agreement with other governments and we are convinced that the Minister in spite of his stubbornness should come to an agreement, not to indulge Mr. Parizeau but as a matter of principle. We would be very glad to see the two governments enter into an agreement and we would support any amendment aiming at a settlement on a government to government basis. When the minister repeats that he made four or five proposals which were all turned down and that he too, refused offers which were extended to him, nevertheless we insist an arrangement should be worked out which would allow the federal government to abandon the field of taxation altogether as refunds are being given to all other provinces, pursuant to agreements which have been going on for years. In the present case 1 am sure the Finance Minister could suggest an agreement which we would be able to support and which would be made on a government to government basis. We are ready, if necessary, to put forward specific proposals ourselves to induce the government to seriously consider such an arrangement in keeping with basic principles of federal and provincial co-operation. In so doing, our purpose is not to ingratiate to Mr. Parizeau and I agree with the federal finance minister that he has unfortunately rejected too hastily the last proposal made by his federal counterpart. Forty-eight hours before it was turned down, we tried again to induce the Minister of Finance to come to an agreement with the Quebec government, and if it were a Liberal government, we would have done the same thing. The government can keep on trying to fool us as it has done for the past two months with all kinds of arguments and reasons.

June 16, 1978

The Minister of Finance mentioned earlier the problem which the Quebec government had yesterday with its civil servants. It is none of our business, Mr. Chairman. 1 think that we are dealing presently with clause 30 and if Mr. Parizeau is having problems with the civil servants, I do not even want to talk about it today. If he were willing to put aside his stubbornness, the Minister of Finance could move an amendment to his bill which, we in the opposition would fully support in order to safeguard this basic principle, namely to come to an agreement as was done with the other provinces between the two levels of government.


Mr. Chr6tien:: Mr. Chairman, 1 have stated on several occasions that 1 have tried repeatedly to reach an agreement. This has not been possible. I think that our position is the most equitable, the clearest and the most in keeping with the spirit of the negotiations 1 had with the other provinces. The other provinces might also have wanted a selective cut. I called the finance ministers of the other provinces and asked them whether it was acceptable to them that I agree to the Quebec proposal. 1 called three finance ministers. They answered me: not at all, because had we been given the same choice, we would have done the same thing. So it was too late. The provinces did not agree. Besides, Mr. McKeough of Ontario made two speeches on this subject.
We therefore decided not to penalize the Quebec taxpayers because they have a higher level of taxation. That suits me fine because my proposal is quite flexible. In the maritime provinces, we have paid for the three percentage points. In the case of Quebec, we have paid $40 million to the provincial government because it went along with the national scheme to the extent of some $40 million. There has been a great deal of flexibility. Quebec has left $186 million on the table. The fairest and most equitable way of rebating that money is to repay Quebec taxpayers, who will know that in Chretien's budget of April last there are incentives for Quebec's economy. And if Mr. Parizeau in turn wants to provide incentives in his budget, that is his business. This way people will know for sure that 1 operated within my jurisdiction, and he did in his jurisdiction. So they can give credit where credit is due, for better or for worse. It will be the electors' choice. Nobody will suffer there. In the motion the hon. member for Levis was attempting to read in this House concerning the unanimous vote in Quebec's National Assembly, he was referring to a just solution for Quebeckers. But Quebeckers as Quebeckers are losing nothing, absolutely nothing, as taxpayers. This is fair and just.
The hon. member for Joliette wants me to make an arrangement with Quebec's government. I tried. 1 am glad he now recognizes I have been making efforts. He calls on still more flexibility on my part. Listen, I tried everything. There are 24 hours left before second reading. There have been no counteroffers. This is an ultimatum. It is either this, or else. Well, this does not impress me. So I go on with my bill. And anyway
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Quebeckers lost nothing, it is altogether fair that those who paid taxes in 1977 get tax credit, the vacating of a fiscal field.
Anytime the Quebec government may occupy a fiscal field. In January, when I cut the personal income tax by $100, they would have taxed those $100. Only, Quebec taxpayers will know of course the Quebec government did it. What do they want, finally? They would like to get all the credit for what they did with sales taxes, then they would like me to come up and fill the gap. Is that two-way federalism? I do not believe so. That is not fair. 1 want to show Quebeckers that the Canadian government stimulated the economy to the tune of $186 million, not including the $40 million sales tax for which they qualified. Nobody is losing. If Mr. Parizeau wants to collect that money rather than face a deficit, as Mr. Levesque indicated last night on TV, he is free to do so. Last week, as I said a while ago, he thought that it was for the originality of the Quebec economic and fiscal policies. Well, alright, let him be original in his fiscal and budgetary measures.


Mr. Joyal:: Mr. Chairman, the Minister of Finance recognized that Quebec is trying to achieve the purposes set forward in his budget of April 10 last. This is why he admitted that he must refund $40 million to Quebec. The $186 million payment remains in abeyance. The minister suggested in his bill a direct and immediate refund to Quebec taxpayers. This is provided in clause 30(b). This proposal, in my opinion, has some major disadvantages and raises a basic question. On the one hand, it is costly for all Quebec taxpayers. Indeed, the cost of issuing refund cheques and the corresponding collection costs by the Quebec department of revenue will come to about $3 million. That is what the Joint Committee of the Senate and of the House of Commons recognized at page 51, chapter 20 of its 1972 report, and I quote:
With regard to the method of compensation provided in the federal government's proposal should a province elect to opt out, direct reimbursement to individuals is unacceptable to us. From the administrative standpoint it implies that all individuals in a non-participating province would first pay a certain amount of tax in one form or another to the federal government; they would then receive a cheque or a tax credit from the federal government; finally these same individuals would be taxed again by their provincial government, which would likely want to set up a program to replace the one in which it refused to participate. Administratively, this procedure seems too unwieldy.
On the other hand, the repayment formula, as described in section 30(b) is likely to create important distortions in the current operations of the government of Quebec: it implies that, in order to make up for the missing sums, the government of Quebec would have, through immediate legislation, to impose a special tax with a view to recovering the $85 Ottawa is paying to Quebec taxpayers.
The whole operation takes on a special connotation at this stage of the constitutional debate. As a matter of fact, the white paper entitled "A Time for Action" states, under the heading "Renewing the Practice of Federalism", and I quote:
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The character of Canadian federalism has varied with time, so that today the federal and provincial governments are more interdependent than at any point in our history.
The federal government proposes the following objectives so that this interdependence may operate effectively while permitting each order of government to serve its citizens as well as possible:
-to bring about a less contentious federal-provincial relationship;
-to eliminate wasteful duplication of legislation, regulations, policies, programs or services, and generally to make the effective provision of services by government less costly.
An a little further on:
To take deliberate steps to ensure that, for its part, the federal government takes fully into account the constitutional responsibilities and priorities of provincial governments, by consulting the provinces when preparing a legislative proposal, formulating a policy, or designing a program that is in an area of shared jurisdiction or that could have a significant effect-financial or other- on an area of provincial responsibility or an activity within that area;
In the federalist system, when one level of government decides to withdraw partly from a program whose aim touches the field of its exclusive jurisdictions, the corresponding compensation to the taxpayers of that province must not be made over the head of the provincial government concerned. In this case, the Quebec decision to selectively remove the tax on four particular items was not a decision that was made, in our political regime, by individual taxpayers. It was made by their government, a government formed after a democratic election.
Since the political and constitutional responsibility for this decision rests with the government of the province of Quebec, it is with this government that the federal government must agree on the compensation formula. This is at the very heart of the sharing of responsibilities in a federal government structure. Of course, the Quebec minister of finance can write to his federal counterpart that "if you do not amend Bill C-56, the government of Quebec will take the necessary action to recover a global amount equivalent to the sum which otherwise would have been paid to the province by the federal government". However, should the federal government persist in this attitude, it would go against the spirit and the general philosophy of a federal experience which they precisely intend to renew, according to their own words. Respect for the legislative and executive independence of each level of government in a healthy federal structure demands that the responsibility for decisions taken remains in the hands of governments.
Under the formula described in clause 30(b), the federal government would directly return to the taxpayers part of the taxes it collected as compensation for a decision made by an autonomous and legitimate provincial government. Under the second formula, which provides for a tax rebate, or a cut in the tax to be paid in the next taxation year, the federal government would avoid the process of tax collection and reimbursement and leave the corresponding tax room to the province.
In the first case, the federal government collects taxes and reimburses them; in the second case, it lowers its taxes. In other words, in the first case, the government reduces its revenue, and in the second case, it cuts down on its expendi-
[Mr. Joyal.J
tures. This is a major difference since the power to tax matches the power to spend. In the case of clause 30, a basic question is asked: How may the federal spending power be exercised? In other words, does the federal government have the power in our federal system to hand out directly to the citizens of a province a financial compensation when the government of this province partly withdraws from a program dealing with something that properly falls within an exclusively provincial jurisdiction?
If the answer is yes, what is there left of the jurisdiction of exclusive powers of the provinces? Can this precedent not serve in the future to justify some federal intrusion, even of a temporary nature, in the field of education, for instance? The limits to the federal government spending powers were partly defined in a judgment rendered in 1937 by the Privy Council in the well-known case of unemployment insurance. In this regard, the Privy Council ruled that the federal parliament is empowered.
-to collect taxes to establish a special fund which would be used to pay subsidies to individuals, corporations or public agencies in the interest of the whole population, but in so doing, the federal parliament cannot take any action which "can intrude on the provincial civil rights or be related to the areas exclusively under provincial jurisdiction.
However, as Professor Ivan Bernier of Laval University wrote, from this point onward, nothing is clear:
Should it be considered that the federal Parliament has full discretion to act in areas of provincial jurisdiction so long as it does not legislate as such? Or, on the contrary, that the federal parliament must not encroach upon areas under provincial jurisdiction or that it can spend in those areas, but without laying down any conditions.
Yet, neither the provincial government nor the federal government have tried since to have this issue clarified by the courts. We can then conclude that there is a modus vivendi which allows the federal parliament to initiate measures in areas that come clearly under provincial jurisdiction without the province openly challenging the legality of such measures, as they prefer to benefit from the amounts offered to them.
But on the political level, the debate is going on. In 1969, the federal government published a white paper suggesting that the Parliament of Canada has the power to make conditional grants in areas coming under exclusive provincial jurisdiction and to compensate directly the taxpayers of the provinces which would refuse to participate in all or part of the program put forward by the federal government.
The final report of the joint special committee of the Senate and the House of Commons tabled in 1972 stated that the repayment was to be made directly to the government of the province.
Since then, no discussions nor rulings have shed light on that debate.
The letter of the Quebec finance minister dated June 7 does not shed any more light on that debate. It leaves the federal

government free to choose between a direct payment to the taxpayers or a tax rebate at the end of the next taxation year.
The first proposal contained in Mr. Parizeau's letter dated June 7 may seem surprising when one reads the briefs and position statements submitted by Quebec at previous constitutional conferences and during prior discussions on the limits of the federal government spending power. Quebec has always maintained that the federal government could not in the exercise of its spending powers intervene in areas of exclusive provincial jurisdiction and pay contributions directly to the citizens of an opting out province.
The letter of June 7 does not contain any reassertion of the traditional Quebec position with respect to the spending powers of the federal government and the direct reimbursement of taxpayers. Nor does it express any intention of questioning the constitutionality of clause 30 of Bill C-56 the nature and limits of which, needless to remind you, have not been defined by the courts. Nor the letter of June 14 which was made public yesterday reiterate the essence of the principle involved in clause 30. Yet the question remains unanswered and the debate open. There is no doubt in my mind that we must avoid creating a precedent that would only postpone a definition of federal spending powers commonly acceptable to the federal government and the provinces in the constitutional debate that is getting under way.
Therefore, considering the arguments previously made I believe that the hon. Minister of Finance should undertake to reimburse Quebec taxpayers using the tax abatement formula set out in subclause (1) of clause 30(a) and to withdraw subclause 30(b). By doing so the spirit of federalism would be observed, a practice the federal government wants to renew; he would avoid the distortions caused by the imposition of a special tax and he would put an end to the political debate which rallied unanimous support in Quebec. Otherwise, the debate which should redefine the constitutional balance in this country will be seriously endangered. I would like, Mr. Speaker, to put a question directly to the Minister of Finance.
The hon. Minister of Finance has said that one of the reasons why he wants to reimburse directly Quebec taxpayers is to immediately inject an amount of $186 million in the Quebec economy. Will the minister not recognize however that the effect of that stimulus will certainly be limited and shortlived since it is not at all certain that the tax-payers who will be receiving it will use it to increase their spending but rather that they will put it in their savings accounts or spend it abroad. Does he not also recognize that the stimulus will certainly be short-lived because according to the letter of June 7, Quebec will soon retrieve a similar amount from the taxpayers?


Joseph Jacques Jean Chrétien: Well, Mr. Chairman, 1 think that if Quebec had accepted my proposal last April and reduced its tax on all items within the economy of Quebec just as the other provinces had agreed to do, we would not have had any problems and
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this is the direction in which we would have liked Quebec to move. However, they even refused to talk about it and failed to answer yes or no. Because we have no agreement with Quebec and since they did not accept the national scheme, the other alternative was to reduce our Income Tax and that is what we are actually doing. With respect to the national scheme, I can say that they have stimulated the Quebec economy for up to an amount of $40 million and this is what we are acknowledging.
As for the balance, we are doing what we intended to do, namely reducing our federal income tax. Sure enough, if Mr. Parizeau turns around and retrieves that amount, the effect of the measure will be nil but Mr. Parizeau alone and not I will be blamed for it.
In addition, I would like to go over the hon. member's remarks when he says that I am making ill use of my spending power. I am not doing so in any way. There has been an agreement covering these $40 million and that we acknowledge. As far as the balance is concerned-the money which remains on the table-we could have told them that since they chose not to accept it, we were going to keep it in the bank for as long as they refused to take it, even for years to come, as it was the case under Mr. St. Laurent with the funds that were meant for the universities. The federal money would go into a trust account or in escrow and remain there for years until Quebec would decide to make use of these funds.
We did not want to do the same, we put the money immediately into the Quebec economy and the money will be there immediately. If Mr. Parizeau recovers it, well the electors or the taxpayers will judge Mr. Parizeau's actions. The hon. member says that the principle of fiscal withdrawal is very good. But what is the difference between withdrawing from a tax field in 1977 or in 1978? It is the same thing. When Mr. Parizeau says that it will cost him $1.5 million to recover it, well what can we do about it? If we are willing to accept this argument, we could also accept the argument put forward by the federalists back in 1954 to the effect that Quebec made a ridiculous move by establishing a department of revenue in Quebec which costs more than $100 million a year, which implies that each taxpayer should fill in two income tax returns, have two tax inspectors. However, it was said that the economy of Quebec might well foot that bill.
People may say that it is necessary, others that it is not, but the provinces can act as they please in their area of jurisdiction. We acknowledge that and we are acting with the utmost expediency. This is not a compensation I am offering the Quebec government because they turned down the scheme I had proposed, i never imposed anything upon the Quebec government. I asked them whether they wanted me to help them in such and such a way. After I had negotiated for three weeks the terms and conditions of my proposal, they did not deem appropriate to notify us of their own idea about selective cuts. I am not to blame for that. However, because of this innovation, and because it was the first time a federal minister of finance was consulting with his provincial counterparts and
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trying to agree on a joint program with the provinces, Quebec decided to go ahead with their own scheme after I had brought down my budget and before they introduced their own. They chose to reduce unilaterally their sales tax, just as Ontario had done some two years ago. The Ontario government had acted unilaterally when they had reduced their sales tax on cars from 6 per cent to 0 per cent. They did not ask the federal government to compensate for that, for they had acted in their own best interests, without ever taking into account the economic interests of the nation; they did not therefore seek any compensation from the national government. Since we were left with $186 million, I funnelled them into Quebec's economy as fast as I can. And if Mr. Parizeau wants to recoup them,
1 made fiscal room, as I had done in January last when implementing the $100 income tax cut. If they want to fill that room let them do so. They will do it now. If the hon. member wants to avoid a lot of problems, if he wants to put an end now to all this fuss, here is the answer: I cut my own tax . If Mr. Parizeau feels he must go and get it, let him do so next month, or next week, and that is the end of the debate. I cannot see why people are concerned with the 1977 or 1978 issue. In both cases it was a personal income tax cut, and the alternative would have been a collecting agreement.
I must tell the hon. member, when I made that proposal during the negotiations that the Quebec government in that area only reacted like offended virgins. "Mr. Chretien, how dare you propose such a thing? There is no way that we Quebeckers will ask the Canadian government to collect our taxes." But now they are stuck, and all of a sudden no mention is made of autonomy and so forth. After trying for two months to get into my hair. Well, that is that. We made a decision, we made fiscal room as the hon. member is requesting it, and if the Quebec government want to step in, let them do so. That is their privilege, indeed it is their duty if they feel that it is needed. The fact is that we will have vacated a $186 million tax field, and this is not a payment to taxpayers as intended in the proposals because we are not vacating a tax field. We made a proposal which Quebec felt was unacceptable, and $186 million were left on the table so we are now giving that money back to the Quebec taxpayers. Things are not as they were, we wanted to act as soon as possible. So my feeling is there is no basic disagreement between the hon. member's proposal and mine. He wants this to be done next spring, and I said that we shall do it now so that we do not hear any more about it.


Serge Joyal: One of the reasons he would make direct payment was that there were no estimates for interest on the loss of revenue until the next fiscal year. However, will the minister not agree that if the amount of $186 million remains in the federal treasury until the end of the current fiscal year, it will bear interest that could eventually be used to cover interest on income lost by Quebec.


Joseph Jacques Jean Chrétien: Mr. Chairman, the hon. member assumes that there is an agreement with the government of Quebec.

There would be such agreement if they had agreed to cut their sales tax the same way the other provinces did; then we could have negotiated such an arrangement. But there is no such agreement because, without taking into account the priorities of the federal government, Quebec decided to act unilaterally in its best interest according to its own views.
Of course, I would urge the hon. member to read carefully the finance minister's letter to the Association of Shoe Manufacturers where he laughed at the idea of lowering the sales tax from 8 per cent to 0 per cent. That was not a long time ago; that is very recent. But when he shows in which spirit he acted, we can see that he was just trying to trip us, while we were only seeking to improve the economic performance of our country. That is what people do not understand or do not want to understand in our proposals. Last week, even though Mr. Levesque had not even seen the white paper yet, he found it altogether insignificant. It is always like that. What do you want? I find it difficult to act as Minister of Finance for all of Canada and integrate everybody in the best interest of the Canadian economy when you know that the very aim of one government is precisely to prove that the Canadian federation cannot work. I acknowledge the hon. member's lofty motives, but I would like to mention that he did not say a word about that. Following representations made by many members from both sides of the House, I have shown great flexibility, but this was matter-of-factly ignored by Mr. Parizeau.


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, please. When the committee took recess at one o'clock, clause 30 of Bill C-56 was under consideration.
On clause 30:


William Hillary (Bill) Clarke: Mr. Chairman, I should like to ask the minister some questions concerning the treatment of taxpayers in some provinces compared to the treatment of taxpayers in other provinces. The Prime Minister has tried to explain to the House a number of times that the treatment was exactly the same for taxpayers in British Columbia, for instance, as for taxpayers in Quebec. May I ask the Minister of Finance if he sees the treatment of taxpayers in the province of Quebec the same as the treatment of taxpayers in British Columbia and, if so how?


Joseph Jacques Jean Chrétien: Mr. Chairman, on the night of the budget I reduced the income tax of the province of British Columbia up
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to $100 per citizen, as in clause 38. In the case of the province of Quebec, I am reducing their income tax by $85, so there is approximately $15 that I am not paying to taxpayers in Quebec because Quebec qualified only partially under the program. As they have their own system of taxation and so on,
I am paying $40 million to the Quebec government. There is a distinction that way. The Quebec taxpayer is receiving $15 less of a tax cut than the taxpayer in British Columbia.


William Hillary (Bill) Clarke: Mr. Chairman, the minister fails to explain how a reduction in a 1978 tax is the same or similar-


Joseph Jacques Jean Chrétien: I am sorry, Mr. Chairman. Of course there is another difference. Rather than taking the list of taxpayers in 1978, 1 am taking the list of 1977 for the reasons I gave the House many times.


William Hillary (Bill) Clarke: Mr. Chairman, the minister said just now "another difference is"-so he then admits there is a difference between the treatment of taxpayers in British Columbia who are not getting any money in their hands and the taxpayers of Quebec who are getting $84 cash in hand. I know from the debates in this House that the taxpayers of Quebec are not happy about that and the representatives of the taxpayers in Quebec are unhappy about it. In fact, by a unanimous motion of the Quebec National Assembly this was declared an improper move on the part of the federal government.
When I go to British Columbia my taxpayers want to know when they are going to get their refund, cash in hand, such as the minister is giving to the taxpayers of Quebec. Can the minister give me an answer to take back?


Joseph Jacques Jean Chrétien: Mr. Chairman, the hon. member can take back a very good answer. I reduced the tax of taxpayers in British Columbia by $100. The same day the British Columbia government increased the tax of the same taxpayers by $100. As we collect the money for both, it is channelled directly to the coffers of the British Columbia government. We do not have a tax agreement with the province of Quebec, so we cannot operate in the same way. We have not collected, Quebec provincial tax since 1954; the provincial government collects that and sends its own assessment to the taxpayers.
The night I reduced income tax by $100 in British Columbia the provincial government raised the provincial income tax of the same people by the same amount of money. By the end of the year when they file their tax return, they will have paid $100 less to the federal government and $100 more to the provincial government. We do not operate that way in Quebec because we have not collected their taxes since 1954. If British Columbia had been in the position of Quebec, collecting their own income tax, we would have sent $100 right to British Columbia taxpayers and the minister in British Columbia would have been obliged to raise his taxes by $100.


William Hillary (Bill) Clarke: I will try to explain that when 1 go back to British Columbia tonight, Mr. Chairman. I hope I will have as much success as the minister seems to indicate.
Let me refer to another difference. In the case of a taxpayer in British Columbia who is being given a sales tax reduction from 7 per cent to 5 per cent with the help of the federal
Income Tax Act
government on all retail purchases, he will get real benefit from that for nine months regardless of which government it comes from. How does the treatment offered by the minister to the taxpayer in the province of Quebec equal that kind of treatment when I hear the minister saying over and over again that he will give an $85 refund by cheque to the taxpayers of Quebec-to those people fortunate enough to pay at least $85 in income tax? In other words, the poor individual in British Columbia who pays no tax, or less than $85, will get some benefit because the sales tax on such basics as telephone service, electric lights, clothing, toothbrushes and practically everything has been reduced. The person in Quebec who does not pay income tax will not get any benefit from the measure the minister offers. How does he see that as equal treatment of taxpayers in different provinces?


Joseph Jacques Jean Chrétien: Mr. Chairman, I made precisely the same offer to the Quebec government and they refused it, so taxpayers in Quebec who buy a car, say, do not benefit. They can blame their government as they turned the offer down. As over $186 million was left I decided not to penalize Quebec citizens because there was no agreement with the federal government, and the provincial government did not want to comply with the national plan. Therefore, Quebeckers who buy a toothbrush will pay more tax than people in British Columbia. I offered to reduce taxes by the same amount as British Columbia, but Mr. Parizeau refused. As it is a provincial tax it is up to the provincial government to decide. In the scheme of Mr. Parizeau in Quebec, the person who buys a fur coat for $100,000 will have the benefit of an $800 tax cut. The person who buys $10,000 worth of imported furniture will get a tax benefit of $800. Mr. Parizeau's scheme is worse than what 1 am doing for Quebec. 1 gave a maximum of $85 to Quebeckers. Mr. Parizeau can give them almost unlimited benefit if they buy the four items on which the sales has been cut.


William Hillary (Bill) Clarke: Mr. Chairman, 1 will try that one on, and see how it applies in British Columbia. May I ask the minister what the estimated cost amounts to of the total reductions that are being offered to all of the provinces?


Joseph Jacques Jean Chrétien: Mr. Chairman, in our calculations I cannot give you a precise amount, but the federal part is $825 million. Perhaps later on I will be able to give you the exact amount. 1 can inform the hon. member that $847.3 million was our estimated cost to the federal treasury. We predicted the cost to the provincial treasury would be the difference-we used to speak about $1.1 billion, so it is less than $300 million.


William Hillary (Bill) Clarke: Mr. Chairman, since there is an $847 million cost, as the minister indicated, for this scheme, how was it that the minister took such objection to ideas put forward by this side to have some further income tax reductions to spread the goodies around among the taxpayers? Why was it so much more sinful to spend, say, $1 billion on reducing income taxes, or spending $1 billion on reducing sales taxes in a field which the minister really did not have the right to get into?

June 16, 1978
Income Tax Act


Joseph Jacques Jean Chrétien: Mr. Chairman, first I want to tell the hon. member that all observers of the economic scene last week attributed the good performance of the American economy to the fact that demands has increased very substantially. The best way to help stimulate consumer demand in Canada is to reduce the tax paid at the consumer level, which is a tax that is applied by the provinces. The government offered the provinces a scheme to reduce that tax. Eight provinces accepted the offer, and Quebec refused. The government could not force Quebec to reduce its sales tax. It was quite evident that they decided to do something other than what the other provinces wanted to do. But the federal government does not have to pay for that. The government just pays that portion that complies with the national scheme. We decided not to penalize the Quebec citizens and to return to them in the form of a tax rebate the $186 million, which amounts to $85 for each taxpayer according to the 1977 list.
[ Translation]


Mr. Lambert (Edmonton West):: Mr. Chairman, if I enter the debate on this bill at this time it is because for several reasons I preferred to concentrate on something else. I have heard the remarks made by several members of this House and listened to the questions asked during the question periods, and for several days I have read the newspapers. I am surprised that my good friend the Minister of Finance should have unfortunately stepped into a trap from which he has great difficulty freeing himself. It is good to see that there has been an agreement. An effort was made to come to some agreement with the provinces in order to offer a common front concerning a budget proposal.

I am going to say to the minister that he has no business using his spending power. I am speaking on behalf of a province that is not directly affected by his original proposal with regard to the sales tax. But may I say at the outset that his statements that there are other compensations-and incidentally statements of the Prime Minister-in the budget for the people of Alberta may come to pass only if certain, shall we say, operations are put into play over the next few years with regard to the development of non-conventional oil resources. In so far as the citizen of Alberta is concerned, he is directly discriminated against. Albertans should be entitled to some relief if we use federal funds to compensate citizens of other provinces generally. What is wrong with the people of Alberta? I know my colleagues from Red Deer and from other constituencies in the province have argued this point but I am arguing it again because the minister has moved away from the field of sales tax, and he has entered the domain of income tax, which brings up an entirely new ball game.
Why should the citizen of Alberta not be compensated in so far as income tax is concerned? He is as much a taxpayer as any other taxpayer in Canada. Why should he be discriminated against in this proposal?
If the minister's proposal with regard to sales tax has been turned down by the government of Quebec-and I say the

government of Quebec is fully entitled to move in the field of retail sales tax as it, and it alone, sees fit-so can the government of Newfoundland, and Newfoundland has variations on sales tax. There are some things which are not taxed in Newfoundland that are taxed in other provinces. We can go right across the country and see variations in the sales tax which are perfectly in accordance with the constitution. But, no, the minister here by his proposal has said, "You must remove 2 per cent of the sales tax for nine months, or 3 per cent for six months. And this must be across the board. There has to be uniformity across the country.'' I cannot see that, nor can I see the Prime Minister who said that everything must be done the same way. The government has not done that for Alberta. That is an example of discrimination right there in their plan. That was item No. 1.
The second discrimination exists in the system itself, as I have pointed out. Various provinces have exceptions to the sales tax. That is of their own doing. Now, because Quebec chose to act in its own way with regard to the sales tax, the minister says, "All right. I am going to compensate the people of Quebec for a portion of what would be the allocation to Quebec, and we are going to compensate income tax payers." But they are not the ones who are paying the sales tax. The minister, in his wildest dreams, will never insist that all sales taxpayers in Quebec are income tax payers. So the compensation is different. That is another form of discrimination.
Then I come to my third point which is the element of rebate of income tax to an individual Quebec taxpayer. I say that is a discrimination against income tax payers of the province of Alberta. They do not get any adjustment for sales tax because there is no sales tax in that province.
When it comes to the income tax rebate, the federal government is trying to stimulate the economy. When the Minister of Finance makes his payment of the income tax rebate to the citizens of Quebec, he has to admit it is for the purpose of economic stimulation in that province. Why not the same for Alberta? The provisions of Bill C-56, in so far as they affect the petroleum industry at some indefinite time in the future, are no compensation for the immediate spending power of the citizens of the province of Alberta, or of Newfoundland, Nova Scotia or wherever. They are entitled to it just as much. For that reason, I oppose clause 30.

I want to deal with another matter, Mr. Chairman, namely the speech made this morning by the hon. member for Maison-neuve-Rosemont who is opposed, not to the principle of stimulating the economy of the province of Quebec or of any other province, but to the federal government encroaching upon an area of provincial jurisdiction.

It is a total breach of the spirit of our constitution.
June 16, 1978



This is not the first time we have seen it happen. So, I invite my colleagues, here, in the House of Commons, to read the speech made by the hon. member for Maisonneuve-Rosemont-I had hoped he would be here this afternoon, but he made his contribution this morning-as I say, I therefore invite the hon. members from the province of Quebec, to set aside petty politics and acquaint themselves with what their colleague from Maisonneuve-Rosemont had to say about federal encroachments upon provincial jurisdictions. This is actually a rape. But we saw the same thing when the federal government tried to gain control over natural resources when we moved in the oil area against the province of Alberta.
Mr. Chairman, in view of this and the fact that we will have a tax allocation for the people of Alberta, I would move an amendment to clause 30 as follows:
That Bill C-56 be amended at clause 30, at page 34, by striking out lines 14 to 35 and substituting therefor the following: (a) $100 for an individual residing in any province other than Quebec, $85 for an individual residing in Quebec, and (b) the amount that would, but for this subsection, be the tax payable by him under this Part for the year.
I have it here in both French and English.


Yvon Pinard: Mr. Chairman, I listened carefully to the amendment moved by the hon. member and 1 suggest that on procedural grounds it is out of order as it goes directly against the amended ways and means motion, and more particularly it goes against and is in total disagreement with the provisions of clause 13 of the amended notice of ways and means motion.
Mr. Chairman, you will recall that the Speaker of the House made a ruling not long ago, that is on May 19, 1978, forcing the Minister of Finance to amend the notice of ways and means motion and specify in clause 13 of that motion the details corresponding to subclause 30(b) of Bill C-56. But even if at that time we had suggested to the Chair that it is not necessary to have a notice of ways and means motion when reducing taxes, in the ruling of the Chair it was clear that since it had been deemed appropriate to put it in a ways and means motion and it had been deemed appropriate to include a clause 13 dealing with clause 30 of the bill but that we had to be consistent and amend the ways and means motion to complete it and make it consistent with clause 30(b).
That has been done, Mr. Chairman. Now what the hon. member suggests is to delete paragraph (b) from clause 30 and to include the province of Quebec in the first part of clause 30, and to provide a special status, that is he now wants an income tax deduction of $100 for the residents of the other provinces for 1978, as provided for in the first part of clause 30 and, still for 1978, the amendment suggests that the reduction be $85 for Quebec taxpayers.
Mr. Chairman, here is the proposed change. According to the provisions of clause 30 of Bill C-56, before the proposed amendment, the rebate will be $85 for 1977 for Quebec. However, clause 13 of the ways and means motion includes
Income Tax Act
two items: first it says the 1978 taxation year and second the 1977 taxation year. What the hon. member proposes is to have only 1978 for all provinces, and of course that is contrary to the ways and means motion as amended which hon. members now have. I certainly would not expect the House and you, Mr. Chairman, to read clause 13 in full because it is quite long.
Mr. Chairman, I would like to draw your attention to Standing Order 60(11) which clearly states the following:
(11) The adoption of any ways and means motion shall be an order to bring in a bill or bills based on the provisions of any such motion.
We have agreed to the amended ways and means motion, Mr. Chairman, and what the House decided at that time now constitutes an order to bring in the bill now under consideration, which must be based on the provisions of this motion. According to the provisions of this motion, for all provinces except Quebec, the year involved is 1978, and for Quebec, it is 1977. Any amendment to change this, Mr. Chairman, goes clearly against the ways and means motion, which must be strictly followed under our standing orders, and I would like to refer in this regard to the ruling of the Speaker which appears in the Votes and Proceedings of Friday, May 19, 1978. This ruling starts on page 784 and ends on page 786.
To support my argument, Mr. Chairman, I would like to read two quotations from this ruling. The first reads as follows-and these are the words of the Speaker:
That is, it appears that section 122.1(2) to be enacted by clause 30 represents a substantial departure from paragraph (13) of the ways and means motion or from any other part of the ways and means motion besides, paragraph (13), in endeavouring to deal, not with the residents of a prescribed province, not for the taxation year 1978, but with the residents of a province which is not a prescribed province and for the taxation year 1977, depending on the ultimate interpretation to be placed on the language which I, of course, do not now decide.
A bit further on, Mr. Speaker said the following:
We must begin from the premise that a ways and means motion as the basis of a tax bill is the procedural device used to protect the financial initiative of the Crown.
Mr. Speaker went on to say:
The cure is simple. It requires a ways and means motion to cover the provisions of section 122.1(2) to be enacted by clause 30 of the bill.
And to conclude, the Speaker of the House ruled and I quote:
Meanwhile, the bill may proceed certainly through second reading, and if necessary into committee up to and including clause 29 of the bill. We have examined carefully the procedents which would support this point. They are clearly recited in Erskine May's Parliamentary Practice, nineteenth Edition, page 790, which reads as follows:
-and he quoted Erskine May.
Mr. Chairman, I say that, by deleting paragraph (2) of Bill C-56, to amend paragraph (1) and to include $85 for the province of Quebec, but for taxation year 1978, the hon. member contradicts paragraph 13 (a) of ways and means

June 16, 1978
6498______________________________________
Income Tax Act motion that says that the first provision of clause 30, 122.1 (1) and 1 quote the motion:
(13) That,
(a) for the 1978 taxation year,...
-this is important-
... the tax otherwise payable by an individual,... resident in a prescribed province on December 31, 1978,
-be reduced by $ 100.
Then the hon. member proposes:
(a) $100 for an individual residing in a province other than the province of Quebec-
-by including this provision, as he wishes to do in Section 122.1(1), the hon. member contradicts completely what suggests the ways and means motion at paragraph 13(a) that says that it will strictly apply to the taxation year 1978 and to prescribed provinces, and that the amount paid will be $100. In fact he proposes the payment of $85 and prescribes that it will be for the province of Quebec. By deleting paragraph 2 in clause 30, section 122.1(2) he renders useless the amendment made to paragraph 13(6) of the ways and means motion. So, on several counts, the member is clearly out of order and goes against the ways and means motion. He is also doing precisely the opposite of what the Chair has instructed us to do before we could consider clause 30. What he is suggesting is that we go back. Mr. Chairman, 1 am not for all practical purposes preventing members of the opposition or members of the House in general from amending a bill in the committee of the whole. But what I am suggesting, Mr. Chairman, is that when we are considering bills which result from a budget or bills which require a ways and means motion, the procedure to amend such bills is very limited. When we are dealing with bills resulting from a budget and tax bills, what parliament has tried to do is to allow the Minister of Finance and the government to decide in which areas taxes would be collected, and that cannot be changed at will.
The act requires us to introduce and have adopted a ways and means motion which has been amended at the request of the Speaker to the satisfaction of the House. Mr. Chairman, the amendment moved by the hon. member only goes against our rules and procedure and only does the opposite of what parliament allows us to do. For these reasons, Mr. Chairman, while reserving my judgment at this time, I would not want my intervention to be considered as a discussion on the merits of the amendment but strictly on procedural grounds and for technical reasons. I say that the amendment is unacceptable and that valuable time would be lost debating it, since the Chair is quite likely to reject it as unacceptable from a procedural standpoint. Furthermore, Mr. Chairman, in conclusion, I wish to point out to the hon. member an answer given last week by the Minister of Finance to the member for Fafontaine-Rosemont to the effect that he may well get most, and I repeat most, of the results sought by his amendment without having to-


Gérald Laniel: The hon. member is entering the debate, the substantive debate. 1 do not think that this would help the procedural discussion at this stage.


Marcel Joseph Aimé Lambert: Mr. Chairman, I find it very surprising that the parliamentary secretary managed to have my amendment declared out of order on procedural grounds. He is presently refuting the argument put forward by my colleague from York-Simcoe and myself when we told the Speaker that Bill C-56 was not in order, because it was contrary to section 59(11) of the rules of the House and because it introduced in the bill an important element which was not covered by the ways and means motion. That is one thing. But the parliamentary secretary now indicates that once a ways and means motion has been passed, there cannot be any amendments to the bill. Who says so?


Yvon Pinard: Our Standing Orders?


Marcel Joseph Aimé Lambert: Someone says our "Standing Orders". But if I want to replace the year 1977 by 1978, that is in order. That is the point. The hon. member is shaking his head. Well, frankly, he is mixed up, because my amendment is quite in accordance with section 122.1. The reimbursement formula is varied, I agree, but I have the right, and it is the right of the hon. members to change the law. And I suggest we do that for the benefit of the Alberta people. They would be entitled to a $100 rebate, and I have the same right as the hon. member, to lower a tax. It has always been acceptable that we reduce taxes. I may not increase them but I may put forward an amendment, and it has been acceptable over the years that a member may affect legislation through an amendment lowering taxes, and this is all I have done. Therefore, Mr. Chairman, it follows in my view that my amendment would be acceptable from a procedural point of view.


Joseph Jacques Jean Chrétien: Mr. Chairman, first this may involve major technical problems, because if the amendment put forward by the hon. member for Edmonton West were to be accepted, we would have to amend other clauses. He failed to provide for consequential amendments, and furthermore there is no point in expanding on the procedural aspect that has been so aptly explained by the Parliamentary Secretary to the President of the Privy Council. We are now, Mr. Chairman, in a somewhat ludicrous situation. In mid-May, when the bill was first introduced, the opposition objected that clause 30(b) was not covered by a notice of ways and means motion and the Chair supported their contention. When, however, we vote on a ways and means motion, we are giving an order to the House, if I understand the procedure, to proceed according to the ways and means motion. And it is because the opposition fought for a ways and means motion covering clause 30(b) that our margin for amending clauses 30(a) and 30(b) is so much more
June 16, 1978

restricted. Ironically, a point made by the opposition is today-restricting the committee's flexibility to proceed in any way.


Sinclair McKnight Stevens: Mr. Chairman, I would like to make a very brief comment following the comments of the minister, who has clearly misunderstood the procedural argument put forward before Mr. Speaker, with which he agreed. Initially, the ways and means motion which the minister suggested the House concur in referred only to the year 1978 and only to a reduction of $100 as far as taxpayers were concerned. The bill he brought in, Bill C-56, clearly was drafted after the initial concept which went into the original ways and means motion had changed. In short, Bill C-56 which is now before us includes the proposed subsection (b) to which the minister has referred but which in no way was encompassed by the original ways and means motion. Our argument was that in his wisdom the minister wanted to amend the ways and means motion as was indicated in clause 30 of Bill C-56, to give him greater parameters. The minister now turns that around and says that we are arguing against subsection (b). All we are saying is that the ways and means motion which he now has before us does allow a parameter which is sufficiently broad to allow proposed subsection (b) to be considered. However, we do not think subsection (b) should remain in the legislation, and we state that while it can be considered, it should be deleted. We are asking that the committee of the whole now delete it.
Before we vote, perhaps the minister could expand on what specific clauses would have to be amended should our motion carry. He has made a representation in his classic fashion in which he makes statements like that only to find he usually cannot back them up. I would like him to tell us what clauses have to be amended.


Gérald Laniel: 1 do not think the question in itself has anything to do with the point of order because I might say at this time that that argument does not stand.
[ Translation]
In my view, the point made by the hon. member on the need to amend other clauses if we were to carry the amendment put forward by the hon. member has no bearing whatsoever on the proposal's acceptability. It is not for the Chair to decide whether a piece of legislation makes sense or not, whether a clause is good or bad, nor whether an amendment is positive or negative. The Chair must only consider the proposal from a procedural point of view. This is a point I should like to clarify. I do not know whether there will be other speeches in this debate on the proposed amendment. If there are members who want to notify me, I am ready to hear them.
Now, with reference to the very interesting and enlightened comments of the Parliamentary Secretary to President of Privy Council, I wish to point out to him that in his ruling, the Speaker of the House especially asked the government to apply
Income Tax Act
the same principle to all provinces as far as clause 30 is concerned and more or less concluded that if the government had deemed it fit in its ways and means motion to include a provision dealing with the first part of clause 30, that is the part dealing with some specified provinces, the Speaker logically asked the government to amend its ways and means notice to give it the same effect in the case of an unspecified province. The parliamentary secretary wants to refer to part of a ruling appearing on page 785 of Votes and Proceedings of May 19, 1978, which states the following and I quote:
However, clause 30 in the bill goes on to deal with matters not contained, in my opinion, in paragraph (13) or elsewhere in the ways and means motion, to deal with those taxpayers not in a prescribed province and perhaps even not in the same taxation year. That is, it appears that section 122.1(2) to be enacted by clause 30 represents a substantial departure from paragraph (13) of the ways and means motion or from any other part of the ways and means motion besides, paragraph (13), in endeavouring to deal, not with the residents of a prescribed province, not for the taxation year 1978, but with the residents of a province which is not a prescribed province and for the taxation year 1977, depending on the ultimate interpretation to be placed on the language which I, of course, do not now decide.
At that stage, the Chair indicated quite clearly that he did not want to give his decision as to the need to have a notice of ways and means motion to comply in principle with clause 30. But I want to deal briefly with that matter, and perhaps to indicate that the implications of Ways and Means motions and those of royal recommendations are different. The ways and means motion deals with taxation and the royal recommendation relates more to expenses which may be incurred.
The parliamentary secretary claims that the hon. members would not have the right to bring in at this stage an amendment which would somehow amend the bill before us, simply because this amendment would amend the bill and would make it somewhat different from what the proposal in the ways and means motion could be. I would like to refer to the remarks made by the parliamentary secretary on the possibilities which are open to the hon. members in the face of such bills, namely taxation bills.
I suggest that he should read Beauchesne's Parliamentary Procedure, citation 265 (1) which says and I quote:
No member other than a minister of the Crown may introduce a bill for the reduction of duties. The government must take full responsibility for the taxation levied to provide the revenue. But the House enjoys complete freedom to make every representation possible to the government with regard to the manner in which the ministers discharge this responsibility. This duty the members may perform by moving amendments to reduce the taxes proposed by the administration.
Without agreeing completely with the suggestion of the hon. member for Edmonton West, I shall point out to hon. members that the purpose of the proposed clause 30 is tax reduction. It is not a taxation measure, it is intended to reduce taxes paid in the 1977 or 1978 taxation year. On that point, I shall now quote from Erskine May, nineteenth Edition, at the top of page 780, which deals with tax reduction. 1 quote:

June 16, 1978
Income Tax Act
Alleviation of Taxation
Provisions for the alleviation of taxation are not subject to the rules of financial procedure. The repeal or reduction of a tax, for instance, by the finance bill, is sometimes preceded by a-

And I think this may, at the same time, refute somewhat the objection of the hon. parliamentary secretary, and I repeat-

-specific ways and means resolution. But this procedure is not necessary if the House has agreed to a resolution for the general amendment of law.

To my mind, the hon. members have enough leeway to move amendments reducing even further the cut, so to speak, provided for in clause 30 of the bill. It remains to be seen whether the proposal of the hon. member for Edmonton West meets all those requirements, or whether it exceeds what is allowed because it goes beyond the scope of the original proposal in the ways and means motion, and in the bill now before the House, by in fact including a province which, though not one of the prescribed provinces, was not covered in the government bill. On this particular point, I should like the committee to allow me to suspend consideration of clause 30 for further consideration of the matter or else to carry this study further while leaving it to the Chair to issue a ruling at the next sitting of the committee. On this last point, I would like to hear the comments of the hon. members.


Joseph Jacques Jean Chrétien: Mr. Chairman, I think your suggestion to wait until the next sitting before issuing a ruling on this matter is quite adequate and that you have dealt very fully with the point that was raised. Personnally, and following representations made by the parliamentary secretary, I think that, on the basis of the ruling made recently by Mr. Speaker, it might be wise to let His Honour give his own point of view in this matter.


Marcel Joseph Aimé Lambert: Mr. Chairman, I should like to add this comment. The question of a province prescribed is subjected to an order in council. So let's listen carefully. If the government, even under the law such as I propose to amend, because it says, at the beginning of clause 122(1), which reads as follows:
122.1(1) An individual... who resided in a prescribed province . ..
This question results from an order in council and, actually, given the circumstances, the government could keep from prescribing the province of Alberta and that would not go beyond the subject matter of the notice of ways and means motion. But I would say that it is precisely on that point that the matter has been well settled.


Joseph Jacques Jean Chrétien: Mr. Chairman, we do not have to go on on a debate concerning the form and the hon. member is presently
[The Chairman.]
talking about the substance while we are discussing the procedure. We could have a whole debate because I have not had the time to discuss the substance of the hon. member's motion, and before discussing that, I would like to know if the form is in conformity with the prescribed rules. Mr. Chairman, you proposed to reserve your decision about the form of the motion until you can consult with the Speaker of the House. We could pursue consideration of section 30 without having a debate on the substance of the amendment, as was proposed by the hon. member for Edmonton West.


Gérald Laniel: Before recognizing the hon. member for Winnipeg North Centre, I want to tell the hon. minister that I have received the remarks of the hon. member for Edmonton West without changing my decision concerning reserving my ruling, a decision I will render as a responsible Chairman of the committee, without any obligation for consultation nor directives, but I will take my responsibilities concerning other decisions I have made.

Does the hon. member for Winnipeg North Centre wish to add a comment which would be helpful to the Chair before next Monday?


Mr. Knowles (Winnipeg North Centre):: Mr. Chairman, that is my middle name, being helpful to the Chair.
May I say that I concur in your suggestion that you be permitted to reserve your decision on this matter, and I should like to support the statement you made a moment ago that the decision is one for you to take, although you still have the right to ask for advice from anyone you wish. But since I did not take part in the procedural discussion earlier, I should be grateful if you would let me have a couple of minutes to express my view on what I think is important about the issue now before us, speaking in procedural terms.
First, I think it should be clear that the fact that Mr. Speaker ruled that there had to be a ways and means motion supporting the provisions in the bill does not mean that, once that ways and means motion has been carried, the House is required to pass what the government puts in the bill on the basis of that motion. We still have freedom in committee of the whole to make our own decision about clauses, whether to pass them or reject them or try to amend them. I say, therefore, that I think all of the argument that was made on the ruling given by Mr. Speaker that there had to be an amended ways and means resolution does not get in the way of what the hon. member for Edmonton West is trying to do.
So far as the ways and means resolution is concerned, it seems to me that the only question that now has to be asked is whether the clause, if it were amended by the proposal of the hon. member for Edmonton West, would still come within the terms of the amended ways and means resolution. As I read the first paragraph of resolution 13(a), it seems to me that it does cover the proposed amendment because in fact it permits the reduction of the tax by $100 across the board; the amendment suggests it be $100 in some provinces and $85 in others.
June 16, 1978

The only other point I wish to make is to confirm, and to put myself on the side of, the argument you have already given from the chair, that members in committee of the whole on a taxation bill do have the right to move amendments that alleviate taxation or cause a reduction. I hope that you will give consideration to these points between now and Monday when you try to make up your mind on this very important procedural decision.


Sinclair McKnight Stevens: Mr. Chairman, on your observation that you thought a province was being added as a result of the amendment of my colleague, the hon. member for Edmonton West, I would point out that under section 248(1), which is a definition section of the Income Tax Act, the word "prescribe" is defined. When we find "prescribe" in the context of the Income Tax Act, it is described as meaning:
"prescribed", in
The case of a form or the information to be given on a form, means prescribed by order of the minister, and, in any other case, means prescribed by regulation-
The point I am trying to underline is that the import of my colleague's amendment is not to add a province. He is saying simply that the province could be added, if the minister saw fit. For that reason, we think the amendment generally is desirable. Quebec and Alberta could be added as prescribed provinces.


Gérald Laniel: I thank the hon. member for his explanation in addition to what was said by the hon. member for Edmonton West. This decision is important. We do not meet such difficulties or controversies that often. Since the change of the rules in this House, it is difficult to interpret exactly citations or previous decisions, especially with the elimination of the resolution stage of a bill. As I have requested, I should like some time to make a decision not later than next Monday. It is clear in my mind that I must examine the entire pattern. I am sure that would be to the benefit of us all.
Is there any objection to standing clause 30, or should we stand the amendment and continue debate on clause 30?


Sinclair McKnight Stevens: Mr. Chairman, our general disposition would be to stand clause 30. The disposition of this amendment will have a substantial bearing on clause 30 itself. Clauses 6 and 17 were stood. Perhaps we could gain a little time by reverting to clause 6 for debate, then proceed to clause 17, followed by clause 31 if we get that far this afternoon.


Joseph Jacques Jean Chrétien: Mr. Chairman, yes, I am willing to discuss other clauses; but before doing that, 1 should like to talk about the substantive aspects of the amendment of the hon. member for Edmonton West.


Charles Joseph Clark: A point of order, Mr. Chairman.


Joseph Jacques Jean Chrétien: Is that not acceptable?


Charles Joseph Clark: No, it is not.
Income Tax Act


Joseph Jacques Jean Chrétien: Why not? I do not know why hon. members opposite do not want to hear an argument on an amendment to clause 30 which was put forward. We can still deal with clause 30 if we want.


Charles Joseph Clark: Surely it is quite clear to the Minister of Finance that he cannot have things both ways in the House, even though he may be able to get away with it outside the House. His parliamentary secretary, on instructions from the minister, introduced a procedural argument to stop this committee from dealing with the substance of the amendment introduced by the hon. member for Edmonton West. The chairman has quite properly ruled that he wants to reserve his decision on that. I think it is most irregular for the Minister of Finance to attempt to rise, in the face of such a ruling, to discuss the substance of the matter.


Some hon. Members:: Order, order!


Mr. Lumley:: That is for Mr. Chairman to decide.


Gérald Laniel: Order, please. I am sure the hon. Leader of the Opposition did not want to reflect on the intervention of the parliamentary secretary. Hon. members are adult enough to stand up on their own feet and answer for themselves. The hon. parliamentary secretary has proven in the past that he is able to contribute seriously in this place, as was the case today.
I accept the rest of the points made by the hon. Leader of the Opposition.


Charles Joseph Clark: Of course my point was not to reflect on the parliamentary secretary of Your Honour. It was simply to stop the Minister of Finance from getting away with a most improper procedure. For the benefit of those who might not understand exactly what his motives were, what precisely was he attempting to do?


Joseph Jacques Jean Chrétien: Mr. Chairman, I want to be agreeable to the committee. 1 have some good arguments on the substance of the motion put forward by the hon. member. We are still on clause 30, and permission to return to clause 6 was requested. I said yes, but I wanted to make some comments about the motion of the hon. member. We can stay on clause 30 and debate it if we want. As yet, we have not agreed to go on to the consideration of other clauses. The hon. member for York-Simcoe asked us to return to the consideration of clause 6. I indicated that was agreeable, but I should like first a few minutes to deal with some aspects of the hon. member's amendment. Hon. members opposite do not agree with that, and the hon. Leader of the Opposition is suggesting motives for this. It is always the same tactic.


Some hon. Members:: Oh, oh!


Joseph Jacques Jean Chrétien: Hon. members opposite do not want us to tell them in the House that they are trying to pay off the PQ.


Some hon. Members:: Hear, hear!

June 16, 1978
Income Tax Act
[ Translation]


Gérald Laniel: Order please. I would like to indicate to the minister that even if the hon. member for Edmonton West and all other members were ready to discuss the proposed amendment, this cannot be done since the amendment has not yet been accepted by the Chair nor been submitted to the committee. We would discuss clause 30 in its present format, but only, in my opinion, with unanimous consent. In view of the fact that consideration of clause 30 has reached a point where the Chair is not ready to hand down a decision on the amendment, I think that, but for unanimous consent, we cannot continue with consideration of this clause without a ruling on my part. I have asked hon. members to give me until Monday to hand down a decision. If the minister does not want me to delay my decision, I shall hand it down immediately and then he may perhaps debate the amendment if I accept it, otherwise we would have to proceed with another clause, as was suggested by hon. members.


Joseph Jacques Jean Chrétien: Mr. Chairman, as we are intent on co-operating with the House and proceed as quickly as possible with consideration of the bill, we would be willing to consider clauses 31, 32, 33, 34 and 6, the other standing, as I did not foresee discussing it this afternoon. 1 would prefer to go on with clauses 31, 32, 33, 34 and some hon. members are ready to ask questions on that. I know that some members have important questions to raise, but since there is only 40 minutes left it might be better to go on to other less controversial clauses.


Gérald Laniel: Is the committee agreeable that we stand clause 30 and proceed from clause 31 onward?


Some hon. Members:: Agreed.


Gérald Laniel: If clause 30 is stood by consent, we can then consider clause 31; but to return to clause 6 also would require unanimous consent, and there does not seem to be such consent. Does the committee consent to standing clause 30?


Some hon. Members:: Agreed.
Clause 30 stood.

On clause 31-Deduction from corporation tax


Joseph Jacques Jean Chrétien: Mr. Chairman, I should like to give the usual explanation concerning clause 31, and I quote:
Since January 1, 1978, the Northwest Territories have been collecting a 10 per cent tax on the taxable income which a corporation has earned during the year in the Northwest Territories. The purpose of the technical change to section 142(1) of the act would allow a corporation with a permanent base in the Northwest Territories to deduct from the federal tax which is otherwise payable an amount equal to 10 per cent of the taxable income it has earned during the year in the Northwest Territories. Therefore, there is no change in the total amount of the tax to be paid. Corporations with a permanent base in the Yukon will not be able to avail themselves of such a deduction because, unlike the Northwest Territories, the Yukon does not have its own tax system.


[Stage Direction]
Clause agreed to.
On clause 32-Qualifying taxable dividends paid
Joseph Jacques Jean Chrétien: Mr. Chairman, clause 32 makes important amendments to the computation of the cumulative deduction account, the technical term for a corporation's post-1971 retained business income. This is an important computation since the special low rate of corporate tax for small businesses is only available if such retained income is $750,000 or less.
The purpose of the amendment is to prevent an artificial increase in the $750,000 ceiling. Through the creation of holding companies, certain corporate groups could be structured to effectively circumvent this ceiling in the $750,000 total business limit and thereby take undue advantage of the small business deduction. This situation arose as a result of the exemption from part IV tax of dividends received by a corporation with an interest of more than 10 per cent in another private company.


Sinclair McKnight Stevens: Mr. Chairman, I am glad that the Minister of State (Small Business) is in the House today. Perhaps we could hear from him as to how the government of which he is a member can be so utterly deceitful when dealing with the small business community in this country. I am referring to the fact that this proposed clause 32 imposes, a serious limitation, if it is carried, on the effect of the small business dividends position as far as the Income Tax Act is concerned. As the minister has indicated, the effect of what they intend to do in section 32 is to disqualify dividends which small business corporations may make in the future with respect to their cumulative $750,000 over-all limit. The effect of this clause would be to limit the deductibility of dividends which go to other corporations that have invested in the small business concerned.
Perhaps I can put it this way, Mr. Chairman. Many small businesses in this country have been able to raise equity funds through other corporations, some of them even being venture capital corporations, which are willing to take the risk of putting new capital into a small business in anticipation of getting dividends back if the business makes a profit. The thrust of what the minister is proposing in clause 32 is to say that, in the event that that occurs and the dividend is paid by the small business corporation, not to an individual but to a corporation-and as I say, it may be a venture capital corporation-then that dividend shall not be given the same weight. In fact, it will be given no weight as far as the over-all cumulative $750,000 of retained earnings is concerned, which the Income Tax Act allows a small business corporation to build up and still preserve their relatively low income tax.
That is why I am pleased that the Minister of State (Small Business) is here, because how this government in the one breath can be talking about doing such great things for small businesses, and in the other breath the Minister of Finance comes into the House today and through this section proposes
June 16, 1978

something that would make a very, very difficult situation- and in some cases even create a hardship-for small businesses, is certainly hard for many of us on this side of the House to understand.
Having said, that, I would like the minister to indicate to us how many corporations he feels are getting out of this income tax net at the present time without this section being passed. How serious a problem is this of dividends going from small business concerns to other corporations, and does the minister feel there is a leak that should be plugged, such as he is proposing in clause 32?


Joseph Jacques Jean Chrétien: Mr. Chairman, we do not have the numbers of the corporations that use this route to avoid paying their normal share of the tax burden. We do see the danger of this situation arising and we merely wish to make sure that it is not abused. Of course, we have done some very positive things for small businesses in the last while, and it would not serve any good purpose to permit some big corporations to abuse or use that route to obtain some benefits which are not necessarily in the best interests of small businesses.
What we want to do, Mr. Chairman, is to have the small entrepreneurs expand, and we have many new measures for this. I would like to congratulate my colleague the Minister of State (Small Business), who has done a very good job since taking over that portfolio, to communicate with small businesses and to perform a series of things that have been accepted by the small business community in Canada. I had the pleasure the other day of meeting the president of the Canadian Federation of Small Business, Mr. Bulloch, and he was telling me that they have made more progress in the last one and a half years than has been made with the government in years. The crocodile tears of the hon. member for York-Simcoe are unwarranted because under the present government, and especially under the leadership of my colleague the Minister of State (Small Business), we have made a lot of progress.
To give a technical explanation, I will read the statement. The small business deduction permits a Canadian controlled private corporation to pay a reduced rate of corporate income tax of up to $150,000 of active business income earned in Canada in each year, until the corporation has accumulated $750,000 of active business income. The technical mechanism that keeps track of the business income accumulated by the corporation for the purpose of the $750,000 test is referred to as the cumulative deduction account, CDA. The CDA is increased by active business income earned and is reduced by dividends paid out of such income.
Bill C-56 will restrict the deductions for dividends paid in computing the CDA in certain circumstances. Let me explain why. Prior to April 10, 1978 the tax system permitted dividends paid by one private corporation to another to be received free of the 25 per cent part IV tax which normally applies to such dividends, provided that the recipient corporation owns more than 10 per cent of the equity of the payor and that the recipient and companies associated with it have not yet accumulated $750,000 of active business income.
Income Tax Act
This technical structure had two serious defects. First, it frustrated corporate joint ventures involving medium and large sized private corporations. This was highly undesirable and the source of numerous representations. Secondly, it provided a mechanism whereby shareholders of many small Canadian companies could recognize their holdings and, in effect, multiply the amount qualifying for the low rate of tax. These reorganizations involving the use of holding companies could be used to multiply the amount of income subject to a low rate of tax so that, in extreme cases, the $750,000 limit might effectively be increased to a $7.5 million limit. Then, of course, it is not any longer small business.
This was clearly inappropriate. The government moved to solve both these problems. First, subclause 42(2) will facilitate joint ventures involving medium and large sized private corporations. Then, in order to check the abuse that already existed and the further abuse that would be possible as the result of subclause 42(2), the government proposed clause 32.
Clause 32 would restrict the deduction for dividends paid in computing the CDA. In effect, the payor corporation or, if the payor is a member of a corporate group, the group, can deduct in computing its CDA only those dividends on which the recipient pays income tax. This is appropriate. It prevents the game that was being played by certain taxpayers prior to April 10 whereby they organized their holdings to facilitate payment of exempt intercorporate dividends to reduce the CDA. It prevents the multiplication of the amount qualifying for the low rate of tax through the use of holding companies.
A number of representations were received by my officials to the effect that clause 32 would produce an unduly harsh result where dividend income flows through a private holding company. Subclause 42(1) should resolve any difficulties in this regard. It allows a private corporation in receipt of a taxable dividend to elect to pay the refundable part IV tax, with the result that the dividends will reduce the payor corporation's CDA.


Sinclair McKnight Stevens: Mr. Chairman, I think it is very clear from the remarks of the minister that he is trying to cope with something when he does not know the size of the problem. This is typical of this government's actions. They set up a provision allowing small businesses to have the advantage of relatively low income tax up to $125,000 per year or a cumulative amount of $750,000, and then panic when they find that some small businessmen actually take advantage of this. I asked the minister in how many situations this had become a problem and he said he could not put a number on it. Reading his prepared text, he said several times that he had many representations on it.
My question to the minister is very simple. If he cannot tell us how many situations are actually involved in this type of payment of a small business corporation dividend to another corporation, could he indicate why he has not at least left an opening so that if a dividend is paid from a small business corporation to another corporation which, in turn, pays a

June 16, 1978
Income Tax Act
dividend to individuals, it can be treated as an ordinary dividend without saying that it is disqualified with respect to the cumulative dividend account of the small business corporation?


Joseph Jacques Jean Chrétien: Mr. Chairman, we will achieve that effect with clause 42(2). In reply to the previous question, the hon. member wants to know exactly how many people abused this system. That is a very funny comment to make. He says, in effect, "don't move until they have run away with the government's money." When we see there is a danger of loopholes and tax evasion, we have to make sure, if we want to have small business, that big business does not run away with the taxpayers' money. It is as simple as that. The hon. member would be the first one to get up a couple of years from now and ask why we did not block it when we heard about it. When I saw it was a loophole 1 blocked it, because I knew that everyone has to pay his fair share of the tax burden. We want to have small business and we do not want big business to use the channel of small business to run away with money that they should take to the treasury. The blue collar workers pay their taxes at the source and do not have all those loopholes.
I am concerned that we keep a fair system of taxes. I can see the hon. member for York-Simcoe is always comfortable in loopholes. Probably he knows more than anybody else about loopholes in the tax system. My job is to plug them, not to help people to run away with a free ride on government money.


Mr. Abbott:: Mr. Chairman, I simply want to join with the Minister of Finance-


Walter David Baker: That is a pair of incompetents.


Anthony Chisholm Abbott: Thank you-in saying that, notwithstanding the fact that measures are introduced to provide small businessmen with opportunities under the tax system, any one of us knows there is always the possibility that the breadth of such a provision will allow people to take advantage of something that was never designed for them. The system which was provided is, in all honesty, designed for people who are earning under $150,000 and who have not accumulated $750,000 retained earnings.
For the hon. member for York-Simcoe to speak as though we have betrayed the small business community just because some slick player that he may be acquainted with is unable to take advantage, is, I would suggest, an outbreak of hypocrisy that we are all too familiar with around here. The fact is that when one speaks of things that are pretty shabby, unfortunately in many communities, and in the business community, there are people who can look with sharp-eyed interest at provisions that were not designed for them, take advantage of them and make a big dollar. We have even known, Mr. Chairman, of people who have taken advantage of the banking system to make a fast dollar.


Sinclair McKnight Stevens: Mr. Chairman, I might make the passing comment that if the Minister of State (Small Business) knows

of somebody who has taken advantage of the banking system to make a fast dollar, he should stand up and make it clear what case he is referring to. I know of none and I do not think any members over here know of any.


Anthony Chisholm Abbott: Mr. Chairman, the hon. member for York-Simcoe and his friends put a bank together under the banking system, made a very comfortable profit out of it and left a lot of other people holding the bag.


Sinclair McKnight Stevens: Mr. Chairman, I should like the minister to back up that statement. If he is referring to me, 1 can assure him that I did not make a nickel. In fact, I lost money out of the promotion of the Bank of Western Canada for which, incidentally, we still have a charter. If the Minister of Finance would like to activate the charter I am sure many Canadians, especially in western Canada, would not mind activating that bank.
I ask the minister to withdraw the allegation that I made any profit out of the promotion of the Bank of Western Canada, because that is simply an untruth and he has misled the House with this statement.


Anthony Chisholm Abbott: Mr. Chairman, I certainly will not withdraw the implication that the hon. member formed a bank with other associates and partners. If he is saying to me that he made no money out of that operation, then this statement comes as a surprise. What we do know without any question is that a great many innocent shareholders lured into the enterprise by him and his associates lost a great deal of money.


Sinclair McKnight Stevens: Mr. Chairman, I now ask the hon. minister to withdraw two statements; first of all, the statement that I made a profit out of the promotion of the Bank of Western Canada, and second, that others got lured into it and lost a lot of money. Both statements are totally untrue and the minister is misleading the House.


Walter David Baker: Mr. Chairman, yesterday when an altercation took place between the Prime Minister and other members of the House, Mr. Speaker indicated that when the Prime Minister made a statement of what he said in the House of Commons we had to accept that statement. The hon. member for York-Simcoe is in no different position than is the Prime Minister or any other minister. From time to time we can play games with each other. A lot of people do not understand those games, but I think it is part of the traditions and rules of this House that when a member of this House makes an assertion with respect to a particular matter and that assertion is denied, that ought to be accepted.
It should be accepted graciously by the Minister of State (Small Business). The hon. member for York-Simcoe has made an assertion in answer to a charge, an imputation by the Minister of State (Small Business). I think in all decency and propriety, having regard to the rules of the House, the hon. minister should stand and withdraw.


Anthony Chisholm Abbott: Mr. Chairman, if the hon. member for York-Simcoe, having full knowledge of the business, asserts that he
June 16, 1978

made no profit in the bank and derived no net profit from his participation in that venture, then 1 must accept his word. He was very close to the scene, so 1 will withdraw the comment.
If he is also saying that I must withdraw the comment that shareholders were encouraged to purchase stock and subsequently lost money, my information would be to the contrary and that that indeed did happen. So 1 do not think I can withdraw that point. But 1 must agree that, if he asserts that he made no profit in that venture, I must accept his word.


Sinclair McKnight Stevens: Mr. Chairman, I thank the hon. minister for withdrawing the first allegation, but 1 would reiterate that I asked him to withdraw the second allegation because he does not know of what he speaks. The fact is people were not lured into the bank, as he is representing. The fact is that shareholders of the bank received their money back, not as he is representing, that there was substantial loss to those shareholders. In fact, Mr. Chairman, I resent this remark very much, having spent one-quarter of a million dollars of my own money trying to ensure there would be no rip-off of the shareholders of the Bank of Western Canada. 1 am not going to stand in this House or any other place and have any member insinuate that, somehow or other, they were ripped off by inference on account of something that I did.


Some hon. Members:: Hear, hear!


Anthony Chisholm Abbott: Mr. Chairman, I never said anybody was ripped off. The hon. member said that nobody lost substantial amounts. Is he prepared to say they lost amounts which might have been, in their judgment, substantial, or in his? Is he saying that nobody lost any money in that venture?


Ramon John Hnatyshyn: Shoddy practice.


Some hon. Members:: Oh, oh!


Sinclair McKnight Stevens: Mr. Chairman-


The Deputy Chairman:: Order please. Hon. members are now getting into a debate. The hon. minister withdrew his first statement, and we accept the word of the hon. member for York-Simcoe. Therefore, I consider the matter closed.


Walter David Baker: Mr. Chairman, that would be a very convenient way of getting over what is a difficult situation on a Friday afternoon, but there is outstanding an allegation that a member of the House has said-


Some hon. Members:: Order.


Joseph Jacques Jean Chrétien: There was a ruling.


An hon. Member:: Sit down.


Walter David Baker: Mr. Chairman, there is an allegation outstanding with respect to a member of this House. The member has said it was false and untrue. The Minister of State (Small Business) was gentlemanly enough to withdraw
Income Tax Act
his comment with respect to the first matter on a denial by the hon. member for York-Simcoe. I believe he should do the same thing with respect to the second matter.


Ramon John Hnatyshyn: He was not convicted, so you better watch it.


An hon. Member:: He doesn't have a record.


Walter David Baker: It is important that he should recognize that what applied in the first case should in all propriety apply in the second case.


Charles Robert Turner: Order please. I suggest to all hon. members that the minister said there was money lost and the hon. member for York-Simcoe said there was no money lost. Therefore, I suggest we examine the blues on Monday and we will render a decision at that time.


Sinclair McKnight Stevens: Mr. Chairman, in getting back to clause 32 I may make the passing reference that I always know when I am getting to the quick with these Grits, who always like to refer to the Bank of Western Canada.


Charles Robert Turner: I suggest we return to clause 32.


Sinclair McKnight Stevens: Mr. Chairman, if the minister ever wants a reference to any committee of this House with respect to the Bank of Western Canada, I would be more than willing to give it, and 1 will tell a few things that have never been disclosed before.


Some hon. Members:: Hear, hear!


Charles Robert Turner: Order please. I suggest we all get back to clause 32.


Sinclair McKnight Stevens: Mr. Chairman, if I could come back to clause 32-


Some hon. Members:: Hear, hear!


Sinclair McKnight Stevens: Mr. Chairman, let there be no doubt, I have noticed the little seals are banging their desks-


Charles Robert Turner: Order please. I point out to the hon. member for York-Simcoe that clause 32 was under discussion and I suggest we return to that clause.


Sinclair McKnight Stevens: Mr. Chairman, if the rabble over there would quit interrupting me, I could come back to clause 32.


Some hon. Members:: Order.


Sinclair McKnight Stevens: After all, it was not my doing to introduce the Bank of Western Canada; it was the Minister of State (Small Business) who did so. Dealing with clause 32-


Some hon. Members:: Oh, oh!


An hon. Member:: Who lost the money?

June 16, 1978
Income Tax Act


Sinclair McKnight Stevens: Dealing with clause 32, the minister has referred to the effect of clause 42, which is consequential upon the passage of clause 32, if it does pass. The minister has left the inference that somehow or other the point that I was raising concerning the payment of dividends from small businesses to a corporation and then out to an individual is not covered. The minister has left the inference that the effect of clause 42 would be to permit that payment of a dividend through the corporate chain. As I understand it, clause 42 simply facilitates the payment of the dividend, but there is no credit left with the small business corporation respecting their cumulative dividend account.


Joseph Jacques Jean Chrétien: Mr. Chairman, 1 think it is exactly as the hon. member has concluded; the transfer of money can be made under clause 42. But when transferred to that type of corporation, the income of the corporation, up to $750,000 is affected in a different fashion.


Sinclair McKnight Stevens: Mr. Chairman, that is just my point. What they have done is that they have set up-and we endorsed it as hon. members will recall-a special provision with respect to small businesses, giving them the privilege to have a relatively low income tax on $150,000 per year to a cumulative amount of $750,000. To the extent that they pay dividends out, they can credit those dividends against the cumulative $750,000 account. The thrust of this section is to take away the dividend credit provision if the dividend is paid to a corporation.
The point I am trying to make, Mr. Chairman, is that surely this is a backward step. When we become analytical as to where the dividends are being paid from the small business corporation, we are automatically, by that restriction, curbing the amount of capital small businesses will have available to them in future. My point is simply that when something appears to be working, when there is some flow of capital coming into small businesses, why is that now being killed by saying that, in the event that small business pays a dividend to the corporation that put up the capital, we are going to take away the cumulative effect of the over-all provision that we have said is available to small business? It is just the reverse of the situation that one would normally expect if we want to encourage venture capital in this country to go into small businesses in order to give them a shot in the arm.
I will ask the minister once again-I see he is anxious to reply. What is the rationale in killing off this type of activity when apparently it has been working a little better than the government expected?


Joseph Jacques Jean Chrétien: Mr. Chairman, I explained that clause 42 facilitated the flow through of the dividends. But what I explained in the earlier written note that I gave the committee is that it is possible with the present system for companies having the proper set-up to receive the preferential rate of taxes that goes to small companies not up to the amount of $750,000 of cumulative profit, but up to $7.5 million. You can do that by using the rules. A clever person with lawyers and so on and a very complex system could have not only $750,000 of taxes paid at the lower level, the preferential level, but have it

accumulated up to $7.5 million. For that reason, it would be unacceptable for us not to move when we see a potential loophole like this. The hon. member should congratulate my officials for being able to forecast that loophole. If we had not forecast it, he would be the first in a few years from now to say we had not done our job properly.
What we are trying to do here is help small business. We do not want to create the situation where there is a loophole for big business. In order to give some further explanation of a more technical nature, may I have permission to read this text. To correct this situation, the amendments provide that dividends on non-control holdings that are exempt from part IV tax will not reduce the payer's cumulative deduction account. This ensures that, to the extent the part IV tax is not paid, the payor corporation's small business deduction entitlement is limited to $750,000. A consequential amendment to part IV permits the receiving corporation to elect to pay the part IV tax on otherwise exempt dividends. In this manner the payor corporation's cumulative deduction account is reduced, its small business entitlement is refreshed, and the part IV tax serves to ensure that an appropriate rate of corporate tax is paid on surplus retained in the corporate sector.
In structural terms, the amendment to subsection 125(6) modifies the definition of "cumulative deduction account'' to provide that those dividends paid after April 10, 1978 to non-controlling private corporations owning more than 10 per cent of the payer's voting stock do not reduce the payor corporation's cumulative deduction account. Subsection 125(7) provides an exception to this general rule for dividends on which the recipient private corporation elected to pay the part IV tax.


Sinclair McKnight Stevens: Mr. Chairman, I think I have made the point. The minister has read what the officials have given him as an explanation. He obviously does not understand the thrust of the clause. He simply has to read what he is handed.


Joseph Jacques Jean Chrétien: Mr. Chairman, if we were to give prizes in this House, the hon. member would receive the prize as the one who throws around more cheap shots than anyone else. I will explain it in French.

Let us take nine companies ... As it is too technical for them in English I will explain it half in French and half in joual and perhaps they will understand. Mr. Chairman, if nine companies decide to merge, they could control only 11 per cent of all shares, and with these nine different companies controlling 11 per cent, they would be able to get the preferential tax rate of this little company, abusing the system. In other words, those companies with interests in the small company could manage things so that this small company would declare a maximum profit of $7,500,000 to avoid the rate applied to bigger corporations. In my mind, Mr. Chairman, there is a real danger of people abusing the advantage which we are
June 16, 1978

seeking to give to smaller companies. What we want here is to allow smaller companies to obtain a preferential rate, to reward initiatives in Canada and to allow them to pay only half the usual rate applied to larger corporations. But what can we do? As my good friend the late hon. member for Temiscamingue, Mr. Real Caouette, used to say, financial sharks might come and create corporations with shares in small companies to avoid paying the normal tax rate which applies to corporations. In view of the circumstances we are trying to block this kind of loophole. This does not mean that we are against investments by corporations in smaller companies. But this must not become a way out for bigger companies anxious to avoid paying the normal rate applying to them. If the hon. member still does not understand, what can 1 do? I cannot explain it any better.


Arthur Ronald Huntington: Mr. Chairman, I rise on a point of order. 1 wonder if I might be allowed to pass to the Minister of Finance or his parliamentary secretary some amendments that 1 have just finished reading and preparing concerning clause 6. May I be allowed to pass them across so that they can study them on the weekend in the hope that we can get to clause 6 on Monday of next week?


Charles Robert Turner: 1 suggest to the hon. member that he can do that directly to the minister or his parliamentary secretary.


Joseph Jacques Jean Chrétien: Mr. Chairman, if the hon. member wants to give me notice of amendments he wants to introduce on Monday, 1 will be delighted to see whether something can be done about them. If they are good ideas but cannot be accommodated in the last hour on the bill, I want him to know 1 always welcome good ideas. I know this hon. member brings out some good ideas. If he will give them to me, I will be pleased to study them.
Before resuming my seat, I want to read something prepared by my officials. They have been good enough to put it in another language. We will use another language because we know this is very difficult for the hon. member for York-Simcoe. It would take a month and a half for this hon. member to understand this. We would be glad to give him seven, eight or nine versions of what, in my opinion, is very simple.


Stanley Howard Knowles: Mr. Chairman, I rise on a point of order. Before we reach four o'clock and rise from committee of the whole, for the record and for the benefit of those who might be following today's proceedings it should be made clear that Friday afternoons are not always like this. It is nice to see so many members with us today, but they should know that usually this is a pretty peaceful place on a Friday afternoon.


Joseph Jacques Jean Chrétien: Mr. Chairman, I am very grateful to the members of my party who are here in such great number to support my proposition.
Food Aid


Some hon. Members:: Hear, hear!


Joseph Jacques Jean Chrétien: I wish to set the record straight. When a private corporation pays a dividend to a holding company which, in turn, pays a dividend to an individual, clause 40 permits a flow-through. The small business company paying the dividends to the holding company can deduct its dividends in computing its CDA.


Charles Robert Turner: Order, please. It being four o'clock p.m., it is my duty to rise, report progress, and request leave to consider the bill at the next sitting of the House.
Progress reported.


PRIVATE MEMBERS' MOTIONS
The Acting Speaker (Mr. Turner):: It being four o'clock p.m., the House will now proceed to the consideration of private members' business as listed on today's order paper, namely notices of motions, public bills and private bills.


Yvon Pinard: Mr. Speaker, it seems that there is unanimous consent to proceed with the debate on notice of motion No. 5, without prejudice to the previous notices of motions.


The Acting Speaker (Mr. Turner):: Is it agreed that items Nos. 13, 3, 7, 9, 2, 18 and 12 stand by unanimous consent and that we proceed with item No. 5?


Some hon. Members:: Agreed.


The Acting Speaker (Mr. Turner):: It is so ordered.


ADVISABILITY OF PROVIDING INTERNATIONAL AID
[Stage Direction]
The House resumed from Friday, March 10, 1978 consideration of the motion (Mr. MacDonald) (Egmont):
That, in the opinion of this House, the government should consider the advisability of providing (a) international food aid at an annual level at least equal in nutritional value to the amount by which Canadians consume more than the world's average per capita protein diet (6) international agricultural development assistance at an annual level at least equal to the gross revenues accruing to Canada from the world arms trade and the vigorous advancement of these initiatives for adoption and implementation by the United Nations.
Some hon. Members:: Question!


Mr. Ross Milne (Parliamentary Secretary to Minister of Indian Affairs and Northern Development):: Mr. Speaker, 1 am pleased to have an opportunity to take part in this continuing debate on the subject of the supply of food to many millions of

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people around the world. This is an area in which I have been very interested for a number of years. I have a professional background in agriculture and I have studied the question in some depth.
In the last day or so I have had an opportunity to read the remarks of the Mister of Agriculture (Mr. Whelan) on the occasion of his address to the fourth session of the World Food Council in Mexico City. I want to be among those congratulating the minister on what I thought was an excellent presentation and I would commend his remarks to the attention of all hon. members. I believe the mover of the motion before us would be encouraged by the response of Canadian farmers to this most urgent problem.
In discussing a subject as significant and wide ranging as this, it would be well to situate our views in the global context of food production and nutrition. The Minister of Agriculture dealt extensively with this issue. I might also remind the House that last year in Ottawa, at Carleton University, a symposium was held on the subject-I am sure members on both sides followed the proceedings closely and, quite likely, made contributions to them.
It is generally agreed that while some progress has been made, the international community has not been very successful in overcoming the world food problem. In too many countries there are acute food shortages. Although, on a global basis food production per capita has kept pace with the growth in population and mass famine has been avoided, we have not been able to give a consistency to efforts to overcome food shortages over time and in different parts of the world.
Since the end of World War II, opinions about the magnitude of the world food situation have swung like a pendulum between pessimism and optimism. Thus, in 1945, the main problems were rehabilitation of agriculture in war-devastated countries and formulation of agricultural policies that would bring stability and prosperity to farmers all over the world. However, as surpluses began to accumulate in North America in the early 1950s, it seemed that getting rid of the surpluses was more of a problem than shortages. There was a wave of optimism. It appeared that the world was on the verge of a food breakthrough. But by the mid-1960s, acreage controls, food aid programs, unfavourable weather in a number of countries, as well as increased exports by major suppliers, reduced the surpluses. In 1966, world grain stocks were rapidly drawn down, mainly as a result of greatly expanded imports by India and the U.S.S.R. Pessimism crept in. More and louder statements were being made about the impending shortages.
By 1972, any optimism about the world food situation and prospects that was prevalent in the previous decade gave way to widespread anxiety. The world food situation in 1973 was the most difficult since the years immediately following the devastation of World War II. Supplies were down. We had a World Food Conference to work out an international program to increase food production, to improve human nutrition.
Agricultural production, especially grains, did recover in
1975-	76 and food production by 1976-77 was at a record level. The strong demand, short supplies and higher prices led to a substantial increase in grain production, especially in North America which now provides about 80 per cent of the world's grain exports. Larger crops in these two years have enabled a rebuilding of world cereal stocks which had been drawn down for three consecutive years to their lowest level in 20 years. According to FAO, at the end of this past crop year these stocks totalled 163 million tons, or 18 per cent of apparent consumption. Carry-over stocks of wheat at the end of the
1976-	77 crop year were the highest since 1969-70.
Both total and per capita food production, as recorded by the Food and Agriculture Organization of the United Nations, rose in 1975 and 1976. Following a gain of about 3 per cent in per capita food production in the developing countries as a whole in 1975, there was a further rise of about 1 per cent in 1976. By developing regions, per capita food production in 1976 was at or close to peak levels in each, with the major exception of Africa. FAO also reported that in general, dietary energy supplies which dropped sharply in many developing countries, particularly in 1972 and 1973, appear now to have recovered approximately to the levels prevailing in 1969-71. There are, however, many countries, especially in Africa, where recovery has not yet taken place.
On the whole, I would say that we are now in a period of cautious optimism. The magnitude of the world food situation now and to 1985 should be viewed in the light of the following data, none of which is new, relating to population, land resources, income, consumption and food requirements and investment:
1.	Currently four billion people have to be fed. By 1985 it will be around five billion people.
2.	In 1976, there were 115 developing countries-the majority being new nations-with a population of nearly three billion, or 73 per cent of the total world's population, and will likely reach 75 per cent in 1985.
3.	It is expected that the marked rural-urban migration will continue and the trend toward urbanization will accelerate, especially in the developing countries. The effect of this urbanization is a progressive disappearance of good farmland and an increase in the number of people seeking employment off the farms. This rapid urbanization in the developing countries will result in a more intensive competition for capital between the rural and urban areas and this may affect seriously agriculture's capacity to expand food production.
4.	Among the factors of production, the world has the people-the working force. It also has the land, but not enough of it is in production. On the whole, the land resource is not a major factor in retarding the rate of expansion of food production, although there is a growing concern over availability of water and the encroaching desert.

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Not long ago I had an opportunity to attend a meeting with the Minister of Agriculture and during his remarks my hon. friend dealt rather extensively with the effect of the encroachment of desert on good agricultural land. This was something I had not really thought about or read very much about. 1 found it a very interesting phenomenon, but if it is as extensive as some of the people who have given scientific papers dealing with climatology and the encroachment of desert indicate, I think this will be one of the emerging issues we will be talking about a great deal in the years ahead as agricultural production is affected.
I do not recall accurately the numbers the minister was using that evening, but it did seem to me that the magnitude of the expansion of desert into good agricultural land was greater by a large measure than any encroachment of the urban society into good agricultural land, and therefore might give some indication of the size of the problem we are talking about. I am sure my good friend across the way is quite an authority on this. Perhaps he will be speaking later in the debate, and perhaps he might address some remarks to this question, because if he did he might enlighten a large number of members of this House on this interesting and very serious problem.
The real problem comes down to more effective use of the land resource. The ratio of the total land under cultivation to total population is .6 hectares per person in developed countries and .3 hectares per person in the developing countries. Those statistics indicate the high degree of efficiency which exists in North American agriculture and the long way efficiency has to go in developing countries.
There is a considerable amount of potentially arable land in the world. We could probably double the area under cultivation. However, as various studies have shown, it would require substantial sums of money to get this potential agricultural land under cultivation. Perhaps I might also add that it seems to me that even in Canada-and I have a much better knowledge of Ontario; I was born and raised in a farm community-the number of acres under cultivation could be greatly increased. In fact, I am sure it could be doubled. I just wanted to interject my own point of view.
When we start talking about the world food supply, we always seem to talk about the potential to produce, and somehow we leave the impression that our agricultural sector is not doing its share. The agricultural sector in Canada is, I suppose, one of the most productive of any in terms of the productivity we often talk about in this House. I think the agricultural sector in Canada has increased its productivity on a percentage basis faster and further than almost any other sector. In terms of encouraging more land use in Ontario and across the country, it should be stated that this would be fine if someone other than the farmer was willing to pay for it.
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Many people in our urban society continue to think that there is the potential in Canada to feed the rest of the world. I think I said that 85 per cent of the world's grain production is on the North American continent. If we are going to increase land use, people other than farmers should have to bear the costs of continued low prices for marginal operations. If exports to developing countries need to be financed, and in many cases underwritten, that should be the responsibility of some sector other than the farm community. I suggest that the farm community in Canada is ready, willing and able. It has been demonstrated by outstanding new farmers that they can get started, and some report to me quite often that they are making substantial progress. This could be achieved quite easily, but the people of Canada must decide that they want to contribute in a more substantial way to a world food program. That assistance and that commitment should be financed either by the treasury of the Government of Canada or in some other way, but it should certainly not be the responsibility only of the farm community.
The Food and Agriculture Organization states that about two billion people out of the three billion in developing countries are dependent on agriculture for a living. They produce only 40 per cent of the world's food. By country, the proportion of population turning to agriculture for a living in developing countries ranges from 50 per cent to 90 per cent. There are thus too many people in agriculture in developing countries, and they are not producing enough food.
I am sure all members of this House have listened a number of times to the Minister of Agriculture when he has talked about the tremendous increase in productivity we have experienced in Canada since World War II. One Canadian farmer produces enough food for himself, his family and 50 other people. That is almost double the production of back in the fifties. Contrasting that with the situation in developing countries, I can understand the changes which will be required to make agriculture a highly productive occupation and to utilize the land in terms of its potential to feed people.
On a per capita basis it is estimated that developed countries produce annually over 600 kilograms of grains, while developing countries produce close to 200 kilograms. Again, that indicates that agriculture in this country per man produces something like three times what developing countries are producing, and with a third or less of the manpower.
On the income side, the average per capita income in developing countries is less than one tenth of that in developed countries. This in itself is a very large problem. Because per capita income is so low, it is almost impossible for people to accumulate enough capital to enter into extensive mechanization. It must be very difficult to enter into any type of program which would allow land assembly of sufficient quantity that mechanization would make any sense. I suppose in most of these countries the only solution would be fairly extensive

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assistance from government to assemble larger blocks of land and to finance mechanization.
Indeed, those very well may be the kinds of things world organizations should be looking at, because if we look back on the history of agriculture even in this country, that was one of the severe problems experienced. Farm communities could not generate enough capital to assemble large acreages which would make mechanization possible. An entirely new approach was taken by lending institutions after the second world war which made this possible, and that allows us to be one of the best fed nations in the world and one of the most productive from an agricultural point of view.
The average per capita income in developing countries is less than one tenth of that in developed countries. In 1973, for instance, the per capita gross national product in developing countries was estimated at U.S. $310 compared with the average of $4,180 in developed countries and $5,372 in Canada. One has only to stop and think about those figures to see the magnitude of the disparity. If in fact in Canada many agricultural sectors are very marginal with regard to size and it is common to generate an average income of about $5,400, one can imagine when in other countries that income is only about $300 how far we have yet to go in the global development of agriculture. The income disparity is greater than the averages indicate. In developing countries there are some 300 million people who are unemployed or underemployed. Estimates made by the World Bank indicate that 750 million people in the developing world are considered to be poor and, of these, 85 per cent are in absolute poverty, based on an arbitrary criterion of annual per capita income of $50 or less.
My colleague the hon. member for Scarborough West (Mr. Martin) has had the opportunity to travel to certain parts of the world and has seen how great this poverty really is. I think all members of this House and particularly those from agricultural communities would agree that the fundamental thing which has to happen to change this situation is the development and the maturity of agricultural organizations within each of these developing countries.
The total grain consumption per capita in one form or another in developed countries is somewhat over 500 kilograms, and in developing countries with market economies it is only about 180 kilograms. About 10 per cent of the grain consumption in this latter group was from imports. In some countries the percentage of grain imports over consumption was even higher. One might reach from that figure the conclusion that Canadians are well fed with a great variety of high quality food, and in spite of the questions and statements expressed in the House in the last few days, as a percentage of total income, food continues to be one of the best bargains there is in Canada. I think that when we are debating our current concern about consumers with respect to food prices, we should not be doing it from the point of view that somehow farmers are presently making a fortune. I suggest that many

farmers in Canada are making a good income at this time, but they require a good deal of it to pay off some of the losses.


The Acting Speaker (Mr. Turner):: Order, please. I regret to inform the parliamentary secretary that the time allotted to him has expired.


Mr. Bert Hargrave (Medicine Hat):: Mr. Speaker, first of all, I wish to say that I did not intend to take part in this debate, but when my agricultural colleague the hon. member for Peel-Dufferin-Simcoe (Mr. Milne) started to speak, I must say he attracted my interest and I decided I would like to make a few comments.
His theme appeared to be the importance of food production at the local level, and he seemed to zero in on the speech of the Minister of Agriculture (Mr. Whelan) made recently in Mexico. I want seriously to suggest that he did not mention in any way the politics of world food production or even the politics of domestic food production, and that is a very important aspect of food production.
I want to say a few words now about the involvement of politics in our domestic food production. Believe me, I have been very much involved in that over quite a number of years and I can think of a number of political involvements which, looking back over the years, we might have been better off avoiding. First of all, I will mention the famous LIFT program, the lower inventory for tomorrow program, which was developed when we had the so-called surplus grain. It is true we produced an immense amount of grain and it seemed as though we would have trouble marketing it.
The initials of the program were quickly twisted around to mean "lower incomes for tomorrow" program. The impact of that totally political program was to interrupt in a massive way the whole program of grain production and livestock production on the prairies for a number of years. I do not think the public at large is quite aware of how significant was the interruption that took place as a result of that program, together with the complementary program which encouraged grain farmers not only to go out of grain production, but to re-seed their cultivated lands to forages, and there was a significant shift to forages. Of course, the only way they could harvest forages is to introduce livestock, mainly cattle, to graze those forages. This was the beginning of a distortion in our cattle cycles, and we are still suffering from it. It enhanced the swings of the cattle cycle. Again this was a solely political decision, and a federal one.
Now I want to speak about more recent developments and comment on another issue, which I am sure is well within the memory of everyone in the House. I am thinking now of the political decision which was made in 1976 in the face of unrestricted access to our Canadian beef markets. The government of the day and the present Minister of Agriculture
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permitted offshore imports to come into Canada in substantial quantities. Actually, about 186 million pounds of it came in in 1976 from Australia and New Zealand in the face of the highest ever domestic production of our own beef. If you do not think that caused consternation and grave hardship in our domestic cattle industry, Mr. Speaker, then all I can say is that you are not aware of the facts of cow life, if you like, especially in western Canada. That situation more than any other single factor prevented the beef cattle cycle from turning around at least one year earlier. The upturn that finally came early this year in the turnaround in beef prices, and all cattle prices, I am sure would have come at least a year earlier had it not been for that one situation in which the Government of Canada permitted unrestricted imports of offshore beef for nine months in 1976. We should never forget about that.
In addition to that, the hon. member spoke about desert regions encroaching on good farm land. I must say I took special interest in that comment; it reminded me of a situation very close to my own home. Whether I like it or not, I am a product of ten years of drought in southern Alberta and southwestern Saskatchewan which took place in the 1930's. I was only 13 years old when it started and I lived through the whole ten years of it. I know what drought has done in western Canada, although most people nowadays are not aware of, and do not seem to be interested in, what can happen when our climate plays tricks on us and we get into a prolonged drought.
I want to remind the hon. member that we had a grim taste of that ten-year drought period last year. 1 spoke about it many times in the House but I felt I was not taken very seriously. All of last year, beginning with the previous winter, we had a situation which was in every respect as serious as the three worst years in the 1930s, 1931, 1932 and 1937. With respect to soil moisture, the year 1977 was as serious as any of those three years in the 1930s. With respect to surface water, on our cattle ranges especially but anywhere as far as that goes, whether on cultivated land in the form of a prairie slough, dams, dugouts, streams and even sources of water in dug wells, the situation was worse for farmers than at any time in the 1930s.
This was unusual in that since the 1930s we have had millions of dollars worth of really good conservation projects developed on the prairies through the PFRA. That agency has done a tremendous job in that respect. I say this not because I am implying that that combination of geography, the Chinook winds and the dry climate, is the result of a political decision in any way, but when we politicians think that we can interfere and distort or change-thinking we are going to do some good-patterns in which nature has a bigger hand, we should be exceedingly careful before taking on such an undertaking.
1 think that in agriculture especially we have not learned the lessons we should have learned from the drought times of the 1930s and from the single bad drought year last year. 1 think we should reflect on that before we forget about it. Perhaps
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also it is fair to say that more damage was done over the years in agriculture by too much political involvement or intervention rather than too little. We should keep that in mind, especially when we start long range planning.
I should like to refer to a program which exists in the cattle industry. Canadian cattle producers should be commended for their new Beef Watch Program. This program was financed by the cattlemen; there is not a nickel's worth of government money in that program. It is financed by check-offs. Most of the check-off money which finances this program comes from Alberta and Ontario, with some from British Columbia, Saskatchewan and Manitoba. The biggest portion comes from where most of our cattle are, Alberta and Ontario. Anyone who will take the trouble to read the reports of this program will be carefully advised. Hopefully the provincial and federal governments, as well as the cattlemen, will read these reports. A concise report is given twice a year in the months of November and May. It started only last fall, but will continue every year. It will assist both producers and governments in understanding the beef cycle as well as the total cattle industry. We would do well to study that report. So far the Beef Watch Program is only in its infancy. The two reports which have been issued are exceedingly good. I sent copies of those reports to every member of the House.
As I said at the outset, Mr. Speaker, I did not intend to take part in this debate, but I am pleased to have made this contribution.


Some hon. Members:: Hear, hear!


Miss Aideen Nicholson (Parliamentary Secretary to Minister of Supply and Services):: Mr. Speaker, there are hundreds of millions of starving people in the world, according to the estimates of the United Nations. It is clear that hon. members on both sides of the House are equally agreed that we have a heavy moral responsibility to provide aid to those less fortunate than ourselves. It seems to me that a highly desirable way to exercise that responsibility is to make every effort to assist these countries in becoming self-sufficient in food production.
Rural development generally, and development of the agriculture sector specifically, are of vital importance to the future of the less developed countries of the world. Since 1970, Canadian food aid to the third world has risen by more than 19 per cent every year, to approximately S225 million in fiscal year 1975-76. This $225 million is about one-quarter of all CIDA disbursements for the fiscal year. The initial figures for fiscal year 1977-78 show more than $230 million in food aid.
Canada's food aid program has now been operating for more than 25 years and has provided the world's hungry countries with food valued at approximately $1.7 billion. Obviously we must continue to respond to these needs; but as I said before, we must also help these countries become self-sufficient. The

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bilateral programs of Cl DA offer an excellent opportunity for Canada to deal with individual countries in the development of food production. For instance, our experience in wheat growing is being utilized in the development of third world wheat production. Many countries, including some of the poorer countries in Africa, are working currently toward self-sufficiency in wheat production through Cl DA funding and technology transfer from Canada. Our contributions to multilateral organizations are also in direct support of this agricultural development, in addition to our assistance to the numerous non-government organizations.
However, food aid represents a small proportion of the food requirements of developing countries. Indeed, all food aid accounts for about 5 per cent of their consumption. Hence, the long term solution to bridging the food gap is in development programs to enhance food production in less developed countries. CIDA is increasing its efforts in food production, handling, and preservation in less developed countries as rapidly as Canadian resources permit.
In developing countries, the agricultural sector-principally farming, but forestry and fisheries as well-is a most important source of employment, income, foreign exchange earnings, and investment capital, in addition to its most obvious role as the source of food. Under point seven of Canada's Strategy for International Development Co-operation, 1975-80, the Canadian International Development Agency gives priority to food production and rural development, both crucial requirements for development in the third world.
Four years ago during fiscal year 1973-74, 6.3 per cent of CIDA's total bilateral budget was allocated toward development projects in the agricultural sector. In 1975-76, an average of 13.9 per cent or about $65 million of all bilateral disbursements were for such projects. For 1977-82, agriculture will be the most important single sector to be handled by bilateral programs, CIDA's largest branch. Disbursements of about 33 per cent of total bilateral funds are anticipated. All figures are exclusive of bilateral shipments of fertilizers which obviously play an important role.
CIDA bilateral programs are handled by five regional divi-sons: Asia, the Caribbean, Latin America, Francophone Africa, and Commonwealth Africa. These divisions handle agricultural projects in eight main categories: crop production, crop storage, animal production, irrigation and drainage, agricultural inputs, agricultural services, fisheries and forestry.
Through its multilateral programs branch, CIDA supports various international and regional institutions engaged in agricultural development, such as financial institutions, United Nations agencies, and agricultural research institutions. Approximately 20 per cent or about $65 million of all multilateral funds are channelled through these institutions for agricultural projects in developing countries.

Canada works through five major lending institutions: the World Bank group, the Inter-American Development Bank, the Asian Development Bank, the African Development Fund, and the Caribbean Development Bank. Over-all, an averge 33 per cent or about $2.5 billion in loans by these banks in 1976 went to agricultural projects. As all multilateral contributions by Canada are categorically untied aid, and since CIDA disburses approximately 50 per cent of all multilateral assistance through these banks, this is one of the more important ways Canada helps agricultural progress in developing countries around the world. One hears often in the developed countries that the untied nature of our agricultural aid, which is geared toward helping countries become self-sufficient, makes that aid acceptable to developing countries.
Essentially there are three United Nations agencies which are involved in agricultural development: the United Nations Development Program, the Food and Agriculture Organization, and the International Fund for Agricultural Development. Canada has given or committed substantial amounts of funds in support of these institutions. During fiscal year 1976-77, for instance, CIDA contributed at least $34 million to UN agencies, of which about $29 million was in support of UNDP alone. As about 25 per cent of total UNDP outlays go to agricultural development, this is another example of Canada's role in the development of agriculture in the Third World. Furthermore, in support of the IFAD, a new addition to UN specialized agencies, Canada has committed through CIDA an estimated $6 million in funds for the fiscal year 1976-77.
The WFP is the main focus of the UN's food aid activities, and it uses contributions from many national sources to organize projects that fall into three main categories: food for work projects intended to help the recipient country improve its food production by offering food as a partial wage for workers engaged in development projects; vulnerable group feeding projects for children, nursing mothers, and the elderly; emergency relief projects for victims of natural and civil disasters.
For 1977-78, Canada pledged $150 million in food aid to the WFP, with an additional $50 million for 1978 should the need arise. Furthermore, the United Nations Relief and Works Agency for Palestine Refugees received $1.89 million from Canada in food aid in 1975-76 for refugees from the Middle East wars of 1948 and 1967.
Meanwhile, the United Nations children's fund, UNICEF, received during the same period $3.5 million as general UN funds, $3 million from bilateral funds for UNICEF projects in Indochina, and $2 million in food aid for the poorest developing countries. The work of the various international institutes engaged in agricultural research is co-ordinated by the Consultative Group on International Agricultural Research (CGIAR). Sponsored by the World Bank, the UNDP and the FAO, the group backs research at 11 centres around the globe,
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dealing with all major food crops of importance to the Third World and covering the majority of the planet's ecological zones. CIDA has also contributed to ten of these research units in the year 1976-77.
One might also mention the non-government organizations. CIDA has provided matching grants in support of many NGO's to a total amount of $38 million during the fiscal year, and at least 30 per cent of this total was spent on projects for agricultural development. These, then, are some of the tools that are at our disposal, and we must remain firm in our commitment to use them.
Hunger remains a vicious assault on the well-being and dignity of mankind, but perhaps an equal threat to the dignity of human beings is to be constantly dependent. Hence, our solutions to dealing with hunger must include ways of helping people help themselves.


Mr. Albert Bechard (Bonaventure-Iles-de-la-Madeleine):: Mr. Speaker, my colleagues the hon. member for Peel-Duffer-in-Simcoe (Mr. Milne) and the hon. member for Trinity (Miss Nicholson) gave a detailed description of the Canadian food aid programs intended for the developing countries and of the aid that Canada is giving to those countries to help them attain a higher degree of self-sufficiency where food is concerned and improve the welfare conditions of their rural communities.
I would like, in turn, in the few minutes that are left to give a general picture of the main problems relating to rural development in third world countries and the role that Canadian technology is expected to play in those parts of the world.
It is important at the start, Mr. Speaker, to distinguish between two types of technological changes in agriculture: first, there are the innovations with respect to plant biology and soil improvement; the second, the introduction of various types of farm machinery. Obviously, there is a clear difference from the functional point of view. The inputs where soil improvement is concerned are precisely those that are intended to increase the production yield per land unit whereas the various types of machinery are intended to replace human or animal energy or both with mechanical energy. Taiwan and Japan are two examples of countries having experienced the former type while the agricultural revolution in Mexico went for the second type. With rural communities that represents 70 per cent to 90 per cent of their population, most third world countries must necessarily rely on agriculture to get them going economically. A few exceptions such as Algeria, Nigeria and Zambia are lucky enough to have their own mineral resources, but the commodities that are thus produced are generally exported and rarely serve as a basis for local industry.
Because of the population explosion those countries have experienced in the last 20 years, they are all facing a very
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serious problem of underemployment. To solve that problem, many efforts and investments have been made in the last 20 years to industrialize the urban areas-I am still talking about third world countries. As a consequence, several underdeveloped countries are now faced with a series of serious and now well-known dilemmas, whether economic, social and cultural, political, or even environmental.
The recent oil crisis, among other benefits, has forced us to review the relationship between technology and development. Such a policy of urban industrialization having failed to create the employment that was anticipated, third world countries, particularly those with little or no mineral resources, opted for rural development as a basis for their economic development. Generally, the objectives of that rural development are as follows:
First, to make the country as self-reliant as possible as concerns food production and second, to create employment and improve the standard of living of rural communities. However, the basis of rural development in underdeveloped countries remains agricultural development and the marketing of the resulting products on the home and foreign markets. Apart from food production, the areas of food and irrigation as well as low-cost housing are those where proper technology can make the greatest contribution at the present time. Since these are priority areas in the developing world, it follows that the research and development of appropriate technologies must be concentrated first on those areas. I shall come back later to the area of food production, but for the moment, I would like to talk about the problem of water supply for domestic and agricultural purposes.
Mr. Speaker, in too many areas throughout the world, this supply is on the decrease or only sporadic. A series of technological devices to collect rain water and develop underground water sources is required in addition to simple distribution and pumping systems. In spite of their surprising power of survival, rural communities have the major inconvenience of not being able to increase their production with their present basic and even primitive tools and technology. This technology is just sufficient to allow a farmer working with his wife and two or three children to cultivate, under difficult conditions, over half an hectare, often with no other tool than a pickaxe, and if climatic conditions are favourable, this can provide the strict minimum for the family to survive.
To improve the social and economic conditions of agriculture and farmers and to give back their former prosperity as much as possible, to rural areas, which are constantly losing their leaders to the cities, we must improve the efficiency of agricultural equipment and technology. These equipments and technologies will be adequate as long as they allow small farmers to stay on their farms and increase their production without a corresponding reduction in farming employment. Second, this equipment must be easy to maintain and durable

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to avoid a stoppage of the operations because of a lack of replacement parts, which happens very often with "oversophisticated" tools. Third, this equipment should be produced in small rural plants and repaired by local craftsmen to create employment in the community and ensure a better use of local resources. Fourth, it should reduce the dependency of developing countries by reducing the importation of tools and replacement parts that might represent too heavy a burden on the national budget.
Trying to increase the production of small farms with North American or European equipment would prove too costly and create an unacceptable level of social and economic dependency for developing countries. This is the situation as far as power equipment is concerned particularly since the skyrocketing increase in oil product prices. Animal driven machinery for which the energy is supplied by locally produced feed grains is a better solution. Fifth, that new technology should be accepted by the local people. In fact, it is the acceptation, ownership and management levels of a technology that to a large extent will determine its integration into the activities of the community and its efficiency as a development tool.
Mr. Speaker, it reminds me of a remark I heard while on an African trip to drought striken areas of Sahel where we had to supply water to people suffering from lack of water. The Government of Canada and other countries wanted to help them by drilling wells and installing pumps. It was a marvelous idea. We drilled several wells and installed several pumps and it was fine as long as the pump was working. In case of a breakdown, they had no trained personnel or skilled labour to repair those engines or pumps. That is why we say it is better to use a technology which is better suited to the level of those developing countries. The small farmer will adopt farming innovations, but only if the three following conditions are met: for instance, if his operation is profitable, the condition applies to the investment required for larger quantities of a same resource as well as to the adoption of a new method. Before investing in a new resource, the farmers of those countries will have to be shown a tangible example of the possible profits they might get from that new production, in easily comparable conditions. Hence the need for an acceptable level of knowledge and the importance of rural counselling and advising services. The farmers must also be able to finance those projects. Even if the project seems profitable, the small farmer must have the means to take the risk and have access to credit to finance those innovations.
Unfortunately, innovations that increase the value of the land, such as irrigation, fertilizers and new seeding methods do have a bearing from the point of view of the size of the business. The majority of poor farmers, to wit, India since the start of the Green Revolution, does not have access to nonusurious credit, and the lack of efficient vulgarization services deprives them of the chance to pass judgment on the profitability of innovations that are clearly financially advantageous. Even when conditions allow it, the inevitable time lags before
farmers can adopt those new methods are extremely long. That is what is known as the progressive nature of innovation. According to a recent survey made in India, the average time that elapses between the moment when a small farmer first hears about a new method and the time when he finally applies it is 7.2 years in the case of new seeding methods, 5.2 in that of the use of new chemical products, and four years in that of the Japanese method of growing rice.
Finally, it must be recognized that appropriate technological changes, even in the best possible circumstances, will not supply jobs to all rural families. Farming as well as non-farming industries will have to be developed in rural areas. We must also be conscious of the fact that there is a price to pay in underdeveloped countries to ensure the application of a technological change in farming, whatever the benefits may be. Indeed, a technological change requires an incentive under the form of public investment. Thus it can be necessary to develop an education or a credit program; the innovations will perhaps have to be made suitable to local conditions and the costs of new inputs will perhaps have to be directly or indirectly subsidized, especially if the proposal is inflexible.
What can Canada as well as its International Development Agency do? The underdeveloped countries insist that industrialized countries should devote .05 per cent of their gross national product, or about 10 per cent of their research budget, to develop technologies which would meet their special needs, that research being preferably carried out by the underdeveloped countries themselves. Without supporting the idea of a set and arbitrary objective, the Canadian International Development Agency recognizes the importance of proper technology as a tool for development and supports this proposal from the developing countries, especially since Canada is making great efforts towards that end, particularly in research programs and research encouragement.
At the meeting of the United Nations Committee on Trade and Development, UNCTAD IV, which was held in May 1976 in Nairobi, CIDA, through the Canadian delegation at the conference, proposed the pairing formula between, on the one hand, Canadian government and provincial research institutes as well as universities, and, on the other, scientific institutes from developing countries so that Canadian researchers might become aware of technological problems in developing countries, that these-


The Acting Speaker (Mr. Turner):: Order, please. The hour provided for the consideration of private members' business has now expired.
It being 5 o'clock p.m., this House stands adjourned until Monday 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, June 19, 1978