1979-10-29

ROUTINE PROCEEDINGS


Mr. Mark MacGuigan (Windsor-Walkerville):: Mr. Speaker, in view of the free trip and the hospitality accepted by the hon. member for Parry Sound-Muskoka (Mr. Darling) from the government of Libya, in view of the international reputation of that country as a haven for international terrorism, and in view of the reported approval of this trip both by the office of the Secretary of State for External Affairs (Miss MacDonald) and the office of the Prime Minister (Mr. Clark), 1 move, seconded by the hon. member for London West (Mr. Buchanan):
That this House request the Prime Minister to make a statement as to the criteria on the basis of which he approves such free trips for members of Parliament.


Mr. Speaker:: Introduction of such a motion for debate at this time can be done only with unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


AGRICULTURE
Mr. Denis Ethier (Glengarry-Prescott-Russell):: Mr. Speaker, I rise, under the provisions of Standing Order 43, on a matter of urgent and pressing necessity.
In view of the fact that we in the Liberal party consider agriculture as one of the most, if not the most important industry in Canada, and in view of the fact that the future of many segments of this industry is presently threatened by the cavalier and relaxed attitude of the Minister of Industry, Trade and Commerce in his negotiations with other countries concerning import quotas, I seek leave of the House to move, seconded by the hon. member for Vaudreuil (Mr. Herbert):
That the right hon. Prime Minister consider restructuring his inner cabinet so as to include the Minister of Agriculture, so that in further discussions concerning the inner cabinet there be a voice representing the hardworking producers of this country.


Mr. Speaker:: Introduction of such a motion for debate at this time can be done only with unanimous consent? Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


NUCLEAR DEVICES
Mr. Simon de Jong (Regina East):: Mr. Speaker, under the provisions of Standing Order 43, 1 wish to rise today on a matter of urgent and pressing necessity.
Over the weekend we learned that the Soviet Union has detonated a nuclear device. This is the sixteenth such nuclear test this year. These tests all add further radiation to our environment and jeopardize the health of all citizens of our planet. 1 move, seconded by the hon. member for Saskatoon East (Mr. Ogle):
That this House calls on the government of the U.S.S.R. to stop all nuclear testing.


Mr. Speaker:: Introduction of such a motion for debate at this time can be done, pursuant to Standing Order 43, only with the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


RESEARCH AND DEVELOPMENT
Mr. Eudore Allard (Rimouski):: Mr. Speaker, under the provisions of Standing Order 43 I ask for the unanimous consent of the House to move a motion dealing with an important matter of pressing and urgent necessity.

October 29, 1979
In view of the fact that the government stated in the throne speech that it intends to give greater importance to development and research; in view of the fact also that the chancellors of Canadian universities pointed out in their memorandum dated October 5 last the failure of Canada to attain these aims as far as research and development were concerned, I move, seconded by the hon. member for Abitibi (Mr. Caouette):
That the House urge the government to grant high priority to university research by providing financial assistance for pure and applied research in engineering, health and natural sciences in our universities.


Mr. Speaker:: The House has heard the motion of the hon. member. The introduction of such a motion for debate pursuant to Standing Order 43 can be done at this time only with unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


AIRPORTS
Mr. Ed Lumley (Stormont-Dundas):: Mr. Speaker, under a matter of urgent and pressing necessity, 1 move, seconded by the hon. member for Hamilton East (Mr. Munro):
That the government implement as soon as possible the commitments made by its predecessor with regard to the Mount Hope airport, in Hamilton, to not only proceed immediately with the over $1 million improvements to existing roads, parking area, runway 11-29, etc., but also with the new parallel runway, additional taxiways, a new passenger terminal and co-operation from Air Canada to bring airline services into the Hamilton airport, in view of the improvement program.


Mr. Speaker:: Such a motion can be introduced at this time only with the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.

[ Translation]



THE CANADIAN ECONOMY


Mr. Dennis Dawson (Louis-Hebert):: Mr. Speaker, I rise under the provisions of Standing Order 43 and ask for the unanimous consent of the House to move a motion relating to a matter of urgent and pressing necessity.

In light of the fact that we are celebrating today the fiftieth anniversary of the 1929 crash and given the fact that several things in the last few weeks have indicated that the danger of another crash still exists, that the steps taken by the present government do not help to stabilize the Canadian economy at all and that in spite of all their rescue manoeuvres, the ship is sinking, I move:
That the House severely blame the present government and request that it take certain steps to improve the situation, namely, to ask the Minister of Finance, the President of the Treasury Board, the Minister of Regional Economic Expansion and others to resign.


Mr. Speaker:: The House has heard the hon. member's motion. Pursuant to the provisions of Standing Order 43, this motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.



FINANCE, TRADE AND ECONOMIC AFFAIRS BROADCASTING OF COMMITTEE MEETINGS-MOTION UNDER

Mr. Bill Clarke (Vancouver Quadra):: Mr. Speaker, I, too, rise under the provisions of Standing Order 43 on a matter of urgent and pressing necessity.
In view of the fact that the current hearings on interest rates before the Standing Committee on Finance, Trade and Economic Affairs have drawn such interest from the media and the public, and in view of the fact that the steering committee of that committee has approved such an action, 1 move, seconded by the hon. member for Windsor West (Mr. Gray):
That the Standing Committee on Finance, Trade and Economic Affairs, if it deems advisable, be authorized by this House to arrange, with the broadcasting media, for coverage of its meetings on Tuesday, October 30, 1979, and Friday, November 2. 1979, at which the Minister of Finance is scheduled to appear in connection with the committee's review of interest rate policy, and that any such broadcasting be done on principles similar to those under which the proceedings of the House are broadcast.


Some hon. Members:: Hear, hear!


Mr. Speaker:: The House has heard the terms of the motion.
It can only be introduced and dealt with at this time with the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


An hon. Member:: No.
October 29, 1979



OLD AGE SECURITY


Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, under the provisions of Standing Order 43, and seconded by the hon. member for Vancouver East (Mrs. Mitchell), 1 move:
That this House urges the government to introduce, without delay, an amendment to the Old Age Security Act to end the discrimination therein against persons of single status between the ages of 60 and 65 by providing for the equivalent of the spouse's allowance to be available to all persons between the ages of 60 and 65, regardless of marital status, provided they are out of the labour market.


Some hon. Members:: Hear, hear!


Mr. Speaker:: In accordance with Standing Order 43, such a motion can be presented at this time only with the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.



FISHERIES


Mr. Remi Bujold (Bonaventure-Iles-de-la-Madeleine):: Mr. Speaker, pursuant to Standing Order 43 I seek the unanimous consent of the House to move a motion on a matter of urgent and pressing necessity.
In view of the fact that in the Speech from the Throne the government has undertaken to study the expansion of the fishing industry in Canada, that the new Minister of Fisheries and Oceans (Mr. McGrath) has failed to award grants to build boats 75 feet long or less, and that coastal fishermen have an urgent need for funds to replace their boats to take advantage of the new 200-mile offshore fishing zone, I move, seconded by the hon. member for Gaspe (Mr. Cyr):
That the President of the Treasury Board transfer forthwith funds to the Department of Fisheries and Oceans to make it possible for our fishermen to obtain grants to carry out and complete the construction of their boats in time for the new fishing season next spring.


Mr. Speaker:: The House has heard the hon. member's motion. Pursuant to Standing Order 43 this motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.
Oral Questions



ORAL QUESTION PERIOD


Right Hon. P. E. Trudeau (Leader of the Opposition):: Mr. Speaker, I have a question for the Prime Minister based on his admonition in the Throne Speech debate concerning people, notably myself, who were expressing concern about the future of the economy. He said, and I quote:
-I believe this is a time for Canadians to raise their expectations, not to lower them.
Within two weeks of that-last Thursday-the Prime Minister talked of very tough decisions that he had to take. In three answers on October 25, he used the word "tough" four times. Apparently what he is advocating now is tough decisions that his government has to make, but perhaps even tougher on Canadians than they are on his government.
My question is this: Since, in the view of the government, we have to follow American interest rates up to 11, 12, 13, 14 per cent, at what rate do we begin to look at alternatives? I just remind the Prime Minister that at his press conference on Friday he said:
-given the situation that we face in the economy now, we literally have no alternative except alternatives that will make the situation worse in time to come.
At what point will the government look at these alternatives, rather than following the American interest rate up to 13, 14 per cent and God knows how high?


Right Hon. Joe Clark (Prime Minister):: Mr. Speaker, we are looking at alternatives now. As I have indicated several times in this House, I hope that members of all parties-and, indeed, members of the public-will take advantage of the fact there is now a standing committee inquiry into interest rate policies, to put forward alternative policies they think might be more effective than those which have been proposed by the governor of the Bank of Canada and supported by this government.


Pierre Elliott Trudeau: The Prime Minister is inviting the public to put alternatives in front of a standing committee. I remind the Prime Minister that on February 13 last, when making a speech precisely on the high interest rates-which I believe then were around 10 per cent-he proposed a number of alternatives. These are recorded at page 3174 of this year's Hansard. I will not read the proposals, but they had to do with currency swaps, borrowing from the IMF, revaluation of Canada's gold reserves, a reduction in the rate of monetary expansion, and raising the chartered bank secondary reserve ratio. He had a whole series of alternatives he was proposing then.
This is the question he asked our minister after proposing these alternatives, and which I now ask the Prime Minister:

October 29, 1979
Oral Questions
When he rises in his place today, will he explain to the people of Canada and to Parliament why these alternatives 1 have listed are not acceptable, whether they are being considered and, if so, whether there is any intention to follow any of them? Can the Prime Minister tell us which of these alternatives that were so brilliantly set out last February he is looking at now.


Mr. Lawrence:: What was the answer we got then?


Charles Joseph Clark: Mr. Speaker, 1 appreciate the Leader of the Opposition's retrospective description of my proposals at that time as brilliant. 1 will have to refresh my memory. I believe those remarks were made in relation to policy having to do with the value of the Canadian dollar. I can review the record.
The fact is that we are, and have been, reviewing various alternatives since we were elected as a government. Our judgment, which confirms the view of the governor of the Bank of Canada, is that the most appropriate policy for the Government of Canada to follow, now, is to follow the advice put forward by the governor of the Bank of Canada. He stated his reasons for giving that advice. The Minister of Finance will be stating again his reasons for following that advice.
We continue to welcome any suggestions that might come from anywhere in the country, including the official opposition, as to policies that will work, that should be considered and that might be preferable alternatives.


Pierre Elliott Trudeau: The Prime Minister says that he is now following these policies. I recall quite distinctly that when we were following those policies, it was seen as a sign of abject servility to the United States.
In what sense does it take more courage now to apply those policies, when we have already gone up to 14 per cent? They might have been appropriate at 7 or 8 per cent, but surely at some point one begins to look at new policies. Since the Prime Minister listed a whole ream of them, 1 would like to know which ones the government is looking at, and why they have been discarded.


Charles Joseph Clark: 1 am pleased the Leader of the Opposition can remember when his party was following those policies, because his finance critic is doing his best to forget.
The right hon. gentleman has made a very valuable suggestion. It may be we have not examined each one of the proposals I put forward in February as closely as we should. We have reviewed certain of those policies. I will go back and read my speech again and see whether there are any suggestions we should be looking at more assiduously than has been the case.
I repeat, we feel it highly important that, in the circumstances this country faces today, we need to call on all Canadians with proposals for a better approach than the one that has been criticized by the Leader of the Opposition. If they can come up with a better proposal than the one we are following, we will consider it. But having looked at the alterna-

fives, our judgment is-and this is also the judgment of the governor of the Bank of Canada-that the policies recommended by the governor, even though they are tough, even though they are not popular, are the best policies available.


Hon. Herb Gray (Windsor West):: Why is the Prime Minister trying to get the Canadian people to forget that when he was speaking as Leader of the Progressive Conservative Party, he said a Progressive Conservative government would bring interest rates down? What is wrong with that policy today? It was all right when he spoke on March 2. Why is he abandoning it today?


Charles Joseph Clark: The goal of our policy is to bring interest rates down. That will not be done if we duck tough decisions today. We are facing tough decisions today dealing with interest rates as a means of creating the kind of stability and strength in the economy which will allow us honestly and with some security to bring interest rates down in the future.


Some hon. Members:: Hear, hear!


Herbert Eser (Herb) Gray: It was reported today that officials of the U.S. Federal Reserve Board have disclosed that another $800 million error has been discovered in the monetary supply of that country, in addition to the $3 billion mistake discovered last week. Representative Henry Reuss, chairman of the House of Representatives Banking Committee has called the miscalculation of the money supply "a monumental goof equivalent to a monetary Three-Mile Island."
How can the government continue to justify supporting a policy of following American interest rates so closely, to what are record levels in Canada, when the soundness of the basis of the American policy has been called into question by U.S. experts? Why does the government not act now to prevent our economy from becoming another Three-Mile Island?


Hon. John C. Crosbie (Minister of Finance):: The hon. gentleman is a slow learner. Last year, in 1978, his government approved interest rate increases of 3.25 per cent. This year, to date, we have had to approve increases of the same amount, for several reasons. Among them is that interest rates in the United States have increased this year, and despite the mistake in the calculation of the money supply in the United States the fact remains that interest rates went up in the United States, they were higher in the United States than in Canada, and that even today the prime rate in the United States has gone to 15.25 per cent: Citibank increased their rate on Friday to 15.25 per cent, higher than the prime rate in Canada.
So whether or not a mistake was made in the calculation of the money supply in the United States is irrelevant. The fact is that their interest rates are higher than ours, so to protect our dollar and to stop the surge of inflation which would affect us here in Canada if we did not do so, we had to raise our rates too. The hon. member for St. Moritz understands that-


Some hon. Members:: Oh, oh!
October 29, 1979


John Carnell Crosbie: -from Saint-Maurice; the former minister of finance, I suggest that the hon. member for Windsor West consult with his colleague; he will explain the situation to him.


FIGHT AGAINST INFLATION-EFFECT ON STANDARD OF LIVING
Mr. Bob Rae (Broadview-Greenwood):: Mr. Speaker, reluctant as I am to interrupt the internecine conflict between tight money's first team and tight money's second team, I would like to address a question to the Prime Minister.
Mr. Volcker, who is chairman of the Federal Reserve Board in the United States, has said that the standard of living of the average American has to decline if inflation is to be fought in the United States. 1 wonder if the Prime Minister is going to come clean with the Canadian people and make a statement as to what is going to happen to the standard of living of the average Canadian, and what he is going to do about it in his fight against inflation.


Charles Joseph Clark: Mr. Speaker, what we are interested in doing in our fight against inflation is taking steps now which will ensure that in the long term the standard of living of Canadians across the country is one which is as high as possible and as reliable as possible. The hon. member knows, and I am sure he is concerned about, the particularly difficult conditions which are imposed, particularly on low income Canadians, by present circumstances. Those circumstances also worry this government very much, and they are circumstances with which we hope to deal in a budget.


Mr. Chretien:: When, next year?


Bob Rae: We now have inflation running at 9.6 per cent, and we have projections-but the government is not prepared to tell us exactly what it is going to do-that the price of energy will be going up substantially in order to face certain problems.
How much unemployment, and how much of a reduction in the standard of living over the short term-because we live over the short term, not over the long term-is this government prepared to tolerate in its so-called trench warfare against inflation?


Charles Joseph Clark: Mr. Speaker, as little as possible.


Bob Rae: Mr. Speaker, governor Bouey said that a rise in interest rates discourages borrowing and spending, and that slower economic growth is the price we all have to pay in the fight against inflation. Instead of talking about biting bullets and making tough decisions, and instead of talking like Superman and acting like Clark Kent, I think it is time the government gave us some figures and an understanding as to what the cost of the government's policy will be both in the energy field and in the interest rate field, and as to how the government intends to distribute these costs to the Canadian consumer-because it is the little guy who is getting screwed by the government's policy.
Oral Questions


Charles Joseph Clark: Mr. Speaker, 1 am not sure there was a question there.


Bob Rae: You wouldn't know it if you saw it.


Mr. Speaker:: I have equal doubts as to whether there was not an infringement of some parliamentary language, but it depends on the interpretation the hon. member wants to put on that term. I hope that, in an abundance of caution, if he has an interpretation of it which is parliamentary, to be on the safe side he would simply avoid using it in the future. In that way there would not be any problem.


HIGH INTEREST RATES-RENEGOTIATION OF MORTGAGES CAUSED THEREBY
Mr. Lloyd Axworthy (Winnipeg-Fort Garry):: Mr. Speaker,
I have a question for the Minister of Finance. By this time, the Minister of Finance must be aware that as a consequence of the high interest rate policy of his government, thousands of Canadian families are facing the horrendous prospect of renegotiating their mortgages at a time when rates have gone up anywhere from 30 per cent to 50 per cent. To put it in other terms, where mortgage rates have gone up, carrying costs have risen as much as $1,500 a year.
Under those circumstances, and now that the Prime Minister has agreed it is time to review policies, is the Minister of Finance also prepared to agree that it is time he took some action to relieve those hardships? In particular, is he prepared to give directives to banks and lending institutions that they provide short-term loans for people caught in those circumstances?
More importantly, is he prepared to provide some shortterm, emergency assistance or low-rate mortgages to enable people to carry over until those great halcyon days when interests rates may go down?


John Carnell Crosbie: Mr. Speaker, we are very conscious of the fact that when interest rates go up, someone suffers. Therefore, we are hoping that the interest rate increase will be as short term as possible.
I am also aware that we are introducing into the House a mortgage interest and property tax credit plan which, if this House passes it before Christmas, will better enable 3,800,000 home owners in Canada to bear the increased costs of mortgage interest, the increased costs of looking after a home, increases in property taxes, or whatever. They will be in a considerably better position to do that if we pass this legislation as quickly as possible. I point out to the hon. member that 76 per cent of Canadians support the mortgage proposal, as shown by a Gallup poll reported in the Toronto Star on October 20. So 1 move that we help that 76 per cent as quickly as possible.


Lloyd Axworthy: I wish to ask the minister a supplementary question, but first may 1 point out that he has not introduced

October 29, 1979
Oral Questions
the bill for which we have been waiting and, second, any benefits that have come from that mortgage taxing plan have been eliminated.
Is this the new kind of Tory economics, when you say that $300 benefits are comparable to $1,500 losses on your mortgage? How do you figure out those economics, Mr. Speaker? I should like to know from the minister whether, first, he is prepared to introduce, within that plan, something to help those who are faced with the short-term hardship of renegotiating their mortgages; and, second, is he prepared to ask his colleagues to shelve all plans to transfer the mortgages back to the private sector, which will only result in higher interest rates and will not allow CMHC to do something about direct lending to people? When is this government going to establish a decent housing policy-


Mr. Speaker:: Order, please.


Lloyd Axworthy: -and when is it going to start helping people?


John Carnell Crosbie: Mr. Speaker, I want to speak calmly, because the hon. member is obviously suffering from incipient hysteria.


Some hon. Members:: Hear, hear!


John Carnell Crosbie: The situation is that, despite increased mortgage interest rates, they do not affect all mortgage holders in Canada. The mortgage rates of many of them need not be renegotiated for anywhere from one to five years as yet. Those people who are affected by what we hope are temporary higher mortgage interest rates, just as they are in the mighty United States of America, will be assisted considerably by the members of the House if we pass the mortgage interest and property tax credit scheme promptly before Christmas so they will get the tax relief they need this year.


ALLEGED CHANGE IN GOVERNMENT POLICY TO CURB INFLATION-REASON FOR LONG RECESS
Edward C. Lumley: Mr. Speaker, my question is for the right hon. Prime Minister. Since the credibility of this government has been grossly undermined by the reversals in policy since the last election, and since the Prime Minister and the Minister of Finance have repeatedly stated that they were not aware of the state of the Canadian economy until they had fully assumed office, would the Prime Minister be specific and tell the House exactly what economic factors have caused him to continue his flip-flop policy?
Would the Prime Minister also advise the House why he waited five months to recall Parliament, when his Minister of Finance had stated that he cannot bring forth his own budget until the budget from the last Parliament has been enacted?


Charles Joseph Clark: Mr. Speaker, I am not sure which one of those questions the hon. member wants answered.


An hon. Member:: Try any one.


Charles Joseph Clark: He was obviously trying anything he could. We felt it important to give the ministers of the new government time to learn the complexities that they were going to be facing as a new government.


An hon. Member:: On the job training.


Charles Joseph Clark: On the job training; that is quite right. That is what our system involves. We believed that it was going to be essential for the new government to take the time to learn the complexities of departmental matters on which they would be questioned here in the House of Commons. That is why we took that time over the summer to prepare ourselves, to ensure that the new government was in a position to introduce new measures that we hoped the House of Commons would deal with as quickly as possible.
Naturally, we are left with the embarrassment of some of the measures from the old government still hanging over Parliament. We hope that those can be dealt with as quickly as possible so that we can get on with passing the tax credit measure, get on with passing the freedom of information bill, and get on with passing some of the other legislation that this government prepared over the summer for introduction.


Edward C. Lumley: The Prime Minister has very carefully avoided answering the first part of my question with respect to what are the economic factors that he has seen since assuming office that he did not see before.
I would remind him that even during the pre-election period, when the Prime Minister was making promises which would not only add to the over-all budgetary deficit but would be inflationary, he was also saying that there was going to be a budgetary deficit far in excess of what was actually incurred by this government.


Charles Joseph Clark: 1 do apologize, Mr. Speaker. There was such a distance betwen the start of the question and its end that 1 overlooked the first question. We did not know the exact nature of the extent of the Government of Canada's obligations until we had an opportunity to become the government and look at information which was not then available to us. There was information in relation to the obligations, the extent and nature of activities of certain Crown corporations which was not known to the government until we had an opportunity to look at information which was not available publicly.
There was a range of other questions which, because the former government did not believe in openness of information-which we believe in-had not been available to Parliament and to the public at that time. It became available to us when we became the government. That changed our view as to the nature of the economic problems with which we are dealing, and that is part of the reason why we have taken the decision on the particular question of interest rates to support the position put forward by the governor of the Bank of Canada.
October 29, 1979


RATE OF GROWTH OF THE ECONOMY
Joseph Jacques Jean Chrétien: Mr. Speaker, in light of the admission by the Prime Minister that he did not know what he was talking about during the campaign-


Some hon. Members:: Oh, oh!


Joseph Jacques Jean Chrétien: -I would like to ask the Prime Minister when he will tell the public that he will not achieve the goals he promised the public during the campaign, that growth in the economy would reach an average of 5.5 per cent in four years.
[ Translation]


Charles Joseph Clark: Mr. Speaker, what 1 did say is that it was not possible for us to have the same degree of information before as after the election because the previous government did not have the same attitude concerning the publication of information as the present government. As to the economic objectives of the Government of Canada, a statement on this subject will be made by the Minister of Finance in his first budget.


Joseph Jacques Jean Chrétien: 1 have a supplementary, Mr. Speaker. Considering the present difficulties of the government, does the right hon. Prime Minister intend to ask the Minister of Finance to delay his budget until he can give all the information on the economy in relation to the increase in oil prices?


Charles Joseph Clark: Mr. Speaker, we hope we shall be able to secure an agreement on matters relating to oil prices as soon as possible. We are in the middle of negotiations and discussions with the provinces. It will be much easier for us to plan a budget with such an agreement, and I hope it will be possible. However, if there is no such agreement, there will be a budget before Christmas.


THE ENVIRONMENT
Mr. Peter Ittinuar (Nunatsiaq):: Mr. Speaker, given the failure last week of the Minister of Indian Affairs and Northern Development to answer my question, would the Prime Minister please answer it?
Given the fact that the recommendations of on-site experts in the Arctic, who were engineers of the Department of Indian Affairs and Northern Development there, have been ignored and that the Department of the Environment guidelines which recommend that all drilling be stopped in the Beaufort Sea by October 5 have been ignored, and that insiders in the whole industry have stated publicly that the Dome Petroleum drilling program is operating on the very edge of the risk factor, will the Prime Minister explain why it is that Dome Petroleum was
Oral Questions
allowed to continue its production testing in the Beaufort against all advice and common sense; and what action does the minister plan to take to ensure that a disaster such as the Mexican oil spill does not happen in Canada?


Some hon. Members:: Hear, hear!


Charles Joseph Clark: Mr. Speaker, I thank the hon. member for his question, although I think he was a little ungenerous in the description of the answer given by the Minister of Indian Affairs and Northern Development. The hon. member put a question which had to do with some problems relating to administrative procedures within the Department of Indian Affairs and Northern Development, as I recall it. That was answered by the minister and I cannot elaborate on that answer.
In relation to the question concerning the Beaufort Sea, I had heard reports of the same allegation to which the hon. member made reference. We are looking into that. I can tell the hon. member and the House that drilling in the Beaufort Sea has ceased as of October 3.


Peter Ittinuar: My supplementary question is again directed to the Prime Minister. Will the Prime Minister, then, set up a regulatory body including officials from the Department of the Environment, the Department of Indian Affairs and Northern Development, and others, to oversee offshore drilling in the Arctic; and will this body ensure that future decisions concerning offshore drilling are based on technical expertise rather than political pressure?


Charles Joseph Clark: Mr. Speaker, that apparatus is now in place, and certainly the standard that will be followed by this government is that those decisions will be based upon technical expertise and not upon political pressure.


REASON GOVERNMENT ALLOWED DRILLING TO CONTINUE
Hon. Warren Allmand (Notre-Dame-de-Grace):: I have a supplementary question for the Prime Minister, Mr. Speaker. I have read very carefully the answer given by the Minister of Indian Affairs and Northern Development to the hon. member for Nunatsiaq last week, on October 26, and I find that at no time did he give the basis for the decision in Ottawa which overruled the technical experts in the north to whom he referred.
Can he tell the House on what basis the people in Ottawa overruled the technical experts in the north in allowing production tests to continue? He talks about information and says he will give more information to this House. So far he has not answered the question. He did not answer the question on Friday, and we are still left in the dark as to why the technical experts were overruled.


Charles Joseph Clark: Mr. Speaker, the former minister is asking me a technical question. I do not

October 29, 1979
Oral Questions
have any answer to that technical question today. I will get it and I will provide it to the House.


William Warren Allmand: Why did you not say that in the first place?

[ Translation]


OFFICIAL LANGUAGES
Mr. Jean-Robert Gauthier (Ottawa-Vanier):: Mr. Speaker, 1 should like to put a question to the Secretary of State. It deals with federal-provincial agreements on the teaching of the official languages and the financial commitments the federal government negotiates every five years to renew those programs. Hon. members will recall that the last agreement expired March 31 last.
Can the minister tell the House whether he has met the provincial representatives and whether negotiations are making good progress? Can he also tell us whether his government will see to it that the provinces are accountable to the Canadian public for those expenditures, the way the money is spent, the criteria that apply and the rules of the game, generally, so that all Canadians and, in particular, those who live in minority surroundings, know where those amounts of money go, what they are used for and how they are spent?


Hon. David MacDonald (Secretary of State and Minister of Communications):: Mr. Speaker, as the hon. member knows-and he has taken considerable interest in this particular program-there has been a hiatus of some time with respect to negotiations on the next five-year agreement.
1 am pleased to report that as a result of meetings a week ago today with provincial ministers of education-this was mentioned in the communique published after the meeting- we have arrived at an important new understanding in the development of federal-provincial relations and support to second language and minority language education. Negotiations will now be resumed with respect to the next agreement, and 1 hope those negotiations will start very shortly.


Jean-Robert Gauthier: Mr. Speaker, the issue 1 raised concerned the funds paid to the provinces by the federal government in support of teaching in both official languages, and dealt mainly with the present lack of accountability of the provinces to the Canadian public, the lack of specific objectives and the necessary criteria which should be put in place so that we know exactly how these funds are spent.
Is the minister telling the House that he will hold firm to these criteria of accountability, the criteria and objectives being clearly put out to the provinces, or is he telling us that he is backing down on these things? This is what I want to know.


David Samuel Horne MacDonald: Mr. Speaker, the hon. member has raised important questions, particularly about the matter of accountability which had been an outstanding issue of dissent among the previous government and the provinces. I think it was creating a rather unproductive relationship in terms of negotiating the next agreement.
What we did discuss a week ago today, and what we are continuing to work on, however, are the important principles and objectives with respect to the program. Initially, there was some very strong agreement on having a package of principles and objectives to which there is unanimous support provincially and federally. Beyond that we hope we can set up a program of support which will ensure the objectives that I think would satisfy all members of the House when they meet in achieving the kind of opportunities for second language and minority language education the program was originally constructed to achieve.


PUBLIC WORKS
Mr. R. E. McKinley (Huron-Bruce):: Mr. Speaker, my question is for the Minister of Public Works. During the last Parliament we advocated a revenue dependency policy for the Department of Public Works. This would be a charge-back policy to the departments of government for the space they occupy, and would be a built-in incentive for cost savings and would ensure the efficient use of government space.
Can the minister advise us if he is heading toward such a policy, what progress is being made, or if it has been forgotten?


Hon. Erik Nielsen (Minister of Public Works):: No, Mr. Speaker, certainly it has not been forgotten. Since that recommendation was made, a pilot project has been under way in the Pacific region. The project is very much alive and we should be in a position to bring it forward for current consideration very soon.


COMBINES INVESTIGATION ACT
Hon.   J.-J. Blais@Nipissing: Mr. Speaker, my question is for the Prime Minister. It is public knowledge that an investigation has been commenced relating to pricing policies and competition practices amongst Canadian oil corporations. Also, it has been admitted by the Attorney General of Canada that he is considering the results of that investigation, undoubtedly in order to contemplate a potential or possible prosecution.
October 29, 1979

In view of what I have just recited, has the right hon. Prime Minister advised the Minister of Energy, Mines and Resources, who is an interested minister in this investigation, to stay away from the Attorney General of Canada while that gentleman is considering his responsibilities under the statute?


Mr. Hnatyshyn:: He did not have to tell me.


Charles Joseph Clark: Mr. Speaker, 1 have given no advice to the Minister of Energy, Mines and Resources with regard to that matter.


Mr. Blais:: Mr. Speaker, in an article in the Toronto Star of Saturday there was a very revealing description of the power of the oil lobby on Parliament Hill. That article indicated that not only is the new national director of the Conservative party a former member of the company known as Imperial Oil but, indeed, two of the assistants of the Minister of Energy, Mines and Resources are former employees of Imperial Oil.
In view of the Prime Minister's evident condoning of meetings between interested ministers and the Attorney General prior to that minister exercising his responsibility under the Combines Investigation Act, and in view of the evident proximity between the Minister of Energy, Mines and Resources and the industry, 1 ask the hon. gentleman whether he would not now review his position and give express directions to the Minister of Energy, Mines and Resources to stay away from the Attorney General of Canada.


Mr. Baker (Nepean-Carleton):: You are an embarrassment to Parliament.


Charles Joseph Clark: Mr. Speaker, 1 will not try to deal with the allegations which the hon. member could not find it within himself to make directly. Certainly, I will take a look at the matter or have a conversation with the Attorney General of Canada to see if there is any instruction which he thinks would be helpful for me to give to any minister. If the hon. member has any accusations he wants to put, 1 hope he will make them in a direct fashion, if he is capable of directness.


THE CANADIAN ECONOMY
Hon. Robert K. Andras (Thunder Bay-Nipigon):: Mr. Speaker, by way of a supplementary to the Prime Minister, I would like to pursue the line of questioning of my colleague, the hon. member for Stormont-Dundas. 1 would ask the Prime Minister to clarify one answer. 1 take it he did not deny that statements were by his colleagues, prior to and during the election, that the domestic deficit was higher than it actually turned out; he is not arguing that point. But in his answer there was an allusion to something about a problem he had identified since assuming office, a hitherto unknown problem, with regard to Crown corporations affecting the deficit. I would be grateful if
Oral Questions
the Prime Minister could elaborate a little on that answer, because I find it very confusing.


Charles Joseph Clark: Mr. Speaker, 1 was referring to the liabilities which can lie against the Government of Canada as a result of some of the obligations that appear to lie directly against certain Crown corporations.


An hon. Member:: Like Via Rail.


Robert Knight Andras: Mr. Speaker, is the Prime Minister honestly telling the House that that line of investigation, followed as we can assume by the introduction of Bill C-13 to adjust the Public Accounts, will actually have any effect on the cash requirements of this government in terms of the domestic deficit? Is he really saying that?


Charles Joseph Clark: What I am saying, Mr. Speaker, is that some of the information which became available to us after we took office, including information having to do with the potential obligation of the Government of Canada as a guarantor in relation to certain Crown corporations, changed our view as to the extent of freedom that we had as a government.
There was a long list of other surprises to us. I will try to consult with some of my colleagues, and if the hon. member would like us to present a more lurid list of them, I am sure we can arrange that.


SUBSIDIZATION OF PRICES IN NORTHERN CONSTITUENCIES- GOVERNMENT POSITION
Mr. Arnold Peters (Timiskaming):: Mr. Speaker, I would like to ask a question of the Minister of Energy, Mines and Resources. In view of the fact gasoline prices and home heating fuel prices in northern constituencies are the highest in the country, would the government consider bringing in a program of subsidization of oil and oil products in Canada's northern areas to alleviate the current injustices and discrimination against all northern residents?


Some hon. Members:: Hear, hear!


Ramon John Hnatyshyn: Mr. Speaker, my colleague, the Minister of Public Works, indicates that he gave that question to the hon. member to ask. But on a serious note, clearly we are, indeed, very much concerned with respect to the implications of any price increases in heating oil, gasoline and general petroleum products. These matters are under consideration. 1 would be glad to take the representations made by the hon. member into consideration in terms of our total energy package.


William Arnold Peters: Mr. Speaker, I would like to thank the Minister of Public Works, since he has not been able himself to ask that question of the Minister of Energy, Mines and Resources.

October 29, 1979
Oral Questions
My supplementary question is to the Minister of Finance. Since the cost of living figures show that northern areas in Canada have an inflation rate almost double that of southern areas of the country, would the Minister of Finance consider, in his forthcoming budget, bringing in a program of subsidizing essential goods and services, such as stove oil, gasoline, milk and bread, to overcome the particularly hard impact of inflation in Canada's northern areas, including the Yukon?


John Carnell Crosbie: Mr. Speaker, we are certainly very sympathetic to the problems of northern residents, and I am particularly conscious of their situation because of Labrador, in my own province, which is such an area. I would certainly consider the hon. member's representation to see what might be done.
I would point out to the House that at the present time power rates in the Yukon and the Northwest Territories, I believe, are subsidized by the Government of Canada because of the fact that their electricity comes from a very expensive source. It is generated by diesel power and the like. The hon. member has made a good point, and if we can do anything to help I will certainly look for a way.


PENITENTIARIES
Mr. Benno Friesen (Surrey-White Rock-North Delta):: Mr. Speaker, my question is to the Solicitor General. Can the Solicitor General confirm or deny reports that there was a riot at the Kent institution last night and tell us, if there were damages, to what extent and whether or not an investigation is going on?


Allan Frederick Lawrence: Mr. Speaker, I can give the information that there was a prisoner in B block who at about 4 a.m. Ottawa time started a fire in his cell. The fire was put out. The inmate was returned to his cell some time later, at which time all the inmates in B block began smashing up the interior of their cells. This eventually spread to A block and C block. That is the extent of my information at the moment, except that I can indicate that everything is under lock and key, and that they are all confined to their cells.


LOTO CANADA
Mr. Irenee Pelletier (Sherbrooke):: Mr. Speaker, can the Minister of State for Fitness and Amateur Sport tell the House whether or not it is true that some of the provinces have returned their contracts to the federal government concerning

the agreement on dismantling Loto Canada with, in some cases, very important alterations?


Hon. Steven E. Paproski (Minister of State for Fitness and Amateur Sport and Multiculturalism):: No, Mr. Speaker.


INQUIRY WHETHER AGREEMENT SIGNED WITH PROVINCES- ALLOCATION OF FUNDS TO CULTURAL ORGANIZATIONS
Irénée Pelletier: Mr. Speaker, on a supplementary. Can the minister tell the House whether or not it is true that, contrary to the statements he made in the last few months, we still do not have, and that barely a few weeks before the last draw, a signed agreement with the provinces on this matter?


Steve Eugene Paproski: Mr. Speaker, all the provincial ministers have signed the agreement. I see no difficulty in the agreement, and I will be glad to table it at the first of the year.


Mr. David Berger (Laurier):: Mr. Speaker, my question is also directed to the Minister of Fitness and Amateur Sport. Could the minister tell us whether part of the agreement entailed retaining the use of the name Loto Canada, or whether there is some reference to Canada in the continued agreement on the lottery?


Steve Eugene Paproski: No, Mr. Speaker.


Mr. Jim Fleming (York West):: Mr. Speaker, I gather that the Minister for Fitness and Amateur Sport is saying that they do have an agreement and that Quebec has not sent back its contract asking for changes within it to the name Canada. If that is the case, I want to ask the Secretary of State if, considering the representations made last Friday, Arts Day, by the Canadian Conference on the Arts that $12 million minimum would be forthcoming from Loto Canada funds, he can assure the House that that will be the case, and those funds will be to supplement budgetary commitments already made for federal cultural institutions, as that group asked, rather than to supplant planned budgeting already in place?


David Samuel Horne MacDonald: Mr. Speaker, I think the hon. member knows, as do many hon. members, that when the announcement was originally made by the former government with respect to the use of these funds, it was very clearly enunciated that these funds would not be taking the place of funds normally made available through the general public revenues but would, in effect, achieve further accomplishments both in the artistic field as well as in the sports field. That is very much the intention of this government.
October 29, 1979


James Sydney Clark Fleming: Mr. Speaker, implicit in the minister's answer-and I thank him for it-is that those funds will go in other directions at the federal level. Considering the minister's statement of last November, that indeed the federal cultural institutions were starving for funding, and considering reports that the inquiry mentioned in the Speech from the Throne will not even begin until late spring-and it is almost a year since he made the "starving" statement-can he assure the House that there will be additional moneys forthcoming very soon in the future for federal cultural institutions?


David Samuel Horne MacDonald: Mr. Speaker, of late I have had a number of meetings already with representatives of the cultural institutions as well as with provincial ministers. There is very great concern, I believe, at both the federal level and the provincial level that adequate funds be made available for the very important work of these agencies. What we are trying to do is look at an expanded basis for financial support and not rely solely on one means of support which, unfortunately, to date has been very much the case.


TRANSPORT
Hon. John M. Reid (Kenora-Rainy River):: Mr. Speaker, my question is for the Minister of Transport. It concerns his recent decision, which I welcomed, to extend train service over the northern CNR line from three days to six days. 1 also want to thank the government for their courtesy in making available the $2 million to $3 million to allow the service to continue.
There has been some concern expressed that we would be going from seven days of service to six days. Can the minister tell the House if there is a possibility that when the CTC and VIA Rail begin to re-examine the route structure with the possibility of bringing in a regional service that would be more akin to the requirements of the region, the seven-day service should be one of those items discussed by the CTC and VIA Rail?


Hon. Don Mazankowski (Minister of Transport):: Mr. Speaker, indeed, that was one of the options which was considered during the course of the deliberations on this very important subject. Of course, that would have meant postponement of the implementation of the final plan and would have entailed several disruptive factors, such as the schedules. More than 20,000 reservations had been booked, and train crews had been booked. It was virtually impossible to go along with the extension of the existing service. That was done in full consultation with Mr. Roberts of VIA Rail.
We did proceed with the implementation of a six-day week service for a six-month period. It is an interim service during which time the CTC will hold public hearings and VIA Rail will consult with various officials within the communities in an attempt to develop the best regional service to meet the needs of the northern Ontario residents who are affected.
Oral Questions


ADMINISTRATION OF JUSTICE
Stanley Howard Knowles: Mr. Speaker, in view of the fact that the Minister of Justice is not in this House, I shall put my question to the Prime Minister. It may be that the question should be put to the Prime Minister, in any case.
In view of the mounting evidence that the crime of which Steven Truscott was convicted may well have been committed by someone else, and in view of mounting evidence that all aspects of this case have not been thoroughly investigated, will the federal government make a thorough study of the case to see what can yet be done to exonorate this young man, so that he will not have to live his entire life as one who is out on parole?


Charles Joseph Clark: Mr. Speaker, I will certainly consult with the Minister of Justice to determine whether there are any steps which could be taken by the Government of Canada and which should be taken in light of the information that has become, or is becoming, available. If there are steps, and if there is information, we will certainly act on that information and take those steps.


Stanley Howard Knowles: Mr. Speaker, I thank the Prime Minister for that response. Will he permit me simply to remind him that the federal government did become a party to this case in 1966 when an inquiry was ordered, and also that at the present time Steven Truscott is under the authority of the National Parole Board. In other words, there are federal angles to the case.


NATIONAL UNITY
Mr. Gaston Isabelle (Hull):: Mr. Speaker, I have a question for the right hon. Prime Minister. It stems from a recent press conference during which he made some rather disquieting remarks when questioned on federal civil servants taking an active part in the separatist referendum in Quebec, as when he submitted in particular that federal civil servants were free to do whatever they wanted after office hours, to the extent that this was legal. Was he giving a free hand to those who are already involved in the "yes" campaign so that they may intensify their activities, and was he by the same token asking the others to get involved in that campaign, which is contrary to section 32 of the Public Service Employment Act?


Charles Joseph Clark: Mr. Speaker, the hon. member has already suggested in this House that some federal civil servants were giving active support to the separa-

October 29, 1979
Canadian Embassy in Israel
tists, the PQ and the referendum. We have already asked the hon. member to give the names of the persons involved, if he has precise knowledge of them. I can also state that the previous government he supported introduced legislation, Bill C-60, if I am right-in which there was a specific provision, if I remember correctly, under which the section he referred to would not have applied to federal civil servants.


Joseph Gaston Isabelle: Mr. Speaker, I have a supplementary. The Prime Minister rightly stated there was no law introduced to that effect, but that is not the point. We are now caught with section 32 of the Public Service Employment Act, under which it is not a nine to five but a 24-hour a day provision precluding any political activity. Does the Prime Minister intend to ask for a legal opinion on whether political activity also includes the referendum campaign?


Charles Joseph Clark: Mr. Speaker, 1 believe the Public Service Commission has already requested such an opinion from the Department of Justice. I believe, and 1 can check on that, that the act affects support to a party and it is not clear as far as federal civil servants are affected in the case of a referendum. Strictly speaking there are no parties, but a group in support of the "yes" answer and a group in support of the "no" answer. But 1 can ask the chairman of the Public Service Commission and give a more precise answer to the hon. member. As far as I am concerned, I can repeat the request by my ministers for a list of the names of civil servants who are now working against the interests of the Canadian government.



ROUTINE PROCEEDINGS


Charles Joseph Clark: Mr. Speaker, 1 would ask the permission of the House to lay upon the table a copy of an interim report in both official languages from the hon. Robert L. Stanfield, special representative of the Government of Canada and ambassador at large.
[ Translation]


ISRAEL-LOCATION OF CANADIAN EMBASSY
Charles Joseph Clark: Mr. Speaker, I tabled a preliminary report to government by the hon. Robert L. Stanfield, special government representative and ambassador at large on the subject of the location of the Canadian Embassy in Israel.


As part of his mandate, Mr. Stanfield was asked for a recommendation on the implementation of our policy on Jerusalem in a way that would be compatible with the efforts that are being made to achieve a comprehensive peace settlement in the Middle East.
As a result of extensive consultations, Mr. Stanfield has concluded that a change in the location of the Canadian embassy in Israel could be seen as pre-judging negotiations among parties in the Middle East and might, in fact, work against progress to a just and lasting peace settlement.
The purpose of this government is to encourage that peace. Consequently, the government accepts the recommendation that no action be taken on the location of the Canadian embassy until the status of Jerusalem is clarified within a comprehensive agreement between Israel and its Arab neighbours.
We look forward, sir, to receiving Mr. Stanfield's final report so that the government might consider other matters involving our relations with the Middle East.


Some hon. Members:: Hear, hear!


Pierre Elliott Trudeau: Mr. Speaker, what we seem to have now is the latest instalment in the series of withdrawals and flip-flops which were alluded to by the hon. member for Stormont-Dundas (Mr. Lumley) today. 1 do not suppose he knew he would be getting this recent instalment today. I must say, however, it is no surprise to the country and to Parliament that this had to come.
This is a very laconic and brief statement and I commend the Prime Minister (Mr. Clark) for making it now, as soon as he received Mr. Stanfield's interim report. When you are going to reverse your position I suppose the best thing is to do it quickly and quietly and sit down, as the Prime Minister has done.
It would have been interesting for Parliament to know why this policy, which is judged to be misguided now, was really adopted in the first place. Did the Prime Minister really think he was helping the cause of peace in the Middle East? We recall that last January when he was visiting that area he said it would be a misguided policy. By the month of April he had changed his mind. Did he change his mind really because he thought he was helping the cause of peace? Did he think he was improving relations with the Middle East? Did he think he was making the job easier for the Canadian peacekeepers in that area? If so, why did he change his mind now? After all, Mr. Stanfield's mission was, in the Prime Minister's own words, "To find recommendations on the way to implement" that policy. We find that now Mr. Stanfield is recommending, not ways to implement it, but clearly a withdrawal from that policy.
The question Canadians must ask the government is: was this really a considered policy by the government? What did it cost? I do not mean only in terms of economic loss, which the Minister of State for International Trade (Mr. Wilson) has
October 29, 1979

told us about, not only millions lost in real contracts but perhaps billions lost in terms of expectations. What did it cost in terms of Canada's credibility in the world?


Some hon. Members:: Hear, hear!


Pierre Elliott Trudeau: Did it really call for an extensive tour by the right hon. member's former leader of all these various countries to find out that the policy was wrong, that it was misguided? He had been told that not only by members on this side and other parties, he had been told that by his own department. Why did he not change his mind sooner, Mr. Speaker, if there was going to be this loss of credibility, loss of face and this loss of financial considerations?
More important, and what the House would like to know, is what was the price paid to try and save the right hon. Prime Minister's face and that of his party? What price did Mr. Stanfield pay? 1 think we are beginning to see that there was a heavy price to pay, not only for Canada, once again in prestige and economic terms, but a price which was paid by this government in terms of reversing its policy on the move from Tel Aviv to Jerusalem. This is a policy which the government of Israel was justified in believing was made in sincerity, with an intent to carry it out and with the consequent weakening of our relations with a friendly foreign country. Not only, therefore, had Mr. Stanfield the price to pay of saying that he would get his Prime Minister to change that policy, but he also had to pay a much higher cost than that, Mr. Speaker.
I think we had the evidence on Thursday, when we were debating the anti-boycott legislation in this House, that Mr. Stanfield obviously gave another commitment on behalf of the government. The Liberal member for York Centre (Mr. Kaplan) presented a bill which was talked out. This was a bill bringing in anti-boycott legislation, a bill which the House will remember was not passed last spring because the government side, which was then in opposition, refused to give unanimous consent to proceed in one day. We were told on Thursday by the hon. member for Burlington (Mr. Kempling), a spokesman for the Conservative government, as reported in Hansard at page 613, that:
-it is our intention to talk this bill out today because we believe the report to be presented by Mr. Stanfield will have an impact-
I suggest that that is the second price paid, Mr. Speaker; not only a withdrawal of the policy of moving the embassy and the consequent embarrassment and disappointment of our friends in Israel, but also the second price, a more serious one, of talking out anti-boycott legislation which could have been passed had that government not deliberately decided to talk it out in the name of some future pie in the sky in the New Year, we are told. But, Mr. Speaker, if the right hon. Prime Minister is sincere in saying that they want to do something in the New Year, nothing would have prevented their coming in with some different kind of legislation. I am sure the House would have given unanimous consent if the hon. Prime Minister would have wanted to improve that legislation, but at least we would
Canadian Embassy in Israel
have something now. So that is the second serious cost of this prime ministerial blunder.
I see you are impatient, Mr. Speaker, because the right hon. Prime Minister did not have much to say, but I think the House has a lot to say on this.


Some hon. Members:: Hear, hear!


Pierre Elliott Trudeau: 1 think the most serious price of all paid by the Hon. Robert Stanfield is the apparent commitment he gave, and the carrying out of that commitment, to meet the PLO. There was no hint from the government that they were going to recognize the PLO. The government, in an answer to the hon. member for Saint-Denis (Mr. Prud'homme), lamely tried to explain that it was not really a recognition of the PLO by the government because somehow Mr. Stanfield was an ambassador extraordinary; presumably he was not representing the government when he talked to the PLO, but presumably he was when he was talking to the other countries. This new theory of international law has never really been explained by the Prime Minister. But I think from the point of view of Israel and the people in Canada who are sympathetic to Israel, the de facto recognition of the PLO by this government as a price paid by the Hon. Robert Stanfield to cover up the right hon. Prime Minister's blunder is a very serious price indeed, I think one which will have lasting effect on the relations of Canada with the Middle East.


Some hon. Members:: Hear, hear!


Pierre Elliott Trudeau: I can only conclude that this series of reversals is a further indication of the government's incompetence in the matter of foreign affairs. Since there was a reversal between January and April and now another reversal between April and October, I wonder if the information I have received from a high official in one of these Arab countries is not correct when he reported the Hon. Robert Stanfield as having said to some of these governments, "Don't worry, we will change the policy but also we will change the Prime Minister pretty soon".


Some hon. Members:: Hear, hear!


Mr. Edward Broadbent (Oshawa):: Mr. Speaker, the question of the possibility of moving the Canadian embassy to Jerusalem has to have been one of the most serious decisions- and I will come to that in a minute-and possibly one of the most serious reversals that this government has been involved in since May 22.
Our position as a party has been very clear on this issue. Not only do we see the very legitimate and real interests of the people of Israel and the historical claims of Jews to the city of Jerusalem; we have also recognized the very profound historical, religious and current political claims of the Arab countries. It is by no means a one-sided case that can be made about the fate of Jerusalem. Therefore, we took the position in the election campaign that it was an irresponsible action. In the context of jeopardizing very serious peace negotiations it was possible for the Government of Canada, or for a candidate

October 29, 1979
Canadian Embassy in Israel
at that time for the prime ministership of Canada, to suggest that we would move our embassy unilaterally when the Camp David agreement between the two most important nations directly affected, Egypt and Isreal, had specifically said that the future of Jersualem was something to be resolved later on between the Israelis and the Arabs. We think it was a promise made irresponsibly in the campaign and repeated irresponsibly after the election.
It seems to me that we cannot simply pass these things off with the acknowledgment that an error has been made. I think responsible politics presumes that if you do not have enough information or knowledge about a position, then you do not announce a decision. That is that.


Some hon. Members:: Hear, hear!


John Edward Broadbent: It seems to me that the Progressive Conservative leader, now Prime Minister (Mr. Clark), made an irresponsible commitment involving a lot of emotional responses from a good many people of Canada, namely the Jewish community, and for understandable reasons. A good number of them thought this was a positive move. For equivalent reasons a good number of Arab Canadians had contrary views, and certainly the Arab states expressed that view as well.
I want to stress that a good deal of attention has been paid in Canada to the economic reaction. I want to underscore that the Arabs have a religious, political and historical claim that is as profound as the Jews, and it has to be recognized as legitimate. I want to say it was an irresponsible decision to make it an election campaign promise and it was even more irresponsible to carry it out in the days immediately following the campaign.
Having said that, I will come to the Prime Minister's position because I am not yet perfectly clear about it. The Leader of the Opposition (Mr. Trudeau) may be, but if one reads the Prime Minister's statement it certainly needs some clarification for me.
Mr. Stanfield in his report is unequivocal on the point. He made the recommendation that: "It is my view the question"- please note the words-"of the relocation of the embassy must await the resolution of Jerusalem's status as part of a just and lasting comprehensive peace settlement". He said that after pointing out that the Arabs have "vital religious and political interests", as well as the Israelis.
Mr. Stanfield's position is clear. It seems to me to be the kind of position that every thinking Canadian who did not have profound, expert knowledge but elementary knowledge in the spring would have taken.
I turn to the Prime Minister's statement today, and that is what causes me concern. Unlike Mr. Stanfield, who says that the resolution of the question of the relocation has to be left to the future to be determined ultimately by a settlement reached by the states involved there, the Prime Minister used very different words in his statement. He said that "consequently the government accepts the recommendation that no action" be taken on the location of the Canadian embassy, etc. Maybe

the Prime Minister will clarify this in the time we have to pose questions and receive answers. Why did he not say no decision will be reached now, no decision to move or not to move, until after the future is resolved? The implication at least is that the Prime Minister is holding to his old commitment that at some point a move will take place. If he had chosen the words of Mr. Stanfield, any possible ambiguity would have been removed.
Mr. Stanfield made it clear that the whole question of a move, even at some time in the future, has to be made in the context of a settlement reached by the states in the Middle East. I want to stress that my party is in full agreement with that position. It is in full agreement with Mr. Stanfield's position on this.
In conclusion, while it is clear that the future position about our embassy in the state of Israel, namely its location, has to be left until the future of Jerusalem is in fact determined by the states in the area, I wish to underscore the rights of the Jewish community in Canada to put as much pressure as any other group on the Government of Canada for what they believe in. That is very important.
I want to take this opportunity to dissociate my party from the Leader of the Opposition (Mr. Trudeau), who said vis-avis the Jewish community that they have "opened the way to growing anti-Semitism"-and that is from the Leader of the Opposition in the House of Commons-because of the pressure they are putting on the Government of Canada. I want to say the Jews of Canada have the same right as anyone else to push as forcefully as they wish, as forcefully as any Canadian citizen, for any policy they want, whether the Government of Canada ultimately agrees with it. To suggest the contrary is to indulge, or seem to indulge, in the course of action to which the Leader of the Opposition was objecting. I hope he reconsiders his words.


Pierre Elliott Trudeau: Mr. Speaker, I understand that under the rules we may now ask questions. I must take great exception to the statement by the leader of the New Democratic Party. It is a question of privilege on which I will ask Your Honour's guidance as to when it should be raised. However, I want to say now that he was presumably quoting from some press report which was not quoted accurately. It was not even given in an interview, but at a background briefing; in short, an interview in which I was asked about the actions of Mr. Moshe Dayan.
It is just as unfair for the leader of the New Democratic Party to take it out on me now when he knows I do not have a right under the rules to answer for perhaps a press release issued by some other members of the Canadian community. If the leader of the NDP had a point to make which is not on this particular policy, he should have chosen another way to make it.
My question to the Prime Minister is simply this. I indicated at the beginning of my remarks that Mr. Stanfield had a mandate to say how we could implement the government's
October 29, 1979

policy. We hear now that implementation is not proceeding. The question 1 have for the Prime Minister is: has the policy been changed or is it merely the implementation of it which has been delayed?


Charles Joseph Clark: Mr. Speaker, it is not our intention now to move the Canadian embassy in Israel to Jerusalem.


Pierre Elliott Trudeau: Mr. Speaker, I think the word "now" is very, very crucial. I take it, and the Prime Minister can answer me, that the policy has not been changed, that they still want to move the embassy from Tel Aviv to Jerusalem, but they will not do it now. These are the words he used; I ask the Prime Minister to clarify them.


Charles Joseph Clark: Excuse me, Mr. Speaker, what I should have said is "it is not now our policy". We do not intend to move the embassy from Tel Aviv to Jerusalem. If there is a just and lasting peace settlement that settles and clarifies the question of Jerusalem, that may allow us to reopen the question. Until there is such a clarification within the context of a just and lasting peace settlement, the Canadian embassy will stay in Tel Aviv.


CONSTITUENCY RECORDS ACT
Mr. Paul Dick (Lanark-Renfrew-Carleton) moved: for leave to introduce Bill C-486, respecting the preservation and surrender of constituency records.


Some hon. Members:: Explain.


Paul Wyatt Dick: Mr. Speaker, this is a bill which appeared before and was once debated. It deals with the passing from one member to his or her successor any information, especially original documents which might be received from constituents.


[Stage Direction]
Motion agreed to, bill read the first time and ordered to be printed.

Paul Wyatt Dick: for leave to introduce Bill C-487, to amend the Federal Business Development Bank Act (corporate objects).


Some hon. Members:: Explain.


Paul Wyatt Dick: Mr. Speaker, this bill is drafted so that any funds which the Federal Business Development Bank might loan to clients would be restricted to clients who are Canadian citizens, landed immigrants or companies beneficially owned by Canadian citizens or landed immigrants.
Introduction of Bills


[Stage Direction]
Motion agreed to, bill read the first time and ordered to be printed.

Paul Wyatt Dick: for leave to introduce Bill C-488, to amend the Canadian Human Rights Act (controlled illness).


Some hon. Members:: Explain.


Paul Wyatt Dick: Mr. Speaker, I perceive there may be a weakness in the Canadian Human Rights Act in that it does not properly define people with certain handicaps. This is to define more clearly certain handicapped people as those with a disease which can be controlled by drugs in order that they will not be discriminated against.


[Stage Direction]
Motion agreed to, bill read the first time and ordered to be printed.

Paul Wyatt Dick: for leave to introduce Bill C-489, to amend the Canada Elections Act (partisan poll officers).


Some hon. Members:: Explain.


Paul Wyatt Dick: Mr. Speaker, this bill is designed to overcome a very obvious inequity in the Canada Elections Act and to bring it more in tune with modern times, such as legislation in Ontario, Quebec and other provinces where the polling clerk and DRO are required to be from two different political parties.


[Stage Direction]
Motion agreed to, bill read the first time and ordered to be printed.

Paul Wyatt Dick: for leave to introduce Bill C-490, to amend the House of Commons Act and the Canada Elections Act (by-elections).


Some hon. Members:: Explain.

October 29, 1979
Order Paper Questions


Paul Wyatt Dick: Mr. Speaker, this is a very important bill which I hope will one day pass. It restricts the time the government would have for calling a byelection. It should be noted that Canada has the slowest procedure for calling a byelection of any country in the democratic world. This would restrict the time in which this must come about.


[Stage Direction]
Motion agreed to, bill read the first time and ordered to be printed.

Paul Wyatt Dick: for leave to introduce Bill C-491, to amend the Criminal Code (reporting names of accused).
He said: This is a bill introduced almost in the sense of a devil's advocate but on what I consider to be a very important topic, one which ought to be considered, and that is that the name of an accused should not be allowed to appear in the press until the accused is convicted.


[Stage Direction]
Motion agreed to, bill read the first time and ordered to be printed.

[Stage Direction]
(Questions answered orally are indicated by an asterisk.)
Mr. David Kilgour (Parliamentary Secretary to President of the Privy Council):: Mr. Speaker, the following question will be answered today: No. 66.
I ask, Mr. Speaker, that the remaining questions be allowed to stand.


Mr. Orlikow: 1.	Who (a) is the president (b) are the vice-presidents of the Dominion Coal Board?
2.	What is the annual salary in each case?


Ramon John Hnatyshyn: The Department of Energy, Mines and Resources reports as follows: 1. The Dominion Coal Board was dissolved by the Dominion Coal Board Dissolution Act which was proclaimed in force on May I, 1970. Subsequently, some of the staff, duties and responsibilities of the Dominion Coal Board were transferred to the Department of Energy, Mines and Resources.
2. Not applicable.

[ English ]


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


Some hon. Members:: Agreed.



GOVERNMENT ORDERS


John Carnell Crosbie: that a ways and means motion to amend the Income Tax Act, laid upon the table Thursday, October 26, be concurred in.


[Stage Direction]
Motion agreed to.

John Carnell Crosbie: that Bill C-20, to amend the Income Tax Act to provide a tax credit in respect of mortgage interest and homeowner property tax, be read a first time.
Motion ageed to, bill read the first time and ordered to be printed.


BORROWING AUTHORITY ACT, 1979-80 SUPPLEMENTARY BORROWING AUTHORITY FOR 1979-80
[Stage Direction]
The House resumed, from Friday, October 26, consideration of the motion of Mr. Crosbie that Bill C-10, to provide supplementary borrowing authority for the fiscal year 1979-80, be read the second time and referred to the Standing Committe on Finance, Trade and Economic Affairs.
Mr. Speaker:: The hon. member for Timiskaming.


Stanley Howard Knowles: Hear, hear!


William Arnold Peters: Mr. Speaker, that spontaneous outburst by my colleague from Winnipeg North Centre (Mr. Knowles) reminds me of a 90 years old gentleman visiting here from Britain a few days ago who was shocked when he heard everybody clapping; he wondered what had happened to the Canadian Parliament and its following of the tradition of the British house where nobody is ever heard to clap.
October 29, 1979

The reason I participate in this debate is that along with a lot of other Canadians 1 am concerned by the fact that we are going outside the country once again to borrow very large sums of money, in this case about $7 billion, knowing full well that if we did not have a trade balance that carried a deficit of about $8 billion we would probably not have to borrow that money.
In the second place, like anyone who has to go to Household Finance we are going to find as a people that the interest rate is likely to be disastrous, that we will have to pay at least the prime interest rate, probably more, and that part of the reason we are paying it is because the Americans cannot add. It is really extraordinary that the governor of the Bank of Canada should appear before the finance committee and tell us we have to raise our prime rate because the Americans raised theirs, only for the public to find that the Americans raised their interest rate because they had made a mistake in their calculation of the money supply in their country.
So, Mr. Speaker, if 1 go to Household Finance for money to buy a television set, 1 have to suffer because of the inability of some people in America to do arithmetic. It seems idiotic that I should have to pay for a mistake the Americans made. We talk about Canadian identity. Surely our financial structure has not got much if we depend on another country to do the proper calculations and come up with the appropriate interest rate 1 should pay on money I borrow to buy a television, a car, or whatever else 1 might buy in my own country. I believe most Canadians, like myself, disagree with the proposition that we must become continental in setting the price of our money, interest rates, the price of oil, of cars, and of almost every other commodity we use just because the American set it.
The government is now proposing to borrow this money knowing full well we are not following the philosophy of the Minister of Finance (Mr. Crosbie) urging privatization, because privatization, he believes, is the best way of doing things. This philosophy goes out of the window. There is no competition among the banks. We do not find one bank charging one price and another bank charging another. Once a decision is made by the Bank of Canada, all the banks raise their interest rates to the same rate because they all borrow from the same source. All these banks are making a good profit and some of them could probably afford to drop by half a per cent the amount they charge on their loans for houses, farms and so on with a little push from us. That would be possible and they still would be able to make a profit. But they have no intention of doing so. They decide, as a great monopoly, that everybody has to pay the same, no matter what bank they go to.
It is not without interest that some of the staff of the House of Commons have recently decided that they will no longer deal with ordinary banks. Many of the staff in this building have decided to put their money into the Province of Ontario Savings Office. I have never heard of it before myself, but it has a small branch on Sparks Street. The reason they give for doing so is that though there are no frills, no big buildings, there are no extra charges, they get the interest on their money
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and if they want to write cheques against the whole of the amount in their account it does not cost them extra. 1 do not know whether the Province of Ontario Savings Office is making a huge profit or not, but even that does not constitute real competition.
The other day we got into a discussion with the Minister of State for Small Businesses and Industry (Mr. Huntington). It was an interesting discussion and I may have missed some of it, but I am not sure why he made an interjection. He did so after 1 had stated that according to the advertisements put out by the pulp and paper companies we should not burn down the forests of Ontario, because in Ontario out of every dollar that changes hands in the province, 27 cents comes directly or indirectly from the forest industry.
Apparently the minister disagreed with that statement. According to him, the major factor in the Canadian economy was the manufacturing sector. Well, Mr. Speaker, he has only been minister for a very short time and he probably does not know much about the situation yet. I listened to him debating on television with the former minister of industry, trade and commerce and I think he ought to take a few lessons before he starts lecturing anyone else.
I was surprised to find that the primary industry is not the big producer in Canada I thought it was. but neither is the manufacturing industry. According to Statistics Canada, the manufacturing industry dropped from 26 per cent in 1970 to 19 per cent now in terms of our gross national product. Its production is going down, not the other way, and this is very much reflected in the deficit we have in our estimated balance of payments for this year, which will be about $8 billion. That figure may increase before the end of the year.
Surprisingly enough, the largest sector in this country is the third sector, the service industry. More transactions take place in that industry, and it is in that industry that the largest percentage of the gross national product is involved. Its production is considerably greater than that of the manufacturing industry of this nation, and it is also much greater than that of the primary industry.
If we want to eliminate our $8 billion estimated balance of payments deficit-and I am sure the minister would like to do that-there is a way of doing it. In this country today we are producing about 1.5 million ounces of gold. That gold was produced by the same mines at about $35 an ounce not too long ago, and the government was subsidizing $15, $20 and up to about $55 an ounce. On the average the country lost about $15 on the gold it was subsidizing, but it is interesting to note that at the end of the emergency gold mines assistance program Canada held enough gold and the increase in the price of gold was sufficient that we were able in one swoop and with a very small amount of gold to write off the total deficit of emergency gold mines assistance. The amounts over 15 years were considered sufficient to keep the mining industry in operation.

October 29, 1979
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Not long ago the Ontario government, the federal government and the municipalities involved participated in the Kirkland Lake area in a magnetometer survey, an electronic survey involving ground evaluation and magnetometer and electromagnetic surveys. As a result the maps for that area now show that there is considerably more wealth in the ground in the Kirkland Lake area than has been mined.
If the Minister of Finance was to decide to mine gold again, he would have to mine only 20 million ounces a year to eliminate the balance of payments deficit. Gold is being mined today in the mines which are already in operation. According to estimates the cost of production is about $115 an ounce. That gold is now selling for something over $400 Canadian. If we were to take 20 million ounces plus the cost of production, we could wipe out the total trade deficit we have, the whole balance of payments deficit, for the next year. This is possible. The government would have to make the decision that it would be its development and that it would mine the gold for the specific purpose of getting rid of the balance of payments. It would mean that we would not be out borrowing in the market. We would not be out looking for loans in the countries of the world, including the United States and Europe. We would be able to balance our payments through the simple operation of mining gold.
When we talked about the gold bullion coin, immediately the people in the Department of Finance tore out their hair because of all the work they had done on the Bretton Woods Agreement. 1 understand that we are going to discuss the Bretton Woods Agreement shortly. The Bretton Woods Agreement was drawn up after the war to get rid of the gold standard. It resulted eventually in the establishment of the International Monetary Fund. It was decided that the base of international currency was to be the American dollar. A new unit of borrowing was established. That meant that United States banks lent so much money around the world that if those loans were called, there would be bankruptcies. It is interesting to know that the federal reserve in the United States is smaller than the loan to one country, Turkey. Turkey owes American banks $13 billion. The federal reserve fund is only $9 billion. If the banks were to call that particular loan, obviously the federal reserve fund would be bankrupt. That would mean that the banks in the United States would start to fall because the only thing propping them up is the federal reserve insurance.
That will not happen because the secretary of state and the secretary of defence in the United States will not allow that to happen. If Turkey was put into bankruptcy, Turkey would no longer be in the NATO camp. Therefore, there obviously will not be any effort to collect that loan. In fact, the American people will eventually pay off the loan for defence purposes. The International Monetary Fund did not work. It was set up by people like the minister in charge of small business. They really did not understand the whole problem or its ramifications. They really believed that people would be able to trade on script forever. That meant that the United States was able to print money like it was going out of style, to the point where
[Mr. Peters.)
Nixon, when he was president of the United States, had to declare that there would no longer be a reclaiming of American dollars for gold. When he said that the reclaiming of those bills for gold could no longer be done, that meant that those dollars would never be back in the United States and would in effect be floating around in Europe to be used for whatever purpose the Europeans desired.
It is very interesting to note that those Eurodollars which probably carried an actual value of six cents or seven cents on the dollar were used not long ago by the Reichbank in Germany to buy all the gold that the United States put on the market. The Reichbank bought the total amount, and it would not have mattered what the price was. The bank could have paid $500 or $600 an ounce, it really did not make any difference, because the gold was worth something. The paper was hardly worth the cost to print it.
The Minister of Finance is obviously not going to consider the mining of gold. He is not going to recognize the interest in gold because in financial circles it is considered to be a disaster to look at a base in gold today. However, he really should look at how some countries have balanced their payments. We sell our wheat to Russia. Until very recently Russia has paid us with gold, and we bought that gold at $35 an ounce when gold was selling on the open market at considerably higher prices. Now Russia is asking a number of countries to bid on supplying their currencies against gold on the international market. That will mean that Russia will be selling its gold for acceptable currency with which Russia can buy commodities from other countries, such as our wheat, and give us in return the currencies of other countries.
The reason the Russians have not played around with transferring roubles to Canada and establishing the value of the rouble was very simple. They did not want to debase their own currency. They did not want to put their currency against that of any country in the world. For years they have mined gold and used it as their method of external exchange and foreign trade. They have not played around with the rouble on international money markets. This means, of course, that whatever the value of the rouble, it is not devalued by putting it against any other currency in the world. South Africa has mined gold at great cost, I am sure. I am sure that they have mined gold at a considerably higher price than the $35 they were getting two years ago for that commodity. They mined it simply because they could go to the international marketplace and buy the goods, services and all their needs in such a way as to balance their trade with the gold they produced.
I am sure that we in this country are in a position to produce very easily the 20 million ounces of gold which we would need to balance our payments so that we do not end up with a deficit and have to borrow money. Any sensible government would take means to protect its economy. For instance, one could stop the flow of money out of the country. It was very interesting to read in a U.S. paper that the Americans are very concerned about the control which Canadians have on their
October 29, 1979

money supply. Most people do not realize that we send out more money than we bring into this country. We own many of the financial institutions in the United States through our control of insurance companies. We are the best savers in the world. When we are at the height of prosperity we still prepare for a depression. When people save, they save themselves into a depression. Much of this is done by sending our money out of the country through insurance companies and depositing it in another country at its face value, to be used by that country, such as the United States. We allow Americans to use the inflationary period to reap the benefits of that money, and we are still covered for the face value of the insurance policy which we bought when our dollar was worth $1 rather than the 40 cents or 50 cents it is now worth.
We are probably not going to mine gold, but I would like the minister to look at this question because I am sure he has some new ideas. 1 am sure he is well aware of the fact that the mining industry is perturbed by the fact that gold is not being mined. One of the reasons they cannot mine gold is that an immense outlay of capital is necessary for any mining company to go into operation today, not so much for underground mining because in many cases the mines are there, the reserves are known and so are the values. Samples have been taken and diamond drilling has been done. All possible ways have been explored to ascertain the value of that mine. In fact, all these things have been done in general years ago. But one of the expenses will be the building of a mill, and to make that kind of expenditure, it is necessary for the government to step in.
1 am glad to see the Minister responsible for DREE (Mr. MacKay) here. Perhaps the minister will have to give some consideration to providing a long range financing structure for the establishment of mills. I see in this country the establishment of a big mill in a mining community, the establishment of a custom mill, and the government would be the only entity which the mining community would trust because it is generally believed by the mining community that all mining companies cheat. I worked in the gold mining industry for I 5 years as an underground miner and 1 also agree that generally mining companies cheat and are dishonest. They have nothing to recommend them. Of course, that can be corrected. They do not trust each other, and certainly I did not trust them when 1 was a miner. 1 struck against them many times. 1 did not believe their financial statements because I figured they were loaded against me as a worker. Workers still believe that.
The gold mining industry as had a bad reputation. However, over the last 15 or 20 years they have been closely supervised by the government. Because their books have been looked at by the government, because all emergency gold mining assistance was paid only after the mine showed the government its books, 1 am sure the situation which I knew 25 years ago has changed. I think that now those mines can be trusted, but I believe they are doubtful as to whether they can trust each other. The same is true of cobalt. They send their assays to a mill owned by the provincial government, and they send their ores there which are tested. The mining company which sends its ores there knows full well it will get exactly
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what they sent; there is no question about the honesty of that particular mill. But there have always been questions about some of the other custom mills.
However, in my opinion, the government cannot guarantee the price of gold. To do that, it would have to go back to the gold standard; it would have to establish the gold standard for Canada, and people are not yet ready for that. Most individuals in the world who are well off today have gone back to the gold standard. They have decided it is better to buy the Kruger Rand, the Maple Leaf coin or the old English guinea because governments back those coins so far as their quality and weight are concerned and they are better deals than the American dollar, treasury notes, mortgages, debentures, or other such things.
For that reason, the price of gold has risen to unreasonably high levels. I suggest that if this government enters into the mining industry and finds a way to start operating gold mines, it would be able to buy offshore oil without the price escalating one iota. Probably the total reason for the inflationary rise in our dollar is the escalation of the price of gold, and that is probably close to the inflationary factor in the world today. The government might find that they would get the same amount of oil for one ounce of gold today as they did ten years ago when the price of oil was considerably lower, and so was the price of gold. It might even be able to buy more oil than it did then. But it seems to me that we should not let those people in the Department of Finance who have studied under Keynes, who believe sincerely in the Bretton Woods Agreement and who were involved in the setting up of the International Monetary Fund, dominate our thinking on what you and I would like as a hedge against inflation. Rather than going out and borrowing $7 billion at 14 per cent tomorrow, we could use a small amount of that money for developing a gold mining industry in conjunction with the government so that we as Canadians could use that gold to make the lot of future generations in Canada much easier as a result of the elimination of much of our foreign debt.


The Acting Speaker (Mr. Scott, Victoria-Haliburton):: Order, please. I must inform the House that if the minister speaks at this time, he will close the debate.


John Carnell Crosbie: Mr. Speaker, no more speeches. Having waited so long for the end of this debate, I will not speak for very long, but I think 1 have to reply to some of the points that were made.
Let me come back first to the principle of this bill to authorize the government to borrow $7 billion up to the end of this financial year. One of the features of this bill is that if $7 billion is not borrowed by the government by March 31, 1980, the borrowing authority will die and we will have to come back to the House to ask for further authority to borrow funds.
Why do we have to borrow $7 billion? We have to borrow that amount because the previous government-I know hon. members opposite do not like to hear the previous government mentioned, are ashamed to hear it mentioned-brought down a budget last year. In that budget there is a deficit. What is
80074 -4S

October 29, 1979
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the deficit? Well, the deficit in the budget brought in by the hon. member for Saint-Maurice (Mr. Chretien) last November 16 was $11,300 million.
If one spends $11,300 million more than one has, one has to get the $11,300 million from somewhere. Where does one get it from? One gets it from people who lend money. How does one get people to lend money? You ask the House to give the authority to borrow the necessary funds. Why are we not asking the House for authority to borrow $11,300 million? It is because we did not need the authority to borrow $11,300 million. Due to the authorities given by this House in previous years, it was tucked away here and tucked away there, in this pocket here or that little cubbyhole there. It was borrowing authority that had never been cancelled by the House. So we discovered that we only needed to borrow or to ask the House to give us authority to borrow $7 billion, because the government had previous authority from other sources to borrow the rest. So we are only asking the House to give us the authority to borrow what appears to be absolutely necessary, although we could have come in, as our Liberal predecessors did last year, and asked the House to authorize $10 billion.
It was hon. members opposite who are now members of the official opposition that asked this House in the income tax legislation earlier in 1979 to authorize them to borrow $10 billion. So we are coming in and asking the House for the authority to borrow $3 billion less than the official opposition requested when it was the government. Lo and behold, members of the official opposition are on their feet condemning us; it is a shocking thing we have done, to ask this House to let us borrow $7 billion. It is dastardly; it is absolutely astounding that we have the audacity to do this!
If we do not do it, where will we get the money to spend in accordance with the estimates that they prepared for the House? Are we going to manufacture it out of thin air?


William Arnold Peters: From gold mining.


John Carnell Crosbie: Where are we going to get it? Do we ask members to surrender the gold from their teeth? I hear the hon. gentleman talking about gold mining. We had to ask the House to authorize this $7 billion borrowing, because we are carrying out the budget left to us by the hon. gentlemen opposite.
I was shocked and amazed. I will not describe it with an adjective because I want to get on with everybody in the House, particularly in view of the fact that they take so long when they are discussing a bill. I will not describe how unusual that behaviour is. We are talked at for four days because we asked for $7 billion to do the job that hon. gentlemen opposite wanted $10 billion authority to do. Certainly it is most peculiar. One would almost think that they are playing partisan politics.


An hon. Member:: Never, never.
[Mr. Crosbie.)


John Carnell Crosbie: 1 would never suspect them of doing that. Let us look at some of the things that were said by hon. gentlemen opposite. It reminded me of the old admonition that the criminal always returns to the scene of his crime. That is just what hon. gentlemen did; they returned to the scene of their crimes. They are chastising us because we asked for $7 billion of borrowing authority. They had the-what can one call it? They had the unmitigated gall-


An hon. Member:: That is putting it mildly.


John Carnell Crosbie: Yes, that is putting it mildly. They had the unmitigated gall to say that we should not ask for this borrowing authority before the budget. They came here some 12 months ago to ask for some borrowing authority before they brought down a budget and before they presented any estimates to the House. The House had no estimates before it. We are asking for a borrowing authority. Not only is there a budget of last November, a year ago, but the estimates have been before the House since before the House was dissolved, if I remember correctly. So all the estimates are before the House, and the supplementary estimates.
Everyone knows how we plan to spend the money, there is no confusion about that.Yet it is suggested by hon. gentlemen opposite, such as the new finance critic-where was he when he was needed? Where was he when he should have been minister of finance? Where was he when he should have been putting his new views before the people of Canada? Where was he for the last four or five years? He was relegated to another role. Certainly he was not in cabinet, and now he is being trotted out. He is being trotted out because the hon. member for Saint-Maurice is afraid to get up in the House and ask a financial question. He dare not ask one, knowing how silly he will sound if he does. The hon. member for Windsor West (Mr. Gray) was the one who said that we should not get borrowing authority because we do not have a budget yet.
I suppose there is not much point in getting into the debate on interest rates at this stage, although a lot of members opposite raised it. We will have other occasions. As a matter of fact, 1 have been attacked in the House because it was alleged that I did not want to go before the House of Commons Standing Committee on Finance, Trade and Economic Affairs.


An hon. Member:: When did you want to go?


John Carnell Crosbie: It was wrongly alleged that I did not want to go there until after Governor Bouey had been there. I did not want to go there until Governor Bouey had been there because Governor Bouey wanted to go before I was there. He wanted to do as had always been done in the past, to appear first and the minister would appear after. But I am more than willing to go. I am going to be there tomorrow morning.
We had a motion here today to allow the whole matter to be televised. These ferocious lions opposite have been attacking me because I will not go before the House of Commons finance committee, implying that I am afraid to answer their questions. We want the television cameras there so that the people of Canada can see what is being said and asked there.
October 29, 1979

We requested that and moved a motion today. The hon. member for Vancouver Quadra (Mr. Clarke) moved the motion. The member who accused me in the House of refusing to go before the committee, a member from Montreal, the hon. member for Vaudreuil (Mr. Herbert), said no and would not allow the motion to be approved.
I am neither afraid to go before the committee nor afraid to go before the committee televised. But apparently the hon. gentlemen in the official opposition do not want that. They do not want the people of Canada to see the clarity of my answers, the way in which 1 handle their questions, and the way in which I will point out to them what they said a few months ago, a few weeks ago, a year ago, two years ago, and what the hon. member for Saint-Maurice said and did not say.
I could stand up in this House any day of the week and just copy the answers of the former minister of finance.


An hon. Member:: You have done that.


John Carnell Crosbie: No, 1 have not needed to do that. I have been able to dream up the same reasons myself! 1 say that I hope hon. gentlemen tomorrow will allow us to have television cameras in this committee.
One of the hon. ladies from Vancouver talked about the Titanic. 1 guess it is like the Titanic. We have a crew over here that is pumping her out. The Titanic was on her way down, if we want to compare the Canadian economy to the Titanic, and the captain and the crew over here are pumping her out as fast as we can. When we are able to bring in our fiscal policy to complement the monetary policy, then we will get Canada on the way again. We are not expecting that governor Bouey and his monetary policy can do this job. It cannot be done with monetary policy alone. It has to be done with a combination of monetary policy and fiscal policy.
Two great things which are so hurting the economy of this country and causing the huge budgetary deficit which we must start eliminating in a healthy manner are overspending and too much tax reduction, leading to a great deficit. That must be cut back if there is going to be a chance to get ahead with the huge deficit in the balance of payments in our international account. That has got to be dealt with. These things take time. What is the good of hon. gentlemen getting up in the House and saying that we should not pay interest, that we should not pay dividends to outside investors, that we should stop doing this? So what? If we stop doing this right now, if from tomorrow onward we pay no extra interest or no extra dividends to outside investors, we would still have to pay those who have already invested and lent us money. We would still have this problem. It would still be a problem for another two, three, four or five years. We were a long time getting to this position, and we are going to be a pretty long time getting out of it. It is not something anyone can cure overnight.
The hon. gentlemen from the NDP say that we should stop this, that we should stop foreign investment and that we should stop borrowing more money abroad. What are we supposed to do? Are we supposed to wave a magic wand so that we can suddenly stop paying out these billions of dollars which Cana-
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dians and governments in Canada owe to foreign investors and foreign lenders? We cannot do that. This is a problem that nobody has a magic wand to cure. Since 1945 this country has been allowing itself to become more and more economically dependent on the United States of America. It is not something that started on June 5 when we became the government; that is a situation which has been building up and building up for the last 30 or 40 years. Now 70 per cent of our exports go to the United States and 70 per cent of our imports come from the United States. We have a lot of our industry owned by the Americans and outside investors. We borrow huge sums outside Canada. So that is not something we can reverse overnight. That is not something we will reverse this year. That is not something that can be reversed this year and next year together. It will not be reversed the year after or the year after that either. It is something which we start with now, and if we are successful we may have a good chance at starting a reversal and bringing the current account deficit down over the next four or five years.
That is our message to the Canadian public. We cannot undo all this damage overnight, no one can. There is no magic wand. That is the course we will start on. Because if we do not start somewhere we will never get there. If one does not start on the road, one will never get to the end of it. 1 will not go into any more detail now, it is not the proper time. We will have lots of time to debate that matter in the coming budget debate.
I was chastised because I was a bit lighthearted when I debated the introduction of this bill. While debating in this House, I try to enjoy the debate, to poke some fun at the other side and so on. A number of sourpusses opposite got up and attacked me as though there was something unhealthy or wrong with trying to enjoy oneself when debating a measure in this House and trying to show one's sense of humour. God knows, 1 have little to laugh about. If 1 cannot get up and attempt a jest or two in this House, I will be in pretty bad shape. It will be pretty gloomy.
As the hon. gentleman from British Columbia pointed out the other day, I was not looking happy, and I explained the reason why. I went through this before, starting back in 1972. I did not smile for three years while 1 was minister of finance in Newfoundland. Now I am trying a different approach and I am being attacked in the House for taking this matter all too lightly. If the Canadian Minister of Finance must go around looking like the hunchback of Notre Dame, 1 will do it to avoid being attacked. You have seen my last smile or chuckle in this House, Mr. Speaker.
The hon. member for Saint-Maurice got up the other day and said there was nothing funny about this matter. He said that the situation was not funny. The hon. member should certainly know that the situation is not funny because he left me this unfunny situation. If 1 am to listen to his advice, 1 will have to be lugubrious. One must be very lugubrious if one is to

October 29, 1979
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be Minister of Finance in this House. From now on "lugubriousness" is the order of the day.
What else is there? Did anybody else say anything of any note? The hon. member for Saint-Maurice said that the countries that have oil do not charge the full price for their oil. He gave the example of Venezuala. That may be true. I have not checked out Venezuela, but 1 know that the United Kingdom has lots of oil in their North Sea, and that if anybody visits the United Kingdom they will find out what they charge for oil and gasoline. The western industrialized countries that have their own indigenous supplies of oil are paying the full international price. That will come to us over the next three or four years, also under our carefully worked out policy, which will be expanded on in every detail once the final flourishing touches are put to it after the first ministers have met.
We will tackle the pricing of oil because it was never attacked by our predecessors. We know that until that problem is tackled and resolved there will not be any major improvement in our economic activity, it cannot be done until we have dealt fairly with Alberta and with this country and put before the people of Canada, and had accepted by them, a policy that will lead us in three to four years' time-always keeping in mind U.S. prices-to the full value of our oil and gas products. We are going to tackle that problem. We are not going to evade it. We do not want to do that, because the Canadian public do not want cosmetic improvements, they want action.
I want a budget, Mr. Speaker. I have been waiting since June 5 to have a chance to bring a budget into this House. 1 plead with hon. members opposite to help me in doing that by passing, for example, this legislation, after reasonable discussion and debate, and the bills remaining from the last budget of the previous minister of finance, so that we have the decks clear and can get on with discussing it.
If that can be done within a reasonable period of time, I am hoping to bring a budget into this House before the end of November. My budget will outline what we think the fiscal and monetary answers are to the problems of this country. I do not want people to think that the solutions will not cause some hurt. There is no painless way to overcome inflation or these other economic problems we face in Canada. We only hope that the process will be as short as possible. We will have a budget as soon as this honourable House permits us to have a budget and to get on with it.
The hon. member for Winnipeg North (Mr. Orlikow) said he had no objection to deficit financing. That is a well known fact and I will not even comment on it. We know that the hon. members in the NDP have no objection to deficit financing. It is the only kind of financing they understand.
After having been criticized by hon. members opposite for not going to the House of Commons finance committee and after their having said how eager they were to have Governor Bouey and myself come to the committee, the other afternoon, in the middle of this debate, an hon. member moved that the debate adjourn. He interrupted Governor Bouey in his testimony before the finance committee, and interfered with all the
[Mr. Crosbie.)
questioners because we were brought back to the House. As a result, an hour to an hour and a halFs time was lost in questioning Governor Bouey. That shows that perhaps it was not strict impartiality with which they were approaching this matter.
The hon. member from Saskatchewan who is sometimes called "Nasty Nystrom" or "Nosy Nystrom"-1 have forgotten the name of his riding-said that I had had a conversion on the road to Damascus. Apparently 1 am allowed to move there. The hon. member said he did not want the government to borrow $7 billion and he accused me of being a right-winger. I say that the hon. member is a "left-footer". He wanted to know why we should need to borrow $7 billion.
1 would like to know what the NDP would like us to cut out of our budget to offset this $7 billion in spending. Should we cut out the social security cheques? Should we do away with the child tax credit? Should we do away with payments to veterans? Is that what the hon. gentlemen of that party want us to cut to make up the $7 billion? We are borrowing this money to carry out these programs. The hon. member did not say exactly why we do not need this $7 billion, and he would not tell me what to cut out of the expenditures.
The hon. member for Gander-Twillingate (Mr. Baker), who is not here today, talked about the arterial road water supply system in the riding of St. John's West. I plead guilty to giving my constituents good service. I can promise them that if they keep returning me to this chamber, as long as I have a breath left in my body I will certainly do the best I can for my constituents in St. John's West, just as the hon. member is doing for his constituents in the riding of Gander-Twillingate. But just because the hon. member is not doing as well as I am, there is no need for him to point a finger in scorn at me. The only advice that I can give to the people in his riding is that they get rid of a member who cannot get them as much as the member for St. John's West can, and try and do better. I have to admit that it took seven to eight years before those expenditures were made on this arterial road, the metropolitan water supply system and the like. I can also say to the member for Gander-Twillingate that if he needs a hand to find his way around the new government, give me a call. The hon. member is a good friend of mine, and I can remember when we were together in previous times. He ran for our party in the provincial election in 1971.


William Arnold Peters: Which party?


John Carnell Crosbie: He ran for the Conservative party. It was after my conversion. The hon. member for Gander-Twillingate converted to the PC's, he reconverted to the Liberals and God knows where he is now. He is reconstituted somewhere. It would do the hon. gentlemen opposite some good to get converted. I suggest they come over here and see what it is like and get off that left foot.
1 think that I have pretty well touched on everything, Mr. Speaker. There was a lot of talk about loan sharks and the like but I will let that subject go until another time. The member for Sault Ste. Marie (Mr. Symes) asked "Who cares?" Obvi-
October 29, 1979

ously the one who cares is me. 1 am asking the House to provide the $7 billion because we care. Next year we hope to approach the House for less. That will be part of our approach to the economic problems of Canada.
The hon. member for Timiskaming (Mr. Peters) said this afternoon that we are paying high interest rates because there was a mistake in the money supply figures in the United States of America. That is absolute, unadulterated twaddle. There was a mistake made in the United States in the money supply figures, but that does not mean that they would not have raised their interest rates in any event. The Citibank raised its interest rate to 15.25 per cent last Friday, just after that mistake had been discovered. If the Americans would drop their interest rates this week, we would be able to consider where we are and hopefully drop ours. But just because they made a mistake in adding up the total of their money supply several weeks ago, has nothing to do with what interest rates are here today in Canada.
Nobody in the opposition asked a question today about whether the seven economists quoted in The Globe and Mail on October 29 were correct when they said that Canada may be able to escape double digit inflation. We did not hear any questions like that. Nobody on the other side asked whether these economists were right when they warned against overemphasizing energy prices in considering inflation. When we listen to hon. gentlemen opposite we might think that if energy prices go up, the cost of living is going to go out of sight. These seven economists-and there will be a hundred more to join them-say we should not overemphasize the importance of energy prices in considering inflation. The Globe and Mail article reports these economists as giving the following warning:
-in the consumer price index itself, energy prices have a direct weight of only 6.2 per cent, equal to the weight assigned to sales of tobacco and alcohol.
Let us get this in prespective. Hon. members on the other side of the House should not get hysterical. Let us keep this in perspective. I refer particularly to those members who were once in the government. They were there for 16 years so they should have learned something. The article continues:
Various other items have a far greater importance, such as food (21.5 per cent), housing (34.1), clothing (10.1) and transportation (15.8).
The economists point out that when we talk about increases in energy prices we should keep it all in perspective and that other matters are far more important in causing the cost of living to go up.
Mr. Speaker, 76 per cent support our mortgage proposal. 1 did not make that up; that is the result of the Gallup poll. It is the mortgage and property tax credit plan that hon. gentlemen opposite have been scoffing at for the last three or four days, particularly the hon. member from Manitoba. As I say, 76 per cent support the mortgage proposal-76 per cent, Mr. Speaker. I hope hon. gentlemen are going to help us get it through the House, Mr. Speaker, so that we can have it all in effect by Christmas.
Borrowing Authority
The Bank of America predicts that Canada's economy will show moderate acceleration in 1980 after three years of more modest growth. They approve what we are doing in Canada. A report in the Toronto Star of October 19 refers to the Bank of America's opinion that this government has taken the following action:
-announced plans to encourage the development of a free-market economy and to reduce the role of the public sector.
This has resulted in spending cuts, a reduction of government transfers, and lower taxes, all of which bode well for the long-term prospects of the Canadian economy.
That is the view of the mighty Bank of America, Mr. Speaker. The bank also expressed the view that spending should accelerate in Canada next year, bolstered by continuing profit growth. The Bank of America has more faith in Canada than hon. gentlemen opposite. I could go on and on, Mr. Speaker, but I just have a small selection here. The October 26 edition of The Globe and Mail had an editorial in support of the attempts we are making to get this economy back on the track.
I have here an article by a rare bird, a Liberal, who gave his views frankly and honestly. I believe Mr. David Greenspan is a Liberal. He ran for them, so he must be a Liberal. I do not know whether he would run for them now. He is a Toronto lawyer and author of the report of the federal-provincial land prices study done for the government. He gives the mortgage tax credit plan full support, saying that a mortgage plan will help tenants acquire new homes and owners to carry existing houses. I would ask hon. gentlemen to read this, particularly those in the official opposition. This is their expert whom they appointed to head a royal commission, the federal provincial land prices study, and who supports this plan fully. In this article he wrote:
A mortgage relief scheme would help not only one large group of tenants to acquire new housing, but also homeowners to carry their homes. They are struggling with the triple whammy of high interest rates, high house prices and high mortgage amounts (made possible by low downpayment requirements).
He went on to deal with some of the objections that have been made to the scheme. He wrote:
Mortgage-relief schemes will continue to be attacked, by bureaucrats, economists and upper-middle-class trendies.
That is the group we have been hearing from across the House-the "upper middle class trendies" with their shot cuffs and whatnot, their lace cuffs. They are against this mortgage tax credit scheme of ours. When we come to that bill I will deal with this article more fully. I just want to point it out to hon. gentlemen now in the hope they will change and be more helpful at that time.
I think that is all I should say at this time, Mr. Speaker. 1 will note the points worth noting made by hon. gentlemen opposite. This will not take too long. Quite seriously, Mr. Speaker, 1 will try to keep my ears open to hear what they are suggesting that is worthy of an attempt to carry out. I shall be glad to have any advice from them privately any time they want to give it. I hope that by working together-we will not always agree-and with hearty debate, this House of Com-

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mons will be able to do something for the people of Canada that will be of some value as long as it lasts.


Some hon. Members:: Hear, hear!


[Stage Direction]
Motion agreed to, on division, bill read the second time and referred to the Standing Committee on Finance, Trade and Economic Affairs.

John Carnell Crosbie: that Bill C-17, an Act to amend the statute law relating to income tax and to amend the Canada Pension Plan, be read the second time and referred to Committee of the Whole.


Stanley Howard Knowles: It must be the same speech!


John Carnell Crosbie: No, Mr. Speaker, this is strictly attending to business in my new morose, lugubrious style.
This is a piece of legislation, which 1 will be moving should have second reading and be referred to the Committee of the Whole House, over which I do not want to take too long but just give some of the main measures contained in the legislation. Essentially the bill contains the income tax measures of the last budget of our predecessor administration. It was introduced in the budget of November 16, 1978. After reviewing these measures last summer, I announced on July 26 that 1 would be reintroducing most of the tax measures proposed by our predecessor. This was a statement made to attempt to eliminate uncertainty for taxpayers who were already conducting their affairs on the basis of that budget.
As you know, Mr. Speaker, it is the practice, once a budget is brought down in the House, That most of the changes are instituted and go into effect from the night the budget is brought down. Of course, many of the measures in the November 16 budget were of that nature.
The major measures in this bill include the following: first, the 3 per cent employment expense deduction will be increased once the measure is passed from $250 to $500, commencing with the 1979 taxation year. That is an improvement for individual taxpayers.
Second, the income tax credit and research and development tax credit will be enriched and extended. The credits will be extended indefinitely beyond the present July 1, 1980 termination date. The present rates of the investment tax credit of 5 per cent, 7.5 per cent and 10 per cent will be increased to 7 per cent, 10 per cent and 20 per cent respectively. The highest rates of credit would apply in the Atlantic provinces and the Gaspe region of Quebec, the middle rates will apply in the rest of Quebec-excluding the Montreal-Hull corridor-northern Ontario, Manitoba, Saskatchewan, northern Alberta, northern British Columbia and the Yukon and Northwest Territories. The 7 per cent investment tax credit will be extended to transportation equipment. That is defined to include commer-

cial aircraft, railway and shipping assets, intercity buses and long haul trucks.
The basic tax credit of 5 per cent of current and capital expenditures on R and D will be raised to 10 per cent for most regions and to 20 per cent for the Atlantic provinces and the Gaspe region. The tax credit will be increased to 25 per cent for R and D expenditures by a Canadian controlled private corporation which qualifies for the low small business tax rates. So that is the investment tax credit in R and D.
The third major item is that the drilling fund incentive allowing a 100 per cent write-off for Canadian exploration expenses incurred by individuals and non-resource corporations will be extended to December 31, 1981.
The fourth measure is a very important item. Financial institutions-and that includes, Mr. Speaker, banks, life insurance companies and trust companies, among others-will become taxable on their earnings from term preferred shares and income debentures issued after November 16, 1978. That became a very serious problem, Mr. Speaker, and when we get into Committee of the Whole no doubt hon. members will want information on what use was made of those kinds of instruments in the months and years leading up to the budget of November 16. We will see that truly astounding amounts of financing were being done by the use of so-called after tax instruments, term preferred shares and income debentures. That had a very significant effect on the taxable income of banks and other companies that were using them. We are continuing with that provision which makes it impossible for this kind of financing to be used, except for its original purpose, after November 16 of last fall.
The bill also contains a number of other important measures. These include tax relief for the RRSP funds, passing on death to dependent children when there is no spouse-that is to assist dependent children; the ability to deduct immediately interest and property taxes on land awaiting development; to permit the deductibility of underwriting expenses; changes in the valuation of inventories to prevent a deduction for both depreciation and capital cost allowance; changes in the tax treatment of payments on termination of employment; and the taxation of income from deferred annuities.
One area where there is a fairly major change from what was originally contemplated in the legislation of the last administration has to do with the question of taxation of small business.
In addition to that change, which I will come to in a minute, there are a number of other changes of a technical nature which are to remove ambiguities or improve clarity. Most of them are as a result of representations made by taxpayers since the budget of last November, but some include measures themselves that were in the budget. For example, under this bill, interest-free housing loans may be made to both the husband and his spouse, and if the combined loans are within the existing $50,000 limit, there will not be a benefit for income tax purposes. In other words, you will not be taxed;
October 29, 1979

you will not be treated as though you had a benefit. Previously the loan could not be divided between husband and wife, but this bill will permit that.
Also, the measures regarding deferred life annuities will now have effect only for contracts entered into after November 16, 1978, rather than after the end of 1977.
As 1 indicated a few moments ago, and as I indicated in my press release of October 23, we have conducted a further review of the measures contained in the Liberal administration's bill relating to the small business deduction. Under the proposals introduced in the budget of the hon. member for Saint-Maurice (Mr. Chretien), aside from income from property, the benefits of the special corporate tax rate on small business would have been denied to three categories of business income. First, you could not get the benefit of the small business tax rate of 25 per cent under the last budget provisions if your company's income was from property in the form of interest, or interest just from property, not active business. That is one area that was affected. Under the proposed legislation companies not permitted to get the small business tax rate of 25 per cent went back up to the normal tax rate of anywhere between 46 per cent and 50 per cent.
In addition to companies that receive their income simply from ownership or leasing of property, the benefits of the special corporate tax rate on small business would have been denied to three categories; that is to say, professional income of lawyers, doctors, chartered accountants, income from certain personal services as well as income from the provision of certain management and other administrative services. For a small business that came within one of these defined categories, the tax rate was changed from 25 per cent to the tax rate that applies to corporations generally, which would range in amount, I think, from 46 per cent to 51 per cent, depending upon the province in which you are situated.
As hon. ladies and gentlemen of the House will know, the small business deduction is available for Canadian-controlled private corporations that carry on an active business. They get a rate of 25 per cent. For a manufacturing or processing business it is 20 per cent. Those reduced rates apply to $150,000 of eligible income annually until the corporation's accumulated income exceeds $750,000. Income in excess of that amount is taxed at the full rate.
The reason for making a change in this area in the first place I will try to explain now. The small business deduction represents forgone federal tax revenue of about $1 billion annually. It costs the Government of Canada approximately $1 billion annually to give the small business tax rate. Our existing tax system recognizes a partial or total integration of corporate and personal taxes. That is achieved through the dividend tax credit. Under that, a shareholder is required to gross-up any dividend he receives, and he is allowed a tax credit in the amount of the gross-up. Until 1977 the dividend gross-up was 33W per cent. There was full integration between personal and corporate income achieved for corporate income which had been subject to the corporate tax of 25 per cent. If
Income Tax Act
the corporate tax exceeded 25 per cent, then there is only partial integration; there was some double taxation.
In 1977 the dividend tax credit was increased from 33'/3 per cent to 50 per cent. The result of that was that the tax credit on dividends exceeds the amount of corporate tax paid, wherever the corporate tax is less than 331/3 per cent. In other words, there was overintegration in that kind of situation. After 1977 when the dividend tax credit was increased to 50 per cent, if there was a situation where the corporation paid a tax rate of less than 33W per cent, there was overintegration compared to the personal tax system. So it was much to the benefit of a person to incorporate for his personal services if he could do so. By doing this he would save taxes, and in addition he would have a tax deferral.
This was a device that came to be much used by the categories of people I have mentioned, and by people just getting income from property. It did not fit into the original reason for giving the small business tax rate, which was to encourage entrepreneurs, risk-takers and small business to go into processing and manufacturing and the service industries where more risks had to be taken than the usual professional takes. I will not go into all the reasons at this stage.
There came to be two significant tax attractions in trying to incorporate. One, there was a tax deferral as long as the income was left in the corporation. Second, even when the income was distributed through a dividend, you were still getting a tax benefit.
The method chosen by the Liberal administration to try to correct this with certain groups of people was to target them, and to say that they would have to pay the full corporation tax rate, not the 25 per cent rate. There were a lot of people very much upset by that. This applied specifically to incorporated employees, namely taxpayers who usually provide services in master-servant relationships. They might be executives, athletes or salesmen on commission. These were people incorporating and using the lower rate although the real form of their activity had not changed. There were incorporated professions, such as doctors, lawyers and other professions who could incorporate and did so wherever the provincial laws or professional ethics allowed them to do so and get the lower rate. There were a lot of incorporated service companies, corporations in most cases, established by the wife of a professional who would provide management and administrative services to his particular profession and siphon off the professional income which would then qualify for the lower tax rate.
There were a tremendous number of objections to the proposals made by the last administration and there were a great many representations made to me by members of our government caucus to take a different approach. Members of the caucus wanted this loophole plugged, but wanted it done in a more fair and equitable manner for the people involved.
There were also several alternatives which the Liberal administration could have chosen. There were three ways of approaching this problem. We have chosen a different alternative. With regard to these categories of business activity, we are going to establish a third tax rate to apply to the incorpo-

October 29, 1979
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rated employee, the incorporated professions and the incorporated service company. The tax rate will be 33'A per cent. They will not be put back in the tax bracket of anywhere from 46 to 50 per cent. They will not have the advantage of the 25 per cent small business tax rate. They will have a new rate of 3395 per cent as a recognition of their special position.
The result will be this. Because the corporation will pay 33'A per cent when they pay their dividends out, and the dividend tax credit was in effect since 1977, the amount of tax for which they are receiving credit will approximate the amount of tax paid by the corporation. Therefore, there is no immediate tax advantage to paying dividends to themselves in that way. In addition, those new rules are going to be in the statute and not in the regulations.
There is still an advantage to persons in this category, because as long as they leave the income that the corporation is making in the corporation, they will be deferring tax. It will only be subject to the 33 A per cent new small business rate. As long as they are income tax payers who earn a taxable income in excess of $15,000, they will get a tax advantage by leaving the income in the corporation. In other words, if the person who has such a corporation is a taxpayer earning in excess of $15,000 in taxable income a year, it is an advantage to him to leave the income in the corporation for the purpose of the corporation rather than take it out. There is still an advantage in tax deferral for such a person.
This is the method we are suggesting to solve the problem of the small business tax rate. The changed provisions will be found in the legislation before us. These changes would apply to taxation years that commence after 1979 for corporations that were in existence on October 23, 1979, and to all taxation years for corporations formed after that date.
All Canadian business income other than investment income in those three categories of corporations affected by this change will be subject to a 33A per cent small business tax rate and also given time to rearrange their affairs so they can receive the benefit of this small business tax rate on eligible active business income. Some of them may not be able to arrange their affairs before the end of the year. When that is the case, the Minister of National Revenue (Mr. Baker) has indicated he is prepared to allow them to reorganize in light of these amendments so that they can change their fiscal year end in 1980.
There are a lot of other provisions in these income tax amendments before hon. members. After second reading and when this bill goes to Committee of the Whole, we will deal with it clause by clause. I do not want to be too long today. I want to conclude by saying that the one major change we have made to this legislation is a definite improvement. We hope hon. members opposite will agree with us.
The proposed legislation has had a very long delay. It was introduced in the budget almost a year ago. This has created a lot of confusion and uncertainty in the minds of taxpayers. It is to be regretted that these measures were not put before

Parliament and given priority to ensure their passage before the House dissolved last March.
I wish to remind the House that taxpayers who filled 1978 returns on the basis of measures in this bill have not yet had their returns processed. There are thousands of taxpayers who filled their 1978 returns based on the changes contained in this bill. The Department of National Revenue cannot process these returns until this bill is passed, until they know whether this House is going to make the changes announced a year ago and pass them into law. For that reason, it would be well for us to pass this bill as soon as reasonably possible. I believe the taxpayers certainly have had their patience pushed to the limit in having to wait this long. Hopefully it will not happen again. I remind hon. members that it is necessary for us to try and clear this out of the way before a new budget.
I hope we can count on the support of members in the official opposition whose legislation in large part this is, with the exception of one major change that I have outlined and which I hope they will also be able to support. I also hope that my confreres in the New Democratic Party will see fit to do this as well. If they have any objections, they should make these known and make their points; but I hope they will let this bill through in a reasonable period of time so that we can get on with the next budget.


Herbert Eser (Herb) Gray: Mr. Speaker, the purpose of this bill obviously is to pass into formal law the proposals in the budget of November, 1978 presented by the last Liberal government. It is not necessary for me to outline the measures in that budget because the Minister of Finance (Mr. Crosbie) has done so. He has done so with approval. He has put forward with approval all the measures in the last budget, except perhaps one which he has changed somewhat. However, basically he has retained the essential objective of that measure as well.
As the minister pointed out, the measures in this budget as a practical matter have been in effect since the date of the budget even though the legislation had not been passed at the time the House was dissolved for the last election. As we know, generally budget measures are considered to be in effect from the time the budget speech is read, unless the speech specifies otherwise. The idea behind this is that a government is supposed to command enough support in Parliament to ensure the budget proposals are passed into law, even though the legislation for that purpose is not passed until some months after the date of the budget speech. However, a change in government creates some uncertainty. That is an understatement when it comes to this new Conservative government. In any case, uncertainty was created as to whether this new government would proceed with the measures in the last budget.
The Minister of Finance stated at his press conference last July that he would remove this uncertainty. He announced at that time that the new Conservative government intended to enact into law almost without change the measures proposed in the last Liberal budget. It is now almost half a year after this new Conservative government took office. The Minister of Finance, as his initial solution to the problems and needs of
October 29, 1979

this country, is asking this House to enact into law the budget of the previous Liberal government.
What better confirmation could there be of the value of these measures? What better endorsement could there be of these measures than the actions today of this new Conservative government? What a contrast with the scorn heaped on these measures during the budget debate last November by the hon. member for York-Simcoe, now the President of the Treasury Board (Mr. Stevens), when he was official spokesman on financial matters in the official opposition. He concluded his speech by saying: "In short, in great contrast to the budget last night, we would bring in a budget, given the opportunity, which would restore for Canadians the visions they see for Canada." Here they have done so by presenting to this House with approval and endorsement the budget of the preceding Liberal government.
In allowing the budget measures of the previous Liberal government, and in fact allowing Liberal economic policies generally, to continue in place for the five months since they took office is, as I have said, a confirmation and endorsement of those measures. This is not a case where a new government has taken office at the end or almost at the end of a fiscal year and where a budget statement had been made prior to that year's beginning with measures taking effect immediately on the date of the presentation of that speech. If that had been the case, the government would have had no practical alternative but to ask Parliament to pass into law the budgetary measures which had been in effect, to all intents and purposes, for that whole preceding period. But that is not the case here. The new Conservative government took office after only about two months had elapsed in the current fiscal year. It has had the opportunity and the authority to change the framework set by the last budget had it wished to do so. Instead, the budget has been allowed to remain unchanged for almost half a year.
This is one confirmation that at the time the government changed Canada's economy was in better shape than it had been for some time due to the kinds of policies to be found in the budget presented to us today by the Minister of Finance with a request for its speedy approval. That this was the situation and that it continued for several months after the election has been confirmed as well by the cost of living figures which were trending lower at the time the government changed than for some time previously. The unemployment rate was also trending lower at that time than had been the case.
Letting the budget continue virtually unchanged for almost half a year also shows that, contrary to what the Prime Minister (Mr. Clark) is saying, there was no new information of substance which would justify statements that the incoming administration had found the economy to be in worse shape than had been expected before taking office and as a result of which it was not possible for them to carry out their pledge to reduce interest rates, or to implement other promises of
Income Tax Act
immediate action with respect to the economy, made during or immediately before the election campaign.
Had there really been such evidence it would have been the obligation of the new government to call Parliament together immediately after the election and to put forward measures to deal with the serious situation they would have claimed to have found. After all, Margaret Thatcher and the British Conservatives were able to call the U.K. parliament into action only one week after their election; she was able to present a budget to that new parliament only four weeks after it had begun its sitting. But this did not happen when the new Conservative government came to power here. It did not take this step. Obviously this showed that not only was the economy in better shape than the Conservatives had claimed, but that they had no real idea what to do once elected to office.
Let us bear in mind, Mr. Speaker, that there have been some important changes in the economic situation since the presentation of the last budget in November, 1978. There has been the substantial OPEC oil price increase, confirmation of an economic downturn in the United States, and the beginnings of a serious economic downturn in our own country. This means important changes in the assumptions on which the previous budget was based. It means there is a need for the new government not simply to implement the budget which had not been passed at the time of the last election, but also to add to the useful basis it provided for the economy by presenting a new budget. So far it was failed to do so. A new budget has been needed to take into account the changed circumstances 1 have mentioned.
The new Conservative government may feel it does not have a lot of room to manoeuvre, but it certainly had some room. There is room for specific measures to help our economy become more productive and efficient, for example. In spite of the inactivity of the past five months and the appearance of inability to act that the new government has given, there was no need for it to be immobilized.
We should remember that it takes six months for budget measures to work their way through the economy. By the time the Conservatives get around to presenting their budget and by the time any useful measures in it take effect, it may be too late for them to have any beneficial effect, bearing in mind the harm the inaction and neglect of members opposite has already begun to do to Canada.
The new Conservative government has wasted the past five months. All they have done is allow interest rates to be raised to record levels even though, before the election, they said they would bring interest rates down. When he was leader of the opposition before the election, the Prime Minister did not say that a Conservative government would lower interest rates only after allowing them first of all to go to record levels. He did not say it would lower interest rates only if it found the economy to be in a certain position. That pledge was made without qualification or equivocation. The Conservatives now say they have information showing the state of the economy to be worse than they had thought, but they have been unable to present such information even though they were urged to do so

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during today's question period. If there is such information, I challenge them to present it. But they cannot do so.
In fact, the Minister of Finance has undermined and contradicted the Prime Minister on this essential excuse they offer for their inactivity and for failing to carry out election promises on key issues, such as the lowering of interest rates. For instance, last Friday he made a special point of telling us how a leading economist, John Grant, had been quoted as stating that the Canadian economy was the strongest in the world. And today he took great pleasure in telling us that the Bank of America was saying nice things about the good state of the Canadian economy. Where does this leave the Prime Minister and his argument that there is some horrendous information about the shape of the Canadian economy which is in the possession of the government and which prevents them carrying out their election promises?
The Minister of Finance proved to us on Friday and again today, by his own words and the authorities he was citing, that that is just a lot of nonsense. All that the inactivity which has followed the election proves is that the Conservatives did not know what they were talking about before and during the election. It shows they did not have a clear idea of Canada's needs and what to do about them. They still do not and they have failed to show they have any capacity to carry out their responsibilities and serve the needs and interests of the people of Canada.
The Prime Minister admitted this today during question period. He explained why the government has done nothing at all in five months. He said he and his ministers needed some on-the-job training. What is wrong with that, he asked. I say there is plenty wrong with that. Before and during the election he said, in effect, that he had an experienced team of people ready and willing to take over the government of Canada immediately after the election and to give it new direction without delay. Instead, when his party was called upon to form the government nothing happened for five months except for the raising of interest rates and the spending of a period of on-the-job training for himself and his ministers at the expense of the Canadian taxpayers and the Canadian economy. Because of the need for this on-the-job training, the Conservative government has wasted the last five months. This is also shown by the emptiness of the Speech from the Throne with regard to such matters as the economy and energy.
The Minister of Finance cannot present a budget because he does not know what the price of energy is to be. Yet the government which pledged itself to institute a new atmosphere of federal-provincial co-operation is just standing back and letting its Conservative friends in Ontario and Alberta squabble among themselves, to the detriment of the whole of this country.



PROCEEDINGS ON ADJOURNMENT MOTION

[Stage Direction]
[Engl is h\

Mr. Deputy Speaker:: Order, please. I regret to interrupt the hon. member but it is my duty, pursuant to Standing Order 40, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Nipissing (Mr. Blais)-Consumer and Corporate Affairs- Dissemination of information gathered on possible prosecutions; the hon. member for Eglinton-Lawrence (Mr. de Corneille)-External Affairs-Meeting of Hon. Robert Stanfield with PLO; the hon. member for Regina East (Mr. de Jong)- Hazardous Products-Remedial action by CHIP to protect homeowners from hazardous insulation materials.
It being five o'clock, the House will now proceed to the consideration of private members' business as listed on today's order paper, namely notices of motions and public bills.



PRIVATE MEMBERS' MOTIONS


Mr. Leonard Hopkins (Renfrew-Nipissing-Pembroke) moved:: That when the government sells an asset such as a radar station or other public complex, in the opinion of this House, the government should consider the advisability of requiring the department concerned to pay at least one additional year of property tax to a small municipality in order to help offset the sudden economic demands that are placed on the community which arise out of this transfer, sale arrangements and maintenance related thereto.
He said: Mr. Speaker, from time to time federal and provincial government facilities are built in very small municipalities. Sometimes these are built in sparsely populated areas for very good reasons, but they have a tremendous effect on those small communities. If one of them were to close down in a large city or major populated area, the effect would not be very great because there would always be something to take its place. However, when a military base, prison complex, radar station or any other agency of government of any size which is located in a small rural township, village or small town, closes down, there certainly are bad social and economic consequences.
First, the government moves in and purchases land. Preparation of the land for construction takes place after the design work has been done, and immediately the lifestyle of the local community starts to change because of construction jobs. Great hopes are raised for the future. New people come into
October 29, 1979

the municipality and mix with the old. This changes lifestyles with regard to education, skills and trades, and it affects every facet of everyday life, right down to the grocery store in the local village or town.
The government puts in new community services. It puts in, for example, water lines, sewer lines, sewage disposal plants, storm drains, filtration plants, schools, recreational facilities, housing and the major project for which the facility is meant. This alone creates a boom in the area. The nature of the land is very important, whether it be rock, sand or soil. The adjustment later on from a government institution or facility to a municipal institution or facility may be even more difficult because of the nature of the services. Today, with greater requirements imposed by departments of environment on sewage disposal, for example, it makes a great deal of difference whether the location is in the Canadian Shield, on good, solid clay ground or, indeed, on sand.
The federal government carries the financial load for keeping up all services and administration-budgeted through the Parliament of Canada-with all its financial and human resources, and those human resources also include expertise in various trades, right down to engineering services for the operation of the total complex. These are not the kinds of services small municipalities have at their disposal, nor indeed can they afford them.
Everything goes along well for a number of years, but if there is a situation in which the facility becomes outdated because it is no longer required or for some other reason, rumours start floating around that the total facility is going to close down, and a state of depression sets in on the over-all community and surrounding communities.
Elected people and other community leaders lobby to keep the facility open a little longer. They may gain one, two or three years' extension, but eventually the crunch comes. The government announcement about closure by a certain date brings about a series of events leading to a final disposal of the total site. First of all, if any federal department can use the establishment and wants it, then it does not go up for sale but simply begins the neat and tidy transfer from one department to another, with big government still footing the bills. If no federal department wants it, it is offered to the province for any of its departments which might be interested. Third, if no department of the provincial government wants it, then it is offered for sale to the municipality or to a group of municipalities such as those represented by a county council, in the case of Ontario. It is in the best interests of the local government, whether it is going to buy it or not, to put forward some ideas as to how it wants the facility used afterwards.
If the local government wants the facility to stay intact, it should request this, and this should go into the agreement with whoever buys the facility thereafter. There may be a real problem if it is not stated clearly how the transfer should be handled or what is wanted for the future of the facility in the municipality. I suppose we could say we are talking about a community here in the sense that the facility is really superimposed on the community by a senior level of government.
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It is important to have the desires of the community written into the agreement of sale. That is a must. If provincial or municipal governments do not want the facility, it then goes up for sale to the highest valid bidder who is willing to follow the guidelines laid down and who can meet the financial commitment of the down payment or deposit with the bid. The bidder must also demonstrate that he is financially capable of paying for the site in the long run.
From this point on the over-all community feels that it has a new lease on life, but in fact what has happened is that it is going through another major change in human environment. Adjustments will be necessary because the municipality is going from big government-supported facilities to dealing with an entirely different organization, and the facility is used for entirely different purposes.
We are beginning to realize how easy it was for a senior level of government to maintain and operate this new section of the community that is suddenly superimposed on the local municipality. Subdivision plans have to be drawn up, but a municipality may not want to take over the subdivision because they may not be able to afford to take over the services of the community, such as the water lines, sewers, filtration and sewer plants, and so on. All of us who are familiar with municipal politics are certainly aware of the cost of these facilities today. You might have a small municipality refusing to accept this responsibility, and certainly they cannot be blamed for that. Other ratepayers may accuse them of being irresponsible if they took that responsibility without having the wherewithal to pay for it. Furthermore, if the new owners do not live up to the agreements with the municipality and with other people, then the municipality is left holding the liability. The whole procedure can end up in messy lawsuits and in a feeling of instability and frustration.
I have discussed this matter at some length with many people at both levels of government. I find that no one has come to grips with the problem, but I think that as time goes on it will be more and more important that we do so. My recommendation in this motion today is that the municipality concerned should receive a grant in lieu of taxes at least equal to one year's taxes.
Second, there is a need for some instrument or instruments to take over to ease the burden on the municipality and help them on the road to a stable community and to become established by way of long-term rather than short-term solutions. The federal and provincial governments should provide personnel with expertise to advise and assist the municipality through the difficult period of change, because the smaller communities are not equipped, as 1 said before, with this type of professional and technical experience. Public instruments should come into play immediately whereby federal and provincial governments can come to an agreement of a type that will require the province, with federal assistance, to provide the expensive services for a period of, say, three to five years or until such time as an adjustment is made and the new commu-

October 29, 1979
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nity has evolved out of the old. With plans such as these, to thrust large institutions into the lap of small communities is simply like trying to float the Queen Mary in the Madawaska River, because small communities are in no way capable of raising that kind of money or setting up that kind of institution.
Another problem is that the Canada Mortgage and Housing Corporation, as it is now called, and provincial governments do not give grants to communities where the water and sewage services are already established. There are only programs through CMHC and the provincial governments for such facilities to be started, and this creates a real block. If the development of a community is rapid, then you do not run into the same problems, but it is not rapid in sparsely populated areas.
1 raise this issue because 1 feel that senior levels of government must come to grips with this serious situation that is created, and when they build an institution they do in fact create the problem in the beginning. They bring in all kinds of infrastructure, and then end up walking away from it and leaving all kinds of problems or repercussions behind. There are relatively few such cases but they do occur from time to time. It would not cost the two senior levels of government very much over a period of readjustment because, in checking the property sections of the Department of Public Works and Crown Assets, 1 learned that there are not many cases, but they do come up from time, and when they do they are serious.
1 hope that my main motion and my other suggestions will meet with the approval of members of the House. I know that when we put forward motions in the House, it is not common practice for a private member's motion to be adopted; but I want to say to my colleagues on both sides of the House that I air this problem because I think it is one that could be common to all of us in all parts of Canada. It is very important, if we are going to think nationally in this Parliament, that we get away from the idea of dumping things on small communities and walking away. It is not fair for any federal government, I do not care what party label it might carry, to do this, and I think this is a matter which could well be discussed at some federal-provincial meeting. It would not take a great deal of discussion, it would not take a great deal of money, and it is a solution which would take a great deal of pain out of municipal politics and in sparsely populated regions of Canada. I thank you, Mr. Speaker, and I thank members of the House for their attention.


Mr. Alex Jupp (Mississauga North):: Mr. Speaker, I want to express my appreciation for the very reasoned argument that the hon. member for Renfrew-Nipissing-Pembroke (Mr. Hopkins) has presented to this House. I appreciate his concern because I have also spent some time in municipal government and appreciate the problems that actions of senior government can create for municipalities.
However, 1 should like to respond to the hon. member's motion at two different levels. First, I wish to address specifically the essence of the motion he has presented to the House

and, second, to address in a more general sense the more serious implication which the motion raises within my mind.
First, the motion implies that a municipality will suffer if the federal government sells real property within the municipality. I would say that that is not necessarily so. In fact, the opposite would be the case. The resolution gives no examples of the kind of "sudden economic demands" which would be placed on the community. But from the tax standpoint, it is hard to see where there would be a problem.
First, we should bear in mind that when the government sells real property, normally it becomes taxable as of the date of sale. The new owner becomes a regular taxpayer, and the municipality does not lose any tax revenue. Indeed, local government could well gain if the property is being sold to be transformed into some new commercial or industrial activity. We should bear in mind that federal grants in lieu of municipal taxes do not extend to cover business occupancy taxes levied by the municipality when the building is used by business. The new owner could well be adding to the building occupancy revenues of the local government when it is taken over by a private industrial concern.
We should not assume, as I think this resolution does, that the sale of government property inevitably creates economic demands on the local government. Indeed, the situation could be quite the reverse if the new buyer used the property for productive purposes. So, on this score, the resolution does not place much confidence in the ability of private enterprise or the private sector to generate new economic activity in Canada.
It is possible that in a particular situation the sale of some federal government property might create some demand on local government. But that does not mean we should assume such expenses will arise in every case and therefore we should provide a quite arbitrary cash transfer to local government of an additional year's federal payments in lieu of real estate taxes.
The resolution does not mention what could be an even greater problem for the municipality. That is the case where the government does not sell the property but rather closes down the activity being carried on previous to the government having to change the status of the property. Such things inevitably happen from time to time, but I do not think any hon. member of the House would try to argue in principle that particular activities of the federal government should never be closed down but should go on forever. When this happens in some municipality-that is, the closing of a federal enterprise or institution-surely it is preferable to try to sell the property for private business activity rather than simply close up the federal installation and see the federal employees move away from the community.
We cannot consider this issue in isolation without taking account of over-all financial relationships among different levels of government. In fact, this resolution argues for a special kind of federal aid to municipalities, something which
October 29, 1979

no other local taxpayer is required to do. If aid is required, why should it be provided through a program of grants in lieu of taxes? This is not a relief program. It has a completely different purpose. The real purpose of the program is to pay grants to municipalities equal to the real property taxes that would be payable if federal property were taxable property. If a private property owner sells property, his liability for taxes stops as of the date of the sale. Therefore he pays taxes up to that date only. Why should the federal government be different? Therein lies the point of my concern.
The attitude of some members opposite is implied in this motion, that there is a basic difference between whether the federal government or any government owns a piece of property or whether it is privately owned. No one would seriously suggest that if a private company owned a piece of property, and if circumstances were such that it had to close that property up, there should be some kind of a law or provision where it would have to pay to the municipality taxes beyond the date of the transfer or sale. Yet that is what is implied in this motion, that there is a basic difference between the federal government and private enterprise, and that the federal government should be expected to do that which we would never expect a private company to do.
It is the provinces, not the federal government, which have created the financial situation municipalities find themselves in today. They have limited the taxing powers of local governments almost entirely to property taxes. They have used the broader range of provincial taxes to finance transfer payments to local governments. Indeed, a whole range of municipal activities is closely circumscribed by provincial laws and regulations. Therefore, if some special financial aid is required by municipalities, should it not be more a concern for provincial governments? This is particularly so when one considers the size of the federal deficit against the relatively strong position of Canada's provincial treasuries.
This is the second over-all point of my concern. This is the aspect of the motion which disturbs me most. On reading between the lines 1 see that somewhere or other there is a public trough, and if we can only get some money from the federal treasury, it does not really count; it is not really money in the normal sense. When 1 hear some of the proposals of members opposite during emergency debates and question period, sometimes I become astounded. It would be very interesting to Canadian taxpayers if every time an hon. member proposed an expenditure of an additional sum of money to the Government of Canada, somewhere over the head of that hon. member there was a little calculator, and the calculator would shine in neon lights the cost of that provision across the country.


An hon. Member:: It sure would have killed you guys in the last election.


George Alexander (Alex) Jupp: I think not, and I think the hon. member will find that out when we bring in our budget.
Certainly one of the major issues in the election was government spending. If what the hon. member across the way is
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saying is true, then 1 suspect we would find that it would not be this party that is the Government of Canada but it would be the socialist party that would be the government. On May 22, Canadians very clearly communicated that one of the things they wanted less of was excessive government spending and excessive waste in government which led to a deficit of $11 billion. I think of the hypocrisy which 1 have heard over the past several days when members opposite have prolonged debate on the borrowing bill, outlining their concerns over a bill to borrow $7 billion. We have a deficit in this country of $11 billion. That works out to the sum of $21,000 per minute. Every minute we proceed along the way in Canada today, we go another $21,000 into debt. Even in the ten minutes or so which I intend to speak in this debate, our country will be a further $210,000 in debt.


Stanley Howard Knowles: You had better sit down!


George Alexander (Alex) Jupp: The only reason that I prolong it is that I realize other hon. members opposite will take up time and it will cost the country a good deal more to fulfil the implications of what they would have to say than what I would have to say.


Some hon. Members:: Hear, hear!


George Alexander (Alex) Jupp: As a nation we are confronted with three real choices when it comes to government spending; A drastic reduction in expenditures, including cuts in programs which none of us really wants to see; a major increase in revenues, largely through increased taxation; and finally, national bankruptcy. The mindless spending of the previous administration had the effect of fueling inflation, debasing our currency and robbing our citizens of their savings. It is the difficult task of this administration, the new government, to restore common sense to government spending notwithstanding the opportunistic posturing of some members opposite. Certainly this motion does nothing to alleviate the very serious problems of fiscal balance and responsibility.
Already the federal government has major responsibilities where property sales lead to unemployment. Of course, these relate to unemployment insurance, the cost of retraining unemployed people and finding new jobs for them. Every time an enterprise in a community must close down, whatever the reason, we expect the federal government to be a party to moving in, to providing unemployment insurance to those who are displaced, to working with manpower counsellors on necessary retraining programs, to finding new jobs for those who have been dislocated from their former employment. The federal government has a very major role to play. It discharges that major role, in terms of enterprises which must close down, without assuming the cost of enterprises from which they will have no additional revenues, but from which there will be a net debt for Canadians.
Nothing that 1 h ,ve said should in any way be meant to denigrate the importance of municipal government. Local government bears a major share of the responsibility for shaping the environment in which people live. It provides many vital public services, including elementary and secondary edu-
____________________COMMONS DEBATES_______________ October 29, 1979
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cation, environmental protection, local transportation, police and fire protection and recreational services.
As a former municipal councillor, 1 appreciate the great pressure under which municipal governments find themselves today. Their costs are all greatly affected by inflation because municipal services, such as those used to employ teachers, civic workers, road builders and repairers, policemen and firemen, are largely labour-intensive acitivities. Largely these costs are in the form of increased salaries and wages. The only way municipalities in Canada can raise these funds, other than through transfer payments, is through taxes on real property. Perhaps this is a real gripe of the municipalities of Canada.
While the senior governments, the federal government and provincial governments, are obvious benefactors of the inflationary process in that their revenues tend to increase with inflation or even in excess of inflation, municipalities are different. Municipalities levy their rates in absolute dollars having regard for the assessment of property. The only way that municipalities can increase their revenue is to increase the mill rate, and the taxpayers then receive a notice indicating precisely how much more they will be paying for their municipal services than they paid the year before. This procedure puts real pressure on the municipalities, and they recognize that fact.
We know that the municipalities are looking to the senior governments and that there is a difficult situation. But I believe that there is no way implied in this motion that this problem can be redressed. It is neither logical, practical, equitable, or administratively sound, and it is based on the notion that the federal government is basically the public trough. That may have been the philosophy of the previous government, but it is not the philosophy of this government.


William Arnold Peters: Mr. Speaker, we have just heard two different points of view, and I can see why they are different. The previous speaker comes from Mississauga, one of the fastest growing areas in the country. If a government facility such as Malton were to close down, that community would be able to put houses on the tarmac within a matter of two or three months. On the other hand the problems in northern Ontario, although Renfrew is not in northern Ontario, are different.
I know of the problems at Freemont where they have a little radar base, and I am aware that Landry Crossing was closed. Perhaps it has not closed entirely, but it has certainly slowed down. There were not more than seven dozen people in the area affected by the radar installation, but in areas where it was much more advisable for people to work for the government than it was to continue farming, the residents will certainly suffer. They probably cannot go back to farming, but there is nothing else. I know that this has happened in my region in the Ramorc area and at Lowther, just west of Kapuskasing. It has happened in a number of areas.
[Mr. Jupp.J
Lowther was particularly important because the United States were in there as well as the Canadian service. As a result more money was brought into the area. Many of these small communities made a sacrifice in rising to the occasion. In many cases the communities purchased firetrucks which they could not afford. They had to put in a water system. In the case of Matheson, in order to accommodate the base at Ramore, it put in a number of trailer sites complete with pads, septic tanks, and a water system. As soon as the base closed, it was no longer of any value and now has become a liability. The lots cannot be sold, they are not usable, and they are probably still under debenture.
These communities made great efforts to meet the requirements of the government and they did it at great expense. The radar base mentioned by the hon. member was very small. Very few people were involved, but those who where made an immense effort to ensure that it was successful and that it worked. The government has a responsibility to these people. They cannot say, "we do not need it, we are closing it; goodbye".
When these bases were abandoned the municipalities were not interested in purchasing what was left behind. As a result, most of what was left behind was sold privately, or dismantled and taken away. The communities could not afford to buy anything because they did not have any money, and instead of creating a tax base the items left behind became a liability. For example, 1 recently viewed the airport at Ramore, which had been put in by the Americans while they were there. It had grown in and there were trees growing four and Five feet high. The municipality had to go in and spend $1,000 to cut down the trees in the hope that some day the airport would again be useful and necessary to the area. There is also a building there which they have to protect. The municipality does not want to see this facility destroyed because they have hopes that something will replace the industry which has just left.
1 have heard that the government intends to close the facility at Landry Crossing. I have noticed lights there when I drive by, so presumably it is not closed. The facility is a minimum security penitentiary set out in the area of Petawawa army base. I am sure that the people located around that area have had to make some concessions in order to attract the facility to their area, but when it disappears they will be asked to take it over and do something with it, otherwise the government will suffer a total loss. Communities such as Landry Crossing do not have a ready use for such facilities. In many cases the facilities have been torn down and taken away, leaving a vacuum in the area. As a result, many of the services offered by the community are a total loss, but they are left with paying the debenture.
The hon. member is simply asking in his motion that we cushion the withdrawal for a period of one year by paying the property tax. He mentioned in his speech that perhaps five years for withdrawal on a graduated basis would be better. The five-year term on a graduated basis is probably the better idea because the communities will need less as time goes on.
October 29, 1979

In many case these communities were asked to make contributions and to participate as municipalities in the government development. They did not want the government to build a fence around the facility because then nobody would associate with the facility, and as a result they were sucked into setting up such things as recreational facilities and the like. One facility which almost all communities provided was firefighting equipment. Now with the government gone they can no longer afford it. In many cases we are talking about a community with approximately 20 families, and in some cases less, but they were stuck with being big sister to a relatively larger facility having probably more employees than the community had citizens.
Now the government has gone. My hon. friend, the member for Mississauga North (Mr. Jupp), has said, "let them go. We are not giving them welfare". In the first place it was the government that wanted the bases, and if the communities had been hostile it would have had a heck of a time moving into those areas. The people of these communities could have made it very difficult. The reason the bases were chosen was because it was best that the bases be located in areas where the radar would be most efficient. Now the government is saying, "Don't worry about them; they do not need handouts, it is not the Conservative way". I suggest that the hon. member will find, after he has been here for a while, that there are other things besides philosophy. There are such things as geography, and what is good for Mississauga is not necessarily good for Sioux Lookout, Lowther and Freemont. The situation is not the same.
It would not be satisfactory in Toronto. I remember many years ago, when you went up Yonge Street and north of Toronto on a streetcar, by the time you got to where Highway 401 is now, you were picking up milk cans and chickens, and after that you went on to Thornhill and Aurora. Now it is very hard to find those communities at all-they are downtown, and every time you go there are another ten buildings. I suppose the hon. member does not have to worry about it. He has enough trouble keeping the water system and the sewers and the streets growing fast enough to keep up with the population.
That is not the problem in most communities in northern Ontario, Mr. Speaker. We are just trying to service the ones we were asked to build as a favour to somebody else. We were anticipating, as we always do, the ultimate-that they were going to be there forever and we thought we could probably help them out by providing these facilities. We are not asking very much in this motion when we ask that those areas that have been asked to make that kind of contribution now receive a contribution that would be very valuable to the wind-down of those communities.
In your own case, Mr. Speaker, you may represent an urban area where you would find this to be a Mickey Mouse concession. You would find it to be undesirable and regressive. In fact, it would tie up property for one or two years and you
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could not get the high taxes out of it that you now do, so you would have to find a substitute for what may have been a long-term contract with the federal government, producing a limited revenue. This could be the situation in northern Ontario, in many cases.
If this motion is accepted the cost will not be very much, but it will certainly benefit those very, very small communities that have made a contribution, as Canadians, to the defence of this country. This is particularly so in the case of radar bases. These were built in very small isolated communities where, to the best of their ability, the people provided the services for the military personnel resident there and participating in community life. We are only asking for a small contribution from the general purse to assist the communities in the one, two or five-year periods when they are winding up their business.


Some hon. Members:: Hear, hear!


Mr. Keith Penner (Cochrane):: Mr. Speaker, I am pleased to have seconded the motion of the hon. member for Renfrew-Nipissing-Pembroke (Mr. Hopkins). In my opinion, the motion addresses itself in a substantive way to a very real problem which exists from time to time in parts of this country. I think the response of the hon. member for Mississauga North (Mr. Jupp) was nothing more than a bookkeeper's response to a very serious human and social problem that, from time to time, exists in the isolated and less advantaged regions of this country.
In terms of this debate, I am much more in sympathy with the words of the hon. member for Timiskaming (Mr. Peters) who, with myself, shares with these communities the kind of agony and travail that they go through when there is a closure of one kind or another, be it a radar base, a small or large industry. We know, all too well, the sense of crisis that develops whenever this happens.
As my contribution to this debate, I think instead of speaking in generalities 1 should share with the House what could loosely be described as a case study. I lived through the closure of a radar base in a small, unorganized community in a constituency that I represented for more than ten years. It is no longer in my riding, because of the readjustment of the boundary lines. I am referring, of course, to the Canadian forces station at Armstrong, Ontario, a radar station. I know the hon. member for Timiskaming is fully conversant with the problems that existed as a result of that closure. The manner in which it was done can only be described as shameful.
It is true that there was a great deal of good will and a lot of fine intentions displayed by government departments at the time the community was going through this agony. But, sir, good will and fine intentions did not result in any positive action. A $1 million payroll was lost to this small community, and there was no time for adaptation to the change, for adjustment to the new situation. Civilian employees of the Department of National Defence who did not want to move or could not move, were left without jobs. Those who were prepared to move and had relatively inexpensive housing in Armstrong were asked to go to some other part of Canada.

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They were not provided with a house for a house, so it was just beyond their economic capacity to accept.
In brief, the closing of that radar base was done in a manner which, I would suggest, was not at all an example of good corporate citizenship. It was a public sector enterprise. No one argues about the fact that technology had overtaken the radar base and closure had to come, but the manner in which it took place should have set a good example for private companies which, due to various circumstances and conditions, must sometimes close their operations. The Department of National Defence was sympathetic. The member of Parliament had a good hearing with senior officials in the Department of Defence, with the minister, and with the parliamentary secretary who now sits near me. 1 refer to the hon. member who moved this motion. The Department of National Defence was primarily concerned about its own costs and its own personnel as well as the civilians who were being affected. There was not much they could do, however, because what had to be done was beyond their authority and competence. The Department of Regional Economic Expansion was also involved in a very serious way, and was prepared to assist if a clear-cut proposal with accurate cost estimates was put forward. This did not happen. The department endeavoured to do what it could but, in the end, there was no action they could take.
Ontario Hydro, another agency of government, was willing to consider putting in a power line to replace the diesel power produced by the radar base that had provided electricity for the citizens. They could not do it on their own, however, They needed the pulp companies to throw in some money. They needed the Department of Indian Affairs and Northern Development to add something and, as well, they needed something from the CNR which was producing power of its own. There were varying degrees of interest, but none of the parties offered the money that was required.
The Crown Assets Disposal Corporation became involved in a rather interesting way. There was a snow plough and a fire truck that this little unorganized community needed, and which DND was prepared to transfer to Crown Assets, so that they somehow could come into the possession of the community. Crown Assets presented a formula which provided that the community could have these two pieces of equipment if it was prepared to pay market value for them. That sounded logical. My bookkeeping friend over there would ask, what is wrong with that? What was wrong with it was that the community of Armstrong was an unorganized municipality. It had no tax base, no revenue. It could not manufacture the money out of thin air. On their behalf 1 put a counter-offer forward. I thought we could raise at least 10 per cent of the market value if Crown Assets was prepared to accept that. They finally did.
Meanwhile, however, the Department of National Defence had second thoughts. They felt they could use this beat up, secondhand, worn out equipment somewhere else, and sent in a couple of military personnel to pick it up. In the middle of a busy afternoon, I received a phone call advising me that two military personnel had come to take away the snow plow and

the fire truck. 1 was asked what I could do about it. There was only one thing that could be done, Mr. Speaker. There was only one road into the town, and with the co-operation of the Ontario Provincial Police a roadblock was set up. The equipment was not allowed to leave until I had the opportunity of speaking to a general or two. They said there had been some kind of misunderstanding, some sort of error, and that the equipment was to remain there. The Ontario Provincial Police took down the roadblock and then provided a police escort to the military personnel so that they could get out of town safely. These are some of the absurd situations and problems that were caused by this kind of a poorly thought out closure of a radar base.
There are many other problems I could cite in this case study, but let me tell the House about the response of an hon. Tory minister in the provincial government. He said that we should not be bothered with all of these problems related to unorganized communities. What we should do is bite the bullet, and let these communities die. Mind you, he did not go to a public meeting in Armstrong and make that statement. He made it in the safety of Queens Park in Toronto. To the best of my knowledge he has never gone to that community.
These small unorganized communities, as the hon. member for Timiskaming knows, do not die. They often have serious economic set backs. They go through a crisis when some job-creating industry or other public or private enterprise leaves, but they do not die. They just linger on and suffer, and the people are a little poorer and worse off for it. But one cannot, by any kind of government action, cause the death of these communities.
What do these communities need? They need a plan for future development. They need someone in these times of crises to help them out. Many government departments, agencies, and even the private sector should get involved. For example, a representative on behalf of one private company said, "We think we can help this community get over this difficulty that it is facing. ' But when a wood cutting operation was started up it was found that adequate accommodations were not available for the workers. It was not possible to attract new skilled labour into the town because facilities were few, if they existed at all.
My hon. friend has proposed that there be a modest program of assistance for these kinds of communities to help them over difficult times. We are not talking about some large, new social program added to our present structure. Of course not. We are all aware of deficits, and we are concerned about them at the various levels of government. But certain expenditures can be justified if there is a real human problem and social need in play, or if it has something to do with nation building or maintaining.
I suggest in addition to what my hon. friend has proposed to this House that there ought to be a co-ordinating committee of government and private enterprise to help communities in crisis overcome these difficulties. Many agencies of govern-
October 29, 1979

ment could be involved. The co-ordinating committee could apply itself with determination and expertise in helping "one industry-small town-unorganized communities" face the crisis of a closure. 1 would think that such a co-ordinating committee should be activated by an order in council. Having assessed the situation, one minister could be designated to press the button in cabinet which would get the committee functioning. It does not need to be a continuing committee or a big costly operation, but it could exist interdepartmentally and include people from the private sector so that when such a problem comes into existence, an order in council could be made to establish and give authority to a committee to help these communities.
1 conclude by saying that what my friend, the hon. member for Renfrew-Nipissing-Pembroke, has proposed is an admirable motion. I am delighted to support it. It is a step in the right direction, and I hope it will have the approval of the House.


Mr. Deputy Speaker:: Does the hon. member wish to ask a question?


George Alexander (Alex) Jupp: Mr. Speaker, 1 have a question of privilege. 1 am used to being insulted in the course of my political career, but no one has yet called me a bookkeeper. I would ask the hon. member to withdraw that remark. If one lets those kinds of comments go by in this House, the next thing that could happen is one might be called an economist. If one lets that go by then one could be called a lawyer and so on. 1 would like to have that comment withdrawn.


B. Keith Penner: Mr. Speaker, I rise on the same point of privilege. Once again the hon. member has failed to listen to what another hon. member has said. Nobody called him a bookkeeper. 1 have no idea what he does or what he ought to be doing. 1 said in his contribution that he was presenting to this House a bookkeeper's approach, and that is a little bit different.


Mr. Joe Reid (Parliamentary Secretary to Postmaster General and Minister of the Environment):: Mr. Speaker, I rise for the first time in this honourable and distinguished House.


Some hon. Members:: Hear, hear!


Joseph Lloyd Reid: I find it a privilege to come here, but having served a goodly number of years in matters of local administration and having served on local government, I find it preferable to address myself to matters of debate of a specific nature.
Local government is an area of government where many of us here have served people of communities for many years in a variety of ways. 1 come here with the full intent, having once served the people of my community, of now addressing myself to the Canadian community, and addressing myself from wherever I sit or stand in what 1 consider the national interest.
1 am somewhat inclined to sympathize with the proponents of this motion, but it is rather ironic it comes before us at a time when Bill C-3 is on the order paper. Bill C-3 is about to
Municipal Taxes
make major changes in the program of grants in lieu of taxes.
1 suggest to all members of this House that that bill will be of benefit to local municipalities. There is no doubt in my mind, Mr. Speaker, that the impact as presented by the proponents of the bill, does change one's lifestyle.
Those who have had to meet budgetary requirements within time periods know what changes come about when there is a change in the assessment rolls by reason of a discontinuance of a major activity, be it an industry, or an institution of governmental change. But that institution came to the municipality concerned, as has already been said, practically at the urging of the municipality. While it leaves an impact, there is no good reason why the federal government should be locked in and be subject to rules and regulations not applicable to other taxpayers or grantors in their particular areas.
May 1 be so bold as to suggest to the hon. member for Renfrew-Nipissing-Pembroke (Mr. Hopkins) that he might better be advised to address himself to Bill C-3 and the Municipal Grants Act when that bill is being discussed before the committee.
The existing program of grants to municipalities in lieu of property taxes is already a substantial item to this country of ours, amounting to about $148 million in the case of department-owned property, and an added $110 million from Crown corporations.
Under the new government bill, grants on departmental properties will be increased by $25 million by bringing into the grant program properties which are now excluded from the grant formula. This will benefit many municipalities across the country and it is a measure that 1 am sure will be supported by all members present.
This particular motion is unusual in that one of the parts of the country that will benefit most from this bill is the constituency of the hon. member for Renfrew-Nipissing-Pembroke. The federal government has a large defence base there, namely Canadian Forces Base Petawawa. At the present time, grants on this base apply to married quarters and land. Bill C-3 will remove this restriction and allow a larger tax base and for a larger grant in lieu thereof.


Mr. Deputy Speaker:: Order, please. I regret to interrupt the hon. member-


William Arnold Peters: On a point of order, Mr. Speaker, I know the hon. member for Niagara Falls-


Joseph Lloyd Reid: St. Catharines.


William Arnold Peters: -excuse me, St. Catharines (Mr. Reid) is a new member. However, he is probably familiar with his party's decision not to kill these bills. Because he is a new member, maybe we can give him the benefit of not talking this bill out, by letting him resume his seat before we see the clock and calling it six o'clock.

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Mr. Deputy Speaker:: The only way we cannot now see the clock is by unanimous consent.


Some hon. Members:: Agreed.


Some hon. Members:: No.


Mr. Deputy Speaker:: Is there unanimous consent that the House does not see the clock?


Some hon. Members:: Agreed.


Some hon. Members:: No.


Mr. Deputy Speaker:: There is not unanimous consent. Therefore, I have to conclude that the hour provided for the consideration of private members' business has now expired. I do now leave the chair until eight o'clock p.m.
At six o'clock the House took recess.


[Stage Direction]
AFTER RECESS

The House resumed at 8 p.m.


[Stage Direction]
The House resumed consideration of the motion of Mr. Crosbie that Bill C-17, to amend the statute law relating to income tax and to amend the Canada Pension Plan, be read the second time and referred to Committee of the Whole.
Mr. Deputy Speaker:: When the debate was interrupted at 5 p.m. the hon. member for Windsor West (Mr. Gray) had the floor.


Herbert Eser (Herb) Gray: Mr. Speaker, 1 was talking about the fact that the Conservative Speech from the Throne was very empty when it came to policy on matters related to energy and the economy. 1 was saying that one reason the Minister of Finance (Mr. Crosbie) has not been able to bring down his own budget as yet is because he does not know what the price of energy will be. He has been hinting that a budget will be presented in November, but today the Prime Minister (Mr. Clark) seemed to suggest, during the question period, that he was hoping for a budget by the end of the year. This would mean further delay when what is needed is prompt action to strengthen the Canadian economy.
In the field of energy prices, the action the Minister of Finance appears to favour is one which, in my view, would harm the Canadian economy rather than help it. He seems to

be promoting a rapid increase to world levels of energy prices in Canada, which would mean increases to $1.30 or $1.40 a gallon for gasoline, an increase of four dollars a barrel for petroleum. All this means an increase of at least 2 per cent in the Canadian cost of living which is already being pushed upward by the Conservative high interest rate policy.
I was informed just before the House resumed that even Premier Lougheed, who at one time was considered such a close friend and supporter of the Prime Minister and his party, has complained, in Vancouver, I believe, about this high interest policy saying, if I recall correctly, that it was a short-term expedient not in the interest of the Canadian economy. The rapid increase in energy prices to world levels apparently sought by the Conservatives would take away most, if not all, of the competitive advantage Canadian industry now possesses when it comes to selling goods both here and abroad because they are able to pay for what are, after all, Canada's own energy resources at prices lower than world prices.
The minister today tabled his mortgage tax credit plan. 1 think we have to recognize that his high interest rate policy, the Conservative high interest rate policy, will cancel out whatever benefit people might have expected from it. It is not the plan which he and the Conservatives promised before the election. A lot of people will get less than they had expected from the old plan. He has admitted, though, that the present tax credit plan is simpler and fairer to lower and middle income people than the one promised by his party before and during the election. We shall, of course, be discussing this matter in greater detail, hopefully within the next few weeks. As 1 have said, though, the Conservative plan promised not simply to help people keep pace with the high Conservative interest rates-which it will not succeed in doing, anyway. People got the impression before and during the election that the Conservative promise of deductibility of mortgage interest rates and property taxes would make them better off than they were at the time that promise was made. But the high interest rates cancel out the benefits completely.
In spite of what the Conservatives said about the budget measures presented to us today during the budget debate last fall, in presenting these measures again they are confirming their value, they are endorsing them, and they are admitting so far they have nothing better. We in the official opposition will therefore not extend debate unduly. We shall, however, insist that the Minister of Finance note and explain clearly what changes, if any, he is making in these measures as compared with what was in the original budget. Our main objective, though, is to have the Minister of Finance present his own budget because action further to what was outlined in the budget of last November can and should be taken in a new budget to help the Canadian economy to make industry more productive and efficient as part of an industrial strategy, as well as measures to help specific sectors of society, for example, small business, farmers, consumers, lower income groups. We in the official opposition will continue to press for measures of this kind.
October 29, 1979

Let the Minister of Finance bring down his own Conservative budget. When it comes, like everything else since the new government took office, there will be a lot less in it than the Conservatives promised the public and the public expected from them before and during the election.


An hon. Member:: We will be responsible.


Herbert Eser (Herb) Gray: My hon. friend says that they will be responsible. If what has happened in the past five months is an example of Conservative reponsibility, heaven help the Canadian people and the Canadian economy!


Some hon. Members:: Hear, hear!


Bob Rae: Mr. Speaker, we come to this debate somewhat as we come to last year's breakfast, and 1 am afraid that so far the debate has been just about as edifying.
In his remarks introducing this budget bill the minister could provide no justification for its specifics. He did not give us any analysis of why the Liberal measures were regarded as the right ones to take, and he emphasized that the only change the Conservatives were going to be making to the Liberal budget of November, 1978, the last budget of the hon. member for Saint-Maurice (Mr. Chretien), was that a loophole which had finally been closed by the Liberals was going to be reopened by the Conservatives, and that professionals will be able to continue to incorporate themselves and, by the magic of incorporation, thereby reduce their effective rate of taxation.
Then the hon. member for Windsor West (Mr. Gray) could find only words of praise for the budget, without analysing one single iota of its features, without analysing one single measure which it put forward, and telling us that the only problem was that the government had taken a long time to bring forward its measures. Then he went on to talk about energy.
What I want to do in this debate is to look at the bill and to ask the Canadian people to consider why it is that the first measures which are brought to this House by the Conservatives are measures which were put forward by the Liberals, and why measures which are completely and perfectly palatable to the Liberals are also acceptable to the Conservative party?
I think we should want to ask ourselves what we are doing to our tax system when we allow the kinds of changes and developments which are so favoured by the government. When 1 listen to the hon. member for Windsor West, 1 am reminded that just as there were two kinds of Tories before the election-there were red Tories and blue Tories-we now find that there are two kinds of Liberals.


Mr. Kempling:: And two kinds of socialists, the pink ones and the yellow ones.


Bob Rae: There are black Liberals and grey Liberals. The black Liberals are those who thought that what governor
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Bouey did was right up until May 22, and they have to agree that what he did was right after May 22. The black Liberals are those who are prepared to admit that they followed the same advice of governor Bouey up until May 22 and that they are prepared to carry the can and support governor Bouey after May 22. While I disagree and have disagreed with the hon. member for Saint-Maurice, the hon. member for Stor-mont-Dundas (Mr. Lumley) and the hon. member for Saint-Henri-Westmount (Mr. Johnston), I at least have some respect for their consistency. I at least know that they will not have worked with the governor of the Bank of Canada, accepted his policies and philosophy for many long years, and then turn around and stab him in the back.
However, the politics of some other Liberals whom 1 have described as grey Liberals are not so consistent. They are very selective in the Liberal tradition which they decide to present to the House as being the new, revised, reformed, revivified, and enlightened Liberal party that they would now have us believe is going to lead Canada to halcyon days.
The problem with the Liberal party is that it is not at the moment an opposition; it is a government in exile. It has not lost that sense that it has, deep in its members' hearts, that somehow on May 22 the Canadian people made a terrible mistake, that all they have to do is snap their fingers and wake up and this horrible nightmare will be over, and once again those who are fit to rule will be ruling over Canada.


Some hon. Members:: Hear, hear!


Bob Rae: That kind of arrogance is exactly what led to May 22 itself, and that same spirit of arrogance is what will guarantee that the Liberal party will quickly evaporate.


Lloyd Axworthy: This is not arrogance; it is sanctimoniousness. You are sanctimonious when you have never had power, and you don't know what it is about.


Bob Rae: 1 have obviously upset some of the sleeping giants in the Liberal party, and I am quite happy that I have wakened them.


An hon. Member:: The black ones or the grey ones?


Bob Rae: They will have to declare themselves as to whether they are black or grey.
I want to look at the measures put forward by the Conservative party and the Liberal party in an effort to solve our country's economic problems. Let me suggest that our country's economic problems are many. Our prospects and our chances for the future are also many. We in my party have been criticized for being too negative, for being too carping, for being constantly critical, and for not looking at the positive side of things.
Let me say that the pessimists in this House and in this country are not those social democrats who have a conviction that Canadians can do better, that Canadians deserve more and that we have tremendous capacity and strength in our country. The pessimists are those like the hon. member for

October 29, 1979
Income Tax Act
Saint-Maurice when he was minister of finance, and like the current Minister of Finance (Mr. Crosbie), or those people who say there is nothing we can do. What I have described is the weatherman theory of politics and economics; that really what we elect a government to do is to tell us to batten down the hatches and that there is nothing we can do about these natural hurricanes which are taking place throughout the economy.
1 think there are two points which need to be made about our economic problems. The first is that they are structural and serious and that they cannot be solved overnight. The second point to make about our economic problems is that their solution must be fair and be seen to be fair by the Canadian people. In our tax policies, in our interest rate policies-in what are called our fiscal and monetary policies- the Canadian people from Newfoundland to British Columbia must have the sense that they are not being taken advantage of by the powerful and that there is in our tax system an element of fairness which pervades that system.
There is much talk these days about biting the bullet, about austerity, and about how to fight inflation, and I say to hon. members opposite in the Conservative party that all of us in this House and all of us in the country are prepared to fight inflation. The critical question which we continue to put to the government is; who will bear the cost?
The interest rate policy is a redistribution of wealth by another name. It has that effect. It has that impact. It is that unfair, and just as we criticize the interest rate policy because it is unfair, because it does nothing to solve our long-term problems, because it does not deal with the fairness problem and because it does not deal with the structural problems of our economy, so too these tax measures which have been left to us by the previous Liberal government do nothing to face these problems of fairness and structural change. That is why for the most part we are opposed to them, and that is why we have put forward suggestions as to how they should be changed. That is why we will be making what 1 hope the minister will agree are constructive comments having to do with the way these programs have been implemented.
We deal, first of all, with the investment tax credit and the research and development tax credit. There is a basic question which the previous Liberal government was asked several times and which, I suggest, we will be asking this government as well. That basic question is: what is the integrity of our tax system when it is so filled with loopholes, with special provisions, with exceptions, with advantages given to some groups and disadvantages to other groups so that it has no integrity? Indeed, it can be argued that it has even lost its capacity as a revenue collecting system; it is leaking like a sieve, and members opposite know it very well. That is at least three quarters of the reason why we have a deficit that is as large and as uncontrolled as the one we currently have.
When you look at the investment tax credits that have been given, when you look at the mining and drilling allowance that

has been given, when you look at the artificially high rate at which certain industries are allowed to write off capital cost allowance, when you look at the other havens that have been created, you realize that not only do we have a system that is unfair, but we also have a system that is ineffective.
It is to these two points, the fairness and the effectiveness of our tax system, that I think members opposite might address some of their attention. 1 had hoped the Minister of Finance would have addressed some of his attention to them.
What has been the experience with the investment tax credit? Where are the studies to tell us whether these are the incentives which in fact rather than in theory lead to greater investment? Is this spending of public money-because every loss of revenue from a credit is as much a spending of public moneys as if the government wrote a cheque-having the effect that it should have? Is it encouraging regional development? The answer is, no. We have tried the tax credit route, it has been used before by past Liberal governments, and study after study over the last two years has told us that the regional tensions in our country are greater than ever before, that the disparity between the Atlantic provinces and Alberta, for example, is far greater than it was before.
1 think we are entitled to ask ourselves: are these kinds of regional tax credits really the reason why businessmen decide to invest in a certain part of the country rather than in another? Do they simply go to companies that would have invested there anyway and, if so, why are we spending that much money? Is that an effective use of government money? I would have thought that those members opposite who pride themselves on cost effectiveness might want to ask themselves that very simple question, and 1 am glad to see that the Minister of Finance has agreed to bring forward a system of tax spending which will allow us at least to start on the road toward looking at the tax spending system in our country and at how it is attacking the integrity of our tax collecting system and of the revenue capacity of the federal government.
So the question we ask ourselves with respect to the investment tax credit and the research and development tax credit is quite a simple one. Is this adequate? Is this the way to redistribute investment in this country? If that is what the government wants to do, why not do it directly? Why not establish an investment fund? Why not have a national investment strategy? We have asked these questions before, and the Liberals were not able to give us an answer. If the Minister of Finance is serious in what he said earlier today that he wanted to start the country on the long road to national economic independence-this was implied in his remarks-I suggest to him that the way to do this is not by taking the route of giving a handout to every company which comes along and asks for one, or every company which uses the route of the tax credit which cannot be controlled or surveyed, but by using this means to direct investment in our country and to encourage the growth of regions as well as to discourage the amount of regional disparity which we have seen in our country.
There are three other measures to which I want to devote a little time. The first is the drilling allowance. The drilling
October 29, 1979

allowance is, without question, the biggest loophole in our tax system at present. It is a national disgrace because it means- last year we did not have the exact amount for it but we hope the government will give it to us-that the federal government is paying for virtually all frontier oil and gas exploration and is not getting a penny in return.
It means that, for example, Dome Petroleum has not paid a single cent of tax since it was founded some ten years ago. It means Shell Canada did not pay a single penny of tax last year. It means that while this government is screwing up its courage, to quote Shakespeare, to fight PetroCan which cost the public treasury somewhere between $300 million and $400 million, it is, at the same time, handing out money hand over fist to the oil companies, which is bad enough and stupid enough, without getting a penny of equity or of interest, or of guarantee of an interest in the long run for the Canadian taxpayer. This is the kind of "tough bargaining" which we can expect from the Liberals, but we hope for a better deal for the Canadian taxpayer from the Conservatives.
Not only that, it means also that the allowance and the loopholes go to those wealthy investors who are encouraged to shelter their money in a frontier drilling allowance. There are not many people in my riding who can afford even to know about or be aware of the meaning of a tax shelter like the frontier drilling allowance, but 1 think the meaning of these shelters should become crystal clear to the Canadian taxpayers. Not only are we subsidizing the takeover of our frontier resources by foreign multinational oil companies so that we are paying people to buy us out, it also means that we are paying wealthy Canadians to reap benefits from the exploration of resources. It means at the same time that while this is going on and while this unfairness is filtering through our tax system, the Conservative party has decided to pick on poor old PetroCan, the one foot in the door which the Canadian public has in the resource sector, in the oil exploration sector, and to give it back to the private sector as well.


Mr. Breau:: Shame!


Bob Rae: The hon. member for Gloucester (Mr. Breau) says it is shameful. I ask him to look at the drilling allowance system which has been set up in the country. I ask him to look at frontier allowance shelters and to go back to his constituents and tell them how fair they are. That is what the Liberal government stood for, and he knows perfectly well if he went back to his constituents and told them about it, they would shake their heads in disbelief. 1 think people are entitled to know about it.
The second point is one that was already mentioned by the Minister of Finance, and that is the change in the term "preferred shares". Both inside and outside this House many members of our party have made the point that, even after the loophole has been closed, our banks are paying virtually no tax. The Minister of Finance says that is not true, he does not agree with my theories. He said the NDP is the party of the twenty-first century. I would remind the minister that the twenty-first century is only 20 years away. I would rather be in
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the party of the twenty-first century than the party of the eighteenth century.
When one looks at what has happened to term preferred shares, one realizes that although the door has been closed, the horse has already bolted. Even as we are in the third quarter of 1979, the average rate of taxation of the banks is 10.7 per cent. I think Canadians are entitled to an explanation. 1 look forward to an explanation from the minister. I look forward to him telling us what he is going to do. The hon. member for Saint-Maurice closed the loophole long after it had the effect of allowing an extraordinary benefit not only to the banks but to those large companies which took advantage of the system. Because the arrangements have been made, because they were entered into, and because the system of term preferred shares lasts on an average between six years and eight years, we have a long way to go before we will collect the taxes which have not been collected as a result of this device.
I think we are entitled to indicate that the door has been closed and the horse is long gone, thanks to the negligence and ignorance of the Liberal government, thanks to its lack of concern for the integrity of the tax system, thanks to its lack of concern for the fairness of the tax system. The question which Canadian taxpayers will be asking members of the House of Commons is: what will be done about it now that the horse is gone?
Finally we come to the one feature of the budget on which the minister wanted to put his own particular stamp. He wanted to make it a Conservative measure as well as a Liberal one. I have only described some of the unfairness in the budget. In addition is the fact that it did not provide for the personal tax cut which obviously was needed back in 1978. The Minister of Finance went a little further, but it is interesting that the only major change the Tories chose to make was to give high income professionals a tax break. It was given to high income professionals, not to the man in the street.


An hon. Member:: What about the woman in the street?


Bob Rae: It was not given to the person in the street. It was given to lawyers, doctors, and dentists, who are in positions where they can incorporate themselves. By the magic of incorporation, they can reduce their effective tax rate to 25 per cent. It is this illusion of unfairness that at least the Liberals realized created abuse. A special tax rate for small business was not created to give a ripoff to professionals. It was not to allow them to avoid taxes. It was not so that they would not be treated like everyone else in the tax system. It was in order to give a benefit to those people who will be going out and hiring people to start a small business and get the economy moving. That is why there was this 25 per cent rate.
Presto, what has the minister done? He said that the way they were going to change this was to switch it from a 25 per cent rate to a 33 per cent rate. The minister has said that this has a neutral tax effect, but I think he is kidding the Canadian

October 29, 1979
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public, and the figures will show it. The minister is kidding the Canadian public because it will not have a neutral tax effect.
The tax effect will be that professionals and members of their families, however they devise it and plan it through their tax planning arrangements for those family members who are engaged in so-called service arrangements with the doctors and so forth, will have far lower effective rates of taxation than if they were not able to take advantage of the incorporation loophole.
I think Canadians are entitled to know that the only thing the members of the Conservative caucus successfully pressured the Minister of Finance on was a tax cut for professionals, not a tax cut for all Canadians, not a means of helping lower and middle income people who are being shafted by high interest rates, not a means of helping pensioners who are struggling to make ends meet. The one group of Canadians whom this government decided to single out in its first act before Parliament by saying, "You people really need help", were the lawyers, doctors and dentists. They singled out high income professionals who are doing very well. Surely, in the name of goodness, they do not deserve the first break, the first act of charity and kindness to come out of the Conservative government.
I think Canadians expected something a little different and better than they received from the government. I will not engage in the kind of hypocritical criticism which we have heard from the government in exile, the Liberal party. Consistently we have opposed the unfairness of Liberal tax measures, the loopholes which have almost become synonymous with Liberal tax measures and the tremendous benefits to the multi-national oil companies which we have described. We say the same thing to the Conservative government, the tight money second team as I described them earlier.
We expected something different from the tight money second team than we have received so far. The people to whom they made promises during the election, those Canadians who remember that the Conservatives in their ridings promised a tax break, will be wondering why they did not receive the same tax breaks as lawyers, doctors and dentists. 1 do not think the government will have an answer for them. The government is responding to those same special interest groups, those same people who think giving a few more breaks to those who have will somehow stimulate the economy and that they will convince every other Canadian that what is happening is fair.
One message will come back and haunt the government. Not only does it have to deal with structural problems of the economy, it will not have Canadians behind it unless they are satisfied that everybody in society will be bearing the burden, and that not only doctors, lawyers and dentists will be receiving a little relief. It cannot deal with structural problems of the economy with a high interest rate and a laissez-faire government which leaves everything to multi-national companies. Canadians will have to be satisfied that pensioners, industrial workers, clerical workers, persons with a little education, and those persons who do not have enough get up and go to start a business, according to Conservative philosophy, will receive
[Mr. Rae.[
equal benefit. They deserve just as much a break and just as much fairness from the tax system as doctors, lawyers, dentists, chartered accountants, and insurance salesmen, who are so beloved by the Conservative party and the Conservative government.
The Liberal budget is worthy of the Liberal party. The black and grey Liberals can unite on this one. I am afraid it is worthy of what we have come to expect so far from the Conservative party which has ignored the great traditions of a national policy, but it is not something which is worthy of the House taken as a whole. We will be putting forward amendments during consideration of it in Committee of the Whole. We will be opposing these benefits because we think that they provide too great a share of the national wealth to a few Canadians. We will be asking that this government demonstrate two things: economic leadership, and compassion. A party which does not combine economic leadership and compassion will very soon find that it is out of favour with the Canadian people. I hope that those so-called "blue Tories" on the other side of the House remember what 1 have said because, if they do not, it will come back to haunt them.


Mr. Dan McKenzie (Parliamentary Secretary to Minister of National Defence and Minister of Veterans Affairs):: Mr. Speaker, I am glad to be in the House tonight and to have this opportunity to enter into this debate. It is interesting to follow the comments of the financial critics for the Liberal party and for the NDP. The financial critic for the NDP was not here on May 23, 1978, but the whole day was spent debating a review of the tax structure for Canada. My party wanted to refer the matter to committee, but this was criticized by the Liberal party which, assisted by the NDP, talked this motion out. The two opposition parties were no more interested in reviewing the tax structure then than they are now.
It is a full-time job to keep up with the statements made by the New Democratic Party members, particularly their statements about what oil companies pay with regard to taxes. Of course, I have another statement which I will have to check out tomorrow, that being the statement by the NDP financial critic that Dome Petroleum does not pay taxes. That statement is probably just as false as all the other statements which they have made and which I will be reading into the record tonight.
There has also been discussion on the high interest rates. I will be going into some detail later in my speech as to why we have these terribly high interest rates. It has nothing to do with policies which my government has introduced, it is simply that we are forced to pay off the Liberal debt. I shall be going into these figures in a moment to remind the Liberal financial critic of the debt his government left this Canadian nation and how it trapped the Canadian people. One of the reasons why we must have these high interest rates is to attract money to pay off the Liberal debt. I will be going into the exact figures.
The financial critic of the NDP has made statements to the effect that all my party is interested in are professional people. That is not true. We have introduced legislation to deal with
October 29, 1979

veterans, pensions, spouse's allowance, and aid has been granted to the municipalities in lieu of taxes, to mention but a few. The Liberal party has continuously criticized our tax credit plan for homeowners. If it is so interested in homeowners, it could have implemented this policy in 1965 because that is when my party first proposed the idea. However, at that time all we got from the Liberal government were taxes on building products. It is no more interested in home owners than it is in flying to the moon.
The Liberal financial critic was held in high esteem in the last Parliament, after he was removed from cabinet. He was quite credible in the House, and the hon. member asked many pointed questions of the government at that time. But now that the hon. member is a critic he seems to have a convenient memory. I would like to remind the hon. member of a bill which his party introduced on January 27, 1978, to bring Canada's oil up to world prices. They have since reversed their stand on this policy, but there has been no explanation as to why. As yet, this government has not said anything about bringing our oil up to world prices because we have not reached a final decision as to what the price will be. The then minister of energy, mines and resources is reported as saying in Hansard at page 2313, January 27, 1978 with regard to his Bill C-19:
The principal purpose of this bill is to enable the government to fulfil its commitment to provide international prices for the synthetic oil produced-
Then he goes on to say:
Steps which have already been taken by the government include the following:
1. A commitment to move Canadian oil prices toward international levels in order to encourage conservation and resource development.
If that party has changed its mind and its policy, 1 would like it to give an explanation, and never mind its negative criticism about what the government is doing with regard to oil prices. Similar comments can be found throughout this debate which carried on until April 10, 1978, where the Liberal party said that it would bring Canadian oil prices up to world prices.
I would like to give the House and hon. members present some idea of what my government has inherited from the successive Liberal governments which can only be described as the most irresponsible group of individuals to have ever held public office in Canadian history. The expenditures in main estimates for the fiscal year 1979-80 are $52.6 billion; for 1980-81, $57.95 billion; for the fiscal year 1981-82, $63.85 billion, and for 1982-83 $69.9 billion. The party while it was in power absolutely trapped the Canadian people. The budget will rise by $20 billion in three years without the present government bringing in one single spending program. They have put in motion this uncontrolled spending, and that is the problem. We must try to reduce that $70 billion budget, and that is why we cannot give tax cuts to renters or the small businessmen. We would like to give more support to the veterans and other groups, but the veterans, renters, home owners and businessmen must pay off this huge expenditure.
At the end of March, 1971, the net public debt was $16.5 billion and was costing per capita $744 per year. Four years later it jumped to $19,275 billion. As of March 31, 1979, the
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net public debt was $51.5 billion. This has all been set in motion by the Liberal government, and the net public debt could reach $104,710 billion by 1983. That is what the Liberals have done for the Canadian people, but we do not hear their finance critic explaining how we are to get out of this mess. He simply offers negative criticism and a complete reversal of policy. It is the policies of the Liberal government which have caused the high interest rates, and I hope that we can overcome this situation. If we cannot attract money into this country we will not be able to pay off these debts.
Another topic of discussion tonight has been Petro-Canada.
I would like to point out to this House and to the people of Canada that we must all take the statements made by the New Democratic Party with a large grain of salt. If a constituent is concerned about any statement made by a spokesman for the New Democratic Party, I suggest that he or she write a government member about that particular statement, whatever it may be.
I would like to go over some statements made during the Speech from the Throne debate by the Leader of the NDP on October 10. The hon. member made a number of misleading statements concerning Petro-Canada and the oil and gas industry in general. For the most part the numbers and the events which he cited are correct. It is his misinterpretation of those numbers and events which is cause for concern, and which should be attacked and dispelled. Their leader stated:
The tax rate for the oil industry declined from 35 per cent to 21 per cent.
He-
-is referring to the effective income tax rate of a company relative to book profit. In order to encourage the discovery of new petroleum reserves, the government has implemented in the last decade a series of tax incentives, through depletion allowances and fast write-offs, which have the effect of reducing the taxable income. While there has been an increase in exploration activity since the introduction of various tax incentives, there appears to be some concern that these tax incentives are overly generous, causing speculation in the business community that there may be revisions in the next budget.
The Leader of the New Democratic Party has also stated: Shell did not pay one cent in taxes.
This was true in 1978 in the case of current income taxes, as a result of increased exploration and depletion expenses. It is not true in the case of other forms of taxation.
In 1978 Shell paid other taxes of $138 million and production royalties of $205 million for a total of $343 million-an amount more than double the corporation's profit of $151 million. The statement made by the Leader of the NDP to the effect that Sheil did not pay one cent in taxes, is completely false. If these oil companies are gouging the public, we on this side have no reservations about conducting an inquiry into their activities. There have been some recent investigations into that matter and the results are being examined by the Minister of Justice.
The Leader of the NDP went on to say:
More than $2 billion of Canada's money has been given to Shell and its partners in the Athabasca Oil Sands.

October 29, 1979
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His choice of words is extremely misleading as he seems to imply direct cash contributions to the oil sands project. If he is referring to the effect, over time, of accelerated capital cost allowances, depletion allowances and other tax incentives, then we probably are dealing with a matter of interpretation, assuming the accuracy of the $2 billion figure. A series of special tax and pricing concessions are being negotiated between the Shell-led consortium and the federal and Alberta governments. This series of concessions are necessary in the oil sands industry where the cost of producing a barrel of oil is in the $16 to $20 range versus around $5 for new and old conventional oil.
The NDP leader also stated:
Petro-Canada is currently involved in 80 per cent of the drillings off the coast of Labrador.
To state Petro-Canada's involvement in terms of drillings is to overstate its contribution. Out of $224 million that was forecast to be expended in the area this summer, Petro-Canada's financial involvement was forecast to be only about $50 million. Further, while Petro-Canada is involved in 9 or 10 out of 12 or 13 wells being drilled this season, it has been the catalyst or leader of none. It is a very weak national oil company, Mr. Speaker. We want to strengthen it and we will strengthen it.
Then he stated:
Canadians as far east as Thunder Bay can go to a Canadian-owned petroleum station.
And as far west as Quebec, Mr. Speaker. Irving oil, a major retailer in eastern Canada, is Canadian owned.
The NDP leader also stated:
-that $500 million has been taken and turned into $3.5 billion for the people of Canada.
This is extremely misleading, as it implies that Petro-Canada has generated $3 billion in earnings. In fact, Petro-Canada's growth is a result of $900 million of government investment and about $2.5 billion in debt. In other words, Petro-Canada has cost, not earned Canadian taxpayers, $3 billion. That is what the two opposition parties support, a weak, bankrupt company that can do nothing for us. That is why we want to strengthen it.


An hon. Member:: Owned by the foreign banks.


A. Daniel McKenzie: That is right. Due to the false and misleading statements made by the Leader of the New Democratic Party, and, of course, the Liberal opposition, considerable concern has been caused to a number of residents in my constituency. I have had to draft a letter to explain the true facts to them. It reads as follows:
There has been widespread concern expressed by a number of Canadians over the future of PetroCan. But there has also been widespread misunderstanding on all sides concerning the Conservative government's proposals in this regard. Much of the misunderstanding has been fostered by those groups who do not understand the poor condition of PetroCan in its present form, or the government's proposals.

May 1 begin by saying it is not the intention of this government to privatize or sell PetroCan to foreign interests. Nor is it our intention-in any sense-to weaken the Crown corporation.
Rather, the government intends to strengthen Canada's role in the oil industry. In order to achieve this-a goal which every Canadian wants-PetroCan must first be reorganized. In its present condition, the Crown corporation is a weak company in a very healthy industry. Despite the propaganda campaign being waged by the NDP and Liberal parties, PetroCan, in its present form, is not protecting Canada's interests in the oil industry.
I am enclosing additional information for my constituents.
The letter goes on:
An overview of the highlights of the task force's report will show how a restructed PetroCan will better serve Canada in a way the present corporation is unable.
First, a reorganized PetroCan would be owned by all Canadians and would consist of about 95 per cent of the assets of the present corporation. After initial distribution, only Canadians would be permitted to purchase any freely traded shares. The amount of equity held by any Canadian or corporation would be limited within strict bounds.
Whether we are going to implement that, I do not know, but that is being considered at the present time.
The letter continues:
Secondly, and just as important, the new corporation would no longer be in chronic debt. In the first six months of 1979, PetroCan has lost $7.6 million. Since it began operation in 1976, the federal government has pumped $800 million worth of equity capital into the corporation. Its financial structure as it now exists is overburdened with debt. Debt exceeds 250 per cent of equity versus the ratio of between 25 per cent and 40 per cent of other petroleum companies.
Now we have the Liberal party and the New Democratic Party supporting a Crown corporation that has a debt equity of 250 per cent. They go around telling the Canadian people what a wonderful company it is because of a debt ratio like that. I do not think they understand what a debt ratio is.
To return to the letter:
Through the proposed reorganization, with the debt of the privatized part largely removed, the new company could earn Canadian shareholders in excess of $100 million per year while the debt of the government would be reduced by about $300 million.
Third, the new corporation will retain three essential functions now performed by PetroCan. The corporation will retain the function of negotiating state to state contracts for crude oil;-
We have said right from the start that Petro-Canada would be dealing with other nations.
My letter goes on:
-exploration in frontier areas; and the development of tar sands. The retention of these three functions, along with a largely debt-free corporation owned by all Canadians, would ensure Canada has strong voice in the energy field.
Finally, the new corporation would, under the proposed reorganization, be more aggressive in the oil industry.
Instead of merely providing money for other operators, such as Mobil, in their explorations, the new company will be a leader in the field of exploration. Unlike the present corporation which has yet to drill an oil well of its own in the frontier areas, the reorganized corporation will surely be a leader in this area.
The Conservative government is as concerned as are all Canadians, of ensuring that Canada has a strong voice in the field of energy. I urge you to read carefully the information provided, for the real story is being clouded by those who do not have the interests of Canada at heart. It is time we consider the real issues involved, not those who raise erroneous arguments for political purposes. I am confident the proposals put forward arc sound proposals, and they are in the best interests of Canada. I am also confident Canadians will see the pressing need to restructure Petro-Canada for the benefit and strengthening of Canada's role in the petroleum industry.
October 29, 1979

That is the extent we have to go to, Mr. Speaker, to explain things to our constituents. We need a team of watchdogs and bulldogs to analyse every statement the NDP makes. They are just unbelievable. They have completely destroyed their credibility with their statements about medicare, PetroCan and taxes. That is all we hear from them.
As late as last Friday, October 26, another of their members was criticizing the Minister of Finance (Mr. Crosbie) because, when in opposition, he opposed the high interest rates that were being imposed in October, 1978. What the hon. member neglected to point out about the speech made at that time by the Minister of Finance was that while he was criticizing the increase in the interest rates he was also criticizing the uncontrolled spending that was being done. That is something you never hear from the NDP-not a word.


An hon. Member:: Oh, oh!


A. Daniel McKenzie: There is one of them now who would never talk of uncontrolled spending. He likes to go around kidding people that we do not have to pay off a debt which is heading toward $100 billion. There is not a word from the NDP on what we would have to do about paying off that debt.


Mr. Nystrom:: Especially in Tory provinces.


A. Daniel McKenzie: We will check out the statements about Dome oil tomorrow. No doubt we will all be back, and I will be back again to correct more and future statements from the two opposition parties.


Lorne Edmund Nystrom: Mr. Speaker, would the hon. member permit a question?


A. Daniel McKenzie: Mr. Speaker, 1 have nothing to learn from any member of the New Democratic Party.


Some hon. Members:: Hear, hear!


Some hon. Members:: Oh, oh!


A. Daniel McKenzie: I will only take questions from a credible organization.


Herb Breau: Mr. Speaker, it gives me great pleasure to take part in this debate on second reading of Bill C-17, an act to amend the statute law relating to income tax and to amend the Canada Pension Plan. Of course, it is not the wish of this party to prolong this debate unduly because at this stage the House of Commons has to vote on the principle of a bill. So, as the House at this late date, in late October, 1979, is still considering legislative matters arising from the budget of last November, obviously we would not want to delay unduly the legislative process on this bill. But, Mr. Speaker, I think it is important to set certain things straight when dealing with budgetary matters, quite simply because nearly every day during question period the ministers answer
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questions put to them by saying that if today we have a difficult financial situation, if the governor of the Bank of Canada must constantly increase interest rates-that now stand at 14 per cent-it is because of the financial situation in which this country finds itself, apparently brought about by the Fiberal party, the previous government.
Mr. Speaker, it is an argument that has absolutely no credibility, quite simply because the government officially became the government on June 4. They were elected on May 22 and since June 4, they have waited nearly four and a half months to reconvene the House of Commons, contrary, as my colleague for Windsor West (Mr. Gray) pointed out this afternoon, to the practice in effect previously in Canada and in other countries like Great Britain, for example. When a new government gets a new mandate, one of the first things it must do is to call the Houses, summon Parliament and bring forward its economic policy and legislative program.
Here is a Prime Minister (Mr. Clark) who suggests they had no data, they did not know what they were talking about, they knew nothing of Canada's economic affairs, and therefore they needed training. This is in effect what the Prime Minister said this afternoon. He indicated that when he spoke in this House last year, when the financial critics-because there were many-Mr. Gillies and the President of the Treasury Board (Mr. Stevens), the then hon. member for York-Simcoe, both were financial critics. I remember very well that in November last, during the budget debate, he started referring to the situation and exaggerating the Canadian deficit. He was referring to figures in the order of $25 billion or $30 billion a year, because at that time he obviously wanted to scare Canadians. He wanted to exaggerate the economic situation, pretending it was very bad.
How can the government now tell us they did not know what this country's economic situation was, when at the time they were the opposition they did not stop referring during last year's budget debate to this country's grave difficulties? Mr. Speaker, they knew what the economic situation was.
They knew last year that the policy they were advocating, the famous $2 billion tax cut, was completely irresponsible. They knew at that time that the monetary policy they were suggesting for supporting the dollar at 90 cents or 92 cents was absolutely irresponsible. In the last two or three weeks the dollar has gone down on the market. We have not heard the Progressive Conservatives complain and say that this is terrible and that the value of the dollar should be brought up to 90 cents or 92 cents.
Mr. Speaker, the members opposite must realize that they have lost all their credibility and that they are acting completely irresponsibly simply because they did not tell the truth to the Canadian population last year during the election campaign, and are not telling the truth now. They should stop groping about for solutions and bring down a budget. It is really regrettable that at the end of October, with a new

October 29, 1979
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government which was elected in May and which officially took power on June 4, we have not yet passed a single bill. We are now at the end of October, Mr. Speaker. The Minister of Finance (Mr. Crosbie) has the gall to tell us, " I cannot bring down a budget before all the bills of the previous budget are passed." First of all, from a technical and a legal standpoint, I am not sure that this is true. In any case, I must tell the members opposite that we were ready to come here in July and even in June if this was so urgent.
As for the bill to increase the borrowing power of the government, which was discussed last week and passed second reading this afternoon, we were ready to pass it in July or August, and the same applies to the budget bills now under consideration. We shall therefore not spend too much time on the principle of this bill because it is rather good after all, Mr. Speaker. The government thought that the budget of my colleague the hon. member for Saint-Maurice (Mr. Chretien) was so good and his economic policy when he was finance minister was so good that it did not even take the trouble to try to change it even a little bit because, since ministers have been officially and electorally in power, they did not even want to convene Parliament or bring down a new budget; so, they recognize that during 12 months, a whole year, the economic policy of the government was the right one.
Now the Prime Minister has the nerve to say, " We did not have all the information, we did not know that the economic situation of the country was so bad". Mr. Speaker, it is totally irresponsible. When a political party, whether it is a third party or anything else, presents itself as a national party and pretends to govern this country and proposes an economic measure, it should have the necessary information and act responsibly. If it promises something one day it has to keep its word once in power.
At his press conference last Friday the Prime Minister said we were irresponsible as the opposition. But it is because of the system, because we were forced to oppose whatever the government proposed. It is not true, Mr. Speaker. If this government proposes good measures for Canadians, we on this side of the House are going to support them, and when it proposes something bad, we shall say how bad it is and ask for something else. We shall be entirely responsible when we take back the power, and that will be before long, within a few months, and we shall ask the House of Commons to implement the same policies that are proposed now.
Mr. Speaker, the excuses given by this government to justify its unwillingness to present a budget now cannot be taken seriously. The only reason why we have no budget and why we did not sit for four and a half months is that this government did not know what it had to do and was unable to make a decision. Internal problems become more and more visible from day to day. The Minister of State for International Trade (Mr. Wilson) could tell us about the problems within the government; he might explain why we lost the contract with

Argentina, a $2 billion contract that might cost us even more just because the ministers were unable to make decisions. Will we continue to carry out idealistic policies or are we going to be more practical? The government could not make up its mind last summer.
The Minister of State responsible for the Canadian International Development Agency (Mr. Asselin) must now eat humble pie and explain to the House how he lost a contract worth $2 billion to Argentina, simply because the Secretary of State for External Affairs (Miss MacDonald), supported by a number of others ministers, made some quite idealistic comments on bilateral nuclear safeguards between Canada and the United States which are buying our Candu reactors and multilateral safeguards as well.
This government last summer could not decide to recall Parliament to adopt the bills resulting from the last budget and present a new budget. There is another reason why we have no new budget just now. The Minister of Finance should also refrain from hiding the conditions, he should stop concealing the real reason. We know that no budget can be prepared in Canada, at least it would be entirely irresponsible and credulous to think that a budget could now be brought down without having taken any decision about oil prices.
Does the Progressive Conservative Party have any policy about oil prices? If it has one, is it ready to put it into effect? It was thought that everything would get better when those gentlemen came to power. They would be in a position to co-operate with the provinces, to bring those people together for a discussion. Suddenly there was no more problem among producing and consuming provinces. Mr. Speaker, it has become obvious that so far this government has failed miserably to get an agreement on oil prices. There again, we can see that they were not being responsible when they were criticizing us for the unilateral measures the then federal government had to take on oil prices. They now realize that it is difficult in Canada to come to an agreement on an issue as crucial as oil.
One of the reasons why the new government has not yet brought down a budget is simply that it has not come to a decision on oil prices. It is impossible to reconcile the interests of the Conservative Premier of Ontario with those of the Alberta Premier. Some might say that the eastern provinces have reached an agreement. Yes indeed! They are going to buy that agreement between the eastern provinces, their Conservative friends from the Atlantic provinces. We know how they are going to do that. When Alberta's revenues rise because its royalties in oil and gas increase, automatically equalization payments to the provinces will go up.
Premier Hatfield of New Brunswick, Premier MacLean of Prince Edward Island, Mr. Levesque of the province of Quebec, Mr. Peckford of Newfoundland and Mr. Buchanan of Nova Scotia will say, "Raise the price of oil because that will increase the revenues of Alberta and, consequently, those of my province through the equalization system." Those gentle-
October 29, 1979

men are in the process of asking Canadians, the consumers of oil in their own provinces, to pay a higher price for oil, in order for them to receive greater amounts of money from the federal government through the equalization programs.
That is dishonest, Mr. Speaker. For, if those people want to get more money from their fellow citizens, from the Canadian Parliament-and that is justifiable through the equalization system-if they want more income, let them ask for it and say, "We want to spend so much; that costs us so much for operating expenditures over a year, and so much for capital expenditures; we therefore need more income." But that is not what they are doing. They say to the federal government, "raise the price of oil. That will increase the revenue of the province of Alberta and ours through the equalization payments."
How dishonest, Mr. Speaker. The government should know that Canadians will realize what is going on, and see how the premiers of the eastern provinces, Mr. Levesque and the premiers of the four Atlantic provinces, are seeking disguised tax increases through higher oil prices. At times that is the most equitable way of collecting money. Naturally, people will have to pay more for their oil because oil will cost more in the future.
Mr. Speaker, 1 believe it was the hon. member from Winnipeg who said, a while ago, that we have the same oil policy as the Progressive Conservative Party, that is, we want to head toward world prices. There is quite a difference if we say that we are going toward world prices or that we are going to world prices. Furthermore, there is quite a difference between our policy and the policy of the Progressive Conservative Party, because last year we had an agreement which was valid until June, 1980, under which oil prices were to increase by $1 a barrel every six months according to economic circumstances. In January this year we postponed that increase precisely because it was said that there were inflationary pressures in Canada and that economic circumstances made it impossible for the Canadian economy to absorb such an increase at that time.


William James Kempling: That's because there was an election coming.


Herb Breau: The hon. member for Burlington (Mr. Kempling) says that was because there was an election coming. We were concerned about the economy of the country. We were a responsible government, just like we are a responsible party now. Of course we were conscious of the election. However, we were also conscious about the economy. We said it was a worth-while objective to go toward a world price for oil. We believed that should be done in stages, and then only if we were sure the economy could absorb it.
What those on the other side do not realize is that there is a limit to which we can go in oil prices. Some sectors of the
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economy and some regions in Canada cannot absorb the drastic price increases being talked about by the Conservative government. For example, the fishing industry would go bankrupt if left to the whims of this government with these kinds of oil price increases.


William James Kempling: Nonsense.


Herb Breau: The hon. member says nonsense. He does not have to worry about fishermen in his constituency. I do. I remind him that when fishermen in my constituency, and in fact throughout the Atlantic provinces, make a profit, they buy equipment that may come from the riding of the hon. member for Burlington (Mr. Kempling). When we talk about protecting the fishing industry or agricultural industry from high oil prices, it is not because we want to help only one region of the country. This helps the whole economy. The stronger these regions or sectors are, the stronger the economy of Canada will be.
We believe that oil prices must increase, but not by $4 a barrel. We do not think we have to go to the world price because it is not we who decide what the world price will be.


William James Kempling: How much?


Herb Breau: We said a dollar a barrel over six months. That was our policy. Last year, because of difficult economic conditions, we said that increase should be delayed. We are not like the Conservative party which follows only one line of policy and that is it. For example, they are now following a policy of high interest rates. The Conservatives say that because the governor of the Bank of Canada follows a certain policy of money management, they must do the same.
We followed a monetary policy, but we were concerned about the effects of it. We did something about that. One thing we did was delay the price increase of oil last January. The Conservative government is not doing that. They let interest rates go to 14 per cent. They are not doing anything on the fiscal side. That is the difference between the Conservative government and the Liberal government.
This is too complicated for the hon. member for Broadview (Mr. Rae) to understand. He said we followed the same policy of the governor of the Bank of Canada. It is true we followed the same monetary policy, but interest rates never went to 14 per cent. When there was some shock to be absorbed in the economy, we were concerned and did something about it on the fiscal side. For example, with regard to our anti-inflation policy in 1975, we put a freeze on dividends and interest payments leaving the country. That applied for a certain period. That is an example of doing something other than monetary policy, something which deals with the effects of monetary policy, something the Conservatives are not doing. If they want to let interest rates go up and follow the policy and advice of the governor of the Bank of Canada, they must do something about the effects these policies are having. That is what they are not doing. By delaying their budget they are being irresponsible. They should be doing something about the effects of these high interest rates. This does not mean changing basic monetary policy.

October 29, 1979
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As my hon. friend, the member for Winnipeg-Fort Garry (Mr. Axworthy), said so eloquently in the last two or three weeks, Conservatives are letting Canadians pay these tremendously high interest rates and some of them do not pay them because they cannot afford it. That is very irresponsible. The government should stop dickering around and present a budget. If they have an economic policy we shall then be able to see it. We shall know whether they have the guts to decide what the energy price shall be and not hide behind provincial premiers who are not elected to deal with national politics, who are not elected to deal with the interests of the country at large but who are elected to look after the interests of their own province.
It is up to the Prime Minister and the Minister of Finance to present a budget. They have been criticizing us for years while they sat on this side of the House. They said our economic policies were wrong. They have been in power for just about five months, now, yet they have not presented a budget. So, in effect, they are saying that the economic policy of the former government as presented by my hon. friend, the member for Saint-Maurice, was a good one. We still do not have a commitment from the government to introduce a budget in November. All we have heard is that there is to be a budget some time before Christmas.
The Minister of Finance and the Prime Minister are insinuating that we are delaying a legitimate program of the government. We are not doing that. We are dealing today with Bill C-17 for the first time. We were very responsible on Bill C-10-all our members spoke for less than their allotted time. We did not take the full 40 minutes because we did not wish to delay unduly the legislative work of Parliament. But the government will have to come up with some policies; it will have to live up to its responsibilities. It will have to stop the nonsense of answering every question by saying nothing can be done because information is lacking, or because it did not know how wrong things were under the former government. That is not what members opposite were elected for. They should have the courage to take up their responsibilities and present a budget before too long.


Simon Leendert de Jong: Mr. Speaker, I shall not go on too long. We have heard some wild oratory this evening. We have heard some good oratory from members of the former government, and some apologies from members of the present government. Basically they are both hooting and hollering over the budget which was brought in last year by the Liberals, one which I am sure the Conservative members of that day strongly criticized and now, lo and behold, we find the same items in the budget being defended by members of the Conservative party and thoroughly criticized by members of the Liberal party!


William James Kempling: That shows how little you know about the question.
(Mr. Breau.]


Simon Leendert de Jong: To be sure, I am a youngster; I am a new person and 1 am learning, and it is definitely a revelation to me. Never before did 1 realize how true that old saying was about Tweedledum and Tweedledee. It actually applies. Essentially the difference between the two old line parties is not all that great. One is in power, one is out of power. One is progressive while in opposition and conservative while in power; and the other, the great Liberal party, goes wherever the wind is blowing. Now that the Liberals are out of power they have to be seen as progressive, imaginative, and assertive. They will put together, 1 am sure, all sorts of good ideas and suggestions which they hope will seduce the Canadian people into allowing them another taste of power.


An hon. Member:: Not for a long time.


Simon Leendert de Jong: 1 tend to agree. It will be quite a long time before the Liberal party gets the taste or even the smell of power. I think the Canadian people have realized after those long hard years of Liberal government that though, indeed, they may sound progressive from time to time, when it comes down to demonstrating where they are at, they generally show themselves not to be on the side of the people but, rather, on the side of those who have generally financed them and kept them in power for such a long time.
1 should like to deal with some of the items in the Liberal budget, items which I am sorry to say the Conservatives have decided to continue and recommend to the House. They are items which illustrate the type of financial favouritism which the former government indulged in, and which is to be carried on by those opposite.
I refer, for example, to the area of MURB which is the Multiple Unit Residential Buildings Program. This is a very lucrative program for those who can get involved in it. It is a $60 million tax shelter mainly for doctors and lawyers and people in high income groups.
When I began to investigate it I was amazed to realize that for a $700,000 initial investment, after a 12-year period it was possible under this program to claim losses for tax purposes of $2,518,581 or a cash return to the owner of $1,341,814. So, Mr. Speaker, for an initial investment of $700,000, over a 12-year period you get back more on tax write-offs than you initially put in. More than the value of the building! No wonder we are in trouble. No wonder there are massive deficits. No wonder the country is in economic crisis with this type of give-away program.
Do our friends across the way intend to fight government deficits by closing these loopholes? No, Mr. Speaker. They are extending them further. They intend to fight the deficit on the backs of old people, poor people and unemployed people. That is their notion of fighting deficits. Essentially this notion was practised by the previous government because they also introduced cutbacks. They did not cut back on these lucrative tax shelter programs. They suggested in their budget that they should be extended, and the Conservatives now propose to continue that policy. I wish, as I am sure the people of Canada wish, that if you are going to fight deficits and inflation you
October 29, 1979

fight it among the people who can afford it, people in the higher income brackets, and not on the backs of poor people and small business people, farming people, the unemployed and the young.
The MURB program is, of course, supposed to have some beneficial effects. It was supposed to be a housing program.
The former government initiated some great housing programs, but over the last number of years it began to whittle away at CMHC, and 1 am afraid this government is going to continue this even further in its privatization of CMHC. 1 understand this government has appointed a one-person commission to look into CMHC to see what aspects of that corporation can be turned over to private investors. I understand the government is even thinking about turning over the mortgage insurance program.
The mortgage insurance program is an important program, especially for people living in social housing, co-operative housing, low income housing, etc. Private insurance companies do not want to touch these people, so they have to turn to CMHC for their insurance. However, the government opposite is going to sell that off to private insurance companies.
I understand that the government is having some difficulty selling the insurance part. There are so many defaults because of the interest rate policy of the government that no private insurance company would want to touch this aspect of the corporation. I am not certain if that is so. I think it is just a facetious joke some people are putting forward, and most probably the mortgage insurance program of CMHC will be sold off. 1 am sure the government will make it attractive enough for private investors to pick it up and to carry the burden. 1 am also sure that when private investors pick up CMHC mortgage insurance, they will not insure co-op housing, social housing or low income housing, which are the types of housing which need protection. They need assistance in the type of housing market and housing conditions which are being created, especially with the present government and its interest policies. However, the MURBs were supposed to do this.
This program, which cost $60 million in lost revenues, allowed people in higher income brackets to put money into MURBs. Unfortunately, the effect has not been to create low cost rental accommodations for people. There is no restriction as to what type of accommodation is to be built. Most of the money in MURBs went to relatively luxurious town houses and high cost rental accommodations. This is not a housing program. It is a tax holiday for rich people. It is no excuse for a housing program at all.
Although it is minor, another aspect of the proposed budgetary changes is the removal of certain home insulation materials from the sales tax exemption. I am glad to see that solar cells will be included as exempt items, but other insulation materials such as double-paned windows, etc. will not. I do not think insulating homes through a taxation system is necessarily the right answer. 1 think it is plain to see that a housing program through tax incentives is not a housing policy because
Income Tax Act
it does not do the job. All it does is create a tax shelter. It does not create housing and rental accommodations which are desired by communities. Such is the case with insulation material. Tax incentives do not do the job. They are a backward step. I think we should be trying to encourage people to insulate. We should be making it easier for people to insulate. We should be providing some leadership in this area. Instead, the proposal of the former Liberal government to tax certain home insulation materials is being carried through by the present government. Even though it is a small step, it is a backward step in the field of home insulation.
There are some basic problems which the Canadian economy faces. Average Canadian workers and income earners know this better than anybody else. I think they appreciate this better than most hon. members opposite and most members of the former government, because they have to live with these problems. They have to try to balance their wages against increases in the cost of living. If they have to renegotiate the mortgage on their homes this month because it has fallen due, they will realize that they will have to pay an extra $100 or $125 per month. They realize that the little income they receive is fast being eroded. They find no protection. They get no understanding from hon. members opposite.
Most hon. members opposite are well protected from economic shocks. Hon. members opposite always want to see working people tighten their belts a little more. As I understand it, the Prime Minister (Mr. Clark) and the governor of the Bank of Canada have asked us to tighten our belts. They are going to make some tough decisions. This is a time for sacrifice. All that does not sound much different from what we heard from the former minister of finance and the former prime minister, that "these are times of sacrifice."
Who has to sacrifice? Wages did not keep up with the cost of living last year. Working people have to sacrifice. Often retired people have to sacrifice. Hon. members opposite might say that the pensions of retired people are indexed, but they really are not. They are indexed to the increase in the cost of living, but those increases do not reflect what the average old age pensioner experiences as his cost of living goes up. The extra $2.50 or $3 per month they might be receiving because of the indexing of the pension is no real protection as fuel bills and food bills go up. Those costs are going up by some 25 per cent. Working people, retired people, people on fixed incomes and people on social assistance have to bear the brunt. The assistance received by people on social assistance is not going up as fast as the cost of living. Those people are losing.
I do not know how close hon. members opposite are to people who live in those types of situations. People who live on the average pension are often expected to live on $200 a month or less. When the cost of fuel goes up by some 15 per cent, 20 per cent or 25 per cent, and when all at once a head of lettuce-as was the case in my riding in Regina this spring- costs $1.75 per head, what does that mean to a person trying to live on less than $200 per month?
It was during the election campaign that the point was really driven home for me. A lady telephoned me telling me

October 29, 1979
Income Tax Act
that she was a retired person and that her total income from all her pensions was some $330. Her rent came to $210. She had roughly $120 to pay for her food and her utilities.


An hon. Member:: What about that great socialist provincial government you are always talking about?


Simon Leendert de Jong: The lady was getting a supplement. Her drug bills were being covered. She did have total access to medicare, but she had only $110 to live on. It was not enough for her food, her clothing, and her energy needs. What effect are the policies of high interest and high fuel costs going to have on her? How much more economic insecurity and living from month to month can we expect? The lady was very depressed, and she said to me, "Mr. de Jong, I think the only solution for me is to take a bottle of pills".
It was shocking to hear that from an elderly retired person who had worked and given much to this country. She had, as economists call it, lived the life of forgoing consumer expectation. Her work created the capital which made this country what it is today. What is her reward? To live from month to month in total economic insecurity, struggling to make ends meet! What a reward! What insanity! Is this the type of system and the type of country in which we are living?
What does this budget do? It helps the rich get richer, and, damn it, it helps to make the poor get poorer. It offers no relief to those who need relief the most. It will give a $60 million write-off to fat cat lawyers and doctors with programs like MURB under which they get over $1 million back in a 12-year period because they have invested $700,000 that otherwise they would have had to pay in taxes. Is this fair? is this just? Is this how it should be? No. Hon. members opposite will talk about balancing the budget, about making tough decisions and about tightening belts, but they will not tighten the belts of these gentlemen. However, unfortunately for my poor pensioner back in Regina, they will tighten her belt.
Because of all that, Mr. Speaker, in all moral consciousness I cannot support this motion.


Mr. Bill Yurko (Edmonton East):: Mr. Speaker, I am very pleased to rise and make some remarks on Bill C-17. First, 1 wish to make some general remarks; then 1 will make some specific ones with regard to the matter of the small businesses deduction in clause 38.
1 believe it is now some 15 years since the Carter Royal Commission Report on Taxation came down. Since then we have had the evolution of a complex taxation system in Canada which tends to baffle most intelligent people in the nation. One thing can be said, however, and that is that as the tax system evolves, except for some brief interludes, basically it has become, first, anti-wealth production, second, anti-incentive, and third, anti-growth. Indeed, the government's share of the total industrial pie or GNP has increased, as I said before, to something like 42 per cent. Indeed, in the nation the government collects through taxes, and recirculates, in the
[Mr. Jong.J
most inefficient way, some 42 per cent of the gross wealth of this nation. This is such a heavy burden upon the productive segment of the nation that a readjustment is absolutely vital. Indeed in some nations like the United States there is a tax revolt. I do not doubt that before very long we will have a similar revolt in Canada. We must reorient the economy toward an incentive society.
The hon. member across the way referred to MURBs. 1 can give him some information about the actual response to incentives which occurred in Alberta. In 1974, housing starts in Alberta were in the order of 15,000 housing units a year. The vacancy rate was effectively nil. Poor people were paying escalating rents because the productive sector of the economy was not producing housing units. As a result of a series of incentives, including MURBs, we went from 15,000 housing units a year to the second highest production of units in the country, second only to Ontario. In a mere three and a half years we went up to 48,000 housing starts a year through using the incentive program.
Indeed, one could have permitted the taxation system to collect the money through various governments and then revert it to the economy to build housing units through CMHC and through other government programs. I can say without any equivocation, as one who has been in the front line of constructing housing units, that this is perhaps the most inefficient method of constructing housing that now exists.
What had to be done was to give the industry and the people the money to invest in housing units directly. In Alberta MURB was indeed successful in introducing the most housing units in the shortest possible time, so that just four years after we had a zero vacancy rate in Alberta. In Edmonton and in Calgary now we have in the order of 3 per cent to 5 per cent excess rental accommodation on the market. More than anything else this brings the rates of rental accommodation down to levels that lower income people can afford.
Saskatchewan is not a particularly poor province. Indeed, if Saskatchewan wanted to help some of the really poor people in the province, then why did that socialist government not do so?


An hon. Member:: They have.


William J. Yurko: They have? How much ?


An hon. Member:: More than Alberta.


William J. Yurko: In Alberta we have various programs for helping the aged in direct assistance which, I understand, does not exist in Saskatchewan. What we have to do in this nation above all else is to decrease the stranglehold on the economy that is imposed on it by governments taxing to the extent that they spend 42 per cent of the GNP of this nation.
A very appropriate article was written recently in which it was suggested that if we do have a depression it will be the first social-oriented depression in the history of the world, for the simple reason that the government has involved itself in the economy to the extent that the production of wealth in this country has suffered drastically. The difficulty with this
October 29, 1979

nation, with its abundant resources, abundant opportunities and well trained people, is that it has engaged itself in a system of redistributing wealth and has forgotten how to create wealth.
Before 1 come to my general comments on the bill 1 should like to say something about frugalness. 1 mentioned frugalness in one of my earlier speeches. I was fortunate in that 1 grew up on a farm as a member of a pioneer family. Next to us lived another pioneer family, a very frugal couple. Throughout the years they amassed more and more wealth. Eventually, the man died and left all his wealth to his wife. Madam allowed herself only one luxury-she hired a maid called Mabel.
In the intervening years, madam accumulated more and more wealth through hard work and frugality. It was her wealth, and Mabel helped her accumulate it. As she became older and came closer to her last days on earth, she called Mabel in and said to her, "Mabel, I want you to bury me face up in my coffin. I want you to bury me in my best black satin dress," she said. "But Mabel, as 1 will be lying there on my back, I want you to cut out all the material from the back of my black satin dress and make yourself a skirt."


An hon. Member:: That is what 1 call Tory Economic policy.


William J. Yurko: And Mabel said to the madam, "Madam, I must tell you that 1 disagree with you because if you can see yourself walking up them golden stairs into heaven, all the people behind you will be staring at your bare back." And madam said, "No, they will not, Mabel. They will be staring at my husband because 1 buried him without his trousers on."
Now I want to get to the more specific comments.


An hon. Member:: Stay where you are.


William J. Yurko: Well, I have been fine most of the day.
The small business tax rate has been a subject of extensive public discussion over the past, and the proposals of the previous government have been widely criticized. Under the proposals introduced in the November, 1978, budget, the benefits of the special corporate tax rate on small business would have been denied to three categories of small business income. They were professional income, the income from certain personal services, and the income from the provision of certain management and other administrative services. Under these proposals, these types of business income would have been taxed at the normal rate of corporate taxation of between 46 per cent and 51 per cent depending on the province, rather than at the special rate of 25 per cent for small business.
This clause of the bill introduces a new small business tax rate of 3316 per cent for any Canadian-controlled private company engaged in any of the three categories of business previously described. For this purpose the professional group, which originally included doctors, dentists, lawyers and accountants, will be expanded to include veterinarians and chiropractors.


An hon. Member:: What is in it for Mabel?
Income Tax Act


William J. Yurko: This new tax rate will generally ensure that, when the corporation pays a dividend, the amount of tax for which a shareholder will receive credit will approximate the amount of tax actually paid by the corporation. As a result the over-all tax result will be neutral, whether the corporation pays salaries or dividends. Such corporations which retain earnings in the business will still enjoy a tax deferral since the tax rate of 3316 per cent is lower than the personal income tax rate on taxable income in excess of $15,000. This deferral would not have been possible under the proposals of the last government. In addition, the new rules will be reflected in the law rather than in the regulations. The changes will apply to taxation years commencing after 1979 for corporations in existence on October 23, 1979, and to all taxation years for corporations formed after today.
Since all Canadian business income, other than investment income, of the three categories of corporations affected by the change will be subject to the 3316 per cent small business tax rate, such corporations will be given time to re-arrange their affairs so that they can receive the benefit of the lower small business tax rate on eligible active business income. Because some companies may be unable to re-arrange their affairs before the end of the year, the President of the Privy Council and Minister of National Revenue (Mr. Baker) has indicated that he will be prepared to allow corporations, which wish to reorganize in light of these amendments, to change their fiscal year ends in 1980. No significant changes will be made to the rules proposed by the previous government relating to the treatment of investment income for purposes of small business deductions.
In regard to detailed comments, prior to 1972 a low tax rate of 21 per cent on the first $35,000 of corporate income was available. While the low rate on the first $35,000 was described as an incentive to small business, it was available to all corporations regardless of the type of income they earned, regardless of whether they were expanding or static, regardless of whether they were Canadian or foreign-controlled, or owned by public corporations or private individuals.
To more specifically target the benefits derived from a low tax rate, the current structure of the small business deduction was introduced with tax reform in 1972 in place of the previous measure. In order to focus more accurately on individual Canadian entrepreneurship, the measure was restricted to Canadian-controlled private corporations. In order to direct the benefits to smaller Canadian-controlled companies, the measure now applies to Canadian source business income of a corporation, as long as the corporation's accumulated business earnings net of dividends paid do not exceed $750,000.
Section 125 of the Income Tax Act provides for a 21 per cent tax reduction for the Canadian active business income of Canadian-controlled private corporations. This reduction to a 25 per cent basic corporate tax rate from the normal corporate tax rate of 46 per cent is available annually on up to $150,000 of Canadian active business, until such time as the corporation reaches its $750,000 cumulative limit. When this special 25

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Income Tax Act
per cent small business rate was first introduced as part of the tax reform in 1972, the amount of annual income eligible for the low rate was limited to $50,000. Both the annual and cumulative limits have been increased twice since 1972.
The small business tax rate was designed to allow Canadian-controlled firms to accumulate funds for expansion, to allow them to compete against larger firms, and to create jobs for Canadian workers. Accordingly the legislation provides that only income from an active business carried on in Canada be eligible for this favourable tax treatment.
Coupled with these tax reform changes and developments regarding the taxation of small businesses, amendments have been made to the dividend tax credit with the view to reducing further the possibilities of double taxation of corporate source income. The dividend tax credit was made taxable by introducing the concept of a gross-up technique to dividends received by individuals. The purpose of the gross-up is to include in the shareholder's income an amount approximating the pre-tax earnings of the corporation. As a result the dividend tax credit provides tax recognition, in the hands of the individual shareholder, for 25 points of corporate tax, which in turn represents the full amount of corporate income tax paid on business income earned by Canadian-controlled private corporations qualifying for the basic 25 per cent tax rate.
In 1977 the dividend credit was increased from one third to one half of the amount of the dividend. This increase generally enhanced the attractiveness of receiving dividend payments and thereby provided an incentive for making equity investments. Also the change had the desirable effect of bringing the tax on dividends more closely into line with the tax on capital gains.


BUSINESS OF THE HOUSE
Mr. Turner:: 1 wonder if someone in the government could inform us of the order of business for tomorrow.


William James Kempling: Mr. Speaker, we will be proceeding tomorrow in committee of the whole with Bill C-17. When that is completed we will probably go to Bill C-18, then Bill C-3, and if we finish with those we will go on to Bills C-4 and C-5.



PROCEEDINGS ON ADJOURNMENT MOTION

[Stage Direction]
A motion to adjourn the House under Standing Order 40 deemed to have been moved.

Hon.   J.-J. Blais@Nipissing: Mr. Speaker, the question at issue is one which arises out of a series of questions and, more specifically, a question which 1 asked the Prime Minister (Mr. Clark) on October 17. The question at issue is important because it involves, in my view, the role of the Attorney General as a law officer of the Crown and the independence of the Attorney General in the exercise of his functions, indeed, as a law officer of the Crown, so that the Attorney General may not only be independent in the exercise of that function, but can be seen to be independent.
The second issue is the independence of the director of investigations as he discharges his responsibilities under the Combines Investigation Act.
There is a series of undisputed facts. There was a meeting which was held on October 12 at eight o'clock a.m. and which was called by the Attorney General of Canada. Attending that meeting were the Minister of Justice, (Mr. Flynn), the Solicitor General and Minister of Consumer and Corporate Affairs (Mr. Lawrence), the Minister of Transport (Mr. Mazankow-ski), and the director of investigations as well as sundry officials.
The discussion centred around possible criminal violations under the Combines Investigation Act involving Western Transport Association and Household Goods Corporations. What is also not disputed is that no such meetings had been under the previous administration involving the Minister of Consumer and Corporate Affairs and the Attorney General at the time when the Attorney General was contemplating prosecutions under the Combines Investigation Act. Those are the facts which we know.
The facts which we do not know are much more numerous. First of all, what was the purpose of that meeting? Was it to gather information? Was it to provide information? Or was it a forum in order to have parties influence the course of the investigation or the prosecution? What role did the director of investigations play at that meeting? Was it an active role? Was it a reluctant role? What role did the Minister of Consumer and Corporate Affairs play in terms of protecting the director and his independence? Had the director actually submitted his evidence under Section 15 prior to the meeting, or was the meeting intended to head the director of investigations off at the pass so that the Attorney General would not have to make a decision under Section 15 as to whether a prosecution ought to be held?
What role did the Minister of Transport play at that meeting? Was it one of gaining information, or was it one of providing information? There is some dispute about those facts. What was the nature of the brief that was prepared by the Minister of Consumer and Corporate Affairs for the benefit of the Minister of Transport which, allegedly, the Minister of Transport never received?
What was the nature of the briefing note prepared by the Minister of Transport's own officials? Was that only to pro-

October 29, 1979

vide him with information, or was it suggestive of his role in preventing a prosecution or in somehow affecting the role of the director? Was there any attempt to interfere with the director's investigation or with the ability of the director to have the Attorney General deal with the matter under Section 15?
Finally, what role did the Attorney General play in this particular meeting? From his own evidence he did not even know what was going to be discussed at that meeting. What representations were made by the Minister of Transport or his officials to the Minister of Justice and the Attorney General? Answers have to be found to all those questions in order to satisfy the House that the independence of the Attorney General was protected.
I wish, Mr. Speaker, to bring to the attention of the House a quotation from a very distinguished jurist relating to the issue of the independence of the Attorney General in matters of prosecution or potential prosecution. This gentleman stated, "1 would say that any consultation would have to be on the legal propriety of the prosecution and not on any other element. It might be, for instance, that some other member of the cabinet might be very experienced in a particular branch of the law involved, in which case he might consult him." That is a very precise indication of the role of the Attorney General as he considers whether he ought to take on a particular prosecution. Mr. Justice Spence is advancing a very interesting argument. I am not saying it is a conclusive argument, but surely that is the sort of debate in which this House has to engage itself.
Next, what about the independence of the director in the discharge of his responsibilities? Was he protected? Was he free at that meeting to advance his own views? Had he discussed the matter with the Minister of Consumer and Corporate Affairs so that that minister, at that meeting, would be aware of the position the director took and so that the Minister of Consumer and Corporate Affairs could protect his director in the face of his cabinet colleagues? Was that investigation completely independent? What we know-


The Acting Speaker (Mr. Scott, Victoria-Haliburton):: Order, please. The hon. member's time has expired.


Mr. George Cooper (Parliamentary Secretary to Minister of Justice and Attorney General):: 1 am very eager to rise and respond to the question that has been put by the hon. member for Nipissing (Mr. Blais) because 1 hope that, once and for all, we can put an end to the series of red herrings that have been drawn across this chamber in the last few days on this issue. At the same time 1 should like to refresh the hon. member's memory of what the proper practice is with regard to ministerial responsibility on a matter of this kind.
Here, Mr. Speaker, are the essential elements of the position of the Attorney General of Canada in relation to prosecutions under the Combines Investigation Act, and any other act if it comes to that. The director of investigations and research may
Adjournment Debate
bring any matter under inquiry to the attention of the Attorney General under the provisions of Section 13 or Section 15 of the Combines Investigation Act. Section 15 provides that the director may, at any stage of an inquiry, remit evidence to the Attorney General of Canada for consideration, to determine whether an offence has been or is about to be committed, and for such action as the Attorney General may be pleased to take.
In dealing with a case where a matter has been referred to him, the Attorney General is unquestionably entitled to obtain both information and advice from whatever sources he sees fit, including his colleagues in cabinet. The decision he takes in particular cases must, however, in the last analysis, be his decision. The Attorney General does not act on directions from his colleagues, other members of Parliament or anyone else, in discharging his duties in the enforcement of the law. On the other hand, he must be prepared to answer to Parliament for what he has done after he makes his final decision. These principles are well known and established, not only in Canada, but in every common law jurisdiction. I refer particularly to the United Kingdom where the practice, of course, grew up.
I should like to read into the record the best statement on the question that I am aware of, which may be found in a work prepared by Professor Edwards of the University of Toronto entitled "Law Officers of the Crown". I shall give my hon. friend the reference when I finish. Professor Edwards said:
I think the true doctrine is... that it is the duty of an Attorney General, in deciding whether or not to authorize the prosecution, to acquaint himself with all the relevant facts, including, for instance, the effect which the prosecution, successful or unsuccessful as the case may be, would have upon public morale and order, and with any other consideration affecting public policy. In order so to inform himself, he may, although I do not think he is obliged to, consult with any of his colleagues in the government, and indeed, as Lord Simon once said, he would in some cases be a fool if he did not. On the other hand, the assistance of his colleagues is confined to informing him of particular considerations which might affect his own decision, and does not consist, and must not consist, in telling him what that decision ought to be. The responsibility for the eventual decision rests with the Attorney General, and he is not to be put, and is not put, under pressure by his colleagues in the matter. Nor, of course, can the Attorney General shift his responsibility for making the decision on to the shoulders of his colleagues-


The Acting Speaker (Mr. Scott, Victoria-Haliburton):: Order, please. I regret to inform the hon. member that his time has expired.


EXTERNAL AFFAIRS-MEETING OF HON. ROBERT STANFIELD WITH PLO
Mr. Roland de Corneille (Eglinton-Lawrence):: Mr. Speaker, ten days ago I addressed a question to the Secretary of State for External Affairs (Miss MacDonald) concerning the meeting held by the Hon. Robert Stanfield with a representative of PLO terrorists. Specifically I asked whether Mr. Stanfield has held any public or clandestine meetings and, if so, had Mr. Stanfield discussed with that terrorist organization any subject other than, or in addition to, the moving of the embassy from Tel Aviv to Jerusalem, and further had Mr. COMMONS DEBATES
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Adjournment Debate
Stanfield made any undertakings to continue further contacts with the PLO.
1 do appreciate the opportunity that is afforded in this House to a member to be able to press for an answer to a question which a member feels was not answered during question period.
To set the record straight, it would be unfair for me to imply or allege that the hon. minister did not reply at all, but the answer was not given to my question. My question was not frivolous, and certainly not deserving of delay. It deals with a matter of grave consequences, consequences meaning that Canada may be giving tacit de facto recognition or encouragement to the PLO, which has, as we know, been involved in terrorist activites, killing not only Jewish but Arab civilians, men, women and children in Israel and in many other parts of the world. It also seeks to obliterate the existence of the state of Israel and indirectly some, or even many members of its population.
Let me point out why it is so serious, important and urgent that a reply to my question be given to this House and to the entire country. What perhaps is at stake is our national honour, the imperilling of the peace process in the Middle East, the possibility of alienating friends such as the United States of America, Israel, and others in the international community, and of giving comfort, therefore, encouragement to the PLO terrorists-a totally immoral act for Canada and an unfriendly one toward the friendly state of Israel.
In short, I would still like to know the answer to my question. The implications are even more grave as the truth unravels. First of all, what rank and authority is Mr. Stanfield perceived by other governments to have? We were told here by the Prime Minister (Mr. Clark) on October 12 that Mr. Stanfield is an ambassador extraordinary, and that because of the adjective extraordinary there can be, and I quote, "no implication of official recognition by the Canadian government of any groups with which he may have consultations." Yet today the Prime Minister tabled a letter from Mr. Stanfield to the Prime Minister on official stationery which describes Mr. Stanfield as, and I quote, "Special Representative of the Government of Canada, and Ambassador at Large." Those are very imposing and impressive titles when added up: ambassador extraordinary, special representative of the Government of Canada, and ambassador at large.
I wonder whether in the eyes of governments which are used to these terms as they have been undertsood in international law or customs over the centuries, it is now realized that a new dictionnary has been written by our Prime Minister giving a new definition to those terms.
Mr. Stanfield met with Khalid al-Fahum, chairman of the Palestine National Council, the PLO's governing body, and a member of the PLO executive committee.
It has been claimed that this meeting between Mr. Stanfield and Mr. al-Fahum does not constitute recognition of the PLO by Canada. Arab diplomats and the PLO, however, can easily

interpret such meetings as constituting a form of recognition of the terrorist organization which remains committed to Israel's ultimate destruction. The PLO's covenant, which has not been renounced, calls for the elimination of Israel. More recent statements by the PLO leaders, including the PLO chairman, Yasser Arafat, belie any intention on the part of that body to recognize Israel or to change its goal of its destruction.
I have in my file recent statements by Mr. Arafat, and I quote:
Armed struggle is our only road. We have no other road to reach Jerusalem, Tel Aviv and every inch of our occupied homeland.
Our people will continue to fuel the torch of the revolution with rivers of blood until the whole of the occupied homeland is liberated ... not just a part of it.
I am confident that we shall eventually overrun Begin's own offices in both Jerusalem and Tel Aviv ... Jerusalem is destined to be the eternal capital of our sovereign independent Palestinian state under the PLO leadership.
Mr. Arafat is not referring only to the "liberation" of the West Bank and Gaza. He refers to the entire state of Israel.
A few weeks ago, Farouk Kaddoumi, director of the PLO political department said; "The PLO will never recognize Israel even if Israel recognizes the PLO" Given such a policy, it seems difficult to comprehend why Mr. Stanfield found it necessary or useful to meet with the PLO's representative. The PLO's vision of peace does not include a state of Israel in the Middle East.


The Acting Speaker (Mr. Scott, Victoria-Haliburton):: Order, please.


Mr. Douglas Roche (Parliamentary Secretary to Secretary of State for External Affairs):: Mr. Speaker, this is the first opportunity I have had for an exchange with the hon. member for Eglinton-Lawrence (Mr. de Corneille) whose reputation has preceded him into this House. I wish him well in his parliamentary career. I want to suggest, in dealing with questions as sensitive as the Middle East, that a certain balanced approach is going to be necessary to reflect that objectivity that I know he wants to bring to this House.
When he complains that the Secretary of State for External Affairs (Miss MacDonald) did not answer the question that he originally posed, he is overlooking the fact the minister did affirm that Mr. Stanfield met a high representative of the PLO Having detoured us on that, he comes into the House tonight and the burden of his argument is there having been this meeting between Mr. Stanfield and Mr. Khalid al-Fahum, chairman of the Palestine National Council, that implies a tacit recognition of this terrorist organization by the Canadian government and, second, this is imperilling the peace process. In fact, nothing of the kind has resulted from this.
The Palestine National Council is a deliberative body on which are represented various Palestinian organizations as well as individual unaffiliated Palestinians. Mr. Stanfield and Mr. al-Fahum in their discussion concentrated on the Middle East situation in general and in particular the prospects for a negotiated peace, and the role of Palestinians in that process. They also touched on the Jerusalem issue. There was no
October 29, 1979

discussion of whether or how there should be further contacts between the PLO and Canada.
Now we come to the heart of the hon. member's assertion in which he suggested this meeting implied tacit recognition. No meeting of this nature could imply a recognition of the PLO by the Government of Canada. If in fact the PLO is neither a state nor a government and does not claim such a status, how then can formal recognition of such an organization follow from a meeting?
The government did not and does not intend that Mr. Stanfield's meeting with Mr. al-Fahum should constitute any form of official recognition of the PLO as what it claims to be, the sole and legitimate representative of the Palestinians. The circumstances in which the government would be prepared to consider the PLO as speaking with authority for the Palestinian people have been very clearly set out by the Prime Minister. Neither criterion has been satisfied as things now stand.


The Acting Speaker (Mr. Scott, Victoria-Haliburton):: Order.


HAZARDOUS PRODUCTS-REMEDIAL ACTION BY CHIP TO PROTECT HOME OWNERS FROM HAZARDOUS INSULATION MATERIALS
Simon Leendert de Jong: Mr. Speaker, I should like to thank the minister for taking sufficient interest in this topic to appear personally in the House this evening. 1 had asked the hon. gentleman previously about the home insulation program, considering this to be an extremely important program.
All this week we have heard how the cost of oil might go up. We have heard how interest rates are going up and the average consumer will be caught in a tight squeeze. An area in which we can take positive steps to reduce the cost of living is the home insulation program. I was going through my notes and 1 see that in one study done by a group from Princeton University in a town called Twin Rivers in New Jersey, it is claimed that three-quarters of the energy used by furnaces in private homes can be eliminated. There are other statistics which show that the amount of money spent on building a nuclear reactor if spent on home insulation, could save more electricity than a nuclear reactor could ever produce.
Home insulation is inflation proof. It is a way in which we can save billions of dollars in foreign exchange by reducing our imports of oil. It fits in with the trend of a more conserving society-making do with what we have makes so much sense.
There are, however, some serious problems with the program. One CBC program in Winnipeg reported that Manitoba Hydro had done a study of 200 randomly selected homes and found that nearly 90 per cent of them did not reach their full insulation potential. There was a group in Waterloo which conducted thermo-checks using infra-red photography, and found that in over 60 per cent of the homes re-insulation had not been properly carried out.
Adjournment Debate
What are the problems? First there is a problem with materials. Cellulose fibre has been classed as a hazardous material. I asked the minister whether similar tests had been conducted at the time with urea-formaldehyde foam as well as treated wood chips. I understand there are serious problems attached to those materials. I understand the foam gives off a toxic formaldehyde gas if not properly applied. What we have is an industry which has grown very fast in a short period of time. Serious problems have been created by a number of unscrupulous or inexperienced manufacturers of materials. According to one statistic which is floating around 60 per cent of the homes which have been insulated with cellulose fibre in the maritimes will experience rotting of the basic structure. This is because cellulose fibre, if it gets damp, produces a fungus growth leading to a rotting of the structure.
I have received reports from all over the country about fly-by-night operators. They generally prey on elderly people and sell them a bill of goods whereby they get some insulation work done, mostly in the attic, and they are charged $500, which CHIP pays. However, local contractors would charge only $200 or $250 for the same job. There is a serious rip-off happening not only for the consumer but also for the government.
I find some difficulty with the CHIP administration. I feel that this is a problem this government has inherited. The former government prided itself on being able to run a very solid administration, but CHIP is just an administrative disaster. It is not living up to the potential the money put into it would indicate. We are not achieving the energy savings we could. The program is allowing unjust operators to enter the field.
In my supplementary question I asked the minister to consider a special committee of this House. 1 ask that question again because 1 think a special committee would be able to take all the information which exists in the various departments. Right now not only is CMHC involved, but the Department of Consumer and Corporate Affairs and the Department of Energy, Mines and Resources are involved as well. A grouping of various departments and agencies is involved with home insulation.
I was suggesting that home insulation is very important to the country. It will save individual consumers as well as the country money. Why not set up a committee, bring the various departments together, have a thorough investigation of the existing practices, and come up with some new solutions? I suggest we bring the various departments, the research, the enforcement and the delivery of services-the three essential aspects to this program-together, and perhaps through a committee of this House offer to the government a new alternative on how this service, which is so essential to the Canadian people, can be delivered.


Hon. Elmer M. MacKay (Minister of Regional Economic Expansion):: Mr. Speaker, first I want to thank my hon. friend opposite for his kindness in referring to the fact that I was here

October 29, 1979
Adjournment Debate
to continue this important debate with him tonight. It is a pleasure to do this because the hon. member is quite right that this is a very important topic. He is also quite right in saying that we inherited this problem from the former administration. That being the case, however, it is one which is very widely used. As a matter of interest, applications are coming in at about 10,000 per week. Approximately $60 million has been spent so far in 1979 on this program, but there are some administrative problems with it. There is no doubt about that, and I would not be prepared to dismiss out of hand the possibility of pursuing this by way of a committee along the lines the hon. member discussed.
However, I think it might be profitable first to discuss the matter in the regular standing committee to see what kind of information, debate and dialogue we can initiate there.
Questions about abuses are bound to occur with a program which is as widely used as this one. 1 am sorry that when the hon. member asked his question I did not make it clear that there are tests being done by the Ontario Research Foundation or other outside agencies on the basis of standards set by the Canadian Government Specification Board on other insulation products such as urea-formaldehyde. One of these tests is designed to ensure that the formaldehyde content does not exceed one part per million, which seems to me to be a pretty
exacting test. However, the difficulty that CMHC has had is that in administering the program for the Department of Energy, Mines and Resources it has had to rely on tests given to us by the Ontario Research Foundation.
We are now in the position with respect to cellulose insulation where, under the Hazardous Products Act, the Minister of Consumer and Corporate Affairs (Mr. Lawrence) can, as I understand it, order some of these products, if they are not accepted, to be taken off the shelves. I trust that there are other things we can do to improve the administration of this program. One of the things I am looking at-but in a tentative way at this point-is perhaps to combine this program with some other housing programs which have an energy factor in them.
In closing, CHIP is not a program which should be condemned out of hand simply because it is so widely used and there are many abuses reported. We have not been able to ascertain the actual extent of the abuses with any great precision as yet.


Some hon. Members:: Hear, hear!


The Acting Speaker (Mr. Scott, Victoria-Haliburton):: Order. The motion to adjourn the House is now deemed to have been adopted. Accordingly, this House stands adjourned until tomorrow at 2 p.m.
Motion agreed to and the House adjourned at 10.30 p.m.

Tuesday, October 30, 1979